Common use of Inventory Covenants Clause in Contracts

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records in a manner consistent with its current practices as of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent and accurate stock ledger inventory system at the Retail Division), (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor Borrowers shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrowers' cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrowers' business that are reported to Agent in accordance with the terms hereof 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 any Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon AgentLender's request, Borrowers shall, at their expense, no more than one (1) time once in any twelve (12) month periodperiod in which no Availability Triggering Event occurs or twice in any twelve (12) month period during which an Availability Triggering Event occurs or an Availability Compliance Period (related to an Availability Triggering Event) exists, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower Borrowers to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as all material respects itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwisewall to wall counts, so that all Inventory is subject to such counts at least once each year (except with respect to Inventory consisting of finished goods windows located at a plant of a Borrower or Guarantor, as to the Inventory which a physical count shall be conducted not less frequently than as of the Distribution Divisioneach calendar month end), but in each case at any time or times as Agent may request on at any time a Default or after an Event of DefaultDefault exists or has occurred and is continuing, and promptly following any such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each calendar quarter if any such counts are performed within such quarter, or otherwise once each calendar year, with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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; except, that, Borrowers and Guarantors may remove Inventory not constituting Eligible Inventory and having an aggregate value of not more than the US Dollar Equivalent of $1,000,000 to locations not otherwise permitted hereunder; provided, that, as the date of the removal of any such Inventory and after giving effect thereto (i) no Default or Event of Default shall exist or have occurred and be continuing and (ii) Global Excess Availability of Borrowers equals not less than twelve and one-half (12 1/2%) percent of the Maximum Credit, (iii) Canadian Excess Availability equals not less than twelve and one-half (12 1/2%) percent of the Canadian Loan Limit and (iv) US Excess Availability equals not less than twelve and one-half (12 1/2%) percent of the US Loan Limit; (d) upon Agent's request, Borrowers shall, (i) at their expense, no more than one two (12) time times in any twelve (12) month period, but (ii) at their expense, one (1) additional time at any time or times that Global Excess Availability is less than the US Dollar Equivalent of $75,000,000, upon Agent’s request, (iii) at Agent’s expense, one (1) further additional time, as Agent may request on in such twelve (12) month period and (iv) at any time at Borrowers’ expense as Agent may request if a Default or after an Event of DefaultDefault shall exist or have occurred and be continuing, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) as of the date hereof, Borrowers and Guarantors shall do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory but shall give Agent prior written notice if such practice changes together with such information with respect to the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return new policy of Borrowersas may reasonably be requested by Agent; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice provide to Agent prompt notice of any License Agreement entered into by a Borrower or the specific identification of Guarantor related to Accounts or Inventory, which License Agreement constitutes a Material Contract; and (j) Borrowers and Guarantors shall not acquire or accept any Inventory on consignment or approval unless such Inventory has been specifically identified in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire hereof when required to be included in such report or accept any Inventory on consignment or approvalAgent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.

