LOAN AND SECURITY AGREEMENT by and among HANCOCK FABRICS, INC. HF MERCHANDISING, INC. HANCOCK FABRICS OF MI, INC. HANCOCKFABRICS.COM, INC. HANCOCK FABRICS, LLC as Borrowers and HF ENTERPRISES, INC. HF RESOURCES, INC. as Guarantors THE LENDERS AND...

Exhibit 10.13

LOAN AND SECURITY AGREEMENT

by and among

XXXXXXX FABRICS, INC.

HF MERCHANDISING, INC.

XXXXXXX FABRICS OF MI, INC.

XXXXXXXXXXXXXX.XXX, INC.

XXXXXXX FABRICS, LLC

as Borrowers

and

HF ENTERPRISES, INC.

HF RESOURCES, INC.

as Guarantors

THE LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO

GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent, Issuing Bank and Syndication Agent

GE CAPITAL MARKETS, INC.

as Sole Lead Arranger, Manager and Bookrunner

Dated: August 1, 2008

TABLE OF CONTENTS

		Page
SECTION 1	DEFINITIONS	1
SECTION 2	CREDIT FACILITIES	38
2.1	Revolving Loans	38
2.2	Letters of Credit	39
SECTION 3	INTEREST AND FEES	45
3.1	Interest	45
3.2	Fees	46
3.3	Changes in Laws and Increased Costs of Loans	46
SECTION 4	CONDITIONS PRECEDENT	48
4.1	Conditions Precedent to Initial Loans and Letters of Credit	48
4.2	Conditions Precedent to All Loans and Letters of Credit	52
SECTION 5	GRANT AND PERFECTION OF SECURITY INTEREST	53
5.1	Grant of Security Interest	53
5.2	Perfection of Security Interests	54
SECTION 6	COLLECTION AND ADMINISTRATION	58
6.1	Borrowers’ Loan Accounts	58
6.2	Statements	58
6.3	Cash Management; Collection of Collateral Proceeds	59
6.4	Payments.	61
6.5	Taxes	62
6.6	Authorization to Make Loans	65
6.7	Use of Proceeds	65
6.8	Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements	65
6.9	Pro Rata Treatment	66
6.10	Sharing of Payments, Etc	66
6.11	Settlement Procedures	67
6.12	Obligations Several; Independent Nature of Lenders’ Rights	69
6.13	Bank Products	70

i

TABLE OF CONTENTS

(continued)

		Page
SECTION 7	COLLATERAL REPORTING AND COVENANTS	70
7.1	Collateral Reporting	70
7.2	Accounts Covenants	72
7.3	Inventory Covenants	73
7.4	Equipment and Real Property Covenants	73
7.5	Collateral Audit	74
7.6	Power of Attorney	74
7.7	Right to Cure	75
7.8	Access to Premises	75
SECTION 8	REPRESENTATIONS AND WARRANTIES	76
8.1	Existence, Power and Authority	76
8.2	Name; State of Organization; Chief Executive Office; Collateral Locations	76
8.3	Financial Statements; No Material Adverse Change	77
8.4	Priority of Liens; Title to Properties	77
8.5	Tax Returns	77
8.6	Litigation	77
8.7	Compliance with Other Agreements and Applicable Laws	78
8.8	Environmental Compliance	78
8.9	Employee Benefits	79
8.10	Bank Accounts	80
8.11	Intellectual Property	80
8.12	Subsidiaries; Affiliates; Capitalization; Solvency; Material Adverse Effect	80
8.13	Labor Disputes	81
8.14	Restrictions on Subsidiaries	81
8.15	Material Contracts	81
8.16	Credit Card Agreements	82
8.17	Interrelated Businesses	82
8.18	Payable Practices	82
8.19	Accuracy and Completeness of Information	83

ii

TABLE OF CONTENTS

(continued)

		Page
8.20	Intercompany Indebtedness	83
8.21	Survival of Warranties; Cumulative	83
SECTION 9	AFFIRMATIVE AND NEGATIVE COVENANTS	83
9.1	Maintenance of Existence	83
9.2	New Collateral Locations	84
9.3	Compliance with Laws, Regulations, Etc	84
9.4	Payment of Taxes and Claims	85
9.5	Insurance	85
9.6	Financial Statements and Other Information	86
9.7	Sale of Assets, Consolidation, Merger, Dissolution, Etc	89
9.8	Encumbrances	91
9.9	Indebtedness	92
9.10	Loans, Investments, Etc	95
9.11	Restricted Payments	97
9.12	Transactions with Affiliates	98
9.13	Compliance with ERISA	99
9.14	End of Fiscal Years; Fiscal Quarters	99
9.15	Change in Business	99
9.16	Limitation of Restrictions Affecting Subsidiaries	99
9.17	License Agreements	100
9.18	Credit Card Agreements	101
9.19	Minimum Excess Availability	101
9.20	After Acquired Real Property	101
9.21	Foreign Assets Control Regulations, Etc	102
9.22	Costs and Expenses	102
9.23	Further Assurances	103
9.24	Leasehold Estates	104
9.25	Specified Subordinated Debt Documents	104
9.26	Credit Card Agreements	104

iii

TABLE OF CONTENTS

(continued)

		Page
9.27	Post Closing Requirements	104
SECTION 10	EVENTS OF DEFAULT AND REMEDIES	105
10.1	Events of Default	105
10.2	Remedies	108
SECTION 11	JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW	111
11.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver	111
11.2	Waiver of Notices	113
11.3	Amendments and Waivers	113
11.4	Waiver of Counterclaims	115
11.5	Indemnification	116
SECTION 12	THE AGENT	116
12.1	Appointment, Powers and Immunities	116
12.2	Reliance by Agent	117
12.3	Events of Default	117
12.4	GE Capital in its Individual Capacity	117
12.5	Indemnification	118
12.6	Non-Reliance on Agent and Other Lenders	118
12.7	Failure to Act	119
12.8	Additional Loans	119
12.9	Concerning the Collateral and the Related Financing Agreements	119
12.10	Field Audit, Examination Reports and other Information; Disclaimer by Lenders	119
12.11	Collateral Matters	120
12.12	Agency for Perfection	122
12.13	Successor Agent	122
12.14	Other Agent Designations	122
SECTION 13	TERM OF AGREEMENT; MISCELLANEOUS	123
13.1	Term	124

iv

TABLE OF CONTENTS

(continued)

		Page
13.2	Interpretative Provisions	124
13.3	Notices	125
13.4	Partial Invalidity	127
13.5	Confidentiality	127
13.6	Publicity	128
13.7	Successors	128
13.8	Assignments; Participations	129
13.9	Entire Agreement	131
13.10	USA PATRIOT Act	131
13.11	Counterparts, Etc	131
13.12	Designated Senior Debt	131

v

INDEX

TO

EXHIBITS, SCHEDULES AND ANNEXES

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Information Certificate
Exhibit C	Form of Borrowing Base Certificate
Exhibit D	Form of Compliance Certificate
Exhibit E-1	Application for Standby Letter of Credit
Exhibit E-2	Application for Commercial Letter of Credit
Exhibit F	Notice of Borrowing
Exhibit G	Notice of Conversion/Continuation
Exhibit H	Form of Applicable Margin Certificate
Exhibit I	Form of Intercompany Subordination Agreement
Schedule 1.1	Commitments
Schedule 1.2	Customs Brokers
Schedule 1.3	Existing Lenders
Schedule 1.4	Owned Real Properties
Schedule 1.5	Existing Letters of Credit
Schedule 1.6	Bankruptcy Claims and Liens
Schedule 2.1	Lenders
Schedule 5.2(b)	Chattel Paper and Instruments
Schedule 5.2(d)	Deposit Accounts
Schedule 5.2(e)	Investment Property and Investment Accounts
Schedule 5.2(h)	Letters of Credit, Bankers’ Acceptances and Similar Instruments
Schedule 5.2(i)	Commercial Tort Claims
Schedule 5.2(j)	Collateral with Third Parties
Schedule 8.2	Name; State of Organization; Chief Executive Office; Collateral Locations
Schedule 8.4	Priority of Liens; Title to Properties
Schedule 8.6	Litigation
Schedule 8.8	Environmental Compliance
Schedule 8.10	Bank Accounts
Schedule 8.11	Intellectual Property
Schedule 8.12	Subsidiaries; Affiliates; Capitalization; Solvency
Schedule 8.13	Labor Disputes
Schedule 8.15	Material Contracts
Schedule 8.16	Credit Card Agreements
Schedule 8.20	Intercompany Indebtedness
Schedule 9.9	Indebtedness
Schedule 9.10	Loans; Investments
Annex 1	Closing Checklist

vi

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement dated August 1, 2008 is entered into by and among Xxxxxxx Fabrics, Inc, a Delaware corporation (“Parent”), HF Merchandising, Inc., a Delaware corporation (“Merchandising”), Xxxxxxx Fabrics of MI, Inc., a Delaware corporation (“Fabrics MI”), xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation (“Xxxxxxx.xxx”), Xxxxxxx Fabrics, LLC, a Delaware limited liability company (“Fabrics LLC”, and together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each individually a “Borrower” and collectively, “Borrowers” as hereinafter further defined), HF Enterprises, Inc., a Delaware corporation (“Enterprises”), HF Resources, Inc., a Delaware corporation (“Resources”, and together with Enterprises, each individually a “Guarantor” and collectively, “Guarantors” as hereinafter further defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined) and General Electric Capital Corporation, a Delaware corporation, in its capacity as agent for Lenders (in such capacity, “Agent” as hereinafter further defined).

WITNESSETH:

WHEREAS, on March 21, 2007 (the “Petition Date”), Parent, Fabrics MI, Resources, Xxxxxxx.xxx, Merchandising, Enterprises and Fabrics LLC each filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), and on March 21, 2007 such cases were approved for joint-administration by the Bankruptcy Court, with Case No. 07-10353 (the “Reorganization Cases”);

WHEREAS, on July 22, 2008, the Bankruptcy Court entered a Final Order (as hereinafter defined) approving the plan of reorganization of Parent, Fabrics MI, Resources, Xxxxxxx.xxx, Merchandising, Enterprises and Fabrics LLC;

WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders enter into financing arrangements with Borrowers pursuant to which Lenders may make loans and provide other financial accommodations to Borrowers; and

WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;

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

SECTION 1  DEFINITIONS

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

“Accounts” shall mean, as to each Borrower and Guarantor, all present and future rights of such Borrower and Guarantor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

“Adjusted Appraised Fair Market Value” shall mean, as of the date of determination, the value assigned to the Eligible Real Property by CRE Business Property (GE) or any Affiliate of GECC approved by the Agent from time to time, which shall be based upon an appraisal conducted in accordance with Section 7.4.  As of the Closing Date the Adjusted Appraised Fair Market Value of the Baldwyn Real Property is $22,000,000.

“Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), the rate per annum determined by dividing (a) the London Interbank Offered Rate for such Interest Period by (b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is two (2) Business Days prior to the beginning of such Interest Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board) that are required to be maintained by a member bank of the Federal Reserve System.

“Adjusted Excess Availability” shall mean, as of the date of determination, Excess Availability less $7,500,000.

“Administrative Borrower” shall mean Xxxxxxx Fabrics, Inc., a Delaware corporation in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.8 hereof and it successors and assigns in such capacity.

“Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds five (5%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds five (5%) percent or more of any class of Voting Stock or in which such Person beneficially owns or holds five (5%) percent or more of the equity interests and (c) any director or executive officer of such Person.  For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

2

“Agent” shall mean General Electric Capital Corporation, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

“Agent Payment Account” shall mean that certain account of Agent, account number xxxx  in the name of Agent at Deutsche Bank Trust Company Americas in New York, New York (ABA No. xxx) or such other account as Agent may from time to time designate to Administrative Borrower as Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

“Agreement” shall mean this Loan and Security Agreement by and among Borrowers, Guarantors, GE Capital, as Agent and Lender, and the other Lenders from time to time party hereto, as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Applicable Margin” shall mean, at any time, as to the interest rate for Prime Rate Loans and the interest rate for Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below if the Quarterly Average Excess Availability for the immediately preceding calendar quarter is at or within the amounts indicated for such percentage as of the last day of the immediately preceding calendar quarter:

Tier		Quarterly Average Excess Availability		Applicable Eurodollar Rate Margin				Applicable Prime Rate Margin
1		Greater than $30,000,000			1.625	%			0	%
2		Less than or equal to $30,000,000 and greater than $20,000,000			1.875	%			0.25	%
3		Less than or equal to $20,000,000 and greater than $10,000,000			2.125	%			0.375	%
4		Less than or equal to $10,000,000			2.375	%			0.50	%

provided, that (i) the Applicable Eurodollar Rate Margin from the Closing Date through December 31, 2008 shall be 2.25%, and (ii) the Applicable Prime Rate Margin from the Closing Date through December 31, 2008 shall be 0.50%.  Adjustments in the Applicable Margins commencing January 1, 2009 shall be implemented effective as of each January 1, April 1, July 1, October 1, commencing at least five (5) days after the date of delivery to Agent of the Applicable Margin Certificate.  Concurrently with the delivery of the Applicable Margin Certificate herein referenced, Administrative Borrower shall deliver to Agent a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins.  Failure to deliver the Applicable Margin Certificate within five (5) days of the date such certificate is required to be delivered pursuant to Section 7.1(a)(iii) shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Applicable Margins to the highest level set forth in the foregoing grid, until the delivery of the Applicable Margin Certificate demonstrating that such an increase is not required.  If an Event of Default has occurred and is continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the date on which such Event of Default is waived or cured.

3

“Applicable Margin Certificate” shall mean the a certificate substantially in the form of Exhibit H hereto, as such form may from time to time be modified by Agent, which is duly completed (including all schedules thereto) and executed by the chief financial officer or other appropriate financial officer of Borrowers acceptable to Agent and delivered to Agent.

“Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 13.8 hereof.

“Baldwyn Real Property” shall mean the Real Property of Parent located at One Fashion Way, Baldwyn, Mississippi.

“Baldwyn Real Property Sale-Leaseback” shall mean the sale and leaseback of the Baldwyn Real Property, the disposition of which shall be permitted by Section 9.7(b)(vi), provided that:

(a)           the Borrowers shall provide the Agent with at least ten (10) days’ prior written notice (or such shorter period as may be agreed upon in writing by the Agent) of the closing date of the proposed sale-leaseback transaction;

(b)           the purchase price of the Baldwyn Real Property pursuant to such sale-leaseback transaction must be no less than eighty percent (80%) of the then current Adjusted Apprised Fair Market Value of the Baldwyn Real Property;

(c)           the consideration paid to the Borrowers for the Baldwyn Real Property pursuant to such sale-leaseback transaction shall be paid one hundred percent (100%) in cash in immediately available funds, the net proceeds of which shall be applied to the Obligations in accordance with the terms hereof;

(d)           the Borrowers shall have delivered to the Agent no less than five days prior to the disposition of the Baldywn Real Property pursuant to such sale-leaseback transaction, true and complete copies of the most current drafts of any documents, instruments or other similar agreements to be entered into or completed by the applicable Borrower(s) in connection with such disposition, such documentation to be in form and substance reasonably acceptable to the Agent; and

(e)           immediately prior to the consummation of such sale-leaseback transaction the Borrowers shall deliver to the Agent (i) a revised Borrowing Base Certificate, determined as of last Business Day of the weekly or monthly period then most recently completed on a pro forma basis, as applicable pursuant to Section 7.1(a)(i), eliminating therefrom the line item relating to Real Property Availability and revising the amount of the then outstanding Loans to reflect the prepayment of the Loans with net proceeds of such sale-leaseback transaction in accordance with the terms hereof; and (ii) a Collateral Access Agreement.

4

“Bank Product Provider” shall mean any Lender, Affiliate of any Lender or other financial institution (in each case to the extent approved by Agent in writing) that provides any Bank Products to Borrowers or Guarantors.

“Bank Products” shall mean any one or more of the following types or services or facilities provided to a Borrower by Agent, any Lender or any Affiliate of any Lender or any other financial institution acceptable to Agent: (a) credit cards or stored value cards or (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of a Borrower pursuant to agreement or overdraft for any accounts of Borrowers maintained at Agent, any Lender or any Affiliate of any Lender (in each case to the extent approved by Agent) that are subject to the control of Agent pursuant to any Deposit Account Control Agreement to which Agent, such Affiliate of Agent, Lender or Affiliate of Lender is a party, as applicable, and (ii) controlled disbursement services and (iii) Hedge Agreements if and to the extent permitted hereunder.  Any of the foregoing shall only be included in the definition of  the term “Bank Products” to the extent that the Lender, its Affiliate or the other financial institution has been approved by Agent in writing.

“Bankruptcy Claims and Liens” shall mean those claims and Liens existing as of the Closing Date and identified on Schedule 1.6 hereof, which Schedule shall identify the claimant and the amount of the claim of each such claimant.

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended from time to time and the Federal Rules of Bankruptcy Procedure, as amended from time to time.

“Bankruptcy Court” shall have the meaning set forth in the preamble.

“Blocked Account” shall mean a deposit account established and maintained by a Borrower or a Guarantor, at its expense, with such banks as are reasonably acceptable to Agent and subject at all times to a Deposit Account Control Agreement.  The Concentration Account shall constitute a Blocked Account.

“Borrowers” shall mean, collectively, the following (together with their respective successors and assigns):  (a) Xxxxxxx Fabrics, Inc., a Delaware corporation; (b) HF Merchandising, Inc, a Delaware corporation; (c) Xxxxxxx Fabrics of MI, Inc., a Delaware corporation; (d) xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation; (e) Xxxxxxx Fabrics, LLC, a Delaware limited liability company, and (f) any other Person that at any time after the date hereof becomes a Borrower; each sometimes being referred to herein individually as a “Borrower”.

5

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

(a)          the sum of:

(i)           the amount equal to eighty-five (85%) percent of Eligible Credit Card Receivables, plus

(ii)          the amount equal to ninety (90%) percent of the Net Recovery Percentage multiplied by the Value of Eligible Inventory, plus

(iii)         the amount equal to ninety (90%) percent of the Net Recovery Percentage multiplied by the Value of Eligible In-Transit Inventory, plus

(iv)         the amount equal to ninety (90%) percent of the Net Recovery Percentage multiplied by the Value of Eligible LC Inventory, plus

(v)          the amount equal to sixty (60%) percent of Real Property Availability, minus

(b)          Reserves.

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

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

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

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

“Cash Collateral Account” has the meaning set forth in Section 2.2(j).

6

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

“Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower or Guarantor to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the adoption of a plan by the stockholders of any Borrower or Guarantor relating to the dissolution or liquidation of such Borrower or Guarantor, other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than Sopris Capital Partners, LP, Xxxx & Xxxx Enterprises, LLC and Trellus Management and their respective Affiliates, of more than thirty (30%) percent of beneficial ownership, directly or indirectly, of the voting power of the total outstanding Voting Stock of Parent or the Board of Directors of Parent; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors (or similar governing body) of any Borrower or Guarantor (together with any new directors whose nomination for election by the stockholders of such Borrower or Guarantor was approved by a vote of at least a majority of the directors (or similar persons) then still in office who were either directors (or similar persons) at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors (or similar governing body) of any Borrower or Guarantor then still in office; (e) the failure of Parent to own and control, directly or indirectly, one hundred (100%) percent of the voting power of the total outstanding Voting Stock of any other Borrower or Guarantor; provided, however, that any action taken in accordance with the terms of the Plan of Reorganization, the issuance of any Specified Warrant or the conversion of the Specified Warrants into the Specified Common Stock pursuant to the terms of the Specified Warrant shall not be considered a “Change of Control” hereunder; or (f) any “Change of Control” (howsoever defined under the Indenture) occurs.

7

“Closing Date” shall mean August 1, 2008.

“Closing Date Mortgaged Properties” means, collectively, the Real Property owned by the Loan Parties and located at: (i) the Baldwyn Real Property, (ii) 000 Xxxxxxx Xxxx (Xxxx Xxxxxxxx), Xxxxxx, XX, (iii) 0000 Xxxxx Xxxxxx, Xxxxxxx, XX, (iv) 000 Xxxx Xxxxx Xxxxxxx Xxxxxxxxxx, XX and (v) 0000 Xxxxx Xxxxxx Xxxx, Xxxxx, XX.

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

“Collateral” shall mean, collectively, all assets of each Borrower and each Guarantor, in each case, as referred to in Section 5.1 hereof, any Pledge Agreement as “Pledged Collateral” or as “Collateral”, as the case may be, and all other property that is or is intended under the terms of the Security Documents to be subject to liens in favor of the Agent for the benefit of the Lenders and the other Secured Parties.

“Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor (other than lessors of retail store locations, except as otherwise agreed to by Administrative Borrower and Agent), or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

“Commercial Letter of Credit” shall mean any Letter of Credit issued for the purpose of providing the primary manner of payment for the purchase price of goods or services by a Borrower in the ordinary course of the business of such Borrower.

“Commitment” shall mean, at any time, as to each Lender, the principal amount set forth opposite such Lender’s name on Schedule 1.1 hereto or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.8 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”.

“Commitment Termination Date” shall mean the earliest of (a) the Maturity Date, (b) the date of termination of Lenders’ obligations to make Loans and/or incur Letter of Credit Obligations or permit existing Loans to remain outstanding pursuant to Section 10.2(b), and (c) the date of indefeasible prepayment in full in cash by Borrowers of the Loans and the cancellation and return (or stand-by guarantee) of all Letters of Credit or the cash collateralization of all Letter of Credit Obligations pursuant to Section 2.2, and the permanent reduction of all Obligations to zero dollars ($0).

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“Concentration Account” means that certain deposit account maintained with BancorpSouth Bank, with account number 01-210513, in the name of Parent, or any replacement account therefor expressly agreed to in advance in writing by the Agent, which replacement account shall be a Blocked Account.

“Confirmation Order” shall have the meaning set forth in Section 4.1(w).

“Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (and as to Borrowers and Guarantors, excluding to the extent included therein (i) any extraordinary, one-time or non-recurring gains, (ii) extraordinary, one-time or non-recurring non-cash losses or charges, and (iii) operations that have been discontinued on or before the date hereof) after deducting all charges which should be deducted before arriving at the net income (loss) for such period (but without regard to operations that have been discontinued on or before the date hereof) and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not a wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly-owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly-owned Subsidiaries or that Person’s assets are acquired by such Person or by any of its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change in accounting principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded; (d) net income shall exclude interest accruing, but not paid, on indebtedness owing to a Subsidiary or parent corporation of such Person; and (e) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded.  For the purposes of this definition, net income excludes any gain and non-cash loss together with any related Provision for Taxes for such gain and non-cash loss realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions and for this purpose sales or other dispositions of retail store locations shall not be deemed to be in the ordinary course of the business of Borrowers and Guarantors) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income or non-cash loss realized as a result of changes in accounting principles or the application thereof to such Person.

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

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

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

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

“Credit Card Receivables” shall mean, collectively, (a) all present and future rights of any Borrower or Guarantor to payment from any Credit Card Issuer, Credit Card Processor or other third party arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card and (b) all present and future rights of any Borrower or Guarantor to payment from any Credit Card Issuer, Credit Card Processor or other third party in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any Credit Card Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.

“Credit Facility” shall mean the Loans and Letters of Credit provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.

“Customs Broker” shall mean the persons listed on Schedule 1.2 hereto or such other person selected by any Borrower after written notice by such Borrower to Agent who are reasonably acceptable to Agent to perform port of entry services to process Inventory imported by such Borrower from outside the United States of America and to supply facilities, labor and materials to such Borrower in connection therewith.

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

“Defaulting Lender” shall have the meaning set forth in Section 6.11(d) hereof.

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“Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, the Borrower or Guarantor with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by such Borrower or Guarantor and has such other terms and conditions as Agent may require.

“Disclosure Letter” shall mean that Disclosure Letter delivered on the Closing Date pursuant to Section 4.1(f), which letter shall be in form and substance reasonably satisfactory to the Agent.

“Discover Deposit Account” means that certain deposit account maintained with BancorpSouth Bank, with account number xxx in the name of Parent.

“EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person and its Subsidiaries for such period, plus (b) depreciation, amortization, LIFO adjustments consisting of non-cash charges, and other non-cash charges, including imputed interest, deferred compensation and in the case of Borrowers and Guarantors, non-cash costs associated with the closing of retail store locations, in each case for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person).

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

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

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

(c)           such Credit Card Receivables are not unpaid more than five (5) Business Days after the date of the sale of Inventory giving rise to such Credit Card Receivables;

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

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

(f)           such Borrower shall have submitted all materials required by the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivables in order for such Borrower to be entitled to payment in respect thereof;

(g)           the Credit Card Issuer or Credit Card Processor obligated in respect of such Credit Card Receivable has not failed to timely remit any monthly payment in respect of such Credit Card Receivable;

(h)           such Credit Card Receivables comply with the applicable terms and conditions contained in Section 7.2 of this Agreement;

(i)            the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff against such Credit Card Receivables (other than setoffs to fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with such Borrower as of the date hereof or as such practices may change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstance of such Borrower), but the portion of the Credit Card Receivables owing by such Credit Card Issuer or Credit Card Processor in excess of the amount owing by such Borrower to such Credit Card Issuer or Credit Card Processor pursuant to such fees and chargebacks may be deemed Eligible Credit Card Receivables;

(j)            the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not setoff against amounts otherwise payable by such Credit Card Issuer or Credit Card Processor to such Borrower for the purpose of establishing a reserve or collateral for obligations of such Borrower to such Credit Card Issuer or Credit Card Processor (notwithstanding that the Credit Card Issuer or Credit Card Processor may have setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with such Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of such Borrower);

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

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(l)            such Credit Card Receivables are subject to the first priority, valid and perfected security interest and lien of Agent, for and on behalf of itself and Lenders, and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any security interest or lien in favor of any person other than Agent except as otherwise permitted in this Agreement, in each case subject to and in accordance with the terms and conditions applicable hereunder to any such permitted security interest or lien;

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

(n)           such Credit Card Receivables are owed by Credit Card Issuers or Credit Card Processors deemed creditworthy at all times by Agent in good faith;

(o)           no event of default has occurred under the Credit Card Agreement of such Borrower with the Credit Card Issuer or Credit Card Processor who has issued the credit card or debit card or handles payments under the credit card or debit card used in the sale which gave rise to such Credit Card Receivables which event of default gives such Credit Card Issuer or Credit Card Processor the right to cease or suspend payments to such Borrower or any Guarantor and no event shall have occurred which gives such Credit Card Issuer or Credit Card Processor the right to setoff against amounts otherwise payable to such Borrower, including on behalf of a Guarantor (other than for then current fees and chargebacks consistent with the current practices of such Credit Card Issuer or Credit Card Processor as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of such Borrower or any Guarantor), except as may have been waived in writing on terms and conditions reasonably satisfactory to Agent pursuant to the Credit Card Acknowledgment by such Credit Card Issuer or Credit Card Processor, or the right to establish reserves or establish or demand collateral, and the Credit Card Issuer or Credit Card Processor has not sent any written notice of default and/or notice of its intention to cease or suspend payments to such Borrower in respect of such Credit Card Receivables or to establish reserves or cash collateral for obligations of such Borrower to such Credit Card Issuer or Credit Card Processor, and such Credit Card Agreements are otherwise in full force and effect and constitute the legal, valid, binding and enforceable obligations of the parties thereto;

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

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

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Credit Card Receivables which would otherwise constitute Eligible Credit Card Receivables pursuant to this Section will not be deemed ineligible solely by virtue of the Credit Card Agreements with respect thereto having been entered into by any Guarantor, for the benefit of Borrowers.  Agent shall have the right to establish, modify or eliminate Reserves against Eligible Credit Card Receivables from time to time in its reasonable credit judgment.  In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth above, to establish new criteria, and to adjust advance rates with respect to Eligible Credit Card Receivables, in its reasonable credit judgment, subject to the approval of Required Lenders in the case of adjustments or new criteria or changes in advance rates which have the effect of making more credit available.  Any Credit Card Receivables which are not Eligible Credit Card Receivables shall nevertheless be part of the Collateral.

“Elavon” means Elavon, Inc. (formerly Nova Information Systems, Inc.), as processor under the Elavon Processor Agreement.

“Elavon Deposit Account” means that certain deposit account maintained with BancorpSouth Bank, with account number 00000000 in the name of Parent, or any replacement account therefor expressly agreed to in advance in writing by the Agent, which replacement account shall be a Blocked Account.

“Elavon Member” means, as of the date hereof, U.S. Bank, National Association, in its capacity as “Member” under the Elavon Processor Agreement and any replacement “Member” thereunder.

“Elavon Processor Agreement” means that certain Terms of Service agreement, dated on or about the Closing Date, among Parent, Elavon, as processor, and Elavon Member, together with all other agreements, documents and instruments now or at any time hereafter executed and/or delivered in connection therewith.

“Elavon Reserve Account” means that “Reserve Account” identified in the Elavon Processor Agreement as in effect on the date hereof.

“Eligible In-Transit Inventory” shall mean, as of the date of determination, without duplication of other Eligible Inventory, Inventory that as to which: (i) the Inventory is not purchased with and subject to a Letter of Credit, (ii) the Inventory is then in transit (whether by vessel, air or land) from a location outside of the continental United States of America to a location permitted hereunder and for which Agent shall have received such evidence thereof as Agent may require, (iii) has been paid for and the title of the Inventory has passed to, and such Inventory is owned by, a Borrower and for which Agent shall have received such evidence thereof as Agent may require, (iv) Agent has received each of the following: (A) a Collateral Access Agreement, duly authorized, executed and delivered by the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (B) a copy of the certificate of marine cargo insurance in connection therewith in which Agent has been named as an additional insured and loss payee in a manner acceptable to Agent and (C) a copy of the invoice, packing slip and manifest with respect thereto, (v) the Inventory is either (A) subject to a negotiable xxxx of lading: (1) that is consigned to Agent, (2) that was issued by the carrier in respect of such Inventory and (3) is either in the possession of the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy which also confirms that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or (B) subject to a negotiable cargo receipt and is not the subject of a xxxx of lading (other than a negotiable xxxx of lading consigned to, and in the possession of a carrier or Agent, or their respective agents) and such negotiable cargo receipt is (1) consigned to Agent, (2) issued by a carrier in respect of such Inventory and (3) either in the possession of Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy which also confirms that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (vi) such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent, (vii) such Inventory shall not have been in transit for more than forty-five (45) days, and (viii) such Inventory is otherwise deemed Eligible Inventory (other than in respect of its location) hereunder.

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“Eligible Inventory” shall mean, as of the date of determination, as to each Borrower, Inventory of such Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower that satisfy the criteria set forth below as determined by Agent.  In general, Eligible Inventory shall not include:  (a) raw materials and work-in-process; (b) spare parts for equipment; (c) packaging and shipping materials; (d) supplies used or consumed in such Borrower’s business; (e) Inventory at premises other than those owned or leased and controlled by any Borrower except any Inventory (other than Eligible In-Transit Inventory and Eligible LC Inventory) which would otherwise be deemed Eligible Inventory that is not located at premises owned and operated by such Borrower may nevertheless be considered Eligible Inventory: (i) as to retail store locations which are leased by such Borrower, Agent may, at its option, establish such Reserves in respect of amounts at any time payable by such Borrower to the lessor thereof as Agent shall determine in accordance with the definition of Reserves, (ii) as to locations which are leased by such Borrower (other than retail store locations which are leased), if Agent shall have received a Collateral Access Agreement from the lessor of such location, duly authorized, executed and delivered by such lessor, or if Agent shall not have received such Collateral Access Agreement (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Agent shall have established such Reserves in respect of amounts at any time payable by such Borrower to the lessor thereof as Agent shall determine in good faith, and (iii) as to locations operated by a third person, (A) if Agent shall have received a Collateral Access Agreement from such owner with respect to such location, duly authorized, executed and delivered by such operator or if Agent shall not have received such Collateral Access Agreement (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Agent shall have established such Reserves in respect of amounts at any time payable by such Borrower to the owner and operator thereof as Agent shall determine, and (B) in addition, if required by Agent, if Agent shall have received: (1) UCC financing statements between the owner and operator, as consignee or bailee and such Borrower, as consignor or xxxxxx, in form and substance satisfactory to Agent, which are duly assigned to Agent and (2) a written notice to any lender to the owner and operator of the first priority security interest in such Inventory of Agent; (f) Inventory subject to a security interest or lien in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent; (g) xxxx and hold goods; (h) unserviceable, obsolete or slow moving Inventory; (i) Inventory that is not subject to the first priority, valid and perfected security interest of and lien in favor of Agent; (j) returned Inventory that is not saleable and held for sale in the ordinary course of business; (k) damaged and/or defective Inventory; (l) Inventory purchased or sold on consignment; (m) Inventory located outside the United States of America; and (n) Inventory of a Borrower sold under a licensed trademark or trade name or which contains or uses a medium subject to a licensed copyright, unless, on or prior to the forty-fifth (45th) day after the date of this Agreement, either (i) Agent shall be satisfied that it has the right to sell or otherwise dispose of such Inventory without further action or (ii) Agent shall have received a letter agreement, in form and substance satisfactory to Agent, duly authorized, executed and delivered by such Borrower and the applicable licensor.  Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment.  In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth above, to establish new criteria, and to adjust advance rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of Required Lenders in the case of adjustments or new criteria or changes in advance rates which have the effect of making more credit available.  Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

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“Eligible LC Inventory” shall mean, as of the date of determination, without duplication of other Eligible Inventory, Inventory that as to which: (i) the Inventory is purchased with and subject to a Letter of Credit, (ii) the Inventory is then in transit (whether by vessel, air or land) from a location outside of the continental United States of America to a location permitted hereunder and for which Agent shall have received such evidence thereof as Agent may require, (iii) the title of the Inventory has passed to, and such Inventory is owned by, a Borrower and for which Agent shall have received such evidence thereof as Agent may require, (iv) Agent has received each of the following: (A) a Collateral Access Agreement, duly authorized, executed and delivered by the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (B) a copy of the certificate of marine cargo insurance in connection therewith in which Agent has been named as an additional insured and loss payee in a manner acceptable to Agent and (C) a copy of the invoice, packing slip and manifest with respect thereto, (v) the Inventory is either (A) subject to a negotiable xxxx of lading: (1) that is consigned to Agent, (2) that was issued by the carrier in respect of such Inventory and (3) is either in the possession of the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy which also confirms that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or (B) subject to a negotiable cargo receipt and is not the subject of a xxxx of lading (other than a negotiable xxxx of lading consigned to, and in the possession of a carrier or Agent, or their respective agents) and such negotiable cargo receipt is (1) consigned to Agent, (2) issued by a carrier in respect of such Inventory and (3) either in the possession of Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy which also confirms that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (vi) such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent, (vii) such Inventory shall not have been in transit for more than forty-five (45) days, and (viii) such Inventory is otherwise deemed Eligible Inventory (other than in respect of its location) hereunder.

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“Eligible Real Property” shall mean, as to any Borrower, Real Property owned by such Borrower in fee simple in each case which are acceptable to Agent in good faith based on the criteria set forth below. In general, Eligible Real Property shall not include:  (i) Real Property which is not operated by a Borrower except as Agent may otherwise agree; (ii) Real Property subject to a security interest, lien, mortgage or other encumbrance in favor of any person other than Agent (and other than those permitted under Section 9.8(b), 9.8(c) or 9.8(d) hereof or are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such lien and Agent); (iii) Real Property that is not located in the continental United States of America; (iv) Real Property that is not subject to the valid and enforceable, first priority, perfected security interest, lien and mortgage of Agent; (v) Real Property where Agent determines that issues relating to compliance with Environmental Laws adversely affect such Real Property in such manner that such Real Property would not be acceptable for purposes of including it in the calculation of the Borrowing Base based on the customary practices, procedures and policies of Agent and its Affiliates; provided, that, if the Real Property is acceptable for such purposes in accordance with such practices, procedures and policies, subject to the satisfaction of the other conditions set forth herein and any requirements arising pursuant to such practices, procedures and policies, such Real Property will be considered Eligible Real Property but subject to the right of Agent to establish Reserves to reflect the adverse affect of any environmental conditions or events with respect thereto on its value or the ability of Agent to sell or otherwise realize on such Collateral; (vi) Real Property improved with residential housing; (vii) Real Property that is not subject to a then current final written appraisal by an appraiser reasonably acceptable to Agent (which shall be one of the appraisers selected by Agent from its list of approved appraisers), on which Agent and Lenders are expressly permitted to rely, and that is in form, scope and methodology reasonably satisfactory to Agent; (viii) if requested by Agent, Real Property for which Agent shall not have received a then current environmental audit conducted by an independent environmental engineering firm reasonably acceptable to Agent (based on Agent’s list of approved firms  and in form, scope, substance and methodology reasonably satisfactory to Agent, the results of which are satisfactory to Agent; (ix) if requested by Agent, Real Property for which Agent shall not have received, in form and substance reasonably satisfactory to Agent, a valid and effective title insurance policy (whether in the form of a pro form policy or a marked up title policy commitment) issued by a company and agent reasonably acceptable to Agent:  (A) insuring the priority, amount and sufficiency of the Mortgage with respect to such Real Property, (B) insuring against matters that would be disclosed by surveys and (C) containing any legally available endorsements, assurances or affirmative coverage requested by Agent for protection of its interests; and (x) any Real Property other than the Baldwyn Real Property, except as Agent may otherwise agree.  Any Real Property that is not Eligible Real Property shall nevertheless be part of the Collateral.

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“Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent; and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that, (i) neither any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree in writing.

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

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

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

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

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“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan or the taking of any action with respect to a Pension Plan that would require the provision of security pursuant to the Pension Funding Rules; (c) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $750,000 and (g) any other event or condition with respect to a Plan including any Pension Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of any Borrower in excess of $750,000.

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

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

“Excess Availability” shall mean the amount, as determined by Agent, calculated at any time, equal to:

(a)           the lesser of (i) the Borrowing Base or (ii) the Maximum Credit (in each case under (i) or (ii) after giving effect to any Reserves (other than any Reserves in respect of Letters of Credit to the extent such amounts are deducted pursuant to clause (b)(ii) below)), minus

(b)           the sum of (i) the amount of the then outstanding Loans, plus (ii) the aggregate undrawn amount of all outstanding Letters of Credit plus any fees and expenses then due and owing in respect to all Letters of Credit.

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

“Existing Lenders” shall mean the lenders to Borrowers listed on Schedule 1.3 hereto and their respective predecessors, successors and assigns.

“Existing Letters of Credit” means those Letters of Credit identified on Schedule 1.5 hereto.

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“Federal Funds Rate” shall mean, for any day, a floating rate per annum equal to the weighted average of the rates on overnight Federal funds transactions among members of the Federal Reserve System, as determined by Agent in its sole discretion, which determination shall be final, binding and conclusive (absent manifest error).

“Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve System.

“Fee Letter” shall mean the letter agreement, dated of even date herewith, by and among Borrowers and Agent, setting forth certain fees payable by Borrowers in connection with the Credit Facility, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Fees” shall mean any and all fees payable to Agent or any Lender pursuant to this Agreement or any of the other Financing Agreements.

“Final Order” means (a) an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in any Reorganization Case, the docket of an adversary proceedings related to any Reorganization Case or the docket of any other court of competent jurisdiction, (b) that has not been reversed, stayed, modified or amended, (c) as to which the time to appeal or seek certiorari or move for a new trial, reargument or rehearing has expired, and (d) for which no appeal or petition for certiorari or other proceedings for a new trial, reargument or rehearing has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been timely filed has been withdrawn with prejudice or resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or the new trial, reargument or rehearing shall have been denied or resulted in no modification of such order.

“Financing Agreements” shall mean, collectively, this Agreement and all notes, the Letter of Credit Documents, all Security Documents, the Intercompany Subordination Agreement, the Subordination Provisions, the Disclosure Letter, the Transfer of Letter of Credit Liability Letter, all guarantees, all other intercreditor agreements, all subordination agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or Guarantor in connection with this Agreement; provided, that, the Financing Agreements shall not include Hedge Agreements other than Secured Rate Contracts.

“Fiscal Month” shall mean one of the three fiscal periods in a Fiscal Quarter, the first of such periods comprised of four weeks, the second of such periods comprised of five weeks, and the third of such periods comprised of four weeks, with each of the weeks in a Fiscal Quarter ending on the close of business on a Saturday (except that the last fiscal period in the last Fiscal Quarter of a 53 week year shall be five weeks).  There are twelve Fiscal Months in a Fiscal Year.

“Fiscal Quarter” means one of four thirteen or fourteen week quarters in a Fiscal Year, with the first of such quarters beginning on the first day of a Fiscal Year and ending on the Saturday of the last week in such quarter.

“Fiscal Year” shall mean the 52 or 53 week period ending on the Saturday nearest to January 31 of each calendar year.

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“Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than that in which a Borrower is resident for tax purposes.  For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Funding Bank” shall have the meaning given to such term in Section 3.3(a) hereof.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied.

“GE Capital” shall mean General Electric Capital Corporation, a Delaware corporation.

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

“Guarantors” shall mean, collectively, the following (together with their respective successors and assigns): (a) each Borrower, (b) HF Enterprises, Inc., a Delaware corporation; (c) HF Resources, Inc., a Delaware corporation; and (d) any other Person that at any time after the date hereof becomes party to a guarantee in favor of Agent for the benefit of any Secured Party or otherwise liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (other than Borrowers); each sometimes being referred to herein individually as a “Guarantor”.

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

“Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and a Bank Product Provider that is a rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

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“Indebtedness” shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (other than an account payable to a trade creditor (whether or not an Affiliate) incurred in the ordinary course of business of such Person and payable in accordance with customary trade practices); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments; (j) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefor as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefor or such Person has no liability therefor as a matter of law; and (k) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.

“Indenture” shall mean that certain Indenture dated as of June 17, 2008 between Deutsche Bank National Trust Company, as trustee, and the Parent, as Issuer, in respect of the Floating Rate Series A Secured Notes Due 2013.

“Information Certificate” shall mean, collectively, the Information Certificates of Borrowers and Guarantors each substantially in the form of Exhibit B hereto containing material information with respect to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of Borrowers and Guarantors to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

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“Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and Guarantor’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service xxxx applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges arising under applicable law with respect to any Borrower’s or Guarantor’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to xxx for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark, or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration; software and contract rights relating to computer software programs, in whatever form created or maintained.

“Intercompany Indebtedness” shall have the meaning set forth in Section 8.20 hereof.

“Intercompany Royalty Accounts” shall mean, collectively, the following bank accounts maintained at PNC Bank: (a) the bank account of Resources bearing account number xxx and (b) the bank account of Enterprises bearing account number xxx.

“Intercompany Subordination Agreement” shall mean the Intercompany Subordination Agreement substantially in the form of Exhibit I attached hereto executed by the Borrowers and each of their subsidiaries from time to time.

“Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts and bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments.

“Interest Period” shall mean for any Eurodollar Rate Loan, each period commencing on a Business Day selected by Administrative Borrower and ending one (1), two (2), or three (3) months thereafter as selected by Administrative Borrower in an irrevocable notice to Agent as set forth in Section 2.1, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that:

(a)           if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

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(b)          any Interest Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) Business Days prior to such date;

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

(d)          Administrative Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Rate Loan during a Interest Period for such Loan; and

(e)          Administrative Borrower shall select Interest Periods so that there shall be no more than 5 separate Eurodollar Rate Loans in existence at any one time.

“Interest Rate” shall mean,

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

(i)           as to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime Rate Loans on a per annum basis plus the Prime Rate, and

(ii)          as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate.

(b)          Notwithstanding anything to the contrary contained herein, during the continuance of an Event of Default under Sections 10.1(a), 10.1(f), 10.1(g) or 10.1(h) or, during the continuance of any other Event of Default and at election of Agent (or at the direction of the Required Lenders), the Interest Rates applicable to the Loans and Letters of Credit Fees shall be increased by two (2%) percent per annum above the rates of interest or rates for such fees otherwise applicable hereunder.

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

“Investment” shall have the meaning set forth in Section 9.10 hereof.

“Investment Property Control Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower or Guarantor acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, and has such other terms and conditions as Agent may require.

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“Issuing Bank” shall have the meaning set forth in Section 2.2(a).

“Lenders” shall mean (a) GE Capital, the other Lenders named on the signature pages of this Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations in accordance with Section 13.8, such term shall include any assignee of such Lender, and (b) solely for the purpose of (x) obtaining the benefit of the liens granted to Agent for the benefit of Lenders under any Financing Agreement and (y) obtaining the benefit of any guarantees by the Guarantors, a Person to whom any Obligations in respect of a Secured Rate Contract are owed.  For the avoidance of doubt, any Person to whom any Obligations in respect of a Secured Rate Contract are owed and which does not hold any Loans or Commitments shall not be entitled to any other rights as a “Lender” under this Agreement or any other Financing Agreements.

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, including, without limitation, any Master Commercial Agreement and/or Master Standby Agreement, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for i) the rights and obligations of the parties concerned or at risk or ii) any collateral security for such obligations.

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

“Letter of Credit Limit” shall mean $20,000,000.

“Letter of Credit Obligations” shall mean all outstanding obligations incurred by Agent and Lenders, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by the Issuing Bank or the purchase of a participation as set forth in Section 2.2 with respect to any Letter of Credit.  The amount of such Letter of Credit Obligations shall equal the maximum amount that may be payable at such time or at any time thereafter Agent or Lenders thereupon or pursuant thereto.

“Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and whether for the purchase of inventory, equipment or otherwise) issued by an Issuing Bank for the account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof.  The Existing Letters of Credit shall constitute Letters of Credit hereunder for all purposes.

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

“Loans” shall mean the Revolving Loans.

“London Interbank Offered Rate” shall mean, for each Interest Period, a rate of interest determined by Agent equal to the offered rate for deposits in United States dollars for the applicable Interest Period that appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time), on the second full Business Day next preceding the first day of such Interest Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used).  If such interest rates shall cease to be available from Telerate News Service (or its successor satisfactory to Agent), the London Interbank Offered Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Administrative Borrower.

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“Master Commercial Agreement” shall mean the Master Agreement for Commercial Letters of Credit dated as of the Closing Date among Borrowers, as Applicant(s), and GE Capital.

“Master Standby Agreement” shall mean the Master Agreement for Standby Letters of Credit dated as of the Closing Date among Borrowers, as Applicant(s), and GE Capital, as issuer.

“Master Warrant Agreement shall mean the Master Warrant Agreement dated as of June 17, 2008 between Continental Stock Transfer & Trust Company, as Warrant Agent, and Parent, in respect of the Specified Warrants of Parent to be issued thereunder.

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

“Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), written or oral, of any Borrower or Guarantor involving monetary liability of or to any Person in an amount in excess of $5,000,000 in any Fiscal Year and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

“Maturity Date” shall mean the earlier of the date which is (i) August 1, 2013 or (ii) 120 calendar days prior to the “Maturity Date” (as defined in the Indenture).

“Maximum Credit” shall mean the amount of $100,000,000.

“Mortgage” shall means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Borrower or any Guarantor to Agent on behalf of itself and Secured Parties with respect to the Real Property of the Borrowers and the Guarantors, all in form and substance reasonably satisfactory to Agent, including, without limitation, the Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing, dated even date herewith by Parent in favor of Agent with respect to the Real Property and related assets of such Borrower located in Baldwyn, Mississippi, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

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

“Net Recovery Percentage” shall mean the net appraised liquidation value of Borrowers’ Eligible Inventory, Eligible LC Inventory and Eligible In-Transit Inventory as set forth in Borrowers’ inventory ledger as determined from time to time in accordance with an independent appraisal satisfactory to Agent.

“Notice of Borrowing” shall have the meaning set forth in Section 2.1(a).

“Notice of Conversion/Continuation” shall have the meaning set forth in Section 3.1(b).

“Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender or any Secured Swap Provider, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements or any Secured Rate Contract, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and the Security Documents and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers or Guarantors to Agent, any Secured Swap Provider arising under or pursuant to any Secured Rate Contract or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising, provided, that, (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedge Agreement (other than a Secured Rate Contract), the same shall only be included within the Obligations if upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers and Guarantors, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, (ii) any Bank Product Provider, other than GE Capital and its Affiliates or a Secured Swap Provider, shall have delivered written notice to Agent that (A) such Bank Product Provider has entered into a transaction to provide Bank Products to a Borrower and Guarantor and (B) the obligations arising pursuant to such Bank Products provided to Borrowers and Guarantors constitute Obligations entitled to the benefits of the security interest of Agent granted hereunder, and Agent shall have accepted such notice in writing, and (iii) in no event shall any Bank Product Provider (other than a Secured Swap Provider) to whom such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness other than for purposes of Section 5.1 hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9, 12.12 and 13.7 hereof and in no event shall such obligations be included in the Obligations to the extent that the effect is that the value of the Collateral (as determined by Agent) is less than the Obligations and in no event shall the approval of any such person be required in connection with the release or termination of any security interest or lien of Agent.

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

“Other Taxes” shall have the meaning set forth in Section 6.5(c).

“Owned Real Properties” shall mean, collectively, the Real Properties of Parent listed on Schedule 1.4.

“Parent” shall mean Xxxxxxx Fabrics, Inc., a Delaware corporation, and its successors and assigns.

“Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letters of Credit in conformity with the provisions of Section 13.8 of this Agreement governing participations.

“Pension Funding Rules” shall mean the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to certain Plans and set forth in, with respect to plan years ending prior to the effective date as to any such Plan of the Pension Protection Act of 2006, Section 412 of the Code and Part 3, Subtitle I, of Title I of ERISA each as in effect prior to the Pension Protection Act of 2006 and, thereafter, Sections 412 and 430 of the Code and Sections 302 and 303 of ERISA.

“Pension Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) subject to the Pension Funding Rules which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA Affiliate or with respect to which any Borrower, Guarantor or any ERISA Affiliate may incur any liability, other than a Multiemployer Plan.

“Permits” shall have the meaning set forth in Section 8.7(b).

“Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (including pursuant to a merger with such Person or the formation of a wholly owned Subsidiary solely for such purpose that is merged with such Person) or of all or a majority of the Capital Stock (such assets or Person being referred to herein as the “Acquired Business”) and in one or a series of transaction that satisfies each of the following conditions as determined by Agent:

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(a)           Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may request, including (i) the proposed date and amount of the acquisition, (ii) a list and description of the assets or shares to be acquired, (iii) the total purchase price for the assets to be purchased (and the terms of payment of such purchase price), and (iv) a summary of the due diligence undertaken by Borrowers in connection with such acquisition,

(b)           the Acquired Business shall be an operating company that engages in a line of business substantially similar to the business that Borrowers are engaged in on the date hereof,

(c)           (i) the aggregate consideration paid for or in connection with the assets or shares of the Acquired Business shall not exceed $15,000,000 (calculated after giving effect to all payments or other consideration paid in respect of such acquisition and after giving effect to the assumption of all Indebtedness in connection with such acquisition), and (ii) the aggregate consideration paid for or in connection with all Permitted Acquisitions shall not exceed $30,000,000 (calculated after giving effect to all payments or other consideration paid in respect of all Permitted Acquisitions and after giving effect to the assumption of all Indebtedness in connection with all Permitted Acquisition),

(d)           if requested by Agent, Agent shall have received: (i) the most recent annual and interim financial statements with respect to the Acquired Business and related statements of income and cash flows, (ii) detailed forecasts of cash flows for the Acquired Business, (iii) detailed projections for Parent and its Subsidiaries through the Maturity Date, on a monthly basis for the first year after the acquisition and on a quarterly basis thereafter, giving pro forma effect to such acquisition, based on assumptions satisfactory to Agent and demonstrating pro forma compliance with all financial covenants set forth in this Agreement, prepared in good faith an in a manner and using such methodology as is consistent with the most recent financial statements delivered to Agent pursuant to Section 9.6 hereof and in form and substance satisfactory to Agent and (iv) current, updated projections of the amount of the Borrowing Base and Excess Availability for the six month period after the date of such acquisition, in a form reasonably satisfactory to Agent, representing Borrowers’ reasonable best estimate of the future Borrowing Base and Excess Availability for the period set forth therein as of the date not more than ten (10) days prior to the date of such acquisition, which projections shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions,

(e)           if Agent so elects, Agent shall have received an appraisal of the inventory of the Acquired Business and such other assets of the Acquired Business as Agent may specify, in each case in form and containing assumptions and appraisal methods satisfactory to Agent by an appraiser acceptable to Agent, on which Agent and Lenders are expressly permitted to rely,

(f)            if Agent so elects, Agent shall have completed a field examination with respect to the business and assets of the Acquired Business in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be satisfactory to Agent and any inventory of the Acquired Business shall only be Eligible Inventory to the extent the criteria for Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in connection with the Acquired Business),

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(g)           Agent shall have received (i) all items required by Sections 5.2 and 9.23 in connection with the Acquired Business, (ii) evidence satisfactory to Agent that all liens and encumbrances with respect to the assets of the Acquired Business (other than liens and encumbrances permitted under Section 9.8) have been discharged in full or arrangements therefor satisfactory to the Agent have been made and (iii) evidence satisfactory to Agent that any Indebtedness assumed in connection with such acquisition shall constitute Indebtedness permitted under Section 9.9,

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

(i)            Adjusted Excess Availability shall have been not less than $25,000,000 for each of the two consecutive months immediately prior to the date of any such acquisition based on the Borrowing Base as of the end of each of such months and after giving effect to the acquisition and all payments and other consideration in respect thereof, on a pro forma basis using the Adjusted Excess Availability as of the end of the month immediately prior to the date of such acquisition and payments or other consideration, Adjusted Excess Availability shall be not less than $25,000,000,

(j)            no Default or Event of Default shall exist or have occurred as of the date of the acquisition or any payment in respect thereof and after giving effect to the acquisition or such payment,

(k)           Agent shall have received true, correct and complete copies of all agreements, documents and instruments relating to such acquisition, which documents shall be satisfactory to Agent, and

(l)            if required by Agent, Agent shall have received a certificate of the chief financial officer or chief executive officer of Administrative Borrower certifying to Agent and Lenders as to the matters set forth above in this definition.

“Permitted Dispositions” shall mean each of the following:

(a)           sales of Inventory in the ordinary course of business,

(b)           the sale or other disposition of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of any Borrower or Guarantor) so long as such sales or other dispositions do not involve Equipment having an aggregate fair market value in excess of $500,000 for all such Equipment disposed of in any Fiscal Year of Borrowers or as Agent may otherwise agree,

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(c)           sales or other dispositions by any Borrower of assets in connection with the closing or sale of a retail store location of such Borrower in the ordinary course of such Borrower’s business which consist of leasehold interests in the premises of such store, the Equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such store; provided, that, as to each and all such sales and closings, (i) after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, and (ii) such sale shall be on commercially reasonable prices and terms in a bona fide arm’s length transaction,

(d)           the grant by any Borrower or Guarantor after the date hereof of a non-exclusive license to any person for the use of any Intellectual Property consisting of trademarks owned by such Borrower or Guarantor; provided, that, as to any such license, each of the following conditions is satisfied, (i) such licenses shall be on commercially reasonable prices and terms in a bona fide arms’ length transactions, (ii) the rights of the licensee shall be subject to the rights of Agent, and shall not adversely affect, limit or restrict the rights of Agent to use any Intellectual Property of a Borrower or Guarantor to sell or otherwise dispose of any Inventory or other Collateral, (iii) Agent shall have received, true, correct and complete copies of the executed license agreement, promptly upon the execution thereof and (iv) as of the date of the grant of any such license, and after giving effect thereto, no Default or Event of Default shall exist or have occurred,

(e)           sales, transfers and dispositions of assets of a Borrower to another Borrower or by a Guarantor or other Subsidiary of Parent to a Borrower or Guarantor, in each case to the extent permitted under Section 9.12 hereof; and

(f)            the sale of the Tupelo Real Property, any of the Owned Real Properties (other than the Baldwyn Real Property), the Equipment and fixtures located at the Tupelo Real Property and the Owned Real Properties (other than the Baldwyn Real Property) and the books and records relating exclusively and directly to the operations of the Tupelo Real Property or any of the Owned Real Properties (other than the Baldwyn Real Property); provided, that, as to such sale and closing, (i) Agent shall have received not less than ten (10) Business Days prior written notice of such sale or closing, which notice shall set forth in reasonable detail satisfactory to Agent, the parties to such sale, the purchase price and the manner of payment thereof and such other information with respect thereto as Agent may request, (ii) after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (iii) such sale shall be on commercially reasonable prices and terms in a bona fide arm’s length transaction.

“Permitted Investments” shall mean each of the following:

(a)           the endorsement of instruments for collection or deposit in the ordinary course of business;

(b)           Investments in cash or Cash Equivalents, provided, that, (i) no Loans are then outstanding and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held;

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(c)           the existing Investments of each Borrower and Guarantor as of the date hereof in its Subsidiaries, provided, that, no Borrower or Guarantor shall have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

(d)           loans and advances by any Borrower or Guarantor to employees of such Borrower or Guarantor not to exceed the principal amount of $250,000 in the aggregate at any time outstanding for: (i) reasonably and necessary work-related travel or other ordinary business expenses to be incurred by such employee in connection with their work for such Borrower or Guarantor and (ii) reasonable and necessary relocation expenses of such employees (including home mortgage financing for relocated employees);

(e)           stock or obligations issued to any Borrower or Guarantor by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to such Borrower or Guarantor in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent, upon Agent’s request, together with such stock power, assignment or endorsement by such Borrower or Guarantor as Agent may request; and

(f)            obligations of account debtors to any Borrower or Guarantor arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to such Borrower or Guarantor; provided, that, promptly upon the receipt of the original of any such promissory note by such Borrower or Guarantor, such promissory note shall be endorsed to the order of Agent by such Borrower or Guarantor and promptly delivered to Agent as so endorsed.

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

“Petition Date” shall have the meaning set forth in the preamble.

“Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or, in the case of a Multiemployer Plan, has made contributions at any time during the immediately preceding six (6) plan years or with respect to which any Borrower or Guarantor may incur liability.

“Plan of Reorganization” shall mean a plan (within the meaning of the Bankruptcy Code) proposed in the Reorganization Cases which is confirmed by a Final Order of the Bankruptcy Court and is in form and substance satisfactory to Agent.

“Pledge Agreements” shall mean that certain Pledge Agreement dated as of the Closing Date executed and delivered by Borrowers, Guarantors and Agent and any pledge agreements entered into after the Closing Date by any Borrower or Guarantor (as required by this Agreement or any other Financing Agreement).

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“Prime Rate” shall mean, on any date, the greater of (a) the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) or (b) the Federal Funds Rate in effect on such day plus one-half (1/2%) percent.  Each change in any interest rate provided for in this Agreement based upon the Prime Rate shall take effect at the time of such change in the Prime Rate.

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

“Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.8 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letters of Credit  and the denominator shall be the aggregate amount of all unpaid Loans and Letters of Credit.

“Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

“Quarterly Average Excess Availability” shall mean, as of the date of determination, the daily average of the aggregate amount of the Adjusted Excess Availability, calculated for the immediately preceding calendar quarter then most recently ended.

“Rate Contracts” shall mean swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates.

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

“Real Property Availability” shall mean the Adjusted Appraised Fair Market Value of Eligible Real Property as set forth in the most recent acceptable appraisal (or acceptable updates of existing appraisals) of such Real Property received by Agent in accordance with Section 4.1 or 7.4 hereof.

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

“Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower or Guarantor with respect to the foregoing maintained with or by any other person).

“Register” shall have the meaning set forth in Section 13.8(b) hereof.

“Reorganization Cases” shall have the meaning set forth in the preamble.

“Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than fifty (50%) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom more than fifty (50%) percent of the then outstanding Obligations are owing; provided, that, if the Pro Rata Share of any Lender exceeds fifty (50%) percent at a time when more than one Lender exists, then Required Lenders shall mean such Lender and at least one other Lender.

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“Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letters of Credit which would otherwise be available to Borrowers that Agent may, in its reasonable credit judgment, establish from time to time.  Without limiting the generality of the foregoing, Reserves may be established to reflect any of the following: dilution; gift certificates; customs duties and other costs to release Inventory which is being imported into the United States; inventory shrinkage; xxxx xxxxx and cost variances; taxes; rental payments, services charges and other amounts to become due to lessors of real property to the extent Inventory or Records are located in or on such property or such Records are needed to monitor or otherwise deal with the Collateral, provided, that, the Reserves established in respect of such payments and charges as to retail store locations that are leased shall not exceed at any time the aggregate of amounts payable for the next three (3) months to the lessors of such retail store locations located in those States where any right of the lessor to Collateral may have priority over the security interest and lien of Agent therein, provided, further, that such limitation on the amount of the Reserves shall only apply so long as: (A) no Event of Default shall exist or have occurred, (B) neither a Borrower, Guarantor nor Agent shall have received notice of any event of default under the lease with respect to such location and (C) no Borrower has granted to the lessor a security interest or lien upon any assets of such Borrower; customer deposits; other obligations, liabilities or indebtedness (contingent or otherwise) of any Borrower or any Guarantor to any Bank Product Provider arising under or in connection with any Bank Products or to any other Person arising in connection with any deposit accounts or other cash management arrangements; and Letter of Credit Outstandings.  Without limiting the generality of the foregoing, Reserves established to ensure the payment of accrued Interest Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent’s credit judgment.

“Restricted Payment” shall mean (a) any cash dividend or other cash distribution, direct or indirect, on account of any shares of any class of Capital Stock of Parent or any of its Subsidiaries, as the case may be, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment on account of, or purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of Parent or any of its Subsidiaries, except for any redemption, retirement, sinking funds or similar payment payable solely in such shares of that class of stock or in any class of stock junior to that class, (c) any cash payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any shares of any class of Capital Stock of Parent or any of its Subsidiaries now or hereafter outstanding, (d) any payment or other transfer of funds or other property made in satisfaction of any Indebtedness arising under any Subordinated Debt Documents, (e) any payment or other transfer of funds or other property made in satisfaction of any liability or obligation owing to any Person arising under any Subordinated Debt Documents, including any fees, expenses, premiums, indemnification obligations or otherwise arising under any Specified Subordinated Indebtedness Documents, or (f) any payment (including, without limitation, any payment of management, consulting, monitoring or advisory fees) to any Affiliate of any Borrower except to the extent expressly permitted in this Agreement.

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

“Secured Parties” shall mean, collectively, (i) Agent, (ii) Lenders, (iii) the Issuing Bank and (iv) any Bank Product Provider (including, in the avoidance of doubt, any Secured Swap Provider); provided, that, (i) as to any Bank Product Provider, only to the extent of the Obligations owing to such Bank Product Provider and (ii) such parties are sometimes referred to herein individually as a “Secured Party”.

“Secured Rate Contract” shall mean any Rate Contract between a Borrower and a Secured Swap Provider.

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“Secured Swap Provider” shall mean a Person with whom a Borrower has entered into a Secured Rate Contract provided or arranged by GE Capital or an Affiliate of GE Capital, and any assignee thereof.

“Security Documents” shall mean, collectively, the following agreements (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): this Agreement, each Pledge Agreement, each Mortgage, each Collateral Access Agreement, each Credit Card Acknowledgment, each Deposit Account Control Agreement, each Investment Property Control Agreement, each trademark security agreement, each copyright security agreement, each patent security agreement, each landlord waiver and consent, each customs broker agreement and any other Financing Agreements as Agent may from time to time designate as a “Security Document” in a writing delivered by Agent to Administrative Borrower.

“Settlement Period” shall have the meaning set forth in Section 6.11(b).

“Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can reasonably be expected to become an actual or matured liability.

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

“Specified Amount” shall mean, as of the date of determination, twenty five percent (25%) of the Borrowing Base then most recently delivered to Agent pursuant to the terms hereof.

“Specified Common Stock” shall mean the shares of common stock of Parent issuable upon exercise of the Specified Warrants.

“Specified Subordinated Indebtedness” shall mean the floating rate secured promissory notes to be issued by Parent in the aggregate principal amount of $20,000,000 on terms reasonably acceptable to Agent and subject to documentation reasonably acceptable to Agent.

“Specified Subordinated Indebtedness Documents” shall mean, collectively, (i) the Indenture, (ii) each of the “Notes” issued pursuant to and as defined under the Indenture, (iii) each of the “Collateral Documents” entered into pursuant to and under the Indenture, and (iv) each of the Indenture Documents as defined in the Indenture as in effect on the date hereof.

“Specified Warrants” shall mean the warrants to be issued by Parent to purchase an aggregate of 9,500,000 shares of common stock of Parent in connection with the issuance of the Specified Subordinated Indebtedness.

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“Standby Letters of Credit” shall mean all Letters of Credit other than Commercial Letters of Credit.

“Store Accounts” shall mean each of the deposit accounts of a Borrower that are used solely for receiving store receipts from a retail store location of a Borrower.

“Subordinated Debt Documents” shall mean, collectively, any and all agreements, documents and instruments evidencing or otherwise related to Indebtedness permitted under Section 9.9(g) hereof, including, without limitation the Specified Subordinated Indebtedness Documents.

“Subordination Provisions” shall mean Article XI of the Indenture.

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

“Supermajority Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than eighty (80%) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom more than eighty (80%) percent of the then outstanding Obligations are owing.

“Taxes” shall have the meaning set forth in Section 6.5(a).

“Transfer of Letter of Credit Liability Letter” shall mean that certain Letter Agreement regarding the Existing Letters of Credit pursuant to which, among other things, Wachovia Bank, N.A. transfers to GE Capital all liability with respect to the Existing Letters of Credit.

“Tupelo Real Property” shall mean the Real Property of Parent located at 0000 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxx.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).

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

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

SECTION 2  CREDIT FACILITIES

2.1          Revolving Loans.

(a)          (i)  Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to Borrowers from time to time until the Commitment Termination Date in amounts requested by Administrative Borrower on behalf of the applicable Borrower up to the aggregate amount outstanding for all Lenders at any time equal to the Borrowing Base at such time.  The Pro Rata Share of the Revolving Loan of any Lender shall not at any time exceed its separate Commitment.  Until the Commitment Termination Date, Borrowers may borrow, repay and reborrow under this Section 2.1(a)(i).

(ii)          Each Revolving Loan shall be made on notice by Administrative Borrower on behalf of the applicable Borrower to one of the representatives of Agent identified on Schedule 2.1 at the address specified therein.  Any such notice must be given no later than (1) 1 p.m. (Eastern time) on the Business Day of the proposed Revolving Loan, in the case of an Prime Rate Loan, or (2) 1 p.m. (Eastern time) on the date which is three (3) Business Days prior to the proposed Revolving Loan, in the case of a Eurodollar Rate Loan.  Each such notice (each a “Notice of Borrowing”) must be given in writing (by telecopy or overnight courier) substantially in the form of Exhibit F, and shall include the information required in such Exhibit and such other information as may be required by Agent.

(b)           Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, the aggregate principal amount of the Revolving Loans and the Letter of Credit Obligations outstanding at any time shall not exceed Excess Availability.

(c)           In the event that the aggregate principal amount of the Revolving Loans and the Letter of Credit Obligations outstanding at any time exceed Adjusted Excess Availability, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

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2.2           Letters of Credit.

(a)           (i) Subject to and upon the terms and conditions contained herein and in the Letter of Credit Documents, at the request of Administrative Borrower on behalf of the applicable Borrower for such Borrower’s account, Agent and Lenders agree to incur, from time to time prior to the Commitment Termination Date, Letter of Credit Obligations by causing Letters of Credit to be issued by GE Capital or a Subsidiary thereof or a bank or other legally authorized Person selected by or acceptable to Agent in its sole discretion (each “an Issuing Bank”).  Issuing Bank agrees to issue, for the account of such Borrower, one or more Letters of Credit, for the ratable risk of each Lender according to its Pro Rata Share, containing terms and conditions acceptable to Agent and Issuing Bank.  No such Letter of Credit shall have an expiry date that is more than one year following the date of issuance thereof, unless otherwise determined by Agent, in its sole discretion (including with respect to customary evergreen provisions), and neither Agent nor Lenders shall be under any obligation to incur Letter of Credit Obligations in respect of, or purchase risk participations in, any Letter of Credit having an expiry date that is later than the Commitment Termination Date.

(b)           In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letters of Credit, Borrowers shall pay to Agent, for the benefit of Lenders, monthly a letter of credit fee (the “Letter of Credit Fee”) at a rate equal to the percentage (on a per annum basis) set forth below on the daily outstanding balance of the Commercial Letters of Credit and Standby Letters of Credit during the immediately preceding month (or part thereof), payable in arrears as of the first Business Day of each succeeding month and on the Commitment Termination Date and calculated based on a three hundred and sixty (360) day year and actual days elapsed, provided, that, such percentage shall be increased or decreased, as the case may be, to the percentage (on a per annum basis) set forth below based on the Quarterly Average Excess Availability for the immediately preceding calendar quarter being at or within the amounts indicated for such percentage:

Tier		Quarterly Average Excess Availability		Commercial Letter of Credit Rate				Standby Letter of Credit Rate
1		Greater than $30,000,000			1.375	%			1.625	%
2		Less than or equal to $30,000,000 and greater than $20,000,000			1.625	%			1.875	%
3		Less than or equal to $20,000,000 and greater than $10,000,000			1.875	%			2.125	%
4		Less than or equal to $10,000,000			2.125	%			2.375	%

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provided, that, (i) the Commercial Letter of Credit Rate from the Closing Date through December 31, 2008 shall be 1.75%, and (ii) the Standby Letter of Credit Rate from the Closing Date through December 31, 2008 shall be 2.25%.  Adjustments in the rates applicable for Letter of Credit Fees commencing January 1, 2009 shall be implemented effective as of each January 1, April 1, July 1, October 1, commencing at least five (5) days after the date of delivery to Agent of the Applicable Margin Certificate.  Concurrently with the delivery of the Applicable Margin Certificate herein referenced, Administrative Borrower shall deliver to Agent a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the rates for the Letter of Credit Fees.  Failure to deliver such Applicable Margin Certificate within five (5) days of the date such certificate is required to be delivered pursuant to Section 7.1(a)(iii) shall, in addition to any other remedy provided for in this Agreement, result in an increase in the rates in the Letter of Credit Fees to the highest level set forth in the foregoing grid, until the delivery of the Applicable Margin Certificate demonstrating that such an increase is not required.  If an Event of Default has occurred and is continuing at the time any reduction in the rates applicable for the Letter of Credit Fees is to be implemented, that reduction shall be deferred until the date on which such Event of Default is waived or cured.

(c)           Borrowers shall give Agent at least three (3) Business Days’ prior written notice requesting the incurrence of any Letter of Credit Obligation.  The notice shall be accompanied by the form of the Letter of Credit (which shall be acceptable to the Issuing Bank) and a completed Application for Standby Letter of Credit or Application and Agreement for Commercial Letter of Credit or Application for Commercial Letter of Credit (as applicable) in the form of Exhibit E-1 or E-2 attached hereto.  Notwithstanding anything contained herein to the contrary, Letter of Credit applications by Borrowers and approvals by Agent and the Issuing Bank may be made and transmitted pursuant to electronic codes and security measures mutually agreed upon and established by and among Borrowers, Agent and the Issuing Bank.  In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit shall be available unless each of the following conditions precedent have been satisfied in a manner reasonably satisfactory to Agent:  (i) Administrative Borrower on behalf of the applicable Borrower shall have delivered to Issuing Bank at such times and in such manner as Issuing Bank may require, an application, in form and substance satisfactory to Issuing Bank and Agent, for the issuance of the Letter of Credit and such other Letter of Credit Documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit shall be reasonably satisfactory to Agent and Issuing Bank, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that Issuing Bank refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit, (iii) after giving effect to the issuance of such Letter of Credit, the Letter of Credit Obligations shall not exceed the Letter of Credit Limit, and (iv) Adjusted Excess Availability, prior to giving effect to any Reserves in the calculation of Excess Availability with respect to such Letter of Credit, on the date of the proposed issuance of any Letter of Credit shall be equal to or greater than an amount equal to one hundred (100%) percent of the face amount of such Commercial Letter of Credit or Standby Letter of Credit being requested and all other commitments and obligations made or incurred by Agent with respect thereto.  Effective on the issuance of each Letter of Credit, a Reserve shall be established in the amount equal to one hundred (100%) percent of the face amount of such Commercial Letter of Credit or Standby Letter of Credit being requested and all other commitments and obligations made or incurred by Agent with respect thereto.

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(d)           Each Borrower shall reimburse immediately Issuing Bank for any draw under any Letter of Credit issued for the account of such Borrower and pay Issuing Bank the amount of all other charges and fees payable to Issuing Bank in connection with any Letter of Credit issued for the account of such Borrower immediately when due, irrespective of any claim, setoff, defense or other right which such Borrower may have at any time against Issuing Bank or any other Person.  Each drawing under any Letter of Credit or other amount payable in connection therewith when due shall constitute a request by the Borrower for whose account such Letter of Credit was issued to Agent for a Prime Rate Loan in the amount of such drawing or other amount then due, and shall be made by Agent on behalf of Lenders as a Revolving Loan (or Special Agent Advance, as the case may be). The date of such Loan shall be the date of the drawing or as to other amounts, the due date therefor.  Any payments made by or on behalf of Agent or any Lender to Issuing Bank and/or related parties in connection with any Letter of Credit shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2 (or Special Agent Advances as the case may be).

(e)           Borrowers and Guarantors shall indemnify and hold the Issuing Bank, Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which the Issuing Bank, Agent or any Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs, charges and expenses (including reasonable attorneys’ fees) due to any action taken by any issuer or correspondent with respect to any Letter of Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of the Issuing Bank, Agent or such Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction.  Each Borrower and Guarantor assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent.  Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or any documents, drafts or acceptances thereunder.  Each Borrower and Guarantor hereby releases and holds the Issuing Bank, Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit, except for the gross negligence or willful misconduct of the Issuing Bank, Agent or such Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  The provisions of this Section 2.2(e) shall survive the payment of Obligations and the termination of this Agreement.  Nothing contained herein shall be deemed to limit or to expand any waivers, covenants or indemnities made by Borrowers in favor of any Issuing Bank in any letter of credit application, reimbursement agreement or similar document, instrument or agreement between or among Borrowers and such Issuing Bank, including an Application and Agreement For Commercial Letter of Credit, a Master Commercial Agreement and a Master Standby Agreement entered into with Agent.

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(f)            In connection with Inventory purchased pursuant to any Letter of Credit, Borrowers and Guarantors shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest that, upon Agent’s request, such items shall be delivered to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s or Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their original form; provided, that, so long as no Default or Event of Default shall then be continuing, Agent shall not exercise the rights under this clause (f) to have such Persons deliver any cash, checks, Inventory, documents or instruments so long as the same are held by a Customs Broker that has entered into a customs broker agreement in form and substance reasonably satisfactory to the Agent).  Borrowers and Guarantors shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

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

(h)           Immediately upon the issuance or amendment of any Letter of Credit, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit and the obligations of Borrowers with respect thereto (including all Letter of Credit Obligations with respect thereto).  Each Lender shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to Issuing Bank therefor and discharge when due, its Pro Rata Share of all of such obligations arising under such Letter of Credit.  Without limiting the scope and nature of each Lender’s participation in any Letter of Credit, to the extent that Issuing Bank has not been reimbursed or otherwise paid as required hereunder or under any such Letter of Credit, each such Lender shall pay to Issuing Bank its Pro Rata Share of such unreimbursed drawing or other amounts then due to Issuing Bank in connection therewith.  If it shall be illegal or unlawful for Borrowers to incur Revolving Loans because of an Event of Default described in Sections 10.1(f), 10.1(g) or 10.1(h) or otherwise or if it shall be illegal or unlawful for any Lender to be deemed to have assumed a ratable share of the reimbursement obligations owed to an Issuing Bank, or if the Issuing Bank is a Lender, then (A) immediately and without further action whatsoever, each Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such Issuing Bank, as the case may be) an undivided interest and participation equal to such Lender’s Pro Rata Share (based on the Maximum Credit) of the Letter of Credit Obligations in respect of all Letters of Credit then outstanding and (B) thereafter, immediately upon issuance of any Letter of Credit, each Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such Issuing Bank, as the case may be) an undivided interest and participation in such Lender’s Pro Rata Share (based on the Maximum Credit) of the Letter of Credit Obligations with respect to such Letter of Credit on the date of such issuance.  Each Lender shall fund its participation in all payments or disbursements made under the Letters of Credit in the same manner as provided in this Agreement with respect to Revolving Loans.

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(i)            The obligations of Borrowers to pay each Letter of Credit Obligations and the obligations of Lenders to make payments to Agent for the account of Issuing Bank with respect to Letters of Credit shall be absolute, unconditional and irrevocable without necessity of presentment, demand, protest or other formalities, and the obligations of each Lender to make payments to the Issuing Bank with respect to Letters of Credit shall be unconditional and irrevocable.  Such obligations of the Borrowers and Lenders shall be paid strictly in accordance with the terms hereof under all circumstances, including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit or this Agreement or any other Financing Agreement, (ii) the existence of any claim, setoff, defense or other right that any Borrower or any of their respective Affiliates or any Lender may at any time have against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such transferee may be acting), Issuing Bank, Agent, any Lender, or any other Person, whether in connection with this Agreement, the Letter of Credit, the transactions contemplated herein or therein or any unrelated transaction (including any underlying transaction between any Borrower or any of their respective Affiliates and the beneficiary for which the Letter of Credit was procured), (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or statement therein being untrue or inaccurate in any respect, (iv) payment by any Issuing Bank under any Letter of Credit or guaranty thereof against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit or guaranty, (v) the failure to satisfy any other condition set forth in Section 4 (including whether a Default or Event of Default has occurred and is continuing) or (vi) any other event or circumstance that is similar to the foregoing.  Furthermore, as between Agent, Issuing Bank, any Lender and the Borrowers, Borrowers assume all risk of the acts and omissions of, or misuse of any Letter of Credit by beneficiaries, of any Letter of Credit.  If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by any Borrower in respect of Loans that are Prime Rate Loans.  Any such reimbursement shall not relieve or otherwise impair the obligation of Borrowers to reimburse Issuing Bank under any Letter of Credit or make any other payment in connection therewith.

(j)            (i)  If a Borrower is required to provide cash collateral for any Letter of Credit Obligations pursuant to this Agreement, including Section 10.2 of this Agreement, prior to the Commitment Termination Date, such Borrower will pay to Agent for the ratable benefit of itself and Lenders cash or Cash Equivalents in an amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Obligations.  Such funds or Cash Equivalents shall be held by Agent in a cash collateral account (the “Cash Collateral Account”) maintained at a bank or financial institution acceptable to Agent.  The Cash Collateral Account shall be in the name of the applicable Borrower and shall be pledged to, and subject to the control of, Agent, for the benefit of Agent and Lenders, in a manner reasonably satisfactory to Agent.  Each Borrower hereby pledges and grants to Agent, on behalf of itself and Lenders, a security interest in all such funds and Cash Equivalents held in the Cash Collateral Account from time to time and all proceeds thereof, as security for the payment of all amounts due in respect of the Letter of Credit Obligations and other Obligations, whether or not then due.  This Agreement shall constitute a security agreement under applicable law.

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 (ii)           If any Letter of Credit Obligations, whether or not then due and payable, shall for any reason be outstanding on the Commitment Termination Date, Borrowers shall either (A) provide cash collateral therefor in the manner described above, or (B) cause all such Letters of Credit and guaranties thereof, if any, to be canceled and returned, or (C) deliver a stand-by letter (or letters) of credit in guaranty of such Letter of Credit Obligations, which stand-by letter (or letters) of credit shall be of like tenor and duration (plus thirty (30) additional days) as, and in an amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Obligations, and shall be issued by a Person, and shall be subject to such terms and conditions, as are be satisfactory to Agent in its sole discretion.

(iii)           From time to time after funds are deposited in the Cash Collateral Account by any Borrower, whether before or after the Commitment Termination Date, Agent may apply such funds or Cash Equivalents then held in the Cash Collateral Account to the payment of any amounts, and in such order as Agent may elect, as shall be or shall become due and payable by such Borrower to Agent and Lenders with respect to such Letter of Credit Obligations of such Borrower and, upon the satisfaction in full of all Letter of Credit Obligations of such Borrower, to any other Obligations of any Borrower then due and payable.

(iv)           No Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds or Cash Equivalents held in the Cash Collateral Account.  Upon the termination of any Letter of Credit and the payment of all amounts payable by Borrowers to Agent and Lenders in respect thereof, the Agent shall promptly pay to the Borrowers unless otherwise required by law such amounts in excess of 105% of the then extant Letter of Credit Obligations.  Interest earned on deposits in the Cash Collateral Account shall be for the account of the Borrowers and held as additional collateral.  Upon payment in full in cash of all Obligations and the termination of all Commitments to lend hereunder, the Agent shall return to the Borrowers any accrued interest not otherwise applied to the payment of the Obligations, unless otherwise required by law.

(k)           Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Letter of Credit Document, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

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(l)            All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

SECTION 3  INTEREST AND FEES

3.1          Interest.

(a)           Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate as provided in clause (d) of this Section 3.1; provided, however, all interest accruing hereunder on and after the date of any Event of Default or the Commitment Termination Date shall be payable on demand.

(b)           Administrative Borrower on behalf of the applicable Borrower may from time to time (i) request that Prime Rate Loans be converted to Eurodollar Rate Loans, (ii) request to convert any Eurodollar Rate Loan to a Prime Rate Loan upon payment of an administrative fee of $250 and subject to payment of Eurodollar breakage costs in accordance with Section 3.3(c) if such conversion is made prior to the expiration of the Interest Period applicable thereto, or (iii) request that all or any portion of any Eurodollar Rate Loan be continued as a Eurodollar Rate Loan upon the expiration of the applicable Interest Period and the succeeding Interest Period of that continued Loan shall commence on the first day after the last day of the Interest Period of the Loan to be continued.  Any Loan or group of Loans having the same proposed Interest Period to be made or continued as, or converted into, a Eurodollar Rate Loan must be in a minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of such amount.  Such request must be made by 1 p.m. (Eastern time) on the third Business Day prior to (1) the date of any proposed Loan which is to bear interest at the Eurodollar Rate, (2) the end of each Interest Period with respect to any Eurodollar Rate Loans to be continued as such, or (3) the date on which Administrative Borrower wishes to convert any Prime Rate Loan to a Eurodollar Rate Loan for an Interest Period designated by Administrative Borrower in such election.  Any request by Administrative Borrower on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable.  Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.  Administrative Borrower on behalf of the applicable Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier.  In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) substantially in the form of Exhibit G.

(c)           Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof.  Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Parent, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed.  Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of any Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

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(d)           Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears not later than the first Business Day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed.  The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs.  In no event shall charges constituting interest payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

3.2          Fees.

(a)           Borrowers shall pay to Agent, for the account of Lenders a monthly unused line fee at a rate equal to the percentage (on a per annum basis) of 0.25% calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof).  Such fee shall be payable on the first Business Day of each month in arrears and on the Commitment Termination Date and shall be calculated based on a three hundred sixty (360) day year and actual days elapsed.

(b)           Borrowers agree to pay to Agent the other fees and amounts set forth in the Fee Letter in the amounts and at all times specified therein.

3.3          Changes in Laws and Increased Costs of Loans.

(a)           If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to any Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank, any Lender or Issuing Bank determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank, any Lender or Issuing Bank complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender’s or Issuing Bank’s capital as a consequence of its obligations hereunder to a level below that which such Lender or Issuing Bank could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s or Issuing Bank’s policies with respect to capital adequacy) by an amount deemed by such Lender or Issuing Bank to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender or Issuing Bank of funding or maintaining the Loans, the Letters of Credit or its Commitment, then Borrowers and Guarantors shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify such Lender, as the case may be, against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified).  A certificate as to the amount of such increased cost shall be submitted to Administrative Borrower by Agent or the applicable Lender and shall be conclusive, absent manifest error.

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(b)           If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrowers and Guarantors) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Adjusted Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Administrative Borrower as soon as practicable thereafter, and will also give prompt written notice to Administrative Borrower when such conditions no longer exist.  If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall Administrative Borrower on behalf of any Borrower have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

(c)           Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrowers and Guarantors shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

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(d)           Borrowers and Guarantors shall jointly and severally indemnify Agent and each Lender and to hold Agent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a consequence of (i) default by any Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after Administrative Borrower on behalf of such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after Administrative Borrower on behalf of such Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto.  With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market.  This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

SECTION 4  CONDITIONS PRECEDENT

4.1          Conditions Precedent to Initial Loans and Letters of Credit.  The obligation of Agent and Lenders to make the initial Loans or of Issuing Bank to issue the initial Letters of Credit hereunder is subject to the satisfaction of, or waiver of, immediately prior to or concurrently with the making of such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

(a)           this Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrowers, Guarantors, Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Financing Agreement, including all those listed in the Closing Checklist attached hereto as Annex 1, each in form and substance reasonably satisfactory to Agent;

(b)           Agent shall have received, in form and substance satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by the Existing Lenders of their respective financing arrangements with Borrowers and Guarantors;

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(c)           all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have requested in connection therewith, such documents to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation or formation of each Borrower and Guarantor certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete name of such Borrower or Guarantor as is set forth herein and such document as shall set forth the organizational identification number of each Borrower or Guarantor, if one is issued in its jurisdiction of incorporation or formation);

(d)           a certificate signed by the chief executive officer, chief financial officer, president or vice president of each Borrower, certifying that since February 2, 2008 no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect;

(e)           Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent may require to determine the amount of Loans available to Borrowers (including, without limitation, current perpetual inventory records with respect to the distribution center of Borrowers and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner reasonably satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Collateral), the results of which in each case shall be reasonably satisfactory to Agent, not more than seven (7) Business Days prior to the date hereof or such earlier date as Agent may agree;

(f)           Agent shall have received, in form and substance reasonably satisfactory to Agent, (i) an opening pro-forma balance sheet of Parent and its Subsidiaries (on a consolidated basis), reflecting the transactions contemplated hereby and (ii) the Disclosure Letter attaching the projected income statements, balance sheets and statements of cash flow for Parent and its Subsidiaries (on a consolidated basis) prepared on a monthly basis for the period through the end of the 2009 Fiscal Year and thereafter, on an annual basis for each Fiscal Year through the end of the 2012 Fiscal Year, in each case with the results and assumptions set forth in all of such projections in form and substance reasonably satisfactory to Agent;

(g)           Agent shall have received a certificate signed by the chief executive officer or chief financial officer of Administrative Borrower, in form and substance satisfactory to Agent, attaching all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements (other than from the lessors of retail store locations) and Credit Card Acknowledgments;

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(h)           Adjusted Excess Availability as determined by Agent, as of the Closing Date, shall be not less than $12,000,000 after giving effect to the Plan of Reorganization, the initial Loans made or to be made, the Letters of Credit issued or to be issued in connection with the initial transactions hereunder, the incurrence of the Specified Subordinated Indebtedness, and the payment of all trade payables and expenses and liabilities of Borrowers in the ordinary course of business;

(i)            Agent shall have received evidence, in form and substance satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral;

(j)            Agent shall have received and reviewed lien search results for each Borrower and Guarantor in such jurisdictions as Agent shall request, which search results shall be in form and substance satisfactory to Agent;

(k)           Agent shall have received environmental audits of the Baldwyn Real Property conducted by an independent environmental engineering firm acceptable to Agent, and in form, scope and methodology reasonably satisfactory to Agent, the results of which shall be satisfactory to Agent;

(l)            Agent shall have received, in form and substance reasonably satisfactory to Agent, a valid and effective title insurance policy issued by a company and agent acceptable to Agent: (i) insuring the priority, amount and sufficiency of the Closing Date Mortgaged Property, (ii) insuring against matters that would be disclosed by surveys and (iii) containing any legally available endorsements, assurances or affirmative coverage requested by Agent for protection of its interests;

(m)           Agent shall have received originals of the shares of the stock certificates (if any) representing all of the issued and outstanding shares of the Capital Stock of each Borrower and Guarantor (other than Parent) and owned by any Borrower or Guarantor, in each case together with stock powers duly executed in blank with respect thereto;

(n)           Agent shall have received a Borrowing Base Certificate setting forth the Loans and Letters of Credit available to Borrowers as of the date hereof as completed in a manner reasonably satisfactory to Agent and duly authorized, executed and delivered on behalf of Borrowers;

(o)           Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee;

(p)           Agent shall have received a written appraisal as to the Inventory of Borrowers and Guarantors and the Baldwyn Real Property, in each case by an appraiser acceptable to Agent, in form, scope and methodology reasonably acceptable to Agent, addressed to Agent and upon which Agent and Lenders are expressly permitted to rely;

(q)           no material pending or threatened, litigation, proceeding, bankruptcy (other than the Reorganization Cases) or insolvency, injunction, order or claims with respect to Borrowers and Guarantors shall exist;

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(r)           as of the date hereof and after giving effect to the transactions contemplated hereby, no defaults or events of default on any material Indebtedness or any other Material Contracts of Borrowers or Guarantors shall exist or have occurred and be continuing;

(s)           Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrowers and Guarantors with respect to the Financing Agreements and such other matters as Agent may request;

(t)           Agent shall have received the audited financial statements of Borrowers and their Subsidiaries for the Fiscal Year ended February 2, 2008, and such financial statements shall be in form and substance reasonably satisfactory to Agent;

(u)           Agent shall have received satisfactory background and reference checks on (i) each Borrower and each Guarantor and (ii) the chief executive officer, chief financial officer, chief operating officer and each other officer and director of each Borrower and each Guarantor, in each case, as determined by the Agent, and the Borrowers and the Guarantors shall have delivered all such documents and instruments necessary to effectuate such background and reference checks;

(v)           Agent shall have received evidence satisfactory to Agent that Borrowers shall have received the Specified Subordinated Indebtedness, together with copies, certified by the chief executive officer or chief financial officer of the Administrative Borrower of all Specified Subordinated Indebtedness Documents.  The terms of the Specified Subordinated Indebtedness and the Specified Subordinated Indebtedness Documents shall be reasonably acceptable to Agent, including, without limitation, with respect to payment subordination and blockage, remedy standstill periods, cross-default provisions and agreement not to contest the Obligations and the liens granted to Agent under the Financing Agreements, and the Obligations arising under the Financing Agreements and the liens granted to Agent under the Financing Agreements shall be senior and first in priority, as applicable, in all respects;

(w)           all motions and other documents to be filed with and submitted to the Bankruptcy Court in connection with this Agreement and the Plan of Reorganization and the approval hereof and thereof shall be satisfactory in form and substance to Agent.  All service and notice requirements in connection this Agreement and the Plan of Reorganization shall have been timely complied with and such requirements have been fulfilled in accordance with all applicable laws and rules.  A Final Order confirming the Plan of Reorganization in form and substance acceptable to Agent (the “Confirmation Order”) shall have been entered in the Reorganization Cases, which order shall not have been subject to injunction, stayed, modified, appealed, reversed or otherwise affected;

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(x)           Borrowers’ Plan of Reorganization, as confirmed, shall be in form and substance satisfactory to Agent, including, without limitation, providing for the discharge of all Indebtedness and other claims against the Borrowers existing as of the Petition Date, the termination of all commitments relating thereto, and the termination, release and discharge of all liens or security interests granted thereunder (other than Permitted Liens), in each case on terms satisfactory to the Agent.  The Bankruptcy Court shall have approved any amendments or modifications to the Plan of Reorganization and entered any and all related orders requested or approved by Agent in connection therewith, and no other amendments or modifications thereto shall have occurred except as shall have been consented to by Agent or the Required Lenders, as appropriate.  All conditions precedent to the Effective Date (as defined in the Plan of Reorganization) of the Plan of Reorganization shall have been met (or the Agent shall have granted its prior written consent to a waiver thereof) and the Effective Date of the Plan of Reorganization shall have occurred or shall be scheduled to occur but for the initial Loans under this Agreement to be made on the Closing Date.  The Confirmation Order shall be a Final Order and shall not have been reversed, modified, amended, subject to injunction, or stayed, shall be in full force and effect, and, unless otherwise agreed by Agent, all appeal periods relating to the Confirmation Order shall have expired, and, unless otherwise agreed by Agent, no appeals from the Confirmation Order shall be outstanding.  Except with the prior written consent of the Agent, the Bankruptcy Court’s retention of jurisdiction under the Final Order confirming the Plan of Reorganization shall not extend to nor govern the enforcement of the Financing Agreements from and after the Closing Date, or any rights or remedies relating thereto;

(y)           Agent shall have completed its legal due diligence with results reasonably satisfactory to Agent (including without limitation Agent’s reasonable satisfactory with any previously undisclosed issues of a business nature that arise in connection with the legal due diligence) for which Agent previously did not have actual knowledge of such issues prior to the date the Commitment Letter dated as of April 8, 2008 having been executed and which such issues affect any Borrower or any of its Subsidiaries or the Transaction that in the Agent’s reasonable judgment is inconsistent in a material and adverse manner with any such information disclosed to the Agent prior to the date of such Commitment Letter.  Without limiting the generality of the foregoing, the corporate structure of the Borrowers and their subsidiaries, documentation evidencing Indebtedness of the Borrowers and their subsidiaries, material contracts and Governing Documents of the Borrowers and their subsidiaries shall be reasonably acceptable to the Agent; and

(z)           Agent shall have received an officer’s certificate duly executed by chief executive officer, president, vice president or treasurer of each of the Borrowers and Guarantors certifying and attesting that, as of the Closing Date, (i) no appeal of the Confirmation Order has been filed; (ii) no request for a stay of the Confirmation Order pending appeal has been made; and (iii) the Confirmation Order has not been stayed in any manner.

