EXHIBIT 10.1

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Fleet Retail Group, Inc.

The Administrative and Collateral Agent

for the Lenders Referenced Herein

Mothers Work, Inc.

The Lead Borrower

For The Borrowers Referenced Herein

AND

The Guarantors Party Hereto

October 15, 2004

TABLE OF CONTENTS

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EXHIBITS

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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

October 15, 2004

THIS AGREEMENT is made between

Fleet Retail Group, Inc., a Delaware corporation, with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇  ▇▇▇▇▇, as agent (in such capacity, herein the “Administrative Agent”) for the benefit of the Lenders, on a Pro Rata basis, based upon each Lender’s Percentage Commitment, who are, at present, those financial institutions identified on the signature pages of this Agreement and who in the future are those Persons (if any) who become a “Lender” in accordance with the provisions of Article VII of the Agency Agreement;

and

Fleet Retail Group, Inc., a Delaware corporation, with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇  ▇▇▇▇▇, as agent (in such capacity, herein the “Collateral Agent”) for the benefit of the Lenders and the Administrative Agent,

and

Cave Springs, Inc., a Delaware corporation (collectively, with the Lead Borrower, the “Borrowers” and each individually, a “Borrower”), which has its principal executive offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇  ▇▇▇▇▇,

Mothers Work, Inc., a Delaware corporation with its principal executive offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇  ▇▇▇▇▇ (the “Lead Borrower” and a “Borrower”),

and

Mothers Work Canada, Inc., a Delaware corporation (“Guarantor”), which has its principal executive offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,

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

WITNESSETH:

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ARTICLE I. - DEFINITIONS:

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

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

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

“ACH”:  Automated clearing house.

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

“Administrative Agent”:  Defined in the Preamble.

“Affiliate”:

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

(b)           Any corporation, limited liability company, trust, partnership, joint venture, or other enterprise which: is a parent, brother-sister, subsidiary, or affiliate, of any Obligor; has such enterprise’s tax returns or financial statements consolidated with the Lead Borrower’s; is a member of the

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same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which the Lead Borrower is a member; controls or is controlled by the Lead Borrower.

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

“Agency Agreement”:  That certain Agency Agreement dated October 15, 2004, by and among the Administrative Agent, the Collateral Agent, and the Lenders.

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

 “Agent Fee Letter”:  That certain letter of even date by and between the Administrative Agent and the Borrowers concerning Administrative Agent’s and Collateral Agent’s fees.

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

“Appraised Inventory Liquidation Percentage”: That percentage, obtained by the Collateral Agent from the then most recent appraisal of the Borrowers’ Inventory obtained by the Collateral Agent, to reflect the appraiser’s estimate of the consolidated net recovery (liquidation value) as a percentage of cost including raw materials.

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

“Approved Electronic Form”:  Defined in Section 14.22.

“Acquired Real Property”: Any real property acquired by the Borrowers after the date hereof, other than the Headquarters Facility.

“Authorized Officer”:  The Lead Borrower’s President, Treasurer or Chief Financial Officer duly authorized by the Lead Borrower’s Board of Directors, or, in the case of Borrowing Base Certificates, such person as is authorized by the Board of Directors of the Borrower.

“Availability”:      The sum of:

(a)           The Borrowing Base

Minus

(b)           The aggregate unpaid balance of the Loan Account

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Minus

(c)           The aggregate undrawn Stated Amount of all then outstanding L/C’s.

“Availability Reserves”:  Such reserves as the Collateral Agent from time to time determines in the Collateral Agent’s reasonable discretion as being appropriate (determined in accordance with customary credit considerations) to reflect the impediments to the Collateral Agent’s ability to realize upon the Collateral.  Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to) reserves based on the following:

(i)            Rent for any location in a Landlord State with respect to which a Landlord Waiver has not been received by the Collateral Agent (which initially shall be one (1) month rent for any such location).

(ii)           Customer Credit Liabilities (the Availability Reserve for which initially shall be up to Thirty-Three Percent (33%) of Customer Credit Liabilities and which may be adjusted based on changes in the operation of the Borrower’s business).

(iii)          Taxes and other governmental charges, including, ad valorem, personal property, and other taxes which might have priority over the Collateral Interests of the Collateral Agent in the Collateral.

(iv)          Payables (based upon payables which are past the Borrower’s normal trade terms).

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

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

“Base Margin”:  Zero Percent (0.00 %).

“Base Margin Loan”:  Each Revolving Credit Loan while bearing interest at the Base Margin Rate.

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

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“Blocked Account”:  Defined in Section 7.3(a)(ii).

“Blocked Account Agreement”:  An agreement, in form satisfactory to the Collateral Agent, which agreement recognizes the Collateral Agent’s Collateral Interest in the contents of the DDA which is the subject of such agreement and agrees that such contents shall be transferred only to the Concentration Account or as otherwise instructed by the Collateral Agent.

“Borrowers”:  Defined in the Preamble.

“Borrowing Base”:             The lesser of:

(a)           the lesser of the Revolving Credit Loan Ceiling or Borrowing Base A;

or

(b)           the Borrowing Base B.

“Borrowing Base A”:  The sum of:

(a)           The lesser of (1) 50% of the sum of clauses (b), (c), (d), and (e) below or (2) the sum of:

(i)      the face amount of Eligible Accounts arising from the sale of goods in wholesale arrangements multiplied by Eighty-Five Percent (85%), plus

(ii)     the face amount of Eligible Accounts arising from the leasing of a customer list, marketing services, or an Account owing to a Borrower from an account debtor operating a department or specialty store or other location in which a Borrower leases or licenses a portion of the space in such store  (provided, however, that customer list or marketing services Accounts shall be included only to the extent that they do not exceed $5,000,000 in the aggregate) multiplied by Eighty Percent (80%),

Plus

(b)           the face amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate;

Plus

(c)           the sum of:

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(i) the Cost of Eligible Raw Materials Inventory (net of Inventory Reserves) multiplied by the applicable Inventory Advance Rate,

(ii) (A) the sum of (I) the Cost of Eligible Finished Goods Inventory (net of Inventory Reserves) not located in department or specialty stores or other locations in which a Borrower leases or licenses a portion of the space in such store; plus (II) the lesser of (a) 18% of the sum of the Cost of Eligible Finished Goods Inventory, Eligible L/C Inventory, and Eligible In-Transit Inventory (in each case, net of Inventory Reserves) or (b) the Cost of Eligible Finished Goods Inventory (net of Inventory Reserves) located in department or specialty stores or other locations in which a Borrower leases or licenses a portion of the space in such store multiplied by (B) the applicable Inventory Advance Rate, and

(iii) the lesser of $20,000,000 or the sum of (A) Cost of Eligible L/C Inventory (net of Inventory Reserves) multiplied by the applicable Inventory Advance Rate; plus (B) the Cost of Eligible In-Transit Inventory (net of Inventory Reserves) multiplied by the applicable Inventory Advance Rate;

Plus

(d)           (i) prior to the date that the Third Mortgage Conditions have been satisfied, the lesser of (i) the Determined Value of the Eligible Fixed Assets multiplied by the Real Estate Advance Rate; or (ii) the Stated Amount of the Special Purpose Credit; or

(ii) thereafter, the amount equal to (A) the Determined Value of the Eligible Fixed Assets multiplied by the Real Estate Advance Rate; less (B) the Second Mortgage Cap;

Plus

(e)           the sum of:

(i) 100% of Eligible Liquid Collateral consisting of a money market fund held by FNB whose assets entirely consist of cash;

PLUS

(ii) 90% of Eligible Liquid Collateral consisting of a money market fund whose assets entirely consist of cash (other than a fund held by FNB);

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PLUS

(iii) 100% of Eligible Liquid Collateral consisting of certificates of deposit with maturities of 365 days or less from the date of acquisition issued by FNB (or a money market fund held by FNB whose assets consist entirely of cash and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution);

PLUS

(iv) 90% of Eligible Liquid Collateral consisting of certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution other than FNB (or a money market fund (other than a fund held by FNB) whose assets consist entirely of cash and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by FDIC-insured financial institutions);

PLUS

(v) 90% of Eligible Liquid Collateral consisting of securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to payment of principal and interest by the United States Treasury held by FNB (or a money market fund held by FNB whose assets consist entirely of cash, securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to payment of principal and interest by the United States Treasury, and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution);

PLUS

(vi) 85% of Eligible Liquid Collateral consisting of securities (not held by FNB) with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to payment of principal and interest by the United States Treasury (or a money market fund (other than a fund held by FNB) whose assets consist entirely of cash, securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to

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payment of principal and interest by the United States Treasury, and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution);

PLUS

(vii) 80% of Eligible Liquid Collateral consisting of senior unsecured bonds of a domestic corporate issuer rated at least A- by a rating agency acceptable to the Collateral Agent with maturities of 2 years or less from the date of acquisition held by FNB (or a money market fund held by FNB whose assets consist entirely of cash, senior unsecured bonds of a domestic corporate issuer rated at least A- by a rating agency acceptable to the Collateral Agent with maturities of 2 years or less from the date of acquisition, securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to payment of principal and interest by the United States Treasury, and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution);

PLUS

(viii) 75% of Eligible Liquid Collateral consisting of senior unsecured bonds (not held by FNB) of a domestic corporate issuer rated at least A- by a rating agency acceptable to the Collateral Agent with maturities of 2 years or less from the date of acquisition (or a money market fund (other than a fund held by FNB) whose assets consist entirely of cash, senior unsecured bonds of a domestic corporate issuer rated at least A- by a rating agency acceptable to the Collateral Agent with maturities of 2 years or less from the date of acquisition, securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured as to payment of principal and interest by the United States Treasury, and certificates of deposit with maturities of 365 days or less from the date of acquisition issued by a FDIC-insured financial institution);

Minus

(f)            Availability Reserves.