Inventory Covenants. With respect to the Inventory: (a) each US Borrower and Guarantor shall at all times maintain inventory records satisfactory to Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent US Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, each US Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent and Tranche B Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors each US Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its such US Borrower’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's ’s and Tranche B Agent’s request, Borrowers each US Borrower shall, at their its expense, but no more than one (1) time once in any twelve six (126) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 and Tranche B Agent written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Required Lenders and by an appraiser acceptable to AgentRequired Lenders, addressed to Agent and Lenders and or upon which Agent and Lenders are is expressly permitted to rely; (e) Borrowers and Guarantors each US Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each US Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors each US Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any such US Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors each US Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors each US Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofand Tranche B Agent, acquire or accept any Inventory on consignment or approvalapproval and (j) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a Borrower shall cause to be conducted by an independent third party acceptable to Lender, at least once every two weeks until such time as Lender is satisfied with Borrower's inventory counting service on behalf of Borrowers reporting and Guarantors shallperpetual inventory system, following which Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one four times during the initial twelve (112) time month period, and thereafter at Lender's discretion, but at least two times in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto)laws; (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles entities the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records in a manner records, consistent with its the current practices each Borrower as of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliablehereof, consistent keeping correct and accurate stock ledger inventory system at records itemizing and describing the Retail Division)kind, type, quality and quantity of Inventory, such Borrower’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of DefaultDefault and for so long as the same is continuing, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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, provided, that, such Borrower may remove Inventory to any locations not otherwise permitted hereunder so long as the aggregate amount of all of such Inventory at such other locations does not have a Value in excess of $10,000; (d) upon Agent's ’s request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of DefaultDefault and for so long as the same is continuing or at any time on or after any change in the calculation of standard costs of Inventory, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent in good faith and by an appraiser acceptable to AgentAgent (which includes Hilco Appraisal Services, LLC), addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to relyrely (provided, that, any appraisal requested at such time as an Event of Default exists or has occurred and is continuing or on and after a change in the calculation of standard costs shall not be considered for purposes of the limitation on the number of appraisals provided for herein); (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance in all material respects and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory other than the right of customers to return given to retail customers of Borrowers defective or non-conforming goods in the ordinary course of business and in accordance with the then current return policy of Borrowersbusiness; (hi) Borrowers and Guarantors shall give Agent not less than thirty (30) days’ written notice prior to the effectiveness of any change in the method of calculation of the standard costs of Inventory; (j) Borrowers shall keep the Inventory generally in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower Borrowers to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableBorrower’s or Guarantor’s Inventory, consistent such Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers each Borrower and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the its Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any 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) Borrowers and Guarantors no Borrower or Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its such Borrower’s or Guarantor’s business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers and Guarantors shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on at Agent’s expense, or after at any time or times as Agent may reasonably request at Borrowers’ expense during an Event of DefaultAdditional Appraisal/Field Exam Period, deliver or cause to be delivered to Agent 67 written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) upon Agent’s request, Borrowers and Guarantors shall, at their expense, conduct through RGIS Inventory Specialists, Inc. or another inventory counting service acceptable to Agent, a physical count of the Inventory in form, scope and methodology acceptable to Agent no more than one (1) time in any twelve (12) month period, and at a time to coincide with Borrowers’ and or Guarantors’ physical count of the Inventory, so long as no Availability Compliance Period exists, 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; (f) each Borrower and Guarantor shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fg) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory Inventory; (but nothing contained herein shall be construed as the basis for any liability of any i) no Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any such Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers any Borrower or Guarantor in the ordinary course of the business and of such Borrower or Guarantor in accordance with the then current return policy of Borrowerssuch Borrower; (hj) Borrowers each Borrower and Guarantors Guarantor shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall notno 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 Lead such Borrower or Guarantor to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory, each Guarantor: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Secured Party, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division one (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two 1) time in any twelve (212) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Divisionmonth period, but in each case at any time or times as Agent Secured Party may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Secured Party with a report in the form and with such specificity as may be reasonably satisfactory to Agent Secured Party concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, herein without the prior written consent of AgentSecured Party, except for sales, returns or transfers sales of Inventory in the ordinary course of its such Guarantor's business that are reported to Agent in accordance with the terms hereof 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 in the Information Certificate or permitted herein; (d) upon AgentSecured Party's request, Borrowers shall, at their its expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent Secured Party may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Secured Party written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Secured Party and by an appraiser acceptable to AgentSecured Party, addressed to Agent Secured Party and Lenders and or upon which Agent Secured Party and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each Borrower and Guarantor proceeds thereof; (g) assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed Inventory, except for the right of return given to customers of such Guarantor consistent with its current policies as of the basis for any liability of any Borrower or Guarantor as to any third party)date hereof; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or such Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofSecured Party, acquire or accept any Inventory on consignment or approval. In addition to, and not in limitation of, anything to the contrary contained herein, Secured Party shall have the right to request the delivery to Secured Party of all documents, invoices and bills of lading relating to any in-transit Inventory. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Guarantors shall, upon Secured Party's request, hold the returned Inventory in trust for Secured Party, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Secured Party's instructions, and not issue any credits, discounts or allowances with respect thereto without Secured Party's prior written consent.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of DefaultDefault and for so long as the same is continuing, and promptly following any such physical inventory 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) Borrowers and Guarantors Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of DefaultDefault and for so long as the same is continuing, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) Borrowers shall, at all times, provide sufficient storage for and Lendersmaintain sufficient stocks of all manuals, on installation kits and other product support, marketing and sales materials related to Inventory of Borrowers consisting of finished goods in order to satisfy any requirements for such materials known or expected by any Borrower in connection with the one handoperation, and Borrowers and Guarantors, on the other hand, marketing or sale of such Inventory by any Borrower or otherwise; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gi) Borrowers and Guarantors Guarantor shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hj) Borrowers and Guarantors Guarantor shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Guarantor shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval; and (l) without limiting the rights of Agent with respect to the establishment of Reserves or otherwise, at any time Excess Availability is less than $2,500,000, Agent may, at its option, establish Reserves to reflect accounts payable or other obligations outstanding to the Microsoft Companies in the aggregate more than sixty (60) days past due, or in the event that the aggregate amount of such accounts payable or other obligations more than thirty (30) days past due but less than sixty (60) days past due exceed $1,000,000, then to reflect all such accounts payable or other obligations in the aggregate more than thirty (30) days past due (in each case other than accounts payable or other obligations being contested or disputed by such Borrower or Guarantor in good faith) or that exceed $3,000,000 for software obligations or $1,000,000 for hardware obligations.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records reasonably satisfactory to Agent in a substantially the same manner consistent with its current practices as of being maintained on the date hereof (except subject, however, to the extent terms of changes in such practices as a result clause (o) of the establishment definition of a reliableEligible Inventory), consistent keeping correct and accurate stock ledger inventory system at records itemizing and describing the Retail Division)kind, type, quality and quantity of Inventory and such Borrower’s or Guarantor’s cost therefor; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that no less frequently than is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance consistent with the current accounting past practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution DivisionGuarantors, but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuance of an Event of Default, and promptly following any such physical inventory shall shall, promptly upon Agent’s request, supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 or distributor thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent's ’s request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on at the expense of Agent or after at the expense of Borrowers upon the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory Inventory, (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; , except for the right of return given to retail customers of Borrowers such Borrower or Guarantor in the ordinary course of the business and of such Borrower or Guarantor in accordance with the then current return policy of Borrowerssuch Borrower or Guarantor; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records that are correct and accurate inventory records in a manner consistent with its current practices as all material respects and itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the 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 (but not more frequently than once in any fiscal quarter) as Agent may reasonably request at any time a Default or an Event of Default exists or has occurred and is continuing, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (if any such counts are performed within such quarter, or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and otherwise once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 a Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, shall deliver or cause to be delivered to Agent 67 Agent, at Borrowers’ expense, written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent (and by an appraiser acceptable selected from a list of Agent-approved appraisers to be supplied by Agent to the Administrative Borrower containing not fewer than two appraisers, as such list may be augmented to include additional appraisers at the reasonable request of the Administrative Borrower or otherwise amended by Agent, from time to time), addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely, upon Agent’s request up to two (2) times in any twelve (12) consecutive month period, or at any time or times as Excess Availability shall be less than the greater of $25,000,000 or twenty (20%) percent of the least of the Maximum Credit, the Borrowing Base or the Revolving Loan Limit, up to three (3) times in any twelve (12) consecutive month period, or at any other time or times as Agent may request at any time an Event of Default shall exist or have occurred and be continuing or at any other time at Agent’s expense; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and GuarantorsBorrowers, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (gf) as of the date hereof, Borrowers and Guarantors shall do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such InventoryInventory but shall give Agent prior written notice if such practice changes together with such information with respect to the new policy as may reasonably be requested by Agent; except for (g) Borrowers shall use commercially reasonable practices to keep the right of return given to retail customers of Borrowers Inventory generally in good and marketable condition in the ordinary course of business business; and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the not acquire or accept any Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default on consignment or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of approval unless such Inventory has been identified in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire hereof when required to be included in such report or accept any Inventory on consignment or approvalAgent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor Loan Party shall at all times maintain inventory records, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory and such practices as a result of the establishment of a reliable, consistent and accurate stock ledger inventory system at the Retail Division), Loan Party’s cost therefor; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Loan Parties shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of Loan Parties’ historical practice in effect on the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, Closing Date but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuation of an Event of DefaultDefault or a Cash Dominion Event, and promptly following any such physical inventory 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) Borrowers and Guarantors Loan Parties shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 Loan Party which is in transit to the locations set forth or permitted herein; (d) upon Agent's ’s request, Borrowers shall, at their expense, no more than one four (14) time times in any twelve (12) month period, but at any time or times as Agent may request on or after upon the occurrence and during the continuation of an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; provided that if no Event of Default has occurred and is continuing, Excess Liquidity is at least $100,000,000 and Total Excess Availability is greater than the Threshold Amount, the Borrowers shall be required to bear the cost of only two (2) such appraisals in any twelve (12) month period; (e) Borrowers and Guarantors Loan Parties 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor Loan Party assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Loan Parties shall keep the Inventory in good and marketable conditioncondition (other than Inventory that is old or obsolete or that the Loan Parties no longer intend to sell in the ordinary course of business); and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Loan Parties shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead the Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count counts of the Inventory at least once each fiscal quarter as to non-perishable (excluding Inventory of the Retail Division located in retail stores that have not been open for more than twelve (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (212) times each yearmonths) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwisewall to wall counts, as so that all Inventory located at distribution centers and retail stores that have been open for more than twelve months is subject to the Inventory of the Distribution Division, such counts at least once each year but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuance of an Event of Default, and promptly following any such physical inventory counts of the 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported business, (ii) for sales, returns and exchanges of Inventory to Agent manufacturers and suppliers in accordance with the terms hereof and except ordinary course of business; (iii) to move Inventory directly from one location set forth or permitted herein to another such permitted location and except (iv) 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month periodperiod (or more frequently as Agent may determine but not at Borrowers’ expense), but at any time or times as Agent may reasonably request on or after upon the occurrence and during the continuance of an Event of DefaultDefault or if there is a Material Adverse Effect (at Borrowers’ sole expense), deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; provided, however, that at all times Average Excess Availability is greater than fifty percent (50%) of the Revolving Commitments for the prior twelve month period prior to such request, only one such appraisal shall be at the sole expense of Borrowers and Guarantors; (e) Borrowers and Guarantors 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 in all material respects (including including, to the extent applicable, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) as between Agent and Lenders, on the one hand, Secured Parties and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right Inventory other than returns and exchanges of return given to retail Inventory from customers of Borrowers in the ordinary course business of business and in accordance such Borrower or Guarantor consistent with the then current return policy of Borrowerssuch Borrower or Guarantor; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approvalapproval except for (x) magazines, stationery and greeting cards, and (y) perishable food stuffs of a de minimus value.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and each Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers Borrower and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwisewall to wall counts, as so that all Inventory is subject to the Inventory of the Distribution Division, such counts at least once each year but in each case at any time or times as Agent may request on or after an Event of DefaultDefault has occurred and is continuing, and promptly following any 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) Borrowers Borrower and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers Borrower shall, at their expense, no more than two (2) times in any twelve (12) month period (and only one (1) time in any twelve (12) month period, at the Agent’s option, in the event that Excess Availability is equal to or greater than $15,000,000), but at any time or times as Agent may reasonably request on at the expense of Agent and Lenders, or at any time or times a Agent may request at Borrower’s expense at any time after an Event of DefaultDefault exists or has occurred and is continuing, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers Borrower and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical event any count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a7.3(b) hereof, acquire above indicates any material irregularities or accept any Inventory on consignment or approval.other adverse

