WARNACO GROUP INC /DE/ (Form Type: 10-Q, Filing Date: 08/06/2010)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JULY 3, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-10857

THE WARNACO GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware		95-4032739
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

501 Seventh Avenue
New York, New York 10018
(Address of registrant’s principal executive offices)

Registrant’s telephone number, including area code: (212) 287-8000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No.

The number of outstanding shares of the registrant’s common stock, par value $0.01 per share, as of August 2, 2010 is as follows: 44,545,889

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, excluding share and per share data)
(Unaudited)


	July 3, 2010			January 2, 2010			July 4, 2009

ASSETS

Current assets:
Cash and cash equivalents	$	172,863		$	320,754		$	177,633
Accounts receivable, net of reserves of $86,001, $89,982 and $84,414 as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively		304,328			290,737			281,400
Inventories		277,565			253,362			291,578
Assets of discontinued operations		1,426			2,172			373
Prepaid expenses and other current assets (including deferred income taxes of $51,516, $51,605, and $65,693 as of July 3, 2010, January 2, 2010, and July 4, 2009, respectively)		144,898			135,832			158,630

Total current assets		901,080			1,002,857			909,614

Property, plant and equipment, net		119,952			120,491			115,387
Other assets:
Licenses, trademarks and other intangible assets, net		344,685			376,831			287,915
Goodwill		101,227			110,721			102,225
Other assets (including deferred income taxes of $14,691, $12,957, and $43,556 as of July 3, 2010, January 2, 2010, and July 4, 2009, respectively)		49,107			48,894			80,618

Total assets	$	1,516,051		$	1,659,794		$	1,495,759


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Short-term debt	$	65,203		$	97,873		$	58,807
Accounts payable		156,695			127,636			124,531
Accrued liabilities		162,639			184,438			148,123
Liabilities of discontinued operations		8,556			8,018			11,363
Accrued income taxes payable (including deferred income taxes of $1,110, $146 and $1,359 as of July 3, 2010, January 2, 2010, and July 4, 2009, respectively)		30,679			24,723			7,831

Total current liabilities		423,772			442,688			350,655
Long-term debt		—			112,835			163,130
Other long-term liabilities (including deferred income taxes of $64,569, $65,219, and $51,533 as of July 3, 2010, January 2, 2010, and July 4, 2009, respectively)		191,661			188,161			122,699
Commitments and contingencies
Stockholders’ equity:
Warnaco Group, Inc. stockholders’ equity:
Preferred stock		—			—			—
Common stock: $0.01 par value, 112,500,000 shares authorized, 51,048,346, 50,617,795 and 50,358,920 issued as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively		510			506			504
Additional paid-in capital		652,988			633,378			639,607
Accumulated other comprehensive income		5,788			46,473			21,885
Retained earnings		440,722			362,813			321,647
Treasury stock, at cost 6,504,161, 4,939,729 and 4,937,038 shares as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively		(199,390	)		(127,060	)		(126,952	)

Total Warnaco Group, Inc. stockholders’ equity		900,618			916,110			856,691

Noncontrolling interest		—			—			2,584

Total stockholders’ equity		900,618			916,110			859,275

Total liabilities and stockholders’ equity	$	1,516,051		$	1,659,794		$	1,495,759

See Notes to Consolidated Condensed Financial Statements.

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Net revenues	$	519,334		$	455,432		$	1,107,498		$	993,275
Cost of goods sold		289,592			266,432			610,638			578,990

Gross profit		229,742			189,000			496,860			414,285
Selling, general and administrative expenses		171,860			145,256			356,833			303,603
Amortization of intangible assets		2,586			2,151			5,254			4,278
Pension expense (income)		(22	)		594			(43	)		1,131

Operating income		55,318			40,999			134,816			105,273
Other loss		5,730			2,799			7,550			2,395
Interest expense		4,259			5,799			9,237			11,868
Interest income		(487	)		(416	)		(1,493	)		(824	)

Income from continuing operations before provision for income taxes and noncontrolling interest		45,816			32,817			119,522			91,834
Provision for income taxes		15,789			13,263			41,183			33,430

Income from continuing operations before noncontrolling interest		30,027			19,554			78,339			58,404
(Loss) from discontinued operations, net of taxes		(93	)		(882	)		(430	)		(1,903	)

Net income		29,934			18,672			77,909			56,501
Less: Net income attributable to the noncontrolling interest		—			(912	)		—			(1,170	)

Net income attributable to Warnaco Group, Inc.	$	29,934		$	17,760		$	77,909		$	55,331


Amounts attributable to Warnaco Group, Inc. common shareholders:
Income from continuing operations, net of tax	$	30,027		$	18,642		$	78,339		$	57,234
Discontinued operations, net of tax		(93	)		(882	)		(430	)		(1,903	)

Net income	$	29,934		$	17,760		$	77,909		$	55,331


Basic income per common share attributable to Warnaco Group, Inc. common shareholders (see Note 17):
Income from continuing operations	$	0.67		$	0.41		$	1.72		$	1.25
(Loss) from discontinued operations		(0.01	)		(0.02	)		(0.01	)		(0.04	)

Net income	$	0.66		$	0.39		$	1.71		$	1.21


Diluted income per common share attributable to Warnaco Group, Inc. common shareholders (see Note 17):
Income from continuing operations	$	0.65		$	0.40		$	1.68		$	1.23
(Loss) from discontinued operations		—			(0.02	)		(0.01	)		(0.04	)

Net income	$	0.65		$	0.38		$	1.67		$	1.19

Weighted average number of shares outstanding used in computing income per common share (see Note 17):
Basic		44,468,794			45,412,175			44,943,829			45,356,680

Diluted		45,426,632			46,010,870			45,936,496			45,879,453

See Notes to Consolidated Condensed Financial Statements.

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)


	Warnaco Group Inc.
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive			Retained			Treasury			Noncontrolling		Comprehensive
	Stock		Capital		Income			Earnings			Stock			Interest		Income			Total

Balance at January 3, 2009	$	501	$	631,891	$	12,841		$	268,016		$	(125,562	)	$	1,054	$	—		$	788,741
Comprehensive income:
Net income									55,331						1,170		56,501			56,501
Other comprehensive income, net of tax:
Foreign currency translation adjustments						9,522									344		9,866			9,866
Loss on cash flow hedges						(572	)										(572	)		(572	)
Other						94									16		110			110

Other comprehensive income															360		9,404			9,404

Comprehensive income															1,530	$	65,905			65,905

Correction of adjustment to initially adopt accounting for uncertain tax positions									(1,700	)										(1,700	)
Stock issued in connection with stock compensation plans		3		1,023																1,026
Compensation expense in connection with employee stock compensation plans				6,693																6,693
Purchase of treasury stock related to stock compensation plans												(1,390	)							(1,390	)

Balance at July 4, 2009	$	504	$	639,607	$	21,885		$	321,647		$	(126,952	)	$	2,584				$	859,275


	Warnaco Group Inc.
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive			Retained		Treasury			Noncontrolling		Comprehensive
	Stock		Capital		Income			Earnings		Stock			Interest		Income			Total

Balance at January 2, 2010	$	506	$	633,378	$	46,473		$	362,813	$	(127,060	)	$	—	$	—		$	916,110
Comprehensive income:
Net income									77,909							77,909			77,909
Other comprehensive income, net of tax:
Foreign currency translation adjustments						(43,290	)									(43,290	)		(43,290	)
Gain on cash flow hedges						2,531										2,531			2,531
Other						74										74			74

Other comprehensive income														—		(40,685	)		(40,685	)

Comprehensive income														—	$	37,224			37,224

Stock issued in connection with stock compensation plans		4		5,836															5,840
Compensation expense in connection with employee stock compensation plans				13,774															13,774
Purchase of treasury stock related to stock compensation plans											(3,326	)							(3,326	)
Repurchases of common stock											(69,004	)							(69,004	)

Balance at July 3, 2010	$	510	$	652,988	$	5,788		$	440,722	$	(199,390	)	$	—				$	900,618

See Notes to Consolidated Condensed Financial Statements.

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)


	Six Months Ended
	July 3, 2010			July 4, 2009
Cash flows from operating activities:
Net income	$	77,909		$	56,501
Adjustments to reconcile net income to net cash provided by operating activities:
Foreign exchange (gain) loss		4,550			(2,355	)
Loss from discontinued operations		430			1,903
Depreciation and amortization		24,205			21,185
Stock compensation		13,774			6,693
Amortization of deferred financing costs		688			855
Provision for trade and other bad debts		923			3,366
Inventory writedown		7,680			8,421
Loss on repurchase of Senior Notes		3,747			—
Other		(1,239	)		(456	)
Changes in operating assets and liabilities:
Accounts receivable		(29,365	)		(25,154	)
Inventories		(38,642	)		32,210
Prepaid expenses and other assets		(13,414	)		2,091
Accounts payable, accrued expenses and other liabilities		16,362			(53,019	)
Accrued income taxes		26,514			18,657

Net cash provided by operating activities from continuing operations		94,122			70,898
Net cash provided by operating activities from discontinued operations		851			3,165

Net cash provided by operating activities		94,973			74,063


Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable		57			175
Purchases of property, plant & equipment		(18,106	)		(20,847	)
Business acquisitions, net of cash acquired		(6,038	)		—

Net cash (used in) investing activities from continuing operations		(24,087	)		(20,672	)
Net cash (used in) investing activities from discontinued operations		—			—

Net cash (used in) investing activities		(24,087	)		(20,672	)


Cash flows from financing activities:
Payment of deferred financing costs		—			(515	)
Repurchase of Senior Notes due 2013		(164,011	)		—
Premium on cancellation of interest rate swap		—			739
Change in short-term notes payable		(2,656	)		(18,707	)
Change in revolving credit facility		25,133			(4,102	)
Proceeds from the exercise of employee stock options		5,086			377
Purchase of treasury stock		(72,330	)		(1,390	)
Contingent payment related to acquisition of non-controlling interest in Brazilian subsidiary		(3,442	)		—

Net cash (used in) financing activities from continuing operations		(212,220	)		(23,598	)
Net cash (used in) financing activities from discontinued operations		—			—

Net cash (used in) financing activities		(212,220	)		(23,598	)

Effect of foreign exchange rate changes on cash and cash equivalents		(6,557	)		213

(Decrease) increase in cash and cash equivalents		(147,891	)		30,006
Cash and cash equivalents at beginning of period		320,754			147,627

Cash and cash equivalents at end of period	$	172,863		$	177,633

See Notes to Consolidated Condensed Financial Statements.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 1—Organization

The Warnaco Group, Inc. (‘‘Warnaco Group’’ and, collectively with its subsidiaries, the ‘‘Company’’) was incorporated in Delaware on March 14, 1986 and, on May 10, 1986, acquired substantially all of the outstanding shares of Warnaco Inc. (‘‘Warnaco’’). Warnaco is the principal operating subsidiary of Warnaco Group.

Note 2 — Basis of Consolidation and Presentation

The Consolidated Condensed Financial Statements include the accounts of Warnaco Group and its subsidiaries. Non-controlling interest represents minority shareholders’ proportionate share of the equity in the Company’s consolidated subsidiary WBR Industria e Comercio de Vestuario S.A (“WBR”). In the fourth quarter of the year ended January 2, 2010, the Company increased its ownership interest in WBR to 100% and, accordingly, at January 2, 2010 and July 3, 2010, there were no minority shareholders of WBR. All inter-company accounts and transactions have been eliminated in consolidation.

The accompanying unaudited Consolidated Condensed Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America (“GAAP”). In the opinion of management, these financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for Fiscal 2009. The year end Consolidated Condensed Balance Sheet data were derived from audited financial statements, but do not include all disclosures required by GAAP.

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Periods Covered: The Company operates on a 52/53 week fiscal year basis ending on the Saturday closest to December 31. As such, the period January 3, 2010 to January 1, 2011 (“Fiscal 2010”) will contain 52 weeks of operations and the period January 4, 2009 to January 2, 2010 (“Fiscal 2009”) contained 52 weeks of operations. Additionally, the period from April 4, 2010 to July 3, 2010 (the “Three Months Ended July 3, 2010”) and the period from April 5, 2009 to July 4, 2009 (the “Three Months Ended July 4, 2009”) each contained thirteen weeks of operations and the period from January 3, 2010 to July 3, 2010 (the “Six Months Ended July 3, 2010”) and the period from January 4, 2009 to July 4, 2009 (the “Six Months Ended July 4, 2009”) each contained twenty-six weeks of operations.

Reclassifications: Prior period items on the Company’s Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Cash Flows have been reclassified to give effect to the Company’s discontinued operations. In addition, amounts related to certain sales of Calvin Klein underwear in regions managed by the Sportswear Group, previously included in net revenues and operating income of the Sportswear Group, have been reclassified to the Intimate Apparel Group for the Three and Six Months Ended July 4, 2009 to conform to the presentation for the Three and Six Months Ended July 3, 2010. See Note 6 of Notes to Consolidated Condensed Financial Statements.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Stock-Based Compensation: 20,350 and 378,650 stock options were granted during the Three and Six Months Ended July 3, 2010, respectively, and 601,350 and 613,850 stock options were granted during the Three and Six Months Ended July 4, 2009, respectively. The fair values of stock options granted during the Three and Six Months Ended July 3, 2010 and the Three and Six Months Ended July 4, 2009 were estimated at the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions:


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Weighted average risk free rate of return (a)		1.99	%		1.83	%		1.82	%		1.84	%
Dividend yield (b)		—			—			—			—
Expected volatility of the market price of the Company’s common stock		56.8	%		59.3	%		56.8	%		59.3	%
Expected option life (years)		4.2			3.72			4.2			3.72


(a)		Based on the quoted yield for U.S. five-year treasury bonds as of the date of grant.

(b)		The terms of the Company’s New Credit Agreements and the terms of the indenture governing its Senior Notes (each as defined below) limit the Company’s ability to make certain payments, including dividends, and require the Company to meet certain financial covenants. The Company has not paid dividends on its common stock in any of the last six fiscal years.

A summary of stock-based compensation expense is as follows:


	Three Months Ended				Six Months Ended
	July 3, 2010		July 4, 2009		July 3, 2010		July 4, 2009

Stock-based compensation expense before income taxes:
Stock options	$	1,601	$	1,529	$	4,860	$	2,619
Restricted stock grants		2,646		1,975		8,914		4,074

Total (a)		4,247		3,504		13,774		6,693


Income tax benefit:
Stock options		563		520		1,737		901
Restricted stock grants		875		664		2,680		1,210

Total		1,438		1,184		4,417		2,111


Stock-based compensation expense after income taxes:
Stock options		1,038		1,009		3,123		1,718
Restricted stock grants		1,771		1,311		6,234		2,864

Total	$	2,809	$	2,320	$	9,357	$	4,582


(a)		The primary reason for the increase in stock-based compensation expense for the Six Months Ended July 3, 2010, compared to the Six Months Ended July 4, 2009, related to the incorporation of a “Retirement Eligibility” feature that was applied to all the equity awards issued in March 2010. For employee stock-based compensation awards issued in March 2010 (and for similar types of future awards), the Company’s Compensation Committee approved the incorporation of a Retirement Eligibility feature such that an employee who has attained the age of 60 years with at least five years of continuous employment with the Company will be deemed to be “Retirement Eligible”. Awards granted to Retirement Eligible employees will continue to vest even if the employee’s employment with the Company is terminated prior to the award’s vesting date (other than for cause, and provided the employee does not engage in a competitive activity). As in previous years, awards granted to all other employees (i.e. those who are not Retirement Eligible) will cease vesting if the employee’s employment with the Company is terminated prior to the award’s vesting date. Stock-based compensation expense is recognized over the requisite service period associated with the related equity award. For Retirement Eligible employees, the requisite service period is either the grant date or the period from the grant date to the Retirement-Eligibility date (in the case where the Retirement Eligibility date precedes the vesting date). For all other employees (i.e. those who are not Retirement Eligible), as in previous years, the requisite service period is the period from the grant date to the vesting date. The Retirement Eligibility feature was not applied to awards issued prior to March 2010.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Subsequent Events: The Company has evaluated events and transactions subsequent to July 3, 2010 for potential recognition or disclosure in the Consolidated Condensed Financial Statements.

Recent Accounting Pronouncements

There were no new accounting pronouncements issued or effective during the Six Months Ended July 3, 2010 that had or are expected to have a material impact on the Company’s Consolidated Condensed Financial Statements.

Note 3—Acquisitions

Acquisition of Businesses in Asia

On April 29, 2010, the Company entered into agreements for the purchase of the businesses of a distributor of the Company’s Calvin Klein Jeans and Calvin Klein Underwear in southern Asia for total consideration of approximately $2,900 and on June 1, 2010, the Company entered into agreements for the purchase of the businesses of a distributor of the Company’s Calvin Klein Jeans and Calvin Klein Underwear in the People’s Republic of China for total consideration of approximately $5,900. The acquisition of the businesses in southern Asia and the People’s Republic of China were accounted for as business combinations, which were deemed not to be material for accounting purposes from a financial disclosure perspective.

Acquisition of Remaining Non-controlling Interest and Retail Stores in Brazil

During the fourth quarter of Fiscal 2009, the Company acquired the remaining non-controlling interest in WBR and eight retail stores in Brazil, collectively, the “Brazilian Acquisition”. In connection with the Brazilian Acquisition, the Company is required to make three future annual payments to the Sellers through March 31, 2012 which are contingent on the operating income, as defined, of WBR during that period. During the Six Months Ended July 3, 2010, the Company paid 6 million Brazilian real (approximately $3,400) to the Sellers, representing the first of the three contingent payments.

During the Three Months Ended July 3, 2010, the Company completed the accounting for the Brazilian Acquisition, including the acquisition of certain store assets, which had been recorded as intangible assets of $3,592 on the date of acquisition. During the Three Months Ended July 3, 2010, the Company reclassified those assets as prepaid rent (included in Other assets on the Company’s Consolidated Condensed Balance Sheet), which will be amortized as rent expense over the expected term of the respective leases (see Note 13 of Notes to Consolidated Condensed Financial Statements). The Company did not adjust prior period balance sheets to give effect to the change in classification as it considers the adjustment to be immaterial.

Note 4—Discontinued Operations

As disclosed in its Annual Report on Form 10-K for Fiscal 2009, the Company discontinued certain operations in prior periods. Summarized operating results for the discontinued operations of those prior periods are as follows:


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Net revenues	$	738		$	503		$	1,349		$	1,075

(Loss) before income tax provision (benefit)	$	(188	)	$	(1,171	)	$	(716	)	$	(2,006	)
Income tax (benefit)		(95	)		(289	)		(286	)		(103	)

(Loss) from discontinued operations	$	(93	)	$	(882	)	$	(430	)	$	(1,903	)

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Summarized assets and liabilities of the discontinued operations are presented in the Consolidated Condensed Balance Sheets as follows:


	July 3, 2010		January 2, 2010		July 4, 2009

Accounts receivable, net	$	213	$	366	$	195
Inventories		400		1,684		—
Prepaid expenses and other current assets		813		122		178

Assets of discontinued operations	$	1,426	$	2,172	$	373


Accounts payable	$	216	$	104	$	105
Accrued liabilities		8,329		7,902		9,380
Other		11		12		1,878

Liabilities of discontinued operations	$	8,556	$	8,018	$	11,363

Note 5—Restructuring Expenses and Other Exit Costs

During the Three and Six Months Ended July 3, 2010, the Company incurred restructuring charges and other exit costs of $1,154 and $2,113, respectively, primarily related to (i) costs associated with workforce reductions, which represented the remainder of the Company’s effort, which began in Fiscal 2008, to align its cost structure to match current economic conditions ($159 and $1,121); (ii) the rationalization and consolidation of the Company’s European operations, which had begun in Fiscal 2007 ($305 and $596) and (iii) other exit activities, including contract termination costs, legal and other costs ($690 and $804). The charges described in clauses (i) through (iii) were partially offset by the reversal of accruals of expense, totaling $408, in the first quarter of Fiscal 2010 that were no longer needed upon conclusion of the related restructuring events.

During the Three and Six Months Ended July 4, 2009, the Company incurred restructuring charges and other exit costs of $1,474 and $10,045, respectively, primarily related to (i) the continuation of the workforce reduction, which commenced during the fourth quarter of Fiscal 2008, in order to align the Company’s cost structure to match current economic conditions ($560 and $6,097, respectively); (ii) the rationalization and consolidation of the Company’s European operations, which had begun in Fiscal 2007 ($195 and $796, respectively) ; (iii) activities associated with management’s initiatives to increase productivity and profitability in the Swimwear Group, which had also begun in Fiscal 2007 ($696 and $1,139, respectively), and (iv) other exit activities, including contract termination costs, legal and other costs ($23 and $2,013, respectively).

Restructuring charges and other exit costs have been recorded in the Consolidated Condensed Statements of Operations for the Three and Six Months Ended July 3, 2010 and Three and Six Months Ended July 4, 2009, as follows:


	Three Months Ended				Six Months Ended
	July 3, 2010		July 4, 2009		July 3, 2010		July 4, 2009
Cost of goods sold	$	183	$	201	$	274	$	1,684
Selling, general and administrative expenses		971		1,273		1,839		8,361

	$	1,154	$	1,474	$	2,113	$	10,045


Cash portion of restructuring items	$	1,154	$	1,474	$	2,113	$	10,045
Non-cash portion of restructuring items		—		—		—		—

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Changes in liabilities related to restructuring expenses and other exit costs for the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009 are summarized below:


Balance at January 3, 2009	$	5,925
Charges for the Six Months Ended July 4, 2009		10,045
Cash reductions for the Six Months Ended July 4, 2009		(7,034	)
Non-cash changes and foreign currency effects		69

Balance at July 4, 2009	$	9,005


Balance at January 2, 2010	$	3,572
Charges for the Six Months Ended July 3, 2010		2,113
Cash reductions for the Six Months Ended July 3, 2010		(3,665	)
Non-cash changes and foreign currency effects		(51	)

Balance at July 3, 2010 (a)	$	1,969


(a)		at July 3, 2010, includes approximately $745 recorded in accrued liabilities (part of current liabilities), which amounts are expected to be settled over the next 12 months and approximately $1,224 recorded in other long term liabilities which amounts are expected to be settled over the next four years.

Note 6—Business Segments and Geographic Information

Business Segments: The Company operates in three business segments: (i) Sportswear Group; (ii) Intimate Apparel Group; and (iii) Swimwear Group.

The Sportswear Group designs, sources and markets moderate to premium priced men’s and women’s sportswear under the Calvin Klein and Chaps^® brands. As of July 3, 2010, the Sportswear Group operated 533 Calvin Klein retail stores worldwide (consisting of 73 full price free-standing stores, 45 outlet free standing stores, 414 shop-in-shop/concession stores and one on-line store). As of July 3, 2010, there were also 371 retail stores operated by third parties under retail licenses or distributor agreements.

The Intimate Apparel Group designs, sources and markets moderate to premium priced intimate apparel and other products for women and better to premium priced men’s underwear, sleepwear and loungewear under the Calvin Klein, Warner’s^®, Olga^® and Body Nancy Ganz/Bodyslimmers^® brand names. As of July 3, 2010, the Intimate Apparel Group operated: 681 Calvin Klein retail stores worldwide (consisting of 84 free-standing stores, 64 outlet free-standing stores and 532 shop-in-shop/concession stores and one on-line store). As of July 3, 2010, there were also 218 Calvin Klein retail stores operated by third parties under retail licenses or distributor agreements.

The Swimwear Group designs, licenses, sources and markets mass market to premium priced swimwear, fitness apparel, swim accessories and related products under the Speedo^®, Lifeguard^® and Calvin Klein brand names. The Swimwear Group operates one on-line store.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Information by business group is set forth below:


	Sportswear		Intimate		Swimwear
	Group		Apparel Group		Group		Group Total		Corporate / Other			Total

Three Months Ended July 3, 2010
Net revenues	$	244,044	$	199,116	$	76,174	$	519,334	$	—		$	519,334
Operating income (loss)		24,987		34,563		8,824		68,374		(13,056	)		55,318
Depreciation and amortization		6,962		4,004		569		11,535		716			12,251
Restructuring expense		549		160		445		1,154		—			1,154
Capital expenditures		6,147		2,320		76		8,543		1,063			9,606

Three Months Ended July 4, 2009
Net revenues (a)	$	212,057	$	168,954	$	74,421	$	455,432	$	—		$	455,432
Operating income (loss) (a)		13,320		27,523		8,238		49,081		(8,082	)		40,999
Depreciation and amortization		7,009		2,783		589		10,381		767			11,148
Restructuring expense (gain)		352		311		852		1,515		(41	)		1,474
Capital expenditures		7,156		6,727		71		13,954		1,412			15,366

Six Months Ended July 3, 2010
Net revenues	$	550,390	$	393,058	$	164,050	$	1,107,498	$	—		$	1,107,498
Operating income (loss)		75,929		68,181		20,709		164,819		(30,003	)		134,816
Depreciation and amortization		14,215		7,365		1,081		22,661		1,544			24,205
Restructuring expense		442		113		714		1,269		844			2,113
Capital expenditures		13,786		6,391		459		20,636		1,368			22,004

Six Months Ended July 4, 2009
Net revenues (a)	$	481,114	$	341,777	$	170,384	$	993,275	$	—		$	993,275
Operating income (loss) (a)		50,789		57,921		20,783		129,493		(24,220	)		105,273
Depreciation and amortization		12,887		5,628		1,186		19,701		1,484			21,185
Restructuring expense		3,388		2,912		2,433		8,733		1,312			10,045
Capital expenditures		9,524		9,221		393		19,138		2,282			21,420

Balance Sheet
Total Assets:
July 3, 2010	$	888,449	$	365,800	$	137,915	$	1,392,164	$	123,887		$	1,516,051
January 2, 2010		875,304		390,610		144,198		1,410,112		249,682			1,659,794
July 4, 2009		800,354		332,761		138,626		1,271,741		224,018			1,495,759
Property, Plant and Equipment:
July 3, 2010	$	41,106	$	38,457	$	3,490	$	83,053	$	36,899		$	119,952
January 2, 2010		30,909		45,882		3,555		80,346		40,145			120,491
July 4, 2009		29,332		40,133		3,864		73,329		42,058			115,387


(a)		net revenues of $10,832 and $21,287 and operating income of $555 and $1,551 for the Three and Six Months Ended July 4, 2009, respectively, related to certain sales of Calvin Klein underwear in regions managed by the Sportswear Group, previously included in net revenues and operating income of the Sportswear Group, have been reclassified to the Intimate Apparel Group to conform to the presentation for the Three and Six Months Ended July 3, 2010.

All inter-company revenues and expenses are eliminated in consolidation. Management does not include inter-company sales when evaluating segment performance. Each segment’s performance is evaluated based upon operating income after restructuring charges and shared services expenses but before unallocated corporate expenses.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The table below summarizes corporate/other expenses for each period presented:


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Unallocated corporate expenses (a)	$	14,186		$	6,418		$	30,554		$	18,116
Foreign exchange losses (gains)		(1,786	)		402			(2,819	)		2,234
Pension expense (income)		(60	)		536			(120	)		1,074
Restructuring expense (income)		—			(41	)		844			1,312
Depreciation and amortization of corporate assets		716			767			1,544			1,484

Corporate/other expenses	$	13,056		$	8,082		$	30,003		$	24,220


(a)		the increase in unallocated corporate expenses for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009 was due primarily to an increase in amounts accrued for performance-based employee compensation. The increase in unallocated corporate expenses for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009 is related primarily to share-based compensation expense due to the addition of Retirement Eligibility provisions in the Fiscal 2010 awards (see Note 2 of Notes to Consolidated Condensed Financial Statements) and an increase in amounts accrued for performance-based employee compensation.

A reconciliation of operating income from operating groups to income from continuing operations before provision for income taxes and non-controlling interest is as follows:


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Operating income by operating groups	$	68,374		$	49,081		$	164,819		$	129,493
Corporate/other expenses		(13,056	)		(8,082	)		(30,003	)		(24,220	)

Operating income		55,318			40,999			134,816			105,273
Other loss		5,730			2,799			7,550			2,395
Interest expense		4,259			5,799			9,237			11,868
Interest income		(487	)		(416	)		(1,493	)		(824	)

Income from continuing operations before provision for income taxes and noncontrolling interest	$	45,816		$	32,817		$	119,522		$	91,834

Geographic Information: Net revenues summarized by geographic region are as follows:


	Three Months Ended
	July 3, 2010		%			July 4, 2009		%
Net revenues:
United States	$	261,964		50.4	%	$	232,320		51.0	%
Europe		99,831		19.2	%		98,274		21.6	%
Asia		83,492		16.1	%		70,214		15.4	%
Canada		29,866		5.8	%		29,226		6.4	%
Mexico, Central and South America		44,181		8.5	%		25,398		5.6	%

	$	519,334		100.0	%	$	455,432		100.0	%

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


	Six Months Ended
	July 3, 2010		%			July 4, 2009		%
Net revenues:
United States	$	532,714		48.1	%	$	502,064		50.5	%
Europe		257,133		23.2	%		240,989		24.3	%
Asia		180,565		16.3	%		152,393		15.4	%
Canada		55,362		5.0	%		49,923		5.0	%
Mexico, Central and South America		81,724		7.4	%		47,906		4.8	%

	$	1,107,498		100.0	%	$	993,275		100.0	%

Note 7—Income Taxes

The effective tax rates for the Three Months Ended July 3, 2010 and July 4, 2009 were 34.5% and 40.4%, respectively. The decrease in effective tax rate reflects a tax benefit relating to the finalization of a foreign tax examination recorded during the Three Months Ended July 3, 2010, partially offset by a shift in earnings from lower to higher taxing jurisdictions. Included in the effective tax rate for the Three Months Ended July 4, 2009 is a non-cash tax charge recorded in the U.S. of approximately $2,500 in order to correct an error in the 2006 income tax provision related to the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003 (see Note 6 of Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2009).

The effective tax rates for the Six Months Ended July 3, 2010 and July 4, 2009 were 34.5% and 36.4%, respectively. The decrease in effective tax rate reflects a decrease in foreign earnings taxed in the U.S. as well as a tax benefit relating to the finalization of foreign tax examinations recorded during the Three Months Ended July 3, 2010, partially offset by a shift in earnings from lower to higher taxing jurisdictions. Included in the effective tax rate for the Six Months Ended July 4, 2009 is a non-cash tax charge of approximately $2,500 recorded in the U.S. associated with the correction of an error in the 2006 income tax provision related to the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003.

The Company applies the applicable provisions of GAAP to determine whether tax benefits associated with uncertain tax positions may be recognized in the financial statements. During the Six Months Ended July 3, 2010, the Company reduced its liability for unrecognized tax benefits by approximately $1,600 as a result of the conclusion of certain income tax examinations in foreign jurisdictions, of which a benefit of approximately $600 impacted the effective tax rate. Additionally, the Company believes that its accruals for uncertain tax positions are adequate and that the ultimate resolution of these uncertainties will not have a material impact on its results of operations, financial position, or statement of cash flows.

The Company remains under audit in various taxing jurisdictions. It is, therefore, difficult to predict the final timing and resolution of any particular uncertain tax position. Based upon the Company’s assessment of many factors, it is reasonably possible that within the next twelve months the amount of unrecognized tax benefits may increase between $2,500 and $5,000 (net of decreases that are reasonably possible), as a result of additional uncertain tax positions, the reevaluation of current uncertain tax positions arising from developments in examinations, the finalization of tax examinations, or from the closure of tax statutes.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 8—Employee Benefit and Retirement Plans

Defined Benefit Pension Plans

The Company has a defined benefit pension plan covering certain full-time non-union domestic employees and certain domestic employees covered by a collective bargaining agreement who had completed service prior to January 1, 2003 (the “Pension Plan”). Participants in the Pension Plan have not earned any additional pension benefits after December 31, 2002. The Company also sponsors defined benefit plans for certain of its United Kingdom and other European employees (the “Foreign Plans”). The Foreign Plans were not considered to be material for any period presented. These pension plans are noncontributory and benefits are based upon years of service. The Company also has health care and life insurance plans that provide post-retirement benefits to certain retired domestic employees (the “Postretirement Plans”). The Postretirement Plans are, in most cases, contributory with retiree contributions adjusted annually.

Each quarter the Company recognizes interest cost of the Pension Plan’s projected benefit obligation offset by the expected return on Pension Plan assets. The Company records pension expense (income) as the effect of actual gains and losses exceeding the expected return on Pension Plan assets (including changes in actuarial assumptions) less changes in the Pension Plan’s projected benefit obligation (including changes in actuarial assumptions) in the fourth quarter of each year. This accounting results in volatility in pension expense or income; therefore, the Company reports pension expense/income on a separate line of its Statements of Operations in each period.

During the Six Months Ended July 3, 2010, the Company made contributions of $2,400 to the Pension Plan. The Company’s contributions to the Pension Plan are expected to be $6,300 in total for Fiscal 2010. The fair value of the Pension Plan’s assets fluctuates with market conditions and is subject to uncertainties that are difficult to predict. During the Six Months Ended July 3, 2010, the fair value of the Pension Plan’s assets decreased to $112,947, representing an annualized rate of return of approximately negative 3.5%.

The following table includes only the Pension Plan. The Foreign Plans were not considered to be material for any period presented. The components of net periodic benefit cost are as follows:


	Pension Plans						Postretirement Plans
	Three Months Ended						Three Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Service cost	$	—		$	—		$	33		$	39
Interest cost		2,358			2,549			91			52
Expected return on plan assets		(2,418	)		(2,012	)		—			—
Amortization of actuarial loss (gain)		—			—			(26	)		(41	)

Net benefit cost (income) (a)	$	(60	)	$	537		$	98		$	50


	Pension Plans						Postretirement Plans
	Six Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Service cost	$	—		$	—		$	66		$	78
Interest cost		4,716			5,098			182			105
Expected return on plan assets		(4,836	)		(4,024	)		—			—
Amortization of actuarial loss (gain)		—			—			(52	)		(83	)

Net benefit cost (income) (a)	$	(120	)	$	1,074		$	196		$	100


(a)		Pension Plan net benefit cost (income) does not include costs related to the Foreign Plans of $38 and $77 for the Three and Six Months Ended July 3, 2010, respectively, and $57 and $57 for the Three and Six Months Ended July 4, 2009, respectively.

Deferred Compensation Plans

The Company’s liability for employee contributions and investment activity was $3,643, $2,838 and $2,334 as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively. This liability is included in other long-term liabilities. The Company’s liability for director contributions and investment activity was $808, $703 and $531 as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively. This liability is included in other long-term liabilities.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 9—Comprehensive Income

The components of comprehensive income are as follows:


	Three Months Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009

Net income	$	29,934		$	18,672		$	77,909		$	56,501
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(38,480	)		20,202			(43,290	)		9,866
Change in fair value of cash flow hedges		2,490			(910	)		2,531			(572	)
Change in actuarial gains (losses), net related to post retirement medical plans		—			1			—			—
Other		70			110			74			110

Total Comprehensive income (loss)		(5,986	)		38,075			37,224			65,905
Less: Comprehensive income attributable to noncontrolling interest		—			(1,181	)		—			(1,530	)

Comprehensive income (loss) attributable to Warnaco Group Inc.	$	(5,986	)	$	36,894		$	37,224		$	64,375

The components of accumulated other comprehensive income as of July 3, 2010, January 2, 2010 and July 4, 2009 are summarized below:


	July 3,			January 2,			July 4,
	2010			2010			2009

Foreign currency translation adjustments (a)	$	5,268		$	48,558		$	22,720

Actuarial (losses), net related to post retirement medical plans, net of tax of $607, $607 and $0 as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively		(1,058	)		(1,058	)		(29	)
Gain (loss) on cash flow hedges, net of taxes of $573, $387, and $0 as of July 3, 2010, January 2, 2010 and July 4, 2009, respectively		1,504			(1,027	)		(900	)
Other		74			—			94

Total accumulated other comprehensive income	$	5,788		$	46,473		$	21,885


(a)		the foreign currency translation adjustments reflect the change in the U.S. dollar relative to functional currencies where the Company conducts certain of its operations and the fact that the majority of the Company’s assets are based outside of the U.S. The decrease of $43,290 in foreign currency translation adjustments at July 3, 2010 compared to January 2, 2010 reflects the increase in the strength of the U.S. Dollar relative to the Euro, Canadian Dollar, Korean Won, Brazilian Real and Mexican Peso between such dates.

Note 10—Fair Value Measurement

The Company utilizes the market approach to measure fair value for financial assets and liabilities, which primarily relate to derivative contracts and interest rate swaps. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company classifies its financial instruments in a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy consists of the following three levels:


		Level 1 -		Inputs are quoted prices in active markets for identical assets or liabilities.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


		Level 2 -		Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

		Level 3 -		Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

Valuation Techniques

The fair value of foreign currency exchange contracts and zero cost collars was determined as the net unrealized gains or losses on those contracts, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current forward or spot exchange rate, as applicable. The fair value of these foreign currency exchange contracts is based on quoted prices that include the effects of U.S. and foreign interest rate yield curves and, therefore, meets the definition of level 2 fair value, as defined above.

The fair value of interest rate swaps was estimated based on the amount that the Company would receive or pay to terminate the swaps on the valuation date. Those amounts are based on receipt of interest at a fixed interest rate of 8⁷/₈% and a payment of a variable rate based on a fixed interest rate above the six month LIBOR rate. As such, the fair value of the interest rate swaps meets the definition of level 2, as defined above. As of July 3, 2010 and January 2, 2010, the Company had no outstanding interest rate swaps.

The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis, as of July 3, 2010, January 2, 2010 and July 4, 2009:


	July 3, 2010						January 2, 2010						July 4, 2009
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)

Assets
Interest rate swap (a)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,508	$	—
Foreign currency exchange contracts	$	—	$	5,388	$	—	$	—	$	79	$	—	$	—	$	801	$	—

Liabilities
Foreign currency exchange contracts	$	—	$	870	$	—	$	—	$	3,400	$	—	$	—	$	5,846	$	—


(a)		the 2004 and 2003 Swap Agreements (as defined in Note 14, below) were called by the issuer in June and July 2009, respectively. The Company received a total debt premium of $2,219, which was being amortized as a reduction to interest expense through June 15, 2013 (the date on which the Senior Notes mature). The Senior Notes were fully repaid on June 15, 2010 and the remaining deferred premium was written off. See Note 14 of Notes to Consolidated Condensed Financial Statements.

Cash and cash equivalents, accounts receivable and accounts payable are recorded at carrying value, which approximates fair value. The Company’s Senior Notes, CKJEA Notes and amounts outstanding under the New Credit Agreements are also reported at carrying value.