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“Borrowing Base B”:  At any time that the Indenture restricts Indebtedness, the sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries (as defined in the Indenture Agreement) are permitted to incur as Indebtedness (as defined in the Indenture Agreement) hereunder on a consolidated basis without violating the Indenture Agreement.

“Borrowing Base Certificate”:  Defined in Section 5.4.

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

“Business Plan”:  The Borrowers’ business plan annexed hereto as EXHIBIT 5.12(b) and any revision, amendment, or update of such business plan, provided such revision, amendment, or update has been accepted in writing by the Administrative Agent.

“Capital Adequacy Demand”:  Defined in Section 14.8.

“Capital Adequacy Charge”:  Defined in Section 14.8.

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

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

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

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

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

(b)           The acquisition after the date hereof, by any group of persons (within the meaning of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial ownership (within the meaning of Rule

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13d-3 of the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% or more of the issued and outstanding capital stock of any Obligor having the right to vote for the election of directors of such Obligor.

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

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

“Closing Date”:  The date on which all conditions precedent in Article III of this Agreement are satisfied and the initial Revolving Credit Loans are made under this Agreement.

“Collateral”:  Defined in Section 8.1.

“Collateral Agent”:  Defined in the Preamble.

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

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

“Concentration Account”:  Defined in Section 7.3(a)(i).

“Consolidated”:  When used to modify a financial term, test, statement, or report, refers to the application or preparation of such term, test, statement, or report (as applicable) based upon the consolidation, in accordance with GAAP, with any adjustments or modifications acceptable to the Administrative Agent, of the financial condition or operating results of the Borrowers.

“Cost”:

The calculated cost of purchases, based upon the Borrowers’ accounting practices, on a first-in, first-out (FIFO) basis, known to the Collateral Agent, which practices are in effect on the date on which this Agreement was executed as such calculated cost is determined from invoices received by the Borrowers; such Borrower’s purchase journal; or such Borrower’s stock ledger

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provided that “Cost” does not include Inventory capitalization costs or other non-purchase price charges (such as freight and UNICAP) used in the Borrowers’ calculation of cost of goods sold.

“Costa Rican Facilities”:  Includes (i) Property # A F 007368-000; Industrial ▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ 01, (ii) Property # A 182290-00, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇, (▇▇▇) Property # A 205774-000, Alajuela, District 02 San ▇▇▇▇, County 01, (iv) Property # A 213743-000, Alajuela, District 01 Palmares, County 07, (v) Property # A 159001-00, Alajuela, District 01 Palmares, County 07, (vi) Property # A 219383-000, Alajuela, District 01 Palmares, County 07, (vii) Property # A 215113-000, Alajuela, District 01 Palmares, County 07, and (viii) Property # P 084214-000, lot for construction, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ Quepos, County 06.

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

“Costs of Collection”:  Includes, without limitation, all attorneys’ reasonable fees and reasonable out-of-pocket expenses incurred by the Agents’ attorneys, and all reasonable costs incurred by any Agent including, without limitation, reasonable costs and expenses associated with any bankruptcy or insolvency proceeding or travel on behalf of any Agent, where such costs and expenses are directly or indirectly related to or in respect of such Agent’s:  administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or the Agent’s Rights and Remedies and/or any of the rights and remedies of any such Agent against or in respect of any guarantor or other person liable in respect of the Liabilities (whether or not suit is instituted in connection with such efforts).  “Costs of Collection” shall also include the reasonable costs and expenses similar to the foregoing of Lender’s Special Counsel.  The Costs of Collection are Liabilities, and at the Administrative Agent’s option may bear interest at the then effective Base Margin Rate.

 “Credit Card Advance Rate”:  Ninety Percent (90%).

“Customer Credit Liability”:  Gift certificates, customer deposits, merchandise credits, layaway obligations, frequent shopping programs, and similar liabilities of any Borrower to its retail customers and prospective customers.

“Customs Broker Agreement”:   A tri-party agreement in form satisfactory to the Collateral Agent, among the Lead Borrower or any Obligor, and a customs broker or other carrier, in which the customs broker or other carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Collateral Agent and agrees, upon notice from the

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Collateral Agent, to hold and dispose of the subject Inventory solely as directed by the Collateral Agent.

“DDA”:  Any checking or other demand depository account maintained by any of the Borrowers other than an Exempt DDA.

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

“Determined Value”:  At the relevant time of reference thereto, the appraised value of such assets on fair market value basis determined by the most recent appraisal thereof acceptable to the Collateral Agent in its discretion.

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

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

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

“Dollar Commitment”:  As set forth on EXHIBIT 2.22, annexed hereto (as such amounts may change in accordance with the provisions of this Agreement).  The aggregate of the Dollar Commitments shall not exceed the Revolving Credit Loan Ceiling.

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

“EBITDA”:  The Borrowers’ Consolidated earnings (excluding extraordinary gains and gains from the sale of assets other than in the ordinary course of business) before interest, taxes, depreciation, amortization and other non-cash charges properly deducted in determining earnings in accordance with GAAP, each as determined in accordance with GAAP.

“Eligible Accounts”:  Includes an Account owing to a Borrower with respect to (A) the leasing of a customer list or marketing services, (B) an Account owing to a Borrower arising from a department or specialty store or other location in which a Borrower leases or licenses a portion of the space in such store, or (C) a wholesale Account, each of which arose in the ordinary course of a Borrower’s business from the lease of customer lists, sale of goods or rendition of services.  Eligible Accounts shall be determined without duplication of Eligible Credit Card Receivables.  In no event shall Accounts purchased by a Borrower or held by a Borrower whose stock has been purchased by a Borrower constitute Eligible Accounts until after a determination thereof has been made by the Collateral Agent in its reasonable discretion (determined in accordance with customary

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credit considerations).  Without limiting the generality of the foregoing, no Account shall be an Eligible Account if:

(i)            it arises out of a sale made by a Borrower to a Subsidiary or an Affiliate of a Borrower or to a Person controlled by an Affiliate of a Borrower; or

(ii)           (a) if arising under clause (A) above, it is due or unpaid more than 60 days after the original due date shown on the invoice or more than 90 days after the date of such invoice;

(b) if arising under clause (B) above, it is due or unpaid more than 30 days from the date such account is owing under the applicable agreement; or

(c) if arising under clause (C) above, it is due or unpaid more than 60 days after the original due date shown on the invoice or more than 120 days after the date of such invoice;

(iii)          50% or more of the Accounts from the Account Debtor are not deemed Eligible Accounts hereunder; or

(iv)          the total unpaid Accounts of the Account Debtor exceed 20% of the net amount of all Eligible Accounts, to the extent of such excess (other than those Account Debtors as to which the Collateral Agent has agreed in writing that this clause (iv) does not apply); or

(v)           any covenant, representation or warranty contained in the Agreement with respect to such Account has been breached; or

(vi)          the Account Debtor is also a Borrower’s creditor or supplier, or the Account Debtor has disputed liability with respect to such Account, or the Account Debtor has made any claim with respect to any other Account due from such Account Debtor to any Borrower or the Account otherwise is or may become subject to any right of setoff by the Account Debtor (but in the case of such claims or setoff, the portion of the Accounts of such Account Debtor in excess of the amount at any time and from time to time owed by such Borrower to such Account Debtor or claimed owed by such Account Debtor may be an Eligible Account); or

(vii)         the Account Debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or made an assignment for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in the premises in respect of the Account Debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other petition or other application for relief under the federal bankruptcy laws has been filed against the Account Debtor, or if the Account Debtor has failed, suspended business, ceased to be solvent, or consented to or suffered a

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receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs; or

(viii)        it arises from a sale to an Account Debtor outside the United States, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Collateral Agent in its sole discretion; or

(ix)           it arises from a sale to the Account Debtor on a ▇▇▇▇-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or any other repurchase or return basis; or

(x)            the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless such Borrower assigns its right to payment of such Account to Collateral Agent for the benefit of the Lenders, in a manner satisfactory to Collateral Agent, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. §§ 203 et seq., as amended); or

(xi)           the Account is not at all times subject to Lender’s duly perfected, first priority security interest and no other Encumbrance other than a Permitted Encumbrance; or

(xii)          the goods giving rise to such Account have not been delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been performed by a Borrower and accepted by the Account Debtor or the Account otherwise does not represent a final sale; or

(xiii)         the Account is evidenced by chattel paper or an Instrument of any kind, or has been reduced to judgment; or

(xiv)        such Borrower has made any agreement with the Account Debtor for any deduction therefrom, except for discounts or allowances which are made in the ordinary course of business for prompt payment and which discounts or allowances are reflected in the calculation of the face value of each invoice related to such Account; or

(xv)         such Borrower has made an agreement with the Account Debtor to extend the time of payment thereof in the ordinary course of business (provided, however that such Account shall cease to be an Eligible Account if it is due or unpaid beyond the applicable limited period of days after the original invoice date or original due date set forth in clause (ii) above); or

(xvi)        the Account is otherwise deemed unacceptable by the Collateral Agent in its reasonable discretion (determined in accordance with customary credit considerations).