(aa)         Agent shall have received such other documents and instruments reasonably as Agent or its counsel may require or request.

4.2          Conditions Precedent to All Loans and Letters of Credit .  The obligation of Lenders to make the Loans, including the initial Loans, or of the Issuing Bank to issue any Letter of Credit, including the initial Letters of Credit and any further Loans and Letters of Credit, is subject to the further satisfaction of, or waiver of, immediately prior to or concurrently with the making of each such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

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

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

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

(d)           Borrowers shall be in compliance with the covenant set forth in Section 9.19; and

(e)           the Final Order confirming the Plan of Reorganization shall be in full force and effect and shall not have been vacated, reversed, modified, amended or stayed.

SECTION 5  GRANT AND PERFECTION OF SECURITY INTEREST

5.1          Grant of Security Interest.  To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and the benefit of the Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of the Lenders, as security, all of the following personal property, and interests in personal property, of each Borrower and Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”), including:

(a)           all Accounts;

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

(c)           all goods, including without limitation, Inventory and Equipment;

(d)           all Real Property (other than leasehold estates) and fixtures;

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

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

(g)           all documents;

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(h)           all deposit accounts;

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

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

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

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

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

(n)           all Records; and

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

5.2          Perfection of Security Interests.

(a)           Each Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower or Guarantor as debtor, as Agent may require, and including any other information with respect to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof.  Each Borrower and Guarantor hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any).  Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any symbol required for authenticating any electronic filing.  In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral.  In no event shall any Borrower or Guarantor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower or Guarantor as debtor.

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(b)           Each Borrower and Guarantor does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth on Schedule 5.2(b).  In the event that any Borrower or Guarantor shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrowers and Guarantors shall promptly notify Agent thereof in writing.  Promptly upon the receipt thereof by or on behalf of any Borrower or Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that such Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree.  At Agent’s option, each Borrower and Guarantor shall, or Agent may at any time on behalf of any Borrower or Guarantor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of General Electric Capital Corporation in its capacity as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c)           In the event that any Borrower or Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

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(d)           Each Borrower and Guarantor does not have any deposit accounts as of the date hereof, except as set forth on Schedule 5.2(d).  Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied:  (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of any Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower or Guarantor is dealing and the purpose of the account, except as to any Store Account opened or established after the date hereof, so long as no Event of Default shall exist or have occurred and be continuing, Agent shall only have received such information as to such Store Account on the next monthly report with respect to deposit accounts in accordance with Section 7.1(a) hereof, (ii) the bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such deposit account (other than as to a Store Account so long as no Default or Event of Default shall exist or have occurred and be continuing), such Borrower or Guarantor shall deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened and maintained.  At all times the Borrowers and Guarantors shall maintain a Deposit Account Control Agreement in full force and effect with respect to the Concentration Account and the Elavon Deposit Account. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees.

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

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

(g)           Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of such Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower or Guarantor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower or Guarantor shall as Agent may specify either (i) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower or Guarantor and such securities intermediary or commodity intermediary or (ii) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.

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(h)           Borrowers and Guarantors are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth on Schedule 5.2(h).  In the event that any Borrower or Guarantor shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof, such Borrower or Guarantor shall promptly notify Agent thereof in writing.  Such Borrower or Guarantor shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance reasonably satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).

(i)            Borrowers and Guarantors do not have any commercial tort claims as of the date hereof, except as set forth on Schedule 5.2(i).  In the event that any Borrower or Guarantor shall at any time after the date hereof have any commercial tort claims, such Borrower or Guarantor shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower or Guarantor to Agent of a security interest in such commercial tort claim (and the proceeds thereof).  In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower or Guarantor to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein.  Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower or Guarantor of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower or Guarantor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower and Guarantor shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in connection with such commercial tort claim.

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(j)            Borrowers and Guarantors do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the Closing Date, except as set forth on Schedule 5.2(j) and except for goods located in the United States in transit to a location of a Borrower or Guarantor permitted herein in the ordinary course of business of such Borrower or Guarantor in the possession of the carrier transporting such goods.  In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to on Schedule 5.2(j) or such carriers, Borrowers and Guarantors shall promptly notify Agent thereof in writing.  Promptly upon Agent’s request, Borrowers and Guarantors shall deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower or Guarantor that is the owner of such Collateral.

(k)           Borrowers and Guarantors shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and (v) taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

SECTION 6  COLLECTION AND ADMINISTRATION

6.1          Borrowers’ Loan Accounts.  Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letters of Credit and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower or Guarantor and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest.  All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time.

6.2          Statements.  Agent shall render to Administrative Borrower each month a statement setting forth the balance in Borrowers’ loan account(s) maintained by Agent for Borrowers pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses.  Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and Guarantors and conclusively binding upon Borrowers and Guarantors as an account stated except to the extent that Agent receives a written notice from Administrative Borrower of any specific exceptions of Administrative Borrower thereto within forty-five (45) days after the date such statement has been received by Parent.  Only those items expressly objected to in such notice shall be deemed to be disputed by Administrative Borrower.  Until such time as Agent shall have rendered to Administrative Borrower a written statement as provided above, the balance in any Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrowers and Guarantors.

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6.3          Cash Management; Collection of Collateral Proceeds.

(a)           Each Borrower and Guarantor shall establish and maintain, at its expense, deposit account arrangements and merchant payment arrangements with the banks set forth on Schedule 8.10 and subject to Section 5.2(d) hereof, such other banks as such Borrower or Guarantor may hereafter select.  The banks set forth on Schedule 8.10 constitute all of the banks with which Borrowers and Guarantors have deposit account arrangements and merchant payment arrangements as of the date hereof, which such Schedule identifies those deposit accounts that constitute a Store Account or otherwise describes the nature of the use of such deposit account by such Borrower.

(b)           (i)  Each Borrower shall deposit all proceeds from sales of Inventory in every form, including, without limitation, cash, checks, credit card sales drafts, credit card sales or charge slips or receipts and other forms of daily store receipts, from each retail store location of such Borrower on each Business Day into the Store Account of such Borrower used solely for such purpose or the Concentration Account; provided, that, each retail store of a Borrower shall be permitted to retain cash on hand in an amount not to exceed $1,000 immediately after giving effect to the deposit of funds from such store into the applicable Store Account or Concentration Account.  All such funds deposited into the Store Accounts shall be sent by wire transfer or other electronic funds transfer on each Business Day to the Concentration Account as provided in Section 6.3(c), except for nominal amounts required to be maintained in such Store Accounts under the terms of such Borrower’s arrangements with the bank at which such Store Accounts are maintained (which nominal amounts shall not at any time exceed $3,000 as to each Store Account).

(ii)            Each Borrower shall cause Elavon Processor to deposit into the Elavon Deposit Account or the Concentration Account all amounts payable by Elavon Processor to any Borrower, such deposits to occur at least twice per calendar week by wire transfer or other electronic funds transfer.  All amounts in the Elavon Deposit Account in excess of $200,000 in the aggregate shall be transferred by wire transfer or other electronic funds transfer on each Business Day to the Concentration Account as provided in Section 6.3(c).

(iii)           Each Borrower shall cause all Credit Card Processors (other than Elavon Processor) and all Credit Card Issuers to deposit into the Concentration Account as provided in Section 6.3(c) all amounts payable from such Credit Card Processor or such Credit Card Issuer to any Borrower by wire transfer or other electronic funds transfer.

(iv)           Borrowers shall, and shall cause each of their Subsidiaries to, transfer any funds released from the Elavon Reserve Account, on the day such funds are released therefrom, to the Concentration Account as provided in Section 6.3(c), by wire transfer or other electronic funds transfer.

(v)           All amounts in each Intercompany Royalty Account shall be sent by wire transfer or other electronic funds transfer on each Business Day to the Concentration Account as provided in Section 6.3(c).

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(c)           Each Borrower shall either (i) cause all amounts (other than to the extent expressly permitted under Section 6.3(b)(i) hereof) on deposit in the Store Accounts of such Borrower to be deposited by wire transfer or other electronic funds transfer on each Business Day in the Concentration Account (or, to the extent consented to in advance in writing by the Agent in its sole discretion, another Blocked Account), or (ii) shall itself deposit or cause to be deposited on each Business Day in the Concentration Account (or, to the extent consented to in advance in writing by the Agent in its sole discretion, another Blocked Account) in immediately available funds all proceeds of Collateral, including all proceeds from sales of Inventory and all other proceeds of Collateral.  Borrowers and Guarantors shall deliver, or cause to be delivered to Agent a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2 hereof.  From and after the Closing Date, all available amounts received in the applicable Blocked Account or, subject to Section 6.3(d), any Store Account (except as provided in Section 6.3(b) above) shall be transferred daily from such Blocked Account or Store Account to the Agent Payment Account.

(d)           At any time a Default or an Event of Default shall exist or have occurred and be continuing, promptly upon Agent’s request, Borrowers and Guarantors shall deliver, or cause to be delivered, to Agent a Deposit Account Control Agreement duly authorized, executed and delivered by such banks where a Store Account is maintained as Agent shall specify.  Without limiting any other rights or remedies of Agent or Lenders, in the event that a Deposit Account Control Agreement is in effect for a Store Account, then Agent may, at its option, instruct the depository bank at which the Store Account is maintained to transfer all available funds received or deposited into the Store Account to Agent Payment Account at any time that an Event of Default shall exist or have occurred and be continuing.

(e)           At all times, all payments made to the the Concentration Account, the Elavon Deposit Account, all Blocked Accounts or Store Accounts subject to a Deposit Account Control Agreement, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Agent in respect of the Obligations and therefore shall constitute the property of Agent and Lenders to the extent of the then outstanding Obligations.

(f)           No Borrower shall, or shall cause or permit any Subsidiary thereof, to accumulate or maintain cash in any payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements.

(g)           For purposes of calculating the amount of the Loans available to each Borrower, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Agent of immediately available funds in Agent Payment Account; provided such payments and notice thereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and within sufficient time to credit the applicable loan account on such day, and if not, then on the next Business Day.

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(h)           Each Borrower and Guarantor and their respective employees, agents and Subsidiaries shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and promptly upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Agent.

(i)            Borrowers agree to reimburse Agent on demand for any amounts owed or paid to any bank or other financial institution at which a Blocked Account or any other deposit account or investment account is established or any other bank, financial institution or other person involved in the transfer of funds to or from the Blocked Accounts arising out of Agent’s payments to or indemnification of such bank, financial institution or other person.  The obligations of Borrowers to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the termination of this Agreement.

6.4          Payments.

(a)           All Obligations shall be payable to Agent Payment Account as provided in Section 6.3 or such other place as Agent may designate from time to time.  Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from any Borrower or Guarantor or for the account of any Borrower or Guarantor (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first, to pay any fees, indemnities or expense reimbursements then due to Agent, Lenders and Issuing Bank from any Borrower or Guarantor; second, to pay interest due in respect of any Loans (and including any Special Agent Advances) or Letter of Credit Obligations; third, to pay principal in respect of Special Agent Advances; fourth, to pay principal in respect of the Loans, any then due Obligations under any Secured Rate Contract and to provide cash collateral for then outstanding Letter of Credit Obligations in the manner described in Section 2.2, ratably to the aggregate, combined principal balance of the principal of the Revolving Loans, the then due Obligations under any Secured Rate Contract and the outstanding Letter of Credit Obligations; fifth, to pay Obligations then due arising under or pursuant to any Hedge Agreement (other than any Secured Rate Contract) of a Borrower or Guarantor with a Bank Product Provider (up to the amount of any then effective Reserve established in respect of such Obligations), on a pro rata basis; sixth, to pay or prepay any other Obligations whether or not then due, in such order and manner as Agent determines and, at any time an Event of Default exists or has occurred and is continuing, to be held as cash collateral in connection with any Letter of Credit; and seventh, to pay Obligations arising under or pursuant to any Bank Product (other than to the extent provided for above) on a pro rata basis.  Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Agent, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans and (ii) to the extent any Borrower uses any proceeds of the Loans or Letters of Credit to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Obligations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Obligations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which such Borrower acquired such rights in or the use of such Collateral.

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(b)           At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of any Borrower maintained by Agent.  If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent, any Lender or Issuing Bank is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender.  Borrowers and Guarantors shall be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned.  This Section 6.4(b) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds.  This Section 6.4 shall survive the payment of the Obligations and the termination of this Agreement.

(c)           (i)           Immediately upon receipt by any Borrower of any cash proceeds of any asset disposition (other than any Permitted Disposition described in clauses (a), (b), (e) and (f) of the definition thereof), Borrowers shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens on such asset (to the extent such Liens constitute encumbrances permitted hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith.  Any such prepayment shall be applied in accordance with Section 6.4(a).  The Commitment shall not be permanently reduced by the amount of any such prepayments.

(ii)           If any Borrower issues Capital Stock or incurs any Indebtedness (other than Indebtedness permitted by Section 9.9), no later than the Business Day following the date of receipt of the proceeds thereof, Borrowers shall prepay the Loans (and cash collateralize Letter of Credit Obligations) in an amount equal to all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith.  Any such prepayment shall be applied in accordance with Section 6.4(a).  The Commitment shall not be permanently reduced by the amount of any such prepayments.

6.5          Taxes.

(a)           Any and all payments by or on account of any of the Obligations shall be made free and clear of and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, charges, withholdings, liabilities, restrictions or conditions of any kind, excluding (i) in the case of each Lender, Issuing Bank and Agent (A) taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, Issuing Bank or Agent (as the case may be) is organized and (B) any United States withholding taxes payable with respect to payments under the Financing Agreements under laws (including any statute, treaty or regulation) in effect on the date hereof (or, in the case of an Eligible Transferee, the date of the Assignment and Acceptance) applicable to such Lender, Issuing Bank or Agent, as the case may be, but not excluding any United States withholding taxes payable as a result of any change in such laws occurring after the date hereof (or the date of such Assignment and Acceptance) and (ii) in the case of each Lender, taxes measured by its net income, and franchise taxes imposed on it as a result of a connection between such Lender and the jurisdiction of the Governmental Authority imposing such tax or any taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, fees, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).

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(b)           If any Taxes shall be required by law to be deducted from or in respect of any sum payable in respect of the Obligations to any Lender, Issuing Bank or Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6.5), such Lender or Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the relevant Borrower or Guarantor shall make such deductions, (iii) the relevant Borrower or Guarantor shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law and (iv) the relevant Borrower or Guarantor shall deliver to Agent evidence of such payment.

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

(d)           Each Borrower and Guarantor shall indemnify each Lender, Issuing Bank and Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 6.5) paid by such Lender, Issuing Bank or Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted, unless the payment thereof by such Lender, Issuing Bank or Agent (as the case may be) resulted from the gross negligence or willful misconduct of such Lender, Issuing Bank or Agent (as the case may be) as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  This indemnification shall be made within ten (10) days from the date such Lender, Issuing Bank or Agent (as the case may be) makes written demand therefor.  A certificate as to the amount of such payment or liability delivered to Administrative Borrower by a Lender or Issuing Bank (in each case with a copy to Agent) or by Agent on its own behalf or on behalf of a Lender or Issuing Bank, shall be conclusive absent manifest error.

(e)           If Agent, Issuing Bank or any Lender receives a refund or credit in respect of any Taxes or Other Taxes for which Agent, Issuing Bank or such Lender has received payment from any Borrower or Guarantor hereunder, so long as no Event of Default shall exist or have occurred and be continuing, Agent, Issuing Bank or such Lender (as the case may be) shall credit to the loan account of Borrowers the amount of such refund or the amount of any tax savings (if any) realized by Agent, Issuing Bank or such Lender directly attributable to such credit.

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(f)            As soon as practicable after any payment of Taxes or Other Taxes by any Borrower or Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address referred to herein, the original or a certified copy of a receipt evidencing payment thereof.

(g)           Without prejudice to the survival of any other agreements of any Borrower or Guarantor hereunder or under any of the other Financing Agreements, the agreements and obligations of such Borrower or Guarantor contained in this Section 6.5 shall survive the termination of this Agreement and the payment in full of the Obligations.

(h)           Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the applicable Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any of the other Financing Agreements shall deliver to Administrative Borrower (with a copy to Agent), at the time or times prescribed by applicable law or reasonably requested by Administrative Borrower or Agent (in such number of copies as is reasonably requested by the recipient), whichever of the following is applicable (but only if such Foreign Lender is legally entitled to do so):  (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming exemption from, or a reduction to, withholding tax under an income tax treaty, or any successor form, (ii)  duly completed copies of Internal Revenue Service Form 8-8ECI claiming exemption from withholding because the income is effectively connection with a U.S. trade or business or any successor form, (iii)  in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect that such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the Code or a “controlled foreign corporation” described and Section 881(c)(3)(C) of the Code and (B) duly completed copies of Internal Revenue Service Form W-8BEN claiming exemption from withholding under the portfolio interest exemption or any successor form or (iv) any other applicable form, certificate or document prescribed by applicable law as a basis for claiming exemption from or a reduction in United States withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit a Borrower to determine the withholding or deduction required to be made.  Unless Administrative Borrower and Agent have received forms or other documents reasonably satisfactory to them indicating that payments hereunder or under any of the other Financing Agreements to or for a Foreign Lender are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, Borrowers or Agent shall withhold amounts required to be withheld by applicable requirements of law from such payments at the applicable statutory rate.

(i)           Any Lender claiming any additional amounts payable pursuant to this Section 6.5 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its applicable lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender.

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6.6          Authorization to Make Loans.  Agent and Lenders are authorized to make the Loans based upon telephonic or other instructions received from anyone purporting to be an officer of Administrative Borrower or any Borrower or other authorized person or, at the discretion of Agent, if such Loans are necessary to satisfy any Obligations.  All requests for Loans or Letters of Credit hereunder shall specify the date on which the requested advance is to be made (which day shall be a Business Day) and the amount of the requested Loan.  Requests received after 1 p.m. (Eastern time) on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day.  All Loans and Letters of Credit under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, any Borrower or Guarantor when deposited to the credit of any Borrower or Guarantor or otherwise disbursed or established in accordance with the instructions of any Borrower or Guarantor or in accordance with the terms and conditions of this Agreement.

6.7          Use of Proceeds.  Borrowers shall use the initial proceeds of the Loans and Letters of Credit hereunder only for: (a) refinancing the Indebtedness (i) owed to the Existing Lenders and (ii) for purposes of consummating the Plan of Reorganization, (b) expenses actually incurred with the consummation of the Plan of Reorganization and (c) costs, expenses and fees incurred in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements.  Borrowers shall deliver to Agent a description of Borrowers’ sources and uses of funds as of the Closing Date, including Loans and Letter of Credit Obligations to be made or incurred on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses.  All other Loans made or Letters of Credit provided to or for the benefit of any Borrower pursuant to the provisions hereof shall be used only for general operating purposes, working capital purposes and other proper corporate purposes of Borrowers and Guarantors not otherwise prohibited by the terms hereof.  None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.

6.8          Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements.

(a)           Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent and attorney-in-fact to request and receive Loans and Letters of Credit pursuant to this Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower.  Agent and Lenders may disburse the Loans to such bank account of Administrative Borrower or a Borrower or otherwise make such Loans to a Borrower and provide such Letters of Credit to a Borrower as Administrative Borrower may designate or direct, without notice to any other Borrower or Guarantor.  Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

(b)           Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative Borrower shall ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the account of Parent, or the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to or for the account of such Borrower.

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(c)           Each Borrower and other Guarantor hereby irrevocably appoints and constitutes Administrative Borrower as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements.

(d)           Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower or any Guarantor by Administrative Borrower shall be deemed for all purposes to have been made by such Borrower or Guarantor, as the case may be, and shall be binding upon and enforceable against such Borrower or Guarantor to the same extent as if made directly by such Borrower or Guarantor.

(e)           No purported termination of the appointment of Administrative Borrower as agent as aforesaid shall be effective, except after ten (10) days’ prior written notice to Agent.

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

6.10        Sharing of Payments, Etc.

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

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

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

(d)           Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower or Guarantor.  If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

6.11        Settlement Procedures.

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

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(b)           With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. (Eastern time) on the Business Day immediately preceding the date of each settlement computation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly.  Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by Agent and received by a Lender prior to 1:00 p.m. (Eastern time), then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. (Eastern time) on the same Business Day and if received by a Lender after 1:00 p.m. (Eastern time), then such Lender shall make the settlement transfer by not later than 3:00 p.m. (Eastern time) on the next Business Day following the date of receipt.  If, as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase.  Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease.  The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent.  Agent and each Lender agrees to xxxx its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Loans and Letters of Credit.  Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender.  Because Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrowers or actually settled with the applicable Lender as described in this Section.

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

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(d)           If Agent is not funding a particular Loan to a Borrower (or Administrative Borrower for the benefit of such Borrower) pursuant to Sections 6.11(a) and 6.11(b) above on any day, but is requiring each Lender to provide Agent with immediately available funds on the date of such Loan as provided in Section 6.11(c) above, Agent may assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of such Borrower on such day.  If Agent makes such corresponding amount available to a Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (Eastern time) on that day by each of the three leading brokers of Federal funds transactions in New York, New York selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.  During the period in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account.  Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Administrative Borrower of such failure and Borrowers shall immediately pay such corresponding amount to Agent for its own account.  A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to Agent, is a “Defaulting Lender”.  Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, relend to a Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender.  For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero (0).  This Section shall remain effective with respect to a Defaulting Lender until such default is cured.  The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower or Guarantor of their duties and obligations hereunder.

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

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

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6.13        Bank Products.  Borrowers and Guarantors, or any of their Subsidiaries, may (but no such Person is required to) request that the Bank Product Providers provide or arrange for such Person to obtain Bank Products from Bank Product Providers, and each Bank Product Provider may, in its sole discretion, provide or arrange for such Person to obtain the requested Bank Products.  Borrowers and Guarantors or any of their Subsidiaries that obtains Bank Products shall indemnify and hold Agent, each Lender and their respective Affiliates harmless from any and all obligations now or hereafter owing to any other Person by any Bank Product Provider in connection with any Bank Products other than for gross negligence or willful misconduct on the part of any such indemnified Person.  This Section 6.13 shall survive the payment of the Obligations and the termination of this Agreement.  Borrower and its Subsidiaries acknowledge and agree that the obtaining of Bank Products from Bank Product Providers (a) is in the sole discretion of such Bank Product Provider, and (b) is subject to all rules and regulations of such Bank Product Provider.  Each Bank Product Provider shall be deemed a party hereto for purposes of any reference in a Financing Agreement to the parties for whom Agent is acting, provided, that, the rights of such Bank Product Provider hereunder and under any of the other Financing Agreements shall consist exclusively of such Bank Product Provider’s right to share in payments and collections out of the Collateral as set forth herein.  In connection with any such distribution of payments and collections, Agent shall be entitled to assume that no amounts are due to any Bank Product Provider unless such Bank Product Provider has notified Agent in writing of any such liability owed to it as of the date of any such distribution.

SECTION 7  COLLATERAL REPORTING AND COVENANTS

7.1          Collateral Reporting.

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

(i)           as soon as possible after (1) the end of each Fiscal Month (but in any event within fifteen (15) days after the end thereof) or (2) the end of each week (but in any event by no later than Thursday of the immediately following week) if Excess Availability is less than the Specified Amount as of the last day of the immediately preceding Fiscal Month or week, as applicable, or (3) any request made by the Agent at any time or times, a Borrowing Base Certificate setting forth the calculation of the Borrowing Base as of the last Business Day of the immediately preceding weekly or monthly period as to the Inventory, duly completed and executed by the chief financial officer, vice president of finance, treasurer or controller of Administrative Borrower, together with all schedules required pursuant to the terms of the Borrowing Base Certificate duly completed, including but not limited to (A) a monthly aging of Credit Card Receivables identifying those outstanding more then five (5) Business Days since the sale date giving rise thereto and (B) an inventory summary report by category (and upon Agent’s request, letter of credit inventory) and identifying where such Inventory is located;

(ii)           as soon as possible after the end of each Fiscal Month (but in any event within fifteen (15) days after the end thereof), on a monthly basis, or more frequently as Agent may request, (A) rollforward inventory reports supported by monthly updates of adjusted cost factors and intercompany eliminations (and including the amounts of Inventory and the value thereof at any leased locations and at premises of  warehouses, processors or other third parties), (B) list or agings of outstanding accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, fulfillment centers, processors, custom brokers, freight forwarders and other third parties from time to time in possession of any Collateral), and (C) a certificate of an authorized officer of Administrative Borrower certifying that sales and use tax collections, deposits and payments are current;

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(iii)           as soon as possible after the end of each calendar month (but in any event within five (5) days after the end thereof), on a monthly basis, or more frequently as Agent may request, a duly completed Applicable Margin Certificate, duly signed by an authorized officer of the Administrative Borrower;

(iv)           as soon as possible after the end of each Fiscal Quarter (but in any event within fifteen (15) Business Days after the end thereof), on a quarterly basis or more frequently as Agent may request, reports by retail store location of sales and operating profits for each such retail store location;

(v)            upon Agent’s reasonable request, (A) reports of sales for each category of Inventory, (B)  reports of aggregate Inventory purchases and identifying items of Inventory in transit to any Borrower or Guarantor related to the applicable documentary letter of credit and/or xxxx of lading number, (C) copies of remittance advices and reports, and copies of deposit slips and bank statements, (D) copies of shipping and delivery documents, (E) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrowers and Guarantor, (F) reports of inventory subject to a license granted to a Borrower by a third party, identifying such inventory by item, source, licensor, royalties paid, royalties payable and applicable license agreement, and (G) a report of all Inventory purchased or sold by Borrowers on consignment;

(vi)           upon Agent’s reasonable request, (A) copies of customer statements, purchase orders, sales invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by any Borrower or Guarantor; and

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

(b)           Nothing contained in any Borrowing Base Certificate shall be deemed to limit, impair or otherwise affect the rights of Agent contained herein and in the event of any conflict or inconsistency between the calculation of the Borrowing Base as set forth in any Borrowing Base Certificate and as determined by Agent in good faith, the determination of Agent shall govern and be conclusive and binding upon Borrowers and Guarantors. Without limiting the foregoing, Borrowers shall furnish to Agent any information which Agent may reasonably request regarding the determination and calculation of any of the amounts set forth in any Borrowing Base Certificate. The Borrowing Base may be adjusted based on the information set forth in the reports received by Agent under Section 7.1(a)(i) above.  If any Borrower’s or Guarantor’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, such Borrower and Guarantor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent’s instructions with respect to further services.

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7.2          Accounts Covenants.

 

(a)           Borrowers shall notify Agent promptly of the assertion of (i) any claims, offsets, defenses or counterclaims by any account debtor, Credit Card Issuer or Credit Card Processor or any disputes with any of such persons or any settlement, adjustment or compromise thereof, to the extent any of the foregoing exceeds $250,000 in any one case or $500,000 in the aggregate, (ii) all material adverse information relating to the financial condition of any account debtor, Credit Card Issuer or Credit Card Processor, and (iii) any event or circumstance which, to the best of any Borrower’s or Guarantor’s knowledge, which would cause Agent to consider any then existing Credit Card Receivables as no longer Eligible Credit Card Receivables.  No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor, Credit Card Issuer or Credit Card Processor except in the ordinary course of a Borrower’s business in accordance with the current practices of such Borrower as in effect on the date hereof.  So long as no Event of Default exists or has occurred and is continuing, no Borrower shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor, Credit Card Issuer, Credit Card Processor.  At any time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors, Credit Card Issuers or Credit Card Processors or grant any credits, discounts or allowances.

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

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

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7.3           Inventory Covenants.  With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records reasonably describing the kind, type, quality and quantity of Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall, at their expense, 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, provided, that Borrowers and Guarantors shall conduct additional physical counts of Inventory as provided herein at any time or times as Agent may request, such additional physical counts at Agent’s expense unless an Event of Default then exists, in which case at Borrowers’ and Guarantors’ expense, and promptly following all such physical 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 Agent (which consent shall not be unreasonably withheld), except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein and except to return defective or non-conforming Inventory to the manufacturers or vendors thereof; (d) 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 such time or times as Agent may request, (ii)(x) to be conducted, at Borrower’s expense, no less than two (2) times in any twelve (12) month period, 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 Agent’s expense unless an Event of Default then exists in which case at Borrowers’ expense, and (ii) to be in form, scope and methodology 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 (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) each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (h) 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 such Borrower or Guarantor in the ordinary course of the business of such Borrower or Guarantor in accordance with the then current return policy of such Borrower or Guarantor; (i) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (j) 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 Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

7.4           Equipment and Real Property Covenants.  (a) The Borrowers and Guarantors shall, and shall cause their Subsidiaries to, cooperate with any appraiser retained by Agent in the conduct of appraises of the Eligible Real Property, such appraises (i) to be conducted at the Borrowers’ and Guarantors’ expense no more than one (1) time in any twelve (12) month period, but at any time or times as Agent may request at the Agent’s expense unless an Event of Default then exists in which case at the Borrowers’ and Guarantors’ expense and (ii) to be in form, scope and methodology (including, without limitation the FIRREA requirements) acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrowers and Guarantors shall keep the Equipment in good order, repair, and operating condition (ordinary wear and tear excepted); (c) Borrowers and Guarantors shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in material conformity with all applicable laws; (d) the Equipment is and shall be used in the business of Borrowers and Guarantors and not for personal, family, household or farming use; (e) Borrowers and Guarantors shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of its business (or to return defective or non-conforming Equipment to the manufacturers or vendors thereof) or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of such Borrower or Guarantor in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrowers and Guarantors shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) each Borrower and Guarantor assumes all responsibility and liability arising from the use of the Equipment and Real Property.

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7.5           Collateral Audit.  With respect to the Collateral, Borrowers and Guarantors shall, and shall cause their Subsidiaries to, cooperate with any auditor retained by the Agent in the conduct of an audit of the Collateral, such audit to occur (i) no less than two (2) times in any twelve (12) month period, unless Adjusted Excess Availability is less than the Specified Amount, then three (3) times in such twelve (12) month period, in either case, at the Borrowers’ and Guarantors’ expense, and (ii) at such time or times as Agent may request at Agent’s expense unless an Event of Default then exists in which case at Borrowers’ and Guarantors’ expense.  Such audit shall in form, scope and methodology acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely.

7.6           Power of Attorney.  Each Borrower and Guarantor hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s or Agent’s name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on any Collateral, (ii) enforce payment of any of the Collateral by legal proceedings or otherwise, (iii) exercise all of such Borrower’s or Guarantor’s rights and remedies to collect any Collateral, (iv) sell or assign any Collateral upon such terms, for such amount and at such time or times as Agent deems advisable, (v) settle, adjust, compromise, extend or renew any of the Collateral, (vi) discharge and release any Collateral, (vii) prepare, file and sign such Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower or Guarantor and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or any item of payment constituting Collateral is otherwise received by Agent or any Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Collateral are sent or received, (iii) endorse such Borrower’s or Guarantor’s name upon any items of payment in respect of Collateral received by Agent and any Lender and deposit the same in Agent’s account for application to the Obligations, (iv) endorse such Borrower’s or Guarantor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with a Letter of Credit through U.S. Customs or foreign export control authorities in such Borrower’s or Guarantor’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in such Borrower’s or Guarantor’s name for such purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (vi) sign such Borrower’s or Guarantor’s name on any verification of amounts owing constituting Collateral and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof.  Each Borrower and Guarantor hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

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

7.8          Access to Premises.  From time to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower’s and Guarantor’s premises during normal business hours and after notice to Parent, or at any time and without notice to Administrative Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of each Borrower’s and Guarantor’s books and records, including the Records, and (b) each Borrower and Guarantor shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may request, and Agent or any Lender or Agent’s designee may use during normal business hours such of any Borrower’s and Guarantor’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral.  Furthermore, so long as any Event of Default has occurred and is continuing, Borrowers shall provide Agent with access to their suppliers, provided that the Administrative Agent will afford the Borrowers a reasonable opportunity to participate in any discussions with such suppliers.  Each Borrower and Guarantor shall deliver any document or instrument necessary for Agent, as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for such Borrower or Guarantor, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Borrower or Guarantor.

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SECTION 8  REPRESENTATIONS AND WARRANTIES

Each Borrower and Guarantor hereby represents and warrants to Agent, Lenders and Issuing Bank the following (which shall survive the execution and delivery of this Agreement):

8.1          Existence, Power and Authority.  Each Borrower and Guarantor is a corporation or limited liability company duly organized and in good standing under the laws of its jurisdiction of organization or formation and is duly qualified as a foreign corporation or limited liability company and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect.  The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower’s and Guarantor’s powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of any Borrower’s or Guarantor’s certificate of incorporation or formation, by laws, operating agreements or other organizational documentation, or any indenture, agreement or undertaking to which any Borrower or Guarantor is a party or by which any Borrower or Guarantor or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of any Borrower or Guarantor.  This Agreement and the other Financing Agreements to which any Borrower or Guarantor is a party constitute legal, valid and binding obligations of such Borrower and Guarantor enforceable in accordance with their respective terms.

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

(a)           The exact legal name of each Borrower and Guarantor is as set forth on the signature page of this Agreement and on Schedule 8.2.  No Borrower or Guarantor has, during the five years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth on Schedule 8.2.

(b)           Each Borrower and Guarantor is an organization of the type and organized in the jurisdiction set forth on Schedule 8.2.  Schedule 8.2 accurately sets forth the organizational identification number of each Borrower and Guarantor or accurately states that such Borrower or Guarantor has none and accurately sets forth the federal employer identification number of each Borrower and Guarantor.

(c)           The chief executive office and mailing address of each Borrower and Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are located only at the address identified as such on Schedule 8.2 and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth on Schedule 8.2, subject to the rights of any Borrower or Guarantor to establish new locations in accordance with Section 9.2 below.  Schedule 8.2 correctly identifies any of such locations which are not owned by a Borrower or Guarantor and sets forth the owners and/or operators thereof.

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8.3          Financial Statements; No Material Adverse Change.  All financial statements relating to any Borrower or Guarantor which have been or may hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of such Borrower and Guarantor as at the dates and for the periods set forth therein.  Except as disclosed in any interim financial statements furnished by Borrowers and Guarantors to Agent prior to the date of this Agreement and except for the filing of the Reorganization Cases, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior to the date of this Agreement.  The projections dated March 5, 2008 for the Fiscal Years ending in 2008 through 2012 that have been delivered to Agent or any projections hereafter delivered to Agent have been prepared in light of the past operations of the businesses of Borrowers and Guarantors and are based upon estimates and assumptions stated therein, all of which Borrowers and Guarantors have determined to be reasonable and fair in light of the then current conditions and current facts and reflect the good faith and reasonable estimates of Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries and of the other information projected therein for the periods set forth therein.

8.4          Priority of Liens; Title to Properties.  The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 and the other liens permitted under Section 9.8 hereof.  Each Borrower and Guarantor has good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 or permitted under Section 9.8 hereof.

8.5          Tax Returns.  Each Borrower and Guarantor has filed, or caused to be filed, in a timely manner (including, subject to any extensions permitted by applicable law) all tax returns, reports and declarations which are required to be filed by it.  All information in such tax returns, reports and declarations is complete and accurate in all material respects.  Each Borrower and Guarantor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books.  Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

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

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8.7          Compliance with Other Agreements and Applicable Laws.

(a)           Borrowers and Guarantors are not in default in any respect under, or in violation in any respect of the terms of, any material agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound.  Borrowers and Guarantors are in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder, all Environmental Laws, all Federal, State and local statutes, regulations, rules and orders relating to consumer credit (including, without limitation, as each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and orders promulgated thereunder), and all Federal, State and local states, regulations, rules and orders pertaining to sales of consumer goods (including, without limitation, the Consumer Products Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as amended, and all regulations, rules and orders promulgated thereunder).

(b)           Borrowers and Guarantors have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the “Permits”).  All of the Permits are valid and subsisting and in full force and effect.  There are no actions, claims or proceedings pending or to the best of any Borrower’s or Guarantor’s knowledge, threatened that seek the revocation, cancellation, suspension or modification of any of the Permits.

8.8          Environmental Compliance.

(a)           Except as set forth on Schedule 8.8, Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or Permit, and the operations of Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor complies in all material respects with all Environmental Laws and all Permits.

(b)           Except as set forth on Schedule 8.8, there has been no investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of any Borrower’s or Guarantor’s knowledge threatened, with respect to any non compliance with or violation of the requirements of any Environmental Law by any Borrower or Guarantor or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which adversely affects or could reasonably be expected to adversely affect in any material respect any Borrower or Guarantor or its or their business, operations or assets or any properties at which such Borrower or Guarantor has transported, stored or disposed of any Hazardous Materials.

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(c)           Except as set forth on Schedule 8.8, Borrowers and Guarantors have no material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

(d)           Borrowers and Guarantors have all Permits required to be obtained or filed in connection with the operations of Borrowers and Guarantors under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect.

8.9          Employee Benefits.

(a)           Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law.  Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of any Borrower’s or Guarantor’s knowledge, nothing has occurred which would cause the loss of such qualification.  Each Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to the Pension Funding Rules has been made with respect to any Plan.

(b)           There are no pending, or to the best of any Borrower’s or Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan.

(c)           (i) Except for the filing of the Reorganization Cases, no ERISA Event has occurred or is reasonably expected to occur; (ii) based on the latest valuation of each Pension Plan and on the actuarial methods and assumptions employed for such valuation (determined in accordance with the assumptions used for funding such Pension Plan pursuant to the Pension Funding Rules), the aggregate current value of accumulated benefit liabilities of such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the aggregate current value of the assets of such Pension Plan; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.

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8.10        Bank Accounts.  All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower or Guarantor maintained at any bank or other financial institution are set forth on Schedule 8.10, subject to the right of each Borrower and Guarantor to establish new accounts in accordance with Section 5.2 hereof.

8.11        Intellectual Property.  Each Borrower and Guarantor owns or licenses or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted.  Borrowers and Guarantors do not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described on Schedule 8.11 and has not granted any licenses with respect thereto other than as set forth on Schedule 8.11.  No event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights.  To the best of any Borrower’s and Guarantor’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by any Borrower or Guarantor infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or threatened against or affecting any Borrower or Guarantor contesting its right to sell or use any such Intellectual Property.  Schedule 8.11 sets forth all of the agreements or other arrangements of each Borrower and Guarantor pursuant to which such Borrower or Guarantor has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower or Guarantor as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by any Borrower or Guarantor after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”).  No trademark, servicemark, copyright or other Intellectual Property at any time used by any Borrower or Guarantor which is owned by another person, or owned by such Borrower or Guarantor subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to any Eligible Inventory, except (a) to the extent permitted under the term of the license agreements listed on Schedule 8.11 and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by such Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).

8.12        Subsidiaries; Affiliates; Capitalization; Solvency; Material Adverse Effect.

(a)           Each Borrower and Guarantor does not have any direct or indirect Subsidiaries and is not engaged in any joint venture or partnership except as set forth on Schedule 8.12.

(b)           Each Borrower and Guarantor is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 as being owned by such Borrower or Guarantor and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares.

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(c)           The issued and outstanding shares of Capital Stock of each Borrower (other than Parent) and Guarantor are directly and beneficially owned and held by the Persons indicated on Schedule 8.12, and in each case all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof.

(d)           Each Borrower and Guarantor (other than with respect to Fabrics MI and Merchandising and, as to Merchandising, solely on account of the Intercompany Indebtedness) is Solvent and will continue to be Solvent after the creation of the Obligations, the security interests of Agent and the other transaction contemplated hereunder.

(e)           Since February 2, 2008, no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect.

8.13        Labor Disputes.

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

(b)           There is (i) no significant unfair labor practice complaint pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against any Borrower or Guarantor.

8.14        Restrictions on Subsidiaries.  Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of any Borrower or Guarantor permitted hereunder, there are no contractual or consensual restrictions on any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between any Borrower or Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral.

8.15        Material Contracts.  Schedule 8.15 sets forth all Material Contracts to which any Borrower or Guarantor is a party or is bound as of the date hereof.  Borrowers and Guarantors have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof.  Borrowers and Guarantors are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

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8.16        Credit Card Agreements.  Set forth on Schedule 8.16 is a correct and complete list of all of the Credit Card Agreements and all other agreements, documents and instruments existing as of the date hereof between or among any Borrower, any of its Subsidiaries, the Credit Card Issuers, the Credit Card Processors and any of their Affiliates.  The Credit Card Agreements constitute all of such agreements necessary for each Borrower to operate its business as presently conducted with respect to credit cards and debit cards and no Receivables of any Borrower arise from purchases by customers of Inventory with credit cards or debit cards, other than those which are issued by Credit Card Issuers with whom such Borrower has entered into one of the Credit Card Agreements set forth on Schedule 8.16 hereto or with whom Borrower has entered into a Credit Card Agreement in accordance with Section 9.18 hereof.  Each of the Credit Card Agreements constitutes the legal, valid and binding obligations of the Borrower that is party thereto and to the best of each Borrower’s and Guarantor’s knowledge, the other parties thereto, enforceable in accordance with their respective terms and is in full force and effect.  No material default or material event of default, or act, condition or event which after notice or passage of time or both, would constitute a material default or a material event of default under any of the Credit Card Agreements exists or has occurred that would entitle the other party thereto to suspend, withhold or reduce amounts that would otherwise be payable to a Borrower.  Each Borrower and the other parties thereto have complied in all material respects with all of the terms and conditions of the Credit Card Agreements to the extent necessary for such Borrower to be entitled to receive all payments thereunder.  Borrowers have delivered, or caused to be delivered to Agent, true, correct and complete copies of all of the Credit Card Agreements.

8.17        Interrelated Businesses.  Borrowers and Guarantors make up a related organization of various entities constituting a single economic and business enterprise so that Borrowers and Guarantors share an identity of interests such that any benefit received by any one of them benefits the others.  Borrowers and Guarantors render services to or for the benefit of the other Borrowers and/or Guarantors, as the case may be, purchase or sell and supply goods to or from or for the benefit of the others, make loans, advances and provide other financial accommodations to or for the benefit of the other Borrowers and Guarantors (including inter alia, the payment by Borrowers and Guarantors of creditors of the other Borrowers or Guarantors and guarantees by Borrowers and Guarantors of indebtedness of the other Borrowers and Guarantors and provide administrative, marketing, payroll and management services to or for the benefit of the other Borrowers and Guarantors).  Substantially all of the Inventory is paid for pursuant to Letters of Credit funded by Merchandising on behalf of the other Borrowers or are otherwise paid for by Merchandising, and Borrowers use substantially all of the proceeds from the disposition of the Inventory so purchased to repay the amounts owing to Merchandising as a result of such arrangements.  Borrowers and Guarantors have centralized accounting and legal services, certain common officers and directors and generally do not provide consolidating financial statements to creditors and certain Borrowers and Guarantors have the same chief executive office.