Note 11— Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments.

Accounts Receivable: The carrying amount of the Company’s accounts receivable approximates fair value.

Accounts Payable: The carrying amount of the Company’s accounts payable is approximately equal to their fair value because accounts payable are short-term in nature and the carrying value is equal to the settlement value.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Short-term Revolving Credit Facilities: The carrying amount of the New Credit Agreements, CKJEA Notes and other short-term debt is approximately equal to their fair value because of their short-term nature and because amounts outstanding bear interest at variable rates which fluctuate with market rates.

Senior Notes: The Senior Notes were scheduled to mature on June 15, 2013 and bore interest at 8⁷/8% payable semi-annually beginning December 15, 2003. However, at July 3, 2010, all of the Senior Notes had been redeemed from bondholders. At January 2, 2010, the fair value of the Senior Notes was based on their redemption price, including the related debt premium on the Swap Agreements, since a portion of the Senior Notes was redeemed on January 5, 2010 (see Note 14 of Notes to Consolidated Condensed Financial Statements). The fair value of the Senior Notes at July 4, 2009 was based upon quoted market prices for the Senior Notes.

Foreign Currency Exchange Contracts: The fair value of the outstanding foreign currency exchange forward contracts is based upon the cost to terminate the contracts, as described above in Note 10 of Notes to Consolidated Condensed Financial Statements.

Interest Rate Swaps: The fair value of the Swap Agreements as of July 4, 2009 was based upon the costs to terminate the contracts. As of July 3, 2010 and January 2, 2010, the Company had no outstanding interest rate swaps.

The carrying amounts and fair values of the Company’s financial instruments at July 3, 2010, January 2, 2010 and July 4, 2009 are as follows:


		July 3, 2010				January 2, 2010				July 4, 2009
	Balance Sheet	Carrying		Fair		Carrying		Fair		Carrying		Fair
	Location	Amount		Value		Amount		Value		Amount		Value
Assets:
Accounts receivable	Accounts receivable, net of reserves	$	304,328	$	304,328	$	290,737	$	290,737	$	281,400	$	281,400
Open foreign currency exchange contracts	Prepaid expenses and other current assets		5,388		5,388		79		79		801		801
Interest rate swaps — net gain	Other assets		—		—		—		—		1,508		1,508

Liabilities:
Accounts payable	Accounts payable	$	156,695	$	156,695	$	127,636	$	127,636	$	124,531	$	124,531
Short-term revolving credit facilities	Short-term debt		65,203		65,203		47,873		47,873		58,807		58,807
Senior Notes, current portion	Short-term debt		—		—		50,000		51,479		—		—
Open foreign currency exchange contracts	Accrued liabilities		870		870		3,400		3,400		5,846		5,846
Senior Notes	Long-term debt		—		—		112,835		116,115		163,130		163,934

Derivative Financial Instruments

The Company is exposed to foreign exchange risk related to U.S. dollar-denominated purchases of inventory, payment of minimum royalty and advertising costs and intercompany payables by foreign subsidiaries whose functional currencies are not the U.S. dollar. The Company or its foreign subsidiaries enter into foreign exchange forward contracts, including zero-cost collar option contracts, to offset certain of its foreign exchange risk. During the Six Months Ended July 4, 2009, the Company also utilized interest rate swaps to convert a portion of the interest obligation related to its long-term debt from a fixed rate to floating rates. See Note 14 of Notes to Consolidated Condensed Financial Statements. The Company does not use derivative financial instruments for speculative or trading purposes.

A number of international financial institutions are counterparties to the Company’s zero cost collars and foreign exchange contracts. The Company monitors its positions with, and the credit quality of, these counterparty financial institutions and does not anticipate nonperformance by these counterparties. Management believes that the Company would not suffer a material loss in the event of nonperformance by these counterparties.

During the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009, the Company’s Korean, European and Canadian subsidiaries continued their hedging programs, which included foreign exchange forward contracts which were designed to satisfy the first 50% of U.S. dollar denominated purchases of inventory over an 18-month period or payment of 100% of the minimum royalty and advertising expenses. All of the foregoing forward contracts were designated as cash flow hedges, with gains and losses accumulated on the Balance Sheet in Other Comprehensive Income and recognized in Cost of Goods Sold in the Statement of Operations during the periods in which the underlying transactions occur.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

During the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009, the Company also continued hedging programs, which were accounted for as economic hedges, with gains and losses recorded directly in Other loss (income) or Selling, general and administrative expense in the Statements of Operations in the period in which they are incurred. Those hedging programs included foreign currency exchange contracts, including, zero-cost collars, that were designed to fix the number of Euros, Korean won, Canadian dollars or Mexican pesos required to satisfy either (i) the first 50% of U.S. dollar denominated purchases of inventory over an 18-month period; (ii) 50% of intercompany purchases from a British subsidiary or (iii) U.S. dollar denominated intercompany loans and payables. See also Item 3. Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange Risk in this Quarterly Report on Form 10-Q for further details.

The following table summarizes the Company’s derivative instruments as of July 3, 2010, January 2, 2010 and July 4, 2009:


	Asset Derivatives								Liability Derivatives
			Fair Value							Fair Value
		Balance Sheet	July 3,		January 2,		July 4,		Balance Sheet	July 3,		January 2,		July 4,
	Type (a)	Location	2010		2010		2009		Location	2010		2010		2009

Derivatives designated as hedging instruments under FASB ASC 815-20

Foreign exchange contracts	CF	Prepaid expenses and other current assets	$	1,969	$	—	$	—	Accrued liabilities	$	—	$	1,119	$	656
Interest rate swaps	FV	Other assets		—		—		1,508	Long-term debt		—		—		—


Total derivatives designated as hedging instruments under FASB ASC 815-20			$	1,969	$	—	$	1,508		$	—	$	1,119	$	656


Derivatives not designated as hedging instruments under FASB ASC 815-20

Foreign exchange contracts	CF	Prepaid expenses and other current assets	$	3,419	$	79	$	801	Accrued liabilities	$	870	$	2,281	$	5,190


Total derivatives not designated as hedging instruments under FASB ASC 815-20			$	3,419	$	79	$	801		$	870	$	2,281	$	5,190


Total derivatives			$	5,388	$	79	$	2,309		$	870	$	3,400	$	5,846


(a)		CF = cash flow hedge; FV = fair value hedge

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The following tables summarize the effect of the Company’s derivative instruments on the Consolidated Condensed Statements of Operations for the Three and Six Months Ended July 3, 2010 and the Three and Six Months Ended July 4, 2009:


														Location of
		Amount of Gain (Loss) Recognized						Amount of Gain (Loss) Reclassified from						Gain (Loss)	Amount of Gain (Loss) Recognized
		in OCI on Derivatives					Location of Gain	Accumulated OCI into Income						Recognized in	in Income on Derivative
		(Effective Portion)					(Loss) Reclassified	(Effective Portion)						Income on	(Ineffective Portion)
		Three Months		Three Months			from Accumulated	Three Months			Three Months			Derivative	Three Months		Three Months
Derivatives in FASB ASC 815-20	Nature of Hedged	Ended		Ended			OCI into Income	Ended			Ended			(Ineffective	Ended		Ended
Cash Flow Hedging Relationships	Transaction	July 3, 2010		July 4, 2009			(Effective Portion)	July 3, 2010			July 4, 2009			Portion) (c)	July 3, 2010		July 4, 2009

Foreign exchange contracts	Minimum royalty and advertising costs (a)	$	877	$	(555	)	cost of goods sold	$	341		$	(27	)	other loss/income	$	9	$	(21	)
Foreign exchange contracts	Purchases of inventory (b)		2,529		(485	)	cost of goods sold		(312	)		(105	)	other loss/income		106		(4	)


Total		$	3,406	$	(1,040	)		$	29		$	(132	)		$	115	$	(25	)


		Six Months		Six Months				Six Months			Six Months				Six Months		Six Months
		Ended		Ended				Ended			Ended				Ended		Ended
		July 3, 2010		July 4, 2009				July 3, 2010			July 4, 2009				July 3, 2010		July 4, 2009

Foreign exchange contracts	Minimum royalty and advertising costs (a)	$	1,515	$	(107	)	cost of goods sold	$	400		$	70		other loss/income	$	26	$	(6	)
Foreign exchange contracts	Purchases of inventory (b)		1,390		(490	)	cost of goods sold		(818	)		(95	)	other loss/income		74		(11	)


Total		$	2,905	$	(597	)		$	(418	)	$	(25	)		$	100	$	(17	)


(a)		At July 3, 2010, the amount of minimum royalty costs hedged was $9,252; contracts expire March 2011. At July 4, 2009, the amount of minimum royalty costs hedged was $9,652; contracts expire March 2010.

(b)		At July 3, 2010, the amount of inventory purchases hedged was $46,650 ; contracts expire October 2011. At July 4, 2009, amount of inventory purchases hedged was $13,292; contracts expire October 2010.

(c)		No amounts were excluded from effectiveness testing

Location of Gain

Amount of Gain (Loss) Recognized
in Income on Derivative

Derivatives not designated as

Amount

(Loss) Recognized

Three Months

Six Months

hedging instruments under FASB

Nature of Hedged

Hedged

Maturity Date

in Income on

Ended

ASC 815-20

Transaction

Instrument

July 3, 2010

Derivative

July 3, 2010

Foreign exchange contracts (d)

Purchases of inventory

Forward contracts

907

August 2010

other loss/income

(110

)

Foreign exchange contracts (e)

Intercompany purchases of inventory

Forward contracts

15,045

December 2011

other loss/income

(873

)

(791

)

Foreign exchange contracts (f)

Minimum royalty and advertising costs

Forward contracts

10,000

April 2011

other loss/income

385

903

Foreign exchange contracts

Intercompany loans

Forward contracts

—

other loss/income

—

(94

)

Foreign exchange contracts

Intercompany payables

Forward contracts

34,000

March 2011

other loss/income

1,762

2,859

Foreign exchange contracts

Intercompany payables

Zero-cost collars

—

other loss/income

383

1,511

Foreign exchange contracts

Intercompany payables

Forward contracts

4,000

July 2010

selling, general and administrative

504

398

Foreign exchange contracts

Intercompany payables

Zero-cost collars

—

selling, general and administrative

(232

)

Total

2,298

4,444

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


							Three Months Ended			Six Months Ended
			July 4, 2009		July 4, 2009		July 4, 2009			July 4, 2009

Foreign exchange contracts (d)	Purchases of inventory	Forward contracts	$	24,185	August 2009 - August 2010	other loss/income	$	(1,852	)	$	(2,560	)

Foreign exchange contracts (e)	Intercompany purchases of inventory	Forward contracts		3,840	December 2009	other loss/income		(605	)		(698	)

Foreign exchange contracts (f)	Minimum royalty and advertising costs	Forward contracts		10,000	April 2010	other loss/income		(504	)		(510	)

Foreign exchange contracts	Intercompany loans	Zero-cost collars		14,728	November 2009 - April 2010	other loss/income		500			415

Foreign exchange contracts	Intercompany payables	Zero-cost collars		35,000	July 2009 - January 2010	other loss/income		3			216

Foreign exchange contracts	Intercompany payables	Zero-cost collars		20,000	July 2009 - May 2010	selling, general and administrative		710			1,560


Total							$	(1,748	)	$	(1,577	)


(d)		Forward contracts used to offset 50% of U.S. dollar-denominated purchases of inventory by the Company’s foreign subsidiaries whose functional currencies were the Canadian dollar and Mexican peso, entered into by Warnaco Inc. on behalf of foreign subsidiaries.

(e)		Forward contracts used to offset 50% of Euro-denominated intercompany purchases by a subsidiary whose functional currency is the British pound.

(f)		Forward contracts used to offset payment of minimum royalty and advertising costs related to sales of inventory by the Company’s foreign subsidiary whose functional currency was the Euro, entered into by Warnaco Inc. on behalf of a foreign subsidiary.

A reconciliation of the balance of Accumulated Other Comprehensive Income during the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009 related to cash flow hedges of foreign exchange forward contracts is as follows:


Balance January 3, 2009	$	(328	)
Derivative losses recognized		(597	)
Gains amortized to earnings		25

Balance July 4, 2009, net of tax	$	(900	)


Balance January 2, 2010	$	(1,414	)
Derivative gains recognized		2,905
Gains amortized to earnings		418
Other		168

Balance before tax effect		2,077
Tax effect		(573	)

Balance July 3, 2010, net of tax	$	1,504

During the twelve months following July 3, 2010, the net amount of gains that were reported in Other Comprehensive Income at that date that are estimated to be amortized into earnings is $1,777. During the Six Months Ended July 3, 2010, the Company expected that all originally forecasted purchases of inventory or payment of minimum royalties, which were covered by cash flow hedges, would occur by the end of the respective originally specified time periods. Therefore, no amount of gains or losses was reclassified into earnings during the Six Months Ended July 3, 2010 as a result of the discontinuance of those cash flow hedges.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 12—Inventories

Inventories are valued at the lower of cost to the Company (using the first-in-first-out method) or market and are summarized as follows:


	July 3, 2010		January 2, 2010		July 4, 2009

Finished goods	$	277,401	$	251,540	$	290,315
Raw materials		164		1,822		1,263

	$	277,565	$	253,362	$	291,578

See Note 11 to Notes to Consolidated Condensed Financial Statements for details on the Company’s hedging programs related to purchases of inventory.

Note 13—Intangible Assets and Goodwill

The following tables set forth intangible assets as of July 3, 2010, January 2, 2010 and July 4, 2009 and the activity in the intangible asset accounts for the Six Months Ended July 3, 2010:


	July 3, 2010						January 2, 2010						July 4, 2009
	Gross Carrying		Accumulated				Gross Carrying		Accumulated				Gross Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net		Amount		Amortization		Net

Finite-lived intangible assets:
Licenses for a term (Company as licensee)	$	310,668	$	50,645	$	260,023	$	330,389	$	46,268	$	284,121	$	286,852	$	40,467	$	246,385
Other		16,164		9,330		6,834		20,427		8,387		12,040		16,298		7,525		8,773

		326,832		59,975		266,857		350,816		54,655		296,161		303,150		47,992		255,158

Indefinite-lived intangible assets:
Trademarks		54,715		—		54,715		56,719		—		56,719		22,530		—		22,530
Licenses in perpetuity		23,113		—		23,113		23,951		—		23,951		10,227		—		10,227

		77,828		—		77,828		80,670		—		80,670		32,757		—		32,757

Intangible Assets (a)	$	404,660	$	59,975	$	344,685	$	431,486	$	54,655	$	376,831	$	335,907	$	47,992	$	287,915


(a)		the increase in the balance of intangible assets from July 4, 2009 to July 3, 2010 primarily relates to the increase in value of certain intangible assets due to the correction of errors in prior period deferred tax balances associated with the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003 (see Note 10 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2009).


										Other
				Licenses			Licenses			Finite-lived
				in			for a			Intangible
	Trademarks			Perpetuity			Term			Assets			Total

Balance at January 2, 2010	$	56,719		$	23,951		$	284,121		$	12,040		$	376,831
Amortization expense		—			—			(4,377	)		(943	)		(5,320	)
Translation adjustments		—			—			(17,873	)		(671	)		(18,544	)
Recapture of tax basis (a)		(2,004	)		(838	)		(1,848	)		—			(4,690	)
Other (b)		—			—			—			(3,592	)		(3,592	)

Balance at July 3, 2010	$	54,715		$	23,113		$	260,023		$	6,834		$	344,685


(a)		relates to the correction of errors in prior period deferred tax balances associated with the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003.

(b)		during the Three Months Ended July 3, 2010, the Company completed the accounting for the acquisition of certain store assets in Brazil (see Note 2 of Notes to Consolidated Condensed Financial Statements), which had been recorded as intangible assets of $3,592 on the date of acquisition during the fourth quarter of Fiscal 2009. During the Three Months Ended July 3, 2010, the Company reclassified those assets as prepaid rent (included in Other assets on the Company’s Consolidated Condensed Balance Sheet).

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The following table summarizes the Company’s estimated amortization expense for intangible assets for the next five years:


2011	$	9,081
2012		8,913
2013		8,827
2014		7,433
2015		7,433

The following table summarizes the changes in the carrying amount of goodwill for the Six Months Ended July 3, 2010:



	Sportswear			Intimate			Swimwear
	Group			Apparel Group			Group		Total

Goodwill balance at January 2, 2010	$	108,633		$	1,446		$	642	$	110,721
Adjustment:
Translation adjustments		(10,075	)		(90	)		—		(10,165	)
Other (a)		573			98			—		671

Goodwill balance at July 3, 2010	$	99,131		$	1,454		$	642	$	101,227


(a)		relates to the acquisition of businesses in the People’s Republic of China during the Three Months Ended July 3, 2010 (see Note 3 of Notes to Consolidated Condensed Financial Statements).

Note 14—Debt

Debt was as follows:


	July 3, 2010		January 2, 2010		July 4, 2009
Short-term debt:
CKJEA notes payable and other	$	39,881	$	47,684	$	50,133
New Credit Agreements		25,322		189		8,674
8 7/8% Senior Notes due 2013 (a)		—		50,000		—

		65,203		97,873		58,807


Long-term debt:
8 7/8% Senior Notes due 2013		—		110,890		160,890
Unrealized gain on swap agreements		—		—		1,508
Debt premium on 2003 and 2004 swaps		—		1,945		732

		—		112,835		163,130

Total Debt	$	65,203	$	210,708	$	221,937


(a)		reflects the portion of the Senior Notes that was redeemed from bondholders on January 5, 2010 (see below).

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Senior Notes

On January 5, 2010, the Company redeemed from bondholders $50,000 aggregate principal amount of its outstanding 8 7/8% Senior Notes due 2013 (“Senior Notes”) for a total consideration of $51,479 and on June 15, 2010, the Company redeemed from bondholders the remaining $110,890 aggregate principal amount of its outstanding Senior Notes for a total consideration of $112,530. In connection with the redemptions, the Company recognized losses, in the Other loss (income) line item in the Company’s Consolidated Condensed Statement of Operations totaling approximately $2,055 and $3,747, for the Three and Six Months Ended July 3, 2010, respectively, which included $1,640 and $3,119 of premium expense, the write-off of approximately $1,594 and $2,411 of deferred financing costs and $1,179 and $1,783 of unamortized gain from the previously terminated 2003 Swap Agreement and 2004 Swap Agreement (both defined below) for the Three and Six Months Ended July 3, 2010, respectively. The Company funded the redemption of the Senior Notes on January 5, 2010 and June 15, 2010 with available cash on hand in the U.S. and borrowings under its New Credit Agreement (defined below).

The aggregate principal amount outstanding under the Senior Notes was $0 as of July 3, 2010 and $160,890 at January 2, 2010 and at July 4, 2009.

Interest Rate Swap Agreements

The Company entered into interest rate swap agreements on September 18, 2003 (the “2003 Swap Agreement”) and November 5, 2004 (the “2004 Swap Agreement” and, together with the 2003 Swap Agreement, the “Swap Agreements”) with respect to the Senior Notes for a total notional amount of $75,000. In June 2009, the 2004 Swap Agreement was called by the issuer and the Company received a debt premium of $740. On July 15, 2009, the 2003 Swap Agreement was called by the issuer and the Company received a debt premium of $1,479. Both debt premiums were being amortized as reductions to interest expense through June 15, 2013 (the date on which the Senior Notes mature). The Senior Notes were fully repaid on June 15, 2010 and the remaining deferred premium was written off. During the Three and Six Months Ended July 3, 2010, $1,244 and $1,945, respectively, was amortized, including $1,179 and $1,783, respectively, related to the redemption of the Senior Notes (see above). The 2003 Swap Agreement and the 2004 Swap Agreement provided that the Company would receive interest at 8⁷/₈% and pay variable rates of interest based upon six month LIBOR plus 4.11% and 4.34%, respectively. As a result of the Swap Agreements and the amortization of the debt premiums, the weighted average effective interest rate of the Senior Notes was 8.53% as of January 2, 2010 and 7.77% as of July 4, 2009.

As of July 3, 2010 and January 2, 2010, the Company had no outstanding interest rate swap agreements. The fair values of the Company’s Swap Agreements at July 4, 2009 reflect the termination premium or termination discount that the Company would have realized if such Swap Agreements had been terminated on that date. Since the provisions of the Company’s Swap Agreements matched the provisions of the Company’s outstanding Senior Notes (the “Hedged Debt”), changes in the fair values of the Swap Agreements did not have any effect on the Company’s results of operations for the Three and Six Months Ended July 4, 2009 but were recorded in the Company’s Consolidated Balance Sheets as of that date in Other assets with a corresponding increase in the Hedged Debt.

New Credit Agreements

On August 26, 2008, Warnaco, as borrower, and Warnaco Group, as guarantor, entered into a revolving credit agreement (the “New Credit Agreement”) and Warnaco of Canada Company, an indirect wholly-owned subsidiary of Warnaco Group, as borrower, and Warnaco Group, as guarantor, entered into a second revolving credit agreement (the “New Canadian Credit Agreement” and, together with the New Credit Agreement, the “New Credit Agreements”), in each case with the financial institutions which, from time to time, will act as lenders and issuers of letters of credit.

At July 3, 2010, the New Credit Agreement had interest rate options (dependent on the amount borrowed and the repayment period) that are based on: (i) a Base Rate (as defined in the New Credit Agreement) plus 0.75% (4.0% at July 3, 2010) or (ii) LIBOR (as defined in the New Credit Agreement) plus 1.75% (2.28% at July 3, 2010) in each case, on a per annum basis. The interest rate payable on outstanding borrowing is subject to adjustments based on changes in the Company’s leverage ratio. At July 3, 2010, the New Canadian Credit Agreement had interest rate options (dependent on the amount borrowed and the repayment period) that are based on: (i) the prime rate announced by Bank of America (acting through its Canada branch) plus 0.75% (3.25% at July 3, 2010) or (ii) a BA Rate (as defined in the New Canadian Credit Agreement) plus 1.75% (2.5% at July 3, 2010), in each case, on a per annum basis and subject to adjustments based on changes in the Company’s leverage ratio. The BA Rate is defined as the annual rate of interest quoted by Bank of America (acting through its Canada branch) as its rate of interest for bankers’ acceptances in Canadian dollars for a face amount similar to the amount of the loan and for a term similar to the applicable interest period.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

As of July 3, 2010, the Company had $25,322 in loans and approximately $85,718 in letters of credit outstanding under the New Credit Agreement, leaving approximately $110,750 of availability. As of July 3, 2010, there were no loans and no letters of credit outstanding under the New Canadian Credit Agreement and the available line of credit was approximately $19,690. As of July 3, 2010, the Company was in compliance with all financial covenants contained in the New Credit Agreements.

Euro-Denominated CKJEA Notes Payable and Other

In connection with the Company’s 2006 acquisition of certain parts of its Calvin Klein businesses, the Company assumed certain short-term notes payable (the “CKJEA Notes”). The total CKJEA notes payable of $38,289 at July 3, 2010 consists of short-term revolving notes with a number of banks at various interest rates (primarily Euro LIBOR plus 1.0%). The weighted average effective interest rate for the outstanding CKJEA notes payable was 2.49% as of July 3, 2010, 2.18% as of January 2, 2010 and 2.39% as of July 4, 2009. All of the CKJEA notes payable are short-term and were renewed during the Six Months Ended July 3, 2010 for additional terms of no more than 12 months. At July 3, 2010, the Company’s Brazilian subsidiary, WBR, had lines of credit with several banks, with a total outstanding balance of $1,592, recorded in Short-term debt in the Company’s Consolidated Condensed Balance Sheet, which was secured by an equal amount of WBR’s trade accounts receivable. In addition, one of the Company’s Korean subsidiaries had an outstanding note payable of $1,568, with an interest rate of 4.7% per annum at July 4, 2009, all of which had been repaid as of January 2, 2010 and July 3, 2010.

Note 15—Stockholders’ Equity

Preferred Stock

The Company has authorized an aggregate of 20,000,000 shares of preferred stock, par value $0.01 per share, of which 112,500 shares are designated as Series A preferred stock, par value $0.01 per share. There were no shares of preferred stock issued and outstanding at July 3, 2010, January 2, 2010 and July 4, 2009.

Share Repurchase Programs

On May 12, 2010, the Company’s Board of Directors authorized a share repurchase program (the “2010 Share Repurchase Program”) for the repurchase of up to 5,000,000 shares of the Company’s common stock. All repurchases of shares under the new program will be made consistent with the terms of the Company’s applicable debt instruments. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

In May 2007, the Company’s Board of Directors authorized a share repurchase program (the “2007 Share Repurchase Program”) for the repurchase of up to 3,000,000 shares of the Company’s common stock. During the first quarter of Fiscal 2010, the Company repurchased the remaining 1,490,131 shares of its common stock allowed to be repurchased under the 2007 Share Repurchase Program in the open market at a total cost of approximately $69,004 (an average cost of $46.31 per share). At July 3, 2010, the Company had cumulatively purchased 3,000,000 shares of common stock in the open market at a total cost of approximately $106,916 (an average cost of $35.64 per share) under the 2007 Share Repurchase Program.

Repurchased shares are held in treasury pending use for general corporate purposes.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Stock Incentive Plans

A summary of stock option award activity under the Company’s stock incentive plans as of and for the Six Months Ended July 3, 2010 is presented below:


				Weighted
				Average
				Exercise
	Options			Price
Outstanding as of January 2, 2010		2,462,346		$	26.79
Granted		378,650			43.13
Exercised		(228,627	)		22.24
Forfeited / Expired		(54,614	)		35.95

Outstanding as of July 3, 2010		2,557,755		$	29.46


Options Exercisable as of July 3, 2010		1,642,755		$	24.96

A summary of the activity for unvested restricted share/unit awards under the Company’s stock incentive plans (excluding Performance Awards, defined below) as of and for the Six Months Ended July 3, 2010 is presented below:


				Weighted
	Restricted			Average Grant
	shares/units			Date Fair Value
Unvested as of January 2, 2010		751,108		$	32.78
Granted		240,410			43.43
Vested (a)		(196,041	)		34.22
Forfeited		(25,781	)		35.67

Unvested as of July 3, 2010		769,696		$	35.64


(a)		does not include an additional 36,750 restricted units with a grant date fair value of $43.28, granted to Retirement-Eligible employees, for which the requisite service period has been completed on the grant date but the restrictions will not lapse until the end of the three-year vesting period.

In March 2010, share-based compensation awards granted to certain of the Company’s executive officers under the 2005 Stock Incentive Plan included 75,750 performance-based restricted stock/restricted unit awards (“Performance Awards”) in addition to the service-based stock options and restricted stock awards, included in the preceding tables, of the types that had been granted in previous periods. The Performance Awards cliff-vest three years after the grant date and are subject to the same vesting provisions as awards of the Company’s regular service-based restricted stock/restricted unit awards granted in March 2010. The final number of Performance Awards that will be earned, if any, at the end of the three-year vesting period will be the greatest number of shares based on the Company’s achievement of certain goals relating to cumulative earnings per share growth (a performance condition) or the Company’s relative total shareholder return (“TSR”) (change in closing price of the Company’s common stock on the New York Stock Exchange compared to that of a peer group of companies (“Peer Companies”)) (a market condition) measured from the beginning of Fiscal 2010 to the end of Fiscal 2012 (the “Measurement Period”). The total number of Performance Awards earned could equal up to 150% of the number of Performance Awards originally granted, depending on the level of achievement of those goals during the Measurement Period.

The Company records stock-based compensation expense related to the Performance Awards ratably over the requisite service period based on the greater of the estimated expense calculated under the performance condition or the grant date fair value calculated under the market condition. Stock-based compensation expense related to an award with a market condition is recognized over the requisite service period regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. Under the performance condition, the estimated expense is based on the grant date fair value (the closing price of the Company’s common stock on the date of grant) and the Company’s current expectations of the probable number of Performance Awards that will ultimately be earned. The fair value of the Performance Awards under the market condition ($2,432) is based upon a Monte Carlo simulation model, which encompasses TSR’s during the Measurement Period, including both the period from the beginning of Fiscal 2010 to March 3, 2010 (the grant date), for which actual TSR’s are calculated, and the period from the grant date to the end of Fiscal 2012, a total of 2.83 years (the “Remaining Measurement Period”), for which simulated TSR’s are calculated.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

In calculating the fair value of the award under the market condition, the Monte Carlo simulation model utilizes multiple input variables over the Measurement Period in order to determine the probability of satisfying the market condition stipulated in the award. The Monte Carlo simulation model computed simulated TSR’s for the Company and Peer Companies during the Remaining Measurement Period with the following inputs: (i) stock price on the grant date (ii) expected volatility; (iii) risk-free interest rate; (iv) dividend yield and (v) correlations of historical common stock returns between the Company and the Peer Companies and among the Peer Companies. Expected volatilities utilized in the Monte Carlo model are based on historical volatility of the Company’s and the Peer Companies’ stock prices over a period equal in length to that of the Remaining Measurement Period. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant with a term equal to the Measurement Period assumption at the time of grant.

The calculation of simulated TSR’s under the Monte Carlo model for the Remaining Measurement Period included the following assumptions:


Weighted average risk free rate of return		1.25	%
Dividend yield		—
Expected volatility — Company		65.0	%
Expected volatility — Peer Companies		39.8% - 114.1	%
Remaining measurement period	2.83 years

The Company recorded compensation expense for the Performance Awards during the Six Months Ended July 3, 2010 based on the performance condition.

Performance share activity for the Six Months Ended July 3, 2010 was as follows:


			Weighted
			Average
	Performance		Grant Date
	Shares		Fair Value
Unvested as of January 2, 2010		—	$	—
Granted		75,750		43.28
Vested (a)		—		—
Forfeited		—		—

Unvested as of July 3, 2010		75,750	$	43.28


(a)		does not include 34,300 Performance Awards granted to Retirement Eligible employees, for which the requisite service period has been completed on the grant date; the restrictions on such awards will not lapse until the end of the three-year vesting period.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 16—Supplemental Cash Flow Information


	Six Months Ended
	July 3, 2010			July 4, 2009

Cash paid (received) during the period for:
Interest expense	$	9,310		$	11,585
Interest income		(445	)		(1,233	)
Income taxes, net of refunds received		14,669			14,676
Supplemental non-cash investing and financing activities:
Accounts payable for purchase of fixed assets		4,999			4,279

Note 17—Income per Common Share

The following table presents the calculation of both basic and diluted income per common share attributable to Warnaco Group, Inc. common shareholders, giving effect to participating securities. The Company has determined that based on a review of its share-based awards, only its restricted stock awards are deemed participating securities, which participate equally with common shareholders. The weighted average restricted stock outstanding was 556,328 and 526,413 shares for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and 577,924 and 511,771 shares for the Six Months Ended July 3, 2010 and July 4, 2009, respectively. Undistributed income allocated to participating securities is based on the proportion of restricted stock outstanding to the sum of weighted average number of common shares outstanding attributable to Warnaco Group, Inc. common shareholders and restricted stock outstanding for each period presented.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


	Six Months Ended
	July 3, 2010			July 4, 2009
Numerator for basic and diluted income per common share:

Income from continuing operations attributable to Warnaco Group, Inc. common shareholders and participating securities	$	78,339		$	57,234
Less: allocation to participating securities		(995	)		(639	)

Income from continuing operations attributable to Warnaco Group, Inc. common shareholders	$	77,344		$	56,595


Income (loss) from discontinued operations, net of tax, attributable to Warnaco Group, Inc. common shareholders and participating securities	$	(430	)	$	(1,903	)
Less: allocation to participating securities		5			21

Income (loss) from discontinued operations attributable to Warnaco Group, Inc. common shareholders	$	(425	)	$	(1,882	)


Net income attributable to Warnaco Group, Inc. common shareholders and participating securities	$	77,909		$	55,331
Less: allocation to participating securities		(990	)		(618	)

Net income attributable to Warnaco Group, Inc. common shareholders	$	76,919		$	54,713


Basic income per common share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing income per common share		44,943,829			45,356,680


Income per common share from continuing operations	$	1.72		$	1.25
Income per common share from discontinued operations		(0.01	)		(0.04	)

Net income per common share	$	1.71		$	1.21


Diluted income per share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing basic income per common share		44,943,829			45,356,680
Effect of dilutive securities:
Stock options and restricted stock units		992,667			522,773

Weighted average number of shares and share equivalents used in computing income per common share		45,936,496			45,879,453


Income per common share from continuing operations	$	1.68		$	1.23
Income per common share from discontinued operations		(0.01	)		(0.04	)

Net income per common share	$	1.67		$	1.19


Number of anti-dilutive “out-of-the-money” stock options outstanding (a)		399,034			1,270,349

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)


	Three Months Ended
	July 3, 2010			July 4, 2009
Numerator for basic and diluted income per common share:

Income from continuing operations attributable to Warnaco Group, Inc. common shareholders and participating securities	$	30,027		$	18,642
Less: allocation to participating securities		(371	)		(214	)

Income from continuing operations attributable to Warnaco Group, Inc. common shareholders	$	29,656		$	18,428


(Loss) from discontinued operations, net of tax, attributable to Warnaco Group, Inc. common shareholders and participating securities	$	(93	)	$	(882	)
Less: allocation to participating securities		1			10

(Loss) from discontinued operations attributable to Warnaco Group, Inc. common shareholders	$	(92	)	$	(872	)


Net income attributable to Warnaco Group, Inc. common shareholders and participating securities	$	29,934		$	17,760
Less: allocation to participating securities		(370	)		(204	)

Net income attributable to Warnaco Group, Inc. common shareholders	$	29,564		$	17,556


Basic income per common share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing income per common share		44,468,794			45,412,175


Income per common share from continuing operations	$	0.67		$	0.41
(Loss) per common share from discontinued operations		(0.01	)		(0.02	)

Net income per common share	$	0.66		$	0.39


Diluted income per share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing basic income per common share		44,468,794			45,412,175
Effect of dilutive securities:
Stock options and restricted stock units		957,838			598,695

Weighted average number of shares and share equivalents used in computing income per common share		45,426,632			46,010,870


Income per common share from continuing operations	$	0.65		$	0.40
(Loss) per common share from discontinued operations		—			(0.02	)

Net income per common share	$	0.65		$	0.38


Number of anti-dilutive “out-of-the-money” stock options outstanding (a)		399,034			431,000

(a)

Options to purchase shares of common stock at an exercise price greater than the average market price of the underlying shares are anti-dilutive and therefore not included in the computation of diluted income per common share from continuing operations.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 18—Legal Matters

SEC Inquiry: As disclosed in its Annual Report on Form 10-K for Fiscal 2009, the Company announced, on August 8, 2006, that it would restate its previously reported financial statements for the fourth quarter of 2005, fiscal 2005 and the first quarter of 2006. The restatements were required as a result of certain irregularities discovered by the Company during the Company’s 2006 second quarter closing review and certain other errors. The irregularities primarily related to the accounting for certain returns and customer allowances at the Company’s Chaps menswear division. These matters were reported to the Company’s Audit Committee, which engaged outside counsel, who in turn retained independent forensic accountants, to investigate and report to the Audit Committee. Based on information obtained in that investigation, and also to correct for an error which resulted from the implementation of the Company’s new systems infrastructure at its Swimwear Group during the first quarter of 2006, and certain immaterial errors, the Audit Committee accepted management’s recommendation that the Company restate its financial statements.

In connection with the restatements, the Company contacted the SEC staff to inform them of the restatements and the Company’s related investigation. Thereafter, the SEC staff initiated an informal inquiry, and on February 22, 2008, informed the Company that in September 2007 the SEC had issued a formal order of investigation, with respect to these matters. The Company is cooperating fully with the SEC.

OP Litigation: On August 19, 2004, the Company acquired 100% of the outstanding common stock of Ocean Pacific Apparel Corp. (“OP”) from Doyle & Bossiere Fund I, LLC (“Doyle”) and certain minority shareholders of OP. The terms of the acquisition agreement required the Company to make certain contingent payments to the sellers of OP under certain circumstances. On November 6, 2006, the Company sold the OP business to a third party. On May 23, 2007, Doyle filed a demand against the Company for arbitration before Judicial Arbitration and Mediation Services in Orange County, California, alleging that certain contingent purchase price payments are due to them as a result of the Company’s sale of the OP business in November 2006. The complaint seeks monetary damages and other relief. The Company believes that Doyle’s lawsuit is without merit and intends to defend itself vigorously. The Company believes that it has adequately reserved for this matter.

Lejaby Claims: On March 10, 2008, the Company sold its Lejaby business to Palmers Textil AG (“Palmers”). On August 18, 2009, Palmers filed an action against the Company in Le Tribunal de Commerce de Paris (The Paris Commercial Court), alleging that the Company made certain misrepresentations in the sale agreement, and seeking to declare the sale null and void, monetary damages and other relief (the “Palmers Suit”). In addition, the Company and Palmers have been unable to agree on certain post-closing adjustments to the purchase price, including adjustments for working capital. The dispute regarding the amount of post-closing adjustments is not a subject of the Palmers Suit. The Company believes that the Palmers’ lawsuit is without merit and intends to defend itself vigorously. The Company believes that it has adequately reserved for these claims.

Other: In addition, from time to time, the Company is involved in arbitrations or legal proceedings that arise in the ordinary course of its business. The Company cannot predict the timing or outcome of these claims and proceedings. Currently, the Company is not involved in any such arbitration and/or legal proceeding that it expects to have a material effect on its financial condition, results of operations or business.

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 19 — Commitments

Except as set forth in the table below, the contractual obligations and commitments in existence as of July 3, 2010 did not differ materially from those disclosed as of January 2, 2010 in the Company’s Annual Report on Form 10-K for Fiscal 2009.


	Payments Due by Year
	2011		2012		2013		2014		2015		Thereafter		Total
Operating leases entered into during the Six Months Ended July 3, 2010	$	13,990	$	11,329	$	6,749	$	3,602	$	1,975	$	2,642	$	40,287
Other contractual obligations pursuant to agreements entered into during the Six Months Ended July 3, 2010		6,722		1,816		1,036		49		51		18		9,692

Total	$	20,712	$	13,145	$	7,785	$	3,651	$	2,026	$	2,660	$	49,979

Contractual obligations as of January 2, 2010 (as reported in the Company’s Form 10-K for Fiscal 2009) included approximately $37,000 related to a 15 year lease contract for a new distribution center in the Netherlands (the “DC”) that was entered into by the Company’s Netherlands subsidiary. In the event of default by the Netherlands subsidiary in making rental payments under the lease, the Warnaco Group Inc. has issued a guarantee to the lessor for those payments.