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's Lender’s request, Borrowers Borrower shall, at their its expense, no more than one two (12) time times in any twelve calendar year (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default), deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an Hilco Appraisal Services or other appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (ih) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalconsignment.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain Inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall cause an independent firm acceptable to Lender to conduct a physical cycle count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with Borrower's existing practices with respect thereto on the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution DivisionOriginal Closing Date, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request (i) on or after an Event of DefaultDefault has occurred and is continuing or (ii) on or after a date on which the amount available under the lending formula set forth in Section 2.1(a) hereof exceeds the outstanding Loans and Letter of Credit Accommodations by less than $10,000,000, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably (including, without limitation, on a "going out of business" basis) acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and , other than in accordance with Borrower's policies in existence on the then current return policy of BorrowersOriginal Closing Date; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable conditioncondition (ordinary wear and tear excepted); and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each proceeds thereof; (g) Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count counts of the Inventory at least once each fiscal quarter as to non-perishable (excluding Inventory of the Retail Division located in retail stores that have not been open for more than twelve (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (212) times each yearmonths) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwisewall to wall counts, as so that all Inventory located at distribution centers and retail stores that have been open for more than twelve months is subject to the Inventory of the Distribution Division, such counts at least once each year but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuance of an Event of Default, and promptly following any such physical inventory counts of the 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentAgent (unless such removal is at the direction of the ABL Agent to the extent such direction is not in violation of the Intercreditor Agreement), except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported business, (ii) for sales, returns and exchanges of Inventory to Agent manufacturers and suppliers in accordance with the terms hereof and except ordinary course of business; (iii) to move Inventory directly from one location set forth or permitted herein to another such permitted location and except (iv) 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 ’s request, Borrowers shall, at their expense, no more than two (2) times in any twelve (12) month period (or one (1) additional time in any twelve (12) month periodperiod as Agent may request but not at Borrowers’ expense), but at any time or times as Agent may reasonably request on or after upon the occurrence and during the continuance of an Event of Default, during a Compliance Period or if there is a Material Adverse Effect (at Borrowers’ sole expense), deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including including, to the extent applicable, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) as between Agent and Lenders, on the one hand, Secured Parties and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right Inventory other than returns and exchanges of return given to retail Inventory from customers of Borrowers in the ordinary course business of business and in accordance such Borrower or Guarantor consistent with the then current return policy of Borrowerssuch Borrower or Guarantor; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approvalapproval except for (x) magazines, stationery and greeting cards, and (y) perishable food stuffs of a de minimus value.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and each Guarantor shall at all times maintain inventory records reasonably satisfactory to Administrative and Collateral Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or such Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division year (or on and after the establishment which may be done by way of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Divisioncount), but in each case at any time or times as Administrative and Collateral Agent may reasonably request on or after during the existence of an Event of Default, and promptly following any such physical inventory shall supply Administrative and Collateral Agent with a report in the form and with such specificity as may be reasonably satisfactory to Administrative and Collateral Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Administrative and Collateral Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 such Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Administrative and Collateral Agent's ’s request, Borrowers shall, at their expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Administrative and Collateral Agent may request on or after an Event of Default, deliver or cause to be delivered to Administrative and Collateral Agent 67 a full written appraisals appraisal as to the Inventory in form, scope and methodology reasonably acceptable to Administrative and Collateral Agent and by an appraiser acceptable to Administrative and Collateral Agent, addressed to Administrative and Collateral Agent and Lenders and upon which Administrative and Collateral Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) Borrowers and Guarantors, on the other hand, Guarantors will hold Agents and each Borrower Lender harmless from and Guarantor assumes indemnify each of them with respect to all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as unless such liability arises from the basis for any liability gross negligence or willful misconduct of any Borrower such Agent or Guarantor as to any third party)Lender; (gh) except as disclosed to Administrative and Collateral Agent in writing or to the extent accounted for in the determination of the Net Orderly Liquidation Value, Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or any Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers Inventory (excluding customary warranty terms and returns accepted by such Borrower or such Guarantor in the ordinary course of business and in accordance with the then current return policy of Borrowersbusiness); (hi) Borrowers and Guarantors shall keep the Eligible Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Administrative and Collateral Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Administrative and Collateral Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor the Borrowers shall at all times maintain inventory records reasonably satisfactory to the Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of Inventory, the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent Borrowers’ cost therefor and accurate stock ledger inventory system at the Retail Division), monthly withdrawals therefrom and additions thereto; (b) the Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter year as to perpetual inventory and quarterly as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Divisionperpetual inventory, but in each case at any time or times as Agent the Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent the Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent the Lender concerning such physical count; (c) the Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agentthe Lender, except for sales, returns or transfers sales of Inventory in the ordinary course of its the Borrowers’ business that are reported to Agent in accordance with the terms hereof 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 the Borrowers that is in transit to the locations set forth or permitted herein; (d) upon Agentthe Lender's request, the Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent the Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 the Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent the Lender and by an appraiser acceptable to Agentthe Lender, addressed to Agent and Lenders the Lender and upon which Agent and Lenders are the Lender is expressly permitted to rely; (e) the Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) the Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) except as set forth on Schedule 5.2 hereto as agreed to by the Lender, the Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return return, or may obligate any Borrower or Guarantor the Borrowers to repurchase repurchase, such Inventory; except for Inventory other than the right return of return given to retail customers of Borrowers defective Inventory in the ordinary course of business and in accordance with the then current return policy of Borrowersbusiness; (hi) the Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (ij) upon Agent's request, the Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent the Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower the Borrowers to Agent the Lender pursuant to Section 7.1(a) 8.6 hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request on or after and during the continuance of an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right rights of return given to retail customers of Borrowers in the ordinary course of business and Borrower in accordance with current practices as of the then current return policy of Borrowersdate hereof; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers (other than Sumco and Guarantors shall, H&H Electronic) shall conduct a physical count of the their Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the H&H Electronic shall conduct a physical count of their Inventory of the Distribution Divisionat least once each month, but (in each case any case) at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) [intentionally omitted]; (f) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fg) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gi) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hj) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers (other than Sumco and Guarantors shall, H&H Electronic) shall conduct a physical count of the their Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the and H&H Electronic shall conduct a physical count of its Inventory of the Distribution Divisionat least once each month, but (in each case any case) at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) upon Agent’s request, Borrowers shall, at their expense, no more than two (2) times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent a written assayer’s report as to the Precious Metals Inventory in form, scope and methodology acceptable to Agent and by an assayer acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (f) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fg) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gi) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hj) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as reasonably describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shallat their expense, conduct a physical count of the Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle provided, that Borrowers and Guarantors shall conduct additional physical counts or otherwise, of Inventory as to the Inventory of the Distribution Division, but in each case provided herein at any time or times as Agent may request on or after request, such additional physical counts at Agent’s expense unless an Event of DefaultDefault then exists, in which case at Borrowers’ and Guarantors’ expense, and promptly following any all such physical inventory inventories (whether through periodic cycle counts or wall to wall counts) Borrowers 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentAgent (which consent shall not be unreasonably withheld), except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 hereinherein and except to return defective or non-conforming Inventory to the manufacturers or vendors thereof; (d) upon Agent's request, Borrowers shall, and shall cause their Subsidiaries to, cooperate with any appraiser retained by Agent in the conduct of appraisals of Inventory, such appraisals (i) to be conducted at their such time or times as Agent may request, (ii)(x) to be conducted, at Borrower’s expense, no more less than one two (12) time times in any twelve (12) month period, but unless Adjusted Excess Availability is less than the Specified Amount, then no less than three (3) times in such twelve (12) month period and (y) to be conducted, at any time or times as Agent may request on or after Agent’s expense unless an Event of DefaultDefault then exists in which case at Borrowers’ expense, deliver or cause and (ii) to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers such Borrower or Guarantor in the ordinary course of the business and of such Borrower or Guarantor in accordance with the then current return policy of Borrowerssuch Borrower or Guarantor; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Bank, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Bank may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Bank with a report in the form and with such specificity as may be reasonably satisfactory to Agent Bank concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentBank, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentBank's request, Borrowers Borrower shall, at their its expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent Bank may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Bank written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Bank and by an appraiser acceptable to AgentBank, addressed to Agent and Lenders and Bank or upon which Agent and Lenders are Bank is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors other than in the ordinary course of business as disclosed to Bank by Borrower from time to time, Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofBank, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s or MCE’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after while an Event of DefaultDefault exists, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such THIRD AMENDED AND RESTATED LOAN AGREEMENT physical count; (c) Borrowers Borrower and Guarantors MCE shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower’s or MCE’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, Borrowers Borrower shall, at their its expense, at Lender’s request, but no more than one (1) time once in any twelve three (123) month periodperiod if an Event of Default does not exist, but and at any time or times as Agent Lender may request on or after an and while Event of DefaultDefault exists, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers Borrower and Guarantors MCE shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes MCE assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers Borrower and Guarantors MCE shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor MCE to repurchase such Inventory; , except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowersor unless such Inventory is not Eligible Inventory; (h) Borrowers Borrower and Guarantors MCE shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division Borrower and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors MCE shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, Borrower shall, at its expense, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records in a manner and conduct physical counts of Inventory consistent with its current practices as of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent and accurate stock ledger inventory system at the Retail Division), (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) hereof or as otherwise consented to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Divisionby Agent, but in each case at any time or times as event in a manner sufficient to permit an audit of the financial statements of Borrowers in accordance with GAAP and Borrowers shall provide to Agent may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent with a report in the form and with such specificity reports as may be reasonably satisfactory prepared consistent with current practices with respect to Agent concerning such physical countcounts; (cb) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted hereinherein (including third party locations as set forth in the Information Certificate), without the prior written consent of Agent, except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except business, (ii) to move Inventory directly from one location set forth or permitted herein to another such location location, and except (iii) for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (dc) upon Agent's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but ’s request at any time or times as Agent may request on or after an a Cash Dominion Event of Defaultand for so long as the same is continuing and after the Inventory Availability Date, Borrowers shall deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, useprovided, 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.that,

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 inventory records in a manner consistent with its current practices as all material respects itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on at any time a Default or after an Event of DefaultDefault exists or has occurred and is continuing, and promptly following any such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each calendar quarter if any such counts are performed within such quarter, or otherwise once each calendar year, with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time in any twelve (12) month period, or up to one (1) additional time in such twelve (12) month period upon Agent’s request, but at any time or times at their expense as Agent may request on if a Default or after an Event of DefaultDefault shall exist or have occurred and be continuing, or the aggregate amount of the Excess Availability of Borrowers shall be less than $7,500,000, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) as of the date hereof, Borrowers and Guarantors shall do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory but shall give Agent prior written notice if such practice changes together with such information with respect to the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return new policy of Borrowersas may reasonably be requested by Agent; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent not acquire or the specific identification of accept any Inventory on consignment or approval unless such Inventory has been specifically identified in a report with respect thereto provided by Lead Borrower Agent to Agent pursuant to Section 7.1(a) hereof, acquire hereof when required to be included in such report or accept any Inventory on consignment or approvalAgent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Bank, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Bank may request on or after an Event of Default, and promptly following any such physical inventory count shall supply Agent Bank with a report in the form and with such specificity as may be reasonably satisfactory to Agent Bank concerning such physical count; (c) Borrowers and Guarantors Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentBank, except for sales, returns or transfers sales of Inventory in the ordinary course of its Guarantor's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentBank's request, Borrowers Guarantor shall, at their its expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent Bank may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Bank written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Bank and by an appraiser acceptable to AgentBank, addressed to Agent and Lenders and Bank or upon which Agent and Lenders are Bank is expressly permitted to rely; (e) Borrowers and Guarantors Guarantor shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Guarantor shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Guarantor shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Guarantor shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofBank, acquire or accept any Inventory on consignment or approval; and (j) upon the occurrence of an Event of Default, Guarantor shall not return any Inventory to its vendors without the prior written consent of Bank.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor Borrowers ------------------- shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrowers' cost therefor and accurate stock ledger inventory system at the Retail Division), withdrawals therefrom and additions thereto; (b) only in the event of default, the Bank may request and the Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning Lender concerning, such physical count; (c) except for demonstration and show equipment in the ordinary course of business, Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrowers' business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) except for demonstration and show equipment in the ordinary course of business, Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.on