8.18        Payable Practices.  Each Borrower and Guarantor have not made any material change in the historical accounts payable practices from those in effect immediately prior to the date hereof.

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

8.20        Intercompany Indebtedness.  As of the Closing Date, Schedule 8.20 sets forth a list of all intercompany Indebtedness of the Parent and its Subsidiaries (such Indebtedness hereinafter referred to as the “Intercompany Indebtedness”), identifying the payor and payee in respect thereof, the outstanding principal amount of such Intercompany Indebtedness, and whether or not such Intercompany Indebtedness is evidenced by a note or other document.

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

SECTION 9  AFFIRMATIVE AND NEGATIVE COVENANTS

9.1          Maintenance of Existence.

(a)           Each Borrower and Guarantor shall at all times preserve, renew and keep in full force and effect its existence and rights and franchises with respect thereto and maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently or proposed to be conducted, other than as permitted in Section 9.7 hereto and other than the termination or expiration of leases in the ordinary course of business.

(b)           No Borrower or Guarantor shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from Administrative Borrower of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the certificate of incorporation or formation of such Borrower or Guarantor providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower or Guarantor as soon as it is available.

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(c)           No Borrower or Guarantor shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from Administrative Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith.  No Borrower or Guarantor shall change its type of organization, jurisdiction of organization or other legal structure.

9.2          New Collateral Locations.  Each Borrower and Guarantor may only open any new location, provided (a) such Borrower or Guarantor (i) gives Agent twenty (20) days prior written notice of the intended opening of any such new location, (ii) prior to the opening of any new location and the relocation of any Collateral or other assets or properties thereto, takes all steps Agent deems necessary or desirable to grant to the Agent, for the benefit of the Secured Parties, a first priority, perfected security interest in and lien on such assets or properties and (iii) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments, including opinions of local counsel, as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral, assets and properties at such location.

9.3          Compliance with Laws, Regulations, Etc.

(a)           Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority.

(b)           Borrowers and Guarantors shall give written notice to Agent immediately upon any Borrower’s or Guarantor’s receipt of any notice of, or any Borrower’s or Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by any Borrower or Guarantor or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by such Borrower or Guarantor to Agent.  Each Borrower and Guarantor shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c)           Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower or Guarantor in order to avoid any non compliance, with any Environmental Law, Borrowers shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Borrower’s or Guarantor’s response thereto or the estimated costs thereof, shall change in any material respect.

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

9.4          Payment of Taxes and Claims.  Each Borrower and Guarantor shall, and shall cause any Subsidiary to, promptly pay and discharge all material taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, Guarantor or Subsidiary, as the case may be; provided, that (i) adequate reserves with respect to such contest are maintained on the books of such Borrower or Guarantor, in accordance with GAAP; (ii) no lien shall be imposed to secure payment of such charges (other than payments to warehousemen and/or bailees) that is superior to any of the liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) such Borrower or Guarantor shall promptly pay or discharge such contested charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Borrower or Guarantor or the conditions set forth in this Section 9.4 are no longer met.

9.5          Insurance.  Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated.  Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer.  Borrowers and Guarantors shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if any Borrower or Guarantor fails to do so, Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers.  All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for each Borrower and Guarantor in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance.  Borrowers and Guarantors shall cause Agent to be named as a lender loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrowers and Guarantors shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance satisfactory to Agent.  Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower, Guarantor or any of its or their Subsidiaries.  Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at any time may be applied to payment of the Obligations, whether or not then due, in any order and in such manner as Agent may determine.  Upon application of such proceeds to the Revolving Loans, Revolving Loans may be available subject and pursuant to the terms hereof to be used for the costs of repair or replacement of the Collateral lost or damages resulting in the payment of such insurance proceeds.

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9.6          Financial Statements and Other Information.

(a)           Each Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower, Guarantor and its Subsidiaries in accordance with GAAP.  Borrowers and Guarantors shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers and Guarantors, and Borrower shall notify the auditors and accountants of Borrowers and Guarantors that Agent is authorized to obtain such information directly from them.  Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Agent, the following:

(i)           within thirty (30) days after the end of each Fiscal Month, consolidated unaudited balance sheets as of the close of such Fiscal Month and the related statements of income (including a calculation of EBITDA) and cash flows for such Fiscal Month and for that portion of the Fiscal Year ending as of the close of such Fiscal Month, together with a comparison of the figures for the corresponding periods in the prior Fiscal Year and the figures contained in the projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments).  Such financial information shall be accompanied by a certificate substantially in the form of Exhibit D hereto signed by the chief financial officer of Parent certifying that (a) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Parent and its Subsidiaries, on a consolidated basis, in each case as at the end of such Fiscal Month and for that portion of the Fiscal Year then ended, (b) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default, and (c) whether Borrowers and Guarantors were in compliance with the covenants set forth in Section 9.19 of this Agreement for such Fiscal Month and attaching a schedule in form reasonably satisfactory to Agent showing calculations used in determining, as of the end of such Fiscal Month, whether Borrowers and Guarantors were in compliance with the covenant set forth in Section 9.19 of this Agreement for such Fiscal Month.

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(ii)           within ninety (90) days after the end of each Fiscal Year, audited consolidated financial statements and unaudited consolidating financial statements of Parent and its Subsidiaries (including, in each case, balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and for such Fiscal Year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selected by the audit committee of Parent and acceptable to Agent (it being understood that any of the “Big Four” accounting firms Xxxx, Xxxxxx & Xxxxx, LLP or Xxxxx, LLP is acceptable to Agent), that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Parent and its Subsidiaries as of the end of and for the Fiscal Year then ended, and

(iii)           at such time as available, but in no event later than fifteen (15) days prior to the end of each Fiscal Year (commencing with the Fiscal Year of Borrowers ending on or about February 2, 2008), projected consolidated financial statements (including, in each case, forecasted balance sheets and statements of income and loss, statements of cash flow, and statements of shareholders’ equity) of Parent and its Subsidiaries for the next Fiscal Year and a projected availability model, all in reasonable detail, and in a format consistent with the projections delivered by Borrowers to Agent prior to the date hereof, together with such supporting information as Agent may reasonably request.  Such projected financial statements and availability model shall be prepared on a monthly basis for the next succeeding year. Such projections and availability model shall represent the reasonable best estimate by Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries for the periods set forth therein and shall have been prepared on the basis of the assumptions set forth therein which Borrowers and Guarantors believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions (it being understood that actual results may differ from those set forth in such projected financial statements and availability model).  Each year Borrowers shall provide to Agent a semi-annual update with respect to such projections and availability model or, at any time a Default or Event of Default exists or has occurred and is continuing, more frequently as Agent may require.

(b)           Borrowers and Guarantors shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would result in any material adverse change in any Borrower’s or Guarantor’s business, properties, assets, goodwill or condition, financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrowers and Guarantors shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $250,000 shall have been entered against any Borrower or Guarantor any of its or their properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default.

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(c)           Promptly after the sending or filing thereof, Borrowers shall send to Agent copies of (i) all reports which Parent or any of its Subsidiaries sends to its security holders generally, (ii) all reports and registration statements which Parent or any of its Subsidiaries files with the Securities Exchange Commission, any national or foreign securities exchange or the National Association of Securities Dealers, Inc., and such other reports as Agent may hereafter specifically identify to Administrative Borrower that Agent will require be provided to Agent, (iii) all press releases and (iv) all other statements concerning material changes or developments in the business of a Borrower or Guarantor made available by any Borrower or Guarantor to the public.

(d)           Borrowers and Guarantors shall furnish or cause to be furnished to Agent such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrowers and Guarantors, as Agent may, from time to time, reasonably request.  Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers and Guarantors to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant. Each Borrower and Guarantor hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrowers’ expense, copies of the financial statements of any Borrower and Guarantor and any reports or management letters prepared by such accountants or auditors on behalf of any Borrower or Guarantor and to disclose to Agent and Lenders such information as they may have regarding the business of any Borrower and Guarantor.  Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Administrative Borrower to Agent or such Lender in writing.

(e)           Borrowers and Guarantors shall promptly notify Agent in advance in writing of any proposed material amendment to the Elavon Processor Agreement (it is understood and agreed that any amendment to to Section B.6 of the Elavon Processor Agreement, any grant of the security interests and liens made by Parent thereunder or in respect thereof or the obligations secured by such security interests and liens shall be deemed to be a material amendment to the Elavon Processor Agreement) and/or replacement of the Elavon Member.

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9.7          Sale of Assets, Consolidation, Merger, Dissolution, Etc.  Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly,

(a)           merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it except that any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with and into or consolidate with any other wholly-owned Subsidiary of Parent (other than any Borrower, and including any such Subsidiary that only becomes a Subsidiary after giving effect to such merger or consolidation subject to the conditions set forth herein) and any Borrower may merge with and into or consolidate with any other Borrower, provided, that, in each case each of the following conditions is satisfied as determined by Agent:  (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Subsidiaries to so merge or consolidate, which notice shall set forth in reasonable detail satisfactory to Agent, the Persons that are merging or consolidating, which Person will be the surviving entity, the locations of the assets of the Persons that are merging or consolidating, and the material agreements and documents relating to such merger or consolidation, (ii) Agent shall have received such other information with respect to such merger or consolidation as Agent may reasonably request, (iii) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) Agent shall have received, true, correct and complete copies of all agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), and (v) the surviving corporation shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance reasonably satisfactory to Agent, and Borrowers and Guarantors shall execute and deliver such other agreements, documents and instruments as Agent may request in connection therewith;

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

(i)           Permitted Dispositions; provided, that, in the event of a sale of Real Property (other than the Baldwyn Real Property) by any Borrower or Guarantor, (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of such sale by such Borrower or Guarantor, which notice shall specify the parties to whom such Real Property is to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the sale of such Real Property and the net cash proceeds which it is anticipated will be received by such Borrower or Guarantor from such sale, (B) the terms and conditions of the sale thereof shall be acceptable to Agent, (C) except as Agent may otherwise agree in writing, all of the proceeds of the sale of such Real Property shall be paid to Agent for application to the Obligations in accordance with the terms hereof and (D) as of the date of such sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred,

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

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(iii)           the sublease by any Borrower or Guarantor of any Real Property leased by such Borrower or Guarantor; provided, that, as to any such sublease, (A) after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, and (B) such sublease shall be on commercially reasonable prices and terms in a bona fide arm’s length transaction,

(iv)           Licenses and sublicenses of Intellectual Property by a Borrower or Guarantor to another Borrower or Guarantor in the ordinary course of business and consistent with past practices,

(v)           the issuance of the Specified Subordinated Indebtedness, the Specified Warrants and the Specified Common Stock in accordance with the term of the Specified Subordinated Indebtedness Documents, or

(vi)           the Baldwyn Real Property Sale-Leaseback.

(c)           wind up, liquidate or dissolve except that any Guarantor or Subsidiary of Parent (other than a Borrower) may wind up, liquidate and dissolve, provided, that, each of the following conditions is satisfied: (i) the winding up, liquidation and dissolution of such Guarantor or other Subsidiary shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which any Borrower or Guarantor is a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (iii) effective upon such winding up, liquidation or dissolution, all of the assets and properties of such Guarantor or other Subsidiary shall be duly and validly transferred and assigned to its shareholders, free and clear of any liens, restrictions or encumbrances other than the security interest and liens of Agent (and Agent shall have received such evidence thereof as Agent may require) and Agent shall have received such deeds, assignments or other agreements as Agent may request to evidence and confirm the transfer of such assets of such Guarantor to a Borrower, (iv) Agent shall have received all documents and agreements that any Borrower or Guarantor has filed with any Governmental Authority or as are otherwise required to effectuate such winding up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly permitted hereunder, (vi) Agent shall have received not less than ten (10) Business Days prior written notice of the intention of such Guarantor or Subsidiary to wind up, liquidate or dissolve, and (vii) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Default or Event of Default shall exist or have occurred; or

(d)           agree to do any of the foregoing.

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9.8          Encumbrances.  Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except:

(a)           the security interests and liens of Agent for itself and the benefit of the Secured Parties;

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

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

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

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

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

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

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

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

(j)           statutory or common law liens or rights of setoff of depository banks with respect to funds of Borrowers or Guarantors at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with the deposit accounts maintained by Borrowers and Guarantors at such banks (but not any other Indebtedness or obligations);

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

(l)            the security interests and liens set forth on Schedule 8.4 which are not permitted by the other provisions of Section 9.8 above;

(m)           non-consensual security interests and liens which are not permitted by the other provisions of Section 9.8 above to secure Indebtedness and other liabilities in an amount not to exceed $100,000 in the aggregate;

(n)           liens of the trustee for the holders of the Specified Subordinated Indebtedness securing the Specified Subordinated Indebtedness, provided that such liens are junior in rank to the security interests and liens of Agent for itself and the benefit of the Secured Parties and subject to the Subordination Provisions; and

(o)           the security interests and liens identified on Schedule 1.6 hereof, provided that Borrowers are in compliance with Section 9.27(a).

9.9          Indebtedness.  Each Borrower and Guarantor shall not, and shall not permit any Subsidiaries to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except:

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(a)           the Obligations;

(b)           purchase money Indebtedness (including Capital Leases) arising after the date hereof to the extent secured by purchase money security interests in Equipment (including Capital Leases) and purchase money mortgages on Real Property not to exceed $2,500,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property of such Borrower, Guarantor or Subsidiary other than the Equipment or Real Property so acquired, and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, as the case may be;

(c)           guarantees by any Borrower or Guarantor of the Obligations of the other Borrowers or Guarantors in favor of Agent for the benefit of Lenders;

(d)           the Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor arising pursuant to loans permitted under Section 9.10(d) or (e) hereof, provided, that, as to any such Indebtedness at any time owing by a Borrower to a Guarantor, (i) the Indebtedness arising pursuant to such loans shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions acceptable to Agent, (ii) such Borrower or such Guarantor shall join the Intercompany Subordination Agreement pursuant to a joinder agreement in form and substance reasonably satisfactory to the Agent, (iii) such Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement, except that Parent and Merchandising may make regularly scheduled payments of interest to Resources on a semi-annual basis at the end of the second and fourth Fiscal Quarters of Parent in respect of intercompany loans made by Resources to Parent or Merchandising, as the case may be, so long as Resources immediately applies all of the proceeds of such interest payments to make an intercompany loan in cash to Parent or Merchandising in accordance with the terms of Section 9.10(d) hereof; and (iv) in the case of any Indebtedness owing to a Borrower or Guarantor, the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require;

(e)           Indebtedness of any Borrower or Guarantor entered into in the ordinary course of business pursuant to a Hedge Agreement; provided, that, (i) such arrangements are with a Bank Product Provider, (ii) such arrangements are not for speculative purposes, and (iii) such Indebtedness shall be unsecured, except to the extent such Indebtedness constitutes part of the Obligations arising under or pursuant to Hedge Agreements with any Bank Product Provider that are secured under the terms hereof;

(f)           unsecured guarantees by Parent or a Borrower of the obligations of a Borrower arising pursuant to a lease from a third party in a bona fide arm’s length transaction of real property for use as a retail store location in the ordinary course of the business of such Borrower; provided, that, (i) the Person issuing such guarantee is permitted hereunder to incur directly the obligation that is being guaranteed and (ii) as of the date on which such guarantee is issued no Event of Default exists or has occurred and is continuing;

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(g)           Specified Subordinated Indebtedness and unsecured Indebtedness of any Borrower or Guarantor arising after the Closing Date to any third person (but not to any other Borrower or Guarantor), provided, that, in each case, each of the following conditions is satisfied as determined by Agent: (i) such Indebtedness shall be on terms and conditions acceptable to Agent and shall be subject and subordinate in right of payment to the right of Agent and Lenders to receive the prior indefeasible payment and satisfaction in full payment of all of the Obligations pursuant to the terms of an intercreditor agreement between Agent and such third party, in form and substance satisfactory to Agent, (ii) Agent shall have received not less than ten (10) days prior written notice of the intention of such Borrower or Guarantor to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto, (iii) Agent shall have received true, correct and complete copies of all Subordinated Debt Documents evidencing or otherwise related to such Indebtedness, (iv) except as Agent may otherwise agree in writing, and except with respect to the Specified Subordinated Indebtedness, all of the proceeds of the loans or other accommodations giving rise to such Indebtedness shall be paid to Agent for application to the Obligations in accordance with Section 6.4(a), (v) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (vi) such Borrower and Guarantor shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, such Borrower or Guarantor may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness (except as otherwise expressly permitted under Section 9.11(g)), or set aside or otherwise deposit or invest any sums for such purpose, and (vii) Borrowers and Guarantors shall furnish to Agent all notices or demands in connection with such Indebtedness either received by any Borrower or Guarantor or on its behalf promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf concurrently with the sending thereof, as the case may be;

(h)           Indebtedness arising from lease payments in connection with one or more sale-leaseback transactions in respect of (i) the Owned Real Properties, and (ii) the Real Properties formerly owned by Borrowers located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000 and 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000;

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(i)           the Indebtedness set forth on Schedule 9.9 to which are not permitted by the other provisions of Section 9.9 above; provided, that, (i) Borrowers and Guarantors may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrowers and Guarantors shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, Borrowers and Guarantors may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all notices or demands in connection with such Indebtedness either received by any Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently with the sending thereof, as the case may be; and

(j)           unsecured Indebtedness of any Borrower or Guarantor arising after the date hereof to any third person which is not permitted by the other provisions of Section 9.9 above in an aggregate outstanding amount not to exceed $100,000 at any time.

9.10         Loans, Investments, Etc.  Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary immediately prior to such merger) any Capital Stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit or all or a substantial part of the assets or property of any other Person (whether through purchase of assets, merger or otherwise), or form or acquire any Subsidiaries, or agree to do any of the foregoing (each of the foregoing an “Investment”), except:

(a)           Permitted Investments;

(b)           Permitted Acquisitions;

(c)           Investments by a Borrower, Guarantor or other Subsidiary of Parent in a Borrower or by a Guarantor or other Subsidiary of Parent (other than a Borrower) in another Guarantor, in each case after the date hereof, provided, that, to the extent that such Investment gives rise to any Indebtedness, such Indebtedness is permitted hereunder and to the extent that such Investment gives rise to the issuance of any shares of Capital Stock, such issuance is permitted hereunder;

(d)           loans by a Borrower or Guarantor to another Borrower or Guarantor after the date hereof, provided, that,

 (i)           as to all of such loans, (A) within thirty (30) days after the end of each Fiscal Month, Borrowers shall provide to Agent a report in form and substance reasonably satisfactory to Agent of the outstanding amount of such loans as of the last day of the immediately preceding month and indicating any loans made and payments received during the immediately preceding month, (B) the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument (and any amendment or modification thereto) is promptly delivered to Agent to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require,

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(ii)           as to loans by a Borrower to a Guarantor or by a Guarantor to another Guarantor, (A) as of the date of any such loan and after giving effect thereto, the Borrower or Guarantor making such loan shall be Solvent, and (B) as of the date of any such loan and after giving effect thereto, as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing,

(iii)           as to loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to such loan shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions acceptable to Agent, (B) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of such Borrower to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Guarantor and such Borrower, and (C) such Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement, except that Parent and Merchandising may make regularly scheduled payments of interest to Resources on a semi-annual basis at the end of the second and fourth Fiscal Quarters of Parent in respect of intercompany loans made by Resources to Parent or Merchandising, as the case may be, so long as Resources immediately applies all of the proceeds of such interest payments to make an intercompany loan in cash to Parent or Merchandising in accordance with the terms of Section 9.10(d) hereof; and

(iv)           the aggregate outstanding principal amount of all loans made by Borrowers to Guarantors shall not exceed $100,000 at any time; and

(e)          the loans and advances set forth on Schedule 9.10 which are not permitted by the other provisions of Section 9.10 above; provided, that:

(i)           as to all such loans and advances, (A) Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto, except that Borrowers and Guarantors may amend any such agreement, document or instrument to increase the principal amount of any loans made by a Guarantor to a Borrower so long as the single original of any amendment to any note or other instrument shall be promptly delivered to Agent to hold as part of the Collateral with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, and (B) Borrowers and Guarantors shall furnish to Agent all notices or demands in connection with such loans and advances either received by any Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently with the sending thereof, as the case may be; and

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 (ii)           as to loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to such loan shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions acceptable to Agent, (B) Agent shall have received the Intercompany Subordination Agreement duly authorized, executed and delivered by such Guarantor and such Borrower, and (C) such Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement, except that Parent and Merchandising may make payments of interest to Resources on a quarterly basis in respect of intercompany loans by Resources to Parent or Merchandising, as the case may be, so long as Resources immediately applies all of the proceeds of such interest payments to make an intercompany loan in cash to Parent or Merchandising in accordance with the terms of Section 9.10(d) hereof.

9.11        Restricted Payments.  Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a)           Parent may make Restricted Payments with respect to its Capital Stock payable solely in additional shares of its Capital Stock that satisfies the requirements for issuance of Capital Stock by Parent under Section 9.7(b)(ii) hereof;

(b)           Subsidiaries of any Borrower or Guarantor may make Restricted Payments to a Borrower;

(c)           Enterprises may make Restricted Payments to Resources for the purpose of paying dividends in respect of the Capital Stock of Enterprises so long as Resources immediately applies all of the proceeds of such Restricted Payments to make an intercompany loan in cash to Parent in accordance with the terms of Section 9.10(d) hereof;

(d)           Borrowers and Guarantors may repurchase Capital Stock consisting of common stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan or upon the vesting of restricted stock in any such employee in accordance with the provisions of the restricted stock plan, provided, that, as to any such repurchase, each of the following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which such Borrower or Guarantor is a party or by which such Borrower or Guarantor or its or their property are bound, and (iv) the aggregate amount of all payments for such repurchases in any calendar year shall not exceed $1,000,000, except that the aggregate amount of all payments for such repurchases in any calendar year may exceed $1,000,000 (but shall not exceed $4,000,000) if (A) Adjusted Excess Availability shall have been equal to or greater than $25,000,000 for each of the two consecutive months immediately prior to the date of such payment based on the Borrowing Base as of the end of each of such months and after giving effect to the payment of such repurchases, on a pro forma basis using Adjusted Excess Availability as of the end of the month immediately prior to the date of such repurchases, and Adjusted Excess Availability shall be not less than $25,000,000, and (B) as of the date of any such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred;

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(e)           Parent may make Restricted Payments for the purpose of paying dividends and paying other distributions in respect of its Capital Stock or the repurchase of its Capital Stock in an amount not to exceed $1,000,000 in the aggregate in any calendar year and not to exceed $3,000,000 in the aggregate during the term of this Agreement, provided, that, each of the following conditions is satisfied as determined by Agent: (i) Administrative Borrower shall have provided to Agent not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to pay such dividends or other distributions or make such other repurchases (specifying the amount to be paid by Borrowers or Guarantors), (ii) such dividends, distributions or repurchases shall paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which such Borrower or Guarantor is a party or by which such Borrower or Guarantor or its or their property are bound, (iv) Adjusted Excess Availability shall have been not less than $40,000,000 for each of the two consecutive months immediately prior to the date of any such payment based on the Borrowing Base as of the end of each of such months and after giving effect to the payment of such dividends or other distributions or repurchases, on a pro forma basis using Adjusted Excess Availability as of the end of the month immediately prior to the date of such dividends or other distributions or repurchases, Adjusted Excess Availability shall be not less than $40,000,000, and (v) as of the date of any such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred; and

(f)           Parent may (i) make scheduled payments of interest (whether in cash or in kind) with respect to the Specified Subordinated Indebtedness, provided, that, (x) no Default or Event of Default is continuing or would result after giving effect to such Restricted Payment,  and (y) for any payment of interest in kind, such payment shall accrue prior to the first anniversary of such Specified Subordinated Indebtedness; and (ii) pay the trustee under the Indenture its usual and customary fees and expenses arising in the ordinary course of business as set forth in Section 7.7 of the Indenture (as in effect on the date hereof) and indemnification obligations arising under such Section 7.7 thereof.

9.12        Transactions with Affiliates.  Each Borrower and Guarantor shall not, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliate of such Borrower or Guarantor, except (a) in the ordinary course of such Borrower’s or Guarantor’s business and upon terms no less favorable to such Borrower or Guarantor than such Borrower or Guarantor would obtain in a comparable arm’s length transaction with an unaffiliated person, (b) for any purchase or acquisition by any Borrower from another Borrower, any sale or transfer by any Borrower to another Borrower, or any lease of any property by any Borrower from another Borrower or lease of any property from any Borrower to another Borrower and (c) transactions expressly permitted by Section 9.7, 9.9, 9.10 or 9.11 hereof.

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9.13           Compliance with ERISA.  Each Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any Pension Plan so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any Plan or any trust created thereunder which would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan (determined without regard to any waiver) which it is obligated to pay under the Pension Funding Rules or the terms of such Plan; (f) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; or (g) not allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any Pension Plan that is a single employer plan, which termination could result in any material liability to the Pension Benefit Guaranty Corporation.

9.14           End of Fiscal Years; Fiscal Quarters.  Each Borrower and Guarantor shall, for financial reporting purposes, cause its, and each of its Subsidiaries’ (a) fiscal years to end on the last Saturday closest to January 31st of each year and (b) fiscal quarters to end on or about each April 30th, July 31st, October 31st and January 31st of each year.

9.15           Change in Business.  Each Borrower and Guarantor shall not engage in any business other than the business of such Borrower or Guarantor on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower or Guarantor is engaged on the date hereof.

9.16           Limitation of Restrictions Affecting Subsidiaries.  Each Borrower and Guarantor shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or advances to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its properties or assets to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement relating to Indebtedness incurred by a Subsidiary of such Borrower or Guarantor prior to the date on which such Subsidiary was acquired by such Borrower or such Guarantor and outstanding on such acquisition date, and (vi) the extension or continuation of contractual obligations in existence on the date hereof; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued.

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9.17        License Agreements.

(a)           With respect to a License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise used in connection with the manufacture, sale or distribution of any Inventory, each Borrower and Guarantor shall (i) give Agent not less than ninety (90) days prior written notice of its intention to not renew or to terminate, cancel, surrender or release its rights under any such License Agreement, or to amend any such License Agreement or related arrangements to limit the scope of the right of such Borrower or Guarantor to use the Intellectual Property subject to such License Agreement in any material respect, either with respect to product, territory, term or otherwise, or to increase in any material respect the amounts to be paid by such Borrower or Guarantor thereunder or in connection therewith (and Agent may establish such Reserves as a result of any of the foregoing as Agent may reasonably determine), (ii) give Agent prompt written notice of any such License Agreement entered into by such Borrower or Guarantor after the date hereof, or any material amendment to any such License Agreement existing on the date hereof, in each case together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may in good faith request, (iii) give Agent prompt written notice of any material breach of any obligation, or any default, by the third party that is the licensor or by the Borrower or Guarantor that is the licensee or any other party under any such License Agreement, and deliver to Agent (promptly upon the receipt thereof by such Borrower or Guarantor in the case of a notice to such Borrower or Guarantor and concurrently with the sending thereof in the case of a notice from such Borrower or Guarantor) a copy of each notice of default and any other notice received or delivered by such Borrower or Guarantor in connection with any such a License Agreement that relates to the scope of the right, or the continuation of the right, of such Borrower or Guarantor to use the Intellectual Property subject to such License Agreement or the amounts required to be paid thereunder.

(b)           With respect to a License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise used in connection with the manufacture, sale or distribution of any Inventory, at any time an Event of Default shall exist or have occurred and be continuing, or if after giving effect to any Reserves or the reduction in the Borrowing Base as a result of Eligible Inventory using such licensed Intellectual Property ceasing to be Eligible Inventory, the Excess Availability is less than the amount required pursuant to Section 9.19 hereof, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend the term of such License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of such Borrower or Guarantor, subject to and in accordance with the terms of such License Agreement.  Agent may, but shall not be required to, perform any or all of such obligations of such Borrower or Guarantor under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower or Guarantor thereunder.  Any sums so paid by Agent shall constitute part of the Obligations.

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9.18           Credit Card Agreements.  Each Borrower shall (a) observe and perform all material terms, covenants, conditions and provisions of the Credit Card Agreements to be observed and performed by it at the times set forth therein; and (b) at all times maintain in full force and effect the Credit Card Agreements and not terminate, cancel, surrender, modify, amend, waive or release any of the Credit Card Agreements, or consent to or permit to occur any of the foregoing; except, that, (i) any Borrower may terminate or cancel any of the Credit Card Agreements in the ordinary course of the business of such Borrower; provided, that, such Borrower shall give Agent not less than thirty (30) days prior written notice of its intention to so terminate or cancel any of the Credit Card Agreements; (d) not enter into any new Credit Card Agreements with any new Credit Card Issuer unless (i) Agent shall have received not less than thirty (30) days prior written notice of the intention of such Borrower to enter into such agreement (together with such other information with respect thereto as Agent may request) and (ii) such Borrower delivers, or causes to be delivered to Agent, a Credit Card Acknowledgment in favor of Agent, (e) give Agent immediate written notice of any Credit Card Agreement entered into by such Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may request; and (f) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may require from time to time concerning the observance, performance and compliance by such Borrower or the other party or parties thereto with the terms, covenants or provisions of the Credit Card Agreements.

9.19           Minimum Excess Availability.  Borrowers shall at all times maintain Excess Availability of not less than $7,500,000.

9.20           After Acquired Real Property.  If any Borrower or Guarantor hereafter acquires any Real Property, fixtures or any other property that is of the kind or nature described in the Baldwyn Real Property Mortgage and such Real Property, fixtures or other property is adjacent to, contiguous with or necessary or related to or used in connection with any Real Property then subject to the Baldwyn Real Property Mortgage, or if such Real Property is not adjacent to, contiguous with or related to or used in connection with such Real Property, then if such Real Property, fixtures or other property at any location (or series of adjacent, contiguous or related locations, and regardless of the number of parcels) has a fair market value in an amount equal to or greater than $250,000 (or if an Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Agent or any Lender, or duties or obligations of any Borrower or Guarantor, reasonably promptly upon Agent’s request, such Borrower or Guarantor shall execute and deliver to Agent a Mortgage, as Agent may determine, in form and substance reasonably satisfactory to the Agent and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property or other property is located granting to Agent a first and only lien and mortgage on and security interest in such Real Property, fixtures or other property (except as such Borrower or Guarantor would otherwise be permitted to incur hereunder or under the Mortgage or as otherwise consented to in writing by Agent) and such other agreements, documents and instruments as Agent may require in connection therewith provided, that, as to any such Real Property that is not adjacent, contiguous or related to Real Property then subject to the Baldwyn Real Property Mortgage, if the purchase price for such Real Property is paid with the initial proceeds of a loan from a financial institution giving rise to Indebtedness permitted under Section 9.9(b) hereof, then such Borrower or Guarantor shall not be required to execute and deliver such mortgage, deed of trust or deed to secure debt in favor of Agent with respect to such Real Property.

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9.21           Foreign Assets Control Regulations, Etc.  None of the requesting or borrowing of the Loans or the requesting or issuance, extension or renewal of any Letter of Credit or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 USC §1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (including, but not limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56).  None of Borrowers or any of their Subsidiaries is or will become a “blocked person” as described in the Executive Order, the Trading with the Enemy Act or the Foreign Assets Control Regulations or engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person”.

9.22           Costs and Expenses.  Borrowers and Guarantors shall pay to Agent reasonably promptly after demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including:  (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, background checks, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent’s customary charges and fees with respect thereto; (c) charges, fees or expenses charged by any Lender in connection with any Letter of Credit; (d) costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and such Borrower’s or Guarantor’s operations, plus a per diem charge at Agent’s then standard rate for Agent’s examiners in the field and office; (g) costs and expenses incurred in connection with any workout or restructuring of the Loans during the pendency of one or more Events of Default, provided, that in the case of reimbursement of counsel for the Lenders (other than the Agent), such reimbursement shall be limited to one counsel for all such Lenders, and (h) the fees and disbursements of counsel to Agent in connection with any of the foregoing.

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9.23        Further Assurances.  (a)  In the case of the formation or acquisition by a Borrower or Guarantor of any Subsidiary after the date hereof, as to any such Subsidiary, (i) the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the following (each in form and substance reasonably satisfactory to Agent), (A) an absolute and unconditional guarantee of payment of the Obligations, (B) a security agreement granting to Agent a first security interest and lien (except as otherwise consented to in writing by Agent) upon all of the assets of any such Subsidiary of the type or category of the assets of Borrowers subject to the security interests and liens pursuant hereto, and (C) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above in order to make such Subsidiary a party to this Agreement as a “Borrower” or as a “Guarantor” as Agent may determine, including, but not limited to, supplements and amendments hereto, authorization to file UCC financing statements, Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person and (ii) the Borrower or Guarantor forming such Subsidiary shall (A) execute and deliver to Agent, a pledge and security agreement, in form and substance reasonably satisfactory to Agent, granting to Agent a first pledge of and lien on all of the issued and outstanding shares of Capital Stock of any such Subsidiary, and (B) deliver the original stock certificates evidencing such shares of Capital Stock (or such other evidence as may be issued in the case of a limited liability company), together with stock powers with respect thereto duly executed in blank (or the equivalent thereof in the case of a limited liability company in which such interests are certificated, or otherwise take such actions as Agent shall require with respect to Agent’s security interests therein).

(b)           In the case of an acquisition of assets (other than Capital Stock) by a Borrower or Guarantor pursuant to a Permitted Acquisition after the date hereof, Agent shall have received, in form and substance reasonably satisfactory to Agent, (i) evidence that Agent has valid and perfected security interests in and liens upon all purchased assets, (ii) all Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, (iii) the agreement of the seller consenting to the collateral assignment by the Borrower or Guarantor purchasing such assets of all rights and remedies and claims for damages of such Borrower or Guarantor relating to the Collateral (including, without limitation, any bulk sales indemnification) under the agreements, documents and instruments relating to such acquisition and (iv) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above, including, but not limited to, supplements and amendments hereto, corporate resolutions and other organization and authorizing documents and favorable opinions of counsel to such person.

(c)           At the request of Agent at any time and from time to time, Borrowers and Guarantors shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements.  Agent may at any time and from time to time request a certificate from an officer of any Borrower or Guarantor representing that all conditions precedent to the making of Loans and providing Letters of Credit contained herein are satisfied.  In the event of such request by Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans or provide any further Letters of Credit until Agent has received such certificate and, in addition, Agent has determined that such conditions are satisfied.

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9.24        Leasehold Estates.  The Borrowers shall not, and shall not permit any of their Subsidiaries to, enter into any leasehold mortgage, deed of trust or any other agreement irrespective of how so identified which grants to any third party a leasehold mortgage in such leasehold estate and the properties and assets located therein.

9.25        Specified Subordinated Debt Documents.  The Borrowers shall not, and shall not permit any of their Subsidiaries to, consent to any amendment, supplement, waiver or other modification of any Specified Subordinated Debt Document without the prior written consent of the Agent.

9.26        Credit Card Agreements.  The Borrowers shall not, and shall not permit any of their Subsidiaries to, consent to any material amendment, supplement, waiver or other modification of any Credit Card Agreement without the prior written consent of the Agent.

9.27        Post Closing Requirements.  The Borrowers shall, and shall cause their Subsidiaries to, cause the following actions shall be taken or documents executed and/or delivered or, caused to be taken, executed and/or delivered, on or prior to the dates set forth below:

(a)           On or before a date which is seven (7) days following the Closing Date, Borrowers shall close the Discover Deposit Account and shall deliver evidence satisfactory to the Agent that such account has been closed.

(b)           On or before a date which is seven (7) days following the Closing Date, Borrower shall deliver to the Agent insurance certificates in form and substance satisfactory to the Agent.

(c)           On or before a date which is thirty (30) days following the Closing Date, Borrowers shall (i) pay in full in cash the Bankruptcy Claims and Liens identified on Schedule 1.6 hereof, (ii) deliver evidence to the Agent that such Bankruptcy Claims and Liens has been paid in full in cash, such evidence to be in form and substance satisfactory to the Agent, and (iiii) use commercially reasonably efforts to deliver to the Agent evidence that the Liens associated with such Bankruptcy Claims and Liens have been discharged and terminated and, to the extent identified on any public record, terminated and released on such public record, such evidence to be in form and substance satisfactory to the Agent.

(d)           On or before a date which is thirty (30) days following the Closing Date, Borrowers shall deliver to Agent a good standing certificate from the Secretary of State of the State of Mississippi evidencing Merchandising as being in good standing in such State, such good standing certificate to be in form satisfactory to the Agent.

(e)           On or before a date which is thirty (30) days following the Closing Date, Borrowers shall deliver to Agent a good standing certificate from the Secretary of State of the State of Tennessee evidencing Parent as being in good standing in each such State, such good standing certificates to be in form satisfactory to the Agent.

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(f)           On or before a date which is sixty (60) days following the Closing Date, Borrowers shall either:  (i) install or cause the installation of a secondary containment system for the approximate 250-gallon above-ground storage tank located to the west of the distribution center building at the Baldwyn Real Property (the “Tank”) which secondary containment system shall be (x) capable of containing, at a minimum, 110% of the maximum capacity of such above-ground storage tank and (y) satisfactory to the Agent; or (ii) remove the Tank from the Property in accordance with all applicable Laws.  On or prior to the date that is sixty (60) days following the Closing Date, Borrowers shall deliver evidence satisfactory to Agent that the Borrowers have satisfied the obligations set forth in this Section 9.27.

SECTION 10  EVENTS OF DEFAULT AND REMEDIES

10.1        Events of Default.  The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

(a)           (i) any Borrower fails to pay any of the Obligations when due; or (ii) any Borrower or Guarantor fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15 and 9.16 of this Agreement and such failure shall continue for twenty (20) days; provided, that, such twenty (20) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such twenty (20) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by any Borrower or Guarantor of any such covenant; or (iii) any Borrower or Guarantor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above; or (iv) any Borrower or Guarantor fails to perform any of the terms, covenants, conditions or provisions contained in any of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;

(b)           any representation, warranty or statement of fact made by any Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect;

(c)           any Guarantor revokes or terminates or purports to revoke or terminate or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Agent or any Lender;

(d)           one or more judgments for the payment of money is or are rendered against any Borrower or Guarantor in excess of $750,000 in the aggregate (to the extent not covered by insurance where the insurer has assumed responsibility in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or Guarantor or any of the Collateral having a value in excess of $750,000; provided, however, any payment of money timely paid in accordance with the terms of the Plan of Reorganization shall not be deemed an “Event of Default” hereunder;

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(e)           any Obligor (being a natural person or a general partner of an Obligor which is a partnership) dies or any Borrower or Obligor, which is a partnership, limited liability company, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business;

(f)           any Borrower or Guarantor makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer of any of their respective assets or calls a meeting of its creditors or principal creditors in connection with a moratorium or adjustment of the Indebtedness due to them;

(g)           a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or Guarantor (other than the Reorganization Cases) or all or any part of its properties and such petition or application is not dismissed within thirty (30) days after the date of its filing or any Borrower or Guarantor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

(h)           a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or Guarantor (other than the Reorganization Cases) or for all or any part of its property;

(i)           any default by any Borrower or Guarantor under any agreement, document or instrument relating to any Indebtedness owing to any person other than Lenders, or any capitalized lease obligations, contingent indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favor of any person other than Lenders, in an amount in excess of $750,000 which default continues for more than the applicable cure period, if any, with respect thereto, or any default by any Borrower or Guarantor under any Material Contract, which default continues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto or any Credit Card Issuer or Credit Card Processor withholds payment of amounts otherwise payable to a Borrower to fund a reserve account or otherwise hold as collateral, or shall require a Borrower to pay funds into a reserve account or for such Credit Card Issuer or Credit Card Processor to otherwise hold as collateral, or any Borrower shall provide a letter of credit, guarantee, indemnity or similar instrument to or in favor of such Credit Card Issuer or Credit Card Processor such that in the aggregate all of such funds in the reserve account, other amounts held as collateral and the amount of such letters of credit, guarantees, indemnities or similar instruments shall exceed $750,000 or any such Credit Card Issuer or Credit Card Processor shall debit or deduct any amounts in excess of $750,000 in the aggregate in any Fiscal Year of Borrowers and Guarantors from any deposit account of any Borrower;

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(j)           any Credit Card Issuer or Credit Card Processor shall send notice to Borrower that it is ceasing to make or suspending payments to Borrower of amounts due or to become due to Borrower or shall cease or suspend such payments, or shall send notice to Borrower that it is terminating its arrangements with Borrower or such arrangements shall terminate as a result of any event of default under such arrangements, which continues for more than the applicable cure period, if any, with respect thereto, unless (in the case of any of the foregoing) Borrower shall have entered into arrangements with another Credit Card Issuer or Credit Card Processor, as the case may be, within sixty (60) days after the date of any such notice;

(k)           any bank at which any deposit account of Borrower or Guarantor is maintained shall fail to comply with any of the material terms of any Deposit Account Control Agreement to which such bank is a party or any securities intermediary, commodity intermediary or other financial institution at any time in custody, control or possession of any investment property of Borrower or Guarantor shall fail to comply with any of the material terms of any Investment Property Control Agreement to which such person is a party;

(l)           any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported to be subject thereto except as otherwise permitted herein or therein and except as to Collateral having an aggregate value of not more than $250,000;

(m)           an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $750,000;

(n)           any Change of Control;

(o)            the indictment by any Governmental Authority, or as Agent may reasonably and in good faith determine, the threatened indictment by any Governmental Authority of any Borrower or Guarantor of which any Borrower, Guarantor or Agent receives notice, in either case, as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against such Borrower or Guarantor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of $750,000 or (ii) any other property of any Borrower or Guarantor which is necessary or material to the conduct of its business;

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(p)           (i) the Bankruptcy Court or another court of competent jurisdiction shall enter any order amending, supplementing, altering, staying, suspending, vacating, rescinding or otherwise modifying the Confirmation Order (unless consented to in writing in advance by Agent or the Required Lenders, as may be appropriate); or (ii) any appeal to the Confirmation Order is filed; or

(q)           Elavon or Elavon Member shall exercise any right of offset, deduction, chargeback or withdraw against any deposit account or securities account of any Borrower or any Guarantor other than from the Elavon Deposit Account or the Elavon Reserve Account.

10.2        Remedies.

(a)           At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or Guarantor, except as such notice or consent is expressly provided for hereunder or required by applicable law.  All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower or Guarantor of this Agreement or any of the other Financing Agreements.  Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times, proceed directly against any Borrower or Guarantor to collect the Obligations without prior recourse to the Collateral.

(b)           Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Administrative Borrower, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(f), 10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and payable), and (ii) terminate the Commitments whereupon the obligation of each Lender to make any Loan and Issuing Bank to issue any Letter of Credit shall immediately terminate (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(f), 10.1(g) and 10.1(h), the Commitments and any other obligation of Agent or a Lender hereunder shall automatically terminate).

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(c)           Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, in its discretion (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any Borrower or Guarantor, at Borrowers’ expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of any Borrower or Guarantor, which right or equity of redemption is hereby expressly waived and released by Borrowers and Guarantors and/or (vi) terminate this Agreement.  If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent.  If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Administrative Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrowers and Guarantors waive any other notice.  In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and Guarantor waives the posting of any bond which might otherwise be required. At any time an Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrowers will either, as Agent shall specify, furnish cash collateral to Issuing Bank to be used to secure and fund the reimbursement obligations to Issuing Bank in connection with any Letter of Credit Obligations or furnish cash collateral to Issuing Bank for the Letter of Credit Obligations.  Such cash collateral shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Obligations.

(d)           At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of any Borrower or Guarantor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables.  Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors (including Credit Card Issuers and Credit Card Processors), secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all account debtors(including Credit Card Issuers and Credit Card Processors), secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders.  At any time that an Event of Default exists or has occurred and is continuing, at Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrowers and Guarantors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require.  In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent.

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(e)           To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), each Borrower and Guarantor acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, except to the extent such failure violates applicable law, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Borrower or Guarantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Each Borrower and Guarantor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

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(f)           For the purpose of enabling Agent to exercise the rights and remedies hereunder, each Borrower and Guarantor hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing) without payment of royalty or other compensation to any Borrower or Guarantor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by any Borrower or Guarantor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

(g)           At any time an Event of Default exists or has occurred and is continuing, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in accordance with the terms hereof, whether or not then due or may hold such proceeds as cash collateral for the Obligations.  Borrowers and Guarantors shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys’ fees and expenses.

(h)           Without limiting the foregoing, upon the occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or arranging for Letters of Credit or reduce the lending formulas or amounts of Loans and Letters of Credit available to Borrowers and/or (B) terminate any provision of this Agreement providing for any future Loans to be made by Agent and Lenders or Letters of Credit to be issued by Issuing Bank and (ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or restriction, notwithstanding anything to the contrary contained herein.

SECTION 11  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

11.1        Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a)           The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of choice of law and conflicts of law (other than Section 5-1401 and Section 5-1402 of the General Obligations Laws of the State of New York).

(b)           Borrowers, Guarantors, Agent, Lenders and Issuing Bank irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against any Borrower or Guarantor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Borrower or Guarantor or its or their property).