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

“Eligible Credit Card Receivables”:  Accounts due on a non-recourse basis from major credit card processors (which, if due on account of a private label credit card program, are deemed in the reasonable discretion of the Collateral Agent to be eligible (determined in accordance with customary credit considerations)), which accounts have been outstanding for no more than Five (5) Business Days.

 “Eligible Finished Goods Inventory”: Eligible Inventory consisting of finished goods.

“Eligible Fixed Assets”:  The Headquarters Facility to the extent that it is (a) owned by the Borrowers, (b) subject to a Mortgage, (c) properly insured in accordance with the provisions of Section 4.9, and (d) not encumbered by an Encumbrance other than Permitted Encumbrances.

“Eligible Inventory”:  Borrowers’ Inventory in the United States, at such locations, and of such types, character, quality and quantities, as the Collateral Agent in its reasonable discretion from time to time determines to be acceptable for inclusion in the calculation of the Borrowing Base purposes (determined in accordance with customary credit considerations), as to which the Collateral Agent has a perfected security interest that is prior and superior to all claims and all Encumbrances (other than Permitted Encumbrances, subject to the Collateral Agent’s rights to establish Reserves therefore).  In no event shall Inventory purchased by a Borrower out of the ordinary course or held by a Borrower whose common stock has been purchased by a Borrower constitute Eligible Inventory until after the results of an appraisal thereof satisfactory to Collateral Agent in its discretion has been performed by an appraiser satisfactory to Collateral Agent in its reasonable discretion and the determination thereof has been made by the Collateral Agent in its reasonable discretion (determined in accordance with customary credit considerations).

In no event, shall  “Eligible Inventory” include: (i) any non-merchandise inventory (such as labels, bags, and packaging materials); (ii) damaged goods, return to vendor merchandise, packaways, consigned inventory, and other similar categories of Goods; (iii) any Inventory located in any store of the Borrowers which has been closed for business for more than 20 days in any fiscal quarter; and (iv) work in process.

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“Eligible In-Transit Inventory”: That portion of the Borrowers’ Inventory (without duplication of other Eligible Inventory and Eligible L/C Inventory)  that meets the following criteria, which criteria may be revised by the Collateral Agent in its reasonable discretion (determined in accordance with customary credit considerations) from time to time after the Closing Date:

(a)           such Inventory currently is in transit (whether by vessel, air, or land) from a location outside of the continental United States to one of the Borrower’s Domestic Distribution Centers, which is expected to be delivered to such Domestic Distribution Center and received by such Borrower within 30 days,

(b)           title to such Inventory has passed to the Borrower,

(c)           such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to the Collateral Agent in its reasonable discretion,

(e)           such Inventory either

(1)   is the subject of a negotiable ▇▇▇▇ of lading that (x) is consigned to Lender (either directly or by means of endorsements), (y) was issued by the carrier respecting the subject Inventory, and (z) either is (I) in the possession of Collateral Agent or a customs broker or (II) if such Inventory was the subject of a documentary L/C, the subject of a telefacsimile copy that Collateral Agent has received from the Issuer which issued the LC and as to which Collateral Agent also has received a confirmation from such Issuer that such document is in-transit by air-courier to Collateral Agent or a customs broker, or

(2)   is the subject of a negotiable cargo receipt and is not the subject of a ▇▇▇▇ of lading (other than a negotiable ▇▇▇▇ of lading consigned to, and in the possession of, a consolidator or Collateral Agent, or their respective agents) and such negotiable cargo receipt is (x) consigned to Collateral Agent (either directly or by means of endorsements), (y) that was issued by a consolidator respecting the subject Inventory, (z) that either is (I) in the possession of Collateral Agent or a customs broker, or (II) if such Inventory was the subject of a documentary L/C, the subject of a telefacsimile copy that Collateral Agent has received from the Issuer which issued the LC and as to which Collateral Agent also has received a confirmation from such Issuer that such document is in-transit by air-courier to Collateral Agent or a customs broker, and

(f)            Borrower has provided a Borrowing Base Certificate to Collateral Agent that certifies that, to the best knowledge of Borrower, such Inventory meets all of Borrower’s representations and warranties contained in the

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Loan Documents concerning Eligible Inventory, that Borrower knows of no reason why such Inventory would not be accepted by the Borrower when it is delivered to Borrower, and that the shipment as evidenced by the documents conforms to the related order documents.

“Eligible L/C Inventory”:  That portion of the Borrowers’ Inventory (without duplication of other Eligible Inventory and Eligible In-Transit Inventory) the purchase of which is supported by a documentary L/C and which is expected to be delivered to such Domestic Distribution Center and received by such Borrower within 30 days, provided that

(a)           Such Inventory is of such types, character, quality and quantities as the Collateral Agent in its reasonable discretion (determined in accordance with customary credit considerations) from time to time determines to be Eligible Inventory; and

(b)           The documentary L/C which relate to such shipment names the Collateral Agent as consignee of the subject Inventory and the Collateral Agent has control over the documents which evidence ownership of the subject Inventory (such as by the providing to the Collateral Agent of a Customs Brokers Agreement to the Collateral Agent).

“Eligible Liquid Collateral”:  Each of the following:

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

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

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

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

in each case only to the extent (i) subject to the Collateral Agent’s first priority, perfected, valid, and enforceable security interest to secure the Liabilities; (ii) immediately available to the Collateral Agent; (iii) not subject to any restriction on their use (other than in favor of Collateral

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Agent; and (iv) either held by FNB or by another financial institution acceptable to the Collateral Agent with whom the Collateral Agent and the applicable Borrower have agreed to a written control agreement in form and substance satisfactory to Collateral Agent.

“Eligible Raw Materials Inventory”: Eligible Inventory consisting of raw materials .

“Employee Benefit Plan”:  As defined in ERISA.

“Encumbrance”:  Each of the following:

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

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

“End Date”:  The date upon which both (a) all Liabilities have been indefeasibly paid in full and (b) all obligations of the Agents and Lenders to make loans and advances and to provide other financial accommodations to the Borrowers hereunder shall have been irrevocably terminated.

“Environmental Laws”:  All of the following:

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

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

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

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

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

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

“Excess Availability”:  The difference of (a) Availability minus (b) all then past due obligations of the Borrowers (other than those being contested in good faith for which adequate reserves have been established by Borrowers), including accounts payable which are beyond customary trade terms and rent obligations for leases which are beyond applicable grace periods.

“Exempt DDA”:  A depository account maintained by any Obligor, the only contents of which may be transfers from the Operating Account and actually used solely (i) for ▇▇▇▇▇ cash purposes; or (ii) for payroll and payroll taxes, together with such other depository accounts agreed to by Collateral Agent in writing as constituting an Exempt DDA.

“Financial Covenant Adjusted Availability”: The sum of:

(i)            The lesser of (a) Borrowing Base A; or (b) the sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries (as defined in the Indenture Agreement) are permitted to incur as Indebtedness (as defined in the Indenture Agreement) hereunder on a consolidated basis without violating the Indenture Agreement.

Minus

(ii)           The aggregate unpaid balance of the Loan Account

Minus

(iii)          The aggregate undrawn Stated Amount of all then outstanding L/C’s.

“First Agreement”:  That certain Loan and Security Agreement dated May 24, 1998, by and between Lead Borrower, Cave Springs and Fleet Capital Corporation, successor-by-assignment to Fleet Retail Group, Inc., as amended.

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

“Fixed Charge Coverage Ratio”:  For any twelve month period, the ratio of Borrowers’ consolidated (a) EBITDA minus non-financed Capital Expenditures minus the payment of any dividends or other distributions on capital stock of the Lead Borrower (except distributions in such stock), to (b) scheduled cash interest expense, plus scheduled principal payments on account of current maturities of long term Indebtedness, plus, without duplication, payments for the scheduled redemption or acquisition of Securities, plus income taxes paid in cash, all as determined in accordance with GAAP.

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

“FNB”:  Fleet National Bank.

“GAAP”:  Principles which are consistent with those promulgated or adopted by the Financial Accounting Standards Board and its predecessors (or successors) in effect and applicable to that accounting period in respect of which reference to GAAP is being made, provided, however, in the event of a Material Accounting Change, then unless otherwise specifically agreed to by the Lead Borrower and the Administrative Agent, (a) the Lead Borrower’s compliance with the financial performance covenants imposed pursuant to Section 5.12 shall be determined as if such Material Accounting Change had not taken place and (b) the Lead Borrower shall include, with its monthly, quarterly, and annual financial statements a schedule, certified by its chief financial officer, on which the effect of such Material Accounting Change to the statement with which provided shall be described.