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its a Borrower's business that are reported to Agent in accordance with the terms hereof 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 each Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors each Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers in such Borrower consistent with its current policies as of the ordinary course of business and in accordance with the then current return policy of Borrowersdate hereof; (h) Borrowers and Guarantors each Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofAgent, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor, and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shallBorrower shall cause, at Borrower's expense, RGIS or a such other third party inventory counting service on behalf of Borrowers and Guarantors shall, firm acceptable to Lender to conduct a complete physical count of the Inventory at least a minimum of once each fiscal quarter as to non-perishable Inventory of the Retail Division every twelve (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (212) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, months but in each case at any time or times as Agent Lender may request on or after upon the occurrence of an Event of Default, and promptly following any such physical inventory count such firm shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time twice in any twelve (12) month period, but at any time or times as Agent Lender may request on or after upon the occurrence of an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and Lender by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory with the right exception of return given to retail customers of Borrowers Inventory sold in the ordinary course of Borrower's business subject to Borrower's normal and in accordance with the then current customary return policy of Borrowerspolicy; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalapproval except as set forth on Schedule 7.3(i) hereto; (j) Borrower shall not convert any Inventory to Rental Inventory without five (5) Business Days' prior written notice to Congress in order that Congress may exclude such Inventory from Eligible Inventory in calculating the amount of Revolving Loans available to Borrower hereunder; and (k) Borrower may return Inventory to vendors of such Inventory pursuant to normal returns policies free and clear of Lender's lien; provided, however that upon an Event of Default, Borrower shall not return any Inventory to vendors of such Inventory without Lender's prior written consent.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality, quantity and aging of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, each Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors no Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its a Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, Borrowers shall, at their its expense, no more than one two times in any twelve (112) month period, but at any time or times as Agent may request at Agent's expense, or at any time or times as Agent may request at Borrowers' expense on or after an Event of Default, deliver or cause to be delivered to Agent written reports or appraisals or appraisal updates 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 is expressly permitted to rely; (e) upon Agent's request, Borrowers shall, at their expense, conduct through RGIS Inventory Specialists, Inc. or another inventory counting service acceptable to Agent, a physical count of the Inventory in form, scope and methodology acceptable to Agent no more than once in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event times as Agent may request in the event of Default shall exist or have occurredtest count variances is in excess of 5% of the Cost of all Eligible Inventory, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.promptly

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals there from and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Guarantor's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Guarantor shall, at their its expense, no more than one four (14) time times in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Guarantor shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers except in the ordinary course of business and Guarantors then only on prompt reporting thereof to Lender Guarantor shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Guarantor shall keep the Inventory in good and marketable condition, subject to normal deterioration of produce, deli and bakery food products, expired foods, and products with short expiration dates or shelf-life; and (i) upon Agent's requestexcept in the ordinary course of business and then only on prompt report thereof to Lender, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Guarantor shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its the business that are of Borrower, (ii) for Inventory purchased by Borrower from a third party which is in transit to a location set forth or permitted herein and is identified to Lender as Inventory in transit, (iii) to move Inventory from time to time in the ordinary course of business to third party processors or outside contractors in order for such third party or outside contractor to process or otherwise work with such Inventory; provided, that, all such Inventory is reported to Agent in accordance with the terms hereof Lender as Inventory at such third party locations, and except (iv) 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of DefaultDefault exists or has occurred and is continuing, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain in the event that the amount of Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, shown on the one hand, books and Borrowers and Guarantors, records of Borrower is greater than the amount of Inventory based on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition physical count of the Inventory by more than five (5%) percent at any time (but nothing contained herein shall be construed at any time or times as the basis for any liability Lender may request on or after an Event of any Borrower Default exists or Guarantor as to any third partyhas occurred and is continuing); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon AgentLender's request, Borrowers Borrower shall, at their its expense, conduct through an RGIS Inventory Specialists, Inc. or another inventory counting service acceptable to AgentLender, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurredLender, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.of