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(c)           Each Borrower and Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by U.S. certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed immediately upon receipt thereof by the applicable Borrower or Guarantor, or, at Agent’s option, by service upon any Borrower or Guarantor (or Administrative Borrower on behalf of such Borrower or Guarantor) in any other manner provided under the rules of any such courts.  Within thirty (30) days after such service, such Borrower or Guarantor shall appear in answer to such process, failing which such Borrower or Guarantor shall be deemed in default and judgment may be entered by Agent against such Borrower or Guarantor for the amount of the claim and other relief requested.

(d)           BORROWERS, GUARANTORS, AGENT, LENDERS AND ISSUING BANK EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWERS, GUARANTORS, AGENT, LENDERS AND ISSUING BANK EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT, ANY LENDER OR ISSUING BANK MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e)           Agent, Lenders and Issuing Bank shall not have any liability to any Borrower or Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by such Borrower or Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent, such Lender and Issuing Bank, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct.  In any such litigation, Agent, Lenders and Issuing Bank shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement.  Each Borrower and Guarantor:  (i) certifies that neither Agent, any Lender, nor any representative, agent or attorney acting for or on behalf of Agent, any Lender or Issuing Bank has represented, expressly or otherwise, that Agent, Lenders and Issuing Bank would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent, Lenders and Issuing Bank are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein.

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11.2        Waiver of Notices.  Each Borrower and Guarantor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein.  No notice to or demand on any Borrower or Guarantor which Agent or any Lender may elect to give shall entitle such Borrower or Guarantor to any other or further notice or demand in the same, similar or other circumstances.

11.3        Amendments and Waivers.

(a)           Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization or consent of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by any Borrower and such amendment, waiver, discharger or termination shall be effective and binding as to all Lenders only in the specific instance and for the specific purpose for which given; except, that, no such amendment, waiver, discharge or termination shall:

(i)           reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of any Loan or Letter of Credit, in each case without the consent of each Lender directly affected thereby,

(ii)          increase the Commitment of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby,

(iii)         release any Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof), without the consent of Agent and all of Lenders,

(iv)         reduce any percentage specified in the definition of Required Lenders, without the consent of Agent and all of Lenders,

(v)          consent to the assignment or transfer by any Borrower or Guarantor of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders,

(vi)         amend, modify or waive any terms of this Section 11.3 hereof, without the consent of Agent and all of Lenders,

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(vii)        amend, modify or waive any terms of Section 9.19 to reduce the minimum Excess Availability required thereunder, without the consent of the Agent and the Supermajority Lenders, or

(viii)       increase the advance rates constituting part of the Borrowing Base, without the consent of Agent and all of Lenders.

(b)           Agent, Lenders and Issuing Bank shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein.  Any such waiver shall be enforceable only to the extent specifically set forth therein.  A waiver by Agent, any Lender or Issuing Bank of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent, any Lender or Issuing Bank would otherwise have on any future occasion, whether similar in kind or otherwise.

(c)           Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then GE Capital shall have the right, but not the obligation, at any time thereafter, and upon the exercise by GE Capital of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to GE Capital or such Eligible Transferee as GE Capital may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto.  GE Capital shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur.  Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, GE Capital, or such Eligible Transferee specified by GE Capital, shall pay to the Non-Consenting Lender (except as GE Capital and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee).  Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date.

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(d)           The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory shall not be deemed an amendment to the advance rates provided for in this Section 11.3.  The consent of Issuing Bank shall be required for any amendment, waiver or consent affecting the rights or duties of Issuing Bank hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section, provided, that, the consent of Issuing Bank shall not be required for any other amendments, waivers or consents.  Notwithstanding anything to the contrary contained in Section 11.3(a) above, (i) in the event that Agent shall agree that any items otherwise required to be delivered to Agent as a condition of the initial Loans and Letters of Credit hereunder may be delivered after the date hereof, Agent may, in its discretion, agree to extend the date for delivery of such items or take such other action as Agent may deem appropriate as a result of the failure to receive such items as Agent may determine or may waive any Event of Default as a result of the failure to receive such items, in each case without the consent of any Lender and (ii) Agent may consent to any change in the type of organization, jurisdiction of organization or other legal structure of any Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or of any of the other Financing Agreements as may be necessary or desirable to reflect any such change, in each case without the approval of any Lender.

(e)           The consent of Agent and any Bank Product Provider that is providing Bank Products and has outstanding any such Bank Products at such time that are secured hereunder shall be required for any amendment to the priority of payment of Obligations arising under or pursuant to any Hedge Agreements of a Borrower or Guarantor or other Bank Products as set forth in Section 6.4(a) hereof.

(f)           No amendment, modification or waiver of this Agreement or any Financing Agreement altering the ratable treatment of Obligations arising under Secured Rate Contracts resulting in such Obligations being junior in right of payment to principal on the Loans or resulting in Obligations owing to any Secured Swap Provider becoming unsecured (other than release of Liens in accordance with the terms hereof), in each case in a manner adverse to any Secured Swap Provider, shall be effective without the written consent of GE Capital.

11.4        Waiver of Counterclaims.  Each Borrower and Guarantor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding involving Agent, Issuing Bank or any Lender with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

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11.5           Indemnification.  Each Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent, each Lender and Issuing Bank and their respective officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel except that Borrowers and Guarantors shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or willful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrowers or Guarantors as to any other Indemnitee).  To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers and Guarantors shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section.  To the extent permitted by applicable law, no Borrower or Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby.  No Indemnitee referred to above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or any of the other Financing Agreements or the transaction contemplated hereby or thereby, except for damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

SECTION 12  THE AGENT

12.1           Appointment, Powers and Immunities.  Each Secured Party irrevocably designates, appoints and authorizes GE Capital to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto.  Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Secured Party; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by any Borrower or any Guarantor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction.  Agent may employ agents and attorneys in fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys in fact selected by it in good faith.  Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent.  GE Capital Markets, Inc. is hereby designated as the sole lead arranger, manager and bookrunner with respect to the Credit Facility.  The designation of GE Capital Markets, Inc. as sole lead arranger, manager and bookrunner shall not create any rights in favor of it in such capacity nor subject it to any duties or obligations in such capacity.

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12.2        Reliance by Agent.  Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent.  As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Lenders.

12.3        Events of Default.

(a)           Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letters of Credit hereunder, unless and until Agent has received written notice from a Lender, or Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of Condition”.  In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders.  Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders to the extent provided for herein; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders.  Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no obligation to, continue to make Loans and Issuing Bank may, but shall have no obligation to, issue or cause to be issued any Letter of Credit for the ratable account and risk of Lenders from time to time if Agent believes making such Loans or issuing or causing to be issued such Letter of Credit is in the best interests of Lenders.

(b)           Except with the prior written consent of Agent, no Lender or Issuing Bank may assert or exercise any enforcement right or remedy in respect of the Loans, Letters of Credit or other Obligations, as against any Borrower or Guarantor or any of the Collateral or other property of any Borrower or Guarantor.

12.4        GE Capital in its Individual Capacity.  With respect to its Commitment and the Loans made and Letters of Credit issued or caused to be issued by it (and any successor acting as Agent), so long as GE Capital shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include GE Capital in its individual capacity as Lender hereunder.  GE Capital (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrower (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and GE Capital and its Affiliates may accept fees and other consideration from any Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

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12.5           Indemnification.  Lenders agree to indemnify Agent and Issuing Bank (to the extent not reimbursed by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction.  The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

12.6           Non-Reliance on Agent and Other Lenders.  Each Secured Party agrees that it has, independently and without reliance on Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrowers and Guarantors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements.  Agent shall not be required to keep itself informed as to the performance or observance by any Borrower or Guarantor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of any Borrower or Guarantor.  Agent will use reasonable efforts to provide Lenders with any information received by Agent from any Borrower or Guarantor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction.  Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent or deemed requested by Lenders hereunder (including the documents provided for in Section 12.10 hereof), Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Borrower or Guarantor that may come into the possession of Agent.

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12.7          Failure to Act.  Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

12.8          Additional Loans.  Agent shall not make any Revolving Loans or Issuing Bank provide any Letter of Credit to any Borrower on behalf of Lenders intentionally and with actual knowledge that such Revolving Loans or Letter of Credit would cause the aggregate amount of the total outstanding Revolving Loans and Letters of Credit to exceed the Borrowing Base, without the prior consent of all Lenders, except, that, Agent may make such additional Revolving Loans or Issuing Bank may provide such additional Letter of Credit on behalf of Lenders, intentionally and with actual knowledge that such Revolving Loans or Letters of Credit will cause the total outstanding Revolving Loans and Letters of Credit to exceed the Borrowing Base, as Agent may deem necessary or advisable in its discretion, provided, that: (a) the total principal amount of the additional Revolving Loans or additional Letters of Credit which Agent may make or Issuing Bank may provide after obtaining such actual knowledge that the aggregate principal amount of the Revolving Loans equal or exceed the Borrowing Base, plus the amount of Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate amount equal to ten (10%) percent of the Maximum Credit and shall not cause the total principal amount of the Loans and Letter of Credit Obligations to exceed the Maximum Credit and (b) no such additional Revolving Loan or Letter of Credit shall be outstanding more than ninety (90) days after the date such additional Revolving Loan or Letter of Credit is made or issued (as the case may be), except as the Required Lenders may otherwise agree.  Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Revolving Loans or Letters of Credit.

12.9          Concerning the Collateral and the Related Financing Agreements.  Each Secured Party authorizes and directs Agent to enter into this Agreement and the other Financing Agreements.  Each Secured Party agrees that any action taken by Agent or Required Lenders in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all Secured Parties.

12.10       Field Audit, Examination Reports and other Information; Disclaimer by Lenders.  By signing this Agreement, each Lender:

 (a)           is deemed to have requested that Agent furnish such Lender (and Agent agrees that it will furnish to such Lender), promptly after it becomes available, a copy of each field audit or examination report and report with respect to the Borrowing Base prepared or received by Agent (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a “Report” and collectively, “Reports”), appraisals with respect to the Collateral and financial statements with respect to Parent and its Subsidiaries received by Agent;

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

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

(d)           agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner.

12.11      Collateral Matters.

(a)           Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letters of Credit hereunder, make such disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or  (ii) to enhance the likelihood or maximize the amount of repayment by Borrowers and Guarantors of the Loans and other Obligations, provided, that, (A) the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii) outstanding at any time, plus the then outstanding principal amount of the additional Loans and Letters of Credit which Agent may make or provide as set forth in Section 12.8 hereof, shall not exceed the amount equal to ten (10%) percent of the Maximum Credit and (B) the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii) outstanding at any time, plus the then outstanding principal amount of the Loans, shall not exceed the Maximum Credit, or (iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to Issuing Bank in respect of any Letter of Credit.  The Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral.  Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder.  Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Prime Rate Loans and shall be payable on demand.  Without limitation of its obligations pursuant to Section 6.11, each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance.  If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (Eastern time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.

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(b)           Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting property being sold or disposed of if Administrative Borrower or any Borrower or Guarantor certifies to Agent that the sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which any Borrower or Guarantor did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $5,000,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) approved, authorized or ratified in writing by all of Lenders.  Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section.  In no event shall the consent or approval of Issuing Bank to any release of Collateral be required.  Except as provided in Section 11.3(f), nothing contained herein shall be construed to require the consent of any Bank Product Provider to any release of any Collateral or termination of security interests in any Collateral.

(c)           Without any manner limiting Agent’s authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section.  Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of any Borrower or Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.

(d)           Agent shall have no obligation whatsoever to any Lender, Issuing Bank or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or Guarantor or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or Letters of Credit hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, subject to the other terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender or Issuing Bank.

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12.12           Agency for Perfection.  Each Secured Party hereby appoints Agent and each other Secured Party as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Secured Party hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party.  Should any Secured Party obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

12.13           Successor Agent.  Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Parent. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders.  If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Parent, a successor agent from among Lenders.  Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated.  After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement.  If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

12.14           Other Agent Designations.  Agent may at any time and from time to time determine that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”, “Documentation Agent” or similar designation hereunder and enter into an agreement with such Lender to have it so identified for purposes of this Agreement.  Any such designation shall be effective upon written notice by Agent to Administrative Borrower of any such designation.  Any Lender that is so designated as a Co-Agent, Syndication Agent, Documentation Agent or such similar designation by Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Financing Agreements other than those applicable to all Lenders as such.  Without limiting the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary relationship with any Lender and no Lender shall be deemed to have relied, nor shall any Lender  rely, on a Lender so identified as a Co-Agent, Syndication Agent, Documentation Agent or such similar designation in deciding to enter into this Agreement or in taking or not taking action hereunder.

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SECTION 13  TERM OF AGREEMENT; MISCELLANEOUS

13.1        Term.

(a)           This Agreement and the other Financing Agreements shall become effective as of the Closing Date and shall continue in full force and effect for a term ending on the Maturity Date, unless sooner terminated pursuant to the terms hereof.  In addition, Borrowers may terminate this Agreement at any time upon ten (10) days prior written notice to Agent (which notice shall be irrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time on or after an Event of Default.  Upon the Commitment Termination Date, Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrowers and at Borrowers’ expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent, Lenders and Issuing Bank from loss, cost, damage or expense, including attorneys’ fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Obligations and checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment (and including any contingent liability of Agent to any bank at which deposit accounts of Borrowers and Guarantors are maintained under any Deposit Account Control Agreement) and for any of the Obligations arising under or in connection with any Bank Products in such amounts as the party providing such Bank Products may require (unless such Obligations arising under or in connection with any Bank Products are paid in full in cash and terminated in a manner satisfactory to such other party).  The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Obligations shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of the then outstanding Letters of Credit.  Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Administrative Borrower for such purpose.  Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to Agent Payment Account or other bank account designated by Agent are received in such bank account later than 1:00 p.m. (Eastern time).

(b)           No termination of the Commitments, this Agreement or any of the other Financing Agreements shall relieve or discharge any Borrower or Guarantor of its respective duties, obligations and covenants under this Agreement or any of the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent’s continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid.  Accordingly, each Borrower and Guarantor waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrowers or Guarantors, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds.

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13.2        Interpretative Provisions.

(a)           All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.

(b)           All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

(c)           All references to any Borrower, Guarantor, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns.

(d)           The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e)           The word “including” when used in this Agreement shall mean “including, without limitation” and the word “will” when used in this Agreement shall be construed to have the same meaning and effect as the word “shall”.

(f)           An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such Event of Default is capable of being cured as determined by Agent.

(g)           All references to the term “good faith” used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned.  Borrowers and Guarantors shall have the burden of proving any lack of good faith on the part of Agent or any Lender alleged by any Borrower or Guarantor at any time.

(h)           Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Parent most recently received by Agent prior to the date hereof.  Notwithstanding anything to the contrary contained in GAAP or any interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise, the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is unqualified and also does not include any explanation, supplemental comment or other comment concerning the ability of the applicable person to continue as a going concern or the scope of the audit.

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(i)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including”.

(j)           Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

(k)           The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(l)           This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(m)           This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties.  Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.

13.3        Notices.

(a)           All notices, requests and demands hereunder shall be in writing and deemed to have been given or made:  if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing by deposit (postage prepaid) in the U.S. mail.  Notices delivered through electronic communications shall be effective to the extent set forth in Section 13.3(b) below.  All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to any Borrower or Guarantor:	Xxxxxxx Fabrics, Inc.
	Xxx Xxxxxxx Xxx
	Xxxxxxx, XX 00000
	Attention: Xxx Xxxxxxxx, CFO
	Telephone No.: (000) 000-0000
	Telecopy No.: (000) 000-0000

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with a copy to:	Baker, Donelson, Bearman, Xxxxxxxx &  Xxxxxxxxx, PC
	000 Xxxxxxx Xxxxxx
	Xxxxx Xxxxxxxxx Xxxxxxxx
	Xxxxxxx, XX 00000
	Attention: Xxx X. Xxxxxxx, Esq.
	Telephone No.: (000) 000-0000
	Telecopy No.: (000) 000-0000
If to Agent:	General Electric Capital Corporation
	000 Xxxxxxx 0, X.X. Xxx 0000
	Xxxxxxx, XX 00000-0000
	Attention: Xxxxxxx Fabrics Account Manager
	Telephone No.: (000) 000-0000
	Telecopy No.: (000) 000-0000
With copies to:
	Xxxxxxx XxXxxxxxx LLP
	Xxx Xxxxxxx Xxxxxx
	Xxxxxx, XX 00000
	Attention: Xxxxxx X. X. Xxxxx, Esq.
	Telephone No.: (000) 000-0000
	Telecopy No.: (000) 000-0000
and
	General Electric Capital Corporation
	000 Xxxxxxx 0
	Xxxxxxx, XX  00000
	Attention: Corporate Counsel - Corporate Lending
	Telephone No.: (000) 000-0000
	Telecopy No.: (000) 000-0000

(b)           Notices and other communications to Lenders and Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Agent or as otherwise determined by Agent, provided, that, the foregoing shall not apply to notices to any Lender pursuant to Section 2 hereof if such Lender or Issuing Bank, as applicable, has notified Agent that it is incapable of receiving notices under such Section by electronic communication.  Unless Agent otherwise requires, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided, that, if such notice or other communication is not given during the normal business hours of the recipient, such notice shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communications is available and identifying the website address therefor.

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13.4        Partial Invalidity.  If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

13.5        Confidentiality.

(a)           Agent, each Lender and Issuing Bank shall use all reasonable efforts to keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by any Borrower pursuant to this Agreement which is clearly and conspicuously marked as confidential at the time such information is furnished by such Borrower to Agent, such Lender or Issuing Bank, provided, that, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule, regulation, subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent, such Lender or Issuing Bank is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to any Affiliate of any Lender or Issuing Bank so long as such Lender, Participant (or prospective Lender or Participant or Issuing Bank)  shall have agreed to treat such information as confidential in accordance with this Section 13.5 and such Lender, Participant (or prospective Lender or Participant or Issuing Bank) shall have caused such Affiliate to treat such information as confidential in accordance with this Section 13.5, or (iv) to counsel for Agent, any Lender, Issuing Bank or Participant (or prospective Lender or Participant).

(b)           In the event that Agent, any Lender or Issuing Bank receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent, such Lender or Issuing Bank, as the case may be, agrees (i) to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent, such Lender or Issuing Bank determines in good faith that it will not create any risk of liability to Agent, Issuing Bank or such Lender, Agent or such Lender or Issuing Bank will promptly notify Administrative Borrower of such request so that Administrative Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrowers of Agent’s or Issuing Bank’s or such Lender’s expenses, cooperate with Administrative Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information which Administrative Borrower so designates, to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent, such Lender or Issuing Bank determines in good faith that it will not create any risk of liability to Agent, such Lender or Issuing Bank.

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(c)           In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of information that has been or is made public by any Borrower, Guarantor or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes available to Agent, any Lender, Issuing Bank (or any Affiliate of any Lender or Issuing Bank) on a non-confidential basis from a person other than a Borrower or Guarantor (unless Agent, Issuing Bank or such Lender knows that such information was disclosed in violation of a confidentiality agreement or applicable law), (iii) to require Agent, any Lender or Issuing Bank to return any materials furnished by a Borrower or Guarantor to Agent, a Lender or Issuing Bank or prevent Agent, a Lender or Issuing Bank from responding to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Xxxxxx Xxxxxx Associates or other applicable industry standards relating to the exchange of credit information.  The obligations of Agent, Lenders and Issuing Bank under this Section 13.5 shall supersede and replace the obligations of Agent, Lenders or Issuing Bank under any confidentiality letter signed prior to the date hereof or any other arrangements concerning the confidentiality of information provided by any Borrower or Guarantor to Agent, any Lender or Issuing Bank.  In addition, Agent, Lenders and Issuing Bank may disclose information relating to the Credit Facility to Gold Sheets and other similar publications with such information to consist of deal terms and other information customarily found in such publications and that Agent and its affiliates may otherwise use the corporate name and logo of Borrowers and Guarantors in “tombstones” or other advertisements or public statements.

13.6         Publicity.  Each Borrower and Guarantor agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure (other than any disclosures required by the Securities and Exchange Commission) using the name of GE Capital or its affiliates or referring to this Agreement, the other Financing Agreements without at least two (2) Business Days’ prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) such Borrower, Guarantor or Affiliate is required to do so under law and then, in any event, such Borrower, Guarantor or Affiliate will consult with GE Capital before issuing such press release or other public disclosure.  GE Capital hereby agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure (other than any disclosures required by the Securities and Exchange Commission) using the name of the Borrowers or their affiliates or referring to this Agreement, the other Financing Agreements without at least two (2) Business Days’ prior notice to the Administrative Borrower without the prior written consent of the Administrative Borrower unless (and only to the extent that) GE Capital or such Affiliate is required to do so under law and then, in any event, GE Capital or such Affiliate will consult with the Administrative Borrower before issuing such press release or other public disclosure.  Notwithstanding the foregoing to the contrary, Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

13.7         Successors.  This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Secured Parties, Issuing Bank, Borrowers, Guarantors and their respective successors and assigns, except that Borrower may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Agent and Lenders.  Any such purported assignment without such express prior written consent shall be void.  No Lender may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 13.8 below.  The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrowers, Guarantors, Agent, Issuing Bank and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements.

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13.8        Assignments; Participations.

(a)           Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $7,500,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective until recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000.

(b)           Agent shall maintain a register of the names and addresses of Lenders, their Commitments and the principal amount of their Loans (the “Register”).  Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance.  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and any Borrowers, Guarantors, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by Administrative Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(c)           Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations (including, without limitation, the obligation to participate in Letter of Credit Obligations) of a Lender hereunder and thereunder and  the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement.

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(d)           By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows:  (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, Guarantor or any of their Subsidiaries or the performance or observance by any Borrower or Guarantor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender.  Agent and Lenders may furnish any information concerning any Borrower or Guarantor in the possession of Agent or any Lender from time to time to assignees and Participants.

(e)           Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of its Commitments and the Loans owing to it and its participation in the Letter of Credit Obligations, without the consent of Agent or the other Lenders); provided, that, (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment hereunder) and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrowers, Guarantors, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, and (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower or Guarantor hereunder shall be determined as if such Lender had not sold such participation.

(f)           Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal Reserve Bank; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.

(g)           Borrowers and Guarantors shall assist Agent or any Lender permitted to sell assignments or participations under this Section 13.8 in whatever manner reasonably necessary in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Lenders or Participants. Borrowers shall certify the correctness, completeness and accuracy, in all material respects, of all descriptions of Borrowers and Guarantors and their affairs provided, prepared or reviewed by any Borrower or Guarantor that are contained in any selling materials and all other information provided by it and included in such materials.

130

 (h)           Any Lender that is an Issuing Bank may at any time assign all of its Commitments pursuant to this Section 13.8.  If such Issuing Bank ceases to be  Lender, it may, at its option, resign as Issuing Bank and such Issuing Bank’s obligations to issue Letters of Credit shall terminate but it shall retain all of the rights and obligations of Issuing Bank hereunder with respect to Letters of Credit outstanding as of the effective date of its resignation and all Letter of Credit Obligations with respect thereto (including the right to require Lenders to make Revolving Loans or fund risk participations in outstanding Letter of Credit Obligations), shall continue.

13.9          Entire Agreement.  This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.  In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

13.10        USA PATRIOT Act.  Each Lender subject to the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001) (the “Act”) hereby notifies Borrowers and Guarantors that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each person or corporation who opens an account and/or enters into a business relationship with it, which information includes the name and address of Borrowers and Guarantors and other information that will allow such Lender to identify such person in accordance with the Act and any other applicable law.  Borrowers and Guarantors are hereby advised that any Loans or Letters of Credit hereunder are subject to satisfactory results of such verification.

13.11        Counterparts, Etc.  This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile or other electronic method of transmission shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements.  Any party delivering an executed counterpart of any such agreement by telefacsimile or other electronic method of transmission shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

13.12        Designated Senior Debt.  All Obligations shall be “Designated Senior Indebtedness” for purposes of and as defined in the Indenture.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these presents to be duly executed as of the day and year first above written.

BORROWERS

XXXXXXX FABRICS, INC.

By:

Title:

HF MERCHANDISING, INC.

By:

Title:

XXXXXXX FABRICS OF MI, INC.

By:

Title:

XXXXXXXXXXXXXX.XXX, INC.

By:

Title:

XXXXXXX FABRICS, LLC

By:

Title:

GUARANTORS

HF ENTERPRISES, INC.

By:

Title:

HF RESOURCES, INC.

By:

Title:

[SIGNATURES CONTINUED ON NEXT PAGE]

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AGENT

GENERAL ELECTRIC CAPITAL

CORPORATION, as Agent and Issuing Bank

By:

Title: 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

GENERAL ELECTRIC CAPITAL

CORPORATION, as Lender

By:

Title: 

EXHIBIT A

to

LOAN AND SECURITY AGREEMENT

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of _____________, 20__ is made between ________________________ (the “Assignor”) and ____________________ (the “Assignee”).

WITNESSETH:

WHEREAS, General Electric Capital Corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the financial institutions which are parties thereto as lenders (in such capacity, “Agent”), and the financial institutions which are parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively, “Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Xxxxxxx Fabrics, Inc., HF Merchandising, Inc., Xxxxxxx Fabrics of MI, Inc., xxxxxxxxxxxxxx.xxx, Inc. and Xxxxxxx Fabrics, LLC (collectively, “Borrowers”) as set forth in the Loan and Security Agreement, dated August 1, 2008, by and among Borrowers, certain of their affiliates, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, as provided under the Loan Agreement, Assignor committed to making Loans (the “Committed Loans”) to Borrowers in an aggregate amount not to exceed $___________ (the “Commitment”);

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and obligations of Assignor under the Loan Agreement in respect of its Commitment in an amount equal to $______________ (the “Assigned Commitment Amount”) on the terms and subject to the conditions set forth herein and Assignee wishes to accept assignment of such rights and to assume such obligations from Assignor on such terms and subject to such conditions;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1.           Assignment and Acceptance.

(a)           Subject to the terms and conditions of this Assignment and Acceptance, Assignor hereby irrevocably sells, transfers and assigns to Assignee, and Assignee hereby irrevocably purchases, assumes and undertakes from Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) an interest in (i) the Commitment and each of the Committed Loans of Assignor and (ii) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Loan Agreement and the other Financing Agreements, so that after giving effect thereto, the Commitment of Assignee shall be as set forth below and the Pro Rata Share of Assignee shall be _______ (__%) percent.

(b)           With effect on and after the Effective Date (as defined in Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Lender under the Loan Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Commitment Amount.  Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender.  It is the intent of the parties hereto that the Commitment of Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Commitment Amount and Assignor shall relinquish its rights and be released from its obligations under the Loan Agreement to the extent such obligations have been assumed by Assignee; provided, that, Assignor shall not relinquish its rights and obligations under Sections 2.2, 6.4, 6.9, 11.5 and 12.5 of the Loan Agreement to the extent such rights and obligations relate to the time prior to the Effective Date.

(c)           After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignee’s Commitment will be $_____________.

(d)           After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignor’s Commitment will be $______________ (as such amount may be further reduced by any other assignments by Assignor on or after the date hereof).

2.           Payments.

(a)           As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in immediately available funds an amount equal to $____________, representing Assignee’s Pro Rata Share of the principal amount of all Committed Loans.

(b)           Assignee shall pay to Agent the processing fee in the amount specified in Section 13.8(a) of the Loan Agreement.

3.           Reallocation of Payments.  Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment, Committed Loans and outstanding Letters of Credit shall be for the account of Assignor.  Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Commitment Amount shall be for the account of Assignee.  Each of Assignor and Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt.

4.           Independent Credit Decision.  Assignee acknowledges that it has received a copy of the Loan Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of Xxxxxxx Fabric, Inc. and its Subsidiaries, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance and  agrees that it will, independently and without reliance upon Assignor, Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Loan Agreement.

5.           Effective Date; Notices.

(a)           As between Assignor and Assignee, the effective date for this Assignment and Acceptance shall be _______________, 20__ (the “Effective Date”); provided, that, the following conditions precedent have been satisfied on or before the Effective Date:

(i)           this Assignment and Acceptance shall be executed and delivered by Assignor and Assignee;

(ii)          the consent of Agent as required for an effective assignment of the Assigned Commitment Amount by Assignor to Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date;

(iii)         written notice of such assignment, together with payment instructions, addresses and related information with respect to Assignee, shall have been given to Administrative Borrower and Agent;

(iv)         Assignee shall pay to Assignor all amounts due to Assignor under this Assignment and Acceptance; and

(v)          the processing fee referred to in Section 2(b) hereof shall have been paid to Agent.

(b)           Promptly following the execution of this Assignment and Acceptance, Assignor shall deliver to Administrative Borrower and Agent for acknowledgment by Agent, a Notice of Assignment in the form attached hereto as Schedule 1.

6.           Agent.  [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]

(a)           Assignee hereby appoints and authorizes Assignor in its capacity as Agent to take such action as agent on its behalf to exercise such powers under the Loan Agreement as are delegated to Agent by Lenders pursuant to the terms of the Loan Agreement.

(b)           Assignee shall assume no duties or obligations held by Assignor in its capacity as Agent under the Loan Agreement.

7.           Withholding Tax.  Assignee (a) represents and warrants to Assignor, Agent and Borrowers that under applicable law and treaties no tax will be required to be withheld by Assignee, Agent or Borrowers with respect to any payments to be made to Assignee hereunder or under any of the Financing Agreements, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to Agent and Borrowers prior to the time that Agent or Borrowers are required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, as applicable (wherein Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new such forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

8.           Representations and Warranties.

(a)           Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any security interest, lien, encumbrance or other adverse claim, (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance, and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignor, enforceable against Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors’ rights and to general equitable principles.

(b)           Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any of the other Financing Agreements or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto.  Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of Borrowers, Guarantors or any of their respective Affiliates, or the performance or observance by Borrowers, Guarantors or any other Person, of any of its respective obligations under the Loan Agreement or any other instrument or document furnished in connection therewith.

(c)           Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance, (iii) Assignee is entering into this Assignment and Assumption in the ordinary course of its business, and is acquiring its interest in the Loans and Letter of Credit Obligations for its own account and not with a view to or for sale in connection with any subsequent distribution; provided, however, that at all times the distribution of Assignee’s property shall, subject to the terms of the Loan Agreement, be and remain within its control, (iv) no future assignment or participation granted by Assignee pursuant to Section 13.8 of the Loan Agreement will require Assignor, Agent, or any Borrower to file any registration statement with the Securities and Exchange Commission or to apply to qualify under the blue sky laws of any state, (v) Assignee has no loans to, written or oral agreements with, or equity or other ownership interest in any Borrower or Guarantor, (vi) Assignee will not enter into any written or oral agreement with, or acquire any equity or other ownership interest in, any Borrower or Guarantor without the prior written consent of Agent, (vii) as of the Effective Date, Assignee is entitled to receive payments of principal and interest in respect of the Obligations without deduction for or on account of any taxes imposed by the United States of America or any political subdivision thereof, and (viii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignee, enforceable against Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors’ rights to general equitable principles.

9.            Further Assurances.  Assignor and Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to Borrowers or Agent, which may be required in connection with the assignment and assumption contemplated hereby.

10.          Miscellaneous.

(a)           Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto.  No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other for further breach thereof.

(b)           All payments made hereunder shall be made without any set-off or counterclaim.

(c)           Assignor and Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance.

(d)           This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK BUT EXCLUDING ANY PRINCIPLES OF CHOICE OF LAW AND CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK).  Assignor and Assignee each (i) irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County and the United States District Court for the Southern District of New York, whichever Agent may elect and (ii) waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Assignment and Acceptance or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Assignment and Acceptance or any of the other Financing Agreements or the transactions related hereto or thereto, and whether in contract, tort, equity or otherwise.

ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:

Title: 

[ASSIGNEE]

By:

Title:

SCHEDULE 1

NOTICE OF ASSIGNMENT AND ACCEPTANCE

 ___, 20__

Attn.:

Re: Xxxxxxx Fabrics, Inc. et al.

Ladies and Gentlemen:

General Electric Capital Corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the financial institutions which are parties thereto as lenders (in such capacity, “Agent”), and the financial institutions which are parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively, “Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Xxxxxxx Fabrics, Inc., HF Merchandising, Inc., Xxxxxxx Fabrics of MI, Inc., xxxxxxxxxxxxxx.xxx, Inc. and Xxxxxxx Fabrics, LLC (collectively, “Borrowers”) as set forth in the Loan and Security Agreement, dated August 1, 2008, by and among Borrowers, certain of their affiliates, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”).  Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement.

We hereby give you notice of, and request your consent to, the assignment by __________________________ (the “Assignor”) to ___________________________ (the “Assignee”) such that after giving effect to the assignment Assignee shall have an interest equal to ________ (__%) percent of the total Commitments pursuant to the Assignment and Acceptance Agreement attached hereto (the “Assignment and Acceptance”).  We understand that the Assignor’s Commitment shall be reduced by $_____________, as the same may be further reduced by other assignments on or after the date hereof.

Assignee agrees that, upon receiving the consent of Agent to such assignment, Assignee will be bound by the terms of the Loan Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest under the Loan Agreement. The following administrative details apply to Assignee:

(A)	Notice address:
	Assignee name:
	Address:
	Attention:
	Telephone:
	Telecopier:
(B)	Payment instructions:
	Account No.:
	At:
	Reference:
	Attention:

You are entitled to rely upon the representations, warranties and covenants of each of Assignor and Assignee contained in the Assignment and Acceptance.

IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned.

Very truly yours,

[NAME OF ASSIGNOR]

By:

Title:

[NAME OF ASSIGNEE]

By:

Title: 

ACKNOWLEDGED AND ASSIGNMENT

CONSENTED TO:

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent

By: 

Title: Its Duly Authorized Agent

EXHIBIT B

TO

LOAN AND SECURITY AGREEMENT

FORM OF INFORMATION CERTIFICATE

The undersigned, the [________________] of [________________], a [__________________] [___________] (the “Company”), hereby certifies, with reference to a certain Loan and Security Agreement dated as of August 1, 2008 (the “Loan and Security Agreement”) (terms defined in such Loan and Security Agreement having the same meanings herein as specified therein) by and among the Company, certain of the Company’s affiliates, the Lenders from time to time party thereto and General Electric Capital Corporation, as Agent, to the Agent as follows:

1.           Name.  The exact legal name of the Company as that name appears on its [Certificate of Incorporation] is as follows:

2.           Other Identifying Factors.

(a)           The following is the mailing address of the Company:

(b)           If different from its mailing address, the Company’s place of business or, if more than one, its chief executive office is located at the following address:

Address County State

(c)           The following is the type of organization of the Company:

(d)           The following is the jurisdiction of the Company’s organization:

(e)           The following is the Company's state issued organizational identification number [state “None” if the state does not issue such a number]:

3. Other Names, Etc.

(a)          The following is a list of all other names (including trade names or similar appellations) used by the Company, or any other business or organization to which the Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, now or at any time during the past five years:

(b)          Attached hereto as Schedule 3 is the information required in §2 for any other business or organization to which the Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, now or at any time during the past five years:

4. Other Current Locations.

(a)          The following are all other locations in the United States of America in which the Company maintains any books or records relating to any of the Collateral consisting of accounts, instruments, chattel paper, general intangibles or mobile goods:

Address County State

(b)          The following are all other places of business of the Company in the United States of America:

Address County State

(c)          The following are all other locations in the United States of America where any of the Collateral consisting of inventory or equipment is located:

Address County State

(d)          The following are the names and addresses of all persons or entities other than the Company, such as lessees, consignees, warehousemen or purchasers of chattel paper, which have possession or are intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment:

Name Mailing Address County State

5. Prior Locations.

(a)          Set forth below is the information required by §4(a) or (b) with respect to each location or place of business previously maintained by the Company at any time during the past five years in a state in which the Company has previously maintained a location or place of business at any time during the past four months:

Address County State

(b)          Set forth below is the information required by §4(c) or (d) with respect to each other location at which, or other person or entity with which, any of the Collateral consisting of inventory or equipment has been previously held at any time during the past twelve months:

Name Address County State

6.           Fixtures.  Attached hereto as Schedule 6 is the information required by UCC §9-502(b) or former UCC §9-402(5) of each state in which any of the Collateral consisting of fixtures are or are to be located and the name and address of each real estate recording office where a mortgage on the real estate on which such fixtures are or are to be located would be recorded.

7.           Intellectual Property.  Attached hereto as Schedule 7 is a complete list of all United States and foreign patents, copyrights, trademarks, trade names and service marks registered or for which applications are pending in the name of the Company.

8.           Securities; Instruments.  Attached hereto as Schedule 8 is a complete list of all stocks, bonds, debentures, notes and other securities and investment property owned by the Company (provide name of issuer, a description of security and value).

9.           Motor Vehicles.  The following is a complete list of all motor vehicles owned by the Company (describe each vehicle by make, model and year and indicate for each the state in which registered and the state in which based):

Vehicle State of Registration State in Which Based

10.         Other Titled Collateral.  The following is a complete list of aircraft and boats and all other inventory, equipment and other goods of the Company which are subject to any certificate of title or other registration statute of the United States, any state or any other jurisdiction (provide description of covered goods and indicate registration system and jurisdiction):

Goods Registration System Jurisdiction

11.         Bank Accounts.  The following is a complete list of all bank accounts (including securities and commodities accounts) maintained by the Company (provide name and address of depository bank, type of account and account number):

Depository Bank Bank Address Type of Account Acct. No.

12.         Unusual Transactions.  Except for those purchases, acquisitions and other transactions described on Schedule 3 or on Schedule 12 attached hereto, all of the Collateral has been originated by the Company in the ordinary course of the Company's business or consists of goods which have been acquired by the Company in the ordinary course from a person in the business of selling goods of that kind.

13.         Commercial Tort Claims.  Attached hereto as Schedule 13 is a brief written description of each and every commercial tort claim which the Company holds.

IN WITNESS WHEREOF, I have hereunto signed this certificate as of [  ] of [__________], 20[__].

[NAME OF COMPANY]

Name:

Title:

EXHIBIT C

TO

LOAN AND SECURITY AGREEMENT

Form of Borrowing Base Certificate

See attached.

Form of Borrowing Base Certificate
Xxxxxxx Fabrics, Inc
REVOLVING LINE OF CREDIT AVAILABILITY CALCULATION AT COST
[Date]
ACCOUNTS RECEIVABLE
Eligible Credit Card Receivables		[Date]
Advance Rate					85.0	%
Credit Card AR Availability								$	0
INVENTORY
Eligible Retail Inventory (Worksheet 1)		[Date]		$	0
NOLV per [Date] Appraisal					82.8	%
Net Orderly Liquidation Value of Inventory				$	0
Advance Rate					90.0	%
Available Inventory								$	0
Eligible DC Inventory (Worksheet 2)		[Date]		$	0
NOLV per [Date] Appraisal					82.8	%
Net Orderly Liquidation Value of Inventory				$	0
Advance Rate					90.0	%
Available Inventory								$	0
Eligible In-Transit Inventory		[Date]
NOLV per [Date] Appraisal					82.8	%
Net Orderly Liquidation Value of Inventory				$	0
Advance Rate					90.0	%
Available Inventory								$	0
Eligible Documentary LC Inventory		[Date]
NOLV per [Date] Appraisal					82.8	%
Net Orderly Liquidation Value of Inventory				$	0
Advance Rate					90.0	%
Available Inventory								$	0
REAL PROPERTY
Adjusted Appraised Fair Market Value		[Date]
Advance Rate					60.0	%
Real Property Availability								$	0
Borrowing Base Before Reserves								$	0
Reserves
Customs, Duties & Taxes On In-transit Inventory  @ 20.4%				$	0
Customs, Duties & Taxes On LC Inventory @ 20.4%				$	0

POR Payment Of Claims			$	0
	0		$	0
	0		$	0
Total Reserves							$	0
(A) Borrowing Base							$	0
(B) Revolving Commitment							$	100,000,000
Lesser of A or B							$	0
Revolving Loan
Standby Letters of Credit (Exhibit 1)							$	0
Documentary Letters of Credit (Exhibit 1)							$	0
Revolving Loan And Letters Of Credit  Exposure							$	0
Excess Availability							$	0
% Excess Availability
Less:
Minimum Excess Availability							$	7,500,000
Adjusted Excess Availability							$	(7,500,000	)
% Adjusted Excess Availability

Reference is made to that certain Loan and Security Agreement dated as of August 1, 2008 (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”) among the undersigned (the “Administrative Borrower”), the other Persons named therein as Borrowers and Guarantors, the Lenders from time to time party thereto and General Electric Capital Corporation, as Agent for the Lenders, Issuing Bank and Syndication Agent (the “Agent”).  Capitalized terms used herein without definition are so used as defined in the Loan Agreement.

The undersigned, being the [chief financial officer][vice president of finance][treasurer][controller] of the Administrative Borrower, hereby certifies on behalf of the Borrowers that the Borrowing Base with respect to Borrowers calculated herein is true and correct in all respects and, without limiting the generality of the foregoing, with respect to the information supporting the determination of Eligible Credit Card Receivables, Eligible Inventory, Eligible In-Transit Inventory, Eligible LC Inventory and Eligible Real Property.

Xxxxxxx Fabrics, Inc., as Administrative Borrower

By:

Title:

Xxxxxxx Fabrics, Inc
Form of Borrowing Base Certificate
Worksheet 1 - Eligible Retail Inventory
		[Date]		Retail		Cost		CF%
Beginning Stock Ledger Inventory, as of
Add:	Purchases
	Net Markup
	Load
	Freight
	Merchandise Available for Sale
Less:	Gross Sales
	Cost of Goods Sold
	Customer Returns
	Markdowns (Permanent and POS)
	Physical Inventory
	Associates Discounts
	Shrink Actual
	Total Reductions
	Ending Stock Ledger Inventory
Add:	Exclusions at Cost
	In-Transit (received in warehouse, not yet in stock ledger)
	Ending Inventory before Cash Discount Reserve
Less:	Cash Discount Reserve
Ending Inventory, as of :
Inventory Ineligibles:
(a)	Shrink Reserve (3.1% of Sales)
(b)	Capitalized Costs
(c)	Other
(d)	Other
(e)	Other
(f)	Other
(g)	Other
	Total Ineligibles
Eligible Inventory
Reserves				Monthly Balance
(a)	Gift Certificates (50% of G/L)
(b)	Merchandise Credits (50% of GL)
(c)	Customer Deposits (50% of GL)
(d)	3 Month Rent Reserve (PA, VA, WA)
(e)	Customs, Duties & Taxes On In-transit Inventory  @ 20.4%
(f)	Customs, Duties & Taxes On LC Inventory @ 20.4%
(g)	POR Payment Of Claims
Total Reserves

Xxxxxxx Fabrics, Inc
Form of Borrowing Base Certificate
Worksheet 2 - DC Inventory
		Date		Retail		Cost		CF%
Beginning Stock Ledger Inventory, as of
Add:	Purchases
	Net Markup
	Load
	Freight
	Merchandise Available for Sale
Less:	Gross Sales
	Cost of Goods Sold
	Customer Returns
	Markdowns (Permanent and POS)
	Physical Inventory
	Associates Discounts
	Shrink Actual
	Total Reductions
	Ending Stock Ledger Inventory
Add:	Exclusions at Cost
	In-Transit (received in warehouse, not yet in stock ledger)
	Ending Inventory before Cash Discount Reserve
Less:	Cash Discount Reserve
Ending Inventory, as of :
DC Inventory Ineligibles:
(a)	Supplies in DC Inventory
(b)	Fixtures in DC Inventory
(c)	Capitalized Costs
(d)	Other
(e)	Other
(f)	Other
(g)	Other
	Total Ineligibles
Eligible Inventory

Xxxxxxx Fabrics, Inc
Form of Borrowing Base Certificate
Exhibit 1 - Letters of Credit
Standby Letters Of Credit
LC Number		Beneficiary		Issued Date		Expiration Date		Purpose		Amount
Total Standby Letters Of Credit
Documentary Letters Of Credit
LC Number		Beneficiary		Issued Date		Expiration Date		Purpose		Amount
Total Documentary Letters Of Credit

EXHIBIT D

TO

LOAN AND SECURITY AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

To: General Electric Capital Corporation, as Agent (as defined below)

000 Xxxxxxx 0, X.X. Xxx 0000

Xxxxxxx, XX 00000-0000

Ladies and Gentlemen:

I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as defined below) as follows:

2.           I am the duly elected Chief Financial Officer of Xxxxxxx Fabrics, Inc., a Delaware corporation (“Parent”).  Capitalized terms used herein without definition shall have the meanings given to such terms in the Loan and Security Agreement, dated as of August 1, 2008, by and among General Electric Capital Corporation, as agent for the financial institutions party thereto as lenders (in such capacity, “Agent”), the financial institutions party thereto as lenders (collectively, “Lenders”), Parent and certain of their affiliates (as such Loan and Security Agreement is amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”).

3.           I have reviewed the terms of the Loan Agreement and have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and the financial condition of Borrowers and Guarantors during the immediately preceding Fiscal Month.

4.           Based on the review described in Section 2 above, the financial information set forth on Schedule I attached hereto presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Parent and its Subsidiaries, on a consolidated basis, in each case as at the end of such Fiscal Month and for that portion of the Fiscal Year then ended.

5.           Based on the review described in Section 2 above, the other information presented on the Schedules (other than Schedule I) hereto is true, correct and complete in all material respects and does not disclose the existence during or at the end of such Fiscal Month, nor is there on the date hereof, of any condition or event which constitutes a Default or an Event of Default, except as set forth on Schedule II attached hereto.  Schedule II describes each Default or Event of Default, if any, detailing the nature of thereof and all efforts which any Borrower or Guarantor has taken, is taking, or proposes to take to cure such Default or Event of Default.