At July 3, 2010, in the ordinary course of business, the Company had open purchase orders with suppliers of approximately $304,848, of which $298,005 is payable in 2010 and $6,843 is payable in 2011.

As of July 3, 2010, the Company was also party to outstanding hedging instruments (see Note 11 of Notes to the Consolidated Condensed Financial Statements and Item 3 — Qualitative and Quantitative Disclosures About Market Risk —Foreign Exchange Risk).

As of July 3, 2010, the Company remains under audit in various taxing jurisdictions. It is, therefore, difficult to predict the final timing and resolution of any particular uncertain tax position. Based upon the Company’s assessment of many factors, including past experience and complex judgments about future events, it is reasonably possible that within the next twelve months its accrual for uncertain tax positions may increase between $2,500 and $5,000 (net of decreases that are reasonably possible), as a result of additional uncertain tax positions, the reevaluation of current uncertain tax positions arising from developments in examinations, the finalization of tax examinations, or from the closure of tax statutes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Warnaco Group, Inc. (“Warnaco Group” and, collectively with its subsidiaries, the “Company”) is subject to certain risks and uncertainties that could cause its future results of operations to differ materially from its historical results of operations and that could affect the market value of the Company’s common stock. Except for the historical information contained herein, this Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements that involve risks and uncertainties. See “Statement Regarding Forward-Looking Disclosure.”

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with: (i) the Consolidated Condensed Financial Statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2010.

The Company operates on a 52/53 week fiscal year basis ending on the Saturday closest to December 31. As such, the period January 3, 2010 to January 1, 2011 (“Fiscal 2010”) will contain 52 weeks of operations and the period January 4, 2009 to January 2, 2010 (“Fiscal 2009”) contained 52 weeks of operations. Additionally, the period from April 4, 2010 to July 3, 2010 (the “Three Months Ended July 3, 2010”) and the period from April 5, 2009 to July 4, 2009 (the “Three Months Ended July 4, 2009”) each contained thirteen weeks of operations and the period from January 3, 2010 to July 3, 2010 (the “Six Months Ended July 3, 2010”) and the period from January 4, 2009 to July 4, 2009 (the “Six Months Ended July 4, 2009”) each contained twenty-six weeks of operations.

References to “Calvin Klein Jeans” refer to jeans, accessories and “bridge” products. “Core Intimates” refer to the Intimate Apparel Group’s Warner’s^®, Olga^® and Body Nancy Ganz/Bodyslimmers^® brand names and intimate apparel private labels. References to “Retail” within each operating Group refer to the Company’s owned full price free standing stores, owned outlet stores, concession / “shop-in-shop” stores and on-line stores. Results related to stores operated by third parties under retail licenses or distributor agreements are included in “Wholesale” within each operating Group.

Overview

The Company designs, sources, markets, licenses and distributes intimate apparel, sportswear and swimwear worldwide through a line of highly recognized brand names. The Company’s products are distributed domestically and internationally in over 100 countries, primarily to wholesale customers through various distribution channels, including major department stores, independent retailers, chain stores, membership clubs, specialty and other stores, mass merchandisers and the internet. As of July 3, 2010, the Company operated: (i) 1,214 Calvin Klein retail stores worldwide (consisting of 266 free-standing stores (including 157 full price and 109 outlet stores), 946 shop-in-shop/concession stores, one Calvin Klein Underwear on-line store and one Calvin Klein Jeans on-line store and (ii) one Speedo^® on-line store. As of July 3, 2010, there were also 589 Calvin Klein retail stores operated by third parties under retail licenses or distributor agreements.

Highlights for the Three and Six Months Ended July 3, 2010 included:

•

Net revenue increased $63.9 million, or 14.0%, to $519.3 million for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009 and increased $114.2 million, or 11.5%, to $1,107.5 million for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009, reflecting increases of $32.0 million and $69.3 million, respectively, in the Sportswear Group, $30.1 million and $51.2 million, respectively, in the Intimate Apparel Group, and, in the Swimwear Group, an increase of $1.8 million and a decrease of $6.3 million, respectively. Net revenue includes increases of $4.8 million and $32.4 million due to the favorable effect of fluctuations in certain foreign currency exchange rates (see below) for the Three and Six Months Ended July 3, 2010, respectively.

•

Operating income increased $14.3 million, or 34.9%, to $55.3 million for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009 and increased $29.5 million, or 28.1%, to $134.8 million for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009. Operating income includes increases of $8.8 million and $16.1 million due to the favorable effect of fluctuations in certain foreign currency exchange rates (see below) for the Three and Six Months Ended July 3, 2010, respectively. Operating income includes restructuring charges of $1.1 million and $2.1 million for the Three and Six Months Ended July 3, 2010, respectively, and $1.5 million and $10.0 million for the Three and Six Months Ended July 4, 2009, respectively.

•

Both net revenues and operating income for the Three and Six Months Ended July 3, 2010 were favorably affected by fluctuations in foreign currencies. On average, for the Three and Six Months Ended July 3, 2010 compared to the Three and Six Months Ended July 4, 2009, the U.S. dollar weakened relative to functional currencies, other than the Euro, of countries where the Company conducts a majority of its foreign operations (primarily the Korean Won, Canadian Dollar, Brazilian Real and Mexican Peso), as follows: the U.S. dollar weakened relative to the Korean Won by 11% and 16%, the Canadian Dollar by 12% and 15%, the Brazilian Real by 17% and 23% and the Mexican Peso by 7% and 9%, respectively. However, on average, for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009, the U.S. dollar strengthened relative to the Euro by 6% and was substantially unchanged for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009 (see Item 3. Quantitative and Qualitative Disclosure About Market Risk — Foreign Exchange Risk, below).

•

Income from continuing operations, on a GAAP basis, for the Three Months Ended July 3, 2010 was $0.65 per diluted share, a 63% increase compared to the $0.40 per diluted share for the Three Months Ended July 4, 2009. On a non-GAAP basis (excluding restructuring expense, pension expense (income) and certain other items (see Non-GAAP Measures, below)), income from continuing operations for the Three Months Ended July 3, 2010 was $0.71 per diluted share, a 51% increase compared to the $0.47 per diluted share for the Three Months Ended July 4, 2009.

•

Income from continuing operations, on a GAAP basis, for the Six Months Ended July 3, 2010 was $1.68 per diluted share, a 37% increase compared to the $1.23 per diluted share for the Six Months Ended July 4, 2009. On a non-GAAP basis (excluding restructuring expense, pension expense (income) and certain other items (see Non-GAAP Measures, below)), income from continuing operations for the Six Months Ended July 3, 2010 was $1.80 per diluted share, a 25% increase compared to the $1.44 per diluted share for the Six Months Ended July 4, 2009.

•

During the first fiscal quarter of 2010, the Company completed all remaining share repurchases under its 2007 Share Repurchase Program by repurchasing 1,490,131 shares of common stock for a total of $69.0 million (based on an average of $46.31 per share). In May 2010, the Company’s Board of Directors approved the 2010 Share Repurchase Program (as defined below, see Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds), which allows the Company to repurchase up to 5.0 million shares of its common stock.

•

At July 3, 2010, the Company had cash and cash equivalents of $172.9 million. The Company’s total debt at July 3, 2010 was $65.2 million after redemption from bondholders on June 15, 2010 of the remaining $110.9 million aggregate principal amount of outstanding Senior Notes for a total consideration of $112.5 million and on January 5, 2010, of $50.0 million aggregate principal amount of its outstanding Senior Notes for a total consideration of $51.5 million.

•

Inventories at July 3, 2010 were down $14.0 million, or 4.8%, from the balance at July 4, 2009, primarily as a result of the Company’s initiative to reduce inventory levels.

•

On April 29, 2010, the Company entered into agreements for the purchase of a distributor’s business in southern Asia for total consideration of approximately $2.9 million and on June 1, 2010, the Company entered into agreements for the purchase of a distributor’s business in the People’s Republic of China for total consideration of approximately $5.9 million.

Non-GAAP Measures

The Company’s reported financial results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The reported operating income, income from continuing operations and diluted earnings per share from continuing operations reflect certain items which affect the comparability of those reported results. Those financial results are also presented on a non-GAAP basis, as defined by Regulation S-K section 10(e) issued by the Securities and Exchange Commission (“SEC”), to exclude the effect of these items. The Company’s computation of these non-GAAP measures may vary from others in its industry. These non-GAAP financial measures are not intended to be, and should not be, considered in isolation from or as a substitute for the most directly comparable GAAP financial measure to which they are reconciled, as presented in the following table:


	Three Months Ended					Six Months Ended
	July 3, 2010		July. 4, 2009			July 3, 2010		July 4, 2009
	(Dollars in thousands, except per share amounts)

Operating income, as reported	$	55,318	$	40,999		$	134,816	$	105,273
Restructuring charges and pension (a)		1,132		2,068			2,070		11,176
Other (b)		—		(260	)		—		(520	)

Operating income, as adjusted	$	56,450	$	42,807		$	136,886	$	115,929


Income from continuing operations, as reported	$	30,027	$	18,642		$	78,339	$	57,234
Restructuring charges and pension (c)		858		1,430			1,340		7,923
Costs related to the redemption of Debt (d)		1,354		—			2,368		—
Other (b)		—		(156	)		—		(312	)
Taxation (e)		446		2,059			1,554		1,731

Income from continuing operations, as adjusted	$	32,685	$	21,975		$	83,601	$	66,576


Diluted earnings per share from continuing operations, as reported	$	0.65	$	0.40		$	1.68	$	1.23
Restructuring charges and pension		0.02		0.03			0.03		0.17
Costs related to the redemption of Debt		0.03		—			0.05		—
Other		—		—			—		—
Taxation		0.01		0.04			0.04		0.04

Diluted earnings per share from continuing operations, as adjusted	$	0.71	$	0.47		$	1.80	$	1.44


(a)		This adjustment seeks to present the Company’s Consolidated Condensed Statements of Operations on a continuing basis without the effects of restructuring charges of $1,154 and $1,474 for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $2,113 and $10,045 for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, and pension (income) expense of $(22) and $594 for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $(43) and $1,131 for the Six Months Ended July 3, 2010 and July 4, 2009, respectively.

(b)		This adjustment seeks to present the Company’s Consolidated Condensed Statements of Operations on a continuing basis with an additional charge of $260 and $520 for the Three Months and Six Months Ended July 4, 2009 for amortization expense related to the correction of amounts recorded in prior periods in connection with the recapture of cancellation of indebtedness income and to reflect these items net of income tax effects of $104 and $208, respectively.

(c)		Adjustment to reflect the items in (a), above, net of income tax effects of $274 and $638 for the Three Months Ended July 3, 2010 and the Three Months Ended July 4, 2009, respectively, and $730 and $3,253 for the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009, respectively.

(d)		This adjustment seeks to present the Company’s Consolidated Condensed Statements of Operations on a continuing basis without the effects of charges of $2,055, net of income tax effects of $701 and charges of $3,747, net of income tax effects of $1,379, related to the repurchase of a portion of its Senior Notes during the Three Months and Six Months Ended July 3, 2010.

(e)		Adjustment to reflect the Company’s income from continuing operations at tax rates of 33.3% and 33.9%, which reflect the Company’s normalized tax rates for the Fiscal 2010 and Fiscal 2009, respectively, excluding the effect of restructuring charges, pension expense, charges related to the repurchase of Senior Notes during the Three and Six Months Ended July 3, 2010 and amortization expense during the Three and Six Months Ended July 4, 2009, and certain other tax-related items.

The Company believes it is valuable for users of its financial statements to be made aware of the non-GAAP financial information as such measures are used by management to evaluate the operating performance of the Company’s continuing businesses on a comparable basis and to make operating and strategic decisions. Such non-GAAP measures will also enhance users’ ability to analyze trends in the Company’s business. In addition, the Company uses performance targets based, in part, on non-GAAP operating income and diluted earnings per share as a component of the measurement of incentive compensation.

Furthermore, the Warnaco Group Inc. is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by the Company from translating its foreign revenues into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to its reported operating results, the Company presents constant currency financial information, which is a non-GAAP financial measure. The Company uses constant currency information to provide a framework to assess how its businesses performed excluding the effects of changes in foreign currency translation rates. Management believes this information is useful to investors to facilitate comparisons of operating results and better identify trends in the Company’s businesses.

To calculate the increase in segment revenues on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not in isolation from, or as a substitute to, the Company’s operating performance measures calculated in accordance with GAAP. The constant currency information presented in the following tables may not be comparable to similarly titled measures reported by other companies.

NET REVENUES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(Unaudited)


	Three Months Ended July 3, 2010
	GAAP		Impact of Foreign			Non-GAAP
	As Reported		Currency Exchange			Constant Currency
By Segment:
Sportswear Group	$	244,044	$	4,057		$	239,987
Intimate Apparel Group		199,116		577			198,539
Swimwear Group		76,174		142			76,032

Net revenues	$	519,334	$	4,776		$	514,558


By Region:
United States	$	261,964	$	—		$	261,964
Europe		99,831		(6,844	)		106,675
Asia		83,492		3,881			79,611
Canada		29,866		3,007			26,859
Mexico, Central and South America		44,181		4,732			39,449

Total	$	519,334	$	4,776		$	514,558

NET REVENUES ON A CONSTANT CURRENCY BASIS
(Dollars in thousands)
(Unaudited)


	Six Months Ended July 3, 2010
	GAAP		Impact of Foreign		Non-GAAP
	As Reported		Currency Exchange		Constant Currency
By Segment:
Sportswear Group	$	550,390	$	21,177	$	529,213
Intimate Apparel Group		393,058		9,521		383,537
Swimwear Group		164,050		1,748		162,302

Net revenues	$	1,107,498	$	32,446	$	1,075,052


By Region:
United States	$	532,714	$	—	$	532,714
Europe		257,133		1,989		255,144
Asia		180,565		12,780		167,785
Canada		55,362		7,051		48,311
Mexico, Central and South America		81,724		10,626		71,098

Total	$	1,107,498	$	32,446	$	1,075,052

Discussion of Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company to use judgment in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in its consolidated condensed financial statements and accompanying notes. See the Company’s Annual Report on Form 10-K for Fiscal 2009 for a discussion of the Company’s critical accounting policies.

Stock-Based Compensation

In March 2010, share-based compensation awards granted to certain of the Company’s executive officers under the 2005 Stock Incentive Plan included 75,750 performance-based restricted stock/restricted unit awards (“Performance Awards”) in addition to the service-based stock options and restricted stock awards of the types that had been granted in previous periods. See Note 15 of Notes to Consolidated Condensed Financial Statements. The Performance Awards cliff-vest three years after the grant date and are subject to the same vesting provisions as awards of the Company’s regular service-based restricted stock/restricted unit awards granted in March 2010. The final number of Performance Awards that will be earned, if any, at the end of the three-year vesting period will be the greatest number of shares based on the Company’s achievement of certain goals relating to cumulative earnings per share growth (a performance condition) or the Company’s relative total shareholder return (“TSR”) (change in closing price of the Company’s common stock on the New York Stock Exchange compared to that of a peer group of companies (“Peer Companies”)) (a market condition) measured from the beginning of Fiscal 2010 to the end of Fiscal 2012 (the “Measurement Period”). The total number of Performance Awards earned could equal up to 150% of the number of Performance Awards originally granted, depending on the level of achievement of those goals during the Measurement Period.

The Company records stock-based compensation expense related to the Performance Awards ratably over the requisite service period based on the greater of the estimated expense calculated under the performance condition or the grant date fair value calculated under the market condition. Stock-based compensation expense related to an award with a market condition is recognized over the requisite service period regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. Under the performance condition, the estimated expense is based on the grant date fair value (the closing price of the Company’s common stock on the date of grant) and the Company’s current expectations of the probable number of Performance Awards that will ultimately be earned. The fair value of the Performance Awards under the market condition ($2.4 million for the March 2010 Performance Awards) is based upon a Monte Carlo simulation model, which encompasses TSR’s during the Measurement Period, including both the period from the beginning of Fiscal 2010 to March 3, 2010 (the grant date), for which actual TSR’s are calculated, and the period from the grant date to the end of Fiscal 2012, a total of 2.83 years (the “Remaining Measurement Period”), for which simulated TSR’s are calculated.

For all employee stock-based compensation awards issued in March 2010 (and for similar types of future awards), the Company’s Compensation Committee approved the incorporation of a Retirement Eligibility feature such that an employee who has attained the age of 60 years with at least five years of continuous employment with the Company will be deemed to be “Retirement Eligible”. Awards granted to Retirement Eligible employees will continue to vest even if the employee’s employment with the Company is terminated prior to the award’s vesting date (other than for cause, and provided the employee does not engage in a competitive activity). As in previous years, awards granted to all other employees (i.e. those who are not Retirement Eligible) will cease vesting if the employee’s employment with the Company is terminated prior to the awards vesting date. Stock-based compensation expense is recognized over the requisite service period associated with the related equity award. For Retirement Eligible employees, the requisite service period is either the grant date or the period from the grant date to the Retirement-Eligibility date (in the case where the Retirement Eligibility date precedes the vesting date). For all other employees (i.e. those who are not Retirement Eligible), as in previous years, the requisite service period is the period from the grant date to the vesting date. The Retirement Eligibility feature was not applied to awards issued prior to March 2010. The increase in stock-based compensation expense recorded during the Six Months Ended July 3, 2010 of approximately $7.1 million, from the Six Months Ended July 4, 2009, primarily related to the Retirement Eligibility feature described above.

Recent Accounting Pronouncements

Results of Operations

Statement of Operations (Selected Data)

The following tables summarize the historical results of operations of the Company for the Three and Six Months Ended July 3, 2010 compared to the Three and Six Months Ended July 4, 2009. The results of the Company’s discontinued operations are included in “Loss from discontinued operations, net of taxes” for all periods presented. Results of operations contained 13 weeks of activity for each of the Three Months Ended July 3, 2010 and for the Three Months Ended July 4, 2009 and twenty-six weeks of activity for each of the Six Months Ended July 3, 2010 and for the Six Months Ended July 4, 2009.


	Three Months						Three Months						Six Months						Six Months
	Ended July 3,			% of Net			Ended July 4,			% of Net			Ended July 3,			% of Net			Ended July 4,			% of Net
	2010			Revenues			2009			Revenues			2010			Revenues			2009			Revenues
	(in thousands of dollars)
Net revenues	$	519,334			100.0	%	$	455,432			100.0	%	$	1,107,498			100.0	%	$	993,275			100.0	%
Cost of goods sold		289,592			55.8	%		266,432			58.5	%		610,638			55.1	%		578,990			58.3	%

Gross profit		229,742			44.2	%		189,000			41.5	%		496,860			44.9	%		414,285			41.7	%
Selling, general and administrative expenses		171,860			33.1	%		145,256			31.9	%		356,833			32.2	%		303,603			30.6	%
Amortization of intangible assets		2,586			0.5	%		2,151			0.5	%		5,254			0.5	%		4,278			0.4	%
Pension expense (income)		(22	)		0.0	%		594			0.1	%		(43	)		0.0	%		1,131			0.1	%

Operating income		55,318			10.7	%		40,999			9.0	%		134,816			12.2	%		105,273			10.6	%
Other (loss)		5,730						2,799						7,550						2,395
Interest expense		4,259						5,799						9,237						11,868
Interest income		(487	)					(416	)					(1,493	)					(824	)

Income from continuing operations before provision for income taxes and noncontrolling interest		45,816						32,817						119,522						91,834
Provision for income taxes		15,789						13,263						41,183						33,430


Income from continuing operations before noncontrolling interest		30,027						19,554						78,339						58,404
(Loss) from discontinued operations, net of taxes		(93	)					(882	)					(430	)					(1,903	)

Net income		29,934						18,672						77,909						56,501
Less: Net Income attributable to the noncontrolling interest		—						(912	)					—						(1,170	)

Net income attributable to Warnaco Group, Inc.	$	29,934					$	17,760					$	77,909					$	55,331

Net Revenues

Net revenues by group were as follows:


	Three Months		Three Months										Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase					Constant $			Ended July 3,		Ended July 4,		Increase						Constant $
	2010		2009		(Decrease)		% Change			% Change			2010		2009		(Decrease)			% Change			% Change
	(in thousands of dollars)
Sportswear Group	$	244,044	$	212,057	$	31,987		15.1	%		13.1	%	$	550,390	$	481,114	$	69,276			14.4	%		9.9	%
Intimate Apparel Group		199,116		168,954		30,162		17.9	%		17.6	%		393,058		341,777		51,281			15.0	%		12.4	%
Swimwear Group		76,174		74,421		1,753		2.4	%		2.1	%		164,050		170,384		(6,334	)		-3.7	%		-4.8	%

Net revenues (a)	$	519,334	$	455,432	$	63,902		14.0	%		13.0	%	$	1,107,498	$	993,275	$	114,223			11.5	%		8.2	%


(a)		includes net revenues of Calvin Klein businesses of $358.0 million and $304.5 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, (an increase of 17.5%) and $778.8 million and $685.4 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively (an increase of 13.6%).

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

The changes in net revenues for the Sportswear, Intimate Apparel and Swimwear Groups for the Three Months Ended July 3, 2010 relative to the Three Months Ended July 4, 2009 reflect:

•

an increase of $43.1 million in wholesale and $20.8 million in retail net revenues, which includes an increase in domestic net revenues of $29.6 million and an increase in international net revenues of $34.3 million. The increase in international net revenues includes a $4.8 million increase due to the favorable effect of fluctuations in foreign currency exchange rates in countries where the Company conducts certain of its operations (primarily the Korean Won, Canadian Dollar, Brazilian Real and Mexican Peso), partially offset by the unfavorable effect of foreign currency exchange fluctuations in the Euro. International net revenues also include an increase of 3.1% from comparable store sales during the Three Months Ended July 3, 2010.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

The changes in net revenues for the Sportswear, Intimate Apparel and Swimwear Groups for the Six Months Ended July 3, 2010 relative to the Six Months Ended July 4, 2009 reflect:

•

an increase of $63.5 million in wholesale and $50.7 million in retail net revenues, which includes an increase in domestic net revenues of $30.7 million and an increase in international net revenues of $83.5 million. The increase in international net revenues includes a $32.4 million increase due to the favorable effect of fluctuations in foreign currency exchange rates in countries where the Company conducts certain of its operations. International net revenues also include an increase of 4.4% from comparable store sales during the Six Months Ended July 3, 2010.

The following table summarizes the Company’s net revenues by channel of distribution and region for the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009:


	Six Months			Six Months
	Ended July 3,			Ended July 4,
	2010			2009
United States — wholesale
Department stores and independent retailers		11	%		10	%
Specialty stores		8	%		9	%
Chain stores		9	%		9	%
Mass merchandisers		2	%		2	%
Membership clubs		7	%		10	%
Off price and other		10	%		10	%

Total United States — wholesale		47	%		50	%
International — wholesale		30	%		30	%
Retail (a)		23	%		20	%

Net revenues — consolidated		100	%		100	%


(a)		for the Six Months Ended July 3, 2010 and the Six Months Ended July 4, 2009, 97.2% and 96.7%, respectively, of retail net revenues were derived from the Company’s international operations.

The following tables summarize the Company’s net revenues by channel of distribution and region for the Three and Six Months Ended July 3, 2010 and the Three and Six Months Ended July 4, 2009:

By Region:


	Net Revenues												Net Revenues
	Three Months		Three Months										Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase /					Constant $			Ended July		Ended July 4,		Increase /					Constant $
	2010		2009		(Decrease)		% Change			% Change			3, 2010		2009		(Decrease)		% Change			% Change
	(in thousands of dollars)												(in thousands of dollars)
United States	$	261,964	$	232,320	$	29,644		12.8	%		12.8	%	$	532,714	$	502,064	$	30,650		6.1	%		6.1	%
Europe		99,831		98,274		1,557		1.6	%		8.6	%		257,133		240,989		16,144		6.7	%		5.9	%
Asia		83,492		70,214		13,278		18.9	%		13.5	%		180,565		152,393		28,172		18.5	%		10.1	%
Canada		29,866		29,226		640		2.2	%		-8.1	%		55,362		49,923		5,439		10.9	%		-3.2	%
Mexico, Central and South America		44,181		25,398		18,783		74.0	%		55.3	%		81,724		47,906		33,818		70.6	%		48.4	%

	$	519,334	$	455,432	$	63,902		14.0	%		13.0	%	$	1,107,498	$	993,275	$	114,223		11.5	%		8.2	%

By Channel:


	Net Revenues									Net Revenues
	Three Months		Three Months							Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase /					Ended July 3,		Ended July 4,		Increase /
	2010		2009		Decrease)		% Change			2010		2009		Decrease)		% Change
	in thousands of dollars									in thousands of dollars
Wholesale	$	392,918	$	349,798	$	43,120		12.3	%	$	857,030	$	793,464	$	63,566		8.0	%
Retail		126,416		105,634		20,782		19.7	%		250,468		199,811		50,657		25.4	%

Total	$	519,334	$	455,432	$	63,902		14.0	%	$	1,107,498	$	993,275	$	114,223		11.5	%

Sportswear Group

Sportswear Group net revenues were as follows:


	Three Months		Three Months							Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase					Ended July 3,		Ended July 4,		Increase
	2010		2009		(Decrease)		% Change			2010		2009		(Decrease)		% Change
	(in thousands of dollars)
Calvin Klein Jeans	$	127,708	$	116,397	$	11,311		9.7	%	$	318,909	$	298,686	$	20,223		6.8	%
Chaps		49,727		43,022		6,705		15.6	%		95,951		80,102		15,849		19.8	%

Sportswear wholesale		177,435		159,419		18,016		11.3	%		414,860		378,788		36,072		9.5	%
Sportswear retail		66,609		52,638		13,971		26.5	%		135,530		102,326		33,204		32.4	%

Sportswear Group (a) (b)	$	244,044	$	212,057	$	31,987		15.1	%	$	550,390	$	481,114	$	69,276		14.4	%


(a)		Includes net revenues of $17.3 million and $12.7 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $55.2 million and $39.3 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, related to the Calvin Klein accessories business in Europe and Asia.

(b)		In order to conform to the Company’s current presentation, approximately $10.8 million and $21.3 million of Calvin Klein underwear net revenues for the Three and Six Months Ended July 4, 2009, respectively, which had previously been included in the Sportswear Group, were reclassified to the Intimate Apparel Group.

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Sportswear Group net revenues increased $32.0 million to $244.1 million for the Three Months Ended July 3, 2010 from $212.1 million for the Three Months Ended July 4, 2009, reflecting an increase of $18.0 million in Sportswear wholesale and an increase of $14.0 million in Sportswear retail. Sportswear Group net revenues include a $4.1 million increase due to the favorable effect of fluctuations in certain foreign currency exchange rates. Sportswear Group net revenues from international operations increased $23.2 million and from domestic operations increased $8.8 million. The increase in Sportswear Group net revenues from international operations included a 2.6% increase from comparable store sales during the Three Months Ended July 3, 2010.

The increase in Sportswear wholesale net revenues (in local currency) primarily reflects:

Calvin Klein Jeans:

Increases in sales:

	•		in Europe of accessories;

	•		in the U.S. to stores operated by Calvin Klein Inc. (“CKI”), as well as to the off-price channel;

	•		in Canada to department stores, membership clubs, and independent retailers;

	•		in Mexico and Central and South America to department stores and membership clubs; and

	•		in Asia, primarily due to an increase in the expansion of the distribution network in the People’s Republic of China and southern Asia

			partially offset by decreases in sales:

	•		in the U.S. to department stores and membership clubs (decreases in membership clubs primarily relate to the timing of shipments);

	•		in Europe to department stores, independent retailers and specialty stores and the off-price channel;

	•		in Canada to off-price channels; and

	•		in Asia in the off-price channel primarily due to lower levels of excess inventory and fewer promotional sales.

Chaps:

			Increases in sales:

	•		in the U.S. in the chain store and off-price channels and in department store channel, primarily due to a new customer in 2010; and

•

in Canada to department stores, off-price channels and independent retailers

partially offset by decreases in sales:

	•		in Canada to membership clubs, primarily due to timing of shipments (certain shipments are expected to occur in third quarter 2010, while comparable shipments occurred in the second quarter 2009); and

	•		in Mexico and Central and South America in department stores.

The increase in Sportswear retail net revenue (in local currency) primarily reflects:

Increases in sales:

•

in Canada, Central and South America, Europe and Asia due to the addition of new stores opened by the Company and acquired by the Company (including the eight stores acquired in Brazil in the fourth quarter of 2009 and twenty-two stores acquired in southern Asia in the second quarter of 2010), and due to an increase in comparable store sales in Central and South America, Europe and Asia.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Sportswear Group net revenues increased $69.3 million to $550.4 million for the Six Months Ended July 3, 2010 from $481.1 million for the Six Months Ended July 4, 2009, reflecting an increase of $36.1 million in Sportswear wholesale and an increase of $33.2 million in Sportswear retail. Sportswear Group net revenues include a $21.2 million increase due to the favorable effect of fluctuations in certain foreign currency exchange rates. Sportswear Group net revenues from international operations increased $50.3 million and from domestic operations increased $19.0 million. The increase in Sportswear Group net revenues from international operations included a 4.9% increase from comparable store sales during the Six Months Ended July 3, 2010.

The increase in Sportswear wholesale net revenues (in local currency) primarily reflects:

Calvin Klein Jeans:

Increases in sales:

	•		in Europe of accessories;

	•		in the U.S. to department stores, the off-price channel and stores operated by CKI;

	•		in Canada to department stores;

	•		in Mexico and Central and South America to department and specialty stores and membership clubs; and

	•		in Asia, primarily due to an increase in the expansion of the distribution network in the People’s Republic of China and southern Asia

			partially offset by decreases in sales:

	•		in the U.S to membership clubs, primarily related to the timing of shipments;

	•		in Europe to independent retailers and specialty stores and the off-price channel;

	•		in Canada to off-price channels, membership clubs, and independent retailers, primarily due to timing of shipments (shipments are expected to occur in the second half of 2010 where comparable shipments occurred in the first half of 2009; and

	•		in Asia in the off-price channel primarily due to lower levels of excess inventory and fewer promotional sales.

Chaps:

Increases in sales:

•

in the U.S. in the chain store and off-price channels and in department store channel, primarily due to a new customer in 2010; and

•

in Canada to department stores, off-price channels, and independent retailers

partially offset by decreases in sales:

	•		in Canada to membership clubs, primarily due to timing of shipments (certain shipments are expected to occur in third quarter 2010, while comparable shipments occurred in the second quarter 2009); and

	•		in Mexico and Central and South America to department stores.

The increase in Sportswear retail net revenue (in local currency) primarily reflects:

Increases in sales:

•

in Canada, Central and South America, Europe and Asia due to the addition of new stores opened by the Company and acquired by the Company (including the eight stores acquired in Brazil in the fourth quarter of 2009 and twenty-two stores acquired in southern Asia in the second quarter of 2010), and an increase in comparable store sales in Central and South America, Europe and Asia.

Intimate Apparel Group

Intimate Apparel Group net revenues were as follows:


	Three Months		Three Months							Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase					Ended July 3,		Ended July 4,		Increase
	2010		2009		(Decrease)		% Change			2010		2009		(Decrease)		% Change
	(in thousands of dollars)
Calvin Klein Underwear	$	99,860	$	78,961	$	20,899		26.5	%	$	195,552	$	175,690	$	19,862		11.3	%
Core Intimates		45,858		43,448		2,410		5.5	%		91,393		77,422		13,971		18.0	%

Intimate Apparel wholesale		145,718		122,409		23,309		19.0	%		286,945		253,112		33,833		13.4	%
Calvin Klein Underwear retail		53,398		46,545		6,853		14.7	%		106,113		88,665		17,448		19.7	%

Intimate Apparel Group (a)	$	199,116	$	168,954	$	30,162		17.9	%	$	393,058	$	341,777	$	51,281		15.0	%


(a)		Includes approximately $10.8 million and $21.3 million for the Three and Six Months Ended July 4, 2009, respectively, related to certain sales of Calvin Klein underwear, previously included in the Sportswear Group, in order to conform to the current period presentation.

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Intimate Apparel Group net revenues increased $30.2 million to $199.1 million for the Three Months Ended July 3, 2010 from $169.0 million for the Three Months Ended July 4, 2009, reflecting an increase of $23.3 million in Intimate Apparel wholesale and an increase of $6.9 million in Calvin Klein Underwear retail. Intimate Apparel Group net revenues include a $0.6 million increase due to the favorable effect of fluctuations in certain foreign currency exchange rates. Intimate Apparel Group net revenues from international operations increased $10.5 million and from domestic operations increased $19.6 million. The increase in Intimate Apparel Group net revenues from international operations included a 4.3% increase from comparable store sales during the Three Months Ended July 3, 2010.

The increase in Intimate Apparel wholesale net revenue (in local currency) primarily reflects:

Calvin Klein Underwear:

Increases in sales:

•

in all geographies in the department store channel, which benefitted from the launch of the Calvin Klein X men’s product line;

•

in the U.S. in membership clubs primarily due to timing of certain shipments (shipments occurred in the second quarter of 2010 and are expected to take place in the third and fourth quarters of 2010, while comparable shipments occurred during the first quarter of 2009);

	•		in the U.S. in the off-price channel primarily due to additional off-price products offered;

	•		in Mexico and Central and South America to membership clubs and specialty stores;

	•		in Canada to department stores, off-price channels, and independent retailers; and

	•		in Asia primarily due to the expansion of the Company’s distribution networks in China and southern Asia

partially offset by decreases in sales:

	•		in Canada to membership clubs primarily due to timing of shipments (shipments occurred in the first quarter of 2010 while comparable shipments occurred in the second quarter of 2009); and

	•		in Asia to the off-price channel, primarily due to lower levels of excess inventory and fewer promotional sales.

Core Intimates:

Increases in sales:

•

in the U.S. in the off-price channel (primarily due to additional offerings) and in the mass merchandisers channel primarily due to a new customer;

	•		in Mexico and Central and South America in membership clubs and department stores

			partially offset by a decline in sales:

	•		in the U.S. in the membership club channel; and

•

in Canada, primarily due to timing-related changes to mass merchandisers, and independent retailers (certain shipments occurred in the first quarter 2010 while comparable shipments occurred in the second quarter 2009), and off-price channels due to lower excess inventory.

The increase in Calvin Klein Underwear retail net revenue (in local currency) primarily reflects:

•

in Canada, Asia, Europe, and Central and South America due to the addition of new stores opened by the Company and acquired by the Company (including the eight stores acquired in Brazil in the fourth quarter of 2009 and twenty-two stores acquired in southern Asia in the second quarter of 2010), and an increase in comparable store sales in Europe, Asia, Canada and Central and South America.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Intimate Apparel Group net revenues increased $51.3 million to $393.1 million for the Six Months Ended July 3, 2010 from $341.8 million for the Six Months Ended July 4, 2009, reflecting an increase of $33.9 million in Intimate Apparel wholesale and an increase of $17.4 million in Calvin Klein Underwear retail. Intimate Apparel Group net revenues include a $9.5 million increase due to the favorable effect of fluctuations in foreign currency exchange rates. Intimate Apparel Group net revenues from international operations increased $29.8 million and from domestic operations increased $21.5 million. The increase in Intimate Apparel Group net revenues from international operations included a 4.3% increase from comparable store sales for the Six Months Ended July 3, 2010.

The increase in Intimate Apparel wholesale net revenue (in local currency) primarily reflects:

Calvin Klein Underwear:

Increases in sales:

•

in all geographies in the department store channel, which benefitted from the launch of the Calvin Klein X men’s product line;

	•		in the U.S. in the off-price channel primarily due to additional off-price products offered;

	•		in Mexico and Central and South America to membership clubs and specialty stores;

	•		in Canada to off-price channels and independent retailers; and

•

in Asia primarily related to the expansion of the Company’s distribution networks in China and southern Asia and the sale of off-season merchandise and promotional events and discounts

partially offset by decreases in sales:

•

in the U.S. in membership clubs primarily due to timing of certain shipments which are expected to take place in the second half of 2010, while comparable shipments occurred during the first half of 2009;

•

in Europe to the off-price channel primarily due to lower levels of excess inventory; and

•

in Canada, to membership clubs primarily related to timing of shipments (shipments are expected to occur in the second half of 2010 where comparable shipments occurred in the second quarter of 2009).

Core Intimates:

Increases in sales:

•

in the U.S. to department stores, the chain store channel and the mass merchandisers channel primarily due to a new customer;

•

in the U.S. in the off-price channel primarily due to additional off-price offerings, partially offset by a decrease in sales primarily due to lower levels of excess inventory;

•

in the U.S. Warner’s products increased, primarily related to higher replenishment of successful styles and new product launches, in the department store and chain store channels and the launch of the Simply Perfect product line into the mass market channel; and

•

in the U.S. the Olga line increased, primarily related to higher replenishment of new styles and additional customers in the chain store and department store channels, beginning in the third quarter of 2009;

	•		in Canada, to department stores and mass merchandisers; and

	•		in Mexico and Central and South America in department stores and membership clubs

			partially offset by a decline in sales:

	•		in the U.S. in the membership club channel; and

	•		in Canada to off-price channels primarily due to lower levels of excess inventory.

The increase in Calvin Klein Underwear retail net revenue (in local currency) primarily reflects:

•

in Canada, Asia, Europe, and Central and South America the addition of new stores opened by the Company and acquired by the Company (including the eight stores acquired in Brazil in the fourth quarter of 2009 and twenty-two stores acquired in southern Asia in the second quarter of 2010), and an increase in comparable store sales in Europe, Asia, Canada and Central and South America.

Swimwear Group

Swimwear Group net revenues were as follows:


	Three Months		Three Months								Six Months		Six Months
	Ended July 3,		Ended July 4,		Increase						Ended July		Ended July 4,		Increase
	2010		2009		(Decrease)			% Change			3, 2010		2009		(Decrease)			% Change
	(in thousands of dollars)
Speedo	$	63,082	$	61,747	$	1,335			2.2	%	$	136,572	$	145,520	$	(8,948	)	-6.1	%
Calvin Klein		6,683		6,223		460			7.4	%		18,653		16,044		2,609		16.3	%

Swimwear wholesale		69,765		67,970		1,795			2.6	%		155,225		161,564		(6,339	)	-3.9	%
Swimwear retail (a)		6,409		6,451		(42	)		-0.7	%		8,825		8,820		5		0.1	%

Swimwear Group	$	76,174	$	74,421	$	1,753			2.4	%	$	164,050	$	170,384	$	(6,334	)	-3.7	%


(a)		includes $3.7 million and $3.8 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $4.1 million and $4.0 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, related to Calvin Klein retail swimwear.