“General Intangibles”:  Includes, without limitation, “general intangibles” as defined in the UCC; and also all: rights to payment for credit extended; deposits; amounts due to the Obligors; credit memoranda in favor of the Obligors; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; payments under any settlement or other agreement; payments or right to receive payments on account of any transfer of any interest in any Leasehold Interest; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of the Obligors to enforce the foregoing; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; patents, patent applications, patents pending, and other intellectual property; internet addresses and domain names; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data; computer software programs (including the source and object codes therefor), computer

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records, computer software, rights of access to computer record service bureaus, service bureau computer contracts, and computer data; tapes, disks, semi-conductors chips and printouts; trade secrets rights, copyrights, copyrightable materials, copyright registrations and applications, mask work rights and interests, and derivative works and interests; user, technical reference, and other manuals and materials; trade names, trademarks, service marks, and all goodwill relating thereto; registrations, applications for registration of the foregoing; and all other intangible property of the Obligors in the nature of intellectual property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by the Obligors or credit extended or services performed, by the Obligors, whether intended for an individual customer or the general business of the Obligors, or used or useful in connection with research and development by the Obligors.

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

“Gross Margin”:  With respect to the subject accounting period for which it is being calculated, the decimal equivalent of the following:

Sales (Minus) Cost of Goods Sold

Sales

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

“Headquarters Facility”:  The Obligors’ headquarters building and related real estate located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇  ▇▇▇▇▇.

“Import Landing Costs”:  To the extent not included in the Stated Amount of an L/C, Landing Costs for Inventory, the purchase of which is supported by such L/C, or customs, duty, freight, and other out-of-pocket costs and expenses which will be expended to “land” in transit Inventory and which is not included in invoices for prepaid Inventory.

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

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

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

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

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

(e)           As lessee under Capital Leases;

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

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

“Indebtedness” also includes:

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

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

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

“Indemnified Person”:  Defined in Section 14.13.

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

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

“Index Loan”:  Any Revolving Credit Loan which bears interest at an Index Rate.

“Index Margin”:  As determined pursuant to the applicable section of the Margin Pricing Grid set forth in Section 2.11(f), for loans initiated on or after the date when so set, that is to say Index contracts in effect at the time of increases/decreases in margin will remain in effect at the margin originally utilized when the contract was opened.  The margin in effect at a given time will apply to contracts opened at that time, and shall be based upon the Margin Pricing Grid.

“Index Offer Rate”:  With respect to any Index Loan, the rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) as determined by the Administrative Agent to be the highest prevailing rate per annum at which deposits on U.S. Dollars are offered to FNB or its successors, by first-class banks in the LIBOR market in which FNB or its successors participates at or about 11:00 a.m. (London Time) Two (2) Index Business Days before the first day of the Interest Period for the subject Index Loan, for a deposit approximately in the amount of the subject loan for a period of time approximately equal to such Interest Period.  Such rate shall be determined on the basis of the highest offered rates for deposits in U.S. Dollars, for a period of time comparable to such Index Loan, which appears on Page 3750 on the Dow ▇▇▇▇▇ Market Service (formerly known as Telerate) as of 11:00 a.m. London time on the day which is Two (2) Business Days preceding the first day of such Index Loan; provided, however, if the rate described above does not appear on the Dow ▇▇▇▇▇ Market Service on any applicable interest determination date, the Index Offer Rate shall be the highest rate (rounded upwards, if necessary, to the nearest one hundred-thousandth of a percentage point) determined on the basis of the offered rates for deposits in U.S. Dollars for a period of time comparable to such Index Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the day that is Two (2) Business Days preceding the first day of such Index Loan as selected by the Administrative Agent.  If such rate is unavailable, the rate for that date will be determined on the basis of the highest rates quoted for loans in U.S. Dollars to leading European banks for a period of time comparable to such Index Loan, offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the day that is Two (2) Business days preceding the first day of such Index Loan.  In the event that the Index Offer Rate for an Index Loan cannot be determined through any of the methods provided above, it will be determined in whatever manner Administrative Agent may reasonably determine or if Administrative Agent deems that it cannot be determined, the Index Offer Rate will be unavailable.

“Index Rate”:  That per annum rate (calculated on a 365/366-day year and actual days elapsed) equal to the Index Offer Rate plus the Index Margin except that, in the

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event that the Administrative Agent determines that any Lender may be subject to the Reserve Percentage, the “Index Rate” shall mean, with respect to any Index Loans then outstanding (from the date on which that Reserve Percentage first became applicable to such loans), and with respect to all Index Loans thereafter made, an interest rate per annum equal the sum of (a) plus (b), where:

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

Index Offer Rate

1 minus Reserve Percentage

(b) is the applicable Index Margin.

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

“Interest Payment Date”:  With reference to:

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

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

“Interest Period”:

(a)           With respect to each Index Loan: subject to Subsection (b), below, the period commencing on the date of the making or continuation of, or conversion to, the subject Index Loan and ending on the day that corresponds numerically to such date, One (1), Two (2), Three (3), or Six (6) months thereafter, as the Lead Borrower may elect by irrevocable notice (pursuant to Section 2.5(b)) to the Administrative Agent.

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

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

(ii)           Subject to Subsections (iii) and (iv), below, any Interest Period applicable to a Index Loan, which Interest Period begins on a day for which there is no numerically corresponding day in the

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calendar month during which such Interest Period ends, shall end on the last Index Business Day of the month during which that Interest Period ends.

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

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

“Inventory”:  Includes, without limitation, “inventory” as defined in the UCC and also all:  packaging, advertising, and shipping materials related to any of the foregoing, and all names or marks affixed or to be affixed thereto for identifying or selling the same; Goods held for sale or lease or furnished or to be furnished under a contract or contracts of sale or service by the Obligors, or used or consumed or to be used or consumed in the Obligors’ business; Goods of said description in transit: returned, repossessed and rejected Goods of said description; and all Documents (whether or not negotiable) which represent any of the foregoing.

“Inventory Advance Rate”:  The following percentages for the applicable category of Eligible Inventory:

provided, however, in the event that at any time or from time to time the ratio of the Inventory Advance Rate to the Appraised Inventory Liquidation Percentage exceeds the ratio of the Inventory Advance Rate to the Starting Inventory Liquidation Percentage, then the Inventory Advance Rate shall be reduced to the extent required so that the ratio of the Inventory Advance Rate (after giving effect

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to such adjustment) to the Appraised Inventory Liquidation Percentage equals the ratio of the Inventory Advance Rate to the Starting Inventory Liquidation Percentage.

“Inventory Reserves”:  Such reserves as may be established from time to time by the Collateral Agent in the Collateral Agent’s reasonable discretion with respect to the determination (determined in accordance with customary credit considerations) of the saleability, at Retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory.  Without limiting the generality of the foregoing, Inventory Reserves may include (but are not limited to) reserves based on the following:

(i)            Obsolescence (based upon Inventory on hand beyond a given number of days).

(ii)           Seasonality.

(iii)          Shrinkage.

(iv)          Imbalance.

(v)           Change in Inventory character.

(vi)          Change in Inventory composition.

(vii)         Change in Inventory mix.

(viii)        Markdowns (both permanent and point of sale)

(ix)           Retail ▇▇▇▇ ons and markups inconsistent with prior period practice and performance; industry standards; current business plans; or advertising calendar and planned advertising events.

(x)            Return to vendors.

(xi)           Damage.

(xii)          Inventory in the possession of any bailee.

(xiii)         Design room Inventory.

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

“Issuer”:  The issuer of any L/C.

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

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“L/C”:  Any letter of credit, the issuance of which is procured by the Administrative Agent for the account of any Borrower and any acceptance made on account of such letter of credit, including without limitation, any letter of credit presently issued by FNB, including without limitation any letter of credit issued under the First Agreement and the Special Purpose Letter of Credit.

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

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

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

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

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

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

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

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

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

(iv)          All interest, fees, and charges and other amounts which may be charged by any Agent or the Lenders, to the Obligors and/or which may be due from the Obligors to any Agent or the Lenders, from time to time.

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

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

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

(b)           Any and all direct or indirect liabilities, debts, and obligations of the Obligors to any Agent or the Lenders or any Affiliate of any Agent or Affiliate of the Lenders, each of every kind, nature, and description owing on account of any service or accommodation provided to, or for the account of any Obligors pursuant to this or any other Loan Document, including cash management services and the issuances of L/C’s, including without limitation the Special Purpose Credit.

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

“Liquid Collateral Investments”: The Borrower’s Investment Property in which the Collateral Agent holds a first priority (other than a prior security interest held by the securities intermediary maintaining a securities account in which the Investment Property is maintained, to the extent such prior security interest

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secures the securities intermediary’s customary fees and charges), perfected, valid, and enforceable lien and security interest to secure the Liabilities, which are not subject to any restriction on their use (other than restrictions in favor of Collateral Agent).

“Loan Account”:  Defined in Section 2.8.