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor Borrowers shall at all times maintain Inventory records reasonably satisfactory to Agents, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrowers' cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Agents may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Agents with a report in the form and with such specificity as may be reasonably satisfactory to Agent Agents concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentAgents, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrowers' business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon either Agent's request, Borrowers shall, at their expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as either Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Agents written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Agents and by an appraiser acceptable to AgentAgent , addressed to Agent and Lenders and Agents or upon which Agent and Lenders Agents are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects Applicable Law (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor Borrowers to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofAgents, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping in all material respects correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of Inventory, the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and Borrower at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof and except to move Inventory directly from one location of Borrower set forth or permitted herein to another such location of Borrower (so long as a Uniform Commercial Code financing statement between Lender, as secured party and except for Borrower, as debtor, covering such Inventory shipped from has previously been recorded in the manufacturer thereof to appropriate governmental offices of the jurisdiction of such Borrower or Guarantor which is in transit to the locations set forth or permitted hereinlocation); (d) upon Agent's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fe) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gf) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any such Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hg) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (ih) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalapproval except in the ordinary course of its business.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's or Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers (other than Sumco and Guarantors shall, H&H Electronic) shall conduct a physical count of the their Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the and Sumco and H&H Electronic shall conduct a physical count of their Inventory of the Distribution Divisionat least once a month, but (in each case any case) at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) upon Agent's request, Borrowers shall, at their expense, no more than two (2) times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent a written assayer's report as to the Precious Metal Inventory in form, scope and methodology acceptable to Agent and by an assayer acceptable to Agent, addressed to Agent and Lenders upon which Agent and Lenders are expressly permitted to rely; (f) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fg) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gi) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hj) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (year or on provide inventory cycle count data in form and after the establishment of a stock ledger inventory system at the Retail Division that is substance satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times Agent at least twice each year as with respect to Inventory those of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets their locations at which physical counts are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be otherwise conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, (but in each case at any time or times as Agent may request on or after an Event of Default, Borrowers and Guarantors shall conduct a physical count of the Inventory), and promptly following any such physical inventory and/or provision of cycle count data in form and substance satisfactory to Agent, shall supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical countcount and/or cycle count data; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one (1) time twice in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower shall, and Guarantor Parent shall cause each Obligor and L/C Debtor to, at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality, location and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliableBorrower's or Obligor's or L/C Debtor's cost therefor, consistent and accurate stock ledger inventory system at the Retail Division)Sales Price thereof (including markdowns with respect thereto) and daily withdrawals therefrom and additions thereto in accordance with such Borrower's or Obligor's or L/C Debtor's existing business practices; each Borrower, (b) Borrowers Obligor and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, L/C Debtor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors each Borrower shall not remove remove, and Parent shall cause each Retail Store Subsidiary and each other Obligor and L/C Debtor to not remove, any Inventory from the locations set forth or permitted hereinon Omnibus Schedule 2 hereto, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof as permitted hereby and except to move Inventory directly from one location set forth or permitted herein to another any other 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrowers' Agent shall, at their its expense, no more than one (1) time three times in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and Lender by an appraiser acceptable Gordon Brothers Partners, Inc. or by any othex xxxxxxxxx xxceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors each Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Inventory; each Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such InventoryInventory except with respect to a customer which is a Retail Store Subsidiary; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors each Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors each Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalapproval except with respect to sales of Inventory to Retail Store Subsidiaries. Borrowers shall not sell any Inventory to any Person other than to any other Borrower or to any Retail Store Subsidiaries or other Obligor without Lender's written consent, except, that, Borrowers may sell Inventory to a Person which is not a US Subsidiary (i) in an aggregate amount in any single transaction or related series of transactions of up to $10,000,000, provided, that, such Inventory is not sold for a sales price below fifty (50%) percent (but such percentage shall be increased to seventy-five (75%) percent if any of the Blocked Account Conditions exist and are continuing) of the cost for such Inventory, the purchase price therefor is due and payable on or before delivery to the buyer thereof, written notice thereof is given to Lender pursuant to Section 7.1(c)(iii) hereof, and, if any of the Blocked Account Conditions exist, all proceeds of such sales of Inventory are immediately paid to Lender, and (ii) where Inventory has been acquired by Borrowers for the specific purpose of resale thereof to such Person, provided that, such Inventory is not sold for a sales price below one hundred (100%) percent of the cost for such Inventory, the entire purchase price therefor is due and payable on or before delivery to the buyer thereof, written notice thereof is given to Lender pursuant to Section 7.1(c)(iii) hereof and the entire proceeds of such sale are immediately paid to Lender. Upon delivery to or for the account of any Borrower, Parent or other Subsidiary of documents of title with respect to Inventory accompanying drafts under a letter of credit opened for the account of any of Borrowers or otherwise relating to Inventory, such documents of title shall be immediately delivered to and held by a customs broker or freight forwarder who has executed a bailment letter with respect thereto in favor of Lender, in form and substance satisfactory to Lender, or, if an Event of Default has occurred, as Lender otherwise directs. All inventory acquired pursuant to the Additional L/C Accommodations shall be owned by and title thereof shall only be in the name of Borrowers, until resold to a Retail Store Subsidiary and all bills of lading with respect to the importation of such inventory into the United States shall be delivered by an overnight courier service only to a customs broker who has executed a bailment letter with respect thereto in favor of Lender, in form and substance satisfactory to Lender. Borrowers shall not use any customs broker or freight forwarder for the importation of Inventory into the United States or any cargo consolidator or store any of their Eligible Inventory nor permit the Additional L/C Debtors to store any of their finished goods inventory outside the United States (other than such inventory which is in transit and covered by a bill of lading issued by a third party and fxxxxhed goods inventory for which the purchase price has not been paid to the manufacturer thereof located at the premises of such manufacturer) with any Person, except, with respect to each of the foregoing, for any such Person who has executed a bailment letter with respect thereto in favor of Lender, in form and substance satisfactory to Lender.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory as required by and in accordance with GAAP and Borrowers’ own internal controls at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any other reasonable time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 a Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent's ’s request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 material conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the its production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, approval or any other similar basis which entitles the customer to return or may obligate any Borrower or Guarantor Borrowers to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower Borrowers to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor ------------------- shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: Inventory (other than consignment Inventory and supplies): (a) each Borrower and Guarantor Loan Party shall at all times maintain inventory records reasonably satisfactory to the Administrative Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Loan Party’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Loan Parties shall conduct a physical count of the Inventory (i) at least any time any Agent may request (provided that any Agent shall make such a request no more frequently than once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each in any calendar year) and once each fiscal four (4ii) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as any Agent may request on or after an Event of Default, and in each case promptly following any such physical inventory count shall supply any Agent with a report in the form and with such specificity as may be reasonably satisfactory to such Agent concerning such physical count; (ccount;(c) Borrowers and Guarantors the Loan Parties shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of the Administrative Agent and the Collateral Agent, except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except business, (ii) to move Inventory directly from one location set forth on Schedule 7.01(bb) or permitted herein to another such location location, and except (iii) for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor Loan Party which is in transit to the locations set forth or permitted herein; (d) upon the Administrative Agent's ’s request, Borrowers the Borrower shall, at their its expense, no more than one (1) time in any twelve (12) month period, but at any time or times as the Administrative Agent may request on or after an Event of Default, deliver or cause to be delivered to the Administrative Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to the Administrative Agent and by an appraiser acceptable to the Administrative Agent, addressed to Agent Agents and Lenders and upon which Agent Agents and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors the Loan Parties 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor Loan Party assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors the Loan Parties shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor Loan Party to repurchase such Inventory; except for (i) the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Loan Parties shall keep the Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Loan Parties shall not, without prior written notice to the Administrative Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead the Borrower to the Administrative Agent pursuant to Section 7.1(a9.03(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's or Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one four (14) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals and drawdowns therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted hereinherein (other than Inventory received for testing or delivered as samples with a Value not to exceed $100,000 in the aggregate per annum), without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's requestsubject to limitation on expenses set forth in Section 9.15 hereof, Borrowers Borrower shall, at their its expense, no more than one at least once every six (16) time in any twelve (12) month periodmonths, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory inventory on consignment or approvalapproval except pursuant to processing or tolling agreements; and (j) Borrower shall not commingle Inventory with goods or materials of customers or other third parties.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor the Borrowers shall at all times maintain inventory records satisfactory to Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of Inventory, the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent applicable Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) the Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of DefaultDefault that has occurred and is continuing, and promptly following any such physical inventory 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) the Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course Ordinary Course of its business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, ’s request the Borrowers shall, at their its expense, but no more than one (1) time once in any twelve six (126) month period, but at any time or times as Agent may request on or after an Event of DefaultDefault that has occurred and is continuing, deliver or cause to be delivered to Agent 67 written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Required Lenders and by an appraiser acceptable to AgentRequired Lenders, addressed to Agent and Lenders and or upon which Agent and Lenders are is expressly permitted to rely; (e) the Borrowers and Guarantors shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) the Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor the Borrowers to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) the Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, the Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofAgent, acquire or accept any Inventory on consignment or approval.approval and (j) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records in a manner consistent with its current practices as of the date hereof Effective Date (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent and accurate stock ledger perpetual inventory system at the Retail DivisionDivision for pharmacy and non-perishables), (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, conduct a physical count of the Inventory at least once twice each fiscal quarter year as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger retail perpetual inventory system for pharmacy or non-perishables at the Retail Division that is satisfactory to Borrowers and Administrative Agent, two one (21) times time each yearyear with respect to pharmacy and/or non-perishables, as applicable, whether through periodic cycle counts or otherwise) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereofEffective Date) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Administrative Agent may request on or after an Event of Default, and promptly following any such physical inventory shall supply Administrative Agent with a report in the form and with such specificity as may be reasonably satisfactory to Administrative Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Administrative Agent, except for sales, returns or transfers of Inventory in the ordinary course of its business that are reported to Administrative Agent in accordance with the terms hereof 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 shall, at their expense, no more (i) not less than one (1) time in any twelve (12) month period, but if Excess Availability at all times during such twelve (12) month period is greater than an amount equal to twenty (20%) percent of the Total Borrowing Base, (ii) not less than two (2) times in any twelve (12) month period, if Excess Availability at any time during such twelve (12) month period is less than or equal to an amount equal to twenty (20%) percent of the Total Borrowing Base and (iii) at any time or times as Administrative Agent may request on or after an Event of DefaultDefault or at Administrative Agent’s own expense, in each case, deliver or cause to be delivered to Administrative Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Administrative Agent and by an appraiser acceptable to Administrative Agent, addressed to Administrative Agent and Lenders and upon which Administrative Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Administrative Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Administrative Agent's ’s request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Administrative Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Administrative Agent (but only to the extent that a physical count that is acceptable to Borrowers and Administrative Agent has not been conducted by such inventory counting service within the immediately preceding two fiscal quarter quarters so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereofEffective Date) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Administrative Agent and Borrowers shall promptly deliver confirmation to Administrative Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.. 106

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwise, as wall to wall counts so that all Inventory is subject to such counts at least once each year during the Inventory of the Distribution Division, term hereof but in each case at any time or times as Agent Lender may request on or after an Event of DefaultDefault and for so long as the same is continuing, and promptly following any such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 Lender’s request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) consecutive month periodperiod (and two (2) times in the event that Excess Availability at any time shall be less than $15,000,000), but and at any time or times at Borrowers’ expense as Agent Lender may request on or after upon the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableBorrower’s or Guarantor’s Inventory, consistent such Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers each Borrower and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the its Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any 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) Borrowers and Guarantors no Borrower or Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its such Borrower’s or Guarantor’s business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers and Guarantors shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably 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 Maximum Credit, 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 Maximum Credit, no more than two (2) such written appraisals 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 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 relyrely as follows: (i) so long as Compliance Excess Availability is greater twenty (20%) percent of the Maximum Credit, 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 Maximum Credit, 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; (ef) 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 Maximum Credit, 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 Maximum Credit, 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 Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (fh) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, 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 Inventory; (but nothing contained herein shall be construed as the basis for any liability of any j) no Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any such Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers any Borrower or Guarantor in the ordinary course of the business and of such Borrower or Guarantor in accordance with the then current return policy of Borrowerssuch Borrower; (hk) Borrowers each Borrower and Guarantors Guarantor shall keep the Inventory in good and marketable condition; and (il) upon Agent's request, Borrowers no Borrower or Guarantor shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead such Borrower or Guarantor to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, each Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors no Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrowers' business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, Borrowers shall, at their expense, no more than one once in every six (1) time in any twelve (126) month period, but at any time or times as Agent Lender may request at Lender's expense, or at Borrowers' expense any time or times as Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.appraiser

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 Borrower shall, at their its expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each proceeds thereof; Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers in Borrower consistent with its current policies as of the ordinary course of business and in accordance with the then current return policy of Borrowersdate hereof; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval. In addition to, and not in limitation of, anything to the contrary contained herein, Agent shall have the right to request the delivery to Agent of all documents, invoices and bills of lading relating to any in-transit Inventory.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after while an Event of DefaultDefault exists, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers Borrower shall not, and Guarantors shall cause MCE and Saitek US not to, remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower’s, MCE’s or Saitek US’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's request, Borrowers Borrower shall, at their its expense, at Lender’s request but, no more than one (1) time once in any twelve three (123) month periodperiod if an Event of Default does not exist, but and at any time or times as Agent Lender may request on or after an and while Event of DefaultDefault exists, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers Borrower shall, and Guarantors shall cause MCE and Saitek US to, produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers Borrower shall not, and Guarantors shall cause MCE and Saitek US not to, sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower Borrower, MCE or Guarantor Saitek US to repurchase such Inventory; , except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowersor unless such Inventory is not Eligible Inventory; (h) Borrowers Borrower shall, and Guarantors shall cause MCE and Saitek US to, keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, and shall cause MCE and Saitek not to, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approval.”