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Swimwear Group net revenues increased $1.8 million to $76.2 million for the Three Months Ended July 3, 2010 from $74.4 million for the Three Months Ended July 4, 2009, reflecting an increase of $1.8 million in Swimwear wholesale. Swimwear retail net revenues were substantially unchanged. Swimwear Group net revenues include a $0.1 million increase due to the favorable effect of fluctuations in foreign currency exchange rates. Swimwear Group net revenues from international operations increased $0.5 million and from domestic operations increased $1.3 million. The increase in Swimwear Group net revenues from international operations included a 4.7% decrease from comparable store sales for the Three Months Ended July 3, 2010.

The increase in Swimwear wholesale net revenues (in local currency) reflects:

Speedo:

Increases in sales:

	•		in the U.S., primarily in the mass channel and sporting goods, specialty and department stores; and

	•		in Canada, to mass merchandisers, chain stores and department stores

			partially offset by decreases in sales:

	•		in the U.S. to membership clubs, team dealers, mid-tier and discounters; and

	•		in Canada, to independent retailers.

Calvin Klein:

Increases in sales:

	•		in the U.S. primarily due to improved delivery to department and specialty stores and the introduction of sales to membership clubs in 2010; and

	•		in Canada, to independent retailers

partially offset by decreases in sales:

•

in Europe to department stores and independent retailers primarily due to timing of shipments (shipments occurred in the first quarter of 2010, while comparable shipments occurred in the second quarter of 2009); and

•

in Canada, to department stores and chain stores.

Swimwear retail net revenue (in local currency) reflects:

			Increases in sales:

	•		at the online Speedo store in the U.S.

			partially offset by decreases in sales:

	•		in Europe of Calvin Klein swimwear at outlet stores; and

	•		in Canada a decrease in comparable store sales.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Swimwear Group net revenues decreased $6.3 million to $164.1 million for the Six Months Ended July 3, 2010 from $170.4 million for the Six Months Ended July 4, 2009, reflecting a decrease of $6.3 million in Swimwear wholesale. Swimwear retail net revenues were substantially unchanged. Swimwear Group net revenues include a $1.7 million increase due to the favorable effect of fluctuations in foreign currency exchange rates. Swimwear Group net revenues from international operations increased $3.6 million and from domestic operations declined $9.9 million. The increase in Swimwear Group net revenues from international operations included a 2.8% decrease from comparable store sales for the Six Months Ended July 3, 2010.

The decrease in Swimwear wholesale net revenues (in local currency) reflects:

Speedo:

Decreases in sales:

	•		in the U.S., primarily due to lower sales volume in membership clubs, mid-tier and discounters;

	•		in Canada, in off-price channels, and independent retailers; and

	•		in Mexico and Central and South America in membership clubs

			partially offset by increases in sales:

	•		in the U.S. to department and specialty stores and the mass merchandisers channel; and

	•		in Canada to chain stores, mass merchandisers and department stores.

Calvin Klein:

Increases in sales:

	•		in the U.S. primarily due to improved delivery to department and specialty stores and the introduction of sales to membership clubs in 2010;

	•		in Europe to department stores and independent retailers; and

	•		in Canada to department stores

			partially offset by decreases in sales:

	•		in Canada to independent retailers and membership clubs.

Swimwear retail net revenue (in local currency) reflects:

	•		in Europe an increase in sales volume at free-standing, concession and outlet stores;

			offset by:

	•		in Canada a decrease in comparable store sales.

Gross Profit

Gross profit was as follows:



	Three Months		% of			Three Months		% of			Six Months		% of			Six Months		% of
	Ended July 3,		Brand Net			Ended July 4,		Brand Net			Ended July 3,		Brand Net			Ended July 4,		Brand Net
	2010		Revenues			2009		Revenues			2010		Revenues			2009		Revenues
	(in thousands of dollars)
Sportswear Group (a)	$	103,419		42.4	%	$	84,536		39.9	%	$	241,566		43.9	%	$	196,991		40.9	%
Intimate Apparel Group (a)		99,575		50.0	%		78,026		46.2	%		197,047		50.1	%		158,540		46.4	%
Swimwear Group		26,748		35.1	%		26,438		35.5	%		58,247		35.5	%		58,754		34.5	%

Total gross profit	$	229,742		44.2	%	$	189,000		41.5	%	$	496,860		44.9	%	$	414,285		41.7	%


(a)		reflects the reclassification of approximately $6.7 million and $13.4 million of gross profit related to certain sales of Calvin Klein underwear, previously reported in the Sportswear Group, to the Intimate Apparel Group for the Three Months and Six Months Ended July 4, 2009, respectively, in order to conform to the current presentation.

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Gross profit was $229.7 million, or 44.2% of net revenues, for the Three Months Ended July 3, 2010 compared to $189.0 million, or 41.5% of net revenues, for the Three Months Ended July 4, 2009. The $40.7 million increase in gross profit was due to increases in the Sportswear Group ($18.9 million), the Intimate Apparel Group ($21.5 million) and the Swimwear Group ($0.3 million). The 270 basis point increase in gross margin is primarily reflective of a favorable sales mix as the Company experienced an increase in full-price (and other more profitable channels) net revenues as a proportion of total net revenues, and the favorable effects of fluctuations in certain foreign currency exchange rates. Gross profit for the Three Months Ended July 3, 2010 includes an increase of $7.8 million due to foreign currency fluctuations.

Sportswear Group gross profit increased $18.9 million, and gross margin increased 250 basis points, for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009, reflecting a $17.0 million increase in the international business (primarily related to the favorable effect of fluctuations in exchange rates of certain foreign currencies, an increase in net sales and a favorable sales mix in Europe, particularly Calvin Klein accessories, and Asia), and a $1.9 million increase in the domestic business (primarily reflecting an increase in net revenues and a favorable sales mix).

Intimate Apparel Group gross profit increased $21.5 million and gross margin increased 380 basis points for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009 reflecting a $12.2 million increase in the international business (primarily related to increased net revenues and a favorable sales mix, partially offset by the unfavorable effect of fluctuations in exchange rates of foreign currencies), and a $9.3 million increase in the domestic business. The increase in the domestic business primarily reflects increased net revenues and a favorable product and channel mix.

Swimwear Group gross profit increased $0.3 million and gross margin decreased 40 basis points for the Three Months Ended July 3, 2010 compared to the Three Months Ended July 4, 2009. The increase in gross profit and decrease in gross margin primarily reflect an increase in sales volume and an unfavorable sales mix.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Gross profit was $496.9 million, or 44.9% of net revenues, for the Six Months Ended July 3, 2010 compared to $414.3 million, or 41.7% of net revenues, for the Six Months Ended July 4, 2009. The $82.6 million increase in gross profit was due to increases in the Sportswear Group ($44.6 million) and the Intimate Apparel Group ($38.5 million), partially offset by a decrease in the Swimwear Group ($0.5 million). The 320 basis point increase in gross margin is primarily reflective of a favorable sales mix as the Company experienced an increase in full-price (and other more profitable channels) net revenues as a proportion of total net revenues, and the favorable effects of fluctuations in foreign currency exchange rates. Gross profit for the Six Months Ended July 3, 2010 includes an increase of $24.3 million due to foreign currency fluctuations.

Sportswear Group gross profit increased $44.6 million, and gross margin increased 300 basis points, for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009, reflecting a $37.7 million increase in the international business (primarily related to the favorable effect of fluctuations in exchange rates of foreign currencies, an increase in net sales in all geographies and a favorable sales mix in Europe, particularly Calvin Klein accessories, and Asia), and a $6.9 million increase in the domestic business (primarily reflecting an increase in net revenues and a favorable sales mix).

Intimate Apparel Group gross profit increased $38.5 million and gross margin increased 370 basis points for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009 reflecting a $26.6 million increase in the international business (primarily related to the favorable effect of fluctuations in exchange rates of foreign currencies, increased net revenues and a favorable sales mix), and an $11.9 million increase in the domestic business. The increase in the domestic business primarily reflects increased net revenues and a favorable product and channel mix.

Swimwear Group gross profit decreased $0.5 million and gross margin increased 100 basis points for the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009. The decrease in gross profit and increase in gross margin primarily reflect a decrease in sales volume and a better sales mix.

Selling, General and Administrative Expenses

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Selling, general & administrative (“SG&A”) expenses increased $26.6 million to $171.9 million (33.1% of net revenues) for the Three Months Ended July 3, 2010 compared to $145.3 million (31.9% of net revenues) for the Three Months Ended July 4, 2009. The increase in SG&A expenses includes (i) an increase of $14.8 million in selling and distribution expenses primarily associated with the opening of additional retail stores in Europe, Asia, Canada and Brazil, partially offset by decreases due to cost savings resulting from restructuring activities during Fiscal 2009; (ii) an increase of $6.5 million in marketing expenses, including the launch of the Calvin Klein X product line of men’s underwear and (iii) an increase in administrative expenses of $5.6 million primarily related to amounts accrued for performance-based employee compensation, partially offset by a decline of $0.3 million in restructuring charges (see Note 5 of Notes to Consolidated Condensed Financial Statements). The U.S. dollar strengthened during the Three Months Ended July 3, 2010 relative to certain functional currencies where the Company conducts certain of its operations compared to the Three Months Ended July 4, 2009, resulting in a $1.0 million decrease in SG&A.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Selling, general & administrative (“SG&A”) expenses increased $53.2 million to $356.8 million (32.2% of net revenues) for the Six Months Ended July 3, 2010 compared to $303.6 million (30.6% of net revenues) for the Six Months Ended July 4, 2009. The increase in SG&A expenses includes (i) an increase of $34.8 million in selling and distribution expenses primarily associated with the opening of additional retail stores in Europe, Asia, Canada and Brazil, partially offset by decreases due to cost savings resulting from restructuring activities during Fiscal 2009; (ii) an increase of $14.2 million in marketing expenses, including the launch of the Calvin Klein X product line of men’s underwear; and (iii) an increase in administrative expenses of $10.8 million, including an increase due to amounts accrued for performance-based employee compensation as well as an increase in stock-based compensation expense primarily as a result in the change in terms of equity awards granted to employees in March 2010. Compensation expense related to those awards granted to employees who were deemed to be Retirement Eligible on the date of grant would be recognized on the date of grant, or, in the case of employees who may become Retirement Eligible within 36 months of the date of grant, on a straight-line basis through the period from the date of grant to the date such employee may become Retirement Eligible, instead of being recognized on a straight-line basis over 36 months as such equity awards were accounted for in prior periods (see Note 2 of Notes to Consolidated Condensed Financial Statements). Those increases were partially offset by a $6.6 million decline in restructuring charges (see Note 5 of Notes to Consolidated Condensed Financial Statements). The U.S. dollar weakened during the Six Months Ended July 3, 2010 relative to certain functional currencies where the Company conducts certain of its operations compared to the Six Months Ended July 4, 2009, resulting in an $8.2 million increase in SG&A.

Amortization of Intangible Assets

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Amortization of intangible assets was $2.6 million for the Three Months Ended July 3, 2010 compared to $2.2 million for the Three Months Ended July 4, 2009. The increase primarily relates to (i) increase in the value of certain intangible assets due to the correction in the second and fourth quarters of Fiscal 2009 of those intangible assets recorded at February 4, 2003, the date that Warnaco Group, Warnaco Inc. (“Warnaco”) and certain of Warnaco’s subsidiaries were reorganized under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. Sections 101-1330, as amended; (ii) the acquisition of favorable retail store leases in Brazil in the fourth quarter of 2009 and (iii) the favorable effect of foreign currency fluctuations on the Korean Won-denominated carrying amounts of Calvin Klein licenses acquired in January 2006 and January 2008, partially offset by the write-off of the Calvin Klein Golf license in the third quarter of Fiscal 2009 and the unfavorable effect of foreign currency fluctuations on the Euro-denominated carrying amounts of Calvin Klein licenses acquired in January 2006 and January 2008.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Amortization of intangible assets was $5.3 million for the Six Months Ended July 3, 2010 compared to $4.3 million for the Six Months Ended July 4, 2009. The increase primarily relates to (i) increase in the value of certain intangible assets due to the correction in the second and fourth quarters of Fiscal 2009 of those intangible assets recorded at February 4, 2003, the date that Warnaco Group, Warnaco Inc. (“Warnaco”) and certain of Warnaco’s subsidiaries were reorganized under Chapter 11 of the U.S. Bankruptcy Code, 11 U.S.C. Sections 101-1330, as amended; (ii) the acquisition of favorable retail store leases in Brazil in the fourth quarter of 2009 and (iii) the favorable effect of foreign currency fluctuations on the Korean Won-denominated carrying amounts of Calvin Klein licenses acquired in January 2006 and January 2008, partially offset by the write-off of the Calvin Klein Golf license in the third quarter of Fiscal 2009 and the unfavorable effect of foreign currency fluctuations on the Euro-denominated carrying amounts of Calvin Klein licenses acquired in January 2006 and January 2008.

Pension Income / Expense

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Pension income was $0.02 million in the Three Months Ended July 3, 2010 compared to pension expense of $0.6 million in the Three Months Ended July 4, 2009. The decrease in pension expense is primarily related to a higher asset base in Fiscal 2010 due to positive returns earned on the Plan’s assets during Fiscal 2010, partially offset by an increase in interest cost on the Company’s projected benefit obligation resulting from a decrease in the discount/interest rate to 6.1% in the Three Months Ended July 3, 2010 from 8.0% in the Three Months Ended July 4, 2009. See Note 8 of Notes to the Consolidated Condensed Financial Statements.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Pension income was $0.04 million in the Six Months Ended July 3, 2010 compared to pension expense of $1.1 million in the Six Months Ended July 4, 2009. The decrease in pension expense is primarily related to a higher asset base in Fiscal 2010 due to positive returns earned on the Plan’s assets during Fiscal 2010, partially offset by an increase interest cost on the Company’s projected benefit obligation resulting from a decrease in the discount/interest rate to 6.1% in the Six Months Ended July 3, 2010 from 8.0% in the Six Months Ended July 4, 2009. See Note 8 of Notes to the Consolidated Condensed Financial Statements.

Operating Income

The following table presents operating income by group:


	Three Months			% of			Three Months			% of			Six Months			% of			Six Months			% of
	Ended July 3,			Group Net			Ended July 4,			Group Net			Ended July 3,			Group Net			Ended July 4,			Group Net
	2010			Revenues			2009			Revenues			2010			Revenues			2009			Revenues
	(in thousands of dollars)
Sportswear Group	$	24,987			10.2	%	$	13,320			6.3	%	$	75,929			13.8	%	$	50,789			10.6	%
Intimate Apparel Group		34,563			17.4	%		27,523			16.3	%		68,181			17.3	%		57,921			16.9	%
Swimwear Group		8,824			11.6	%		8,238			11.1	%		20,709			12.6	%		20,783			12.2	%
Unallocated corporate expenses		(13,056	)	na				(8,082	)	na				(30,003	)	na				(24,220	)	na

Operating income (a)	$	55,318		na			$	40,999		na			$	134,816		na			$	105,273		na


Operating income as a percentage of net revenue		10.7	%					9.0	%					12.2	%					10.6	%


(a)		Includes approximately $1.2 million and $1.5 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and approximately $2.1 million and $10.0 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, related to restructuring expenses. See Note 5 of Notes to Consolidated Condensed Financial Statements.

The following table summarizes key measures of the Company’s operating income for the Three Months and Six Months Ended July 3, 2010 and the Three Months and Six Months Ended July 4, 2009:


	Three Months			Three Months									Six Months			Six Months
	Ended July 3,			Ended July 4,			Increase /			%			Ended July 3,			Ended July 4,			Increase /			%
	2010			2009			(Decrease)			Change			2010			2009			(Decrease)			Change
	(In thousands of dollars)												(in thousands of dollars)
By Region:
Domestic	$	41,586		$	34,251		$	7,335			21.4	%	$	86,274		$	76,817		$	9,457			12.3	%
International		26,788			14,830			11,958			80.6	%		78,545			52,676			25,869			49.1	%
Unallocated corporate expenses		(13,056	)		(8,082	)		(4,974	)		61.5	%		(30,003	)		(24,220	)		(5,783	)		23.9	%

Total (a)	$	55,318		$	40,999		$	14,319			34.9	%	$	134,816		$	105,273		$	29,543			28.1	%


By Channel:
Wholesale	$	54,804		$	38,187		$	16,617			43.5	%	$	142,660		$	113,130		$	29,530			26.1	%
Retail		13,570			10,894			2,676			24.6	%		22,159			16,363			5,796			35.4	%
Unallocated corporate expenses		(13,056	)		(8,082	)		(4,974	)		61.5	%		(30,003	)		(24,220	)		(5,783	)		23.9	%

Total (a)	$	55,318		$	40,999		$	14,319			34.9	%	$	134,816		$	105,273		$	29,543			28.1	%


(a)		includes operating income from Calvin Klein businesses of $44.4 million and $28.9 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, (an increase of 53.8%) and $116.8 million and $90.5 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, (an increase of 29.1%).

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Operating income was $55.3 million (10.7% of net revenues) for the Three Months Ended July 3, 2010 compared to $41.0 million (9.0% of net revenues) for the Three Months Ended July 4, 2009. Operating income for the Three Months Ended July 3, 2010 includes an increase of $8.8 million related to the favorable effects of fluctuations in exchange rates of foreign currencies.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Operating income was $134.8 million (12.2% of net revenues) for the Six Months Ended July 3, 2010 compared to $105.3 million (10.6% of net revenues) for the Six Months Ended July 4, 2009. Operating income for the Six Months Ended July 3, 2010 includes an increase of $16.1 million related to the favorable effects of fluctuations in exchange rates of foreign currencies.

Sportswear Group

Sportswear Group operating income was as follows:


	Three Months		% of			Three Months		% of			Six Months		% of			Six Months		% of
	Ended July 3,		Brand Net			Ended July 4,		Brand Net			Ended July 3,		Brand Net			Ended July 4,		Brand Net
	2010 (c)		Revenues			2009 (c)		Revenues			2010 (c)		Revenues			2009 (c)		Revenues
	(in thousands of dollars)
Calvin Klein Jeans	$	11,855		9.3	%	$	6,724		5.8	%	$	54,473		17.1	%	$	38,514		12.9	%
Chaps		8,178		16.4	%		4,672		10.9	%		14,727		15.3	%		9,292		11.6	%

Sportswear wholesale		20,033		11.3	%		11,396		7.1	%		69,200		16.7	%		47,806		12.6	%
Sportswear retail		4,954		7.4	%		1,924		3.7	%		6,729		5.0	%		2,983		2.9	%

Sportswear Group (a) (b)	$	24,987		10.2	%	$	13,320		6.3	%	$	75,929		13.8	%	$	50,789		10.6	%


(a)		includes restructuring expense of $0.5 million and $0.4 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and a $0.4 million and $3.4 million charge for the Six Months Ended July 3, 2010 and July 4, 2009, respectively.

(b)		reflects the reclassification of approximately $0.5 million and $1.5 million of operating income related to certain sales of Calvin Klein underwear previously reported in the Sportswear Group to the Intimate Apparel Group for the Three Months and Six Months Ended July 4, 2009, respectively, in order to conform to the current period presentation.


(c)		includes an allocation of shared services expenses by brand in the following table:


	Three Months		Three Months		Six Months		Six Months
	Ended July 3,		Ended July 4,		Ended July 3,		Ended July 4,
	2010		2009		2010		2009
	(in thousands of dollars)
Calvin Klein Jeans	$	3,127	$	3,081	$	6,243	$	6,300
Chaps		2,057		1,815		4,114		3,621

Sportswear wholesale		5,184		4,896		10,357		9,921
Sportswear retail		21		185		43		187

Sportswear Group	$	5,205	$	5,081	$	10,400	$	10,108

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Sportswear Group operating income increased $11.7 million, or 87.7%, primarily reflecting increases of $5.2 million, $3.0 million and $3.5 million in the Calvin Klein Jeans wholesale, Calvin Klein Jeans retail and Chaps businesses, respectively. The increase in Sportswear operating income primarily reflects an $18.9 million increase in gross profit, partially offset by a $7.2 million increase in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales decreased 1.5 percentage points. The increase in SG&A expenses primarily reflects increases in Europe, Asia and Central and South America due to store openings and the effects of foreign currency fluctuations.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Sportswear Group operating income increased $25.1 million, or 49.5%, primarily reflecting increases of $16.0 million, $3.7 million and $5.4 million in the Calvin Klein Jeans wholesale, Calvin Klein Jeans retail and Chaps businesses, respectively. The increase in Sportswear operating income primarily reflects a $44.6 million increase in gross profit, partially offset by a $19.5 million increase in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales decreased 0.3 percentage points. The increase in SG&A expenses primarily reflects increases in Europe, Asia and Central and South America due to store openings and the effects of foreign currency fluctuations, partially offset by a $2.8 million decrease in restructuring charges (see Note 5 of Notes to Consolidated Condensed Financial Statements).

Intimate Apparel Group

Intimate Apparel Group operating income was as follows:


	Three Months		% of			Three Months		% of			Six Months		% of			Six Months		% of
	Ended July 3,		Brand Net			Ended July 4,		Brand Net			Ended July 3,		Brand Net			Ended July 4,		Brand Net
	2010 (a)		Revenues			2009 (a)		Revenues			2010 (c)		Revenues			2009 (c)		Revenues
	(in thousands of dollars)
Calvin Klein Underwear	$	21,238		21.3	%	$	13,778		17.4	%	$	41,122		21.0	%	$	37,691		21.5	%
Core Intimates		5,994		13.1	%		6,229		14.3	%		13,122		14.4	%		8,413		10.9	%

Intimate Apparel wholesale		27,232		18.7	%		20,007		16.3	%		54,244		18.9	%		46,104		18.2	%
Calvin Klein Underwear retail		7,331		13.7	%		7,516		16.1	%		13,937		13.1	%		11,817		13.3	%

Intimate Apparel Group (a) (b)	$	34,563		17.4	%	$	27,523		16.3	%	$	68,181		17.3	%	$	57,921		16.9	%


(a)		Includes restructuring charges of $0.2 million and $0.3 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $0.2 million and $2.9 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively.

(b)		Reflects the reclassification of approximately $0.5 million and $1.5 million of operating income related to certain sales of Calvin Klein underwear previously reported in the Sportswear Group to the Intimate Apparel Group for the Three Months and Six Months Ended July 4, 2009, respectively, in order to conform to the current period presentation.

(c)		Includes an allocation of shared services/other expenses by brand in the following table:


	Three Months		Three Months		Six Months		Six Months
	Ended July 3,		Ended July 4,		Ended July 3,		Ended July 4,
	2010		2009		2010		2009
	(in thousands of dollars)
Calvin Klein Underwear	$	2,385	$	2,319	$	4,767	$	4,615
Core Intimates		1,478		1,398		2,955		2,759

Intimate Apparel wholesale		3,863		3,717		7,722		7,374
Calvin Klein Underwear retail		68		88		134		174

Intimate Apparel Group	$	3,931	$	3,805	$	7,856	$	7,548

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Intimate Apparel Group operating income for the Three Months Ended July 3, 2010 increased $7.0 million, or 25.6%, reflecting a $7.4 million increase in Calvin Klein Underwear wholesale, partially offset by decreases of $0.2 million in Core Intimates and $0.2 million in Calvin Klein Underwear retail. The increase in Intimate Apparel operating income primarily reflects a $21.5 million increase in gross profit, partially offset by a $14.5 million increase in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales increased 2.7 percentage points. The increase in SG&A expense primarily reflects incremental marketing investment behind the launch of the Calvin Klein X product line of men’s underwear, an increase related to retail store openings in Europe, Asia and Canada and the effect of fluctuations in foreign currency exchange rates.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Intimate Apparel Group operating income for the Six Months Ended July 3, 2010 increased $10.2 million, or 17.7%, reflecting increases of $3.4 million Calvin Klein Underwear wholesale, $2.1 million in Calvin Klein Underwear retail and $4.7 million in Core Intimates. The increase in Intimate Apparel operating income primarily reflects a $38.5 million increase in gross profit, partially offset by a $28.3 million increase in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales increased 3.4 percentage points. The increase in SG&A expense primarily reflects incremental marketing investments behind the launch of the Calvin Klein X product line of men’s underwear, an increase related to retail store openings in Europe, Asia and Canada and the effect of fluctuations in foreign currency exchange rates, partially offset by a reduction of $2.0 million in restructuring charges.

Swimwear Group

Swimwear Group operating income was as follows:


	Three Months			% of			Three Months			% of			Six Months			% of			Six Months			% of
	Ended July 3,			Brand Net			Ended July 4,			Brand Net			Ended July 3,			Brand Net			Ended July 4,			Brand Net
	2010 (c)			Revenues			2009 (c)			Revenues			2010 (c)			Revenues			2009 (c)			Revenues
	(in thousands of dollars)
Speedo	$	9,439			15.0	%	$	8,923			14.5	%	$	19,576			14.3	%	$	20,690			14.2	%
Calvin Klein		(1,900	)		-28.4	%		(2,139	)		-34.4	%		(360	)		-1.9	%		(1,470	)		-9.2	%

Swimwear wholesale		7,539			10.8	%		6,784			10.0	%		19,216			12.4	%		19,220			11.9	%
Swimwear retail (a)		1,285			20.0	%		1,454			22.5	%		1,493			16.9	%		1,563			17.7	%

Swimwear Group (b)	$	8,824			11.6	%	$	8,238			11.1	%	$	20,709			12.6	%	$	20,783			12.2	%


(a)		Includes $1.0 million and $1.1 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $0.9 million and $1.0 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively, related to Calvin Klein retail swimwear.

(b)		Includes restructuring charges of $0.4 million and $0.9 million for the Three Months Ended July 3, 2010 and July 4, 2009, respectively, and $0.7 million and $2.4 million for the Six Months Ended July 3, 2010 and July 4, 2009, respectively.

(c)		Includes an allocation of shared services expenses by brand in the following table:


	Three Months		Three Months		Six Months		Six Months
	Ended July 3,		Ended July 4,		Ended July 3,		Ended July 4,
	2010		2009		2010		2009
	(in thousands of dollars)
Speedo	$	2,347	$	2,439	$	4,702	$	4,848
Calvin Klein		70		60		146		116

Swimwear wholesale		2,417		2,499		4,848		4,964
Swimwear retail		141		150		282		300

Swimwear Group	$	2,558	$	2,649	$	5,130	$	5,264

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Swimwear Group operating income for the Three Months Ended July 3, 2010 increased $0.6 million, or 7.1%, reflecting a $0.5 million increase in Speedo wholesale, a $0.2 million increase in Calvin Klein wholesale, partially offset by a decrease of $0.1 million in Swimwear retail. The increase in Swimwear operating income primarily reflects a $0.3 million increase in gross profit, partially offset by a $0.3 million decrease in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales decreased 1.0 percentage point.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Swimwear Group operating income for the Six Months Ended July 3, 2010 was substantially unchanged compared to the Six Months Ended July 4, 2009, reflecting a $1.1 million decrease in Speedo wholesale, offset by a $1.1 million increase in Calvin Klein wholesale. Operating income in Swimwear retail was substantially unchanged. The substantially unchanged Swimwear operating income primarily reflects a $0.5 million decrease in gross profit, partially offset by a $0.5 million decrease in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales increased 0.6 percentage points.

Other Loss (Income)

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Loss of $5.7 million for the Three Months Ended July 3, 2010 primarily reflects a loss of $2.0 million related to the redemption of $110.9 million of Senior Notes during the Three Months Ended July 3, 2010 (see Note 14 of Notes to Consolidated Condensed Financial Statements and Capital Resources and Liquidity — Financing Arrangements — Senior Notes, below) and a loss of $3.7 million due to losses on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency, net of gains on foreign currency exchange contracts designed as economic hedges (see Note 11 to Notes to Consolidated Condensed Financial Statements). Loss of $2.8 million for the Three Months Ended July 4, 2009 primarily reflects $3.6 million of net losses related to foreign currency exchange contracts designed as economic hedges (see Note 11 to Notes to Consolidated Condensed Financial Statements), partially offset by net gains of $0.8 million on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Loss of $7.5 million for the Six Months Ended July 3, 2010 primarily reflects a loss of $3.7 million related to the redemption of $160.9 million of Senior Notes during the Six Months Ended July 3, 2010 (see Note 14 of Notes to Consolidated Condensed Financial Statements and Capital Resources and Liquidity — Financing Arrangements — Senior Notes, below) and a loss of $3.8 million due to losses on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency, net of gains on foreign currency exchange contracts designed as economic hedges (see Note 11 to Notes to Consolidated Condensed Financial Statements). Loss of $2.4 million for the Six Months Ended July 4, 2009 primarily reflects $4.4 million of net losses related to foreign currency exchange contracts designed as economic hedges (see Note 11 to Notes to Consolidated Condensed Financial Statements), partially offset by net gains of $2.0 million on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency.

Interest Expense

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Interest expense decreased $1.5 million to $4.3 million for the Three Months Ended July 3, 2010 from $5.8 million for the Three Months Ended July 4, 2009. The decrease primarily relates to the redemption of $110.9 million and $50.0 million of the outstanding balance of the Senior Notes in the U.S., which were repaid on June 15, 2010 and January 5, 2010, respectively, decreases in the outstanding balances and interest rates related to the CKJEA Notes payable and the New Credit Agreements, and the amortization of the premium on the Swap Agreements, each defined below, which were terminated in the second and third quarters of Fiscal 2009, partially offset by an increase related to the accretion of the liability for the contingent payments to the Sellers in the acquisitions in Brazil in the fourth quarter of 2009 (see Note 3 of Notes to Consolidated Condensed Financial Statements).

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Interest expense decreased $2.7 million to $9.2 million for the Six Months Ended July 3, 2010 from $11.9 million for the Six Months Ended July 4, 2009. The decrease primarily relates to the redemption of $110.9 million and $50.0 million of the outstanding balance of the Senior Notes in the U.S., which were repaid on June 15, 2010 and January 5, 2010, respectively, decreases in the outstanding balances and interest rates related to the CKJEA Notes payable and the New Credit Agreements, and the amortization of the premium on the Swap Agreements, which were terminated in the second and third quarters of Fiscal 2009, partially offset by an increase related to the accretion of the liability for the contingent payments to the Sellers in the acquisitions in Brazil in the fourth quarter of 2009 (see Note 3 of Notes to Consolidated Condensed Financial Statements).

Interest Income

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Interest income increased $0.1 million to $0.5 million for the Three Months Ended July 3, 2010 from $0.4 million for the Three Months Ended July 4, 2009. The increase in interest income was due primarily to an increase of $0.1 million related to a third-party note receivable.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Interest income increased $0.7 million to $1.5 million for the Six Months Ended July 3, 2010 from $0.8 million for the Six Months Ended July 4, 2009. The increase in interest income was due primarily to an increase of $0.6 million related to a third-party note receivable and an increase of $0.1 million due to higher cash balances in 2010 than in 2009.

Income Taxes

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

The effective tax rates for the Three Months Ended July 3, 2010 and July 4, 2009 were 34.5% and 40.4%, respectively. The decrease in effective tax rate reflects a tax benefit relating to the finalization of a foreign tax examination recorded during the Three Months Ended July 3, 2010, partially offset by a shift in earnings from lower to higher taxing jurisdictions. Included in the effective tax rate for the Three Months Ended July 4, 2009 is a non-cash tax charge recorded in the U.S. of approximately $2.5 million in order to correct an error in the 2006 income tax provision related to the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003 (see Note 6 of Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2009).

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

The effective tax rates for the Six Months Ended July 3, 2010 and July 4, 2009 were 34.5% and 36.4%, respectively. The decrease in effective tax rate reflects a decrease in foreign earnings taxed in the U.S. as well as a tax benefit relating to the finalization of foreign tax examinations recorded during the Three Months Ended July 3, 2010, partially offset by a shift in earnings from lower to higher taxing jurisdictions. Included in the effective tax rate for the Six Months Ended July 4, 2009 is a non-cash tax charge of approximately $2.5 million recorded in the U.S. associated with the correction of an error in the 2006 income tax provision related to the recapture of cancellation of indebtedness income which had been deferred in connection with the Company’s bankruptcy proceedings in 2003.

Discontinued Operations

Three Months Ended July 3, 2010 compared to Three Months Ended July 4, 2009

Loss from discontinued operations, net of taxes, was $0.1 million for the Three Months Ended July 3, 2010 compared to a loss of $0.9 million for the Three Months Ended July 4, 2009, in both periods primarily related to the Company’s Ocean Pacific and Calvin Klein Collection discontinued businesses. See Note 4 of Notes to Consolidated Condensed Financial Statements.

Six Months Ended July 3, 2010 compared to Six Months Ended July 4, 2009

Loss from discontinued operations, net of taxes, was $0.4 million for the Six Months Ended July 3, 2010 compared to a loss of $1.9 million for the Six Months Ended July 4, 2009, in both periods primarily related to the Company’s Ocean Pacific and Calvin Klein Collection discontinued businesses. See Note 4 of Notes to Consolidated Condensed Financial Statements.

Capital Resources and Liquidity

Financing Arrangements

Senior Notes

On January 5, 2010, the Company redeemed from bondholders the $50.0 million aggregate principal amount of its outstanding 87/8% Senior Notes due 2013 (“Senior Notes”) for a total consideration of $51.5 million and on June 15, 2010, the Company redeemed from bondholders the remaining $110.9 million aggregate principal amount of its outstanding Senior Notes for a total consideration of $112.5 million. In connection with the redemptions, the Company recognized losses, in the Other loss (income) line item in the Company’s Consolidated Condensed Statement of Operations of approximately $2.0 million and $3.7 million, for the Three and Six Months Ended July 3, 2010, respectively, which included $1.6 million and $3.1 million of premium expense, the write-off of approximately $1.6 million and $2.4 million of deferred financing costs, and $1.2 million and $1.8 million of unamortized gain from the previously terminated 2003 Swap Agreement and 2004 Swap Agreement (see Note 14 of Notes to Consolidated Condensed Financial Statements) for the Three and Six Months Ended July 3, 2010, respectively. The Company funded the redemption of the Senior Notes on January 5, 2010 and June 15, 2010 with available cash on hand in the U.S. and borrowings under its New Credit Agreement (defined below).

The aggregate principal amount outstanding under the Senior Notes was $0 as of July 3, 2010 and $160.9 million at January 2, 2010 and at July 4, 2009.

New Credit Agreements

As of July 3, 2010, the Company had $25.3 million of loans and approximately $85.7 million in letters of credit outstanding under the New Credit Agreement, leaving approximately $110.8 million of availability. As of July 3, 2010, there were no loans and no letters of credit outstanding under the New Canadian Credit Agreement and the available line of credit was approximately $19.7 million. As of July 3, 2010, the Company was in compliance with all financial covenants contained in the New Credit Agreements.

Euro-Denominated CKJEA Notes Payable and Other

In connection with the Company’s 2006 acquisition of certain parts of its Calvin Klein businesses, the Company assumed certain short-term notes payable (the “CKJEA Notes”). The total CKJEA notes payable of $38.3 million at July 3, 2010 consists of short-term revolving notes with a number of banks at various interest rates (primarily Euro LIBOR plus 1.0%). The weighted average effective interest rate for the outstanding CKJEA notes payable was 2.49% as of July 3, 2010, 2.18% as of January 2, 2010 and 2.39% as of July 4, 2009. All of the CKJEA notes payable are short-term and were renewed during the Six Months Ended July 3, 2010 for additional terms of no more than 12 months. At July 3, 2010, the Company’s Brazilian subsidiary, WBR, had lines of credit with several banks, with a total outstanding balance of $1.6 million, recorded in Short-term debt in the Company’s Consolidated Condensed Balance Sheet, which was secured by an equal amount of WBR’s trade accounts receivable. In addition, one of the Company’s Korean subsidiaries had an outstanding note payable of $1.6 million with an interest rate of 4.7% per annum at July 4, 2009, all of which had been repaid as of January 2, 2010 and July 3, 2010.

Liquidity

The Company’s principal source of cash is from sales of its merchandise to both wholesale and retail customers. During the Six Months Ended July 3, 2010, sales of the Company’s products increased in local currencies compared to the same period in the prior year. Since more than 50% of those sales arose from the Company’s operations outside the U.S., fluctuations in foreign currencies (principally the Euro, Korean Won, Canadian Dollar, Brazilian Real and Mexican Peso) relative to the U.S. Dollar have a significant effect on the Company’s cash inflows, expressed in U.S. Dollars. During the Six Months Ended July 3, 2010 compared to the same period in the prior year, the U.S. Dollar was weaker relative to the foreign currencies noted above, other than the Euro, against which the U.S. Dollar was substantially unchanged As a result, the increase in sales in local currencies was further increased by the favorable effect of fluctuations in foreign currencies, which was reflected in an increase in net revenues of 11.5% during the Six Months Ended July 3, 2010 compared to the Six Months Ended July 4, 2009 (see Results of Operations — Net Revenues, above).

The Company believes that, at July 3, 2010, cash on hand, cash available under its New Credit Agreements (see Capital Resources and Liquidity — Financing Arrangements, above) and cash to be generated from future operating activities will be sufficient to fund its operations, including contractual obligations (see Note 19 to Notes to Consolidated Condensed Financial Statements, above) and capital expenditures, for the next 12 months.

As of July 3, 2010, the Company had working capital (current assets less current liabilities) of $477.3 million. Included in working capital as of July 3, 2010 was (among other items) cash and cash equivalents of $172.9 million, and short-term debt of $65.2 million, including $25.3 million of New Credit Agreements, $38.3 million of the CKJEA Notes and $1.6 million of other short-term debt.

On January 5, 2010, the Company redeemed from bondholders $50.0 million aggregate principal amount of the outstanding Senior Notes for a total consideration of $51.5 million. On June 15, 2010, the Company redeemed from bondholders the remaining $110.9 million aggregate principal amount of outstanding Senior Notes for a total consideration of $112.5 million. The Company funded the redemption of the Senior Notes on January 5, 2010 and June 15, 2010 with available cash on hand in the U.S. and borrowings under its New Credit Agreement. See Financing Arrangements — Senior Notes, above.

As of July 3, 2010, under the New Credit Agreement, the Company had $25.3 million of loans and $85.7 million in letters of credit outstanding, leaving approximately $110.8 million of availability, and, under the New Canadian Credit Agreement, no loans and no letters of credit, leaving approximately $19.7 million of availability. The Company expects to make principal payments under its short-term notes payable as excess cash becomes available.