6.           I further certify that, based on the review described in Section 2 above, no Borrower or Guarantor has at any time during or at the end of such Fiscal Month, except as specifically described on Schedule III attached hereto or as permitted by the Loan Agreement, done any of the following:

(a)           Changed its respective corporate name, or transacted business under any trade name, style, or fictitious name, other than those previously described to you and set forth in the Financing Agreements.

(b)           Changed the location of its chief executive office, changed its jurisdiction of incorporation, changed its type of organization or changed the location of or disposed of any of its properties or assets (other than pursuant to the sale of Inventory in the ordinary course of its business or as otherwise permitted by Section 9.7 of the Loan Agreement), or established any new asset locations.

(c)           Materially changed the terms upon which it sells goods (including sales on consignment) or provides services, nor has any vendor or trade supplier to any Borrower or Guarantor during or at the end of such period materially adversely changed the terms upon which it supplies goods to any Borrower or Guarantor.

(d)           Permitted or suffered to exist any security interest in or liens on any of its properties, whether real or personal, other than as specifically permitted in the Financing Agreements.

(e)           Received any notice of, or obtained knowledge of any of the following not previously disclosed to Agent:  (i) the occurrence of any event involving the release, spill or discharge of any Hazardous Material in violation of applicable Environmental Law in a material respect or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any applicable Environmental Law by any Borrower or Guarantor in any material respect or (B) the release, spill or discharge of any Hazardous Material in violation of applicable Environmental Law in a material respect or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials in violation of applicable Environmental Laws in a material respect or (D) any other environmental, health or safety matter, which has a material adverse effect on any Borrower or Guarantor or its business, operations or assets or any properties at which such Borrower or Guarantor transported, stored or disposed of any Hazardous Materials.

(f)           Become aware of, obtained knowledge of, or received notification of, any breach or violation of any material covenant contained in any instrument or agreement in respect of Indebtedness for money borrowed by any Borrower or Guarantor.

(g)          Failed to pay when due any rent or other amounts owing under any real property lease (or similar agreement).

(h)          Failed to pay when due any royalty payment or other amounts owing under any License Agreement (or similar agreement).

7.           Attached hereto as Schedule IV are the calculations used in determining, as of the end of such Fiscal Month, whether Borrowers and Guarantors are in compliance with the covenant set forth in Section 9.19 of the Loan Agreement for such Fiscal Month.

8.           Attached hereto as Schedule V are the calculations used in determining, as of the end of the most recently ended Fiscal Quarter, the EBITDA of the Parent and its Subsidiaries for the four (4) Fiscal Quarter period ending on the last day of such Fiscal Quarter.

IN WITNESS WHEREOF, the foregoing certifications are made and delivered this ___ day of ___________, 20__.

Very truly yours,

XXXXXXX FABRICS, INC.,

as Administrative Borrower

By:

Title: Chief Financial Officer

EXHIBIT E-1

Application For Irrevocable Standby Letter of Credit

TO:  General Electric Capital Corporation

Date

L/C No.

(Bank Use Only)

The undersigned Applicant hereby requests General Electric Capital Corporation (“GE Capital”) to issue and transmit by:

Teletransmission             Mail            Overnight Courier            Other, Explain  

the Standby Letter of Credit (the “Credit”) substantially as set forth below.  In issuing the Credit, GE Capital is expressly authorized to make such changes from the terms herein below set forth as GE Capital, in its sole discretion, may deem advisable.

Applicant (Full Name and Address)	Advising Bank: Wachovia Bank National Association       000 Xxxxxx Xxxxxx       Xxxxxxx-Xxxxx, XX  00000       Attention:  Standby Letters of Credit
Beneficiary (Full Name and Address)	Currency and Amount in Figures: Currency and Amount in Words:
	Expiration Date
	* Special Instructions Is EVERGREEN language required? Yes No If  yes, what is the number of days notification required for customary non-renewal notice? Thirty days     Sixty Days Ninety days     Other
Charges:  GE Capital’s charges are for our account, all other charges are to be paid by beneficiary.

Credit to be available to payment against Beneficiary’s draft(s) at sight drawn on GE Capital or its correspondent at GE Capital’s option accompanied by the following documents:

Statement, purportedly signed by the Beneficiary, reading as follows (please state below exact wording to appear on the statement):

Other Documents

Special Conditions

Issue substantially in form of attached specimen.  (Specimen must also be signed by applicant)

Complete only when the Beneficiary (Foreign Bank, or other Financial Institution) is to issue its undertaking based on this Credit.

        Request Beneficiary to issue and deliver their (specify the type of undertaking) _______________________________

in favor of _____________________________________________________________________________________

for an amount not exceeding the amount specified above, effective immediately relative to (specify contract number or other pertinent reference)_______________________________________________________________________

to expire on __________.  (This date must be at least 15 days prior to the expiry date indicated above).  It is understood that if the Credit is issued in favor of any bank or other financial or commercial entity which has issued or is to issue an undertaking on behalf of Applicant of the Credit in connection with the Credit, Applicant hereby agrees to remain liable under the Master Agreement and this Application in respect of the Credit (even after its expiry date) until GE Capital is released by such bank or entity.

Each Applicant signing below affirms that it has fully read and agrees to this Application.  In consideration of GE Capital’s issuance of the Credit, Applicant agrees to be bound by the Master Agreement for Standby Letters of Credit between Applicant and GE Capital (the “Master Agreement”), the terms of which are incorporated by reference.  All actions to be taken by GE Capital hereunder or in connection with any Credit may be taken by First Union National Bank or another bank designated by GE Capital as GE Capital’s agent.

(Note:  If a bank, trust company, or other financial institution signs as Applicant for its customer, or if two Applicants jointly apply, both parties should sign below).  Documents may be forwarded to you by the Beneficiary, or the negotiating bank, in one mail.  You may forward documents to us or our customhouse broker, if specified below, in one mail.  We understand and agree that this Credit will be subject to the International Standby Practices, International Chamber of Commerce Publication No. 590 (“ISP98”).

(Print or type name of Applicant)		(Print or type name of Applicant)
(Address)		(Address)
Authorized Signature (Title)		Authorized Signature (Title)
Authorized Signature (Title)		Authorized Signature (Title)

Customer Contact

GE CAPITAL USE ONLY

(NOTE:  Application will NOT be processed if this section is not complete.)

Approved:		City:		Date:
		Telephone:
(Print name and title)

EXHIBIT E-2

Application For Commercial Letter of Credit

TO: General Electric Capital Corporation

APPLICATION FOR COMMERCIAL LETTER OF CREDIT

THIS DOCUMENT MAY ONLY BE USED BY APPLICANTS WHO HAVE ENTERED

INTO A MASTER AGREEMENT FOR COMMERCIAL LETTERS OF CREDIT

Dear Sir/Madam:

The undersigned hereby requests General Electric Capital Corporation ("GE Capital") to arrange for GE Capital Trade Services, Ltd. (the "Issuer"), to open (as the undersigned's agent) the irrevocable Letter of Credit.

Applicant: (Full Name, Address and Tele #):	Beneficiary: (Full Name and Address)
Up to an aggregate currency  amount of: Currency:	Available by drafts at  ____________   drawn at the issuer’s option, on the Issuer or it’s correspondent for ____________% of invoice value Presented no later than____________________________                                 (Letter of Credit Expiration date)

Evidencing shipment of _______________________________________________________________

(PLEASE MENTION COMMODITY ONLY, OMITTING DETAILS ON PRICE, GRADE, QUALITY, ETC.)

DOCUMENTS REQUIRED (indicate # originals and copies)

Commercial Invoice:	US Special Customs Form #5515:
Insurance Policy/Certificate/Address (Insurance to be effected by the undersigned if "Insurance Policy/Certificate" is not completed:	Packing List:
	Certificate Of Origin:
	Other Documents (use a separate page (“3”) if needed noting here “see attached”):

SHIPPING DOCUMENTS/TERMS:

Air Way Xxxx consigned to First Union National Bank

Full set clean on board ocean Bills of Lading issued or endorsed to the order of First Union National Bank

marked "Freight ______ Collect     ______ Prepaid      Latest Shipping Date ______________________________

Notify Party: ___________________________________________________________________________________

Shipment From ____________________________________________  To ______________________________________________________

Partial shipments ____ are    _____are not permitted.    Transhipments ______ are   ______  are not permitted.

Indicate shipping terms:  (FOB, C&F, CIF) _____________________Container shipments ______ are _______ are not permitted

-Documents must be presented for payment, acceptance or negotiation within _________days after the date of issuance of the Xxxx   of Lading or other shipping documents (latest date of presentation, 21 days if silent).

-Unless otherwise stated, all banking charges outside USA are for account of the Beneficiary

-The negotiating bank, if any, is to be authorized to forward all documents in one registered airmail.

The Master Agreement for Commercial Letters of Credit dated as of [__________], 20[___] between Applicant and GE Capital is incorporated herein by reference.

Name of Applicant:	Applicant Authorized Signature and Title: Date:
GE Capital Unit and Region:	GE Official Signature and Title: Date:

Other Documents:

  INITIAL GE CAPITAL             INITIAL APPLICANT AUTHORIZED SIGNATURE

EXHIBIT F

TO

LOAN AND SECURITY AGREEMENT

FORM OF NOTICE OF BORROWING

Reference is made to that certain Loan and Security Agreement (as amended and in effect from time to time, the “Loan Agreement”), dated as of August 1, 2008, by and among Xxxxxxx Fabrics, Inc, a Delaware corporation (“Administrative Borrower”), HF Merchandising, Inc., a Delaware corporation (“Merchandising”), Xxxxxxx Fabrics of MI, Inc., a Delaware corporation (“Fabrics MI”), xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation (“Xxxxxxx.xxx”) and Xxxxxxx Fabrics, LLC, a Delaware limited liability company (“Fabrics LLC”, and together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each individually a “Borrower” and collectively, “Borrowers”), HF Enterprises, Inc., a Delaware corporation (“Enterprises”) and HF Resources, Inc., a Delaware corporation (“Resources”, and together with Enterprises, each individually a “Guarantor” and collectively, “Guarantors), the parties thereto from time to time as lenders, whether by execution of the Loan Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined) and General Electric Capital Corporation, a Delaware corporation, in its capacity as agent for Lenders (in such capacity, “Agent”).  Capitalized terms used herein without definition shall have the meanings given to them in the Loan Agreement.

Administrative Borrower hereby gives you irrevocable notice, pursuant to Section 2.1(a) of the Loan Agreement, of its request of a Revolving Loan (the “Proposed Borrowing”) on behalf of ___________________ (the “Applicable Borrower”) under the Loan Agreement and, in that connection, sets forth the following information:

A.           The date of the Proposed Borrowing is ___________, _____ (the “Funding Date”), which is a Business Day.

B.           The aggregate principal amount of Revolving Loans is $___________, of which $___________consists of Prime Rate Loans and $____________ consists of Eurodollar Rate Loans having an initial Interest Period of [1][2][3] months.

The undersigned hereby certifies that the following statements are true on the date hereof, both before and after giving effect to the Proposed Borrowing:

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

(b) no law, regulation, order, judgment or decree of any Governmental Authority exists, and no action, suit, investigation, litigation or proceeding is pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Proposed Borrowing, or (B) the consummation of the transactions contemplated pursuant to the terms the Loan Agreement or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect;

(c) no Default or Event of Default exists or shall have occurred and be continuing on and as of the date hereof and after giving effect the Proposed Borrowing;

(d) Borrowers are in compliance with the covenant set forth in Section 9.19; and

(e) the Final Order is in full force and effect and has not been vacated, reversed, modified, amended or stayed; and

(f) after giving effect to the Proposed Borrowing, the outstanding principal amount of the Revolving Loans plus the Letter of Credit Obligations outstanding does not exceed Adjusted Excess Availability.

[Remainder of this page intentionally left blank]

IN WITNESS WHEREOF, Administrative Borrower on behalf of the Applicable Borrower has caused this Notice of Borrowing to be executed and delivered by its duly authorized officer as of the date first set forth above.

XXXXXXX FABRICS, INC.

By:

Name:

Title:

Account Manager:  Fax: (000) 000-0000;  Phone: (000) 000-0000  Email: Xxx.Xxxxxxxxx@xx.xxx, Xxxxxxx.Xxxxxx@xx.xxx,

Operations: Primary Contact: Xxxxxxx Xxxxxx; Fax: (000) 000-0000; Phone:(000) 000-0000; Email: Xxxxxxx.Xxxxxx@xx.xxx

EXHIBIT G

to

LOAN AND SECURITY AGREEMENT

FORM OF NOTICE OF CONVERSION/CONTINUATION

Reference is made to that certain Loan and Security Agreement (as amended and in effect from time to time, the “Loan Agreement”), dated as of August 1, 2008, by and among Xxxxxxx Fabrics, Inc, a Delaware corporation (“Administrative Borrower”), HF Merchandising, Inc., a Delaware corporation (“Merchandising”), Xxxxxxx Fabrics of MI, Inc., a Delaware corporation (“Fabrics MI”), xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation (“Xxxxxxx.xxx”) and Xxxxxxx Fabrics, LLC, a Delaware limited liability company (“Fabrics LLC”, and together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each individually a “Borrower” and collectively, “Borrowers”), HF Enterprises, Inc., a Delaware corporation (“Enterprises”) and HF Resources, Inc., a Delaware corporation (“Resources”, and together with Enterprises, each individually a “Guarantor” and collectively, “Guarantors”), the parties thereto from time to time as lenders, whether by execution of the Loan Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined) and General Electric Capital Corporation, a Delaware corporation, in its capacity as agent for Lenders (in such capacity, “Agent”).  Capitalized terms used herein without definition shall have the meanings given to them in the Loan Agreement.

Administrative Borrower, on behalf of ______________ (the “Applicable Borrower”) hereby gives irrevocable notice, pursuant to Section 3.1(b) of the Loan Agreement, of its request on behalf of the Applicable Borrower to:

[(a)           on __________ convert $___________ of the aggregate outstanding principal amount of the [Prime Rate][Eurodollar Rate] Loans, bearing interest at the applicable Interest Rate, into [a/an] [Eurodollar Rate][Prime Rate] Loan [and, in the case of a Eurodollar Rate Loan, having a Period of [1][2][3] month(s)];]

[(b)           on __________ continue $___________ of the aggregate outstanding principal amount of the Revolving Loans, bearing interest at the Adjusted Eurodollar Rate, as a Eurodollar Rate Loan having an Interest Period of [1][2][3] month(s)].

[Administrative Borrower certifies that the conversion/continuation of the Loans requested above is for the account of the Borrowers.]

Administrative Borrower on behalf of the Applicable Borrower hereby represents and warrants that all of the conditions contained in Sections 4.1 and 4.2 of the Loan Agreement have been satisfied on and as of the date hereof (assuming that each item or matter that is required to be satisfactory to Agent or any Lender is satisfactory to each such Person), and will continue to be satisfied on and as of the date of the conversion/continuation requested hereby, before and after giving effect thereto; and (ii) reaffirms the continuance of Agent’s liens, on behalf of itself and Secured Parties, pursuant to the Security Documents.

[Remainder of this page intentionally left blank]

IN WITNESS WHEREOF, Administrative Borrower on behalf of the Applicable Borrower has caused this Notice of Conversion/Continuation to be executed and delivered by its duly authorized officer as of the date first set forth above.

XXXXXXX FABRICS, INC.,

as Administrative Borrower

By: 

Name:

Title:

EXHIBIT H

TO

LOAN AND SECURITY AGREEMENT

FORM OF APPLICABLE MARGIN CERTIFICATE

To: General Electric Capital Corporation, as Agent (as defined below)

000 Xxxxxxx Xxxxx

Xxxxxxx, XX 00000-0000

Ladies and Gentlemen:

Reference is hereby made to the Loan and Security Agreement, dated August 1, 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among by and among Xxxxxxx Fabrics, Inc, a Delaware corporation (“Parent”), certain of Parent’s affiliates, the parties thereto from time to time as lenders (each individually, a “Lender” and collectively, the “Lenders”) and General Electric Capital Corporation, a Delaware corporation, in its capacity as agent for Lenders (in such capacity, “Agent”).  Capitalized terms used herein without definition shall have the meanings given to such terms in the Loan Agreement.

I hereby certify to you pursuant to Section 7.1(a) of the Loan Agreement as follows:

9.           I am the duly elected Chief Financial Officer of Parent.

10.         [I have reviewed the terms of the Loan Agreement and have made, or have caused to be made under my supervision, the calculations used in determining Quarterly Average Excess Availability for the immediately preceding calendar quarter ending [____________________], which calculations are attached hereto as Schedule I.]*

[I have reviewed the terms of the Loan Agreement and have made, or have caused to be made under my supervision, the calculations used in determining the daily Adjusted Excess Availability for the immediately preceding calendar month ending [___________________], which calculations are attached hereto as Schedule I.]**

11.         [Based on the calculations on Schedule I, the Quarterly Average Excess Availability for the immediately preceding calendar quarter is $[__________________].]*

12.         [Based on the calculations of the Quarterly Average Excess Availability for the preceding calendar quarter and the pricing grids set forth in the Loan Agreement, rates for the calendar quarter from [_________________] to [________________] as follows:

* To be used for calendar quarter end deliveries.

** To be used for inter-quarter monthly deliveries.

(a)           the Applicable Margin for Eurodollar Rates Loans for such calendar quarter shall [continue to] be [___________ (__)]% percent;

(b)           the Applicable Margin for Prime Rate Loans for such calendar quarter shall [continue to] be [___________ (__)]% percent;

(c)           the rate for Commercial Letter of Credit Fees for such calendar quarter shall [continue to] be [__________] (__)]% percent; and

(d)           the rate for Standby Letter of Credit Fees for such calendar quarter shall [continue to] be [__________] (__)]% percent.]*

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the foregoing certifications are made and delivered this day of ___________, 20__.

Very truly yours,

XXXXXXX FABRICS, INC.,

as Administrative Borrower

By: 

Title: Chief Financial Officer

SCHEDULE I

[Quarterly Average][Adjusted] Excess Availability Calculation

See attached.

Date		Borrowing Base				Revolving Loan Balance				Standby LC's				Documentary LC's				Excess Availability				Minimum Availability Block				Adjusted Excess Availability
1-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
2-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
3-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
4-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
5-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
6-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
7-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
8-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
9-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
10-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
11-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
12-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
13-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
14-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
15-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
16-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
17-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
18-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
19-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
20-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
21-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
22-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
23-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
24-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
25-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
26-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
27-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
28-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
29-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
30-Jun-08																		$	-			$	7,500,000			$	(7,500,000	)
1-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
2-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
3-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
4-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
5-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
6-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
7-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
8-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
9-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
10-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
11-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
12-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
13-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
14-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
15-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
16-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
17-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
18-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
19-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
20-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
21-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
22-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
23-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
24-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
25-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
26-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
27-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
28-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
29-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
30-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
31-Jul-08																		$	-			$	7,500,000			$	(7,500,000	)
1-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
2-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
3-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)

4-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
5-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
6-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
7-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
8-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
9-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
10-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
11-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
12-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
13-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
14-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
15-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
16-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
17-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
18-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
19-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
20-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
21-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
22-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
23-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
24-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
25-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
26-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
27-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
28-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
29-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
30-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
31-Aug-08																		$	-			$	7,500,000			$	(7,500,000	)
																										$	(7,500,000	)

EXHIBIT I

TO

LOAN AND SECURITY AGREEMENT

FORM OF INTERCOMPANY SUBORDINATION AGREEMENT

This INTERCOMPANY SUBORDINATION AGREEMENT (this “Agreement”), dated as of August 1, 2008, is among the undersigned and any other Person (as defined in the Loan Agreement referred to below) which may become a party hereto pursuant to Section 14 hereof (each a “Subordinated Creditor” and, collectively, the “Subordinated Creditors”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent (“Agent”) for itself and the other financial institutions (collectively, the “Lenders”) who are or may become parties to that certain Loan and Security Agreement, dated as of even date herewith (as amended, restated, modified, supplemented or otherwise modified and in effect from time to time, the “Loan Agreement”), among Xxxxxxx Fabrics, Inc, a Delaware corporation (“Parent”), HF Merchandising, Inc., a Delaware corporation (“Merchandising”), Xxxxxxx Fabrics of MI, Inc., a Delaware corporation (“Fabrics MI”), xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation (“Xxxxxxx.xxx”), Xxxxxxx Fabrics, LLC, a Delaware limited liability company (“Fabrics LLC”, and together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each individually a “Borrower” and, collectively, the “Borrowers”), HF Enterprises, Inc., a Delaware corporation (“Enterprises”), HF Resources, Inc., a Delaware corporation (“Resources”, and together with Enterprises, each individually a “Guarantor” and, collectively, the “Guarantors”), Agent and the Lenders.  Agent, the Lenders and the other Secured Parties (as defined in the Loan Agreement) are referred to herein as the “Senior Creditors”.  Terms not otherwise defined herein have the same respective meanings given to them in the Loan Agreement, including, without limitation, the term “Indebtedness”.

WHEREAS, the Borrowers have requested that Agent and the Lenders enter into the Loan Agreement, pursuant to which the Lenders have agreed to advance Loans and provide certain other financial accommodations in an aggregate initial principal amount of $100,000,000 to be evidenced by Notes issued under the Loan Agreement in respect of which the Borrowers are obligated to pay principal, interest, fees and other amounts, and the Borrowers, including Parent, and the Guarantors have entered into such other ancillary agreements with Agent in connection with the foregoing which evidence, guaranty, and secure certain obligations and indebtedness of the Borrowers and such Subsidiaries in favor of Agent, for the benefit of the Secured Parties, including, without limitation, the Security Documents and the other Financing Agreements;

WHEREAS, the Subordinated Creditors have made and anticipate continuing to make intercompany Indebtedness (collectively, the “Intercompany Indebtedness”) to each other as permitted under Section 9.10(e)(ii) of the Loan Agreement;

WHEREAS, the Senior Creditors have indicated that they are unwilling to enter into the Loan Agreement and the other Financing Agreements unless each Subordinated Creditor shall join in this Agreement and each Subordinated Creditor shall subordinate, to the extent and in the manner hereinafter set forth, the Intercompany Indebtedness and also all other indebtedness of any Subordinated Creditor to any other Subordinated Creditor, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising (herein called the “Subordinated Debt”) to all indebtedness of the Borrowers to the Senior Creditors, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising under or in connection with the Financing Agreements or otherwise or any refinancings or replacement thereof (herein called the “Senior Debt”, which term shall expressly include any and all interest and fees (including prepayment premiums and fees), accruing and out of pocket costs and expenses incurred, after the date of any filing by or against any of the Borrowers of any petition under the Bankruptcy Code or the commencement of similar proceedings under any other bankruptcy, insolvency, liquidation, reorganization or similar law, with respect to any such indebtedness, regardless of whether Agent’s or any Secured Party’s claim therefor is allowed or allowable in the case or proceeding relating thereto), it being understood that any debt which refinances or replaces any portions of any such indebtedness of the Borrowers to Agent or any of the Secured Parties as described above shall have the benefit of the subordination provisions contained herein, shall be Senior Debt hereunder, and the holders thereof shall be Senior Creditors for all purposes hereof.

NOW, THEREFORE, in consideration of the premises and as an inducement to the Senior Creditors to grant financial accommodations to the Borrowers, and in consideration of the granting thereof, each Subordinated Creditor warrants to and covenants and agree with the Senior Creditors, as follows:

1.           Until all Senior Debt shall have been indefeasibly paid in full in cash and all lending and other credit commitments under the Financing Agreements (including all outstanding Letters of Credit), have terminated, each Subordinated Creditor shall not, directly or indirectly, make any payment on account of or transfer any property for any part of the Subordinated Debt, each other Subordinated Creditor shall not demand, accelerate, xxx for, or accept from any other Subordinated Creditor or any other person any such payment or collateral, nor take any other action to enforce or collect upon any such payments or to enforce their rights in respect of the Subordinated Debt, nor cancel, set off or otherwise discharge any part of the Subordinated Debt, and no Subordinated Creditor shall otherwise take or permit any action prejudicial to or inconsistent with the Senior Creditors’ priority position over each Subordinated Creditor created by this Agreement; provided, however, Parent and Merchandising may make payments of interest to Resources to the extent expressly permitted under Section 9.10(e)(ii) of the Loan Agreement.

2.           Any instrument or agreement evidencing Subordinated Debt shall specifically provide by an appropriate legend conspicuously placed thereon that payment of principal, interest, and other amounts relating thereto has been subordinated to prior payment of Senior Debt in the manner and to the extent set forth in this Agreement.

3.            Until all Senior Debt shall have been indefeasibly paid in full in cash and all lending and other credit commitments under the Financing Agreements (including all outstanding Letters of Credit), have terminated, no Subordinated Creditor will with respect to any claim it may have in respect of its Subordinated Debt commence or join with any other creditor or creditors of such Subordinated Creditor in commencing any bankruptcy, reorganization or insolvency proceedings against any other Subordinated Creditor.  At any general meeting of creditors of any Subordinated Creditor or in the event of any proceeding, voluntary or involuntary, for the marshalling, distribution, division or application of all or any part of the assets of any Subordinated Creditor or the proceeds thereof, whether such proceeding be for the liquidation, dissolution or winding up of any Subordinated Creditor or its business, or in the event of a receivership, bankruptcy, insolvency, reorganization, or similar proceeding, an assignment for the benefit of creditors or a proceeding by or against any Subordinated Creditor for relief from indebtedness by way of moratorium, arrangement, composition, extension or otherwise, in any such case if all Senior Debt has not been indefeasibly paid in full in cash at the time, the Senior Creditors are hereby irrevocably authorized on behalf of such Subordinated Creditor at any such meeting and in any such proceeding:

(a)           to enforce claims comprising Subordinated Debt either in their own name, or the name of such Subordinated Creditor, by proof of debt, proof of claim, suit or otherwise;

(b)           to collect any assets of such Subordinated Creditor distributed, divided or applied by way of dividend or payment, or any such securities issued, on account of Subordinated Debt and apply the same, or the proceeds of any realization upon the same that the Senior Creditors in their discretion elect to effect, to Senior Debt until all Senior Debt shall have been indefeasibly paid in full in cash, rendering any surplus to such Subordinated Creditor;

(c)           to vote claims comprising Subordinated Debt to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension; and

(d)           to take generally any action in connection with any such meeting or proceeding which such Subordinated Creditor might otherwise take.

4.            Except for payments expressly permitted under §1 hereof, should any payment on account of or any property on account for any part of the Subordinated Debt be received by any Subordinated Creditor in contravention of this Agreement, such payment or property shall be delivered forthwith to Agent by the recipient for application to Senior Debt, in the form received except for the addition of any endorsement or assignment necessary to effect transfer of all rights therein to Agent.  The Senior Creditors are irrevocably authorized to supply any required endorsement or assignment which may have been omitted.  Until so delivered any such payment or collateral shall be held by the recipient in trust for the Senior Creditors and shall not be commingled with other funds or property of the recipient.

5.            Each Subordinated Creditor hereby acknowledges and agrees that the Subordinated Debt is unsecured and covenants and agrees that the Subordinated Debt shall remain unsecured.  In addition, each Subordinated Creditor hereby agrees, upon request of Agent at any time and from time to time, to execute such other documents or instruments as may be requested by Agent further to evidence of public record or otherwise the senior priority of the Senior Debt as contemplated hereby.

6.           No part of the Subordinated Debt is evidenced by any agreement, instrument, security or other writing which does not bear the legend required by §2 hereof.  The Subordinated Creditors are the lawful owners of the Subordinated Debt and no part thereof has been assigned to or subordinated or subjected to another security interest in favor of anyone other than the Senior Creditors.  Until all Senior Debt has been indefeasibly paid in full in cash and all lending and other credit commitments under the Financing Agreements (including all outstanding Letters of Credit), have terminated, no Subordinated Creditor shall issue any agreement, instrument, security or other writing evidencing any part of the Subordinated Debt (except as permitted by the Loan Agreement) or amend or modify in any respect any document or instrument evidencing the Subordinated Debt except with the prior written consent of Agent.  No Subordinated Creditor shall assign or subordinate any part of the Subordinated Debt except with the prior written consent of Agent (it is hereby acknowledged that the Subordinated Debt shall also be subordinated to the obligations arising under the Specified Subordinated Indebtedness Documents, which shall be subject to the Subordination Provisions).

7.           The Senior Creditors are hereby authorized to demand specific performance of this Agreement, whether or not the Subordinated Creditors shall have complied with the provisions hereof applicable to them, at any time when any Subordinated Creditor shall have failed to comply with any of the provisions hereof.  Each Subordinated Creditor hereby irrevocably waives any defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance hereof in any action brought therefor by the Senior Creditors.  Each Subordinated Creditor further (i) waives presentment, notice and protest in connection with all negotiable instruments evidencing Senior Debt or Subordinated Debt to which it may be a party, notice of the acceptance of this Agreement by the Senior Creditors, notice of any loan made, extension granted or other action taken in reliance hereon and all demands and notices of every kind in connection with this Agreement, Senior Debt or Subordinated Debt; (ii) assents to any renewal, extension or postponement of the time of payment of Senior Debt, any increase or decrease of the Senior Debt or any other indulgence with respect thereto, to any substitution, exchange or release of collateral therefore and to the addition or release of any Person primarily or secondarily liable thereon; and (iii) agrees to the provisions of any instrument, security or other writing evidencing Senior Debt.  No Subordinated Creditor shall be subrogated to, or be entitled to any assignment of of any Senior Debt or Subordinated Debt or any collateral for or guarantees or evidence of any thereof.  Each Subordinated Creditor hereby waives any and all rights of marshalling of assets.

8.            This Agreement shall continue in full force and effect, and the obligations and agreements of the Subordinated Creditors hereunder shall continue to be fully operative, until all of the Senior Debt shall have been indefeasibly paid and satisfied in full in cash and all lending and other credit commitments under the Financing Agreements (including all outstanding Letters of Credit), have terminated.  To the extent that any Borrower or any Guarantor of or provider of Collateral for the Senior Debt makes any payment on the Senior Debt that is subsequently invalidated, declared to be fraudulent or preferential or set aside or is required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or reorganization act, state or federal law, common law or equitable cause (such payment being hereinafter referred to as a “Voided Payment”), then to the extent of such Voided Payment, that portion of the Senior Debt that had been previously satisfied by such Voided Payment shall be revived and continue in full force and effect as if such Voided Payment had never been made.  In the event that a Voided Payment is recovered from Agent or any Secured Party solely for purposes of this Agreement, an Event of Default shall be deemed to have existed and to be continuing under the Loan Agreement from the date of Agent’s or such Secured Party’s initial receipt of such Voided Payment until the full amount of such Voided Payment is restored to Agent or such Secured Party.  During any continuance of any such Event of Default, this Agreement shall be in full force and effect with respect to the Subordinated Debt.  To the extent that any Subordinated Creditor has received any payments with respect to the Subordinated Debt subsequent to the date of Agent’s or any Secured Party’s initial receipt of such Voided Payment and such payments have not been invalidated, declared to be fraudulent or preferential or set aside or are required to be repaid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable cause, such Subordinated Creditor shall be obligated and hereby agrees that any such payment so made or received shall be deemed to have been received in trust for the benefit of Agent or such Secured Party, and each Subordinated Creditor hereby agrees to pay to Agent for the benefit of Agent or (as the case may be) such Secured Party, upon demand, the full amount so received by such Subordinated Creditor during such period of time to the extent necessary fully to restore to Agent or such Secured Party the amount of such Voided Payment.  Upon the payment and satisfaction in full in cash of all of the Senior Debt, which payment shall be final and not avoidable, this Agreement will automatically terminate without any additional action by any party hereto. Each Subordinated Creditor shall execute and deliver to the Senior Creditors such further instruments and shall take such further action as the Senior Creditors may at any time or times reasonably request in order to carry out the provisions and intent of this Agreement.

9.            The rights granted to the Senior Creditors hereunder are solely for their protection and nothing herein contained shall impose on the Senior Creditors any duties with respect to any property of the Subordinated Creditor received hereunder beyond reasonable care in its custody and preservation while in the Senior Creditors’ possession.  The Senior Creditors shall have no duty to preserve rights against prior parties in any instrument or chattel paper received hereunder.

10.          Payments received by Senior Creditors herein for application to Senior Debt shall be applied in accordance with the provisions of Section 6.4 of the Loan Agreement.

11.          All notices and other communications made or required to be given pursuant to this Agreement shall be made as follows:

(a) if to any Subordinated Creditor, at Xxx Xxxxxxx Xxx, Xxxxxxx, XX, 00000, Attention: Xxx Xxxxxxxx, CFO, telecopy  number (000) 000-0000 with a copy to Baker, Donelson, Bearman, Xxxxxxxx & Xxxxxxxxx, PC, 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxxx Xxxxxxxx, Xxxxxxx, XX, 00000, Attention: Xxx X. Xxxxxxx, Esq., telecopy number (000) 000-0000, or at such other address for notice as the Subordinated Creditor shall last have furnished in writing to the party giving the notice; and

(b) if to Agent, at 000 Xxxxxxx 0, X.X. Xxx 0000, Xxxxxxx, XX, 00000-0000, Attention: Xxxxxxx Fabrics Account Manager, telecopy number (000) 000-0000, with copies to Xxxxxxx XxXxxxxxx, Xxx Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, Attn: Xxxxxx X.X. Xxxxx, Esq., telecopy number (000) 000-0000 and General Electric Capital Corporation, 000 Xxxxxxx 0, Xxxxxxx, XX, 00000, Attention: Corporate Counsel - Corporate Lending, telecopy number (000) 000-0000, or at such other address for notice as Agent shall last have furnished in writing to the party giving the notice.

Any such notice or communication shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile or other electronic means to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile (if sent during normal business hours on a business day in the location of the addressee of the facsimile, otherwise as of the opening of the next business day in such location), and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third business day following the mailing thereof.

12.          This Agreement may be executed in any number of counterparts, but all of such counterparts shall together constitute but one agreement.  In making proof of this Agreement, it shall not be necessary to produce or account for more than one counterpart signed by each of the parties hereto.

13.         This Agreement shall be binding upon the Subordinated Creditors, their respective executors, administrators, other legal representatives, successors and assigns, and shall inure to the benefit of each Senior Creditor, its respective successors and assigns.

14.          Each Subordinated Creditor hereby covenants and agrees that any subsidiary hereinafter incorporated or formed shall automatically and without any further action be deemed a “Subordinated Creditor” hereunder as if such subsidiary had executed this Agreement on the date first written above.  Notwithstanding the previous sentence, each Subordinated Creditor hereby further covenants and agrees to cause such subsidiary to immediately execute and deliver an instrument of accession in form and substance satisfactory to Agent.

15.          THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ANY PRINCIPLES OF CHOICE OF LAW AND CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK).  Each of the parties hereto (i) irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, (ii) waives any objection based on venue or forum non conveniens with respect to any action instituted therein and (iii) waives any right to trial by jury of any claim, demand, action or cause of action, in each case whether now existing or hereafter arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, and whether in contract, tort, equity or otherwise.  Each of the parties hereto further agrees and consents that (i) any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent shall have the right to bring any action or proceeding against any Subordinated Creditor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Subordinated Creditor or its or their property) and (ii) agrees that any such claim, demand, action or cause of action shall be decided by court trial without a jury and that any such party may file a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

SUBORDINATED CREDITORS

XXXXXXX FABRICS, INC.

By: 

Name:

Title:

HF MERCHANDISING, INC.

By:

Name:

Title:

XXXXXXX FABRICS OF MI, INC.

By:

Name:

Title:

XXXXXXXXXXXXXX.XXX, INC.

By:

Name:

Title:

XXXXXXX FABRICS, LLC

By:

Name:

Title:

HF ENTERPRISES, INC.

By:

Name:

Title:

HF RESOURCES, INC.

By:

Name:

Title:

AGENT

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Issuing Bank

By: 

Its: Duly Authorized Signatory

Schedule 1.1

Commitments

Revolving Loan Commitment	Lender(s)
$100,000,000	General Electric Capital Corporation

Schedule 1.2

Customs Broker

Xxxxxxx International, LLC

Schedule 1.3

Existing Lenders

Wachovia Bank, National Association

Ableco Finance, LLC

Schedule 1.4

Owned Store Real Properties

1. 000 Xxxxxxx Xxxx, Xxxxxx, Xxx Xxxxxx, Xxxxxxxxxxx

2. 0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxxx

3. 000 Xxxx Xxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxx

4. 0000 Xxxxx Xxxxxx Xxxx, Xxxxx, Xxxxxxx Xxxxxx, Xxxxxxxx

5. One Fashion Way, Xxxxxxx, Xxx County, Mississippi

6. 0000 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx, Xxxxxxxxxxx

Schedule 1.5

Existing Letters of Credit

LETTER OF CREDIT NO. AMOUNT EXPIRATION

[On File with the Company]

Schedule 1.6

Bankruptcy Claims and Liens

CREDITOR NAME	XXX0	XXX0	XXXX	XXXXX	XXX	Xxxxxxx Category	Claim Amount
AL- HOUSTON COUNTY	XX XXXXXX 0000		XXXXXX	XX	00000	Property Taxes	58.94
AL- XXXXX XXXXX, REVENUE
COMMISSIONER	0000 XXXXX XX., XXX 000		XXXXXXXX	XX	00000	Property Taxes	654.05
AL- XXXXX XXXX, TAX
COLLECTOR	000 XXXXXXXXX XXXXXX		XXXXXXXXXX	XX	00000	Property Taxes	1,099.68
	000 XXXXXXXXXX XXX,
AL- XXXXXX X. XXXXXXXX	XXXX 000		XXXXXXXXXX	XX	00000	Property Taxes	359.47
AL- SHELBY COUNTY
PROPERTY TAX COMM	XX XXX 0000		XXXXXXXXX	XX	00000	Property Taxes	1,039.34
MADISON COUNTY	000 XXXXXXXXX XXXXXX		XXXXXXXXXX	XX	00000	Property Taxes	114.49
MADISON COUNTY	000 XXXXXXXXX XXXXXX		XXXXXXXXXX	XX	00000	Property Taxes	164.96
MOBILE COUNTY	XX XXX 0000		XXXXXX	XX	00000	Property Taxes	146.78
XXXXXXXXXX COUNTY	XX XXX 0000		XXXXXXXXXX	XX	00000	Property Taxes	114.85
XXXXXX COUNTY	XX X XX 000		XXXXXXX	XX	00000	Property Taxes	113.93
REVENUE COMMISSIONER	0000 XXXXX XXX		XXXXXX	XX	00000	Property Taxes	116.36
REVENUE COMMISSIONER	0000 XXXXX XX	XXX 000	XXXXXXXX	XX	00000	Property Taxes	145.58
TUSCALOOSA COUNTY	000 XXXXXXXXXX XXX		XXXXXXXXXX	XX	00000	Property Taxes	74.02
	000 X. XXXXXXX, XXXX
XX- XXXXXX XXXXXX	000		XXXXXXXXXXX	XX	00000	Property Taxes	1,116.81
AR- XXXXXXXXX COUNTY TAX
COLLECTOR	XX XXX 0000		XXXXXXXXX	XX	00000	Property Taxes	1,636.88
AR- XXXXXXXXX XXXXXX	X. X. XXXXXX X		XXXX XXXXX	XX	00000	Property Taxes	4,587.42
AR- XXXX COUNTY COLLECTOR	000 XXXX XXXX XX		XXXXXXXXXXXX	XX	00000	Property Taxes	734.66
AR- PULASKI CO. TREASURER	XX XXX 000		XXXXXX XXXX	XX	00000	Property Taxes	1,794.51
AR- SEBASTIAN COUNTY	XX XXX 0000		XXXX XXXXX	XX	00000	Property Taxes	2,330.47
AR- WASHINGTON COUNTY	000 X XXXXXXX, XXX 000		XXXXXXXXXXXX	XX	00000	Property Taxes	881.46
XXXXXXXX COUNTY	000 XXXXXXX XX		XXXXXX	XX	00000	Property Taxes	1,390.66
GARLAND COUNTY	000 XXXXXXXX,	XX 000	XXX XXXXXXX	XX	00000	Property Taxes	1,230.71
JEFFERSON COUNTY	XX XXXXXX X		XXXX XXXXX	XX	00000	Property Taxes	5,580.32
XXXXXX COUNTY COLLECTOR	000 XXXXXX XXX 000		XXXXXXXXX	XX	00000	Property Taxes	476.17

PULASKI CO. TREASURER	XX XXX 0000		XXXXXX XXXX	XX	00000		Property Taxes	1,087.79
PULASKI CO. TREASURER	XX XXX 0000		XXXXXX XXXX	XX	00000		Property Taxes	1,095.13
WASHINGTON COUNTY	000 X. XXXXXXX, XXX 000		XXXXXXXXXXXX	XX	00000		Property Taxes	536.12
WHITE COUNTY	000 XXXX XXXX		XXXXXX	XX	00000		Property Taxes	548.46
COCONINO COUNTY	000 X. XXXXXX XXX		XXXXXXXXX	XX	00000		Property Taxes	69.25
MARICOPA COUNTY TREAS	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	54.42
MARICOPA COUNTY TREAS	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	68.49
MARICOPA COUNTY TREAS	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	74.86
MARICOPA COUNTY TREAS	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	75.13
MARICOPA COUNTY TREAS	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	107.31
PIMA COUNTY TREAS	000 X. XXXXXX XXX		XXXXXX	XX	00000		Property Taxes	125.44
YUMA COUNTY TREAS	000 XXXXXX XXXX	XXX X	XXXX	XX	00000		Property Taxes	120.38
CA- ALAMEDA COUNTY TAX
COLLECTOR	0000 XXX XXXXXX		XXXXXXX	XX	00000		Property Taxes	155.56
		00 XXXX
XX- XXXXXX XX XXXXX XXXXX	XXXXXX GOVERNMENT	XXXXXXX
TAX COLLECTOR	CENTER, XXXX XXXX	XXXXXX	XXX XXXX	XX	00000		Property Taxes	258.55
CA- HUMBOLDT COUNTY	000 0XX XX	XXXX 000	XXXXXX	XX	00000		Property Taxes	134.53
CA- LOS ANGELES COUNTY					90051-
TREASURER & TAX COLL.	XX XXX 00000		XXX XXXXXXX	XX	0000		Property Taxes	451.86
CA- ORANGE COUNTY
TREASURER-TAX COLL.	XX XXX 0000		XXXXX XXX	XX	00000		Property Taxes	73.10
CA- XXXXXX COUNTY TAX					94533-
COLLECTOR	000 XXXXX XX, XXX 0000		XXXXXXXXX	XX	6337		Property Taxes	218.92
CA- XXXXXX COUNTY TAX
COLLECTOR	000 XXXXX XX, XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	1,086.94
BOULDER COUNTY	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	68.47
XX- XX XXXX XXXXXX					00000-
TREASURER	XX XXX 0000		XXXXXXXX XXXXXXX	XX	0000		Property Taxes	1,008.80
CO- JEFFERSON COUNTY	000 XXXXXXXXX XXXXXX
XXXXX	XXXX		XXXXXX	XX	00000		Property Taxes	937.48
CO- JEFFERSON COUNTY	000 XXXXXXXXX XXXXXX
XXXXX	XXXX		XXXXXX	XX	00000		Property Taxes	1,247.16
CO- JEFFERSON COUNTY	000 XXXXXXXXX XXXXXX
XXXXX	XXXX		XXXXXX	XX	00000		Property Taxes	1,465.52
EL PASO CO. TREAS	XX XXX 0000		XXXXXXXX   XXXXXXX	XX	00000		Property Taxes	207.64

COUNTY OF VOLUSIA	000 X. XXXXXXX XXX	XXXX 000	XXXXXX	XX	00000		Property Taxes	960.09
XXXX XXXXXX	XX XXX 000000		XXXXX	XX	00000		Property Taxes	739.29
XXXX XXXXXX	XX XXX 000000		XXXXX	XX	00000		Property Taxes	892.37
XXXX X. XXXX	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	767.22
XXXX X. XXXX	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	1,276.75
ESCAMBIA COUNTY	XX XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	000.00
XX- XXXXXX XX XXXXXXX	000 XXXX XXXXXXX				00000-
FINANCE DEPARTMENT	AVENUE, ROOM 103		DELAND	FL	4602		Property Taxes	789.26
FL- XXXXX XXXXXX	X.X. XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	749.71
FL- XXX X. XXXXXX, POLK		430 E. MAIN			33831-
COUNTY TAX COLLECTOR	X.X. XXX 0000	XXXXXX	XXXXXX	XX	0000		Property Taxes	1,429.40
FL- XXX X. XXXXXX, CFC-TAX
COLLECTOR-POLK CTY	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	2,534.83
FL- MANATEE COUNTY TAX					34206-
COLLECTOR	XX XXX 00000		XXXXXXXXX	XX	5300		Property Taxes	554.70
FL- MANATEE COUNTY TAX					34206-
COLLECTOR	XX XXX 00000		XXXXXXXXX	XX	5300		Property Taxes	688.52
FL- PINELLAS COUNTY TAX					33757-
COLLECTOR	XX XXX 0000		XXXXXXXXXX	XX	0000		Property Taxes	1,658.31
					34236-
FL- SARASOTA COUNTY	000 X XXXXXXXXXX XXXX		XXXXXXXX	XX	6993		Property Taxes	536.78
					34236-
FL- SARASOTA COUNTY	000 X XXXXXXXXXX XXXX		XXXXXXXX	XX	6993		Property Taxes	536.78
MANATEE COUNTY	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	837.55
POLK COUNTY TAX COLL.	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	1,661.43
SARASOTA COUNTY	000 X. XXXXXXXXXX XXXX		XXXXXXXX	XX	00000		Property Taxes	652.96
CHATHAM COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,183.79
CITY OF XXXXXX	0000 XXXXXX XX		XXXXXX	XX	00000		Property Taxes	204.26
CITY OF SAVANNAH	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	542.28
XXXXXXX COUNTY	COURTHOUSE ANNEX 3	2ND FLOOR	XXXXXXXXX	XX	00000		Property Taxes	1,185.30
XXXX COUNTY TAX COMM	XX XXX 000		XXXXXXXX	XX	00000		Property Taxes	1,076.06
XXXX COUNTY TAX COMM	XX XXX 000		XXXXXXXX	XX	00000		Property Taxes	1,312.01
DEKALB COUNTY	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,280.92
XXXXXX COUNTY TAX COMM	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,242.23