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, otherwise at least once each year but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory (whether pursuant to periodic cycle counts or otherwise) 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) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 Table of Contents locations set forth or permitted herein; (d) upon Agent's ’s request, Borrowers Borrower shall, at their its expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each proceeds thereof; (g) Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval. In addition to the foregoing, in the event that the Borrower, at any time, has Inventory on consignment having a value in excess of $1,000,000 in the aggregate, Borrower, at the request of Agent, shall obtain consignee waivers, which shall be in form and substance satisfactory to Agent, from any consignee in possession or control of Inventory having a value in excess of $300,000.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to the Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) the Borrowers and Guarantors shall, or a third party inventory counting service on behalf shall continue their current practices for conducting physical counts of Borrowers and Guarantors shall, conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that distribution centers and the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that retail stores but shall also conduct such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the of such Inventory of the Distribution Division, but in each case at any time or times as the Agent may request on or after an Event of Default, and promptly following any such physical inventory shall supply the Agent with a report in the form and with such specificity as may be reasonably satisfactory to the Agent concerning such physical count; (c) the Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted hereinin the Security Documents, without the prior written consent of the Agent, except for sales, returns sales or transfers other dispositions of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 the Agent's ’s request, the Borrowers shall, at their expense, no more than one three (13) time times in any twelve (12) month period, but at any time or times as the Agent may request on or after an Event of DefaultDefault or at any time Excess Availability is less than $150,000,000, and in any event at any time at the expense of the Lenders, deliver or cause to be delivered to the Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to the Agent and by an appraiser acceptable to the Agent, addressed to the Agent and Lenders and upon which the Agent and Lenders are expressly permitted to rely; (e) the Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition none of the Inventory or other Collateral constitutes farm products (but nothing contained herein shall be construed as defined in the basis for any liability of any Borrower UCC) or Guarantor as to any third party)the proceeds thereof; (g) the Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis upon which entitles the customer has a right to return or may obligate obligates any Borrower or Guarantor to repurchase such Inventory (it being acknowledged that this does not include discretionary decisions on the part of the Borrowers and Guarantors to repurchase Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers); (h) the Borrowers and Guarantors shall keep maintain current rent payments (within applicable grace periods contained in the leases) at all locations that contain Inventory in good and marketable condition; and (i) upon the Borrowers and the Guarantors shall provide Agent with a weekly report of new purchases of Inventory consisting of produce, dairy, meat and seafood or other categories or departments of Inventory as designated by the Agent's request; in the event that Agent determines Inventory turnover or the nature, Borrowers shallquality, at their expensequantity, conduct through an inventory counting service acceptable to Agent, a physical count gross margin or mix of the Inventory of has deteriorated, Agent shall, in its sole discretion, have the Retail Division and the United Wholesale Division in form, scope and methodology acceptable right to Agent (but only to the extent that establish a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approvalReserve.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor Debtor shall at all times maintain inventory records reasonably satisfactory to Secured Party, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Debtor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, each Debtor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Secured Party may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Secured Party with a report in the form and with such specificity as may be reasonably satisfactory to Agent Secured Party concerning such physical count; (c) Borrowers and Guarantors each Debtor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentSecured Party, except for sales, returns or transfers sales of Inventory in the ordinary course of its each Debtor’s business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon Agent's Secured Party’s request, Borrowers each Debtor shall, at their its expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent Secured Party may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Secured Party written reports or appraisals as to the Inventory in form, scope and methodology reasonably US OBLIGORS GSA acceptable to Agent Secured Party and by an appraiser acceptable to AgentSecured Party, addressed to Agent and Lenders and Secured Party or upon which Agent and Lenders are Secured Party is expressly permitted to rely; (e) Borrowers and Guarantors each Debtor shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor Debtor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors each Debtor shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor such Debtor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors each Debtor shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors each Debtor shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofSecured Party, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the InventoryInventory of any Domestic Loan Party that is included by the Borrowers as Eligible Inventory in the calculation of the Borrowing Base: (a) each Borrower and Guarantor such Loan Party shall at all times maintain inventory records reasonably satisfactory to the Administrative Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent such Loan Party's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, such Loan Parties shall conduct a physical count of such the Inventory at least once each fiscal quarter as to non-perishable Inventory of any time the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Administrative Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Defaultreasonably request, and promptly following any such physical inventory shall supply the Administrative Agent with a report in the form and with such specificity as may be reasonably satisfactory to the Administrative Agent concerning such physical count; (c) Borrowers and Guarantors such Loan Parties shall not remove any such Inventory from the locations set forth or permitted herein, without the prior written consent of the Administrative Agent, except for sales, returns or transfers sales of such Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except to move such Inventory directly from one location set forth or permitted herein to another such location and except for such Inventory shipped from the manufacturer thereof to such Borrower or Guarantor Loan Party which is in transit to the locations set forth or permitted herein; (d) upon the Administrative Agent's request, the Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to the Administrative Agent 67 written appraisals as to the such Inventory in form, scope and methodology reasonably acceptable to the Administrative Agent (and consistent with the methodology used by Hilco) by Hilco or an appraiser reasonably acceptable to the Administrative Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors such Loan Parties shall produce, use, store and maintain the such Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of such Inventory constitutes farm products or the one hand, and Borrowers and Guarantors, on the other hand, proceeds thereof; (g) each Borrower and Guarantor such Loan Party assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)such Inventory; (gh) Borrowers and Guarantors such Loan Parties shall not sell such Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor such Loan Party to repurchase such Inventory; except for the right of return given to retail customers of Borrowers Inventory (unless such Inventory may be returned only if it is not damaged and is resalable in the ordinary normal course of business and in accordance with the then current return policy of Borrowersbusiness); (hi) Borrowers and Guarantors such Loan Parties shall keep the such Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Loan Parties shall not, without prior written notice to the Administrative Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead the Administrative Borrower to the Administrative Agent pursuant to Section 7.1(a8.05(a) hereof, acquire or accept any such Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after at any time an Event of DefaultDefault exists or has occurred and is continuing, and promptly following any such physical inventory shall supply Agent with a report in the such form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any their insurance and in material conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (e) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for , other than the right of customers to return given any product that does not meet the specifications provided to retail customers of Borrowers in by the ordinary course of business and customer in accordance with Borrowers' current practices as in effect on the then current return policy of Borrowersdate hereof; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers each Borrower and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Guarantor shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether either through periodic cycle counts or otherwisewall to wall counts, as so that all Inventory is subject to the Inventory of the Distribution Division, such counts at least once each year but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuance of an Event of Default, and promptly following any 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 in good faith concerning such physical count; (c) Borrowers except as permitted under Section 9.2 hereof, each Borrower and Guarantors Guarantor shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 a Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent's request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely, (i) two (2) times in any consecutive twelve (12) month period at Borrowers’ expense, (ii) in addition to the appraisals delivered pursuant to clause (i) above, one (1) additional time in each consecutive twelve (12) month period at Borrowers’ expense if (A) Excess Availability shall be less than $110,000,000 on any day during such consecutive twelve-month period or (B) since the date hereof, Borrowers shall have closed twelve (12) or more stores (other than “hometown” and “express” stores) or twenty (20) or more “hometown” and “express” stores, in each case, excluding (x) all stores to be closed (not to exceed 15 stores) as part of the Pamida-ShopKo conversion store closings occurring within one (1) year of the date hereof and (y) all Pamida stand-alone pharmacy stores to be closed within one (1) year of the date hereof, (iii) in addition to the appraisals delivered pursuant to clauses (i) and (ii) above, at any time or times as Agent may request at Borrowers’ expense upon the occurrence and during the continuance of an Event of Default and (iv) in addition to the appraisals delivered pursuant to clauses (i), (ii) and (iii) above, at any additional time or times as Agent may request at the expense of Lenders; (e) Borrowers each Borrower and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) upon Agent’s request, each Borrower shall, at its expense, conduct through RGIS Inventory Specialists, Inc., WIS International, Inc. or another inventory counting service acceptable to Agent, a physical count of the Inventory in form, scope and methodology acceptable to Agent no more than one (1) time in any consecutive twelve (12) month period, but at any time or times as between Agent may request at any time an Event of Default exists or has occurred and is continuing or at any time or times as Agent may request in the event of test count variances in excess of the shrinkage reserve established by Borrowers, the results of which shall be reported directly by such inventory counting service to Agent and Lenders, on each Borrower shall promptly deliver confirmation in a form satisfactory to Agent that appropriate adjustments have been made to the one hand, and Borrowers and Guarantors, on inventory records of such Borrower to reconcile the inventory count to such Borrower’ inventory records; (g) none of the Inventory or other hand, Collateral constitutes farm products or the proceeds thereof; (h) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory Inventory; (but nothing contained herein shall be construed as the basis for any liability of any i) no Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers Borrower in the ordinary course of the business and of Borrowers in accordance with the then current return policy of Borrowers; (hj) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall notno 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 Lead Borrower Borrowers to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval; and (l) except as disclosed to Agent, no Inventory of Borrowers with an aggregate Cost in excess of $6,500,000 shall be in the possession or control of bailees or other third parties except to the extent that Agent shall have received a Collateral Access Agreement duly executed and delivered by such bailees or other third parties.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lenders and Lenders' Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory with respect to Inventory counting service on behalf of Borrowers and Guarantors shall, (i) each Borrower shall conduct a physical count of the its Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic unless such Borrower's cycle counts or otherwise, of Inventory during such year are reasonably acceptable to Lender as to the scope, methodology and frequency and are at least ninety-five (95%) percent accurate when compared with such Borrower's Inventory of the Distribution Divisionaccounting records, but in each case (ii) Borrowers shall conduct a physical inventory at any time or times as Lenders' Agent may request on or after and during the continuance of an Event of Default, and (iii) promptly following any such physical inventory or each cycle count, upon request by Lenders' Agent, each Borrower shall supply Lenders' Agent with a report in the form and with such specificity as may be reasonably satisfactory to Lenders' Agent and Lenders concerning such physical count or cycle count; (c) Borrowers and Guarantors no Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Lenders' Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its such Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon request by Lenders' Agent's request, Borrowers each Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Lenders' Agent or either Lender may request on or after and during the continuance of an Event of Default, deliver or cause to be delivered to Lenders' Agent 67 written reports of appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Lenders' Agent and by an appraiser acceptable to AgentLenders, addressed to Lenders' Agent and Lenders and or upon which Lenders' Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors each Borrower shall produce, use, store and maintain the Inventory its Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended amended, and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)its Inventory; (g) Borrowers and Guarantors no Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; , except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowerspast practices or policies previously disclosed in writing to Lenders' Agent; (h) Borrowers and Guarantors each Borrower shall keep the its Inventory in good and marketable conditionsaleable condition except for Inventory, separately reported to Lender, as to which it is commercially uneconomical to do so or which is obsolete (all Inventory so reported to be excluded from Eligible Inventory); and (i) upon Agent's request, Borrowers no Borrower shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLenders' Agent, acquire or accept any Inventory on consignment or approval, except if the acquisition or acceptance of any such Inventory so acquired is separately reported in writing to Lenders' Agent upon receipt thereof by such Borrower, and provided such Inventory is readily identifiable or is segregated from other Inventory (but Lenders' Agent may, in its discretion, establish Availability Reserves to cover possible claims by the consignor as to such consigned Inventory or the products or the proceeds thereof).