The revolving credit facilities under the New Credit Agreements reflect funding commitments by a syndicate of 14 banks, including Bank of America N.A., JPMorgan Chase, N.A., Deutsche Bank, HSBC, Royal Bank of Scotland and The Bank of Nova Scotia. The ability of any one or more of those banks to meet its commitment to provide the Company with funding up to the maximum of available credit is dependent on the fair value of the bank’s assets and its legal lending ratio relative to those assets (amount the bank is allowed to lend). The Company believes that the ability of those banks to make loans during the Six Months Ended July 3, 2010 has increased relative to Fiscal 2009 since the turmoil in the credit markets during Fiscal 2009 had diminished by the end of the second quarter of Fiscal 2010. However, the Company continues to monitor the creditworthiness of the syndicated banks.

During Fiscal 2009, the Company was able to borrow funds, from time to time, under the New Credit Agreements for seasonal and other cash flow requirements. The Company repaid those borrowings by the end of Fiscal 2009. As of July 3, 2010, the Company expects that it will continue to be able to obtain needed funds under the New Credit Agreements when requested. However, in the event that such funds are not available, the Company may have to delay certain capital expenditures or plans to expand its business, to scale back operations and/or raise capital through the sale of its equity or debt securities. There can be no assurance that the Company would be able to sell its equity or debt securities on terms that are satisfactory.

The Company’s corporate credit ratings and outlooks at July 3, 2010, are summarized below:


Rating	Corporate
Agency	Rating (a)	Outlook

Moody’s	Ba1	stable

Standard & Poor’s	BB+	positive


(a)		ratings on individual debt issuances can be different from the Company’s composite credit ratings depending on the priority position of creditors holding such debt, collateral related to such debt and other factors. The Company’s secured debt is rated BBB by Standard & Poor’s and Baa2 by Moody’s.

The Company’s credit ratings contribute to its ability to access the credit markets. Factors that can affect the Company’s credit ratings include changes in its operating performance, the economic environment, conditions in the apparel industry, the Company’s financial position, and changes in the Company’s business or financial strategy. The Company is not currently aware of any circumstances that would likely result in a downgrade of its credit ratings. If a downgrade were to occur, it could adversely affect, among other things, the Company’s future borrowing costs and access to capital markets. The current state of the economy creates greater uncertainty than in the past with regard to financing opportunities and the cost of such financing. Given the Company’s capital structure and its projections for future profitability and cash flow, the Company believes it is well positioned to obtain additional financing, if necessary, to refinance its debt, or, if opportunities present themselves, to make future acquisitions. However, there can be no assurance that such financing, if needed, can be obtained on terms satisfactory to the Company or at such time as a specific need may arise.

During Fiscal 2010, the Company has targeted the leasing of 120,000 square feet of new retail store space worldwide, which the Company expects will result in capital expenditures of approximately $21.0 million. During the Six Months Ended July 3, 2010, capital expenditures related to material handling equipment and other leasehold improvements at the Company’s new distribution center in the Netherlands was approximately $9.5 million. The distribution center began operations during May 2010. Capital expenditures for the remainder of Fiscal 2010 related to the distribution center are expected to be $0.4 million.

During the Six Months Ended July 3, 2010, the Company made $2.1 million in cash severance payments to employees and expects to make an additional $0.7 million of cash severance payments during the remainder of Fiscal 2010 in connection with consolidation of its European operations. The Company also paid $1.5 million related to other restructuring and exit activities, including contract termination costs. The Company expects to incur further restructuring expenses of approximately $0.9 million in connection with the consolidation of its European operations through 2010.

During the fourth quarter of Fiscal 2009, the Company acquired the remaining 49% equity interest in WBR, its subsidiary in Brazil. In addition to the initial cash payment made upon acquisition, the Company may be required to make up to three annual contingent payments through March 31, 2012. During the Six Months Ended July 3, 2010, the Company made the first such payment, amounting to 6 million Brazilian Real (approximately $3.4 million), based upon the operating results achieved by WBR in the fourth quarter of Fiscal 2009.

During the Six Months Ended July 3, 2010, the Company acquired the businesses of certain of its distributors in southern Asia and the People’s Republic of China for total consideration of $8.8 million, of which $6.0 million was paid during the Three Months Ended July 3, 2010.

During the Six Months Ended July 3, 2010, the Company completed repurchases under its 2007 Share Repurchase Program by repurchasing the 1,490,131 shares of common stock available for repurchase under the 2007 Share Repurchase Program for a total of $69.0 million (based on an average of $46.31 per share). In addition, the Company repurchased 74,301 shares of common stock for a total of $3.3 million (based on an average of $44.76 per share) related to the surrender of shares for the payment of minimum income tax due upon vesting of certain restricted stock awarded by the Company to its employees (see Note 15 of Notes to Consolidated Condensed Financial Statements and Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds). Repurchased shares are held in treasury pending use for general corporate purposes.

During the Six Months Ended July 3, 2010, some of the Company’s foreign subsidiaries with functional currencies other than the U.S. dollar made purchases of inventory, paid minimum royalty and advertising costs and /or had intercompany loans and payables denominated in U.S. dollars. During the Six Months Ended July 3, 2010 compared to the same period in the prior year, the U.S. Dollar was weaker relative to the foreign currencies noted above, other than the Euro, against which the U.S. Dollar was substantially unchanged. The cash flows of those subsidiaries were, therefore, impacted by the fluctuations relative to the U.S. dollar in relation to those foreign currencies. In order to minimize the effects of fluctuations in foreign currency exchange rates of those transactions, the Company uses derivative financial instruments, primarily foreign currency exchange forward contracts and zero cost collars (option contracts). There were no zero cost collars at July 3, 2010 (see Item 3. Quantitative and Qualitative Disclosures About Market Risk - Foreign Exchange Risk and Note 11 of Notes to Consolidated Condensed Financial Statements).

The Company carries its derivative financial instruments at fair value on the Consolidated Condensed Balance Sheets. The Company utilizes the market approach to measure fair value for financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. At July 3, 2010, the Company’s hedging programs included $62.6 million of future inventory purchases, $19.3 million of future minimum royalty and advertising payments and $38.0 million of intercompany payables denominated in non-functional currencies, primarily the U.S. dollar.

The Company classifies its financial instruments under a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

	Level 1 —		Inputs are quoted prices in active markets for identical assets or liabilities.

	Level 2 —		Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

	Level 3 —		Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The fair value of foreign currency exchange contracts was determined as the net unrealized gains or losses on those contracts, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current forward exchange rate. The fair value of these foreign currency exchange contracts is based on exchange-quoted prices which are adjusted by a forward yield curve and, therefore, meets the definition of level 2 fair value, as defined above.

The fair value of zero-cost collars was determined as the net unrealized gains or losses on the option contracts comprising each collar, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current spot exchange rate. The fair value of these zero-cost collars is based on exchange-quoted prices and, therefore, meets the definition of level 2 fair value, as defined above.

The Pension Protection Act of 2006 (the “PPA”) revised the basis and methodology for determining defined benefit plan minimum funding requirements as well as maximum contributions to and benefits paid from tax-qualified plans. The PPA may ultimately require the Company to make additional contributions to its domestic plans. During the Six Months Ended July 3, 2010, the Company contributed $2.4 million to the domestic pension plan. Fiscal 2010 domestic plan contributions of $6.3 million are currently expected and annual contributions for the following four years are expected to be similar. Actual Fiscal 2010 and later year contributions could exceed the Company’s current projections, and may be influenced by future changes in government requirements. Additionally, the Company’s projections concerning timing of the PPA funding requirements are subject to change and may be influenced by factors such as general market conditions affecting trust asset performance, interest rates, and the Company’s future decisions regarding certain elective provisions of the PPA. See Note 8 of Notes to Consolidated Financial Statements for additional information on the Company’s pension plan.

Accounts receivable increased $13.6 million to $304.3 million at July 3, 2010 from $290.7 million at January 2, 2010, due primarily to increased sales volume in June 2010 compared to December 2009. The balance of accounts receivable at July 3, 2010 includes a decrease of $12.4 million, due to the stronger U.S. dollar relative to foreign currencies in connection with transactions in countries where the Company conducts certain of its operations (principally the Euro, Korean won, Canadian dollar, Brazilian real and Mexican peso), at that date compared to January 2, 2010.

Accounts receivable increased $22.9 million to $304.3 million at July 3, 2010 from $281.4 million at July 4, 2009. The balance of accounts receivable at July 3, 2010 includes a decrease of $4.5 million, due to the stronger U.S. dollar relative to foreign currencies in connection with transactions in countries where the Company conducts certain of its operations, at that date compared to July 4, 2009.

Inventories increased $24.2 million to $277.6 million at July 3, 2010 from $253.4 million at January 2, 2010 to support expected sales. The balance of inventories at July 3, 2010 includes a decrease of $13.6 million, due to the stronger U.S. dollar relative to foreign currencies in connection with transactions in countries where the Company conducts certain of its operations, at that date compared to January 2, 2010.

Inventories decreased $14.0 million to $277.6 million at July 3, 2010 from $291.6 million at July 4, 2009, reflecting primarily the Company’s initiative, begun in 2009, to reduce inventory in light of the downturn in the global economy. The balance of inventories at July 3, 2010 includes a decrease of $6.6 million, due to the stronger U.S. dollar relative to foreign currencies in connection with transactions in countries where the Company conducts certain of its operations, at that date compared to July 4, 2009.

Cash Flows

The following table summarizes the cash flows from the Company’s operating, investing and financing activities for the Six Months Ended July 3, 2010 and July 4, 2009:


	Six Months Ended
	July 3, 2010			July 4, 2009
	(in thousands of dollars)

Net cash provided by operating activities:
Continuing operations	$	94,122		$	70,898
Discontinued operations		851			3,165
Net cash (used in) investing activities:
Continuing operations		(24,087	)		(20,672	)
Discontinued operations		—			—
Net cash (used in) financing activities:
Continuing operations		(212,220	)		(23,598	)
Discontinued operations		—			—
Translation adjustments		(6,557	)		213

(Decrease) increase in cash and cash equivalents	$	(147,891	)	$	30,006

For the Six Months Ended July 3, 2010, cash provided by operating activities from continuing operations was $94.1 million compared to cash provided by operating activities of $70.9 million in the Six Months Ended July 4, 2009. The $23.2 million increase in cash provided by operating activities was due to an increase in net income, net of non-cash charges, partially offset by an increase in outflows related to changes in working capital.

Working capital changes for the Six Months Ended July 3, 2010 included cash outflows of $29.4 million related to accounts receivable (due to increased sales in June 2010 than in December 2009 and the timing of payments), $38.6 million related to inventory (due to expected sales) and $13.4 million related to prepaid expenses and other assets (primarily related to prepaid advertising and royalty expenses), partially offset by cash inflows of $16.4 million related to accounts payable, accrued expenses and other liabilities (due to the timing of payments for purchases of inventory) and $26.5 million related to accrued income taxes.

Working capital changes for the Six Months Ended July 4, 2009 included cash outflows of $25.2 million related to accounts receivable (due to an increase in volume and timing of sales) and $53.0 million related to accounts payable and accrued expenses (due to the timing of payments for purchases of inventory), partially offset by cash inflows of $32.2 million related to inventory (due to the Company’s initiative to reduce inventory balances following the downturn in the economy), $2.1 million related to prepaid expenses and other assets and $18.7 million related to accrued income taxes.

The Company experienced a $15.1 million increase in non-cash charges in the Six Months Ended July 3, 2010, compared to the Six Months Ended July 4, 2009 primarily reflecting increases in foreign exchange losses, depreciation and amortization, compensation expense related to share-based awards and loss on repurchase of the Senior Notes during the Six Months Ended July 3, 2010, partially offset by decreases in provision for bad debts, inventory write-down (primarily related to the Company’s Swimwear group) and loss from discontinued operations.

For the Six Months Ended July 3, 2010, net cash used in investing activities from continuing operations was $24.1 million, mainly attributable to purchases of property, plant and equipment, including $9.5 million related to the Company’s new distribution center in the Netherlands, and $6.0 million related to acquisitions of businesses in Asia. For the Six Months Ended July 4, 2009, net cash used in investing activities from continuing operations was $20.7 million, mainly attributable to purchases of property, plant and equipment.

Net cash used in financing activities for the Six Months Ended July 3, 2010 was $212.2 million, which primarily reflects net cash used of $164.0 million related to the repurchase of Senior Notes, $72.3 million related to the repurchase of treasury stock (in connection with the 2007 Share Repurchase Program and the surrender of shares for the payment of minimum income tax due upon vesting of certain restricted stock awarded by the Company to its employees), $3.4 million related to a contingent payment in connection with the acquisition of the equity interest in WBR in the fourth quarter of Fiscal 2009, which was accounted for as an equity transaction and $2.7 million related to repayment of short-term notes, partially offset by cash provided of $25.1 million related to amounts borrowed under the New Credit Agreements and $5.1 million from the exercise of employee stock options. Net cash used in financing activities for the Six Months Ended July 4, 2009 was $23.6 million, which primarily reflects a decrease of $18.7 million related to repayment of short-term notes, a decrease of $4.1 million due to repayment of amounts borrowed under the New Credit Agreements and a decrease of $1.4 million related to the repurchase of treasury stock (in connection with the surrender of shares for the payment of minimum income tax due upon vesting of certain restricted stock awarded by the Company to its employees), partially offset by an increase of $0.7 million of cash received upon the cancellation of the 2004 Swap (see Note 14 to Notes to Consolidated Condensed Financial Statements).

Significant Contractual Obligations and Commitments

Contractual obligations and commitments as of July 3, 2010 were not materially different from those disclosed in the Company’s Annual Report on Form 10-K for Fiscal 2009, with the exception of certain operating leases and other contractual obligations pursuant to agreements entered into during the Six Months Ended July 3, 2010 (see Note 19 of Notes to Consolidated Condensed Financial Statements).

Off-Balance Sheet Arrangements

None.

Statement Regarding Forward-Looking Disclosure

This Quarterly Report on Form 10-Q, as well as certain other written, electronic and oral disclosures made by the Company from time to time, contains “forward-looking statements” that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company’s estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results, targets or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact, including, without limitation, future financial targets, are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words “believe,” “anticipate,” “estimate,” “expect,” “intend,” “may,” “project,” “scheduled to,” “seek,” “should,” “will be,” “will continue,” “will likely result”, “targeted”, or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies.

The following factors, among others, including those described in this Quarterly Report on Form 10-Q under the heading Item 1A. Risk Factors (as such disclosure may be modified or supplemented from time to time), could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by it: the Company’s ability to execute its repositioning and sale initiatives (including achieving enhanced productivity and profitability) previously announced; economic conditions that affect the apparel industry, including the recent turmoil in the financial and credit markets; the Company’s failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company’s products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; possible additional tax liabilities; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the risk of product safety issues, defects or other production problems associated with our products; the Company’s dependence on a limited number of customers; the effects of consolidation in the retail sector; the Company’s dependence on license agreements with third parties including, in particular, its license agreement with Calvin Klein Inc., the licensor of the Company’s Calvin Klein brand name; the Company’s dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company’s exposure to conditions in overseas markets in connection with the Company’s foreign operations and the sourcing of products from foreign third-party vendors; the Company’s foreign currency exposure; the Company’s history of insufficient disclosure controls and procedures and internal controls and restated financial statements; unanticipated future internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the effects of fluctuations in the value of investments of the Company’s pension plan; the sufficiency of cash to fund operations, including capital expenditures; the Company’s ability to service its indebtedness, the effect of changes in interest rates on the Company’s indebtedness that is subject to floating interest rates and the limitations imposed on the Company’s operating and financial flexibility by the agreements governing the Company’s indebtedness; the Company’s dependence on its senior management team and other key personnel; the Company’s reliance on information technology; the limitations on purchases under the Company’s share repurchase program contained in the Company’s debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the Company’s inability to achieve its financial targets and strategic objectives, as a result of one or more of the factors described above, changes in the assumptions underlying the targets or goals, or otherwise; the failure of acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of such acquisitions); and such acquired businesses being adversely affected, including by one or more of the factors described above, and thereby failing to achieve anticipated revenues and earnings growth.

The Company encourages investors to read the section entitled Item 1A. Risk Factors and the discussion of the Company’s critical accounting policies in Discussion of Critical Accounting Policies included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2010, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. This discussion of forward-looking statements is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company’s ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk primarily related to changes in hypothetical investment values under certain of the Company’s employee benefit plans, interest rates and foreign currency exchange rates. The Company does not use derivative financial instruments for speculation or for trading purposes.

Market Risk

The Company’s pension plan invests in marketable equity and debt securities, mutual funds, limited partnerships and cash accounts. These investments are subject to changes in the market value of individual securities and interest rates as well as changes in the overall economy. Investments are stated at fair value, except as disclosed below, based upon quoted market prices. Investments in limited partnerships are valued based on estimated fair value by the management of the limited partnerships in the absence of readily ascertainable market values. These estimated fair values are based upon the underlying investments of the limited partnerships. Because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. The limited partnerships utilize a “fund of funds” approach resulting in diversified multi-strategy, multi-manager investments. The limited partnerships invest capital in a diversified group of investment entities, generally hedge funds, private investment companies, portfolio funds and pooled investment vehicles which engage in a variety of investment strategies, managed by investment managers. Fair value is determined by the administrators of each underlying investment, in consultation with the investment managers.

Changes in the fair value of the pension plan’s investment portfolio are directly reflected in the Company’s Consolidated Condensed Statements of Operations through pension expense and in the Company’s Consolidated Condensed Balance Sheets as a component of accrued pension liability, included in Other liabilities. The Company records the effect of any changes in actuarial assumptions (including changes in the discount rate) and the difference between the assumed rate of return on plan assets and the actual return on plan assets in the fourth quarter of its fiscal year. The total value of the pension plan’s investment portfolio was $118.3 million at January 2, 2010. A hypothetical 10% increase/decrease in the value of the Company’s pension plan investment portfolio would have resulted in a decrease/increase in pension expense of $11.8 million for Fiscal 2009. Based on historical appreciation in the Company’s pension plan investment portfolio, the Company, during the first six months of Fiscal 2010, estimated pension expense on an interim basis assuming a long-term rate of return on pension plan investments of 8%, net of pension plan expenses. A 1% decrease/increase in the actual return earned on pension plan assets (a decrease in the return on plan assets from 8% to 7% or an increase in the return on plan assets from 8% to 9%) would result in an increase/decrease of approximately $1.2 million in pension expense (decrease/increase in pension income) for Fiscal 2010.

During the Six Months Ended July 3, 2010, the actual annualized rate of return on the Pension Plan’s assets has been a loss of approximately 3.5%. However, based upon historical results, the Company has been using an assumed rate of return of 8% (gain) per year on Pension Plan assets to estimate pension income/expense on an interim basis. The fair value of the Pension Plan’s assets, before contributions, was approximately $110.5 million at July 3, 2010 compared to $118.3 million at January 2, 2010. The fair value of the Pension Plan’s assets reflects a $6.8 million decrease from their assumed value of approximately $117.3 million, net of benefits paid but before contributions, at July 3, 2010. During the Six Months Ended July 3, 2010, the Company made contributions of $2.4 million to the Pension Plan, which increased the fair value of the Pension Plan’s assets, net of benefits paid, to approximately $112.9 million at July 3, 2010. Assuming that the fair value of the investment portfolio increases at the assumed rate of 8% per annum for the remainder of Fiscal 2010, the Company could recognize $6.9 million of pension expense for the year ending January 1, 2011. The Company’s pension income/expense is also affected by the discount rate used to calculate Pension Plan liabilities, Pension Plan amendments, Pension Plan benefit experience compared to assumed experience and other factors. These factors could increase or decrease the amount of pension income/expense ultimately recorded by the Company for Fiscal 2010. Based upon results for Fiscal 2009, a 0.1% increase (decrease) in the discount rate would decrease (increase) pension expense by approximately $1 million.

Interest Rate Risk

The Company has market risk from exposure to changes in interest rates, at July 3, 2010, on $38.3 million under the CKJEA Notes, and $25.3 million under the New Credit Agreements and, at July 4, 2009, on its 2003 Swap Agreement with a notional amount of $50.0 million, on $50.1 million under the CKJEA Notes and other short-term debt and on $8.7 million under the New Credit Agreements. At July 4, 2009, the Company was not exposed to interest rate risk on its Senior Notes because the interest rate was fixed at 8 7/8 per annum. With respect to the 2003 Swap Agreement (which was called by the issuer in July 2009), a hypothetical 10% increase in interest rates would have had a negligible unfavorable impact for the Six Months Ended July 4, 2009 on the Company’s income from continuing operations before provision for income taxes. A hypothetical 10% increase in interest rates for the loans outstanding under the New Credit Agreements and for the CKJEA Notes would have had a negligible unfavorable effect in the Six Months Ended July 3, 2010 and July 4, 2009 on the Company’s income from continuing operations before provision for income taxes. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity — Financing Arrangements and Note 14 of Notes to Consolidated Condensed Financial Statements.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk related to its U.S. dollar-denominated purchases of inventory, payment of minimum royalty and advertising costs and intercompany payables where the functional currencies of the subsidiaries that are party to these transactions are the Euro, Canadian Dollar, Korean Won, Mexican Peso or British Pound. The foreign currency derivative instruments that the Company uses to offset its foreign exchange risk are forward purchase contracts and zero-cost collars. See Note 11 of Notes to the Consolidated Condensed Financial Statements for further details on the derivative instruments and hedged transactions. These exposures have created significant foreign currency fluctuation risk and have had a significant favorable impact on the Company’s earnings during the first half of Fiscal 2010, compared to the same period in Fiscal 2009, due to the weakening of the U.S. dollar against those foreign currencies, except for the Euro, against which the U.S. dollar was substantially unchanged. The Company’s European, Asian, Canadian, Mexican and South American operations accounted for approximately 52% of the Company’s total net revenues for the Six Months Ended July 3, 2010. These foreign operations of the Company purchase products from suppliers denominated in U.S. dollars. Total purchases of products made by foreign subsidiaries denominated in U.S. dollars amounted to approximately $113.1 million for Six Months Ended July 3, 2010. A hypothetical decrease of 10% in the value of these foreign currencies relative to the U.S. dollar would have increased cost of goods sold (which would decrease operating income) by $11.3 million for Six Months Ended July 3, 2010.

The following table summarizes the effect on earnings for the Six Months Ended July 3, 2010 of a hypothetical 10% adverse change in foreign exchange rate on the Company’s foreign currency exchange contracts:


					Weighted		Effect of Hypothetical
					Average		10% Adverse Change in Foreign
		Foreign			Contractual		Currency Exchange Rates
		Currency (a)	Amount		Exchange Rate		on Earnings
Derivative Instrument	Hedged Transaction	Sell/Buy	Hedged		or Strike Price		Gain (loss) (b)
			USD (thousands)				USD (thousands)

Foreign exchange contracts	Minimum royalty and advertising costs	Euro/USD		19,252		1.3573		(1,780	)
Foreign exchange contracts	Purchases of inventory	KRW/USD		11,450		1,186		(1,104	)
Foreign exchange contracts	Purchases of inventory	CAD/USD		35,750		0.9572		(3,516	)
Foreign exchange contracts	Purchases of inventory	MXN/USD		357		16.81		(46	)
Foreign exchange contracts	Intercompany purchases of inventory	Euro/GBP		15,045		0.8651		(1,436	)
Foreign exchange contracts	Intercompany payables	Euro/USD		34,000		1.3467		(3,168	)
Foreign exchange contracts	Intercompany payables	KRW/USD		4,000		1,115		(363	)

								(11,413	)


(a)		USD = U.S. dollar, KRW = Korean won, CAD = Canadian dollar, MXN = Mexican peso, GBP = British pound

(b)		The Company expects that these hypothetical gains and losses would be offset by gains and losses on the related underlying transactions.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

The information required by this Item 1 of Part II is incorporated herein by reference to Part I, Item 1. Financial Statements, Note 18 Legal Matters.

Item 1A. Risk Factors.

Please refer to Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for Fiscal 2009, filed with the SEC on March 2, 2010 for a description of certain significant risks and uncertainties to which the Company’s business, operations and financial condition are subject. There have been no material changes to these risk factors during the Six Months Ended July 3, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During May 2010, the Company’s Board of Directors authorized a share repurchase program (the “2010 Share Repurchase Program”), which allows the Company to repurchase up to 5,000,000 shares of its common stock. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

In addition, an aggregate of 74,301 shares included below as repurchased during the Six Months Ended July 3, 2010 reflect the surrender of shares in connection with the vesting of certain restricted stock awarded by the Company to its employees. At the election of an employee, shares having an aggregate value on the vesting date equal to the employee’s withholding tax obligation may be surrendered to the Company in satisfaction thereof. The repurchase of these shares is not a part of the 2010 Share Repurchase Program or the 2007 Share Repurchase Program.

The following table summarizes repurchases of the Company’s common stock during the Six Months Ended July 3, 2010.


					Total Number		Maximum
					of Shares		Number of Shares
	Total Number		Average		Purchased as		that May Yet Be
	of Shares		Price Paid		Part of Publicly		Repurchased Under
Period	Repurchased		per Share		Announced Plan		the Announced Plans

January 3, 2010 - January 30, 2010		1,259	$	39.18		—		1,490,131

January 31, 2010 - February 27, 2010		213	$	38.62		—		1,490,131

February 28, 2010 - April 3, 2010		1,560,592	$	46.24		1,490,131		—

April 4, 2010 - May 1, 2010		1,663	$	49.06		—		—

May 2, 2010 - May 29, 2010		369	$	42.75		—		5,000,000

May 30, 2010 - July 3, 2010		336	$	42.03		—		5,000,000

The New Credit Agreements (as well as the Senior Notes prior to the date of their redemption) place restrictions on the Company’s ability to pay dividends on the Common Stock, and the Company has not paid any dividends on the Common Stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Reserved.

Item 5. Other Information.

None.

Item 6. Exhibits.

The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and:

	•		were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

	•		may have been qualified in such agreements by disclosures that were made to the other party in connection with the negotiation of the applicable agreement;

	•		may apply contract standards of “materiality” that are different from “materiality” under the applicable security laws; and

	•		were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

The Company acknowledges that notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q not misleading.


Exhibit No.		Description of Exhibit

	3.1	Amended and Restated Certificate of Incorporation of The Warnaco Group, Inc. (incorporated by reference to Exhibit 1 to the Form 8-A/A filed by The Warnaco Group, Inc. on February 4, 2003).*

	3.2	Third Amended and Restated Bylaws of The Warnaco Group, Inc. (incorporated by reference to Exhibit 3.2 to the Form 8-K filed by The Warnaco Group, Inc. on July 13, 2010).*

	10.1	Credit Agreement, dated as of August 26, 2008, among Warnaco Inc., The Warnaco Group, Inc., the Lenders (as defined therein) and Issuers (as defined therein) party thereto, Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders and the Issuers party thereto, Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, Banc of America Securities LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as joint bookrunners, Deutsche Bank Securities Inc., as sole syndication agent for the Lenders and the Issuers party thereto, and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset Finance Inc., each as a co-documentation agent for the Lenders and Issuers (previously filed as Exhibit 10.1 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.2	Guaranty, dated as of August 26, 2008, by The Warnaco Group, Inc. and each of the other entities listed on the signature pages thereof or that becomes a party thereto, in favor of Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders (as defined therein) and Issuers (as defined therein) party thereto, and the Issuers and Lenders party thereto (previously filed as Exhibit 10.2 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.3	Pledge and Security Agreement, dated as of August 26, 2008, by The Warnaco Group, Inc., Warnaco Inc., and each of the other entities listed on the signature pages thereto or that becomes a party thereto, in favor of Bank of America, N.A., as collateral agent for the secured parties thereunder (previously filed as Exhibit 10.3 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.4	Canadian Credit Agreement, dated as of August 26, 2008, among Warnaco of Canada Company, The Warnaco Group, Inc., the Lenders (as defined therein) and Issuers (as defined therein) party thereto, Bank of America, N.A., as administrative agent for the revolving credit facility and as collateral agent for the Lenders and the Issuers party thereto, Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers, and Deutsche Bank Securities Inc., as sole syndication agent for the Lenders and the Issuers party thereto (previously filed as Exhibit 10.4 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.5	U.S. Loan Party Canadian Facility Guaranty, dated as of August 26, 2008, by The Warnaco Group, Inc., Warnaco Inc., and each of the other entities listed on the signature pages thereto or that becomes a party thereto, in favor of, Bank of America, N.A. as administrative agent for the revolving credit facility and as collateral agent for the Lenders (as defined therein) and Issuers (as defined therein) party thereto, and the Issuers and Lenders party thereto (previously filed as Exhibit 10.5 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †


Exhibit No.		Description of Exhibit

	10.7	General Security Agreement, dated as of August 26, 2008, granted by Warnaco of Canada Company to Bank of America, N.A. (previously filed as Exhibit 10.7 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.8	General Security Agreement, dated as of August 26, 2008, granted by 4278941 Canada Inc. to Bank of America, N.A. (previously filed as Exhibit 10.8 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.9	Securities Pledge Agreement, dated as of August 26, 2008 made by Warnaco of Canada Company to and in favour of Bank of America, N.A. as collateral agent (previously filed as Exhibit 10.9 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.10	Deed of Hypothec, dated as of August 26, 2008, between Warnaco of Canada Company and Bank of America, N.A. (previously filed as Exhibit 10.10 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	10.11	Deed of Hypothec, dated as of August 26, 2008, between 4278941 Canada Inc. and Bank of America, N.A. (previously filed as Exhibit 10.11 to The Warnaco Group, Inc.’s Form 8-K filed August 28, 2008, and refiled herein). †

	31.1	Certification of Chief Executive Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.†

	31.2	Certification of Chief Financial Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.†

	32	Certifications of Chief Executive Officer and Chief Financial Officer of The Warnaco Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

101.CAL		XBRL Taxonomy Extension Calculation Linkbase †

101.INS		XBRL Instance Document †

101.LAB		XBRL Taxonomy Extension Label Linkbase †

101.PRE		XBRL Taxonomy Extension Presentation Linkbase †

101.SCH		XBRL Taxonomy Extension Schema Linkbase †

*		Previously filed.

†		Filed herewith.

Credit Agreement, dated as of August 26, 2008, among Warnaco Inc., a Delaware corporation (the “Borrower”), The Warnaco Group, Inc., a Delaware corporation (“Group”), the Lenders (as defined below), the Issuers (as defined below), Bank of America, N.A. (“BofA”), as administrative agent for the Revolving Credit Facility (as defined below) (in such capacity, the “Administrative Agent”) and as collateral agent for the Lenders and the Issuers (in such capacity, the “Collateral Agent”), Banc of America Securities LLC (“BAS”) and Deutsche Bank Securities Inc. (“DBSI”), as joint lead arrangers (in such capacity, the “Arrangers”), BAS, DBSI and J.P. Morgan Securities Inc., as joint bookrunners (in such capacity, collectively, the “Joint Bookrunners”), DBSI, as sole syndication agent for the Lenders and the Issuers (in such capacity, the “Syndication Agent” and together with the Administrative Agent and the Collateral Agent, collectively, the “Agents”), and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset Finance Inc., each as a co-documentation agent for the Lenders and Issuers (in such capacity, collectively, the “Co-Documentation Agents”).

W i t n e s s e t h:

Whereas, the Borrower has requested that the Lenders and the Issuers make available to the Borrower for the purposes specified in this Agreement (as defined below) a revolving credit and letter of credit facility;

Whereas, the Lenders and Issuers are willing to make available to the Borrower such revolving credit and letter of credit facility upon the terms and subject to the conditions set forth herein;

Now, Therefore, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

Section 1.1 Defined Terms. As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Accelerated Borrowing Base Certificate Delivery Date” means any date on which the Available Credit has been less than 15% of the Aggregate Borrowing Limit for five consecutive Business Days.

“Accelerated Borrowing Base Certificate Delivery Period” means the period commencing on an Accelerated Borrowing Base Certificate Delivery Date and ending on the first day after any 45 consecutive day period, commencing after such Accelerated Borrowing Base Certificate Delivery Date, during which the Available Credit equals or exceeds 15% of the Aggregate Borrowing Limit for each day during such 45 consecutive day period and no Event of Default has occurred or existed (or ending such earlier time after the commencement of such Accelerated Borrowing Base Certificate Delivery Date that the Available Credit equals or exceeds 15% of the Aggregate Borrowing Limit as the Administrative Agent shall agree in writing in its sole discretion).

“Account” has the meaning specified in the Pledge and Security Agreement.

“Account Debtor” has the meaning specified in the Pledge and Security Agreement.

“Adjusted Orderly Liquidation Value Rate” means 90% of the Orderly Liquidation Value Rate (or, in the case of Eligible Inventory consisting of Documented Non-Letter of Credit Inventory or Inventory covered by Documentary Letters of Credit, 85% of the Orderly Liquidation Value Rate).

“Administrative Agent” has the meaning specified in the preamble to this Agreement.

“Advance Rate” means, for each category of Collateral set forth below, the rate set forth below (as a percentage of book value) opposite such category of Collateral:


Category	Rate
Eligible Receivables		85	%
Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit)		80	%

provided, that (a) if at any time the product of (i) the Adjusted Orderly Liquidation Value Rate and (ii) the sum of Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) of each Loan Party (valued, in each case, at the lower of cost and market on a first-in, first-out basis) is less than the aggregate Borrowing Base attributable to such Inventory under clause (a)(ii)(x) of the definition of Borrowing Base (calculated using the above Advance Rate), then, at the sole discretion of the Administrative Agent, exercised reasonably, the effective Advance Rate for Eligible Inventory will be adjusted (until delivery of the next Appraisal) to a level that would cause such Advance Rate to effectively equal the Adjusted Orderly Liquidation Value Rate; and (b) any reduction in the foregoing advance rates (or any increase up to the rates set forth above) shall be determined by the Administrative Agent in its sole discretion exercised reasonably and shall take effect 10 Business Days (or, if pursuant to clause (a) above, three (3) Business Days) after the Administrative Agent delivers written notice thereof to the Borrower.

“Affiliate” means, with respect to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person, each officer, director, general partner or joint-venturer of such Person, and each Person who is the beneficial owner of 10% or more of any class of Voting Stock of such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Affiliated Account Debtor” means, (a) in relation to an Account Debtor that is a Governmental Authority, any other Account Debtor that is a Governmental Authority, and (b) in relation to an Account Debtor that is not a Governmental Authority, each Account Debtor that is an Affiliate of such Account Debtor.

“Agent Affiliate” has the meaning specified in Section 10.9(c).

“Agents” has the meaning specified in the preamble to this Agreement.

“Agreement” means this Credit Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Agreement Accounting Principles” means, subject to Section 1.3, GAAP or, if (x) the Securities and Exchange Commission requires or permits United States reporting companies to utilize the IFRS in lieu of GAAP for reporting purposes and (y) Group adopts the IFRS with the agreement of its independent public accountants, the IFRS, each as in effect from time to time, applied in a manner consistent with that used in the preparation of the audited annual Financial Statements referred to in Section 6.1(c); provided that if the adoption by Group of the IFRS results in a change in any of the calculations required by Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by Group and the Borrower or the determination of the “Applicable Margin” or the calculation of the Fixed Charge Coverage Ratio in the definition of “Permitted Acquisition” shall be the same after such adoption as if such adoption had not been made; and provided, further, that the adoption of the IFRS (to the extent that such adoption would affect a calculation that measures compliance with any covenant contained in Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”) shall not be given effect until such provisions are amended to reflect such adoption.

“Aggregate Borrowing Base” means, at any time, the aggregate of the Borrowing Base and the Borrowing Base (as defined in the Canadian Facility) at such time.

“Aggregate Borrowing Limit” means, at any time, the lesser of (i) the sum of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the Canadian Facility) in effect at such time and (ii) the Aggregate Borrowing Base at such time.

“Alternative Currency” means the lawful currency of each of the European Union, the United Kingdom, Canada and Hong Kong, provided that in each case such currency is freely transferable into Dollars.

“Anniversary Date” means each anniversary of the Closing Date.

“Applicable Lending Office” means, with respect to each Lender, its Domestic Lending Office, in the case of a Base Rate Loan, and its Eurodollar Lending Office, in the case of a Eurodollar Rate Loan.

“Applicable Margin” means, as of any date of determination, (a) from and after the Closing Date but prior to the date 10 Business Days after delivery by Group to the Administrative Agent of Financial Statements pursuant to Section 6.1(b) for the Fiscal Quarter ending on or about March 31, 2009, a per annum rate equal to 1.75% (in the case of Eurodollar Rate Loans) and .75% (in the case of Base Rate Loans) and (b) from and after the date 10 Business Days after delivery by Group to the Administrative Agent of Financial Statements pursuant to Section 6.1(b) for the Fiscal Quarter ending on or about March 31, 2009, a per annum rate equal to the rate set forth below opposite the applicable type of Loan and the then applicable Leverage Ratio of Group (determined on the last day of the most recent Fiscal Quarter for which Financial Statements have been delivered pursuant to Section 6.1(b) or Section 6.1(c)) set forth below:


	Base Rate			Eurodollar
Leverage Ratio	Loans			Rate Loans
Greater than 1.75 to 1		1.00	%		2.00	%
Less than or equal to 1.75 to 1 and greater than 0.50 to 1		.75	%		1.75	%
Less than or equal to 0.50 to 1		.50	%		1.50	%

Changes in the Applicable Margin resulting from a change in the Leverage Ratio on the last day of any subsequent Fiscal Quarter shall become effective 10 Business Days after delivery by Group to the Administrative Agent of new Financial Statements pursuant to Section 6.1(b) or Section 6.1(c) as applicable. Notwithstanding anything to the contrary set forth in this Agreement (including the then effective Leverage Ratio of Group), if Group shall fail to deliver such Financial Statements within any of the time periods required under Section 6.1(b) or Section 6.1(c) (as either such section has been amended, waived or otherwise modified), the Applicable Margin from and including the day on which such Financial Statements were due, to but not including the date 10 Business Days after Group delivers to the Administrative Agent such Financial Statements, shall equal the highest possible Applicable Margin provided for by this definition.

“Applicable Unused Commitment Fee Rate” means, as of any date of determination, a per annum rate equal to the rate set forth below opposite the respective Level (i.e., Level 1 or Level 2, as the case may be) of Average Revolver Usage for the calendar quarter most recently ended (or, for the first payment of the Unused Commitment Fee under Section 2.12(a), for the period commencing on the Closing Date and ending on the last day of the calendar quarter in which the Closing Date occurred); provided that the Applicable Unused Commitment Fee Rate shall not change until 5 Business Days after the end of such calendar quarter (or shorter period).