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

“Margin Adjustment Date”:  As defined in Section 2.11(f).

“Margin Pricing Grid”:  Provides for quarterly adjustment to the interest rate to be charged on Revolving Credit Loans based upon the level of Pricing Adjusted Availability then existing and is shown in Section 2.11(f).

“Master Letter of Credit Agreement”:  Defined in Section 2.18(d).

“Material Accounting Change”:  Any change in GAAP applicable to accounting periods subsequent to the Borrowers’ fiscal year most recently completed prior to the execution of this Agreement, if such change has a material effect on the Borrowers’ financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrowers, when compared with such condition or results as if such change had not taken place, or where preparation of the Borrowers’ statements and reports in compliance with such change results in the breach of a financial performance covenant imposed pursuant to Section 5.12, where such a breach would not have occurred if such change had not taken place or visa versa.

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

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“Maturity Date”:   October 15, 2009, or if such day is not a Business Day, the next succeeding Business Day.

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

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

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

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

With respect to any Lender, as indicated adjacent to such Lender’s signature at the foot of this Agreement.  With respect to any Person who becomes a Lender hereafter pursuant to Section 7.2 of the Agency Agreement, as indicated in the Assignment and Acceptance of such Person.

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

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

“Operating Account”:   Defined in Section 7.3(a)(iii).

“Overloan”: A loan, advance, or providing of credit support (such as the issuance of any L/C) to the extent that, at the time it is made, it exceeds Availability immediately prior to the making of such loan, advance, or providing of credit support.

“Participant”:  Defined in Section 14.16.

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

“Percentage Commitment”:  As set forth on EXHIBIT 2.22, annexed hereto, reflecting, with respect to any Lender, the ratio of (i) the amount of the Dollar Commitment of such Lender to (ii) the aggregate amount of the Dollar Commitments of all Lenders (as such percentage may change in accordance with the provisions of this Agreement).

“Permissible Overloans”:  Defined in the Agency Agreement.

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

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

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

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

(v)           all Persons, assets or divisions acquired shall be in the retail business or such other lines of business as may be consented to by Administrative Agent.

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

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

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

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

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

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of the date such Person becomes a Subsidiary of Borrowers, each of the Permitted Creation Requirements; and

(v)           all Persons, assets or divisions created shall be in the retail business or such other lines of business as may be consented to by Administrative Agent.

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

“Permitted Encumbrances”:  The following:

(a)           Encumbrances in favor of the Collateral Agent.

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

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

(d)           Deposits under workmen’s compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed

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money) or leases, or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds arising in the ordinary course of business.

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

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

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

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Real Property, together with the improvements and fixtures thereon.

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

(i) Inclusive of those Encumbrances (if any) listed on EXHIBIT 4.7 in favor of landlords, liens or security interests held by the Borrowers’ landlords for up to a maximum of ten (10) store locations in the aggregate.

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

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

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

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

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

“Pricing Adjusted Availability”: The sum of:

(i)            The sum of (a) the lesser of (I) Borrowing Base A; or (II) the sum that the Lead Borrower and those Obligors that are Restricted Subsidiaries (as defined in the Indenture Agreement) are permitted to incur as Indebtedness (as defined in the Indenture Agreement) hereunder on a consolidated basis without violating the Indenture Agreement; plus (b) the average amount of Liquid Collateral Investments for the applicable fiscal quarter (for purposes of the calculation of this average amount, any “overnight funds” consisting of Liquid Collateral Investments shall be included only on the date of purchase of such overnight funds).

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Minus

(ii)           The aggregate unpaid balance of the Loan Account

Minus

(iii)          The aggregate undrawn Stated Amount of all then outstanding L/C’s.

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

“Pro Forma Fixed Charge Coverage Ratio”: For any twelve month period, the ratio of Borrowers’ consolidated (a) EBITDA during such period minus projected Non-Financed Capital Expenditures for the following twelve month period minus projected Distributions for the following twelve month period, to (b) projected cash interest expense for the following twelve month period, plus projected principal payments on account of current maturities of long term Indebtedness for the following twelve month period, plus projected income taxes paid in cash for the following twelve month period, all as determined in accordance with GAAP.  Any projections used in computing Pro Forma Fixed Charge Coverage Ratio shall be determined by the Borrowers and acceptable to the Administrative Agent in its reasonable discretion.

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

“Pro Rata”:           (a) With respect to any Lender vis à vis any other Lender, a fraction (expressed as a percentage), the numerator of which shall be the amount of such Lender’s Dollar Commitment and the denominator of which shall be the aggregate of all of the Lenders’ Dollar Commitments, as adjusted from time to time in accordance with the provisions of Section 7.1 of the Agency Agreement, provided that, if all Loan Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in L/C exposure and the denominator shall be the aggregate unpaid principal amount of all unpaid Loans and L/C exposure.

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

“Real Estate Advance Rate”:  Sixty Percent (60%).

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

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

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“Regulatory Change”:  Defined in Section 2.21(c).

“Requirement of Law”:  As to any Person:

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

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

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

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

“Reserves”:  The following: Availability Reserves and Inventory Reserves.

“Revolving Credit”:   Defined in Section 2.1(a).

“Revolving Credit Commitment Fee”:   Defined in Section 2.12.

“Revolving Credit Early Termination Fee”:   Defined in Section 2.15.

“Revolving Credit Loans”:  Defined in Section 2.1(a).

“Revolving Credit Loan Ceiling”:   $60,000,000, provided that at the written request of the Borrowers, and with the prior written consent of the Administrative Agent in its sole discretion, the Revolving Credit Loan Ceiling shall be increased an additional $15,000,000, in increments of $2,500,000 up to a maximum Revolving Credit Loan Ceiling of $75,000,000.  Notwithstanding the foregoing, the Revolving Credit Loan Ceiling shall at no time exceed the amount that the Indenture Agreement permits Borrowers and the Restricted Subsidiaries (as

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defined in the Indenture) to incur as Indebtedness (as defined in the Indenture) hereunder at such time.

“Revolving Credit Note”:  Defined in Section 2.9.

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

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

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

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

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

“Starting Inventory Liquidation Percentage”: That percentage reflected on page 4 of the Inventory Valuation and Review with respect to the Borrowers, with a report date of August 30, 2004, prepared by GB Asset Advisors, LLC, to reflect the appraiser’s projection of the “[c]onsolidated net recovery (liquidation value) as a percentage of cost including raw materials”.

“Stated Amount”:  The maximum amount for which an L/C may be honored, less any amounts already drawn thereunder.

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

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

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

“Survey”:  In relation to the Headquarters Facility, an instrument survey dated as of a date within a reasonable period prior to the satisfaction of the Third Mortgage Conditions which shall show the location of all buildings, structures, easements and utility lines on such Headquarters Facility, shall be sufficient to remove the survey exception from the applicable title policy, shall show that all buildings and structures are within the lot lines of the Headquarters Facility, shall not show any encroachments by others, shall show the zoning district or districts in which the Headquarters Facility is located, shall show any flood hazard district as established by the Federal Emergency Management Agency or any successor agency or equivalent of any other governmental authority and shall show whether the Headquarters Facility is located in any flood plain, flood hazard or wetland protection district established by any Governmental Authority.

“Surveyor Certificate”:  In relation to the Headquarters Facility, a certificate executed by the surveyor who prepared such Survey dated as of date within a reasonable period prior to the satisfaction of the Third Mortgage Conditions and containing such information relating to such Headquarters Facility as the Collateral Agent may require, such certificate to be satisfactory to the Collateral Agent in form and substance.

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

“Sweep Period”: Defined in Section 7.3(c).

“Sweep Suspension”: Defined in Section 7.3(c).  

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 “SwingLine Lender”:  FNB or its successor, or another financial institution designated by the Administrative Agent.

“SwingLine Loan Ceiling”:  $10,000,000.

“SwingLine Loans”:  Defined in Section 2.7(a).

“SwingLine Note”:  Defined in Section 2.7(c).

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

“Termination Date”:  The earliest of (a) the Maturity Date; or (b) the occurrence of any event described in Section 10.11, below; or (c) the date set as the Termination Date in a notice by the Administrative Agent to the Lead Borrower on account of the occurrence of any Event of Default other than as described in Section 10.11, below; or (d) the date of the Borrowers’ termination of the Lenders’ commitments to advance Revolving Credit Loans hereunder.

“Third Mortgage Conditions”:  The satisfaction of all of the following conditions on any date:

(a)  No Event of Default shall have occurred that is continuing;

(b)  The representations and warranties of the Obligors contained in this Agreement shall be true and correct (except to the extent that such representations and warranties expressly relate to an earlier date);

(c)  All other documents, instruments, certificates and information as the Collateral Agent or its counsel reasonably requests shall have been delivered to Lender by Obligors;

(d)  The Obligors shall have paid all of the Collateral Agent’s out-of-pocket expenses, including reasonable attorneys’ fees in connection with the transactions contemplated hereby and the matters referred to herein and the other Loan Documents, including, without implied limitation, the Third Mortgage Conditions;

(e)  The Collateral Agent, the Lead Borrower and PIDCFC shall have recorded an amendment to the Mortgage in form and substance satisfactory to the Collateral Agent (the “Mortgage Amendment”) to secure all Liabilities under this Agreement, without limitation (such Liabilities, to the extent they exceed the existing obligations secured by the Mortgage, the “Additional Mortgage

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Obligations”).  The Additional Mortgage Obligations shall be secured as a third priority mortgage interest in the Mortgaged Property subject and subordinate only to (i) the existing interest of Collateral Agent under the Mortgage, and (ii) up to the Second Mortgage Cap, the interest of PIDA under the PIDA Mortgage.