XXXXXX COUNTY TAX COMM	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,256.69
XXXXXX COUNTY TAX COMM	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,959.82
GA- XXXXXXX COUNTY TAX	COURTHOUSE ANNEX 3,
COMMISSIONER	2ND FLOOR		XXXXXXXXX	XX	00000		Property Taxes	6,423.75
GA- DEKALB COUNTY TAX					30031-
COMMISSIONER	P. O. XXX 000000		XXXXXXX,	XX	7004		Property Taxes	5,087.01
GA- XXXXXXX COUNTY TAX
COMMISSIONER	XX XXX 0000		XXXXXXXXXXXX	XX	00000		Property Taxes	6,358.94
GA- XXXXXX COUNTY TAX
COMMISSIONER	000 XXXXX XX, XXXXX 0000		XXXXXXX	XX	00000		Property Taxes	2,793.89
GA- GWINNETT   COUNTY	XX XXX 000		XXXXXXXXXXXXX	XX	00000		Property Taxes	6,970.56
					31902-
GA- XXXX XXXXXXXX XXXX	X.X. XXX 0000		XXXXXXXX	XX	1441		Property Taxes	741.09
HOUSTON COUNTY	XX XXX 0000		XXXXXX XXXXXX	XX	00000		Property Taxes	868.62
TAX COMMISSIONER	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,584.89
ADA COUNTY TREAS	XX XXX 0000		XXXXX	XX	00000		Property Taxes	112.14
BONNEVILLE COUNTY	000 X. XXXXXXX XXX		XXXXX XXXXX	XX	00000		Property Taxes	235.40
	000 X. XXXXX XX., 0XX
ID- ADA XXXXXX XXXXXXXXX	XXXXX		XXXXX	XX	00000		Property Taxes	88.52
ID- BONNEVILLE COUNTY
TREASURER	000 X. XXXXXXX XXX		XXXXX XXXXX	XX	00000		Property Taxes	208.64
					83303-
ID- TWIN FALLS CO. TREAS.	XXX 00		XXXX XXXXX	XX	0000		Property Taxes	261.54
KOOTENAI COUNTY TREAS	XX XXX 0000		XXXXX X'XXXXX	XX	00000		Property Taxes	680.24
XXXXXXXX COUNTY TREAS	00 XXXXX 0XX XXXXXX		XXXXXXXXXXX	XX	00000		Property Taxes	5,927.46
	EAST MAIN STREET, ROOM
IN- XXXXX XXXXXX XXXXX	000		XX. XXXXX	XX	00000		Property Taxes	2,897.47
IN- XXXXX COUNTY TREAS	000 X. XXXXX XXX	XXXX 000	XXXXXXXXXXXXXX	XX	00000		Property Taxes	1,600.00
IN- XXXXXXXX COUNTY TREAS.	00 XXXXX 0XX XXXXXX		XXXXXXXXXXX	XX	00000		Property Taxes	814.44
		200 EAST
IN- XXXXXX COUNTY	RM 0000 XXXX-XXXXXX	XXXXXXXXXX
XXXXXXXXX	XXXX.	XX.	XXXXXXXXXXXX	XX	00000		Property Taxes	4,915.27
		1 X.X. XXXXXX
IN- VANDERBURGH COUNTY		XXXXXX XXXX			47708-
TREASURER	ROOM 210 CIVIC CENTER	JR BLVD	EVANSVILLE	IN	1882		Property Taxes	807.52
XXXXXX COUNTY TREAS	XX XXX 0000		XXXXXXXXXXXX	XX	00000		Property Taxes	4,086.74
XXXXXX COUNTY TREAS	XX XXX 0000		XXXXXXXXXXXX	XX	00000		Property Taxes	9,674.97
ST. XXXXXX CO. TREAS	XX XXX 0000		XXXXX XXXX	XX	00000		Property Taxes	14,327.99

VANDERBURGH CO. TREAS	XX XXX 00		XXXXXXXXXX	XX	00000		Property Taxes	7,649.11
	XXXXXXX COUNTY	000 XXXXX
	XXXXXXXXXXXXXX	XXXXXX, XXXXX			00000-
XX- XXXXXXX COUNTY	BUILDING	3200	OLATHE	KS	3486		Property Taxes	289.00
SEDGWICK CO. TREAS	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	86.24
SEDGWICK CO. TREAS	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	144.65
CITY OF BOWLING GREEN	XX XXX 0000		XXXXXXX XXXXX	XX	00000		Property Taxes	198.17
CITY OF ELIZABETHTOWN	XX XXX 000		XXXXXXXXXXXXX	XX	00000		Property Taxes	81.32
CITY OF OWENSBORO	XX XXX 000		XXXXXXXXX	XX	00000		Property Taxes	692.76
DAVIESS COUNTY SHERRIFF	000 XX.XXX XXXXXX		XXXXXXXXX	XX	00000		Property Taxes	250.14
L.F.U.C.G.	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	570.65
L.F.U.C.G.	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	607.33
XXXXXX COUNTY SHERIFF	XX XXX 000		XXXXXXX XXXXX	XX	00000		Property Taxes	500.08
CITY OF ALEXANDRIA	XXX 00		XXXXXXXXXX	XX	00000		Property Taxes	290.97
CITY OF LAFAYETTE	XX XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	257.85
CITY OF MONROE	XX XXX 000		XXXXXX	XX	00000		Property Taxes	386.38
CITY OF NEW IBERIA	000 X. XXXX, XX 000		XXX XXXXXX	XX	00000		Property Taxes	220.94
XXXXX XXX	XX XXX 000		XXXXXX	XX	00000		Property Taxes	133.50
XXXXX XXX	XX XXX 000		XXXXXX	XX	00000		Property Taxes	1,547.27
IBERIA PARISH	000 XXXXXX XX., XXX 000		XXX XXXXXX	XX	00000		Property Taxes	660.11
LA- CALCASIEU PARISH
SHERIFF &	XX XXX 0000		XXXX XXXXXXX	XX	00000		Property Taxes	10,539.10
LA- LAFAYETTE
CONSOLIDATED GOVERNMENT	X.X. XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	1,585.45
PARISH TAX COLLECTOR	XX XXXXXX 00000		XXXXXXXXX	XX	00000		Property Taxes	1,224.51
XXXXXXX & XX-XXXXXXX	XX XXXXXX 0000		XXXXX	XX	00000		Property Taxes	1,171.35
	0000 XXXXXXXXXX				00000-
XX- XXXXXXX XXXXXX	AVENUE	SUITE 400	RIVERDALE PARK	MD	1385		Property Taxes	766.16
MD- WICOMICO COUNTY, MD	XX XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	4,040.94
MI- CITY OF KENTWOOD	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	416.39
MI- CITY OF STERLING					48311-
HEIGHTS	00000 XXXXX XXXX	P.O. BOX 8009	STERLING HEIGHTS	MI	8009		Property Taxes	389.76

	XXXXXX COUNTY
XXXXXX COUNTY	COURTHOUSE		XXXXXX XXXXX	XX	00000		Property Taxes	25.88
		000 XXX
XXXX XXXXXXXXX	XXXX XXXX	XXXXXX	XXXXXX XXXXX	XX	00000		Property Taxes	5.08
CITY OF GLADSTONE	XX   XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	11.89
COLLECTOR OF REVENUE	000 X. XXXXXXXXX XXX		XXXXXXXXXXX	XX	00000		Property Taxes	34.07
MO- CAPE GIRARDEAU	#0 XXXXXX XXXXXX		XXXXXXX	XX	00000		Property Taxes	69.50
ST. XXXXXXX COUNTY	000 X. XXXXXX XX		XX. XXXXXXX	XX	00000		Property Taxes	163.72
MS- MADISON CO. TAX
COLLECTOR	P. O. XXX 000		XXXXXX	XX	00000		Property Taxes	6,740.00
TAX COLLECTOR	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,945.73
CASCADE COUNTY TREAS	XX XXX 0000		XXXXX XXXXX	XX	00000		Property Taxes	48.89
MT- YELLOWSTONE CO. TREAS.	XXX 00000		XXXXXXXX	XX	00000		Property Taxes	40.02
XXXXXXXXXXX XX. XXXXX	XXX 00000		XXXXXXXX	XX	00000		Property Taxes	62.82
COUNTY OF DURHAM	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	85.02
CUMBERLAND COUNTY	XX XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	28.37
FORSYTH COUNTY	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	58.12
FORSYTH COUNTY	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	93.32
NC- CABARRUS COUNTY TAX
COLLECTOR	XX XXX 000000		XXXXXXXXX	XX	00000		Property Taxes	366.77
NC- FORSYTH COUNTY-CITY					27102-
TAX COLLECTOR	X.X. XXX 000		XXXXXXX-XXXXX	XX	0082		Property Taxes	668.57
NC- GUILFORD COUNTY TAX
DEPT.	XX XXX 0000		XXXXXXXXXX	XX	00000		Property Taxes	104.39
NC- XXXX COUNTY TAX	000 X XXXXXXXXXX XX,
XXXXXXXXX	XXX 0000		XXXXXXXXX	XX	00000		Property Taxes	60.31
NC- WAKE COUNTY	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	464.41
ONSLOW COUNTY	XX XXX 000000		XXXXXXXXX	XX	00000		Property Taxes	47.77
WAKE COUNTY	XX XXX 00000		XXXXXXXXX	XX	00000		Property Taxes	67.17
XXXXXXX COUNTY TREAS.	0000 XXXXXX XX.	XX X-00	XXXXX	XX	00000		Property Taxes	752.49
XXXXXXX COUNTY TREAS.	0000 XXXXXX XX.	XX X-00	XXXXX	XX	00000		Property Taxes	890.73
XXXXXXX COUNTY TREAS.	0000 XXXXXX XX.	XX X-00	XXXXX	XX	00000		Property Taxes	986.22
HALL COUNTY TREAS	000 X. XXXX XX., XXX 0		XXXXX XXXXXX	XX	00000		Property Taxes	762.35
LANCASTER CO. TREAS	000 X. 00XX XX		XXXXXXX	XX	00000		Property Taxes	895.55

NE- HALL COUNTY TREASURER	000 X. XXXX XXXXXX		XXXXX XXXXXX	XX	00000		Property Taxes	504.92
NE- HALL COUNTY TREASURER	000 X. XXXX XXXXXX		XXXXX XXXXXX	XX	00000		Property Taxes	626.70
NE- LANCASTER COUNTY
TREASURER	000 XX 00XX XXXXXX		XXXXXXX	XX	00000		Property Taxes	736.20
NE- TREASURER OF XXXXXXX	909 CIVIC CENTER, 0000
XXXXXX	XXXXXX XXXXXX		XXXXX	XX	00000		Property Taxes	2,174.01
XXXXX COUNTY ASSESSOR	XX XXX 000000		XXX XXXXX	XX	00000		Property Taxes	281.28
XXXXX COUNTY ASSESSOR	XX XXX 000000		XXX XXXXX	XX	00000		Property Taxes	523.22
NV- X.X. XXXXXXXXX XXXXX					89155-
COUNTY ASSESSOR	X.X. XXX 000000		XXX XXXXX	XX	0000		Property Taxes	849.47
NV- WASHOE COUNTY					89520-
TREASURER	P.O. BOX 30039		RENO	NV	3039		Property Taxes	322.54
WASHOE CO. TREAS	XX XXX 00000		XXXX	XX	00000		Property Taxes	335.29
XXXX XXXXX,   TREAS.	000 X. XXXXX XX		XXXXXX	XX	00000		Property Taxes	1,188.82
MAHONING COUNTY	000 XXXXXX XX		XXXXXXXXXX	XX	00000		Property Taxes	1,280.15
XXXXXX X. XXXXXXX	XX XXX 0000		XXXXXXXXXXX	XX	00000		Property Taxes	842.58
XXXXXX X. XXXXXXX	XX XXX 0000		XXXXXXXXXXX	XX	00000		Property Taxes	1,112.63
OK- XXXXXXX 'XXXXX'	000 XXXXXX X. XXXX, XX
XXXXXXX	307		XXXXXXXX XXXX	XX	00000		Property Taxes	36,989.71
OKLAHOMA COUNTY TREAS	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	962.09
OKLAHOMA COUNTY TREAS	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	977.82
OKLAHOMA COUNTY TREAS	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	1,056.43
XXXXXXXX XXXXXX XXXXX	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	1,108.49
XXXXXXXX XXXXXX XXXXX	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	1,232.04
XXXXXXXX XXXXXX XXXXX	XX XXX 000000		XXXXXXXX XXXX	XX	00000		Property Taxes	1,717.26
XXXXXX COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	87.49
OR- XXXXXXX COUNTY	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	833.81
OR- XXXXXX COUNTY TAX					97308-
COLLECTOR	PO BOX 2511		SALEM	OR	2511		Property Taxes	390.33
XXXXXXXXXX XXXXXX XXXXX	XXX 000		XXXXXXXXXX	XX	00000		Property Taxes	132.30
XXXXXXXXXX XXXXXX XXXXX	XXX 000		XXXXXXXXXX	XX	00000		Property Taxes	139.16
CITY OF XXXXXXXX	000 X. XXXX XX		XXXXXXXX	XX	00000		Property Taxes	127.27

COUNTY OF LEXINGTON	000 X. XXXX XXXXX		XXXXXXXXX	XX	00000		Property Taxes	487.46
RICHLAND COUNTY TREAS	XX XXX 00000		XXXXXXXX	XX	00000		Property Taxes	238.25
SC- GREENVILLE COUNTY TAX	000 XXXXXXXXXX XXXXX,
XXXXXXXXX	XXX 000		XXXXXXXXXX	XX	00000		Property Taxes	162.18
SC- GREENVILLE COUNTY TAX	000 XXXXXXXXXX XXXXX,
XXXXXXXXX	XXX 000		XXXXXXXXXX	XX	00000		Property Taxes	620.62
XXXX XXXXXX XXXXX	XX XXX 000		XXXX	XX	00000		Property Taxes	258.23
XXXXXX COUNTY TRUSTEE	000 XXXXX XX		XXXXXXXXX	XX	00000		Property Taxes	28.14
CITY OF ALCOA	000 XXXXXXXXXX XXX		XXXXX	XX	00000		Property Taxes	25.87
CITY OF CHATTANOOGA	XX XXX 000		XXXXXXXXXXX	XX	00000		Property Taxes	37.53
CITY OF XXXXXXX	000 X. XXXX XX	XXX 000	XXXXXXX	XX	00000		Property Taxes	31.04
CITY OF XXXXXXX CITY	XX XXX 0000		XXXXXXX XXXX	XX	00000		Property Taxes	14.72
CITY OF MEMPHIS	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	21.03
CITY OF MEMPHIS	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	33.26
CITY OF MEMPHIS	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	95.06
XXXXXXXX COUNTY TRUSTEE	XX XXX 00000		XXXXXXXXXXX	XX	00000		Property Taxes	49.35
XXXX COUNTY TRUSTEE	XX XXX 00000		XXXXXXXXX,	XX	00000		Property Taxes	50.81
XXXX COUNTY TRUSTEE	XX XXX 00000		XXXXXXXXX,	XX	00000		Property Taxes	59.68
MADISON COUNTY TREAS	000 X. XXXX		XXXXXXX	XX	00000		Property Taxes	33.96
TN- XXXX COUNTY TRUSTEE	XX XXX 00		XXXXXXXXX	XX	00000		Property Taxes	362.00
TN- XXXXXXXXXX COUNTY
TRUSTEE	X.X. XXX 000		XXXXXXXX	XX	00000		Property Taxes	369.00
XXXXXXXXXX COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	77.27
XXXXXX COUNTY TRUSTEE	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	86.14
ANGELINA COUNTY	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	1,709.25
XXXX XXXXXX	XX XXX 000		XXXXXX	XX	00000		Property Taxes	2,160.14
	000 X. XX XXXX XXXXX
XXXXXX XXXXXX	XXXX		XXXXX	XX	00000		Property Taxes	1,621.45
CITY OF AUSTIN	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	14,554.90
CITY OF XXXXXX	000 X. XXXXXXX. XXX   X		XXXXXX	XX	00000		Property Taxes	414.79
CITY OF GARLAND	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	534.42

CITY OF MCALLEN	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	261.83
CITY OF SUGAR LAND	XX   XXX 0000		XXXXX XXXX	XX	00000		Property Taxes	285.86
CLEAR CREEK ISD	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	1,268.28
CLEAR LAKE CITY WA	000 XXX XXXX XXXX		XXXXXXX	XX	00000		Property Taxes	214.37
COLLIN COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,679.00
CYPRESS-FAIRBANKS ISD	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,345.11
XXXXXX COUNTY	XX XXX 00000		XXXXXX	XX	00000		Property Taxes	1,321.41
DENTON COUNTY	XX XXX 00000		XXXXXX	XX	00000		Property Taxes	1,869.94
ECTOR COUNTY	0000 X. XXXXXX XX		XXXXXX	XX	00000		Property Taxes	2,051.70
EMERALD FOREST UTILITY	00000 XXXX XXXXXXX
XXXX	#000		XXXXXXX	XX	00000		Property Taxes	528.61
	00000 XXXX XXXXXXX
XXXXX XXXXXX X.X.X.	#000		XXXXXXX	XX	00000		Property Taxes	172.51
FORT BEND COUNTY	XX XXX 0000		XXXXX XXXX	XX	00000		Property Taxes	1,917.92
XXXX COUNTY TAX XXXXXX	000 X. XXX		XXX XXXXXX	XX	00000		Property Taxes	2,882.84
XXXXXXX COUNTY	XX XXX 000		XXXXXXXX	XX	00000		Property Taxes	1,431.48
HUMBLE ISD	XX XXX 0000		XXXXXX	XX	00000		Property Taxes	1,406.03
INTERSTATE MUD	0000 XXXXXX XX, XXX 000		XXXXXXX	XX	00000		Property Taxes	529.21
IRVING IND. SCH. DIST.	XX XXX 000000		XXXXXX	XX	00000		Property Taxes	1,268.09
JEFFERSON COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,920.13
JEFFERSON COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	2,251.29
KATY ISD	XX XXX 000		XXXX	XX	00000		Property Taxes	1,477.69
LUBBOCK CENTRAL APPRAISAL
DIST.	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	2,017.43
XXXXXXXXX COUNTY	XX XXX 000		XXXX	XX	00000		Property Taxes	2,587.04
MIDLAND CENTRAL APPR. DIST	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	2,260.64
MIDLAND COUNTY	XX XXX 000		XXXXXXX	XX	00000		Property Taxes	233.57
PASADENA IND. SCH. DIST	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,056.08
PASADENA IND. SCH. DIST	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,237.72
PONDEROSA FOREST U. D.	XX XXX 00000		XXXXXXX	XX	00000		Property Taxes	79.73

XXXXXXX COUNTY	XX XXX 0000		XXXXXXXX	XX	00000		Property Taxes	1,976.41
ROUND ROCK TAX XXXXXX	0000 XXXXX XXXX XXX		XXXXX XXXX	XX	00000		Property Taxes	1,736.06
XXXXX COUNTY TAX
COLLECTOR	XX   XXX 0000		XXXXX	XX	00000		Property Taxes	1,756.18
SPRING ISD-TAX OFFICE	XX XXX 000000		XXXXXXX	XX	00000		Property Taxes	1,363.33
TARRANT COUNTY	XX XXX 000000		XXXX XXXXX	XX	00000		Property Taxes	1,787.71
TARRANT COUNTY	XX XXX 000000		XXXX XXXXX	XX	00000		Property Taxes	2,154.10
TARRANT COUNTY	XX XXX 000000		XXXX XXXXX	XX	00000		Property Taxes	2,347.55
TARRANT COUNTY	XX XXX 000000		XXXX XXXXX	XX	00000		Property Taxes	2,774.88
XXXXXX COUNTY	XX XXX 0000		XXXXXXX	XX	00000		Property Taxes	2,662.01
XXX XXXXX COUNTY	PO BOX 3307		SAN ANGELO	TX	76902		Property Taxes	2,009.51
TX- ARLINGTON INDEPENDENT					76094-
SCHOOL DISTRICT	PO XXX 00000		XXXXXXXXX	XX	0430		Property Taxes	15,144.79
TX- BEXAR COUNTY	711 XXXXXXX, SUITE 300		SAN ANTONIO	TX	78205		Property Taxes	43,587.70
		1200 XXXXX
	XXXX: XXXX X. XXXXXX,	LOOP WEST,
TX- CITY OF BELLAIRE	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	1,494.86
	1100 XXXXXX XXXXX, XXXXX
XX- XXXX XX XXXXXX	000		DENTON	TX	76205		Property Taxes	5,395.83
TX- CITY OF GARLAND TAX	777 EAST 15TH ST.		PLANO	TX	75074		Property Taxes	2,469.15
					76000-
XX- XXXX XX XXXXXX XXXX	XO BOX 13430		ARLINGTON	TX	0430		Property Taxes	1,925.29
					76094-
TX- CITY OF XXXXX	PO BOX 13430		ARLINGTON	TX	0430		Property Taxes	2,133.18
					78000-
XX- XXXX XX XXXXXXX	0000 XXXXX XX 05 (78741)	PO BOX 17428	AUSTIN	TX	7428		Property Taxes	1,712.74
	2300 XXXXX XXXXXX,
XX- CITY OF MEMPHIS (TN)	SUITE 1600		DALLAS	TX	75201		Property Taxes	182.38
					78000-
XX- XXXX XX XXX XXXXXX	0000 XXXXX XX 05 (78741)	PO XXX 00000	XXXXXX	XX	0428		Property Taxes	2,717.73
TX- CITY OF WACO, WACO	700 XXXXXXX XXX, XXXXX
XXX. XXXXXX XXXXXXXX	000	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	9,676.65
		1200 XXXXX
XX- CLEAR CREEK	ATTN: XXXX X. XXXXXX,	LOOP WEST,
INDEPENDENT SCHOOL DIST.	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	6,266.65
		1200 XXXXX
XX- XXXXX XXXX XXXX XXXXX	XTTN: XXXX X. XXXXXX,	LOOP WEST,
AUTHORITY	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	1,028.99
TX- COLLIN COUNTY TAX	777 E. 15TH ST		PLANO	TX	75074		Property Taxes	8,059.22

		700 XXXXXXX
TX- COUNTY OF BRAZOS, CITY		WAY, STE. 100,
OF COLLEGE STATION	ATTN: XXXXXXX XXXX	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	8,172.09
	700 XXXXXXX XXX, XXXXX
XX- XXXXXX XX XXXXXX	000	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	1,371.82
	700 XXXXXXX XXX, XXXXX
XX- XXXXXX XX XXXX	000	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	1,559.82
	700 XXXXXXX XXX, XXXXX
XX- XXXXXX XF XXXXXX	100	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	12,236.74
	700 XXXXXXX XXX, XXXXX
XX- XXXXXX XF XXXXXXXXXX	100	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	5,281.04
	2323 XXXXX STREET,
TX- DALLAS COUNTY	SUITE 1600		DALLAS	TX	75201		Property Taxes	31,191.29
TX- XXXXXX INDEPENDENT	1100 DALLAS DRIVE, SUITE
SCHOOL DISTRICT	100		DENTON	TX	76205		Property Taxes	1,916.44
TX- ECTOR CAD	711 XXXXXXX, SUITE 300		SAN ANTONIO	TX	78205		Property Taxes	12,115.02
		1200 XXXXX
XX- EMERALD FOREST UTILITY	ATTN: XXXX X. XXXXXX,	LOOP WEST,
DISTRICT	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	2,791.28
		1200 XXXXX
	XXXX: XXXX X. XXXXXX,	LOOP WEST,
TX- FIRST COLONY L.I.D.	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	876.76
TX- FORT WORTH
INDEPENDENT SCHOOL					76094-
DISTRICT	PO XXX 00000		XXXXXXXXX	XX	0430		Property Taxes	6,172.51
TX- GARLAND INDEPENDENT	4411 NORTH CENTRAL
SCHOOL DISTRICT	EXPRESSWAY		DALLAS	TX	75205		Property Taxes	7,612.67
	2323 XXXXX STREET,
TX- XXXXX COUNTY	SUITE 1600		DALLAS	TX	75201		Property Taxes	3,568.31
	3301 NORTHLAND DR., STE
TX- XXXXXXX COUNTY	505		AUSTIN	TX	78731		Property Taxes	1,925.30
		1200 XXXXX
XX- HUMBLE INDEPENDENT	ATTN: XXXX X. XXXXXX,	LOOP WEST,
SCHOOL DISTRICT	ESQ.	STE 600	HOUSTON	TX	77008		Property Taxes	7,145.82
		1200 XXXXX
	XXXX: XXXX X. XXXXXX,	LOOP WEST,
TX- INTERSTATE M.U.D.	ESQ.	SUITE 600	HOUSTON	TX	77008		Property Taxes	2,689.58
	2300 XXXXX XXXXXX,
XX- IRVING ISD	SUITE 1600		DALLAS	TX	75201		Property Taxes	6,437.60
					77000-
XX- XXXXXXXXX XXXXXX	0148 PARK STREET		BEAUMONT	TX	3614		Property Taxes	10,806.18
					77253-
TX- KATY ISD	PO XXX 0000		XXXXXXX	XX	0064		Property Taxes	6,827.30
TX- LEWISVILLE INDEPENDENT	4411 NORTH CENTRAL
SCHOOL DISTRICT	EXPRESSWAY		DALLAS	TX	75205		Property Taxes	6,084.61
TX- LONGVIEW INDEPENDENT	700 XXXXXXX XXX, XXXXX
XXXXXX XIST.	100	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	5,385.82
TX- LUBBOCK CENTRAL
APPRAISAL DISTRICT	PO BOX 817		LUBBOCK	TX	79408		Property Taxes	9,321.06
					78760-
TX- MCALLEN ISD	1949 SOUTH IH 35 (78741)	PO BOX 17428	AUSTIN	TX	7428		Property Taxes	4,654.85

					78000-
XX- XXXXXXXX XXXXXX	0000 XXXXX XX 05 (78741)	PO XXX 00000	XXXXXX	XX	0428		Property Taxes	3,070.46
TX- MIDLAND CENTRAL	700 XXXXXXX XXX, SUITE
APPRAISAL DIST.	100	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	11,056.70
TX- MIDLAND COUNTY TAX					79710-
OFFICE	PO XXX 00000		XXXXXXX	XX	0188		Property Taxes	1,121.12
TX- NACOGDOCHES COUNTY
CAD	216 WEST HOSPITAL		NACOGDOCHES	TX	75961		Property Taxes	7,640.23
					78000-
XX- XXXXX XXXX XXX	0000 XXXXX XX 05 (78741)	P.O. BOX 17428	AUSTIN	TX	7428		Property Taxes	8,024.06
					78000-
XX- XXX XXXXXX XXXX	0000 XXXXX XX 05 (78741)	PO BOX 17428	AUSTIN	TX	7428		Property Taxes	6,369.85
	2323 XXXXX STREET,
TX- XXXXX COUNTY	SUITE 1600		DALLAS	TX	75201		Property Taxes	3,307.50
					78000-
XX- XXXXX XXXXX XOLLEGE	1949 SOUTH IH 35 (78741)	PO XXX 00000	XXXXXX	XX	0428		Property Taxes	626.07
TX- SOUTH TEXAS ISD					78760-
(XXXXXXX CO)	1900 XXXXX XX 00 (00000)	X.X. XXX 00000	XXXXXX	XX	0428		Property Taxes	200.02
	2300 XXXXX XXXXXX,
XX- TARRANT COUNTY	SUITE 1600		DALLAS	TX	75201		Property Taxes	25,031.78
TX- TAX APPRAISAL DIST. OF	700 XXXXXXX XXX, XXXXX
XXXX XXXXXX	000	P.O. BOX 1269	ROUND ROCK	TX	78680		Property Taxes	10,479.40
TX- TAXING DISTRICTS					79105-
COLLECTED BY XXXXXXX CTY	PO BOX 9132		AMARILLO	TX	9132		Property Taxes	9,029.93
TX- TEXAS COMPTROLLER OF	COLLECTIONS DIVISION -				78711-
PUBLIC ACCOUNTS	BANKRUPTCY SECTION	P O BOX 12548	AUSTIN	TX	2548		Property Taxes	6,182.45
	2300 XXXXX XXXXXX,
XX- XXX XXXXX CAD	SUITE 1600		DALLAS	TX	75201		Property Taxes	10,582.25
TX- TYLER INDEPENDENT					75710-
SCHOOL DISTRICT	PO BOX 2007		TYLER	TX	2007		Property Taxes	6,533.18
					78000-
XX- XXXXXXXX XXXXXX	0000 XXXXX XX 05 (78741)	PO XXX 00000	XXXXXX	XX	0428		Property Taxes	12,696.40
TX- WICHITA COUNTY	PO BOX 8188		WICHITA FALLS	TX	76307		Property Taxes	10,319.67
VICTORIA COUNTY	PO BOX 2569		VICTORIA	TX	77902		Property Taxes	2,309.14
VICTORIA COUNTY	PO BOX 2569		VICTORIA	TX	77902		Property Taxes	3,911.84
WICHITA COUNTY	PO BOX 1471		WICHITA FALLS	TX	76307		Property Taxes	2,235.71
XXXXXXXXXX COUNTY	904 S. MAIN ST		GEORGETOWN	TX	78626		Property Taxes	1,088.59
SALT LAKE COUNTY	2001   S. STATE STREET		SALT LAKE CITY	UT	84190		Property Taxes	80.92
SALT LAKE COUNTY	2001   S. STATE STREET		SALT LAKE CITY	UT	84190		Property Taxes	83.66
SALT LAKE COUNTY	2001   S. STATE STREET		SALT LAKE CITY	UT	84190		Property Taxes	195.22
UT- SAXX XXXX XXXXXX	0000 XXXXX XXXXX				00000-
XXXXXXXX	XTREET, #N2300		SALT LAKE CITY	UT	1300		Property Taxes	122.52
UT- XXXXX COUNTY	2380 WASHINGTON BLVD.,
TREASURER	SUITE 350		OGDEN	UT	84401		Property Taxes	211.80

UTAH COUNTY ASSESS	100 EAST CENTER ST		PROVO	UT	84606		Property Taxes	55.97
XXXXX COUNTY ASSESSOR	MUNICIPAL   BLDG		OGDEN	UT	84401		Property Taxes	49.45
CITY OF CHESAPEAKE	PO BOX 1606		CHESAPEAKE	VA	23327		Property Taxes	100.23
CITY OF CHESAPEAKE	PO BOX 1606		CHESAPEAKE	VA	23327		Property Taxes	115.86
CITY OF DANVILLE	PO BOX 3308		DANVILLE	VA	24543		Property Taxes	36.55
CITY OF FREDERICKSBURG	PO BOX 7630		XXXXXXXXXX	VA	22116		Property Taxes	98.99
CITY OF ROANOKE	PO BOX 1451		ROANOKE	VA	24007		Property Taxes	119.76
CITY OF VIRGINIA BEACH	TREASURER		VIRGINIA BEACH	VA	23456		Property Taxes	796.98
CITY OF WILLIAMSBURG	401 LAFAYETTE STREET		WILLIAMSBURG	VA	23185		Property Taxes	127.04
COUNTY OF FAIRFAX	PO BOX 10201		FAIRFAX	VA	22035		Property Taxes	231.03
COUNTY OF LOUDOUN	PO BOX 100004		LEESBURG	VA	20177		Property Taxes	500.09
COUNTY OF LOUDOUN	PO BOX 100004		LEESBURG	VA	20177		Property Taxes	654.81
PRINCE XXXXXXX COUNTY	DEPT 871		ALEXANDRIA	VA	22334		Property Taxes	437.12
TOWN OF LEESBURG	PO BOX 88		LEESBURG	VA	20178		Property Taxes	25.52
TREAS. , CHESTERFIELD
COUNTY	PO BOX 26585		RICHMOND	VA	23285		Property Taxes	102.25
TREAS. , CHESTERFIELD
COUNTY	PO BOX 26585		RICHMOND	VA	23285		Property Taxes	202.97
VA- CITY OF FREDERICKSBURG	PO BOX 267		FREDERICKSBURG	VA	22404		Property Taxes	552.48
VA- CITY OF HAMPTON	1 FRANKLIN ST, SUITE 100		HAMPTON	VA	23669		Property Taxes	851.32
VA- CITY OF HAMPTON	1 FRANKLIN ST, SUITE 100		HAMPTON	VA	23669		Property Taxes	1,187.28
	210 XXXXXX XXXXXX, XX,				00000-
XX- XXXX XF ROANOKE	ROOM 212		ROANOKE	VA	1513		Property Taxes	89.87
		2401
	ATTN: XXXXXX X. XXXXXXX	COURTHOUSE
VA- CITY OF VIRGINIA BEACH	II, ATTORNEY	DRIVE	VIRGINIA BEACH	VA	23456		Property Taxes	369.88
VA- CITY OF WILLIAMSBURG	401 LAFAYETTE STREET		WILLIAMSBURG	VA	23185		Property Taxes	585.96
					23000-
XX- XXXXXX XX XXXXXXX	XX XXX 00000		XXXXXXXX	XX	0032		Property Taxes	255.32
					23273-
VA- COXXXX XX XXXXXXX	XX XXX 00000		XXXXXXXX	XX	0032		Property Taxes	758.57
VA- COUNTY OF PRINCE					22195-
XXXXXXX	PO BOX 2467		PRINCE XXXXXXX	VA	2467		Property Taxes	2,830.91
VA- XXXXXXXX XXXXXX					00000-
TREAS.	P.O. BOX 347		LEESBURG,	VA	0347		Property Taxes	30.79

VA- XXXXXXXX XXXXXX					00000-
TREAS.	P.O. BOX 347		LEESBURG,	VA	0347		Property Taxes	1,246.37
XXXXX COUNTY TREAS	PO BOX 9808		VANCOUVER	WA	98666		Property Taxes	52.15
KING COUNTY	RM 600	500 4TH AVE	SEATTLE	WA	98104		Property Taxes	57.22
KING COUNTY	RM 600	500 4TH AVE	SEATTLE	WA	98104		Property Taxes	58.63
XXXXXX COUNTY	PO BOX 11621		TACOMA	WA	98411		Property Taxes	84.59
SNOHOMISH COUNTY TREAS	PO BOX 34171		SEATTLE	WA	98124		Property Taxes	62.31
SPOKANE COUNTY TREAS	PO BOX 199		SPOKANE	WA	99210		Property Taxes	75.02
SPOKANE COUNTY TREAS	PO BOX 199		SPOKANE	WA	99210		Property Taxes	94.74
WA- XXXXXX COUNTY
TREASURER	PO BOX 630		XXXXXXX	WA	99350		Property Taxes	22.77
WA- XXXXXX COUNTY
TREASURER	PO BOX 630		PROSSER	WA	99350		Property Taxes	315.27
WA- XXXXX COUNTY
TREASURER	PO BOX 5000		VANCOUVER	WA	98666		Property Taxes	52.80
WA- KING COUNTY	500 4TH AVE, RM 600		SEATTLE	WA	98104		Property Taxes	5,090.90
WA- KITSAP COUNTY TREAS.	614 DIVISION ST. MS-32		PORT ORCHARD	WA	98366		Property Taxes	121.21
WA- XXXXXX COUNTY BUDGET
& FINANCE	615 SO 9TH ST, STE 100		TACOMA	WA	98405		Property Taxes	85.66
WA- SNOHOMISH COUNTY	3000 XXXXXXXXXXX XXX,				00000-
XXXXXXXXX	XX 001		EVERETT	WA	4060		Property Taxes	548.54
WA- SPOKANE COUNTY
TREASURER	PO BOX 199		SPOKANE	WA	99210		Property Taxes	837.11
WA- YAKIMA COUNTY TREAS	PO BOX 22530		YAKIMA	WA	98907		Property Taxes	62.09
CITY OF MADISON-TREAS	PO BOX 2999		MADISON	WI	53701		Property Taxes	169.30
CITY OF MADISON-TREAS	PO BOX 2999		MADISON	WI	53701		Property Taxes	233.26
ROCK COUNTY TREAS	PO BOX 1975		JAINESVILLE	WI	53547		Property Taxes	177.88
					53000-
XX- XXXX XX XXXXXXX-XXXXX.	P.O. BOX 2999		MADISON	WI	2999		Property Taxes	1,079.67
NATRONA COUNTY TREAS	PO BOX 2300		CASPER	WY	82602		Property Taxes	81.05
AL- XXXXXXX XXXXXXXXXXXX					00000-
XXXXXX XXXXXX	X.O. BOX 696		DECATUR	AL	0696		TAXES	91.77
AK- DEPT. OF FINANCE AND	P.X. XXX 0000, XXXX				00000-
XXXXXXXXXXXXXX	0380		LITTLE ROCK	AR	1272		TAXES	24,311.45
AR- GARLAND COUNTY TAX	200 WOODBINE ST, ROOM
COLLECTOR	#108		HOT SPRINGS	AR	71901		TAXES	2,021.02
AZ- MARICOPA COUNTY	200 X. XXXXXXXXXX,				00000-
XXXXXXXXX	XXXXX 000		XXXXXXX	XX	0327		TAXES	102.66

AZ- MARICOPA COUNTY	200 X. XXXXXXXXXX,				00000-
XXXXXXXXX	XXXXX 000		XXXXXXX	XX	0327		TAXES	133.36
CA- NAPA COUNTY TAX	1100 XXXXX XXXXXX, XX				00000-
COLLECTOR	108		NAPA	CA	3050		TAXES	102.21
CA- ORANGE COUNTY
TREASURER-TAX COLL.	PO BOX 1438		SANTA ANA	CA	92702		TAXES	73.10
CA- SACRAMENTO COUNTY
TAX COLLECTOR	700 H STREET, ROOM 1710		SACRAMENTO	CA	95814		TAXES	252.93
FL- BREVARD COUNTY TAX	400 SOUTH STREET, 6TH				32000-
XXXXXXXXX	XXXXX	X.X. XXX 0000	XXXXXXXXXX	XX	0500		TAXES	589.54
		600 X.
		XXXXXXX
XX- XXXX XXXXXX,		XXXX., 00XX			00000-
XXXXXXXXXXXX XXXXXX	X.X. XXX 000000	XXXXX	XXXXX	XX	0920		TAXES	488.98
		600 X.
		XXXXXXX
XX- XXXX XXXXXX,		XXXX., 00XX			00000-
XXXXXXXXXXXX XXXXXX	X.X. XXX 000000	XXXXX	XXXXX	XX	0920		TAXES	591.68
GA- CHATHAM COUNTY TAX
COMMISSIONER	P.O. BOX 8321		SAVANNAH	GA	31412		TAXES	4,528.17
GA- CITY OF WARNER ROBINS	PO BOX 1488		WARNER ROBINS	GA	31099		TAXES	1.00
GA- CITY OF WARNER ROBINS	PO BOX 1488		WARNER ROBINS	GA	31099		TAXES	382.51
GA- XXXX COUNTY TAX					30061-
COMMISSIONER	P.X. XXX 000		XXXXXXXX	XX	0649		TAXES	2,287.84
HOUSTON CO. TAX					31069-
COMMISSIONER	P.O. DRAWER 69		PERRY	GA	0069		TAXES	4,166.45
ID- STATE TAX COMM.	PO BOX 36		BOISE	ID	83707		TAXES	1,018.00
					83303-
ID- TWIN FALLS CO. TREAS.	BOX 88		TWIN FALLS	ID	0088		TAXES	853.08
					42000-
XX- XXXX XX XXXXXXX XXXXX	XO XXX 000		XXXXXXX XXXXX	XX	0430		TAXES	30.00
KY- DEPARTMENT OF REVENUE	P.O. BOX 5222		FRANKFORT	KY	40602		TAXES	11,968.28
IRS- DEPARTMENT OF THE	31 XXXXXXX PLAZA, RM
TREASURY	1150		BALTIMORE	MD	21201		TAXES	32,881.98
		3000 X.
XX- XXXXXXXXXX XX		XXXXX XXXX.,
TREASURY	CADILLAC PLACE	SUITE 10-200	DETROIT	MI	48202		TAXES	19,272.81
MO- DEPARTMENT OF REVENUE	BOX 475		JEFFERSON CITY	MO	65105		TAXES	408.00
MO- DEPARTMENT OF REVENUE	BOX 475		JEFFERSON CITY	MO	65105		TAXES	3,217.99
					39225-			1,500,000
MS- STATE TAX COMMISSION	P.O. BOX 22808		JACKSON	MS	2808		TAXES	0.00
					27000-
XX- XXXXXXXXXX XX XXXXXXX	X.O. BOX 1168		RALEIGH	NC	1168		TAXES	55,851.60
					27602-			107,404.20
NC- DEPARTMENT OF REVENUE	P.O. BOX 1168		RALEIGH	NC	1168		TAXES	8
XX- XXXXXXXXXX XX					00000-
XXXXXXXX & FINANCE	PO XXX 0000		XXXXXX	XX	0300		TAXES	556.00
OH- DEPARTMENT OF	30 E. BROAD STREET,
TAXATION	23RD FL		COLUMBUS	OH	43216		TAXES	27,234.25
RI- DIVISION OF TAXATION	ONE CAPITOL HILL		PROVIDENCE	RI	02908		TAXES	1,000.00
SC- GREENVILLE COUNTY TAX	301 UNIVERSITY RIDGE,
COLLECTOR	STE 700		GREENVILLE	SC	29601		TAXES	824.42

					37202-
TN- DEPARTMENT OF REVENUE	PO BOX 20207		NASHVILLE	TN	0207		TAXES	4,552.66
					37202-			229,928.0
TN- DEPARTMENT OF REVENUE	PO XXX 00000		XXXXXXXXX	XX	0207		TAXES	1
					38101-
TN- SHELBY COUNTY TRUSTEE	P.X. XXX 0000		XXXXXXX	XX	0751		TAXES	1,503.60
					77253-
TX- ANGELINA COUNTY	PO XXX 0000		XXXXXXX	XX	0064		TAXES	7,838.65
TX- ARLINGTON INDEPENDENT					76094-
SCHOOL DISTRICT	PO XXX 00000		XXXXXXXXX	XX	0430		TAXES	8,313.13
					76094-
TX- XXXX XX XXXXX	XX XXX 00000		XXXXXXXXX	XX	0430		TAXES	2,950.39
TX- CITY OF MESQUITE &	XXXXX FARGO BANK	120 X. XXXX,
XXXXXXXX XND SCHOOL	BUILDING	#201	MESQUITE	TX	75149		TAXES	10,945.23
					77000-
XX- XXXX XX XXXXX XXXX	XO XXX 0000		XXXXXXX	XX	0064		TAXES	1,655.19
TX- COMPTROLLER OF PUBLIC	ATTN: XXXXXXX XXXXX,				78711-
ACCOUNTS	LEGAL COUNSEL	PO XXX 00000	XXXXXX	XX	0548		TAXES	6,182.45
TX- COMPTROLLER OF PUBLIC	ATTN: XXXXXXX XXXXX,				78711-
ACCOUNTS	LEGAL COUNSEL	PO XXX 00000	XXXXXX	XX	0548		TAXES	48,961.70
					77253-
TX- CYPRESS - FAIRBANKS ISD	PO XXX 0000		XXXXXXX	XX	0064		TAXES	6,595.55
					77000-
XX- XXXX XXXX XOUNTY	PO XXX 0000		XXXXXXX	XX	0064		TAXES	9,747.64
TX- FORT WORTH
INDEPENDENT SCHOOL					76094-
DISTRICT	PO XXX 00000		XXXXXXXXX	XX	0430		TAXES	6,679.20
					77253-
TX- XXXXXX COUNTY, ET AL	PO XXX 0000		XXXXXXX	XX	0064		TAXES	45,142.54
					77253-
TX- XXXXXXXXXX COUNTY	PO XXX 0000		XXXXXXX	XX	0064		TAXES	12,288.74
TX- PASADENA INDEPENDENT
SCHOOL DISTRICT	4701 PRESTON AVE		PASADENA	TX	77505		TAXES	6,363.13
TX- XXXXXX COUNTY
ATTORNEY'S OFFICE	P O BOX 1748		AUSTIN	TX	78767		TAXES	21,076.26
					23000-
XX- XXXX XX XXXXXXXXXX	X.O. BOX 1606		CHESAPEAKE	VA	1606		TAXES	225.72
VA- DEPARTMENT OF					23218-
TAXATION	PO XXX 0000		XXXXXXXX	XX	0156		TAXES	7,948.00
VA- XXXXXXXXXX XX					00000-
XXXXXXXX	XO XXX 0000		XXXXXXXX	XX	0156		TAXES	58,612.65
VA- TREASURER
CHESTERFIELD COUNTY	PO BOX 70		CHESTERFIELD	VA	23832		TAXES	152.89
WI- DEPARTMENT OF REVENUE	2135 RIMROCK ROAD		MADISON	WI	53713		TAXES	5,651.42
WI- DEPARTMENT OF REVENUE	2135 RIMROCK ROAD		MADISON	WI	53713		TAXES	23,294.81
								3,082,406

Schedule 2.1

Lenders

AGENT/LENDER

General Electric Capital Corporation

400 Xxxxxxx 0, X.X. Xxx 0000

Xxxxxxx, XX 00000-0000

Attention: Xxxxxxx Fabrics Account Manager

Telephone No.: (000) 000-0000

Telecopy No.: (000) 000-0000

Schedule 5.2(b)

Chattel Paper and Instruments

None.