	Average
Level	Revolver Usage	Unused Commitment Fee

Level 1	Less than 50%	0.50%

Level 2	Equal to or greater than 50%	0.375%

“Appraisal” means each appraisal that is conducted prior to, on or after the Closing Date pursuant to Section 6.12(b) for purposes of determining the Borrowing Base, in form and substance acceptable to the Administrative Agent and performed by an appraiser that is satisfactory to the Administrative Agent.

“Approved Electronic Communications” means each notice, demand, communication, information, document and other material that any Loan Party is obligated to, or otherwise chooses to, provide to any Agent pursuant to any Loan Document or the transactions contemplated therein, including (a) any supplement to the Guaranty, any joinder to the Pledge and Security Agreement and any other written Contractual Obligation delivered or required to be delivered in respect of any Loan Document or the transactions contemplated therein and (b) any Financial Statement, financial and other report, notice, request, certificate and other information material, provided, however, that, “Approved Electronic Communication” shall exclude (i) any Notice of Borrowing, Letter of Credit Request, Swing Loan Request, Notice of Conversion or Continuation, and any other notice, demand, communication, information, document and other material relating to a request for a new, or a conversion of an existing, Borrowing (other than a Notice of Borrowing, Swing Loan Request or Notice of Conversion or Continuation sent by e-mail in accordance with the terms hereof; provided, that (A) the Borrower shall confirm each such notice by prompt delivery to the Administrative Agent of a Notice of Borrowing, Swing Loan Request or Notice of Conversion or Continuation, as applicable, in a manner permitted by Section 11.8 (other than by electronic mail, Approved Electronic Platform, internet website or other electronic transmission), but if it differs in any material respect from the action taken by any Facility Agent or Lender, the records of the applicable Facility Agents and Lenders shall govern, (B) each Facility Agent and Lender shall be entitled to rely on such e-mail notice (and regardless of whether any confirmation is received by the Administrative Agent) and (C) no Facility Agent or Lender shall have any liability for any loss suffered by the Borrower or any other Loan Party as a result of a Facility Agent or any Lender acting upon such e-mailed instructions), (ii) any notice pursuant to Section 2.8 or Section 2.9 and any other notice relating to the payment of any principal or other amount due under any Loan Document prior to the scheduled date therefor, (iii) any notice of any Default or Event of Default and (iv) any notice, demand, communication, information, document and other material required to be delivered to satisfy any of the conditions set forth in Article II or Section 2.4(a) or any other condition to any Borrowing or other extension of credit hereunder or any condition precedent to the effectiveness of this Agreement.

“Approved Electronic Platform” has the meaning specified in Section 10.9.

“Approved Fund” means any Fund that is advised or managed by (a) an Agent or a Lender, (b) an Affiliate of any Agent or any Lender or (c) an entity or Affiliate of an entity that administers or manages a Lender.

“Arrangers” has the meaning specified in the preamble to this Agreement.

“Asset Sale” has the meaning specified in Section 8.4.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A.

“Assumption Agreement” means an assumption agreement entered into by a Lender or an Eligible Assignee pursuant to Section 2.18, in form acceptable to the Administrative Agent.

“Availability Reserves” means, as of three (3) Business Days after the date of written notice of any determination thereof to the Borrower by the Administrative Agent (except that no such advance notice shall be required with respect to any amounts established on or prior to the Closing Date so long as the Administrative Agent notifies the Borrower of such amounts on or prior to the Closing Date, which amounts shall be in effect as of the Closing Date), such amounts as the Administrative Agent may from time to time establish against the Revolving Credit Facility, in the Administrative Agent’s sole discretion exercised reasonably, in order to (a) preserve the value of the Collateral or the Collateral Agent’s Lien thereon and/or (b) provide for the payment of unanticipated liabilities of any of the Loan Parties arising after the Closing Date and, to the extent that the Administrative Agent is not aware of same on the Closing Date, arising on or prior to the Closing Date and/or (c) provide for the effect, or anticipated effect, of the loss of the benefit to the Warnaco Entities of a Material License.

“Available Credit” means, at any time, the sum of the Available U.S. Credit at such time and the Dollar Equivalent of the Available Canadian Credit (as defined in the Canadian Facility) at such time; provided that in no event shall the Dollar Equivalent of the amount of Available Canadian Credit included in the determination of “Available Credit” at any time exceed 25% of the Available Credit at such time.

“Available U.S. Credit” means, at any time, (a) the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base at such time minus (b) the sum of (i) the aggregate Revolving Credit Outstandings at such time and (ii) the aggregate amount of any Availability Reserve in effect at such time.

“Average Revolver Usage” means, for any period, an amount equal to (i) the quotient of (x) the sum of the Revolving Credit Outstandings (excluding the amount of any outstanding Swing Loans) for each day during such period, divided by (y) the number of days in such period, divided by (ii) the quotient of (x) the sum of the Revolving Credit Commitments of the Lenders for each day during such period, divided by (y) the number of days in such period, all as determined by the Administrative Agent.

“Bailee’s Letter” means a letter in form and substance acceptable to the Administrative Agent and executed by any Person (other than a Loan Party) that is in possession of Inventory on behalf of a Loan Party pursuant to which such Person acknowledges, among other things, the Collateral Agent’s Lien with respect thereto.

“Bankruptcy Code” means title 11, United States Code, as amended from time to time.

“BAS” has the meaning specified in the preamble to this Agreement.

“Base Rate” means, for any day, the greater of (a) the rate of interest in effect for such day as publicly announced from time to time by BofA in Charlotte, North Carolina as its “prime rate” (the “prime rate” being a rate set by BofA based upon various factors including BofA’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate) or (b) the Federal Funds Rate in effect for such day, plus 0.50% per annum, provided, that, in the Administrative Agent’s sole discretion, such amount is subject to change at any time without notice to the Borrower (it being understood and agreed that no change shall be made under this proviso except as a result of a change in the above “prime rate” or Federal Funds Rate). With respect to any determination of any interest rate which is based on the Base Rate, any change in the prime rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change, and any change in the Federal Funds Rate shall take effect as of the date of such change.

“Base Rate Loan” means any Loan during any period in which it bears interest based on the Base Rate.

“Blocked Account” has the meaning specified in the Pledge and Security Agreement.

“Blocked Account Bank” has the meaning specified in the Pledge and Security Agreement.

“Blocked Account Letter” has the meaning specified in the Pledge and Security Agreement.

“BofA” has the meaning specified in the preamble to this Agreement.

“Borrower” has the meaning specified in the preamble to this Agreement.

“Borrowing” means a Revolving Credit Borrowing.

“Borrowing Base” means, at any time, the Dollar Equivalent of (a) the sum of (i) the product of the Advance Rate then in effect for Eligible Receivables and the face amount of all Eligible Receivables of each Loan Party (calculated net of all finance charges, late fees and other fees which are unearned, sales, excise or similar taxes, and credits or allowances granted at such time), (ii) the sum of (x) the product of the Advance Rate then in effect for Eligible Inventory and the value of the Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) of each Loan Party (valued, in each case, at the lower of cost and market on a first-in, first-out basis) and (y) subject to the proviso in the last sentence of the definition of Eligible Inventory, the product of the Adjusted Orderly Liquidation Value Rate then in effect and the sum of (1) the value of the Eligible Inventory consisting of Documented Non-Letter of Credit Inventory of each Loan Party (valued, in each case, at the lower of cost and market on a first-in, first-out basis) and (2) the value of the Eligible Inventory consisting of Inventory covered by Documentary Letters of Credit of each Loan Party (which value under this clause (2) shall be deemed to be the aggregate undrawn amount of such Documentary Letters of Credit at such time) and (iii) the lesser of (x) that amount which is the excess of $35,000,000 over the Dollar Equivalent of the aggregate amount of cash and Permitted Cash Equivalents (as defined in the Canadian Facility) held in the Special Cash Collateral Account (as defined in the Canadian Facility) at such time and (y) the aggregate amount of cash and Permitted Cash Equivalents held in the Special Cash Collateral Account at such time (but only so long as such cash, Permitted Cash Equivalents and account are subject to a valid and perfected first priority Lien in favor of the Collateral Agent) minus (b) any Eligibility Reserve, and, in the case of Eligible Receivables, any Dilution Reserve then in effect.

“Borrowing Base Certificate” means a certificate to be executed and delivered from time to time by the Borrower to the Administrative Agent substantially in the form of Exhibit E.

“Business Day” means a day of the year on which banks are not required or authorized to close in New York, New York or Charlotte, North Carolina, and, (a) in the case of Letters of Credit Issued in Euros or within the European Union, in London, (b) in the case of Letters of Credit Issued in Canadian dollars or in Canada, in the Province of Ontario, Canada, (c) in the case of Letters of Credit Issued in Hong Kong dollars or in Hong Kong, in Hong Kong, and, (d) if the applicable Business Day relates to notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, a day on which dealings in Dollar deposits are also carried on in the London interbank market.

“Canadian Borrower” means Warnaco of Canada Company.

“Canadian Facility” means the Credit Agreement, dated as of the date hereof, among the Canadian Borrower, Group, the lenders and letter of credit issuers party thereto from time to time, BofA, as administrative agent and as collateral agent, and the other parties thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Canadian Secured Obligations” means the Secured Obligations (as defined in the Canadian Facility).

“Capital Expenditures” means, with respect to any Person for any period, the aggregate of amounts that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries on a consolidated basis prepared in conformity with Agreement Accounting Principles, excluding (i) interest capitalized during construction, (ii) amounts expended on leasehold improvements for which such Person has received a commitment of reimbursement from the landlord; provided, that if any such amount is not reimbursed within six months after the expenditure (the “Reimbursement Expiration Date”), such amount will be counted towards Capital Expenditures as if such amount had been expended on the Reimbursement Expiration Date, (iii) amounts credited to, or received by, any Warnaco Entity in connection with a substantially contemporaneous trade in and (iv) reinvestments of Net Cash Proceeds in replacement assets pursuant to Section 2.9(c)(i) and Section 2.9(c)(i) of the Canadian Facility.

“Capital Lease” means, with respect to any Person, any lease of property by such Person as lessee which would be accounted for as a capital lease on a balance sheet of such Person prepared in conformity with Agreement Accounting Principles.

“Capital Lease Obligations” means, with respect to any Person, the capitalized amount of all obligations of such Person or any of its Subsidiaries under Capital Leases, as determined on a consolidated basis in conformity with Agreement Accounting Principles.

“Cash Collateral Account” has the meaning specified in the Pledge and Security Agreement.

“Cash Equivalents” means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof (including, without limitation, the Federal Home Loan Mortgage Association, the Federal Home Loan Bank, the Federal National Mortgage Association and the Governmental National Mortgage Association) or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States or, in the case of a Foreign Subsidiary, securities issued or fully guaranteed or insured by the federal government of the country under which such Foreign Subsidiary was formed or any agency thereof or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of such federal government, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers’ acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least “A-1” by Standard & Poor’s Rating Services (“S&P”) or “P-1” by Moody’s Investors Services, Inc. (“Moody’s”), (c) commercial paper of an issuer rated at least “A-1” by S&P or “P-1” by Moody’s, and (d) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than $500,000,000 and (iii) is rated at least “A-1” by S&P or “P-1” by Moody’s; provided, however, that the maturities of all obligations of the type specified in clauses (a) through (c) above shall not exceed 365 days.

“Cash Interest Expense” means, with respect to any Person for any period, the Interest Expense of such Person for such period less the Non-Cash Interest Expense of such Person for such period.

“Cash Management Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person in respect of cash management services (including treasury, depository, overdraft, credit or debit card, electronic funds transfer, automatic clearing house and other cash management arrangements) provided by any Agent, Lender or any Affiliate of any Agent or Lender in connection with this Agreement or any Loan Document, including obligations for the payment of fees, interest, charges, expenses, attorneys’ fees and disbursements in connection therewith.

“Cash on Hand” means an amount equal to the amount of cash and Cash Equivalents on deposit in the Cash Collateral Accounts less the aggregate amount of accounts payable and other unpaid expenses of the Warnaco Entities which, in Group’s reasonable judgment, are in excess of ordinary course accounts payable and unpaid expenses as certified in a certificate of a Responsible Officer of Group delivered to the Administrative Agent prior to the repurchase of any Senior Notes.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

“Change of Control” means any of the following: (a) Group shall at any time cease to have legal and beneficial ownership of 100% of the capital stock of the Borrower, or, directly or indirectly, any other Loan Party (except if such other Loan Party shall be disposed of pursuant to an Asset Sale permitted by Section 8.4 or if such parties shall merge, liquidate or dissolve in accordance with Section 8.7); or (b) any Person, or two or more Persons acting in concert, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Group (or other securities convertible into such Voting Stock) representing 35% or more of the combined voting power of all Voting Stock of Group; or (c) any Person, or two or more Persons acting in concert, shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, the power to exercise, directly or indirectly, a controlling influence over the management or policies of Group, or control over Voting Stock of Group (or other securities convertible into such securities) representing 35% or more of combined voting power of all Voting Stock of Group or (d) so long as the Senior Note Indenture is in effect or any Senior Notes are outstanding, any “Change of Control” as defined in the Senior Note Indenture.

“Chargeback” means a deduction from a Receivable taken by a customer.

“Chattel Paper” has the meaning specified in the Pledge and Security Agreement.

“Closing Date” means the first date on which each of the conditions set forth in Section 3.1 have been satisfied.

“Co-Documentation Agents” has the meaning specified in the preamble to this Agreement.

“Code” means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time.

“Collateral” means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party in or upon which a Lien is granted under any Collateral Document.

“Collateral Agent” has the meaning specified in the preamble to this Agreement.

“Collateral Documents” means the Pledge and Security Agreement, other pledge or security agreements, the Mortgages, the Blocked Account Letters, the Restricted Account Letters, the Control Account Agreements and any other document executed and delivered by a Loan Party granting a Lien on any of its property to secure payment of any of the Secured Obligations.

“Collections” means, with respect to any Receivable: (a) all funds that are received by any Loan Party in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or property of the related Account Debtor or any other Person directly or indirectly liable for the payment of such Receivable and available to be applied thereon) and (b) all other proceeds of such Receivable.

“Commitment” means, with respect to any Lender, such Lender’s Revolving Credit Commitment and “Commitments” means the aggregate Revolving Credit Commitments of all Lenders.

“Compliance Certificate” has the meaning specified in Section 6.1(d).

“Consolidated Net Income” means, for any Person for any period, the net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in conformity with Agreement Accounting Principles; provided, however, that (a) the net income of any other Person in which such Person or one of its Subsidiaries has a joint interest with a third party (which interest does not cause the net income of such other Person to be consolidated into the net income of such Person in accordance with Agreement Accounting Principles) shall be included only to the extent of the amount of dividends or distributions paid to such Person or Subsidiary, (b) the net income of any Subsidiary of such Person that is subject to any restriction or limitation on the payment of dividends or the making of other distributions shall be excluded to the extent of such restriction or limitation, (c) any net gain (or loss) resulting from an Asset Sale by such Person or any of its Subsidiaries other than in the ordinary course of business shall be excluded, and (d) extraordinary gains and losses and any one-time increase or decrease to net income which is required to be recorded because of the adoption of new accounting policies, practices or standards required by Agreement Accounting Principles shall be excluded.

“Constituent Documents” means, with respect to any Person, (a) the articles/certificate of incorporation (or the equivalent organizational documents) of such Person, (b) the by-laws (or the equivalent governing documents) of such Person and (c) any document setting forth the manner of election and duties of the directors or managing members of such Person (if any) and the designation, amount and/or relative rights, limitations and preferences of any class or series of such Person’s Stock.

“Contaminant” means any material, substance or waste that is classified, regulated or otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning or regulatory effect, including any petroleum or petroleum-derived substance or waste, asbestos and polychlorinated biphenyls.

“Contractual Obligation” of any Person means any obligation, agreement, undertaking or similar provision of any Security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument (excluding a Loan Document) to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject.

“Control Account” has the meaning specified in the Pledge and Security Agreement.

“Control Account Agreement” has the meaning specified in the Pledge and Security Agreement.

“Corporate Chart” means a corporate organizational chart, list or other similar document in each case in form reasonably acceptable to the Administrative Agent and setting forth, for each Person that is a Loan Party, that is subject to Section 7.11 or that is a Subsidiary of any of them, (a) the full legal name of such Person (and any trade name, fictitious name or other name such Person may have had or operated under), (b) the jurisdiction of organization, the organizational number (if any) and the tax identification number (if any) of such Person, (c) the location of such Person’s chief executive office (or sole place of business) and (d) the number of shares of each class of such Person’s Stock authorized (if applicable), the number outstanding as of the date of delivery and the number and percentage of such outstanding shares for each such class owned (directly or indirectly) by any Loan Party or any Subsidiary of any of them.

“Credit and Collection Policy” means, as the context may require, those receivables credit and collection policies and practices of the Loan Parties in effect on the Closing Date and as disclosed in writing to the Lenders, as such credit and collection policies and practices may be modified in any material respect with the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) and with a copy of any such modification (whether material or not) to be delivered to the Administrative Agent promptly after its effectiveness.

“Customary Permitted Liens” means, with respect to any Person, any of the following Liens:

(a) Liens with respect to the payment of taxes, assessments or governmental charges in all cases which are not yet due and payable or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by Agreement Accounting Principles;

(b) Liens of landlords arising by statute and liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen and other like liens imposed by law or otherwise incurred, in each instance, in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by Agreement Accounting Principles, or deposits or pledges to obtain the release of any such Liens;

(c) deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), public or statutory obligations, and surety, stay, appeal, customs or performance bonds, or similar obligations arising in each case in the ordinary course of business;

(d) encumbrances arising by reason of zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar encumbrances or such other matters as disclosed in Mortgagee’s Title Insurance Policy on the use of Real Property which do not materially detract from the value of such Real Property or interfere with the ordinary conduct of the business conducted and proposed to be conducted at such Real Property;

(e) encumbrances arising under leases or subleases of Real Property which do not in the aggregate materially detract from the value of such Real Property or interfere with the ordinary conduct of the business conducted and proposed to be conducted at such Real Property; and

(f) financing statements of a lessor’s rights in and to personal property leased to such Person in the ordinary course of such Person’s business.

“DBSI” has the meaning specified in the preamble to this Agreement.

“Default” means any event which with the passing of time or the giving of notice or both would become an Event of Default.

“Defaulted Receivable” means a Receivable:

(a) in the case of a Receivable that is not an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment,

(b) in the case of a Receivable that is an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 30 days or more from the original due date for such payment,

(c) unless otherwise agreed in writing by the Administrative Agent in its sole discretion exercised reasonably, the Account Debtor of such Receivable (or any other Person obligated thereon or owning any Related Security with respect thereto) has: (i) filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors; (ii) made an assignment for the benefit of creditors; (iii) had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law; (iv) has failed, suspended business operations, become insolvent, called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation; or (v) had or suffered a receiver or a trustee to be appointed for all or a significant portion of its assets or affairs, or

(d) which, has been, or, consistent with the Credit and Collection Policy would be, written off a Loan Party’s books as uncollectible.

“Deposit Account” has the meaning given to such term in the UCC.

“Dilution” means, at any given time in respect of all Accounts of the Loan Parties, 100 times a quotient, (a) the numerator of which is the sum (for the most recent twelve months) of any net credits, rebates, markdowns, freight charges, cash discounts, volume, early payment and other discounts, cooperative advertising expenses, warranties, warehouse and other allowances, disputes, chargebacks, defective returns, other returned or repossessed goods, reductions in balance in respect of billing errors or adjustments to estimated billing settlements for defective products or other reasons, allowances for early payments and other similar allowances that are made or coordinated with the usual practices of the Loan Party owning such Account and (b) the denominator of which is the sum (for the most recent twelve months) of the gross amount of any sales made on account (including, without limitation, the original balances of such Accounts).

“Dilution Reserve” means, effective as of three (3) Business Days following the date of written notice of any determination thereof to the Borrower by the Administrative Agent (except that no such advance notice shall be required with respect to any amounts established on or prior to the Closing Date, which amounts shall be in effect as of the Closing Date), such amounts as the Administrative Agent may from time to time establish against the gross amounts of Eligible Receivables, calculated as an aggregate amount equal to the product of (x) the gross amount of Eligible Receivables times (y) the percentage (but not below 0%) equal to that percentage of Dilution reported in the most recent Borrowing Base Certificate delivered to the Administrative Agent that is in excess of 5% of Dilution.

“Document” has the meaning specified in Article 9 of the UCC.

“Documentary Letter of Credit Inventory Conditions” means, with respect to any Inventory covered by a Documentary Letter of Credit, that such Inventory (a) is subject to a negotiable Document showing the Collateral Agent (or, with the consent of the Administrative Agent, the applicable Loan Party) as consignee, which Document is in the possession of the Collateral Agent or such other Person as the Administrative Agent shall approve; (b) is insured in a manner reasonably satisfactory to the Administrative Agent; (c) is owned by the applicable Loan Party (that is, title has passed to such Loan Party); (d) is not sold by a vendor that has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of title or otherwise assert Lien rights against the Inventory; (e) is not subject to any import restrictions or requirements that the applicable Loan Party, in the Administrative Agent’s good faith judgment, is unable to comply with; (f) is shipped by a common carrier that is not controlled by the vendor; and (g) is subject to a valid and perfected first priority Lien in favor of the Collateral Agent under the UCC.

“Documentary Letter of Credit” means any Letter of Credit Issued by an Issuer pursuant to Section 2.4 for the account of the Borrower, which is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by Group or any of its Subsidiaries in the ordinary course of its business.

“Documented Non-Letter of Credit Inventory” means Inventory of a Loan Party (i) that is not covered by a Documentary Letter of Credit, (ii) that is in transit from a vendor from outside the United States of America, (iii) that is subject to a valid and perfected first priority Lien in favor of the Collateral Agent under the UCC and (iv) as to which such other conditions (including, without limitation, receipt of documentation) as the Administrative Agent shall request, in its sole discretion exercised reasonably, have been satisfied.

“Dollar Equivalent” of any amount means, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Alternative Currency, the equivalent of such amount in Dollars determined by using the mid-range rate of exchange quoted by the Wall Street Journal for such Alternative Currency under its “Exchange Rates” column on the Business Day preceding the date of determination and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as determined by the Administrative Agent using any method of determination it reasonably deems appropriate; provided, however, if such amount is expressed in an Alternative Currency and such amount relates to the Issuance of a Letter of Credit by any Issuer, the “Dollar Equivalent” shall mean the equivalent of such amount in Dollars as determined by such Issuer using any customary method of determination it reasonably deems appropriate.

“Dollars” and the sign “$” each mean the lawful money of the United States of America.

“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the Assignment and Acceptance or Assumption Agreement by which it became a Lender or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.

“Domestic Subsidiary” means any Subsidiary of Group organized under the laws of any state of the United States of America or the District of Columbia.

“Earnout Obligations” means earn-outs and deferred compensation incurred in connection with any Permitted Acquisition or Investment permitted under Section 8.3(l) consummated after the Closing Date under non-compete agreements, consulting agreements, earn-out agreements and similar deferred compensation arrangements (including such as may be contained in the purchase agreement or related documents for such Permitted Acquisition). The unpaid amount of Earnout Obligations to be determined at any time with respect to any such Permitted Acquisition shall be calculated on the basis of the maximum determinable amount payable with respect to such Permitted Acquisition, or such lesser amount thereof agreed to by the Administrative Agent in its sole discretion.

“EBITDA” means, with respect to any Person for any period, an amount equal to (a) Consolidated Net Income of such Person for such period plus (b) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items, (iv) loss from the sale, exchange or other disposition of capital assets, (v) depreciation, depletion and amortization of intangibles or financing or acquisition costs, (vi) all other non-cash charges and non-cash losses for such period, including non-cash charges relating to any change in the methodology of estimating reserves against Receivables and Inventory and non-cash charges for employee stock compensation, and (vii) any restructuring charges not to exceed $20,000,000 in the aggregate in any Fiscal Year minus (c) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any credit for income tax, (ii) interest income, (iii) gains from extraordinary items for such period, (iv) any aggregate net gain from the sale, exchange or other disposition of capital assets by such Person, (v) any other non-cash gains which have been added in determining Consolidated Net Income and (vi) cash payments for charges that have been reserved.

“Eligibility Reserve” means, effective as of three (3) Business Days after the date of written notice of any determination thereof to the Borrower by the Administrative Agent (except that no such advance notice shall be required with respect to amounts established on or prior to the Closing Date, which amounts shall be in effect as of the Closing Date), such amounts as the Administrative Agent, in its sole discretion exercised reasonably, may from time to time establish against the gross amounts of Eligible Receivables or Eligible Inventory, to reflect (a) risks or contingencies which may affect any one or class of such items and which have not already been taken into account in the calculation of the Borrowing Base, (b) Cash Management Obligations owing to any of the Facility Agents that constitute Secured Obligations and (c) (i) at any time that Available Credit is less than $50,000,000 or during an Event of Default, upon the written request of any Lender that is (or whose Affiliate is) party to a Hedging Contract, the aggregate obligations of the Borrower or any other Loan Party under such Hedging Contract calculated on a mark to market basis or (ii) at any time that any such Hedging Contract has been terminated, the amount due and owing pursuant to such Hedging Contract.

“Eligible Assignee” means (a) a Lender or an Affiliate or Approved Fund of any Lender or Agent, (b) a commercial bank having total assets whose Dollar Equivalent exceeds $5,000,000,000, (c) a finance company or insurance company, in each case reasonably acceptable to the Administrative Agent, and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, whose Dollar Equivalent exceeds $500,000,000 (or, to the extent net worth is less than such amount, a finance company or insurance company, reasonably acceptable to the Administrative Agent), (d) a savings and loan association or savings bank organized under the laws of the United States or any State thereof having a net worth, determined in accordance with GAAP, whose Dollar Equivalent exceeds $500,000,000 or (e) any other financial institution or Fund, in each case reasonably acceptable to the Administrative Agent and each Issuer, and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, whose Dollar Equivalent exceeds $500,000,000 (or, to the extent net worth is less than such amount, any other financial institution or Fund, reasonably acceptable to the Administrative Agent and each Issuer).

“Eligible Foreign Account Debtor” means an Account Debtor (i) who is organized under the laws of a country other than the United States or any state thereof, (ii) whose Receivables are denominated and payable only in Dollars in the United States, and (iii) the obligations of which are supported by a letter of credit which letter of credit names the Collateral Agent as beneficiary for the benefit of the Secured Parties or in respect of which the issuer has consented to the assignment to the Collateral Agent of the proceeds thereof.

“Eligible Inventory”means the Inventory of a Loan Party (other than any Inventory which has been consigned by such Loan Party) consisting of finished goods:

(a) which is owned solely by such Loan Party,

(b) with respect to which the Collateral Agent has a valid and perfected first priority Lien,

(d) which is not, in the Administrative Agent’s sole discretion exercised reasonably, obsolete or unmerchantable,

(e) with respect to which (in respect of any Inventory labeled with a brand name or trademark and sold by such Loan Party pursuant to a trademark owned by a Loan Party or a license granted to a Loan Party) the Collateral Agent would have rights pursuant to this Agreement or any other agreement satisfactory to the Administrative Agent to sell such Inventory in connection with a liquidation thereof, and

(f) which the Administrative Agent has not deemed to be ineligible based on such credit and collateral considerations relating thereto as the Administrative Agent may, in its sole discretion exercised reasonably, deem appropriate and as to which the Administrative Agent provides the Borrower three (3) Business Days prior notice.

No Inventory of a Loan Party shall be Eligible Inventory if such Inventory consists of (i) goods returned or rejected by customers other than goods that are undamaged or are resalable in the normal course of business, (ii) goods to be returned to suppliers, (iii) goods in transit (other than goods in transit from one location of a Loan Party to another location of a Loan Party and Documented Non-Letter of Credit Inventory) or goods located outside of the continental United States (other than Documented Non-Letter of Credit Inventory) or (iv) goods located, stored, used or held at the premises of a third party unless (A) the Collateral Agent shall have received a Landlord Waiver or Bailee’s Letter or (B) in the case of Inventory located at a leased premises, an Eligibility Reserve in an amount equal to the aggregate of three months gross lease payments (or, in the case of Eligible Inventory located at the premises at 5305 Rivergrade Road, Irwindale, California, a maximum of $250,000) or otherwise satisfactory to the Administrative Agent shall have been established with respect thereto. Notwithstanding the foregoing, Eligible Inventory shall at any time be deemed to include Eligible Inventory of a Loan Party covered by Documentary Letters of Credit in an amount equal to the aggregate undrawn amount of such Documentary Letters of Credit at such time; provided, however, that if the Available Credit shall be less than 25% of the Aggregate Borrowing Limit for 5 consecutive Business Days and until Available Credit shall thereafter be at least 25% of the Aggregate Borrowing Limit for 45 consecutive days, the Administrative Agent may, in its sole discretion and upon not less than 3 Business Days prior written notice to the Borrower, exclude from the calculation of the Borrowing Base any such Inventory which does not satisfy the Documentary Letter of Credit Inventory Conditions.

“Eligible Receivable” means, at any time, any Receivable:

(a) in respect of which the Account Debtor (i) (A) is organized under the laws of the United States or any state thereof and has its principal place of business located in the United States or (B) is an Eligible Foreign Account Debtor and (ii) is not an Affiliate of Group or any of its Subsidiaries,

(b) that does not have a stated maturity which is more than 90 days after the original invoice date of such Receivable unless such Receivable is an Extended Term Receivable, in which case it does not have a stated maturity which is more than 180 days after the original invoice date of such Receivable,

(c) that arises under a duly authorized Sales Contract for the sale and delivery of goods and services in the ordinary course of any Loan Party’s business,

(d) that is a legal, valid and binding obligation of the related Account Debtor, enforceable against such Account Debtor in accordance with its terms,

(e) that conforms in all material respects with all Requirements of Law,

(f) that is not the subject of any dispute, offset, holdback, defense, Lien (other than a Customary Permitted Lien) or other claim other than such adjustments in the ordinary course of the applicable Loan Party’s business as such Loan Party’s business is conducted on the date hereof (such Receivable to be ineligible to the extent of such dispute, offset, holdback, defense, Lien or claim),

(g) that satisfies all applicable requirements of the applicable Credit and Collection Policy,

(h) that has not been modified, waived or restructured since its creation,

(i) in which a Loan Party owns good and marketable title, free and clear of any Lien (other than a Customary Permitted Lien and Liens created by the Loan Documents), and that is freely assignable by the Loan Party (including without any consent of the related Account Debtor),

(j) for which the Collateral Agent, for the benefit of the Secured Parties, has a valid and enforceable perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free and clear of any Lien (other than a Customary Permitted Lien and Liens created by the Loan Documents),

(k) that constitutes an account as defined in the UCC, and that is not evidenced by Instruments or Chattel Paper,

(l) that is not a Defaulted Receivable,

(m) that represents all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940,

(n) for which the aggregate of the Defaulted Receivables owed by the related Account Debtor and any of its Affiliated Account Debtors does not exceed 50% of the outstanding balance of all Receivables owed by such Account Debtor,

(o) which is denominated and payable only in Dollars in the United States,

(p) that represents amounts earned and payable by the Account Debtor that are not subject to the performance of additional services by any Loan Party,

(q) that has not been rewritten, canceled or rebilled or is not a Receivable that has resulted from a rewritten, canceled or rebilled Receivable,

(r) that, when taken together with all other Eligible Receivables owed by such Account Debtor to the Loan Parties, does not exceed 20% of the Eligible Receivables of the Loan Parties at such time (it being understood that only the excess of such Eligible Receivables over such 20% threshold shall be deemed ineligible pursuant to this clause, unless such Eligible Receivable is covered by credit insurance acceptable to the Administrative Agent, in which case that portion of such Eligible Receivable in excess of the deductible for such credit insurance shall not be deemed ineligible pursuant to this clause), and

(s) that is not owed by the government of the United States of America, Canada or any other foreign country or sovereign state, or of any state, province, municipality or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, except if such Receivable is owed to a Loan Party by the government of the United States or any department, agency, public corporation or other instrumentality thereof to the extent the amount thereof, together with the amount of all such other Receivables of the Loan Parties, does not exceed $1,000,000 in the aggregate; provided, however, that such Receivables in excess of $1,000,000 shall not be excluded if the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.), and any other steps necessary to perfect the Collateral Agent’s Liens therein have been complied with to the Administrative Agent’s reasonable satisfaction with respect to such Receivables;

provided, however, that in no event shall any Chargeback qualify as an Eligible Receivable.

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Contaminant or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Laws” means all applicable Requirements of Law, now or hereafter in effect and as amended or supplemented from time to time, relating to pollution or the regulation and protection of human health, safety, the environment or natural resources, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. § 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); and each of their state and local counterparts or equivalents and any transfer of ownership notification or approval statute, including the Industrial Site Recovery Act (N.J. Stat. Ann. § 13:1K-6 et seq.).

“Environmental Liabilities and Costs” means, with respect to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute and whether arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, in each case relating to any environmental, health or safety condition or to any Release or threatened Release and resulting from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries.

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control or treated as a single employer with Group or any of its Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code.

“ERISA Event” means (a) a reportable event described in Section 4043(b) or 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title IV Plan or a Multiemployer Plan; (b) the withdrawal of the Borrower, any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of the Borrower, any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (d) notice of reorganization or insolvency of a Multiemployer Plan; (e) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (f) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to make any required contribution to a Title IV Plan or Multiemployer Plan; (h) the imposition of a lien under Section 412 of the Code or Section 302 of ERISA on Group or any of its Subsidiaries or any ERISA Affiliate; or (i) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA.

“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurodollar Lending Office” opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the Assignment and Acceptance or Assumption Agreement by which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.

“Eurodollar Rate” means, with respect to any Interest Period for any Eurodollar Rate Loan, the per annum rate of interest (rounded upward, if necessary, to the nearest 1/8th of 1%), determined by the Administrative Agent at approximately 11:00 a.m. (London time) two Business Days prior to commencement of such Interest Period, for a term comparable to such Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source designated by the Administrative Agent); or (b) if BBA LIBOR is not available for any reason, the interest rate at which Dollar deposits in the approximate amount of the Eurodollar Rate Loan would be offered by BofA’s London branch to major banks in the London interbank Eurodollar market. If the Federal Reserve Board imposes a Eurodollar Reserve Percentage with respect to eurocurrency or LIBOR deposits, then the Eurodollar Rate shall be the foregoing rate, divided by 1 minus the Eurodollar Reserve Percentage.

“Eurodollar Rate Loan” means any Revolving Loan that, for an Interest Period, bears interest based on the Eurodollar Rate.

“Eurodollar Reserve Percentage” means the reserve percentage (expressed as a decimal, rounded upward to the nearest 1/8th of 1%) applicable to member banks under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”).

“Event of Default” has the meaning specified in Section 9.1.

“Existing Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of January 31, 2006, among the Borrower, Group, the financial institutions from time to time party thereto as lenders, the financial institutions from time to time party thereto as letter of credit issuers, Citicorp North America, Inc., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as syndication agent, and BofA, The CIT Group/Commercial Services, Inc., and Wachovia Capital Finance Corporation (Central) f/k/a Congress Financial Corporation (Central), as co-documentation agents, as amended, supplemented or otherwise modified from time to time prior to the date hereof.

“Existing Rollover Letter of Credit” has the meaning specified in Section 2.4(a).

“Extended Term Receivable” means a Receivable that has an original stated maturity that is greater than 90 days after the original invoice date of such Receivable and less than or equal to 180 days after the original invoice date of such Receivable.

“Facility Agents” means, collectively, the Administrative Agent and the Collateral Agent.

“Facility Increase” has the meaning specified in Section 2.18(a).

“Facility Increase Effective Date” has the meaning specified in Section 2.18(c).

“Fair Market Value” means (a) with respect to any asset or group of assets (other than a marketable Security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset (provided that in the case of assets with a net book value in excess of $5,000,000, the “Fair Market Value” thereof shall be as reasonably determined pursuant to the foregoing criteria by the Board of Directors of Group) or, if such asset shall have been the subject of a relatively contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, the value set forth in such appraisal, and (b) with respect to any marketable Security at any date, the closing sale price of such Security on the Business Day next preceding such date, as appearing in any published list of any national securities exchange or the NASDAQ Stock Market or, if there is no such closing sale price of such Security, the final price for the purchase of such Security at face value quoted on such Business Day by a financial institution of recognized standing regularly dealing in Securities of such type and selected by the Administrative Agent.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/8th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to BofA on such day on such transactions as determined by BofA.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any successor thereto.

“Fee Letters” means (i) the fee letter dated the Closing Date, addressed to the Borrower, from BofA and BAS and accepted by the Borrower on the Closing Date with respect to certain fees to be paid on the Closing Date and otherwise from time to time to one or more of BofA, the Facility Agents and BAS, as applicable, and (ii) the fee letter dated the Closing Date, addressed to the Borrower, from Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc. and accepted by the Borrower on the Closing Date with respect to certain fees to be paid on the Closing Date to Deutsche Bank Trust Company Americas and Deutsche Bank Securities Inc.

“Financial Covenant Debt” of any Person means Indebtedness of the type specified in clauses (a), (b), (d), (e), (f) and (h) of the definition of “Indebtedness,” non-contingent obligations of the type specified in clause (c) of such definition and Guaranty Obligations of any of the foregoing.

“Financial Statements” means the financial statements of Group and its Subsidiaries delivered in accordance with Section 4.4 and Section 6.1.

“Fiscal Quarter” means each of the three-month fiscal periods ending on or about March 31, June 30, September 30 and December 31.

“Fiscal Year” means the twelve-month fiscal period ending on or about December 31.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of (a) EBITDA of such Person for such period minus (x) Capital Expenditures of such Person for such period and (y) cash consideration paid during such period by such Person or any of its Subsidiaries in respect of a Permitted Acquisition for such period (but only to the extent such cash consideration is funded from proceeds of Loans, as defined herein or in the Canadian Facility) minus the total income tax liability actually payable by such Person and its Subsidiaries in respect of such period to (b) the Fixed Charges of such Person for such period.

“Fixed Charges” means, with respect to any Person for any period, the sum, determined on a consolidated basis in accordance with Agreement Accounting Principles, of (a) the Cash Interest Expense of such Person and its Subsidiaries for such period and (b) the principal amount of Financial Covenant Debt of such Person and its Subsidiaries on a consolidated basis having a scheduled due date during such period.

“Foreign Plan” means an employee benefit plan to which any Warnaco Entity or any ERISA Affiliate has any obligation or liability (contingent or otherwise) with respect to employees who are not employed in the United States.