(f)  PIDA shall have amended its existing Subordination Agreement with Collateral Agent (as successor in interest to Fleet Capital Corporation) in order to confirm the effect of the Mortgage Amendment and its relative priority of the obligation secured by the Mortgage and the PIDA Mortgage as described above and to determine the Second Mortgage Cap;

(g)  Borrower shall have provided copies or originals as appropriate of the resolutions of the board of directors of the Lead Borrower, PIDA, and PIDCFC and any other usual evidence of authority and incumbency for the Lead Borrower, PIDA, and PIDCFC to enter into all documents related to the Third Mortgage Conditions;

(h)  An endorsement to the existing loan policy of title insurance issued with respect to the Mortgaged Property in an amount and from a title insurance company satisfactory to Collateral Agent and subject to only such exceptions as may be acceptable to Collateral Agent and confirming that real estate taxes are paid through the date of such policy;

(i)  Copies of UCC, tax lien and other searches reasonably requested by the Collateral Agent in all appropriate search offices, together with termination statements, mortgage discharges, and other discharges of all liens and security interests other than those consented to by the Collateral Agent in its discretion;

(j)  Copies of all consents or approvals that may required in connection with the transactions contemplated by the Third Mortgage Conditions;

(k)  An updated Surveyor’s Certificate evidencing no material changes at the Headquarters Facility and the date of the existing Survey, or, if applicable, an update of the Survey showing all material changes at the Mortgaged Property; and

(l)  In the event that the Third Mortgage Conditions have not occurred on or before February 28, 2005, updated environmental reports reasonably requested by and satisfactory to the Collateral Agent in its discretion.

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

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

“Unused Line Fee”:   Defined in Section 2.14.

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

ARTICLE II. - THE REVOLVING CREDIT

2.1  Establishment of Revolving Credit.

(a)  The Lenders  hereby establish a revolving line of credit (the “Revolving Credit”) in the Borrowers’ favor pursuant to which the Lenders, acting through the Administrative Agent,  shall make loans and advances and otherwise provide financial accommodations to and for the account of the Borrowers until the Maturity Date its Pro Rata share of advances (each, a “Revolving Credit Loan”) as provided herein in each instance equal to its applicable Percentage Commitment of  Availability, up to a maximum amount of its applicable Dollar Commitment.  The obligations of each Lender hereunder shall be several and not joint.

(b)  Loans, advances, and financial accommodations under the Revolving Credit shall be made with reference to the Borrowing Base and shall be subject to Availability.  The Borrowing Base and Availability shall be determined by the Collateral Agent by reference to Borrowing Base Certificates furnished as provided in Section 5.4 below (subject to Reserves established by the Collateral Agent):

(c)  The commitment of each Lender to provide such loans, advances, and financial accommodations is subject to Section 2.2.

(d)  The proceeds of borrowings under the Revolving Credit shall be used solely for working capital purposes, debt prepayments, Distributions, Capital Expenditures and other general corporate purposes of the Borrowers, all solely to the extent permitted by this Agreement.  No proceeds of a borrowing under the Revolving Credit may be used, nor shall any be requested, with a view towards the accumulation of any general fund or funded reserve of the Borrowers other than in the ordinary course of the Borrowers’ business and consistent with the provisions of this Agreement.

2.2  Advances in Excess of Borrowing Base (Overloans).

(a)  No Lender has any obligation to make any loan or advance, or otherwise to provide any credit to or for the benefit of the Borrowers where the result of such loan, advance, or credit is an Overloan except in respect to Permissible Overloans which the Agents deem prudent.

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(b)  The Lenders’ obligations, among themselves, are subject to Section 3.3 of the Agency Agreement (which relates to each Lender’s making amounts available to the Administrative Agent) and to Sections 6.1(d) and 6.5(a) of the Agency Agreement (which relate to Permissible Overloans).

(c)  The Lenders’ providing of an Overloan on any one occasion does not affect the obligations of the Borrowers hereunder (such as the Borrowers’ obligation to immediately repay any amount which otherwise constitutes an Overloan) nor shall it obligate the Lenders to do so on any other occasion.

2.3  Risks of Value of Collateral.

Any reference to a given asset in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit and/or the monitoring of compliance with the provisions hereof shall not be deemed a determination by any Agent or the Lenders relative to the actual value of the asset in question.  All risks concerning the value of the Collateral are and remain upon the Obligors.  All Collateral secures the prompt, punctual, and faithful performance of the Liabilities and, with respect to the Guarantor, secures its Liabilities, whether or not relied upon by the Agents in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit.

2.4  Commitment to Make Revolving Credit Loans and Support Letters of Credit.

Subject to the provisions of this Agreement, the Lenders shall make a loan or advance under the Revolving Credit and the Administrative Agent shall endeavor to have an L/C issued for the account of the Borrowers, in each instance if duly and timely requested by the Lead Borrower as provided herein provided that:

(a)  No Overloan is then outstanding and none will result therefrom.

(b)  No Suspension Event or Event of Default has occurred or would result therefrom.

2.5  Revolving Credit Loan Requests.

(a)  Requests for loans and advances under the Revolving Credit or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the Lead Borrower in such manner as may from time to time be reasonably acceptable to the Administrative Agent.

(b)  Subject to the provisions of this Agreement, the Lead Borrower may request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the following:

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

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

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

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

(d)  Intentionally omitted.

(e)  The Lead Borrower may request that the Administrative Agent cause the issuance of L/C’s for the account of the Borrowers as provided in Section 2.18.

(f)  The Administrative Agent may rely on any request for a loan or advance, or other financial accommodation under the Revolving Credit which the Administrative Agent, in good faith, believes to have been made by a Person duly authorized to act on behalf of the Lead Borrower and may decline to make any such requested loan or advance, or issuance, or to provide any such financial accommodation pending the Administrative Agent’s being furnished with such documentation concerning that Person’s authority to act as may be satisfactory to the Administrative Agent.  As an accommodation to Borrowers, Administrative Agent may in its discretion permit telephonic requests for Revolving Credit Loans and electronic transmittal of instructions, authorizations, agreements or reports to Administrative Agent by Borrowers,

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provided that Administrative Agent only shall accept or act upon telephonic or electronic communications from an authorized representative of Lead Borrower, or such other individuals identified by Lead Borrower from time to time in a written notice delivered to Administrative Agent.  Administrative Agent and Lenders shall have no liability to Borrowers for any loss or damage suffered by Borrowers as a result of Administrative Agent’s honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Administrative Agent by an authorized representative of Borrowers, and Administrative Agent shall have no duty to verify the origin of any such communication or the authority of the Person sending it.

(g)  A request by the Lead Borrower for loan or advance or other financial accommodation under the Revolving Credit shall be irrevocable and shall constitute certification by each Borrower that as of the date of such request, each of the following is true and correct:

(i)            There has been no material adverse change in the Borrowers’ financial condition (taken as a whole) from the most recent financial information furnished Administrative Agent or any Lender pursuant to this Agreement.

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

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

(h)  If, at any time or from time to time, a Suspension Event or Event of Default exists which is continuing,

(i)            The Administrative Agent may suspend the Revolving Credit immediately, in which event neither the Administrative Agent nor the Lenders shall be obligated during such suspension to make any loans or advances or to provide any financial accommodation hereunder or to seek the issuance of any L/C.

(ii)           The Administrative Agent may suspend the right of the Lead Borrower to request any Index Loan or to convert any Base Margin Loan to an Index Loan.

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2.6  Making Of Revolving Credit Loans.

(a)  A loan or advance under the Revolving Credit  shall be made by the Transfer of the proceeds of such loan or advance to the Operating Account or as otherwise instructed by the Lead Borrower.

(b)  A loan or advance shall be deemed to have been made under the Revolving Credit (and the Borrowers shall be indebted to the Agent or Lenders for the amount thereof immediately) upon the Administrative Agent’s initiation of the Transfer of the proceeds of such loan or advance in accordance with the Lead Borrower’s instructions (if such loan or advance is of funds requested by the Lead Borrower) or the charging of the amount of such loan to the Loan Account (in all other circumstances).

(c)  There shall not be any recourse to or liability of the Agent or Lenders (except to the extent caused by the gross negligence or willful misconduct of the Agent or Lenders as determined by a court of competent jurisdiction), on account of:

(i)            Any delay in the making of any loan or advance requested under the Revolving Credit.

(ii)           Any delay by any bank or other depository institution in treating the proceeds of any such loan or advance as collected funds.

(iii)          Any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Agent or Lenders in accordance with wire instructions provided to the Administrative Agent by the Lead Borrower).