Schedule 5.2(d)

Deposit Accounts

[on file at Company]

Schedule 5.2(e)

Investment Property and Investment Accounts

None.

Schedule 5.2(h)

Letters of Credit, Bankers’ Acceptances and Similar Instruments

None.

Schedule 5.2(i)

Commercial Tort Claims

None.

Schedule 5.2(j)

Collateral with Third Parties

None.

Schedule 8.2

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

Organizational
Legal Name		State of Organization		Type of Organization		Number		Chief Executive Office		Mailing Address
								One Fashion Way		One Fashion Way
Xxxxxxx Fabrics, Inc.		Delaware		Corporation		2118546		Baldwyn, MS 38824		Baxxxxx, XX 00000
								One Fashion Way		One Fashion Way
HF Merchandising, Inc.		Delaware		Corporation		2830820		Baldwyn, MS 38824		Baxxxxx, XX 00000
								One Fashion Way		One Fashion Way
Xxxxxxx Fabrics of MI, Inc.		Delaware		Corporation		2992656		Baldwyn, MS 38824		Baxxxxx, XX 00000
								One Fashion Way		One Fashion Way
xxxxxxxxxxxxxx.xxx, Inc.		Delaware		Corporation		3480502		Baldwyn, MS 38824		Baxxxxx, XX 00000
								One Fashion Way		One Fashion Way
HF Resources, Inc.		Delaware		Corporation		2830818		Baldwyn, MS 38824		Baxxxxx, XX 00000
								One Fashion Way		One Fashion Way
HF Enterprises, Inc.		Delaware		Corporation		2830824		Baldwyn, MS 38824		Baxxxxx, XX 00000
								5200X Xxxxx Xxx.		One Fashion Way
Xxxxxxx Fabrics, LLC		Delaware		Limited Liability Company		3480339		Fair Oaks, CA  95628		Baxxxxx, XX 00000

Collateral Locations
Entity	Address	County	State
Xxxxxxx Fabrics, Inc.	100 Xxxxx Xxxx	Xxx Xxxxxx	Xxxxxxxx
	Ste. 202
	Wilmington, DE  19803
Xxxxxxx Fabrics, Inc.	215 X. Xxxx Hwy,	Caddo	Louisiana
	Shreveport, LA 71104
Xxxxxxx Fabrics, Inc.	6530 E. 51st St.,	Tulsa	Oklahoma
	Tulsa, OK 74145
Xxxxxxx Fabrics, Inc.	7509 Xxxxxxxx Xx,	Pulaski	Arkansas
	Little Rock, AR 72207
Xxxxxxx Fabrics, Inc.	1403 W. Pipeline,	Tarrant	Texas
	Hurst, TX 76053
Xxxxxxx Fabrics, Inc.	6325 E. 22nd St.,	Pima	Arizona
	Tucson, AZ 85710
Xxxxxxx Fabrics, Inc.	1614 Lindsey,	Cleveland	Oklahoma
	Norman, OK 73071
Xxxxxxx Fabrics, Inc.	2104 Franklin Ave.,	Jefferson	Louisiana
	Gretna, LA 70053
Xxxxxxx Fabrics, Inc.	3157 San Mateo Blvd.,	Bernalillo	New Mexico
	N.E.,
	Albuquerque, NM
	87110
Xxxxxxx Fabrics, Inc.	7521 S.E. 15th St.,	Oklahoma	Oklahoma
	Midwest City, OK
	73110
Xxxxxxx Fabrics, Inc.	5143 Quince Rd.,	Shelby	Tennessee
	Memphis, TN 38117
Xxxxxxx Fabrics, Inc.	3400 Xxxxxxxx Xxxx,	Xxxx Xxxxx Xxxxx	Xxxxxxxxx
	Baton Rouge, LA 70809

Xxxxxxx Fabrics, Inc.	2800 Xxxxxxxxxx Xxx.,	Xxxxx Xxxx	Xxxx
Waterloo, IA 50701
Xxxxxxx Fabrics, Inc.	3121 S. 38th St.,	Xxxxxx	Xxxxxxxxxx
	Tacoma, WA 98409
Xxxxxxx Fabrics, Inc.	3922 S.W. Alaska,	King	Washington
	Seattle, WA 98116
Xxxxxxx Fabrics, Inc.	2228 Shawnee By-Pass,	Muskogee	Oklahoma
	Muskogee, OK 74401
Xxxxxxx Fabrics, Inc.	95 X. Xxxxxxx Xx.,	Xxxxxxx	Xxxxxxx
	Merritt Island, FL
	32953
Xxxxxxx Fabrics, Inc.	16701 El Camino Real	Xxxxxx	Texas
	#101,
	Houston, TX 77062
Xxxxxxx Fabrics, Inc.	9168 Xxxxxxxxx Xx.,	Caddo	Louisiana
	Shreveport, LA 71118
Xxxxxxx Fabrics, Inc.	710 Xxxxxxx St.,	Xxxxxxx	Mississippi
	Hattiesburg, MS 39401
Xxxxxxx Fabrics, Inc.	11711 Princeton Rd.,	Hamilton	Ohio
	Ste 241,
	Cincinnati, OH 45246
Xxxxxxx Fabrics, Inc.	8780 Xxxxxxxx Xx.,	St. Louis	Missouri
	Hazelwood, MO 63042
Xxxxxxx Fabrics, Inc.	Old Hickory Blvd.,	Madison	Tennessee
	Jackson, TN 38305
Xxxxxxx Fabrics, Inc.	1930 Xxxxxxx Xx.,	Tulsa	Oklahoma
	Tulsa, OK 74128
Xxxxxxx Fabrics, Inc.	5717 Preston Hwy,	Jefferson	Kentucky
	Louisville, KY 40219
Xxxxxxx Fabrics, Inc.	1602 Lake Xxxxxx Xx.,	Xxxxxxx	Xxxxxxx
	Xxxxxx, GA 30260
Entity	Address	County	State
Xxxxxxx Fabrics, Inc.	11000 Xxxxxxx Xxxx.,	Xxxx Xxxxx Xxxxx	Xxxxxxxxx
	Baton Rouge, LA 70815
Xxxxxxx Fabrics, Inc.	15 Meta Dr.,	Midland	Texas
	Midland, TX 79701
Xxxxxxx Fabrics, Inc.	10896 FM 1960,	Xxxxxx	Texas
	Houston, TX 77070
Xxxxxxx Fabrics, LLC	898 Blossom Xxxx Xx.,	Santa Clara	California
	San Jose, CA 95123
Xxxxxxx Fabrics, Inc.	1900 E. University,	Maricopa	Arizona
	Mesa, AZ 85203
Xxxxxxx Fabrics, Inc.	5867 Bissonnet,	Xxxxxx	Texas
	Bellaire, TX, 77401
Xxxxxxx Fabrics, Inc.	3000-B Canton Hwy,	Xxxx	Georgia
	Marietta, GA 30066
Xxxxxxx Fabrics, Inc.	2901 X. Xxxxxx Rd..	Collin	Texas
	Plano, TX 75023
Xxxxxxx Fabrics, Inc.	1971 Decatur,	Xxxxx	Nevada
	Las Vegas, NV 89108
Xxxxxxx Fabrics, Inc.	523 X. Xxxxx & Xxxxx	Xxxxx	Indiana
	Parkway,
	Clarksville, IN 47129

Xxxxxxx Fabrics, Inc.	1229 X. Xxxxxxxx Rd.,	St. Louis	Missouri
	Kirkwood, MO 63122
Xxxxxxx Fabrics, Inc.	5201 Xxxxx Xx.,	Jefferson	Kentucky
	Louisville, KY 40258
Xxxxxxx Fabrics, Inc.	7046 Bandera Rd.,	Bexar	Texas
	San Antonio, TX 78238
Xxxxxxx Fabrics, Inc.	1112 X. Xxxx Xxxxx	Hillsborough	Florida
	Hwy, Tampa, FL 33629
Xxxxxxx Fabrics, Inc.	4500 S. Broadway,	Xxxxx	Texas
	Tyler, TX 75703
Xxxxxxx Fabrics, Inc.	4472/4464 Indian	Xxxxxx	Ohio
	Ripple Rd.,
	Dayton, OH 45440
Xxxxxxx Fabrics, LLC	1800 Xxxxxx Xxx.	Xxxxxx	Xxxxxxxxxx
	Bonanza S/C,
	Clovis, CA 93612
Xxxxxxx Fabrics, Inc.	8051 W. Broad St.,	Henrico	Virginia
	Richmond, VA 23294
Xxxxxxx Fabrics, LLC	2601 S. “H” St.,	Xxxx	California
	Bakersfield, CA 93304
Xxxxxxx Fabrics, Inc.	1408 XxXxxx Xx.,	Xxxxx	Texas
	Longview, TX 75601
Xxxxxxx Fabrics, Inc.	9425 Xxxxxxx,	Xxxxxxx	Kansas
	Overland Park, KS
	66212
Xxxxxxx Fabrics, Inc.	1608 W. Nob Hill,	Yakima	Washington
	Yakima, WA 98902
Xxxxxxx Fabrics, Inc.	Summit Ctr, Bloomfield	Xxxx	Georgia
	Rd.,
	Macon, GA 31201
Xxxxxxx Fabrics, Inc.	700 X. Xxxxxxx Xx.,	Xxxxxxx	Xxxxxxx
	Xxxxxx Xxxxxxx, GA
	31093
Xxxxxxx Fabrics, Inc.	2655 Decatur Rd.,	Dekalb	Georgia
	Decatur, GA 30033
Xxxxxxx Fabrics, Inc.	6910 NW Expressway,	Oklahoma	Oklahoma
	Oklahoma City, OK
	73132
Xxxxxxx Fabrics, Inc.	2026 Auburn Avenue,	Muscogee	Georgia
	Columbus, GA 31906
Xxxxxxx Fabrics, Inc.	12030 N.E. 85th St.,	King	Washington
	Kirkland, WA 98033
Xxxxxxx Fabrics, LLC	2711 El Camino,	Sacramento	California
	Sacramento, CA 95821
Xxxxxxx Fabrics, Inc.	3300 Xxxxxxxxx Xx.,	Xxxxxxx	Xxxxxxxx
	Owensboro, KY 42301
Xxxxxxx Fabrics, Inc.	1409-X X Xxxxx Dr.,	Xxxxxxxx	Tennessee
	Kingsport, TN 37660
Xxxxxxx Fabrics, Inc.	710 Memorial Bldg, Xx	Xxxxxxxxxx	Tennessee
	100,
	Murfreesboro, TN
	37130

Xxxxxxx Fabrics, LLC	20806 Hesperian Blvd.,	Alameda	California
	Hayward, CA 94541
Xxxxxxx Fabrics, Inc.	4100 Xxxxxx Xx.,	Xxx Xxxxx	Texas
	San Angelo, TX 76903
Xxxxxxx Fabrics, Inc.	2108 W. 27th, Su G,	Xxxxxxx	Kansas
	Lawrence, KS 66047
Xxxxxxx Fabrics, Inc.	908 Eldorado Rd.,	XxXxxxx	Illinois
	Bloomington, IL 60701
Xxxxxxx Fabrics, LLC	1375 W. Imola Rd.,	Napa	California
	Napa, CA 94559
Xxxxxxx Fabrics, Inc.	3112 Washington Rd.,	Richmond	Georgia
	Su F,
	Augusta, GA 30907
Xxxxxxx Fabrics, Inc.	4221 Xxxxxx Barracks	St. Louis	Missouri
	Rd.,
	St Louis, MO 63125
Xxxxxxx Fabrics, Inc.	3741 W. Ina Rd., Ste	Pima	Arizona
	125, Tucson, AZ 85741
Xxxxxxx Fabrics, Inc.	1959 S. Hurstbourne	Jefferson	Kentucky
	Pkwy, Louisville, KY
	40220
Xxxxxxx Fabrics, Inc.	266 N. State St.,	Utah	Utah
	Orem, UT 84057
Xxxxxxx Fabrics, Inc.	633 E. 3300 S,	Salt Lake	Utah
	Salt Lake City, UT
	84106
Xxxxxxx Fabrics, Inc.	2811 SW Parkway,	Wichita	Texas
	Wichita Falls, TX
	76308
Xxxxxxx Fabrics, Inc.	2524 Miracle Lane,	St. Xxxxxx	Indiana
	Mishawaka, IN 46545
Xxxxxxx Fabrics, Inc.	7400 Rivers Ave., Su 0,	Charleston
	North Charleston, SC
	29418
Xxxxxxx Fabrics, Inc.	8811 Hardegan St.,	Marion	Indiana
	#315, Indianapolis, IN
	46227
Xxxxxxx Fabrics, Inc.	1920 N. 4th St.,	Coconino	Arizona
	Flagstaff, AZ 86004
Xxxxxxx Fabrics, Inc.	6332 Roswell Rd.,	Xxxxxx	Georgia
	Atlanta, GA 30328
Xxxxxxx Fabrics, Inc.	1812 Hwy 7,	Charleston
	Charleston, SC 29407
Hancock Fabrics, Inc.	700 W. 9th Avenue,	Boulder	Colorado
	Longmont, CO 80501
Hancock Fabrics, LLC	534 Greenbrae Dr.,	Washoe	Nevada
	Sparks, NV 89431
Hancock Fabrics, Inc.	1408 G. W Coop 336,	Montgomery	Texas
	Conroe, TX 77304
Hancock Fabrics, Inc.	3715 196th St. S.W. Su	Snohomish	Washington
	131,
	Lynnwood, WA 98036
Hancock Fabrics, Inc.	4050 Riverdale Rd.,	Weber	Utah
	Riverdale, UT 84405

Hancock Fabrics, Inc.	628 NE 81st St., Su A,	Clark	Washington
	Vancouver, WA 98665
Hancock Fabrics, Inc.	9609 E. Independence	Mecklenburg
	Blvd.,
	Matthews, NC 28105
Hancock Fabrics, Inc.	1635 E. 116th St.,	Hamilton	Indiana
	Carmel, IN 46032
Hancock Fabrics, Inc.	15048 San Pedro,	Bexar	Texas
	San Antonio, TX 78232
Hancock Fabrics, Inc.	4750 Tama St., SE,	Linn	Iowa
	Cedar Rapids, IA 52402
Hancock Fabrics, Inc.	900 C E Hwy 83,	Hidalgo	Texas
	McAllen, TX 78501
Hancock Fabrics, Inc.	3235 W. 7800 South, Su	Salt Lake	Utah
	A,
	West Jordan, UT 84088
Hancock Fabrics, Inc.	101 Verdae Blvd., Su	Greenville
	520, Greenville, SC
	29606
Hancock Fabrics, Inc.	109 Shakespeare Lane,	Richland
	Columbia, SC 29223
Hancock Fabrics, Inc.	454 Ohio Pike, Suite	Clermont	Ohio
	#46, Cincinnati, OH
	45255
Hancock Fabrics, Inc.	4310 Waverly St.,	Jefferson	Louisiana
	Metairie, LA 70006
Hancock Fabrics, Inc.	7503 N. Oak	Clay	Missouri
	Trafficway, Gladstone,
	MO 64118
Hancock Fabrics, Inc.	266 Harbison,	Lexington
	Columbia, SC 29212
Hancock Fabrics, Inc.	723 N. Main St.,	Davis	Utah
	Layton, UT 84041
Hancock Fabrics, Inc.	5407 S. Boulevard,	Mecklenburg
	Charlotte, NC 28217
Hancock Fabrics, Inc.	10010 Abercorn St.,	Chatham	Georgia
	Savannah, GA 31406
Hancock Fabrics, LLC	1524 Barton Rd.,	San Bernardino	California
	Redlands, CA 92373
Hancock Fabrics, Inc.	3333 N. Cole Rd.,	Ada	Idaho
	Boise ID 83704
Hancock Fabrics, Inc.	2813 E. Nettleton Ave.,	Craighead	Arkansas
	Jonesboro, AR 72401
Hancock Fabrics, Inc.	14375 W. Manchester	St. Louis	Missouri
	Rd. Su 2,
	Manchester, MO 63011
Hancock Fabrics, Inc.	301 Sterlington Rd.,	Ouachita	Louisiana
	Monroe, LA 71201
Hancock Fabrics, Inc.	4400 Roswell Rd., Su	Cobb	Georgia
	130, Marietta, GA
	30062
Hancock Fabrics, Inc.	2625 Piedmont Rd. Su	Fulton	Georgia
	8,
	Atlanta, GA 30324

Hancock Fabrics, Inc.	108 Johnson City Plaza	Washington	Tennessee
	Dr.,
	Johnson City, TN 37601
Hancock Fabrics, Inc.	3142 S.E. Military, Ste.	Bexar	Texas
	126,
	San Antonio, TX 78235
Hancock Fabrics, Inc.	6540 Old Canton Rd.,	Madison	Mississippi
	Ridgeland, MS 39157
Hancock Fabrics, Inc.	3250 Austin Peay Hwy,	Shelby	Tennessee
	Memphis, TN 38128
Hancock Fabrics, Inc.	2300 Ryan St,	Calcasieu	Louisiana
	Lake Charles, LA
	70601
Hancock Fabrics, Inc.	1350 Airline Rd.,	Nueces	Texas
	Corpus Christi, TX
	78412
Hancock Fabrics, Inc.	4230 Wadsworth Blvd.,	Jefferson	Colorado
	Wheat Ridge, CO
	80033
Hancock Fabrics, Inc.	1464 S. Glenstone St.,	Greene	Missouri
	Springfield, MO 65804
Hancock Fabrics, Inc.	3225 50th St. #B4,	Lubbock	Texas
	Lubbock, TX 79413
Hancock Fabrics, Inc.	8269 Colerain Ave.,	Hamilton	Ohio
	Cincinnati, OH 45239
Hancock Fabrics, LLC	5229A Hazel Ave.,	Sacramento	California
	Fair Oaks, CA
Hancock Fabrics, Inc.	1751-A Monmouth St.,	Campbell	Kentucky
	Newport, KY 41071
Hancock Fabrics, Inc.	3901 Spencer Hwy,	Harris	Texas
	Pasadena, TX 77504
Hancock Fabrics, Inc.	260B Azalea Rd.,	Mobile	Alabama
	Mobile, AL 36609
Hancock Fabrics, Inc.	3842 Center St. N.E.,	Marion	Oregon
	Salem, OR 97301
Hancock Fabrics, Inc.	40B East Golf Rd.,	Cook	Illinois
	Schaumberg, IL 60173
Hancock Fabrics, LLC	1600 Saratoga Ave.,	Santa Clara	California
	Space 505,
	San Jose, CA 95129
Hancock Fabrics, Inc.	3507 Noland Rd.,	Jackson	Missouri
	Independence, MO
	64055
Hancock Fabrics, Inc.	6660 Richmond Hwy,	Fairfax	Virginia
	Alexandria, VA 22306
Hancock Fabrics, Inc.	13583 Midlothian	Chesterfield	Virginia
	Turnpike,
	Midlothian, VA 23114
Hancock Fabrics, Inc.	2825 Thornton Lane,	Bell	Texas
	Ste. 100,
	Temple, TX 76502
Hancock Fabrics, Inc.	811 Cortez Road West,	Manatee	Florida
	Bradenton, FL 34207
Hancock Fabrics, Inc.	4001 South Lamar, Ste.	Travis	Texas
	A, Austin, TX 78704

Hancock Fabrics, Inc.	2909 Richmond Rd.,	Fayette	Kentucky
	Suite 20,
	Lexington, KY 40509
Hancock Fabrics, Inc.	40 Northwest Coon	Anoka	Minnesota
	Rapids Blvd.,
	Coon Rapids, MN
	55448
Hancock Fabrics, Inc.	1101 Beltline Road.	Morgan	Alabama
	S.W., Decatur, AL
	35603
Hancock Fabrics, Inc.	3008 Raeford Road,	Cumberland
	Fayetteville, NC 28303
Hancock Fabrics, Inc.	2892 Reynolda Rd.,	Forsyth
	Winston-Salem, NC
	27106
Hancock Fabrics, Inc.	442 Southland Drive,	Fayette	Kentucky
	Lexington, KY 40503
Hancock Fabrics, Inc.	703 Greenville Blvd.,	Pitt
	S.E., Greenville, NC
	27858
Hancock Fabrics, Inc.	1241 Hargett St.,	Onslow
	Jacksonville, NC 28540
Hancock Fabrics, Inc.	706 Gilead Road,	Mecklenburg
	Huntersville, NC 28078
Hancock Fabrics, Inc.	219 Towne Drive,	Hardin	Kentucky
	Elizabethtown, KY
	42701
Hancock Fabrics, Inc.	1030 Cloverleaf Plaza,	Cabarrus
	Kannapolis, NC 28083
Hancock Fabrics, Inc.	1551 N. Cherry Road,	York
	Rock Hill, SC 29732
Hancock Fabrics, Inc.	210 Monticello Avenue,	James City	Virginia
	Williamsburg, VA
	23185
Hancock Fabrics, Inc.	3443 Hillsborough	Durham
	Road, Durham, NC
	27705
Hancock Fabrics, Inc.	237 Battlefield Blvd.,	Chesapeake	Virginia
	S., Ste 10,
	Chesapeake, VA 23322
Hancock Fabrics, Inc.	5796 Brainerd Road,	Hamilton	Tennessee
	Chattanooga, TN 37411
Hancock Fabrics, Inc.	3848 Union Deposit	Dauphin	Pennsylvania
	Road, Harrisburg, PA
	17109
Hancock Fabrics, Inc.	5836 E. State St.,	Winnebago	Illinois
	Rockford, IL 61108
Hancock Fabrics, Inc.	9617 Anderson Mill	Williamson	Texas
	Rd.,
	Austin, TX 78750
Hancock Fabrics, LLC	952 Admiral Callaghan	Solano	California
	Way,
	Vallejo, CA 94591

Hancock Fabrics, Inc.	2850 Wilma Rudolph	Montgomery	Tennessee
	Blvd.,
	Clarksville, TN 37040
Hancock Fabrics, Inc.	2520 Mall Drive,	Eau Claire	Wisconsin
	Eau Claire, WI 54701
Hancock Fabrics, Inc.	3108 Ross Clark Cir.,	Houston	Alabama
	Ste. 2,
	Dothan, AL 36303
Hancock Fabrics, Inc.	2249 East 17th St.,	Bonneville	Idaho
	Idaho Falls, ID 83404
Hancock Fabrics, Inc.	75 Goodman Road	Desoto	Mississippi
	West, Southaven, MS
	38671
Hancock Fabrics, Inc.	2525 West Mason,	Brown	Wisconsin
	Green Bay, WI 54303
Hancock Fabrics, Inc.	5905 Atlanta Hwy,	Montgomery	Alabama
	Montgomery, AL 36117
Hancock Fabrics, Inc.	1220 Crossing	LaCrosse	Wisconsin
	Meadows,
	Ste. 300,
	Onalaska, WI 54650
Hancock Fabrics, Inc.	1201 S. Broadway,	Olmstead	Minnesota
	Rochester, MN 55904
Hancock Fabrics, Inc.	1185 Mutual Way,	Outagamie	Wisconsin
	Appleton, WI 54913
Hancock Fabrics, Inc.	2101 W. 41st St., Suite	Minnehaha	South Dakota
	26,
	Sioux Falls, SD 57105
Hancock Fabrics, Inc.	1763 Fillmore Street,	Twin Falls	Idaho
	Twin Falls, ID 83301
Hancock Fabrics, Inc.	1740 Madison Avenue,	Blue Earth	Minnesota
	Mankato, MN 56001
Hancock Fabrics, Inc.	3911 16th St.,	Rock Island	Illinois
	Moline, IL 61265
Hancock Fabrics, Inc.	1421 22nd St.,	Polk	Iowa
	West Des Moines, IA
	50265
Hancock Fabrics, Inc.	3019 E. Race Avenue,	White	Arkansas
	Searcy, AR 72143
Hancock Fabrics, Inc.	6800 P. Street, Suite B,	Lancaster	Nebraska
	Lincoln, NE 68505
Hancock Fabrics, Inc.	3206 South Clack	Taylor	Texas
	Drive,
	Abilene, TX 79606
Hancock Fabrics, Inc.	1804 Macarthur Dr.,	Rapides	Louisiana
	Ste. 500,
	Alexandria, LA 71301
Hancock Fabrics, Inc.	3800 3rd Street North,	Stearns	Minnesota
	St. Cloud, MN 56303
Hancock Fabrics, Inc.	1721 W. Palmetto St.,	Florence
	Florence, SC 29501
Hancock Fabrics, Inc.	3420 Clemson Blvd.,	Anderson
	Anderson, SC 29621
Hancock Fabrics, Inc.	3191 Peters Creek	Forsyth
	Pkwy., Winston-Salem,
	NC 27127

Hancock Fabrics, Inc.	4839 N. 72nd St.,	Douglas	Nebraska
	Omaha, NE 68134
Hancock Fabrics, Inc.	3501 S. 84th St,	Douglas	Nebraska
	Omaha, NE 68124
Hancock Fabrics, Inc.	210 S. Silver Springs	Cape Girardeau	Missouri
	Road,
	Cape Girardeau, MO
	63703
Hancock Fabrics, Inc.	4607 High Point Road,	Gilford
	Greensboro, NC 27407
Hancock Fabrics, Inc.	383 Edgewood Rd.,	Linn	Iowa
	NW,
	Cedar Rapids, IA 52405
Hancock Fabrics, Inc.	292 Eisenhower Drive,	Harrison	Mississippi
	Biloxi, MS 39531
Hancock Fabrics, Inc.	100 24th Street West,	Yellowstone	Montana
	Billings, MT 59102
Hancock Fabrics, Inc.	3064 Wake Forest	Wake
	Road,
	Raleigh, NC 27609
Hancock Fabrics, Inc.	11220 S. Memorial	Madison	Alabama
	Pkwy, Ste. M.
	Huntsville, AL 35803
Hancock Fabrics, Inc.	115 Convenience Ctr,	Champaign	Illinois
	Rd., T-16,
	Champaign, IL 61820
Hancock Fabrics, Inc.	1139 N. Broadway,	Pottawattamie	Iowa
	Council Bluffs, IA
	51503
Hancock Fabrics, Inc.	2515 Redmond Circle,	Floyd	Georgia
	NW,
	Rome, GA 30161
Hancock Fabrics, Inc.	15530 E. Sprague	Spokane	Washington
	Avenue, Veradale, WA
	99037
Hancock Fabrics, Inc.	600 W. Independence	Pottawattamie	Oklahoma
	St., Ste. D,
	Shawnee, OK 74801
Hancock Fabrics, Inc.	1919 N. Central	Marathon	Wisconsin
	Avenue, Marshfield, WI
	54449
Hancock Fabrics, Inc.	2050 Highway 70,	Catawba
	Hickory, NC 28602
Hancock Fabrics, Inc.	501 E. Montague	Greenwood
	Avenue, Greenwood,
	SC 29649
Hancock Fabrics, Inc.	6441 West Park	Terrebonne	Louisiana
	Avenue,
	Houma, LA 70364
Hancock Fabrics, Inc.	2025 W. Hwy 50,	St. Clair	Illinois
	O’Fallon, IL 62269
Hancock Fabrics, Inc.	120 S. Willow Ave.,	Putnam	Tennessee
	Ste. B,
	Cookeville, TN 38501

Hancock Fabrics, Inc.	1616 S.W. 74th St.,	Oklahoma	Oklahoma
	Oklahoma City, OK
	73159
Hancock Fabrics, Inc.	5373 Hwy 10 East, Unit	Portage	Wisconsin
	#1,
	Stevens Point, WI
	54481
Hancock Fabrics, Inc.	195 West Gause Blvd.,	St. Tammany	Louisiana
	Slidell, LA 70460
Hancock Fabrics, Inc.	12977 West Center	Douglas	Nebraska
	Road,
	Omaha, NE 68144
Hancock Fabrics, Inc.	2125 East 12th St.,	Natrona	Wyoming
	Casper, WY 82601
Hancock Fabrics, Inc.	3650 Austin Bluffs	El Paso	Colorado
	Pkwy,
	Ste. 101,
	Colorado Springs, CO
	80918
Hancock Fabrics, Inc.	1020 W. Francis	Spokane	Washington
	Avenue, Spokane, WA
	99205
Hancock Fabrics, Inc.	337 Civic Avenue, Suite	Wicomico	Maryland
	101,
	Salisbury, MD 21804
Hancock Fabrics, Inc.	1288 West Main St.,	Denton	Texas
	Suite 131,
	Lewisville, TX 75067
Hancock Fabrics, Inc.	6275 University Dr.,	Madison	Alabama
	NW, Ste. 26,
	Huntsville, AL 35806
Hancock Fabrics, Inc.	1751 Scottsville Road,	Warren	Kentucky
	Bowling Green, KY
	42104
Hancock Fabrics, Inc.	9110 Wadsworth Blvd.,	Jefferson	Colorado
	Westminster, CO 80021
Hancock Fabrics, Inc.	3617-A Ambassador	Lafayette	Louisiana
	Caffery Pkwy,
	Lafayette, LA 70503
Hancock Fabrics, Inc.	3812 Brady Street,	Scott	Iowa
	Davenport, IA 52806
Hancock Fabrics, Inc.	708 Poplar Avenue,	Shelby	Tennessee
	Collierville, TN 38017
Hancock Fabrics, Inc.	4122 Lima Road, Suite	Allen	Indiana
	C-0,
	Fort Wayne, IN 46805
Hancock Fabrics, Inc.	5115 Burning Tree Rd.,	St. Louis	Minnesota
	Ste 318,
	Duluth, MN 55811
Hancock Fabrics, Inc.	2255 N. Haines Ave.,	Pennington	South Dakota
	Ste. 100,
	Rapid City, SD 57701

Hancock Fabrics, Inc.	8131 East Kellogg	Sedgwick	Kansas
	Drive, Wichita, KS
	67207
Hancock Fabrics, Inc.	335 W. Prairie	Kootenai	Idaho
	Shopping Ctr.,
	Hayden, ID 83835
Hancock Fabrics, Inc.	1111 Garth Brooks	Canadian	Oklahoma
	Blvd.,
	Yukon, OK 73099
Hancock Fabrics, Inc.	801 S. Ankeny Blvd,	Polk	Iowa
	Ankeny, IA 50023
Hancock Fabrics, Inc.	526 S. Bryant Avenue,	Oklahoma	Oklahoma
	Edmond, OK 73034
Hancock Fabrics, Inc.	7393 W. Central	Sedgwick	Kansas
	Avenue, Wichita, KS
	67212
Hancock Fabrics, Inc.	2700 State Street, Ste.	Burleigh	North Dakota
	A-1, Bismarck, ND
	58503
Hancock Fabrics, Inc.	5740 Highway 80 East,	Rankin	Mississippi
	Pearl, MS 39208
Hancock Fabrics, Inc.	323 S. Mason Road,	Harris	Texas
	Katy, TX 77450
Hancock Fabrics, LLC	5233 N. Blackstone,	Fresno	California
	Ave.,
	Fresno, CA 93710
Hancock Fabrics, Inc.	2304 N. Alexander	Harris	Texas
	Drive, Baytown, TX
	77520
Hancock Fabrics, Inc.	205 Oak Street,	Faulkner	Arkansas
	Conway, AR 72032
Hancock Fabrics, Inc.	2501 Wabash Avenue,	Sangamon	Illinois
	Springfield, IL 62704
Hancock Fabrics, Inc.	6801 West 159th St.,	Cook	Illinois
	Tinley Park, IL 60477
Hancock Fabrics, Inc.	7946 Giacosa Place,	Shelby	Tennessee
	Memphis, TN 38133
Hancock Fabrics, Inc.	3190 Atlanta Highway,	Clarke	Georgia
	Athens, GA 30606
Hancock Fabrics, Inc.	3245 Florida Avenue,	Polk	Florida
	Lakeland, FL 33803
Hancock Fabrics, Inc.	4705 Navarro Street,	Victoria	Texas
	Victoria, TX 77904
Hancock Fabrics, Inc.	1063 Edwards Ferry	Loudoun	Virginia
	Rd., NE,
	Leesburg, VA 20176
Hancock Fabrics, Inc.	63040 N. Highway 97,	Deschutes	Oregon
	Bend, OR 97701
Hancock Fabrics, Inc.	5209 Hwy 280 South,	Shelby	Alabama
	Birmingham, AL 35242
Hancock Fabrics, Inc.	800 Fairview Rd., Ste,	Buncombe
	KK, Asheville, NC
	28803

Hancock Fabrics, Inc.	1721 Montgomery Hwy	Jefferson	Alabama
	S, Birmingham, AL
	35244
Hancock Fabrics, Inc.	1741 E. North Avenue,	Cass	Missouri
	Belton, MO 64012
Hancock Fabrics, Inc.	1340 Town East Blvd.,	Dallas	Texas
	Ste. A,
	Mesquite, TX 75150
Hancock Fabrics, Inc.	3400 State Line Road,	Miller	Arkansas
	Texarkana, AR 71854
Hancock Fabrics, Inc.	3009 Market Avenue,	Washington	Arkansas
	Fayetteville, AR 72703
Hancock Fabrics, Inc.	3325-A S. 74th Street,	Sebastian	Arkansas
	Fort Smith, AR 72903
Hancock Fabrics, Inc.	4523 Central,	Garland	Arkansas
	Hot Springs, AR 71913
Hancock Fabrics, Inc.	1702 Veterans	Tuscaloosa	Alabama
	Memorial
	Pkwy. E.,
	Tuscaloosa, AL 35404
Hancock Fabrics, Inc.	405 N. Mall Court,	Lauderdale	Alabama
	Florence, AL 35630
Hancock Fabrics, Inc.	1500 Browns Bridge	Hall	Georgia
	Rd.,
	Ste. 104C,
	Gainesville, GA 30501
Hancock Fabrics, Inc.	942 Commonwealth	Lee	Mississippi
	Blvd., Tupelo, MS
	38804
Hancock Fabrics, Inc.	3178 Lavon Dr., Ste	Dallas	Texas
	103, Garland, TX 75040
Hancock Fabrics, Inc.	235 Mid Rivers Mall	St. Charles	Missouri
	Drive,
	St. Peters, MO 63376
Hancock Fabrics, Inc.	230 Virginia St., Unit	McHenry	Illinois
	850, Crystal Lake, IL
	60014
Hancock Fabrics, Inc.	9311 Coors Blvd., NW,	Bernallilo	New Mexico
	Ste. M2,
	Albuquerque, NM
	87114
Hancock Fabrics, Inc.	9850 S. Maryland	Clark	Nevada
	Pkwy, Ste. 4,
	Las Vegas, NV 89123
Hancock Fabrics, Inc.	10150 Hudson Rd.	Washington	Minnesota
	#136, Woodbury, MN
	55129
Hancock Fabrics, Inc.	7993 S Town Ctr.,	Hennepin	Minnesota
	Minneapolis, MN
	55431
Hancock Fabrics, Inc.	11325 Hwy 7,	Hennepin	Minnesota
	Minnetonka, MN 55305
Hancock Fabrics, Inc.	441 E. Roosevelt Road,	DuPage	Illinois
	Lombard, IL 60148

Hancock Fabrics, Inc.	1899 S. Robert So.,	Dakota	Minnesota
	West St. Paul, MN
	55118
Hancock Fabrics, Inc.	5700 Monroe St.,	Lucas	Ohio
	Sylvania, OH 43560
Hancock Fabrics, Inc.	7179 N. Lincoln Ave.,	Cook	Illinois
	Lincolnwood, IL 60712
Hancock Fabrics, Inc.	7299 24th St.,	Cook	Illinois
	North Riverside, IL
	60546
Hancock Fabrics, Inc.	3404 Donnel Dr.,	Prince George’s	Maryland
	Forestville, MD 20747
Hancock Fabrics, Inc.	1135 W. Larpenteur,	Ramsey	Minnesota
	Roseville, MN 55113
Hancock Fabrics, Inc.	4817 Virginia Beach	Fairfax	Virginia
	Blvd., Virginia Beach,
	VA 23462
Hancock Fabrics, Inc.	1939 S. Military Hwy,	Chesapeake	Virginia
	Chesapeake, VA 23320
Hancock Fabrics, Inc.	9160 Mathis Ave.,	Prince William	Virginia
	Manassas, VA 20110
Hancock Fabrics, Inc.	218 N. Frederick Ave.,	Montgomery	Maryland
	Gaithersburg, MD
	20877
Hancock Fabrics, Inc.	565 Waukegan Rd.,	Cook	Illinois
	Northbrook. IL 60062
Hancock Fabrics, Inc.	2028 Plank Road,	Fredericksburg	Virginia
	Fredericksburg, VA
	22401
Hancock Fabrics, Inc.	2320 W. Mercury Blvd.,	Hampton	Virginia
	Hampton, VA 23666
Hancock Fabrics, Inc.	1498 N. Larkin Ave.,	Will	Illinois
	Joliet, IL 60435
Hancock Fabrics, Inc.	150 W. Gate Mall,	Dane	Wisconsin
	Madison, WI 53711
Hancock Fabrics, Inc.	6101 N. Broadway,	Cook	Illinois
	Chicago, IL 60660
Hancock Fabrics, Inc.	8151 Ritchie Hwy, Su	Anne Arundel	Maryland
	A, Pasadena, MD 21122
Hancock Fabrics, Inc.	2964 South 108th St.,	Milwaukee	Wisconsin
	West Allis, WI 53227
Hancock Fabrics, Inc.	2920 Festival Way,	Charles	Maryland
	Waldorf, MD 20601
Hancock Fabrics, Inc.	7980 New Hampshire	Prince George’s	Maryland
	Ave.,
	Langley Park, MD
	20787
Hancock Fabrics, Inc.	7440 S. Cicero Ave.,	Cook	Illinois
	Bedford Park, IL 60629

Schedule 8.4

Priority of Liens; Title to Properties

None.

Schedule 8.6

Litigation

None.

Schedule 8.8

Environmental Compliance

None.

Schedule 8.10

Bank Accounts

See Schedule 5.2(d).

Schedule 8.11

Intellectual Property

				Expiration/
Trademark		Registration	Registration	Cancellation
Owner	Trademark	Number	Date	Date
HF Enterprises, Inc.	America’s Fabric Store	2,090,281	08/19/97	08/19/17
HF Enterprises, Inc.	Hancock Fabrics	2,161,840	06/02/98	06/02/18
HF Enterprises, Inc.	Lauren Hancock	2,615,823	09/03/02	09/03/08
	Collection
HF Enterprises, Inc.	Sew Perfect (tools)	1,971,704	04/30/96	04/30/16
HF Enterprises, Inc.	Sew Perfect (bobbins,	1,971,703	04/30/96	04/30/16
	needles, etc.)
HF Enterprises, Inc.	The Fabric Card	1,970,555	04/23/96	04/23/16
Hancock Fabrics, Inc.	Buy Retail, Add Detail	3,270,559	07/24/07	07/24/13
HF Enterprises, Inc.	Absolutely Cotton	3,157,181	10/17/06	10/17/12
HF Enterprises, Inc.	Hancock Fabrics -	TMA594,330	11/07/03	11/07/18
	Canada
Trademark	Trademark	Application/Serial		Application
Applicant	Application	Number		Date
Hancock Fabrics, Inc.	Wishes & Dreams	77/251,959		08/10/07
License Agreements:  None.

Schedule 8.12

Subsidiaries; Affiliates; Capitalization; Solvency

Hancock Fabrics, Inc. - 80,000,000 shares of common stock, par value $0.01, authorized, 19,387,343 outstanding as of August 1, 2008. 5,000,000 shares of preferred stock, par value $0.01, authorized, 0 outstanding.

Hancock Fabrics of MI, Inc.- 1,000 shares of common stock, par value $0.01, authorized, 1,000 shares issued and outstanding to Hancock Fabrics, Inc.

Xxxxxxxxxxxxxx.xxx, Inc. - 1,000 shares of common stock, par value $0.01, authorized, 1,000 shares issued and outstanding to Hancock Fabrics, Inc.

HF Resources, Inc. - 1,000 shares of common stock, par value $0.01, authorized, 1,000 shares issued and outstanding to Hancock Fabrics, Inc.

HF  Merchandising, Inc. - 1,000  shares  of  common  stock,  no  par  value, authorized, 1,000 shares issued and outstanding to HF Resources, Inc.

HF Enterprises, Inc. - 1,000 shares of common stock, par value $0.01, authorized, 1,000 shares issued and outstanding to HF Resources, Inc.

Hancock Fabrics, LLC - 1,000 units of membership interest authorized and outstanding to HF Enterprises, Inc.

Schedule 8.13

Labor Disputes

None.

Schedule 8.15

Material Contracts

Indemnification Agreement, dated June 8, 1995, for each of Don L. Frugé and Donna L. Weaver.

Indemnification Agreements for Bruce D. Smith dated December 10, 1996, Larry D. Fair  dated June 8, 1995, William A. Sheffield, Jr. dated June 13, 1996, and William D. Smothers dated July 8, 1995.

Agreements (deferred compensation) with Bruce D. Smith dated December 10, 1996, Larry D. Fair dated June 13, 1996, William A. Sheffield, Jr. dated June 13, 1996, and William D. Smothers dated June 9, 1988.

Severance Agreements with Bruce D. Smith dated December 10, 1996 and Larry D. Fair, William A. Sheffield, Jr., and William D. Smothers dated May 4, 2002.

Agreement to Secure Certain Contingent Payments with Bruce D. Smith dated December 10, 1996.

Supplemental Retirement Plan, as amended.

1996 Stock Option Plan.

Indemnification Agreement for Roger T. Knox dated June 21, 1999.

Agreement and Renewal of Severance Agreement for Bruce D. Smith dated May 4, 1999. 2001 Stock Incentive Plan.

Employment Agreement with Jane F. Aggers, dated as of December 15, 2004.

2004 Special Stock Plan.

Amendment to Agreement and Agreement to secure Certain Contingent Payments with Bruce  D. Smith, dated as of March 15, 2005.

Indemnification Agreement, dated September 23, 2004 for Wellford L. Sanders, Jr. and June 10, 2004 for Bernard J. Wein.

Short-Term Incentive Compensation Bonus Program.

Long-Term Incentive Compensation Restricted Stock Program.

2005 Stock Compensation Plan for Non-Employee Directors.

Amendment to Employment Agreement with Jane F. Aggers, dated December 15, 2004.

Amendment No. 1, dated December 9, 2005, to the Amended and Restated Rights Agreement. Severance agreement with Kathleen Kennedy, dated March 15, 2006.

Amendment No. 2, dated March 20, 2006, to the Amended and Restated Rights Agreement.

Amended and Restated Rights Agreement with Continental Stock Transfer and Trust Company as amended through March 20, 2006.

2001 Stock Incentive Plan, as amended.

Severance agreement with Gail Moore, dated June 12, 2006.

Severance agreement with Kathleen Kennedy, dated May 9, 2007.

Amendments and Renewals of Severance Agreements for Larry D. Fair, William A. Sheffield and William D. Smothers, Jr. dated March 16, 2005.

Amendments to the Deferred Compensation Agreements for Larry D. Fair, William A. Sheffield, Jr. and William D. Smothers dated December 22, 2005.

Agreement for American Express Card Acceptance, between American Express Travel Related Services Company, Inc. and Hancock Fabrics, Inc., as amended and in effect.

Merchant Service Agreement dated March 28, 1990, between Discover Card Services and Hancock Fabrics, Inc.

Terms of Service Agreement dated August 1, 2008 between Hancock Fabrics, Inc., Elavon, Inc. and U.S. Bank National Association.

Schedule  8.16

Credit Card Agreements

Agreement for American Express Card Acceptance, between American Express Travel Related Services Company, Inc. and Hancock Fabrics, Inc., as amended and in effect.

Merchant Service Agreement dated March 28, 1990, between Discover Card Services and Hancock Fabrics, Inc.

Terms of Service Agreement dated August 1, 2008 between Hancock Fabrics, Inc., Elavon, Inc. and U.S. Bank National Association.

Schedule 8.20

Intercompany Indebtedness

As of the Closing Date, a balance of $42,028,000 is owed from HF Merchandising, Inc. to HF Resources, Inc. pursuant to a Note dated February 2, 1998, as amended.

As of the Closing Date, a balance of $171,368,000 is owed from Hancock Fabrics, Inc. to HF Resources, Inc. pursuant to a Loan Agreement dated December 22, 1997, as amended.

Schedule 9.9

Indebtedness

None.

Schedule 9.10

Loans; Investments

Note dated February 2, 1998, as amended, made by HF Merchandising, Inc. for the benefit of HF Resources, Inc.

Loan Agreement dated December 22, 1997, as amended, between Hancock Fabrics, Inc. and HF Resources, Inc.