“Foreign Subsidiary” means a Subsidiary of Group incorporated under the laws of a jurisdiction that is not within the United States of America.

“Fund” means any Person (other than a natural Person) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination.

“General Intangible” has the meaning specified in the Pledge and Security Agreement.

“Governmental Authority” means any nation, sovereign or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Group” has the meaning specified in the preamble to this Agreement.

“Guarantor” means Group and each Domestic Subsidiary of Group other than the Borrower.

“Guaranty” means the guaranty, in substantially the form of Exhibit J, executed by the Guarantors.

agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss or (v) to supply funds to, or in any other manner invest in, such other Person (including to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under clause (b)(i), (ii), (iii), (iv) or (v) above the primary purpose or intent thereof is to provide assurance that Indebtedness of another Person will be paid or discharged, that any agreement relating thereto will be complied with or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof. The amount of any Guaranty Obligation shall be equal to the amount of the Indebtedness so guaranteed or otherwise supported.

“Hedging Contracts” means all Interest Rate Contracts, foreign exchange contracts, currency swap or option agreements, forward contracts, commodity swap, purchase or option agreements, other commodity price hedging arrangements, and all other similar agreements or arrangements designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices.

“IFRS” means the International Financial Reporting Standards set by the International Accounting Standards Board as in effect from time to time.

“Indebtedness” of any Person means without duplication (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments or which bear interest, (c) all reimbursement and other obligations with respect to letters of credit, bankers’ acceptances, surety bonds and performance bonds, whether or not matured, (d) all indebtedness for the deferred purchase price of property or services, other than trade payables incurred in the ordinary course of business, (e) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all Capital Lease Obligations of such Person, (g) all Guaranty Obligations of such Person, (h) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock or Stock Equivalents of such Person, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (i) all payments that such Person would have to make in the event of an early termination on the date Indebtedness of such Person is being determined in respect of Hedging Contracts of such Person and (j) all Indebtedness of the type referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including Accounts and General Intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.

“Indemnitees” has the meaning specified in Section 11.4.

“Instrument” has the meaning specified in the Pledge and Security Agreement.

“Insurance Assets” means sums payable to the insured under an insurance policy, including, any gross unearned premiums and any payment on account of loss which results in a reduction of unearned premium with respect to the underlying policy.

“Intellectual Property” has the meaning specified in the Pledge and Security Agreement.

“Interest Expense” means, for any Person for any period, (a) total interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with Agreement Accounting Principles and including, in any event, interest capitalized during construction for such period and net costs under Interest Rate Contracts for such period minus (b) the sum of (i) net gains of such Person and its Subsidiaries under Interest Rate Contracts for such period determined on a consolidated basis in conformity with Agreement Accounting Principles plus (ii) any interest income of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with Agreement Accounting Principles.

“Interest Period” means, in the case of any Eurodollar Rate Loan, (a) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 or Section 2.11, and (b) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.11, a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three or six months thereafter, as selected by the Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.11; provided, however, that all of the foregoing provisions relating to Interest Periods in respect of Eurodollar Rate Loans are subject to the following:

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

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

(iii) the Borrower may not select any Interest Period that ends after the Revolving Loan Maturity Date;

(iv) the Borrower may not select any Interest Period in respect of Loans having an aggregate principal amount of less than $10,000,000; and

(v) there shall be outstanding at any one time no more than ten (10) Interest Periods in the aggregate for all Loans.

“Interest Rate Contracts” means all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and interest rate insurance.

“Inventory” has the meaning specified in the Pledge and Security Agreement.

“Investment” means, with respect to any Person, (a) any purchase or other acquisition by that Person of (i) any Security issued by, (ii) a beneficial interest in any Security issued by, or (iii) any other equity ownership interest in, any other Person, (b) any purchase by that Person of assets constituting a business conducted by another Person, (c) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable and similar items made or incurred in the ordinary course of business as presently conducted) or capital contribution by that Person to any other Person, including all Indebtedness of any other Person to that Person arising from a sale of property by that Person other than in the ordinary course of its business and (d) any Guaranty Obligation incurred by that Person in respect of Indebtedness of any other Person.

“Investment Grade Debt Securities” means any bond, debenture, note or other evidence of indebtedness which is rated at least BBB- (stable) by Standard & Poor’s Rating Services and Baa3 (stable) by Moody’s Investors Services, Inc.

“IRS” means the Internal Revenue Service of the United States or any successor thereto.

“Issue” means, with respect to any Letter of Credit, to issue, extend the expiry of, renew or increase the maximum face amount (including by deleting or reducing any scheduled decrease in such maximum face amount) of, such Letter of Credit. The terms “Issued” and “Issuance” shall have a corresponding meaning.

“Issuer” means each Agent, Lender or Affiliate of such Agent or Lender that (a) is listed on the signature pages hereof as an “Issuer” or (b) hereafter becomes an Issuer with the approval of the Administrative Agent and the Borrower by agreeing pursuant to an agreement with and in form and substance satisfactory to the Administrative Agent and the Borrower to be bound by the terms hereof applicable to Issuers.

“Italian Debt Facility” means the Italian Debt Facility (as defined in Schedule 8.1 (Existing Indebtedness)).

“Joint Bookrunners” has the meaning specified in the preamble to this Agreement.

“Landlord Waiver” means a letter in form and substance reasonably acceptable to the Administrative Agent and executed by a landlord in respect of Inventory of a Loan Party located at any leased premises of a Loan Party pursuant to which such landlord, among other things, waives or subordinates on terms and conditions reasonably acceptable to the Administrative Agent any Lien such landlord may have in respect of such Inventory.

“Leases” means, with respect to any Person, all of those leasehold estates in real property of such Person, as lessee, as such may be amended, supplemented or otherwise modified from time to time.

“Lender” means the Swing Loan Lender and each other financial institution or other entity that (a) is listed on the signature pages hereof as a “Lender” or (b) from time to time becomes a party hereto by execution of an Assignment and Acceptance or an Assumption Agreement.

“Letter of Credit” means any letter of credit Issued pursuant to Section 2.4(d).

“Letter of Credit Obligations” means, at any time, the Dollar Equivalent of the aggregate of all liabilities at such time of the Borrower to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, and includes the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn Amounts at such time; in each case, the Dollar Equivalent of Letter of Credit Obligations denominated in an Alternative Currency shall be determined on each day on which a Borrowing Base Certificate is delivered pursuant to Section 6.12.

“Letter of Credit Reimbursement Agreement” has the meaning specified in Section 2.4(e).

“Letter of Credit Request” has the meaning specified in Section 2.4(c).

“Letter of Credit Sub-Limit” means, at any time, $150,000,000 less the Dollar Equivalent of the Letter of Credit Obligations (as defined in the Canadian Facility) at such time.

“Letter of Credit Undrawn Amounts” means, at any time, the aggregate undrawn amount of all Letters of Credit outstanding at such time.

“Leverage Ratio” means, with respect to any Person as of any date, the ratio of (a) consolidated Financial Covenant Debt of such Person and its Subsidiaries outstanding as of such date minus the aggregate amount of cash and Cash Equivalents held by such Person and its Subsidiaries to the extent that such cash and Cash Equivalents are held in a Deposit Account or a Securities Account over which the Collateral Agent has a perfected Lien for the benefit of the Secured Parties to (b) EBITDA for such Person for the last four Fiscal Quarter period ending on or before such date.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement that has been authorized by the applicable debtor under the UCC or comparable law of any jurisdiction naming the owner of the asset to which such Lien relates as debtor.

“Loan” means any loan made by any Lender pursuant to this Agreement.

“Loan Documents” means, collectively, this Agreement, the Fee Letters, the Guaranty, each Letter of Credit Reimbursement Agreement, the Collateral Documents and each certificate, agreement or document executed by a Loan Party and delivered to any Facility Agent or any Lender in connection with or pursuant to any of the foregoing.

“Loan Party” means the Borrower, Group, each Subsidiary Guarantor and each other Domestic Subsidiary of Group that executes and delivers a Loan Document.

“Loan Party Canadian Facility Guaranty” means the Guaranty, dated as of the date hereof, by the Loan Parties with respect to the guarantee of the payment of the Canadian Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Material Adverse Change” means a material adverse change in any of (a) the business, condition (financial or otherwise), operations, performance or properties of the Loan Parties, taken as a whole, or Group and its Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform their respective obligations under the Loan Documents or (c) the ability of the Administrative Agent, the Collateral Agent or the Lenders to enforce the Loan Documents.

“Material Adverse Effect” means an effect that results in or causes, or could reasonably be expected to result in or cause, a Material Adverse Change.

“Material Leased Property” means all real estate leasehold properties of any Warnaco Entity other than those with respect to which the aggregate rental payments under the term of the lease in any year are less than $2,000,000.

“Material License” means the license agreements relating to the Calvin Klein trademark with respect to jeans (expiring at the end of its renewal term on December 31, 2044 or December 31, 2046) and underwear, and the license agreements relating to the Speedo trademark, granted to the Warnaco Entities in perpetuity.

“Material Owned Real Property” means all fee-owned real property of any Loan Party having a fair market value in excess of $2,000,000 as of the Closing Date, or if later, the date of acquisition thereof.

“Maximum Credit” means, at any time, (a) the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base at such time, minus (b) the aggregate amount of any Availability Reserve in effect at such time.

“Mortgagee’s Title Insurance Policy” has the meaning specified in the definition of Mortgage Supporting Documents.

“Mortgage Supporting Documents” means, with respect to a Mortgage for a parcel of Material Owned Real Property, each of the following:

(a) (i) a mortgagee’s title policy (or policies) or marked-up unconditional binder (or binders) for such insurance (or other evidence reasonably acceptable to the Administrative Agent proving ownership thereof) (“Mortgagee’s Title Insurance Policy”), dated a date reasonably satisfactory to the Administrative Agent, and shall (A) be in an amount not less than the appraised value (determined by references to the applicable Appraisals or, if no such Appraisals are available, by other means reasonably acceptable to the Administrative Agent) of such parcel of Real Property, (B) be issued at ordinary rates, (C) insure that the Lien granted pursuant to the Mortgage insured thereby creates a valid perfected Lien on such parcel of Real Property having at least the priorities described in Section 4.20 of this Agreement and the Collateral Documents, free and clear of all defects and encumbrances, except for Customary Permitted Liens and for such defects and encumbrances as may be approved by the Administrative Agent, (D) name the Collateral Agent for the benefit of the Secured Parties as the insured thereunder, (E) be in the form of ALTA Loan Policy — 2006 (or such local equivalent thereof as is reasonably satisfactory to the Administrative Agent), (F) contain a comprehensive lender’s endorsement (including, but not limited to, a revolving credit endorsement and a floating rate endorsement), (G) be issued by Chicago Title Insurance Company, First American Title Insurance Company, Lawyers Title Insurance Corporation, Stewart Title Company or any other title company reasonably satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers) and (H) be otherwise in form and substance reasonably satisfactory to the Administrative Agent and (ii) a copy of all documents referred to, or listed as exceptions to title, in such title policy (or policies) in each case in form and substance reasonably satisfactory to the Administrative Agent;

(b) maps or plats of a current as-built survey of such parcel of Real Property certified to and received by (in a manner reasonably satisfactory to each of them) the Administrative Agent and the title insurance company issuing the Mortgagee’s Title Insurance Policy for such Mortgage, dated a date reasonably satisfactory to the Administrative Agent and such title insurance company, by an independent professional licensed land surveyor reasonably satisfactory to the Administrative Agent and such title insurance company, which maps or plats and the surveys on which they are based shall be made in form and substance reasonably satisfactory to the Administrative Agent;

(c) an opinion of counsel in each state in which any such Mortgage is to be recorded in form and substance and from counsel reasonably satisfactory to the Administrative Agent; and

(d) such other agreements, documents and instruments in form and substance reasonably satisfactory to the Administrative Agent as the Administrative Agent deems necessary or appropriate to create, register or otherwise perfect, maintain, evidence the existence, substance, form or validity of, or enforce a valid and enforceable Lien on such parcel of Real Property in favor of the Collateral Agent for the benefit of the Secured Parties (or in favor of such other trustee as may be required or desired under local law) having the priorities described in Section 4.20 of this Agreement and the Collateral Documents and subject only to (A) Liens permitted under Section 8.2 and (B) such other Liens as the Administrative Agent may reasonably approve.

“Mortgages” means the mortgages, deeds of trust or other real estate security documents made or required herein to be made by a Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent.

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Group, any of its Subsidiaries or any ERISA Affiliate has any obligation or liability, contingent or otherwise.

“Net Cash Proceeds” means proceeds received by any Loan Party after the Closing Date in cash or Cash Equivalents from any (a) Asset Sale (other than an Asset Sale permitted under clauses (a), (c) and (h) of Section 8.4) of Receivables or Inventory net of (i) the reasonable cash costs of sale, assignment or other disposition, (ii) taxes paid or payable as a result thereof and (iii) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by a perfected Lien on the assets subject to such Asset Sale; provided, however, that the evidence of each of (i), (ii) and (iii) are provided to the Administrative Agent in form and substance satisfactory to it and, if such Asset Sale includes assets in addition to Receivables and Inventory, only such portion of the amounts in clauses (i), (ii) and (iii) reasonably allocable to Receivables and Inventory sold may be deducted under such clauses (i), (ii) and (iii); or (b) Property Loss Event with respect to Inventory.

“Non-Cash Interest Expense” means, with respect to any Person for any period, the sum of the following amounts to the extent included in the definition of Interest Expense: (a) the amount of debt discount and debt issuance costs amortized, (b) charges relating to write-ups or write-downs in the book or carrying value of existing Financial Covenant Debt, (c) interest payable in evidences of Indebtedness or by addition to the principal of the related Indebtedness and (d) other non-cash interest.

“Non-Funding Lender” has the meaning specified in Section 2.2(d).

“Non-U.S. Agent” means each Agent that is not a United States person as defined in Section 7701(a)(30) of the Code.

“Non-U.S. Lender” means each Lender or each Issuer that is not a United States person as defined in Section 7701(a)(30) of the Code.

“Notice of Borrowing” has the meaning specified in Section 2.2(a).

“Notice of Conversion or Continuation” has the meaning specified in Section 2.11(b).

“NPL” means the National Priorities List under CERCLA.

“Obligations” means the Loans, the Letter of Credit Obligations and all other amounts and obligations owing by the Borrower to any Facility Agent, any Lender, any Issuer, an Affiliate of any of them or any Indemnitee, of every type and description (whether by reason of an extension of credit, opening or amendment of a letter of credit or payment of any draft drawn or other payment thereunder, loan, guaranty, indemnification, foreign exchange or currency swap transaction, interest rate hedging transaction or otherwise), present or future, arising under this Agreement or any other Loan Document, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired and whether or not evidenced by any note, guaranty or other instrument or for the payment of money, and includes all letter of credit, cash management and other fees, interest, charges, expenses, fees, attorneys’ fees and disbursements and other sums chargeable to the Borrower under this Agreement or any other Loan Document, and all obligations of the Borrower to cash collateralize Letter of Credit Obligations.

“Orderly Liquidation Value Rate” means (i) with respect to Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit), the Dollar Equivalent of the orderly liquidation value (net of costs and expenses incurred in connection with liquidation) of such Eligible Inventory, divided by the aggregate value of such Eligible Inventory, in each case, determined by reference to the most recent Appraisal received by the Administrative Agent and (ii) with respect to Eligible Inventory consisting of Documented Non-Letter of Credit Inventory or Inventory covered by Documentary Letters of Credit, the Dollar Equivalent of the orderly liquidation value (net of costs and expenses incurred in connection with liquidation) of such Eligible Inventory, divided by the aggregate value of such Eligible Inventory, in each case, determined by reference to the most recent Appraisal received by the Administrative Agent. The Orderly Liquidation Value Rate with respect to Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) shall initially be 85.9% and the Orderly Liquidation Value Rate with respect to Eligible Inventory consisting of Documented Non-Letter of Credit Inventory or Inventory covered by Documentary Letters of Credit shall initially be 61.0%.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Permit” means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law.

“Permitted Acquisition” means any Proposed Acquisition subject to the satisfaction of each of the following conditions:

(i) the Administrative Agent shall receive at least 10 Business Days’ prior written notice of such Proposed Acquisition, which notice shall include, without limitation, a reasonably detailed description of such Proposed Acquisition;

(ii) such Proposed Acquisition shall have been approved by the applicable board of directors of the Person constituting or owning the Proposed Acquisition Target;

(iii) no additional Indebtedness or other liabilities shall be incurred, assumed or otherwise be reflected on a consolidated balance sheet of Group and the Proposed Acquisition Target after giving effect to such Proposed Acquisition, except (i) Loans made hereunder, (ii) ordinary course trade payables, contingent obligations and accrued expenses and (iii) Indebtedness of the Proposed Acquisition Target (or any such Indebtedness assumed by a Warnaco Entity in connection with such Proposed Acquisition) permitted under Section 8.1;

(iv) both (x) after giving pro forma effect to such Proposed Acquisition and to any Facility Increase to be effective on the date of the consummation of such Proposed Acquisition Available Credit is at least 20% of the Aggregate Borrowing Limit at such time and (y) prior to the consummation of such Proposed Acquisition, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of such requirement with respect to such Proposed Acquisition and setting forth in reasonable detail the calculation of such Available Credit;

(v) at or prior to the closing of such Proposed Acquisition, the Warnaco Entity making such Proposed Acquisition and the Proposed Acquisition Target shall have executed such documents and taken such actions as may be required under Section 7.11 and Section 7.13;

(vi) the Borrower shall (i) have delivered to the Administrative Agent, upon the request of the Administrative Agent, promptly upon its becoming available, the acquisition agreement (including all schedules), all financial information, financial analysis, projections and similar documentation relating to the proposed acquisition, and (ii) use its reasonable commercial efforts to provide such additional documentation or other information relating to such Proposed Acquisition that the Administrative Agent shall reasonably request, including, without limitation, financial projections on a Pro Forma Basis after giving effect to the Proposed Acquisition;

(vii) on or prior to the date of such Proposed Acquisition, the Administrative Agent shall have received copies of the acquisition agreement authorizing assignment of the rights and obligations thereunder of any Warnaco Entity that is a Loan Party to the Collateral Agent as security for the Secured Obligations, related Contractual Obligations and instruments and all opinions, certificates, lien search results and other documents reasonably requested by the Administrative Agent;

(viii) at the time of such Proposed Acquisition and after giving effect thereto, (i) no Default or Event of Default shall have occurred and be continuing and (ii) all representations and warranties contained in Article IV and in the other Loan Documents shall be true and correct in all material respects (and immediately prior to the consummation of such Proposed Acquisition, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (viii) with respect to such Proposed Acquisition); and

(ix) with respect to any Proposed Acquisition by any Foreign Subsidiary (whether by acquisition of assets or Stock or the merger of any Proposed Acquisition Target with or into a Foreign Subsidiary or otherwise), at the time of such Proposed Acquisition and after giving effect thereto, the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a Pro Forma Basis (and prior to the consummation of such Proposed Acquisition, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (ix) with respect to such Proposed Acquisition and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio).

“Permitted Cash Equivalents” means time deposits of, or certificates of deposit issued by, BofA that, in each instance, are acceptable to the Administrative Agent.

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, estate, trust, limited liability company, unincorporated association, joint venture or other entity or a Governmental Authority.

“Pledge and Security Agreement” means a pledge and security agreement, in substantially the form of Exhibit I, executed by the Borrower and each Guarantor.

“Pledged Debt Instruments” has the meaning specified in the Pledge and Security Agreement.

“Pledged Stock” has the meaning specified in the Pledge and Security Agreement.

“Pro Forma Basis” means, with respect to any determination for any period, that such determination shall be made giving pro forma effect to each acquisition consummated during such period, together with all transactions relating thereto consummated during such period (including any incurrence, assumption, refinancing or repayment of Indebtedness), as if such acquisition and related transactions had been consummated on the first day of such period, in each case based on historical results accounted for in accordance with Agreement Accounting Principles and, to the extent applicable, reasonable assumptions that are specified in the relevant Compliance Certificate, Financial Statement or other document provided to the Administrative Agent or any Lender in connection herewith in accordance with Regulation S-X of the Securities Act of 1933.

“Projections” means those financial projections dated August 2008 covering the fiscal years ending in 2008 through 2013 inclusive, delivered to the Lenders by Group prior to the Closing Date.

“Property Loss Event” means any loss of or damage to property of Group or any Subsidiary thereof that results in the receipt by such Person of proceeds of insurance in excess of $2,000,000 or any taking of property of Group or any Subsidiary thereof that results in the receipt by such Person of a compensation payment in respect thereof in excess of $2,000,000.

“Proposed Acquisition” means the proposed acquisition by the Borrower or any of its Subsidiaries of all or substantially all of the assets or Stock of any Proposed Acquisition Target, or the merger of any Proposed Acquisition Target with or into the Borrower or any Subsidiary of the Borrower (and, in the case of a merger with the Borrower, with the Borrower being the surviving corporation).

“Proposed Acquisition Target” means any Person, any trademark (including any trademark license in respect of which the licensee makes an up-front payment not credited against future royalties), or any assets constituting a business, division, branch or other unit of operation of any Person, in each case, subject to a Proposed Acquisition.

“Protective Advances” means all expenses, disbursements and advances incurred by the Administrative Agent pursuant to the Loan Documents after the occurrence and during the continuance of an Event of Default that the Administrative Agent, in its sole discretion, exercised reasonably, deems necessary or desirable to preserve or protect the Collateral or any portion thereof or to enhance the likelihood, or maximize the amount, of repayment of the Obligations.

“Ratable Portion” or (other than in the expression “equally and ratably”) “ratably” means, with respect to any Lender, the percentage obtained by dividing (i) the Revolving Credit Commitment of such Lender by (ii) the aggregate Revolving Credit Commitments of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to such Lender by the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to all Lenders).

“Real Property” means all of those plots, pieces or parcels of land now owned or leased or hereafter acquired or leased by Group or any of its Subsidiaries (the “Land”), together with the right, title and interest of any Warnaco Entity, if any, in and to the streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, including all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land, and any fixtures appurtenant thereto.

“Receivable” means any indebtedness and other obligations owed to any Loan Party from or on behalf of, or any right of any Loan Party to payment from or on behalf of, an Account Debtor, whether constituting an Account, Chattel Paper, Instrument or General Intangible, arising in connection with the sale of goods or the rendering of services by any Loan Party or any Subsidiary thereof, and includes the obligation to pay any finance charges, fees and other charges with respect thereto.

“Register” has the meaning specified in Section 11.2(c).

“Reimbursement Obligations” means all matured reimbursement or repayment obligations of the Borrower to any Issuer with respect to amounts drawn under Letters of Credit.

“Reinvestment Deferred Amount” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the portion of such Net Cash Proceeds subject to a Reinvestment Notice.

“Reinvestment Event” means any Asset Sale or Property Loss Event in respect of which the Borrower has delivered a Reinvestment Notice.

“Reinvestment Notice” means a written notice executed by a Responsible Officer of the Borrower stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through one of the Warnaco Entities) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Property Loss Event to consummate a Permitted Acquisition (in the case of an Asset Sale only) or to acquire replacement or fixed assets useful in its or one of its Subsidiaries’ businesses or, in the case of a Property Loss Event, to effect repairs or replacements.

“Reinvestment Prepayment Amount” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the Reinvestment Deferred Amount for such Net Cash Proceeds less any amount expended or required to be expended pursuant to a Contractual Obligation entered into prior to the relevant Reinvestment Prepayment Date for such Net Cash Proceeds to consummate, to the extent otherwise permitted hereunder, a Permitted Acquisition (in the case of an Asset Sale only) or to acquire, to the extent otherwise permitted hereunder, replacement or fixed assets useful in the business of the Borrower or any of its Subsidiaries or, in the case of a Property Loss Event, to effect repairs or replacements.

“Reinvestment Prepayment Date” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the earlier of (a) the date occurring 180 days after such Reinvestment Event and (b) the date that is five Business Days after the date on which the Borrower shall have notified the Administrative Agent of the Borrower’s determination not to consummate a Permitted Acquisition (in the case of an Asset Sale only) or to acquire replacement or fixed assets useful in the Borrower’s or a Subsidiary’s business (or, in the case of a Property Loss Event, not to effect repairs or replacements) with all or any portion of the relevant Reinvestment Deferred Amount for such Net Cash Proceeds.

“Related Security” means, with respect to any Receivable:

(a) all of each Loan Party’s interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable,

(b) all Instruments and Chattel Paper that may evidence such Receivable,

(c) all other Liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Sales Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, and

(d) all of each Loan Party’s rights, interests and claims under the Sales Contracts and all guaranties, indemnities and other agreements (including the related Sales Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Sales Contract related to such Receivable or otherwise.

“Release” means, with respect to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, in each case, of any Contaminant into the indoor or outdoor environment or into or out of any property owned or leased by such Person, including the movement of Contaminants through or in the air, soil, surface water, ground water or property.

“Remedial Action” means all actions required to (a) clean up, remove, treat or in any other way address any Contaminant in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release so that a Contaminant does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.

“Requirement of Law” means, with respect to any Person, the common and civil law and all federal, state, provincial, local and foreign laws, rules and regulations, orders, judgments, decrees and other legal requirements or determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Requisite Lenders” means, collectively, (a) on and prior to the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Revolving Credit Commitments and (b) after the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the aggregate Revolving Credit Outstandings. A Non-Funding Lender shall not be included in the calculation of “Requisite Lenders”.

“Responsible Officer” means, with respect to any Person, any of the principal executive officers, managing members or general partners of such Person, but in any event, with respect to financial matters, the chief financial officer, treasurer or controller of such Person.

“Restricted Account” has the meaning specified in the Pledge and Security Agreement.

“Restricted Account Letter” has the meaning specified in the Pledge and Security Agreement.

“Restricted Payment” means (a) any dividend, distribution or any other payment whether direct or indirect, on account of any Stock or Stock Equivalent of Group or any of its Subsidiaries now or hereafter outstanding and (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Stock or Stock Equivalent of Group or any of its Subsidiaries now or hereafter outstanding.

“Revolving Credit Borrowing” means a borrowing consisting of Revolving Loans made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments.

“Revolving Credit Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire interests in other Revolving Credit Outstandings in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Revolving Credit Commitment,” as amended to reflect each Assignment and Acceptance or Assumption Agreement executed by such Lender and as such amount may be adjusted pursuant to this Agreement.

“Revolving Credit Facility” means the Revolving Credit Commitments and the provisions herein related to the Revolving Loans, Swing Loans and Letters of Credit.

“Revolving Credit Facility Register” has the meaning specified in Section 11.2(c).

“Revolving Credit Outstandings” means, at any particular time, the sum of (a) the principal amount of the Revolving Loans outstanding at such time, (b) the Letter of Credit Obligations outstanding at such time and (c) the principal amount of the Swing Loans outstanding at such time.

“Revolving Credit Termination Date” shall mean the earliest of (a) the Revolving Loan Maturity Date, (b) the date of termination of the Commitments pursuant to Section 2.5 and (c) the date on which any of the Obligations become due and payable pursuant to Section 9.2.

“Revolving Loan” has the meaning specified in Section 2.1.

“Revolving Loan Maturity Date” means the fifth anniversary of the Closing Date.

“Sale and Leaseback Transaction” means, with respect to any Person, any direct or indirect arrangement pursuant to which assets of such Person are sold or transferred by such Person or a Subsidiary of such Person and are thereafter leased back from the purchaser thereof by such Person or one of its Subsidiaries; provided, however, any sale and leaseback of assets that were purchased in connection with a proposed lease financing transaction by such Person within 45 days of such sale and leaseback transaction shall not constitute a “Sale and Leaseback Transaction”.

“Sales Contract” means, with respect to any Receivable, any and all sales contracts, purchase orders, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Account Debtor becomes or is obligated to make payment in respect of such Receivable.

“Secured Obligations” means, (a) in the case of the Borrower, the Obligations, (b) in the case of each Guarantor, the obligations of such Loan Party under the Guaranty and the other Loan Documents to which it is a party, and (c) in the case of each Loan Party, (i) the obligations of such Loan Party under any Hedging Contract entered into with any Agent, Lender or any Affiliate of any thereof, (ii) any Cash Management Obligations owing by such Loan Party to any Agent, Lender or any Affiliate of any thereof and (iii) the obligations of such Loan Party under the Loan Party Canadian Facility Guaranty.

“Secured Parties” means the Lenders (including the Swing Loan Lender), the Issuers, the Administrative Agent, the Collateral Agent, each of their respective successors and assigns, and any other holder of any Secured Obligation or of any other obligations under the Loan Documents, including the beneficiaries of each indemnification obligation undertaken by any of the Loan Parties and the Facility Agents.

“Securities Account” has the meaning given to such term in the UCC.

“Security” means any Stock, Stock Equivalent, voting trust certificate, bond, debenture, note or other evidence of Indebtedness, whether secured, unsecured, convertible or subordinated, or any certificate of interest, share or participation in, or any temporary or interim certificate for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing, but shall not include any evidence of the Obligations.

“Senior Note Documents” means, collectively, the Senior Note Indenture, the Senior Notes and each certificate, agreement or document executed by a Warnaco Entity and delivered to the Senior Note Indenture Trustee or any Senior Noteholder in connection with or pursuant to any of the foregoing.

“Senior Note Indenture” means the indenture, dated as of June 12, 2003, among the Borrower, as issuer, Group and each Domestic Subsidiary thereof (other than the Borrower), as guarantors, and the Senior Note Indenture Trustee.

“Senior Note Indenture Trustee” means Wells Fargo Bank Minnesota, National Association, in its capacity as indenture trustee for the Senior Noteholders and each successor thereto.

“Senior Noteholders” means each holder of a Senior Note.

“Senior Notes” means the 8-7/8% senior notes due 2013 issued by the Borrower pursuant to the Senior Note Indenture.

“Solvent” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person (both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature and (c) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Special Cash Collateral Account” means an account maintained with BofA or an affiliate thereof for the purpose of providing cash collateral as part of the Borrowing Base, which account shall be subject to a control agreement in form and substance reasonably satisfactory to the Facility Agents and shall be a segregated account holding only cash of the Borrower deposited into such account in accordance with Section 2.19, investments of such cash in Permitted Cash Equivalents and investment income derived from such investments.

“Special Purpose Vehicle” means any special purpose funding vehicle identified in writing as such by any Lender to the Administrative Agent.

“Standby Letter of Credit” means any letter of credit Issued pursuant to Section 2.4 which is not a Documentary Letter of Credit.

“Stock” means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or non-voting.

“Stock Equivalents” means all securities convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any Stock, whether or not presently convertible, exchangeable or exercisable.

“Subordinated Indebtedness” means Indebtedness of a Loan Party that satisfies all of the following requirements: (i) interest on such Indebtedness is not payable in cash prior to the date that is six months after the Revolving Loan Maturity Date, (ii) such Indebtedness does not mature and does not require any scheduled or mandatory prepayments prior to the date that is six months after the Revolving Loan Maturity Date, (iii) such Indebtedness is not secured and is not guaranteed by any Warnaco Entity that is not guaranteeing the Obligations and (iv) such Indebtedness (and any guarantee thereof) is subordinated to the Secured Obligations on terms reasonably satisfactory to the Administrative Agent.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, trust or estate or other business entity of which an aggregate of more than 50% of (a) the outstanding Voting Stock, (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, is in any case, at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Subsidiary Guarantor” means each Domestic Subsidiary of Group party to or that becomes party to the Guaranty.

“Super-Majority Lenders” means, collectively, the Lenders having more than sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding amount of the Revolving Credit Commitments. A Non-Funding Lender that is a Lender shall not be included in the calculation of “Super-Majority Lenders.”

“Swing Loan” has the meaning specified in Section 2.3.

“Swing Loan Availability” means an aggregate principal amount at any time outstanding of Swing Loans not to exceed $25,000,000.

“Swing Loan Lender” means BofA or any other Person who becomes the Administrative Agent or who agrees with the approval of the Administrative Agent and the Borrower to act as the Swing Loan Lender hereunder.

“Swing Loan Request” has the meaning specified in Section 2.3(b).

“Syndication Agent” has the meaning specified in the preamble to this Agreement.

“Tax Affiliate” means, with respect to any Person, (a) any Subsidiary of such Person, and (b) any Affiliate of such Person with which such Person files or is eligible to file consolidated, combined or unitary United States tax returns.

“Tax Return” has the meaning specified in Section 4.8(a).

“Taxes” has the meaning specified in Section 2.16(a).

“Test Period” means, if a Trigger Event shall occur, each period of four consecutive Fiscal Quarters (taken as one accounting period) ending on each of (x) the last day of the Fiscal Quarter most recently ended prior to the occurrence of such Trigger Event for which Financial Statements for Group and its Subsidiaries have been delivered to the Administrative Agent pursuant to Section 6.1(b) or Section 6.1(c) and (y) the last day of each Fiscal Quarter after the Fiscal Quarter referred to in clause (x) ending prior to or during the Trigger Event Compliance Period for such Trigger Event.

“Title IV Plan” means a pension plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA to which Group, any of its Subsidiaries or any ERISA Affiliate has any obligation or liability (contingent or otherwise).

“Trigger Amount” means, at any time, (i) prior to the first Anniversary Date, the greater of (x) 10% of the Aggregate Borrowing Base at such time and (y) $30,000,000, (ii) on or after the first Anniversary Date and prior to the second Anniversary Date, the greater of (x) 12.5% of the Aggregate Borrowing Base at such time and (y) $35,000,000 and (iii) on or after the second Anniversary Date, the greater of (x) 15% of the Aggregate Borrowing Base at such time and (y) $40,000,000.

“Trigger Event” means for any reason Available Credit is less than the Trigger Amount at any time.

“Trigger Event Compliance Period” means the period commencing on the occurrence of a Trigger Event and continuing until such time as Available Credit is greater than the Trigger Amount for forty-five (45) consecutive calendar days.

“UCC” has the meaning specified in the Pledge and Security Agreement.

“Unfunded Pension Liability” means, with respect to Group at any time, the sum of (a) the amount, if any, by which the present value of all accrued benefits under each Title IV Plan (other than any Title IV Plan subject to Section 4063 of ERISA) exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, as determined as of the most recent valuation date for such Title IV Plan using the actuarial assumptions in effect under such Title IV Plan, and (b) the aggregate amount of withdrawal liability that could be assessed under Section 4063 with respect to each Title IV Plan subject to such Section, separately calculated for each such Title IV Plan as of its most recent valuation date, (c) for a period of five years following a transaction reasonably likely to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by Group, any of its Subsidiaries or any ERISA Affiliate as a result of such transaction and (d) with respect to each Foreign Plan, the amount, if any, by which the present value of all benefit obligations under such plan exceed the fair market value of assets attributable to such plan (determined for the most recent valuation date for such plan using the actuarial assumptions in effect for such plan set forth in the actuarial valuation report).

“Unused Commitment Fee” has the meaning specified in Section 2.12(a).

“U.S. Lender” means each Lender, each Issuer and each Agent that is a United States person as defined in Section 7701(a)(30) of the Code.

“Voting Stock” means Stock of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or other controlling Persons of such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency).

“Warnaco Entity” means Group or any Subsidiary thereof.

“Wholly Owned Subsidiary” means any Subsidiary of Group, all of the Stock of which (other than director’s qualifying shares or such other de minimus portion thereof to the extent required by law) is owned by Group, either directly or indirectly through one or more Wholly Owned Subsidiaries.

“Withdrawal Liability” means, with respect to the Borrower at any time, the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA.

Section 1.2 Computation of Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”

Section 1.3 Accounting Terms and Principles.

(a) Except as set forth below, all accounting terms not specifically defined herein shall be construed in conformity with Agreement Accounting Principles and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with Agreement Accounting Principles.

(b) If any change in the accounting principles used in the preparation of the most recent Financial Statements referred to in Section 6.1 is hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or the International Accounting Standards Board, in the case of the IFRS) (or any successors thereto) and such change is adopted by the Borrower or Group with the agreement of its independent public accountants and results in a change in any of the calculations required by Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by Group and the Borrower or the determination of the “Applicable Margin” or the calculation of the Fixed Charge Coverage Ratio in the definition of “Permitted Acquisition” shall be the same after such change as if such change had not been made; provided, however, that no change in Agreement Accounting Principles that would affect a calculation that measures compliance with any covenant contained in Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition” shall be given effect until such provisions are amended to reflect such changes in Agreement Accounting Principles.

(c) For purposes of making all financial calculations to determine compliance with Article V, all components of such calculations shall be adjusted to include or exclude, as the case may be, without duplication, such components of such calculations attributable to any business or assets that have been acquired or disposed of by any Warnaco Entity after the first day of the applicable period of determination and prior to the end of such period, as determined in good faith by Group on a Pro Forma Basis.

Section 1.4 Conversion of Foreign Currencies.

(a) Financial Covenant Debt. Financial Covenant Debt denominated in any currency other than Dollars shall be calculated using the Dollar Equivalent thereof as of the date of the Financial Statements on which such Financial Covenant Debt is reflected.

(b) Dollar Equivalents. The Administrative Agent shall determine the Dollar Equivalent of any amount as required hereby, and a determination thereof by the Administrative Agent shall be conclusive absent manifest error. The Administrative Agent may, but shall not be obligated to, rely on any determination made by any Loan Party in any document delivered to the Administrative Agent. The Administrative Agent may determine or redetermine the Dollar Equivalent of any amount on any date either in its own discretion or upon the request of any applicable Lender or Issuer.

(c) Rounding-Off. The Administrative Agent may set up appropriate rounding off mechanisms or otherwise round-off amounts hereunder to the nearest higher or lower amount in whole Dollar or cent to ensure amounts owing by any party hereunder or that otherwise need to be calculated or converted hereunder are expressed in whole Dollars or in whole cents, as may be necessary or appropriate.

Section 1.5 Certain Terms.

(a) The words “herein,” “hereof” and “hereunder” and similar words refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in this Agreement.

(b) References in this Agreement to an Exhibit, Schedule, Article, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in this Agreement.

(c) Each agreement defined in this Article I shall include all appendices, exhibits and schedules thereto. If the prior written consent of the Requisite Lenders is required hereunder for an amendment, restatement, supplement or other modification to any such agreement and such consent is obtained, references in this Agreement to such agreement shall be to such agreement as so amended, restated, supplemented or modified.

(d) References in this Agreement to any statute shall be to such statute as amended or modified and in effect at the time any such reference is operative.