2.7  SwingLine Loans.

(a)  For ease of administration of Revolving Credit Loans, Revolving Credit Loans which are Base Margin Loans may be made by the Administrative Agent, in its capacity as the SwingLine Lender (in the aggregate, the “SwingLine Loans”) in accordance with the procedures set forth in this Agreement for the making of Revolving Credit Loans. The unpaid principal balance of the SwingLine Loans shall not at any one time be in excess of the SwingLine Loan Ceiling (which SwingLine Loan Ceiling is subject to amendment from time to time, by reasonable advance notice by the Administrative Agent to the Lead Borrower).

(b)  The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans and shall be repayable as a Revolving Credit Loan under the Revolving Credit.

(c)  The Borrower’s obligation to repay SwingLine Loans may be evidenced by a Note in the form of EXHIBIT 2.7 (“SwingLine Note”), executed by the Borrowers and payable to the Administrative Agent.  Neither the original nor a copy of the SwingLine Note shall be required  to establish or prove any Liability.   Upon the Lead Borrower being provided with an

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affidavit (which shall include an indemnity reasonably satisfactory to the Lead Borrower) from the Administrative Agent to the effect that the SwingLine Note has been lost, mutilated, or destroyed, the Borrowers shall execute and deliver a replacement of any SwingLine Note to the Administrative Agent.

(d)  For all purposes of this Loan Agreement, the SwingLine Loans and the Borrower’s obligations to the Administrative Agent constitute Revolving Credit Loans and are secured as “Liabilities”.

(e)  SwingLine Loans may be subject to periodic settlement with the Lenders.

2.8  The Loan Account.

(a)  An account (“Loan Account”) shall be opened on the books of the Administrative Agent in which a record shall be kept of all loans and advances made under the Revolving Credit.

(b)  The Administrative Agent may also keep a record (either in the Loan Account or elsewhere, as the Administrative Agent may from time to time elect) of all interest, fees, service charges, costs, expenses, and other debits owed to the Agent and the Lender on account of the Liabilities and of all credits against such amounts so owed.

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

(d)  Except as otherwise provided herein, all fees, service charges, costs, and expenses for which the Borrowers are obligated hereunder are payable on demand.  In the determination of Availability, the Administrative Agent may deem fees, service charges, accrued interest (except for interest charged on Index Loans, which, unless charged earlier, shall be charged on the Interest Payment Date), and other payments which will be due and payable between the date of such determination and the first day of the then next succeeding month as having been advanced under the Revolving Credit whether or not such amounts are then due and payable.

(e)  The Administrative Agent, without the request of the Lead Borrower, may advance under the Revolving Credit any interest, fee, service charge, or other payment to which the Agent or any Lender is entitled from the Borrowers pursuant hereto and may charge the same to the Loan Account notwithstanding that such amount so advanced may result in Borrowing Base being exceeded.  Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.8(e) shall bear interest, at the interest rate then and thereafter applicable to Base Margin Loans.  Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agent’s right or the Borrowers’ obligations under Section 2.10(b).

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

2.9  The Revolving Credit Note.

The Borrowers’ obligation to repay loans and advances under the Revolving Credit, with interest as provided herein, may be evidenced by a Note or Notes (each, individually, and collectively, in the aggregate, a “Revolving Credit Note”) in the form of EXHIBIT 2.9, annexed hereto, executed by the Lead Borrower and the other Borrowers, payable to the applicable Lender.  Neither the original nor a copy of any Revolving Credit Note shall be required, however, to establish or prove any Liability.  Upon the Lead Borrower being provided with an affidavit (which shall include an indemnity reasonably satisfactory to the Lead Borrower) from any Lender to the effect that a Revolving Credit Note has been lost, mutilated, or destroyed, the Lead Borrower and the other Borrowers shall execute and deliver a replacement thereof to such Lender.

2.10                Payment of the Loan Account.

(a)  The Borrowers may repay all or any portion of the principal balance of the Loan Account from time to time until the Termination Date, without premium or penalty except as expressly set forth herein.

(b)  The Borrowers, without notice or demand from the Administrative Agent, shall pay the Administrative Agent that amount, from time to time, which is necessary so that there is no Overloan outstanding.

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

(d)  The Administrative Agent shall cause payments, pursuant to Sections 2.10(a) and 2.10(b), to be applied in accordance with Section 7.5(a) of this Agreement, provided that the Administrative Agent shall cause those application of payments (if any), pursuant to Sections 2.10(a) and 2.10(b) against Index Loans then outstanding in such manner as results in the least cost to the Borrowers, but shall not have any affirmative obligation to do so nor liability on account of the Administrative Agent’s failure to have done so.  In no event shall action or inaction taken by the Administrative Agent excuse the Borrowers from any indemnification obligation under Section 2.10(e).

(e)  Upon the request of the Administrative Agent, each Borrower, jointly and severally, shall indemnify the Agent and Lenders and hold the Agent and Lenders harmless from

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and against any loss, cost or expense (including loss of anticipated profits) which the Agent or Lenders may sustain or incur (including, without limitation, by virtue of acceleration after the occurrence of any Event of Default) as a consequence of any of the following:

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

(ii)           Default by the Borrowers in making a borrowing or conversion  after the Borrowers has given (or is deemed to have given) a request for a Revolving Credit Loan or a request to convert a Revolving Credit Loan from one applicable interest rate to another.

(iii)          The making of any payment on an Index Loan or the making of any conversion of any such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by the Agent and Lenders as “breakage fees”.

2.11                Interest On Revolving Credit Loans.

(a)  Each Revolving Credit Loan which consists of a Base Margin Loan shall bear interest at the Base Margin Rate (determined based upon a 365/366-day year and actual days elapsed), unless and until it is made as, or is converted to, an Index Loan pursuant to Section 2.5 hereof.

(b)  Each Revolving Credit Loan which consists of an Index Loan shall bear interest at the applicable Index Rate (determined based upon a 365/366-day year and actual days elapsed).

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

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

(e)  The Borrowers shall pay accrued and unpaid interest on each Revolving Credit Loan in arrears on the applicable Interest Payment Date therefor.  Following the occurrence and during the continuance of any Event of Default (and whether or not the Agent exercises the Agent’s rights on account thereof), all Revolving Credit Loans shall bear interest, at the option of the Agent, at rate which is the aggregate in the case of Base Margin Loan, of the then applicable

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Base Margin Rate plus Two Percent (2.00%) per annum, and in the case of Index Loans, the then applicable Index Rate plus Two Percent (2.00%) per annum.

(f)  The Index Margin and Base Margin shall be reset for each fiscal quarter as of the first (1^st) day of such fiscal quarter (the “Margin Adjustment Date”) based upon the Margin Pricing Grid set forth below for the prior fiscal quarter, subject to the provisions in the definitions of “Base Margin” and “Index Margin”:

MARGIN PRICING GRID

*Pricing Adjusted Availability will be determined based upon a Certificate by an Authorized Officer delivered to the Administrative Agent no later than ten (10) days after the end of each fiscal quarter certifying as to average Pricing Adjusted Availability maintained for the prior fiscal quarter.  If there is a change in the applicable Index Margin or Base Margin, the Administrative Agent and Borrower agree that all such changes shall be retroactive to the Margin Adjustment Date.  Failure of the Administrative Agent to receive such Certificate within the time frame specified shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Index Margin and the Base Margin to the highest level set forth in the foregoing grid, until next Margin Adjustment Date following receipt of such Certificate demonstrating that such an increase is not required.  If an Event of Default has occurred and is continuing at the time any reduction in the Index Margin and Base Margin is to be implemented, that reduction shall be deferred until the next Margin Adjustment Date following the date on which such Event of Default is waived or cured.

2.12                Revolving Credit Commitment Fee.

As compensation for the respective commitments of the Lenders at the execution of this Agreement to make loans and advances to the Borrowers under the Revolving Credit and as compensation for the Lenders’ maintenance of sufficient funds available for such purpose, the Lenders shall  have earned as of the Closing Date the “Revolving Credit Commitment Fee” in the amount set forth in the Agent’s Fee Letter.

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2.13                Intentionally Omitted.

2.14                Unused Line Fee.

In addition to any other fee to be paid by the Borrowers on account of the Revolving Credit, the Borrowers shall pay the Administrative Agent, for the benefit of the Lenders, an “Unused Line Fee”.  The Unused Line Fee shall equal Two-Tenths of One Percent (0.20%) per annum of the average difference, during the fiscal quarter just ended (or relevant period with respect to the payment being made on the Termination Date) between the Revolving Credit Loan Ceiling and the sum of (i) the unpaid principal balance of the Loan Account and (ii) the Stated Amount of L/Cs.  The Unused Line Fee shall be paid in arrears, on the first day of each fiscal quarter after the execution of this Agreement and on the Termination Date.