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after and during the continuance of an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one two (12) time times in any twelve (12) month period, and at any other time prior to an Event of Default thereafter, at Lender's expense, but at any time or times as Agent Lender may request on or after and during the continuance of an Event of Default, at Borrower's expense, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each proceeds thereof; (g) Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable conditioncondition except for shrinkage of Inventory that occurs in the ordinary course of Borrower's business in an aggregate amount not to exceed $250,000 in Value in any of Borrower's fiscal years; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: Inventory (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate inventory records itemizing and describing the kind, type, quality and quantity of Inventory and such Borrower’s cost therefor, in a manner each case consistent with its current practices as of the date hereof (except records reviewed by Agent prior to the extent of changes in such practices as a result of the establishment of a reliable, consistent and accurate stock ledger inventory system at the Retail Division), Original Closing Date; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent or Term Loan Agent may request on or after during the existence of an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except business, (ii) to move Inventory directly from one location set forth or permitted herein to another such location and except location, (iii) for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted hereinherein or (iv) to an outside processor for processing; (d) upon Agent's ’s request, Borrowers Borrower shall, at their expense, no more than one (1) time in any twenty-four (24) month period (or once in any twelve (12) month periodperiod in respect of core Inventory), but at any time or times as Agent may request on or after an Event during the existence of Defaulta Trigger Event, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably by an independent appraiser acceptable to Agent and by applying an appraiser acceptable approach to Agentvaluation which is consistent to the approach used in the appraisals of Borrowers’ Inventory prepared for Agent prior to Original Closing Date, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's or Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after at any time an Event of DefaultDefault exists or has occurred and is continuing, and promptly following any 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 hereinherein and except to return defective or non-conforming Inventory to the manufacturers or vendors thereof; (d) upon Agent's request, Borrowers shall, at their expense, no more less than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.methodology

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent and accurate stock ledger inventory system at the Retail Division), Borrower's cost therefor; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (either through periodic cycle counts or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and otherwise at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory (whether pursuant to periodic cycle counting or otherwise) shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one four (14) time times in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards the requirements of any the insurance maintained by Borrower with respect thereto, and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended amended, the Federal Food, Drug and Cosmetic Act, the Dietary Supplemental Health Education Act, and all rules, regulations and orders related theretoto any of the foregoing); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; Inventory except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.required by

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent and accurate stock ledger inventory system at Borrower's cost therefor, the Retail Division), Sales Price thereof (including markdowns with respect thereto) and daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a complete physical count of the Inventory at least a minimum of once each fiscal quarter as to non-perishable Inventory of the Retail Division every twelve (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (212) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, months but in each case at any time or times as Agent Lender may request on or after upon the occurrence and during the continuance an Event of Default, and promptly following any such physical inventory count shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted hereinherein in excess of Two Hundred Fifty Thousand Dollars ($250,000) during any twelve month period, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request on or after upon the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and Lender by an appraiser acceptable Gordon Brothers Partners, Inc. or by any other xxxxxxxxx xxxxxtable to AgentLender, addressed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to relyrely (with the understanding that Lender may revise the definition of "Eligible Inventory" hereunder or establish Availability Reserves as Lender may deem advisable in its sole discretion based upon the results of such updated appraisals); (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors Borrower shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory with the right exception of return given to retail customers of Borrowers Inventory sold in the ordinary course of Borrower's business subject to Borrower's normal and in accordance with the then current customary return policy of Borrowerspolicy; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalapproval except as set forth on Schedule 7.3(i) hereto.

Inventory Covenants. With respect to the Eligible Inventory: (a) each Borrower and Guarantor the Borrowers shall at all times maintain inventory records reasonably satisfactory to the Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of Eligible Inventory, the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent Borrowers' costs therefor and accurate stock ledger inventory system at the Retail Division), monthly withdrawals therefrom and additions thereto; (b) the Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Eligible Inventory at least once each every fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent the Lenders may request requests on or after an Event of DefaultDefault occurs and is continuing, and promptly following any such physical inventory shall supply the Agent with a report in the form and with such specificity as may be reasonably satisfactory to the Agent concerning such physical count; (c) the Borrowers and Guarantors shall not remove any Eligible Inventory from the locations set forth or permitted herein, without the prior written consent of Agentthe Lenders, except for sales, returns or transfers sales of Eligible Inventory in the ordinary course of its the Borrowers' business that are reported to Agent in accordance with the terms hereof and except to move Eligible 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 hereinlocation; (d) upon Agent's request, the Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory monthly Eligible Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto)laws; (fe) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Eligible Inventory; (gf) the Borrowers and Guarantors shall not sell Eligible Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor the Borrowers to repurchase such Eligible Inventory; except for and (g) the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Eligible Inventory in good and marketable condition; and (i) upon Agent's request, . The Borrowers shallagree that, at their expensethe Borrowers' expense and upon request of the Lenders, a third party appraisal firm may be engaged to conduct through an inventory counting service appraisal of the Borrower's Inventory. The Borrowers agree to cooperate with any such appraisal firm in connection therewith; provided, that such third party appraisal firm shall sign a confidentiality agreement reasonably acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain correct and accurate inventory records reasonably satisfactory to Agent in a substantially the same manner consistent with its current practices as of being maintained on the date hereof (except subject, however, to the extent terms of changes in such practices as a result clause (o) of the establishment definition of a reliableEligible Inventory), consistent keeping records correct and accurate stock ledger inventory system at in all material respects itemizing and describing the Retail Division)kind, type, quality and quantity of Inventory and such Borrower’s or Guarantor’s cost therefor; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that no less frequently than is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance consistent with the current accounting past practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution DivisionGuarantors, but in each case at any time or times as Agent may request on or after upon the occurrence and during the continuance of an Event of Default, and promptly following any such physical inventory shall shall, promptly upon Agent’s request, supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except except: (i) for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except business, (ii) to move Inventory directly from one location set forth or permitted herein (including any new location opened pursuant to Section 9.2 hereof) to another such location and except for location, (iii) Inventory shipped from the manufacturer or distributor thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted hereinherein (including any new locations opened pursuant to Section 9.2 hereof), and (iv) Inventory (other than Inventory consisting of fuel located at leased terminals) having a value not greater than $500,000 in the aggregate any time; (d) upon Agent's ’s request, Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on at the expense of Agent or after at the expense of Borrowers upon the occurrence and during the continuance of an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; provided, that, if a Cash Dominion Period exists, upon Agent’s request, Borrowers shall, at their expense, deliver or cause to be delivered to Agent an additional written inventory appraisal during any twelve (12) month period which shall be in form, scope and methodology reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) as between Agent Borrowers and LendersGuarantors, on the one hand, and Borrowers Agent and GuarantorsLenders, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory Inventory, (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; , except for the right of return given to retail customers of Borrowers such Borrower or Guarantor in the ordinary course of the business and of such Borrower or Guarantor in accordance with the then current return policy of Borrowerssuch Borrower or Guarantor; (hi) Borrowers and Guarantors shall keep the all Eligible Inventory in good and marketable conditioncondition for so long as it constitutes Eligible Inventory; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliable, consistent Inventory. Borrower's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower's business that are reported to Agent in accordance with the terms hereof 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 hereinlocation; (d) upon AgentLender's request, Borrowers Borrower shall, at their its expense, no more than one (1) time twice in any twelve calendar year (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default), deliver or cause to be delivered to Agent 67 Lender written reports or appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an Daley-Hodkin Appraisal Corporation or other appraiser acceptable to AgentLexxxx, addressed xxxxxxsed to Agent and Lenders and Lender or upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower shall produce, use, store and maintain the Inventory Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including including, but not limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (ih) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereofLender, acquire or accept any Inventory on consignment or approvalconsignment.

Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Lender, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent Borrower’s cost therefore and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, Borrower shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent Lender may request on or after an Event of Default, and promptly following any such physical inventory shall supply Agent Lender with a report in the form and with such specificity as may be reasonably satisfactory to Agent Lender concerning such physical count; (c) Borrowers and Guarantors Borrower shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of AgentLender, except for sales, returns or transfers sales of Inventory in the ordinary course of its Borrower’s business that are reported to Agent in accordance with the terms hereof 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 Lender’s request, Borrowers Borrower shall, at their its expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent Lender may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 Lender written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent Lender and by an appraiser acceptable to AgentLender, addressed to Agent and Lenders Lender and upon which Agent and Lenders are Lender is expressly permitted to rely; (e) Borrowers and Guarantors Borrower 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, each proceeds thereof; (g) Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors Borrower shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Borrower shall not, without prior written notice to Agent Lender or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf shall continue their current practices for conducting physical counts of Borrowers and Guarantors shall, conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that distribution centers and the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that retail stores but shall also conduct such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the of such Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory Inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted hereinin the Security Documents, without the prior written consent of Agent, except for sales, returns sales or transfers other dispositions of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but and in addition, at any time or times as Agent may request on or after the occurrence and during the continuance of an Event of DefaultDefault or at any time Excess Availability is less than $125,000,000, and in any event at any time at the expense of the Lenders, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis upon which entitles the customer has a right to return or may obligate obligates any Borrower or Guarantor to repurchase such Inventory; except for Inventory (it being acknowledged that this does not include discretionary decisions on the right of return given to retail customers part of Borrowers in the ordinary course of business and in accordance with the then current return policy of BorrowersGuarantors to repurchase Inventory); and (hg) Borrowers and Guarantors shall keep maintain current rent payments (within applicable grace periods contained in the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereofleases) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent all locations that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approvalcontain Inventory.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory (either in one count or a series of counts) at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's or Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the their Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (year or on provide inventory cycle count data in form and after the establishment of a stock ledger inventory system at the Retail Division that is substance satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle year with respect to those of their locations at which physical counts or otherwise, as to the Inventory of the Distribution Division, are not otherwise conducted (but in each case at any time or times as Agent may request on or after an Event of Default, Borrowers and Guarantors shall conduct a physical count of the Inventory), and promptly following any such physical inventory and/or provision of cycle count data in form and substance satisfactory to Agent, shall supply Agent with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical countcount and/or cycle count data; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time once in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower's or Guarantor's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution caution, ordinary wear and tear and casualty and condemnation excepted and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as to non-perishable Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Default, and promptly following any such physical inventory 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) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 ’s request, Borrowers shall, at their expense, no more than one two (12) time times in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of the one hand, and Borrowers and Guarantors, on Inventory or other Collateral constitutes farm products or the other hand, proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)Inventory; (gh) Borrowers and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return policy of Borrowers; (hi) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (kj) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

Inventory Covenants. With respect to the InventoryInventory of any Domestic Loan Party that is included by the Borrowers as Eligible Inventory in the calculation of the Borrowing Base: (a) each Borrower and Guarantor such Loan Party shall at all times maintain inventory records reasonably satisfactory to the Administrative Agent, keeping correct and accurate inventory records in a manner consistent with its current practices as itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in such practices as a result of the establishment of a reliableInventory, consistent such Loan Party's cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, such Loan Parties shall conduct a physical count of such the Inventory at least once each fiscal quarter as to non-perishable Inventory of any time the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Administrative Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on or after an Event of Defaultreasonably request, and promptly following any such physical inventory shall supply the Administrative Agent 110 with a report in the form and with such specificity as may be reasonably satisfactory to the Administrative Agent concerning such physical count; (c) Borrowers and Guarantors such Loan Parties shall not remove any such Inventory from the locations set forth or permitted herein, without the prior written consent of the Administrative Agent, except for sales, returns or transfers sales of such Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof and except to move such Inventory directly from one location set forth or permitted herein to another such location and except for such Inventory shipped from the manufacturer thereof to such Borrower or Guarantor Loan Party which is in transit to the locations set forth or permitted herein; (d) upon the Administrative Agent's request, the Borrowers shall, at their expense, no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request on or after an Event of Default, deliver or cause to be delivered to the Administrative Agent 67 written appraisals as to the such Inventory in form, scope and methodology reasonably acceptable to the Administrative Agent (and consistent with the methodology used by Hilco) by Hilco or an appraiser reasonably acceptable to the Administrative Agent, addressed to Administrative Agent and Lenders and upon which Administrative Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors such Loan Parties shall produce, use, store and maintain the such Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws in all material respects (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on none of such Inventory constitutes farm products or the one hand, and Borrowers and Guarantors, on the other hand, proceeds thereof; (g) each Borrower and Guarantor such Loan Party assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party)such Inventory; (gh) Borrowers and Guarantors such Loan Parties shall not sell such Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor such Loan Party to repurchase such Inventory; except for the right of return given to retail customers of Borrowers Inventory (unless such Inventory may be returned only if it is not damaged and is resalable in the ordinary normal course of business and in accordance with the then current return policy of Borrowersbusiness); (hi) Borrowers and Guarantors such Loan Parties shall keep the such Inventory in good and marketable condition; and (ij) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors Loan Parties shall not, without prior written notice to the Administrative Agent or the specific identification of such Inventory in a report with respect thereto provided by Lead the Administrative Borrower to the Administrative Agent pursuant to Section 7.1(a8.05(a) hereof, acquire or accept any such Inventory on consignment or approval.

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 inventory records in a manner consistent with its current practices as all material respects itemizing and describing the kind, type, quality and quantity of the date hereof (except to the extent of changes in Inventory, such practices as a result of the establishment of a reliable, consistent Borrower’s or Guarantor’s cost therefor and accurate stock ledger inventory system at the Retail Division), daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, or a third party inventory counting service on behalf of Borrowers and Guarantors shall, shall conduct a physical count of the Inventory at least once each fiscal quarter as either through periodic cycle counts or wall to non-perishable wall counts, so that all Inventory of the Retail Division (or on and after the establishment of a stock ledger inventory system at the Retail Division that is satisfactory subject to Borrowers and Agent, two (2) times each year) and once each fiscal four (4) week period of Borrowers and Guarantors (determined in accordance with the current accounting practices of Borrowers and Guarantors as of the date hereof) as to the perishable Inventory of the Retail Division, three (3) times each year as to Inventory of the United Wholesale Division (provided, that, in the event that the United Wholesale Division Assets are not sold pursuant to the United Wholesale Sale Agreements on or before March 31, 2004, Agent may require that such physical counts be conducted more frequently) and at least once each year, whether through periodic cycle counts or otherwise, as to the Inventory of the Distribution Division, but in each case at any time or times as Agent may request on at any time a Default or after an Event of DefaultDefault exists or has occurred and is continuing, and promptly following any such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each calendar quarter if any such counts are performed within such quarter, or otherwise once each calendar year, with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory having an aggregate value of more than $500,000 in the aggregate, from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales, returns or transfers sales of Inventory in the ordinary course of its business that are reported to Agent in accordance with the terms hereof 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 shall, (i) at their expense, no more than one two (12) time times in any twelve (12) month period, but (ii) at any time or times Agent’s expense, one (1) further additional time, as Agent may request on in such twelve (12) month period and (iii) at any time at Borrowers’ expense as Agent may request if a Default or after an Event of DefaultDefault shall exist or have occurred and be continuing, deliver or cause to be delivered to Agent 67 written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors 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 in all material respects 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); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) as of the date hereof, Borrowers and Guarantors shall do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory; except for Inventory but shall give Agent prior written notice if such practice changes together with such information with respect to the right of return given to retail customers of Borrowers in the ordinary course of business and in accordance with the then current return new policy of Borrowersas may reasonably be requested by Agent; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable conditionall respects as required under the terms of this Agreement; and (i) upon Agent's request, Borrowers shall, at their expense, conduct through an inventory counting service acceptable to Agent, a physical count of the Inventory of the Retail Division and the United Wholesale Division in form, scope and methodology acceptable to Agent (but only to the extent that a physical count that is acceptable to Borrowers and Agent has not been conducted by such inventory counting service within the immediately preceding fiscal quarter so long as no Default or Event of Default shall exist or have occurred or four (4) fiscal week period of Borrowers and Guarantors (determined in accordance with the current accounting principles of Borrowers and Guarantors as of the date hereof) at any time a Default or Event of Default shall exist or have occurred, the results of which shall be reported directly by such inventory counting service to Agent and Borrowers shall promptly deliver confirmation to Agent that appropriate adjustments have been made to the inventory records of Borrowers to reconcile the inventory count to the inventory records of Borrowers; (k) Borrowers and Guarantors shall not, without prior written notice to Agent not acquire or the specific identification of accept any Inventory on consignment or approval unless such Inventory has been specifically identified in a report with respect thereto provided by Lead Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire hereof when required to be included in such report or accept any Inventory on consignment or approvalAgent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.