2.15                Early Termination Fee.

In the event that the Termination Date occurs, for any reason, prior to the Maturity Date, the Borrowers shall pay to the Administrative Agent, for the benefit of the Lenders, the “Revolving Credit Early Termination Fee” determined and payable as follows:

(a)  One-Half of One Percent (0.50%) of the Revolving Credit Loans as in effect immediately prior to such termination or reduction in the event termination occurs prior to October 15, 2006; or

(b)  Three-Eighths of One Percent (0.375%) of the Revolving Credit Loans as in effect immediately prior to such termination or reduction in the event termination occurs on or after October 15, 2006, but prior to October 15, 2007; or

(c)  Zero Percent (0.00%) of the Revolving Credit Loans as in effect immediately prior to such termination or reduction in the event termination occurs on or after October 15, 2007.

Notwithstanding the foregoing, the Administrative Agent and Lenders agree to waive the Revolving Credit Early Termination Fee in the event that the Borrowers refinance the Revolving Credit with Bank of America, N.A. or any of its Affiliates, it being understood that, neither Bank of America, N.A. nor any of its Affiliates are hereby committing to provide such refinancing.

2.16                Concerning Fees.

The Borrowers shall not be entitled to any credit, rebate or repayment of the Revolving Credit Commitment Fee, Unused Line Fee, Revolving Credit Early Termination Fee, or other fee earned by the Agent or Lenders pursuant to this Agreement or any Loan Document notwithstanding any termination of this Agreement or suspension or termination of the Agent’s or Lenders’ obligation to make loans and advances hereunder.

2.17                Intentionally Omitted.

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2.18                Procedures For Issuance Of L/C’s.

(a)  The Lead Borrower may request that the Administrative Agent cause the issuance of L/C’s for the account of the Borrower.  Each such request shall be in such manner as may from time to time be acceptable to the Administrative Agent.

(b)  The Administrative Agent will endeavor to cause the issuance of any L/C so requested by the Lead Borrower, provided that, at the time that the request is made, the Revolving Credit has not been suspended as provided in Section 2.5(h) and if so issued:

(i)            The aggregate Stated Amount of all L/C’s then outstanding (giving effect to the issuance of the requested L/C), does not exceed  Thirty Million Dollars ($30,000,000);

(ii)           The expiry of the requested L/C is not later than the earlier of Thirty (30) days prior to the Maturity Date or the following:

(A)          For standby L/C’s: One (1) year from initial issuance.

(B)           For documentary L/C’s: One hundred (120) days from issuance; and

(iii)          an Overloan will not result from the issuance of the subject L/C.

(c)  Unless otherwise agreed between the Lead Borrower and the Administrative Agent, the Issuer of all L/C’s shall be FNB and any successor to FNB.

(d)  The Lead Borrower shall also execute such other documentation to apply for and support the issuance of an L/C as may be required by FNB or its successor or any other  Issuer, including, without limitation, in respect of the Special Purpose Credit. This Agreement shall control any conflict between this Agreement and any such documentation.

(e)           There shall not be any recourse to, nor liability of, the Agent or Lenders on account of

(i)            Any delay or refusal by an Issuer to issue an L/C; or

(ii)           Any action or inaction of an Issuer on account of or in respect to, any L/C.

(f)  The Borrowers shall reimburse the Issuer for the amount of any honoring of a drawing under an L/C on the same day on which such honoring takes place. The Borrowers authorize the Administrative Agent and the Issuer to charge Borrowers’ Operating Account for such purpose.  In the event the funds in the Operating Account are not sufficient, the Administrative Agent or Lenders, without the request of the Lead Borrower, may advance under the Revolving Credit (and charge to the Loan Account) the amount of any honoring of any L/C and other amount for which the Borrowers, the Lenders, the Agent, or the Issuer becomes obligated on account of, or in respect to, any L/C.  Such advance shall be made whether or not a

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Suspension Event exists or such advance would result in an Overloan.  Such action shall not constitute a waiver of the Administrative Agent’s rights under Section 2.10(b) hereof.

2.19                Fees For L/C’s.

(a)  The Borrowers shall pay to the Administrative Agent a fee, for the benefit of the Lenders, on account of each L/C procured by the Administrative Agent, quarterly in arrears, and on the Termination Date and on the End Date, equal to the following:

(i)            For standby L/C’s:   (a) For the first $8,500,000 of the Stated Amount of such standby L/Cs, the applicable Index Margin less One-Half of One Percent (0.50%) per annum, of the Stated Amount of such standby L/Cs, and (b) for the excess, if any, over $8,500,000, the applicable Index Margin, of the Stated Amount of such standby L/Cs, in each case payable on the Stated Amount of each outstanding standby L/C quarterly in arrears on the first day of each fiscal quarter.

(ii)           For documentary L/C’s:  The applicable Index Margin less One-Half of One Percent (0.50%) per annum, payable on the weighted average of the Stated Amount of such documentary L/C outstanding at any time during the period since the then most recent payment of such fee, payable quarterly in arrears, on the first day of each fiscal quarter, and on the End Date.

(iii)          Notwithstanding Subsections (i) and (ii), above, following the occurrence of any Event of Default (and whether or not the Administrative Agent exercises the Administrative Agent’s rights on account thereof), the above fees, at the option of the Administrative Agent, shall be Two Percent (2.00%) per annum above the applicable rates above.

(b)  In addition to the fee to be paid as provided in Section 2.19(a), above, the Borrowers shall pay to the Administrative Agent (or to the Issuer, if so requested by Administrative Agent), on demand, all issuance, processing, negotiation, amendment, and administrative fees and other amounts charged by the Issuer on account of, or in respect to, any L/C.

(c)  If any change in any law, executive order or regulation, or any directive of any administrative or governmental authority (whether or not having the force of law), or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof, shall either:

(i)            impose, modify or deem applicable any reserve, special deposit or similar requirements against letters of credit heretofore or hereafter issued by any Issuer or with respect to which the Agent, the

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Lenders or any Issuer has an obligation to lend to fund drawings under any L/C; or

(ii)           impose on any Issuer any other condition or requirements relating to any such letters of credit;

and the result of any event referred to in Section 2.19(c)(i) or 2.19(c)(ii), above, shall be to increase the cost to the Agent, the Lenders or any Issuer issuing or maintaining any L/C (which increase in cost shall be the result of such Issuer’s reasonable allocation among that Issuer’s letter of credit customers of the aggregate of such cost increases resulting from such events), then, upon demand by the Administrative Agent and delivery by the Administrative Agent to the Lead Borrower of a certificate of an officer of the Administrative Agent or the subject Issuer describing such change in law, executive order, regulation, directive, or interpretation thereof, its effect on such Issuer, and the basis for determining such increased costs and their allocation, the Borrowers shall immediately pay to the Administrative Agent, from time to time as specified by the Administrative Agent, such amounts as shall be sufficient to compensate the Agent, the Lenders or the subject Issuer for such increased cost.  Any Issuer’s determination of costs incurred under Section 2.19(c)(i) or 2.19(c)(ii), above, and the allocation, if any, of such costs among the Borrowers and other letter of credit customers of such Issuer, if done in good faith and made on an equitable basis and in accordance with such officer’s certificate, shall be conclusive and binding on the Borrowers.

2.20                Concerning L/C’s.

(a)  None of the Issuer, the Issuer’s correspondents, or any advising, negotiating, or paying bank with respect to any L/C shall be responsible in any way for:

(i)            The performance by any beneficiary under any L/C of that beneficiary’s obligations to any Borrower.

(ii)           The form, sufficiency, correctness, genuineness, authority of any person signing, falsification, or the legal effect of, any documents called for under any L/C if such documents on their face appear to be in order.

(b)  The Issuer may honor, as complying with the terms of any L/C and of any drawing thereunder, any drafts or other documents otherwise in order, but signed or issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under such L/C to draw or issue such drafts or other documents.

(c)  Unless the Lead Borrower on behalf of itself and the other Borrowers instructs any Issuer otherwise, in the particular instance, the Lead Borrower hereby authorizes any Issuer to:

(i)            Select an advising bank;

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(ii)           Select a paying bank; and

(iii)          Select a negotiating bank.

(d)  All directions, correspondence, and funds transfers relating to any L/C are at the risk of the Borrowers.  The Issuer shall have discharged the Issuer’s obligations under any L/C or the drawing thereunder which includes payment instructions if the Issuer initiates the method of payment called for thereby (or initiates any other commercially reasonable and comparable method). None of the Agent, the Lenders or the Issuer shall have any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph or cable, or for any inaccuracy of translation, excepting gross negligence or willful misconduct.

(e)  The Agent’s, the Lenders’ and the Issuer’s rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising, whether by statute or rule of law or contract.

(f)  Except to the extent otherwise expressly provided hereunder or agreed to in writing by the Issuer and the Lead Borrower, the L/C will be governed by either, at the election of the Issuer, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce, Publication No. 500, and any subsequent revisions thereof, or the International Standby Practices - ISP 98, International Chamber of Commerce Publication, No 590, and subsequent revisions thereto.

The obligations of the Borrowers under this Agreement with respect to L/C’s are absolute, unconditional, and irrevocable and shall be performed strictly in accordance with the terms hereof under all circumstances, whatsoever including, without limitation, the following:

(i)            Any lack of validity or enforceability or restriction, restraint, or stay in the enforcement of this Agreement, any L/C, or any other agreement or instrument relating thereto;