(e) The term “including” when used in any Loan Document means “including without limitation”, except when used in the computation of time periods.

(f) The terms “Lender,” “Issuer” and “Agent” include their respective successors.

(g) Upon the appointment of any successor Facility Agent pursuant to Section 10.6, references to BofA in Section 10.3 to the extent applicable to such Facility Agent and to BofA in the definitions of Base Rate, Eurodollar Rate, Federal Funds Rate, Dollar Equivalent, Permitted Cash Equivalents and Special Cash Collateral Account to the extent applicable to such Facility Agent shall be deemed to refer to the financial institution then acting as such Facility Agent or one of its Affiliates if it so designates.

(h) Terms not otherwise defined herein and defined in the UCC are used herein with the meanings specified in the UCC.

ARTICLE II

THE REVOLVING CREDIT FACILITY

Section 2.1 The Commitments. On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make loans in Dollars (each a “Revolving Loan”) to the Borrower from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date in an aggregate principal amount not to exceed at any time outstanding for all such loans by such Lender such Lender’s Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Loan (i) in excess of such Lender’s Ratable Portion of the Available U.S. Credit or (ii) to the extent that the aggregate Revolving Credit Outstandings, after giving effect to such Revolving Loan, would exceed the Maximum Credit in effect at such time. Within the limits of the Revolving Credit Commitment of each Lender, amounts of Revolving Loans repaid may be reborrowed under this Section 2.1.

Section 2.2 Borrowing Procedures.

(a) Each Borrowing shall be made on notice given by the Borrower to the Administrative Agent not later than 11:00 a.m. (New York City time) (i) one Business Day, in the case of a Borrowing of Base Rate Loans and (ii) three (3) Business Days, in the case of a Borrowing of Eurodollar Rate Loans, prior to the date of the proposed Borrowing. Each such notice shall be in writing in substantially the form of Exhibit B (a “Notice of Borrowing”), specifying (A) the date of such proposed Borrowing, (B) the aggregate amount of such proposed Borrowing, (C) whether any portion of such Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, (D) the initial Interest Period or Periods for any such Eurodollar Rate Loans, and (E) the Available U.S. Credit (after giving effect to the proposed Borrowing). Revolving Loans shall be made as Base Rate Loans unless (subject to Section 2.14) the Notice of Borrowing specifies that all or a portion thereof shall be Eurodollar Rate Loans. Each Revolving Credit Borrowing shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $250,000 in excess thereof.

(b) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent’s receipt of a Notice of Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate determined pursuant to Section 2.14(a). Each Lender shall, before 11:00 a.m. (New York City time) on the date of the proposed Borrowing, make available to the Administrative Agent at its address referred to in Section 11.8 in immediately available funds, such Lender’s Ratable Portion of such proposed Borrowing. After the Administrative Agent’s receipt of such funds and (i) on the Closing Date, upon fulfillment of the applicable conditions set forth in Section 3.1 and (ii) at any time (including the Closing Date), upon fulfillment of the applicable conditions set forth Section 3.2, the Administrative Agent will make such funds available to the Borrower.

(c) Unless the Administrative Agent shall have received notice from any Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing, the Administrative Agent may assume that such Lender has made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing. If such Lender shall repay to the Administrative Agent such corresponding amount, such corresponding amount so repaid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have hereunder to the Borrower.

(d) The failure of any Lender to make the Loans or any payment required by it on the date specified (a “Non-Funding Lender”), including any payment in respect of its participation in Swing Loans and Letter of Credit Obligations, shall not relieve any other Lender of its obligations to make such Loan or payment on such date but no such other Lender shall be responsible for the failure of any Non-Funding Lender to make a Loan or payment required under this Agreement.

Section 2.3 Swing Loans.

(a) On the terms and subject to the conditions contained in this Agreement, the Swing Loan Lender may in its sole discretion make loans in Dollars (each a “Swing Loan”) otherwise available to the Borrower under the Revolving Credit Facility from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date in an aggregate amount at any time outstanding at any time not to exceed the Swing Loan Availability; provided, however, that the Swing Loan Lender shall not make any Swing Loan to the extent that, after giving effect to such Swing Loan, the aggregate Revolving Credit Outstandings would exceed the Maximum Credit. The Swing Loan Lender shall be entitled to rely on the most recent Borrowing Base Certificate delivered to the Administrative Agent. Each Swing Loan shall be a Base Rate Loan and must be repaid in full within one Business Day of any demand by the Swing Loan Lender therefor and shall in any event mature and become due and payable on the Revolving Credit Termination Date. Within the limits set forth in the first sentence of this Section 2.3(a), amounts of Swing Loans prepaid or repaid may be reborrowed under this Section 2.3(a).

(b) In order to request a Swing Loan, the Borrower shall telecopy (or forward by electronic mail or similar means) to the Administrative Agent a duly completed request, in substantially the form of Exhibit C, setting forth the date, the requested amount and date of the Swing Loan (a “Swing Loan Request”), to be received by the Administrative Agent not later than 1:00 p.m. (New York City time) on the day of the proposed borrowing. The Administrative Agent shall promptly notify the Swing Loan Lender of the details of the requested Swing Loan. Subject to the terms of this Agreement, the Swing Loan Lender shall make a Swing Loan available to the Administrative Agent which will make such amounts available to the Borrower on the date of the relevant Swing Loan Request. The Swing Loan Lender shall not make any Swing Loan in the period commencing on the first Business Day after it receives written notice from the Administrative Agent or any Lender that one or more of the conditions precedent contained in Section 3.2 shall not on such date be satisfied, and ending when such conditions are satisfied. The Swing Loan Lender shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 hereof have been satisfied in connection with the making of any Swing Loan.

(c) The Swing Loan Lender shall notify the Administrative Agent in writing (which may be by telecopy or electronic mail) weekly, by no later than 10:00 a.m. (New York City time) on the first Business Day of each week, of the aggregate principal amount of its Swing Loans then outstanding.

(d) The Swing Loan Lender may demand at any time that each Lender pay to the Administrative Agent, for the account of the Swing Loan Lender, in the manner provided in clause (e) below, such Lender’s Ratable Portion of all or a portion of the outstanding Swing Loans, which demand shall be made through the Administrative Agent, shall be in writing and shall specify the outstanding principal amount of Swing Loans demanded to be paid.

(e) The Administrative Agent shall forward each notice referred to in clause (c) above and each demand referred to in clause (d) above to each Lender on the day such notice or such demand is received by the Administrative Agent (except that any such notice or demand received by the Administrative Agent after 2:00 p.m. (New York City time) on any Business Day or any such demand received on a day that is not a Business Day shall not be required to be forwarded to the Lenders by the Administrative Agent until the next succeeding Business Day), together with a statement prepared by the Administrative Agent specifying the amount of each Lender’s Ratable Portion of the aggregate principal amount of the Swing Loans stated to be outstanding in such notice or demanded to be paid pursuant to such demand, and, notwithstanding whether or not the conditions precedent set forth in Section 3.2 shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive), each Lender shall, before 11:00 a.m. (New York City time) on the Business Day next succeeding the date of such Lender’s receipt of such written statement, make available to the Administrative Agent, in immediately available funds, for the account of the Swing Loan Lender, the amount specified in such statement. Upon such payment by a Lender, such Lender shall, except as provided in clause (g) below, be deemed to have made a Revolving Loan to the Borrower. The Administrative Agent shall use such funds to repay the Swing Loans to the Swing Loan Lender. To the extent that any Lender fails to make such payment available to the Administrative Agent for the account of the Swing Loan Lender, the Borrower shall repay such Swing Loan on demand.

(f) Upon the occurrence of a Default under Section 9.1(e), each Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Loan otherwise required to be repaid by such Lender pursuant to clause (e) above, which participation shall be in a principal amount equal to such Lender’s Ratable Portion of such Swing Loan, by paying to the Swing Loan Lender on the date on which such Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (e) above, in immediately available funds, an amount equal to such Lender’s Ratable Portion of such Swing Loan. If all or part of such amount is not in fact made available by such Lender to the Swing Loan Lender on such date, the Swing Loan Lender shall be entitled to recover any such unpaid amount on demand from such Lender together with interest accrued from such date at the Federal Funds Rate for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Base Rate Loans.

(g) From and after the date on which any Lender (i) is deemed to have made a Revolving Loan pursuant to clause (e) above with respect to any Swing Loan or (ii) purchases an undivided participation interest in a Swing Loan pursuant to clause (f) above, the Swing Loan Lender shall promptly distribute to such Lender such Lender’s Ratable Portion of all payments of principal of and interest received by the Swing Loan Lender on account of such Swing Loan other than those received from a Lender pursuant to clause (e) or (f) above.

Section 2.4 Letters of Credit.

(a) On the terms and subject to the conditions contained in this Agreement, each Issuer agrees to Issue one or more Letters of Credit at the request of the Borrower for the account of the Borrower from time to time during the period commencing on the Closing Date and ending on the earlier of the Revolving Credit Termination Date and 30 days prior to the Revolving Loan Maturity Date; provided, however, that no Issuer shall be under any obligation to Issue any Letter of Credit if:

(i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuer from issuing such Letter of Credit or any Requirement of Law applicable to such Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuer shall prohibit, or request that such Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the date of this Agreement or result in any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuer as of the date of this Agreement and which such Issuer in good faith deems material to it;

(ii) such Issuer shall have received written notice from the Administrative Agent, any Lender or the Borrower, on or prior to the requested date of issuance of such Letter of Credit, that one or more of the applicable conditions contained in Section 3.1 and Section 3.2 is not then satisfied;

(iii) after giving effect to the issuance of such Letter of Credit, the aggregate Revolving Credit Outstandings would exceed the Maximum Credit at such time;

(iv) after giving effect to the issuance of such Letter of Credit, the aggregate amount of Letter of Credit Obligations then outstanding would exceed the Letter of Credit Sublimit;

(v) any fees due and payable in connection with a requested issuance have not been paid; or

(vi) such Letter of Credit is not denominated in Dollars or in an Alternative Currency.

None of the Lenders (other than the Issuers in their capacity as such) shall have any obligation to Issue any Letter of Credit. It is acknowledged and agreed by each party to this Agreement that each of the letters of credit issued by BofA or The Bank of Nova Scotia under the Existing Credit Agreement prior to the Closing Date and which remain outstanding on the Closing Date and are set forth on Schedule 2.4 (each such letter of credit, an “Existing Rollover Letter of Credit”) shall, from and after the Closing Date, constitute a Letter of Credit for all purposes of this Agreement and shall, for purposes of this Agreement (including, without limitation, Sections 2.4(g) and 2.12(b)), be deemed issued on the Closing Date. The stated amount of each Existing Rollover Letter of Credit and the expiry date therefor as of the Closing Date is set forth on Schedule 2.4.

(b) In no event shall the expiration date of any Letter of Credit (i) be more than one year after the date of issuance thereof, or (ii) be less than five days prior to the Revolving Loan Maturity Date.

(c) In connection with the issuance of each Letter of Credit, the Borrower shall give the relevant Issuer and the Administrative Agent at least two Business Days’ (or such shorter period as may be agreed by such Issuer) prior written notice, in substantially the form of Exhibit D (or in such other written or electronic form as is acceptable to the Issuer), of the requested issuance of such Letter of Credit (a “Letter of Credit Request”). Such notice shall be irrevocable and shall (i) specify (A) the Issuer of such Letter of Credit, the stated amount of the Letter of Credit requested, which stated amount (or, if such Letter of Credit is to be denominated in an Alternative Currency, the Dollar Equivalent of such stated amount) shall not be less than $5,000 (or such lesser amount as may be agreed to by such Issuer), (B) the date of issuance of such requested Letter of Credit (which day shall be a Business Day), (C) the date on which such Letter of Credit is to expire (which date shall be a Business Day), and (D) the Person for whose benefit the requested Letter of Credit is to be Issued and (ii) certify that, after issuance of the requested Letter of Credit, (A) the aggregate amount of the Letter of Credit Obligations then outstanding will not exceed the Letter of Credit Sub-Limit and (B) the sum of the aggregate principal or undrawn amount of the then-outstanding (I) Letter of Credit Obligations, (II) Revolving Loans and (III) Swing Loans, will not exceed the Maximum Credit then in effect. Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 11:00 a.m. (New York City time) on the second (2^nd) Business Day (or such shorter period as agreed by the relevant Issuer) prior to the requested issuance of such Letter of Credit.

(d) Subject to the satisfaction of the conditions set forth in this Section 2.4, the relevant Issuer shall, on the requested date, Issue a Letter of Credit on behalf of the Borrower in accordance with such Issuer’s usual and customary business practices. No Issuer shall Issue any Letter of Credit in the period commencing on the first Business Day after it receives written notice from the Administrative Agent or any Lender that one or more of the conditions precedent contained in Section 3.2 shall not on such date be satisfied, and ending when such conditions are satisfied. The relevant Issuer shall not otherwise be required to determine that, or take notice whether, the conditions precedent set forth in Section 3.2 have been satisfied in connection with the issuance of any Letter of Credit.

(e) If requested by the relevant Issuer, prior to the issuance of each Letter of Credit by such Issuer, and as a condition of such issuance, the Borrower shall have delivered to such Issuer a letter of credit reimbursement agreement, in such form as the Issuer may employ in its ordinary course of business for its own account (a “Letter of Credit Reimbursement Agreement”), signed by the Borrower, and such other documents or items as may be required pursuant to the terms thereof. In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern.

(f) Each Issuer shall:

(i) give the Administrative Agent written notice (or telephonic notice confirmed promptly thereafter in writing, which may be by telecopier) of the issuance or renewal of a Letter of Credit Issued by it, of all drawings under a Letter of Credit Issued by it and the payment (or the failure to pay when due) by the Borrower of any Reimbursement Obligation when due (which notice the Administrative Agent shall promptly transmit by telecopy, electronic mail or similar transmission to each Lender);

(ii) upon the request of any Lender, furnish to such Lender copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by such Lender; and

(iii) no later than 10 Business Days following the last day of each calendar month, provide to the Administrative Agent (and the Administrative Agent shall provide a copy to each Lender requesting the same) and the Borrower separate schedules for Documentary and Standby Letters of Credit Issued by it, in form reasonably satisfactory to the Administrative Agent, setting forth the aggregate Letter of Credit Obligations outstanding at the end of each month and any information requested by the Borrower or the Administrative Agent relating thereto.

(g) Immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, such Issuer shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed irrevocably and unconditionally to have purchased and received from such Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Ratable Portion of the Revolving Credit Commitments, in such Letter of Credit and the obligations of the Borrower with respect thereto (including all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto.

(h) The Borrower agrees to pay to the Issuer of a Letter of Credit the amount of all Reimbursement Obligations owing to such Issuer under a Letter of Credit when such amounts are due and payable, irrespective of any claim, set-off, defense or other right that the Borrower may have at any time against such Issuer or any other Person. In the event that any Issuer makes any payment under any Letter of Credit and the Borrower shall not have repaid such amount to such Issuer pursuant to this clause (h) or such payment is rescinded or set aside for any reason, such Reimbursement Obligation shall bear interest computed from the date on which such Reimbursement Obligation arose to the date of repayment in full at the rate of interest applicable to Revolving Loans bearing interest at a rate based on the Base Rate during such period, and such Issuer shall promptly notify the Administrative Agent, which shall promptly notify each Lender of the failure to repay such Reimbursement Obligation, and each Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuer the amount of such Lender’s Ratable Portion of such payment in Dollars (or, if such payment was made in an Alternative Currency, an amount in Dollars equal to the Dollar Equivalent thereof) and in immediately available funds. If the Administrative Agent so notifies such Lender prior to 11:00 a.m. (New York City time) on any Business Day, such Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds. Upon such payment by a Lender, such Lender shall notwithstanding whether or not the conditions precedent set forth in Section 3.2 shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive) be deemed to have made a Revolving Loan to the Borrower in the principal amount of such payment. Whenever any Issuer receives from the Borrower a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Lender pursuant to this clause (h), such Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Lender, in immediately available funds, an amount equal to such Lender’s Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Lenders have paid in respect of such Reimbursement Obligation.

(i) If and to the extent such Lender shall not have so made its Ratable Portion of the amount of the payment required by clause (h) above available to the Administrative Agent for the account of such Issuer, such Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand any such unpaid amount together with interest thereon, for the first Business Day after payment was first due at the Federal Funds Rate and, thereafter, until such amount is repaid to the Administrative Agent for the account of such Issuer, at a rate per annum equal to the rate applicable to Base Rate Loans under the Revolving Credit Facility. The failure of any Lender to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent for the account of the Issuer such other Lender’s Ratable Portion of any such payment.

(j) The Borrower’s obligation to pay each Reimbursement Obligation and the obligations of the Lenders to make payments to the Administrative Agent for the account of the Issuers with respect to Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, including the occurrence of any Default or Event of Default, and irrespective of:

(i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;

(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;

(iii) the existence of any claim, set off, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuer, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction;

(iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(v) payment by the Issuer under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and

(vi) any other act or omission to act or delay of any kind of the Issuer, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.

Any action taken or omitted to be taken by the relevant Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put such Issuer under any resulting liability to the Borrower or any Lender. In determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof, the Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary and, in making any payment under any Letter of Credit (x) the Issuer may rely exclusively on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute willful misconduct or gross negligence of the Issuer.

(k) Letters of Credit may be Issued in favor of a beneficiary that is a creditor of a Subsidiary of Group provided that the account party with respect to such Letter of Credit is the Borrower.

(l) The amount of Revolving Credit Commitments utilized by Letters of Credit denominated in an Alternative Currency shall be measured by a determination by the applicable Issuer of the Dollar Equivalent of such Letters of Credit on each day on which a Borrowing Base Certificate is delivered. The applicable Issuers shall notify the Administrative Agent and the Borrower of the aggregate Dollar Equivalent of such utilization in respect of the Letters of Credit Issued by it.

Section 2.5 Reduction and Termination of the Commitments. The Borrower may, upon at least five Business Days’ prior notice to the Administrative Agent, terminate in whole or reduce in part ratably the unused portions of the respective Revolving Credit Commitments of the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof and, in the case of any reduction of the Revolving Credit Commitments, the requirements of Section 2.9(e) shall have been satisfied. The Borrower may not terminate the Revolving Credit Commitments in their entirety pursuant to this Section 2.5 unless, concurrently with such termination, the Revolving Credit Commitments under and as defined in the Canadian Facility are terminated.

Section 2.6 Repayment of Loans. The Borrower promises to repay the entire unpaid principal amount of the Revolving Loans and the Swing Loans and all accrued but unpaid interest thereon on the Revolving Credit Termination Date or earlier, if otherwise required by the terms hereof.

Section 2.7 Evidence of Debt.

(a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing Indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

(b) The Administrative Agent shall establish and maintain a Register pursuant to Section 11.2(c) and accounts therein in accordance with its usual practice in which it will record (i) the amount of each applicable Loan made and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable by the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof, if applicable.

(c) The entries made in the accounts maintained pursuant to clauses (a) and (b) of this Section 2.7 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations recorded therein; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.

Section 2.8 Optional Prepayments. The Borrower may prepay the outstanding principal amount of the Revolving Loans and Swing Loans in whole or in part at any time; provided, however, that if any prepayment of any Eurodollar Rate Loan is made by the Borrower other than on the last day of an Interest Period for such Loan, the Borrower shall also pay any amount owing pursuant to Section 2.14(e).

Section 2.9 Mandatory Prepayments.

(a) [Intentionally Omitted].

(b) Subject to clause (c) below, upon receipt by any Loan Party of Net Cash Proceeds (but only if at the time of such receipt the Available Credit is less than 25% of the Aggregate Borrowing Limit at such time), the Borrower shall within one Business Day after such receipt prepay the Loans (or provide cash collateral in respect of Letters of Credit as set forth in clause (d) below) in an amount equal to 100% of such Net Cash Proceeds as set forth in clause (d) below.

(c) Notwithstanding clause (b) above, as long as no Event of Default shall have occurred or be continuing on the date Net Cash Proceeds are received by any Loan Party, the Borrower shall not be required to so apply an amount equal to Net Cash Proceeds arising from a Reinvestment Event to the extent that all Net Cash Proceeds from all Reinvestment Events do not exceed $50,000,000 (in the aggregate since the Closing Date) and are actually used (or have been contractually committed to be used) to consummate a Permitted Acquisition or to purchase replacement or fixed assets (in the case of an Asset Sale) or repair or replace (in the case of a Property Loss Event) the sold, damaged or taken property within 180 days of the receipt of such Net Cash Proceeds by a Loan Party and, pending application of such proceeds, the Borrower has either (i) paid an amount equal to such Net Cash Proceeds to the Administrative Agent to be held by the Administrative Agent in a Cash Collateral Account designated by the Administrative Agent or (ii) applied an amount equal to such Net Cash Proceeds in repayment of the Revolving Loans and the Administrative Agent shall have established an Availability Reserve in the amount of such repayment, which reserve shall abate on the Reinvestment Prepayment Date applicable to such Net Cash Proceeds or earlier to the extent that Revolving Loans up to the amount of such Net Cash Proceeds are used as set forth in the Reinvestment Notice with respect thereto; provided, however, that to the extent any asset subject to such Asset Sale or Property Loss Event constituted Collateral, any replacement, fixed or alternative assets acquired with Net Cash Proceeds shall, upon acquisition thereof by a Warnaco Entity, be subject to a perfected Lien in favor of the Collateral Agent, for the benefit of the Secured Parties, in each case, having the priority described in Section 4.20 of this Agreement and the Collateral Documents (but, in the case of a Permitted Acquisition, only to the extent required by clause (v) of the definition thereof); provided further, however, in the event an Event of Default has occurred and is continuing after the provisions in this clause (c) become operative, the Administrative Agent may, or shall at the direction of the Requisite Lenders, apply all amounts in the Cash Collateral Account referred to above to the Obligations.

(d) Subject to the provisions of clause (c) above and Section 2.13(h) (Payments and Computations), any prepayments made by the Borrower required to be applied in accordance with this clause (d) shall be applied, first, to repay the outstanding principal balance of the Swing Loans until the Swing Loans shall have been repaid in full; second, to repay the outstanding principal balance of the Revolving Loans until the Revolving Loans shall have been repaid in full; and third, to provide cash collateral for any Letter of Credit Obligations in the manner set forth in Section 9.3 until all the Letter of Credit Obligations have been fully cash collateralized in the manner set forth therein.

(e) If at any time the aggregate principal amount of Revolving Credit Outstandings exceed the Maximum Credit at such time, the Borrower shall, as soon as possible, but in any event within one Business Day, prepay first the Swing Loans and then the Revolving Loans then outstanding in an amount equal to such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and the Revolving Loans, the Borrower shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Section 9.3 to the extent required to eliminate such excess.

(f) Except in the case where Section 2.13(h) shall be applicable, all available funds in each Cash Collateral Account (other than an amount equal to any proceeds arising from a Reinvestment Event that are held in the Cash Collateral Account pending application of such proceeds as specified in a Reinvestment Notice) shall be applied on a daily basis: first, to repay the outstanding principal amount of the Swing Loans until the Swing Loans have been repaid in full; second, to repay the outstanding principal amount of the Revolving Loans until the Revolving Loans have been repaid in full; third, to any other Obligation in respect of the Revolving Credit Facility then due and payable and then, to cash collateralize all outstanding Letter of Credit Obligations in the manner set forth in Section 9.3. The Facility Agents agree so to apply such funds and the Borrower consents to such application. Notwithstanding the first sentence in this clause (f), at any time there is no Event of Default that is continuing, there are no Loans outstanding and no other Obligations in respect of the Revolving Credit Facility are then due and payable each Facility Agent shall cause any funds in any Cash Collateral Account maintained by it to be paid at the written direction of the Borrower for any other purpose.

Section 2.10 Interest.

(a) Rate of Interest. All Loans and the outstanding amount of all other Obligations shall bear interest, in the case of Loans, on the unpaid principal amount thereof from the date such Loans are made and, in the case of such other Obligations, from the date such other Obligations are due and payable until, in all cases, paid in full, except as otherwise provided in Section 2.10(c), as follows:

(i) if a Base Rate Loan or such other Obligation, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time and (B) the Applicable Margin for such Loans; and

(ii) if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate determined for the applicable Interest Period and (B) the Applicable Margin in effect from time to time during such Interest Period.

(b) Interest Payments. Interest accrued:

(i) on each Base Rate Loan shall be payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the making of such Base Rate Loan and (B) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Base Rate Loan;

(ii) on each Swing Loan shall be payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the making of such Swing Loan and (B) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Swing Loan;

(iii) on each Eurodollar Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and if such Interest Period has a duration of more than three months, on each day during such Interest Period which occurs every three months from the first day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part, and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Eurodollar Rate Loan; and

(iv) on the amount of all other Obligations shall be payable on demand after the time such Obligation becomes due and payable (whether by acceleration or otherwise).

(c) Default Interest. Notwithstanding the rates of interest specified in Section 2.10(a) or elsewhere herein, effective immediately upon the occurrence of an Event of Default, and for as long thereafter as such Event of Default shall be continuing, the principal balance of all Loans and the amount of all other Obligations shall bear interest at a rate which is two percent per annum in excess of the rate of interest applicable to such Loans or such other Obligations from time to time. Default interest under this clause (c) shall be payable on demand by the Administrative Agent or the Requisite Lenders.

Section 2.11 Conversion/Continuation Option.

(a) The Borrower may elect (i) on any Business Day to convert Base Rate Loans (other than Swing Loans) or any portion thereof to Eurodollar Rate Loans, or (ii) at the end of any applicable Interest Period, to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate amount of the Eurodollar Loans for each Interest Period must be in the amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof. Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with such Lender’s Ratable Portion.

(b) Each such election shall be in substantially the form of Exhibit F hereto (a “Notice of Conversion or Continuation”) and shall be made by giving the Administrative Agent at least three (3) Business Days’ prior written notice specifying (i) the amount and type of Loan being converted or continued, (ii) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the applicable Interest Period, and (iii) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the last day of the applicable Interest Period). The Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein.

(c) Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any applicable Interest Period, shall be permitted at any time at which (A) a Default or an Event of Default shall have occurred and be continuing or (B) the continuation of, or conversion into, would violate any of the provisions of Section 2.14.

(d) If, within the time period required under the terms of this Section 2.11, the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to continue any Loan that is a Eurodollar Rate Loan for an additional Interest Period or to convert any such Loan, then, upon the expiration of the applicable Interest Period, such Loan will be automatically converted to a Base Rate Loan.

(e) Each Notice of Conversion or Continuation shall be irrevocable.

Section 2.12 Fees.

(a) Unused Commitment Fee. The Borrower agrees to pay to each Lender a commitment fee (the “Unused Commitment Fee”) on the average amount by which the Revolving Credit Commitment of such Lender exceeds such Lender’s Ratable Portion of the Revolving Credit Outstandings (excluding the amount of any outstanding Swing Loans) from the Closing Date until the Revolving Credit Termination Date at the Applicable Unused Commitment Fee Rate, payable in arrears on the first Business Day of each calendar quarter, commencing on the first such day following the Closing Date, and on the Revolving Credit Termination Date.

(b) Letter of Credit Fees. The Borrower agrees to pay the following amounts with respect to Letters of Credit Issued by any Issuer:

(i) to each Issuer of a Letter of Credit, with respect to each Letter of Credit Issued by such Issuer, an issuance fee (the “Issuing Fee”) equal to 0.125% per annum of the maximum amount available from time to time to be drawn under such Letter of Credit, payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the issuance of such Letter of Credit, and (B) on the Revolving Credit Termination Date;

(ii) to the Administrative Agent for the ratable benefit of the Lenders, with respect to each Letter of Credit, a fee accruing at a rate per annum equal to the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans of the maximum amount available from time to time to be drawn under such Letter of Credit, payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the issuance of such Letter of Credit, and (B) on the Revolving Credit Termination Date; provided, however, that during the continuance of an Event of Default, such fee shall be increased by two percent per annum and shall be payable on demand; and

(iii) to the Issuer of any Letter of Credit, with respect to the issuance, extension, amendment, transfer or other action of or with respect to each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with such Issuer’s standard schedule for such charges in effect at the time of issuance, extension, amendment, transfer, other action or drawing, as the case may be.

(c) Additional Fees. The Borrower has agreed to pay additional fees under the Fee Letters, the amount, payees and dates of payment of which are embodied in the Fee Letters.

Section 2.13 Payments and Computations.

(a) The Borrower shall make each payment hereunder (including fees and expenses) not later than 11:00 a.m. (New York City time) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 11.8 in immediately available funds without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed immediately available funds relating to the payment of principal or interest or fees (to the extent payable to the Lenders) to the Lenders, in accordance with the application of payments set forth in clauses (g) and (h) of this Section 2.13, as applicable, for the account of their respective Applicable Lending Offices; provided, however, that amounts payable pursuant to Section 2.14(c), Section 2.14(e), Section 2.15 or Section 2.16 shall be paid only to the affected Lender or Lenders and amounts payable with respect to Swing Loans shall be paid only to the Swing Loan Lender. Payments received by the Administrative Agent after 11:00 a.m. (New York City time) shall be deemed to be received on the next succeeding Business Day.

(b) All computations of interest and of fees shall be made by the Administrative Agent on the basis of a year of 360 days (365/366 days in the case of interest on Base Rate Loans to the extent that such interest is determined based upon BofA’s “prime rate” and not the Federal Funds Rate), in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

(d) Each payment by the Borrower of any Loan, Reimbursement Obligation (including interest or fees in respect thereof) and each reimbursement of various costs, expenses or other Obligation shall be made in the currency in which such Loan was made, such Letter of Credit Issued or such cost, expense or other Obligation was incurred; provided, however, that (i) the Letter of Credit Reimbursement Agreement for a Letter of Credit may specify another currency for the Reimbursement Obligation in respect of such Letter of Credit and (ii) other than for payments in respect of a Loan or Reimbursement Obligation, Loan Documents duly executed by the Administrative Agent or any Hedging Contract may specify other currencies of payment for Obligations created by or directly related to such Loan Document or Hedging Contract.

(e) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day. All repayments of any Revolving Loans shall be applied first to repay such Loans outstanding as Base Rate Loans and then to repay such Loans outstanding as Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods.

(f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each relevant Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have made such payment in full to the Administrative Agent, each relevant Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon at the Federal Funds Rate, for the first Business Day, and, thereafter, at the rate applicable to Base Rate Loans, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent.

(g) Subject to the provisions of clause (h) of this Section 2.13 (and except as otherwise provided in Section 2.9 or elsewhere in this Agreement), all payments and any other amounts received by the Administrative Agent from or for the benefit of the Borrower or any other Loan Party shall be applied first, to pay principal of and interest on any portion of the Loans which the Administrative Agent may have advanced pursuant to the express provisions of this Agreement on behalf of any Lender, for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower; second, to pay all other Obligations then due and payable; and then, as the Borrower so designates. Payments in respect of Swing Loans received by the Administrative Agent shall be distributed to the Swing Loan Lender; payments in respect of Revolving Loans received by the Administrative Agent shall be distributed to each Lender in accordance with such Lender’s Ratable Portion; and, unless provided otherwise herein, all payments of fees and all other payments in respect of any other Obligation shall be allocated among such of the Lenders and the Issuers as are entitled thereto, and, if to the Lenders, in proportion to their respective Ratable Portions.

(h) The Borrower hereby irrevocably waives the right to direct the application of any and all payments in respect of the Secured Obligations and any proceeds of Collateral after the occurrence and during the continuance of an Event of Default, and agrees that upon the termination of the Commitments or the acceleration of any of the Obligations pursuant to Section 9.2, the Facility Agents shall apply all payments made to or received by any Facility Agent, any Lender or any Issuer constituting proceeds of Collateral (including all funds on deposit in the Special Cash Collateral Account or any Cash Collateral Account (including all proceeds arising from a Reinvestment Event that are held in the Cash Collateral Account pending application of such proceeds as specified in a Reinvestment Notice)) and all other payments made to or received by any Facility Agent, any Lender or any Issuer with respect to any Secured Obligations in the following order:

first, to pay interest on and then principal of any portion of the Revolving Loans which the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower;

second, to pay interest on and then principal of any Swing Loan;

third, to pay Secured Obligations in respect of any expense reimbursements (including indemnities) or Cash Management Obligations then due to the Facility Agents;

fourth, to pay Secured Obligations in respect of any expense reimbursements (including indemnities) then due to the Lenders and the Issuers;

fifth, to pay Secured Obligations in respect of any fees then due to the Facility Agents, the Lenders and the Issuers;

sixth, to pay interest then due and payable in respect of the Loans and Reimbursement Obligations;

seventh, to pay or prepay principal payments on the Loans and Reimbursement Obligations and to provide cash collateral for outstanding Letter of Credit Undrawn Amounts in the manner described in Section 9.3;

eighth, to pay or prepay principal amounts on Secured Obligations in respect of Hedging Contracts and Cash Management Obligations, ratably (based on the proportional amounts thereof) to the aggregate principal amount of such Hedging Contracts and Cash Management Obligations;

ninth, to the ratable (based on the proportional amounts thereof) payment of all other Secured Obligations (other than Secured Obligations under the Loan Party Canadian Facility Guaranty);

tenth, to the payment of all Secured Obligations under the Loan Party Canadian Facility Guaranty; and

eleventh; as directed by the Borrower;

Requisite Lenders and each adversely affected Lender without necessity of notice to or consent of or approval by the Borrower, any Secured Party that is not a Lender or an Issuer, or any other Person. The order of priority set forth in clauses first through fifth of this Section 2.13(h) may be changed only with the prior written consent of the Administrative Agent in addition to the Requisite Lenders. The order of priority set forth in clause tenth of this Section 2.13(h) may be changed only with the prior written consent of the Requisite Lenders and the administrative agent under the Canadian Facility.

(i) At the option of the Administrative Agent, principal on the Swing Loans, Reimbursement Obligations, interest, fees, expenses and other sums due and payable in respect of the Revolving Loans and Protective Advances may be paid from the proceeds of Swing Loans or Revolving Loans. The Borrower hereby authorizes the Swing Loan Lender to make such Swing Loans pursuant to Section 2.3(a) and the Lenders to make Revolving Loans pursuant to Section 2.2(a) from time to time in the amounts of any and all principal payable with respect to the Swing Loans, Reimbursement Obligations, interest, fees, expenses and other sums payable in respect of the Revolving Loans and Protective Advances, and further authorizes the Administrative Agent to give the Lenders notice of any Borrowing with respect to such Swing Loans and Revolving Loans and to distribute the proceeds of such Swing Loans and Revolving Loans to pay such amounts. The Borrower agrees that all such Swing Loans and Revolving Loans so made shall be deemed to have been requested by it (irrespective of the satisfaction of the conditions in Section 3.2 which conditions the Lenders irrevocably waive) and directs that all proceeds thereof shall be used to pay such amounts.

Section 2.14 Special Provisions Governing Eurodollar Rate Loans.

(a) Determination of Interest Rate. The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Administrative Agent pursuant to the procedures set forth in the definition of “Eurodollar Rate.” The Administrative Agent’s determination shall be presumed to be correct, absent manifest error, and shall be binding on the Borrower.

(b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that: (i) the Administrative Agent determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the Eurodollar Rate then being determined is to be fixed; or (ii) the Requisite Lenders notify the Administrative Agent that the Eurodollar Rate for any Loans for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon each Eurodollar Loan will automatically, on the last day of the current Interest Period for such Loan, convert into a Base Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that the Administrative Agent (in the case of clause (i) above) or the Requisite Lenders (in the case of clause (ii) above) has or have determined that the circumstances causing such suspension no longer exist.

(c) Increased Costs. If at any time any Lender shall determine that due to the introduction of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate or with respect to taxes (payment with respect to which shall be governed by Section 2.16)) or the compliance by such Lender with any guideline, request or directive from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error.

(d) Illegality. Notwithstanding any other provision of this Agreement, if any Lender determines that the introduction of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order after the date of this Agreement shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, and each such Lender shall make a Base Rate Loan as part of any requested Borrowing of Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loans are then outstanding, the Borrower shall immediately convert each such Loan into a Base Rate Loan. If at any time after a Lender gives notice under this Section 2.14(d) such Lender determines that it may lawfully make Eurodollar Rate Loans, such Lender shall promptly give notice of that determination to the Borrower and the Administrative Agent, and the Administrative Agent shall promptly transmit the notice to each other Lender. The Borrower’s right to request, and such Lender’s obligation, if any, to make Eurodollar Rate Loans shall thereupon be restored.

(e) Breakage Costs. In addition to all amounts required to be paid by the Borrower pursuant to Section 2.10, the Borrower shall compensate each Lender, upon demand (with a copy of such demand to the Administrative Agent), for all losses, expenses and liabilities (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Lender’s Eurodollar Rate Loans to the Borrower but excluding any loss of the Applicable Margin on the relevant Loans) which such Lender may sustain (i) if for any reason a proposed Borrowing, conversion into or continuation of Eurodollar Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion or Continuation given by the Borrower or in a telephonic request by it for borrowing or conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.11, (ii) if for any reason any Eurodollar Rate Loan is prepaid (including mandatorily pursuant to Section 2.9) on a date which is not the last day of the applicable Interest Period, (iii) as a consequence of a required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of the events indicated in Section 2.14(d), or (iv) as a consequence of any failure by the Borrower to repay Eurodollar Rate Loans when required by the terms hereof. The Lender making demand for such compensation shall deliver to the Borrower and the Administrative Agent concurrently with such demand a written statement as to such losses, expenses and liabilities, and this statement shall be conclusive as to the amount of compensation due to that Lender, absent manifest error.

Section 2.15 Capital Adequacy. If at any time any Lender determines that (a) the adoption of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order after the date of this Agreement regarding capital adequacy, (b) compliance with any such law, treaty, rule, regulation, or order, or (c) compliance with any guideline or request or directive from any central bank or other Governmental Authority regarding capital adequacy (whether or not having the force of law) shall have the effect of reducing the rate of return on such Lender’s (or any corporation or other Person controlling such Lender’s) capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation or other Person could have achieved but for such adoption, change, compliance or interpretation, then, upon demand from time to time by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error.

Section 2.16 Taxes.

(a) Except as otherwise provided in this Section 2.16, any and all payments by any Loan Party under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) in the case of each Lender, each Issuer and each Agent (A) taxes imposed on or measured by its net income or net profits and franchise taxes imposed on such Person by the United States of America, and similar taxes imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, such Issuer or such Agent (as the case may be) is organized, in which its principal office is located, or in which it is otherwise doing business, or, in the case of any Lender, in which its Applicable Lending Office is located, (B) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Loan Party is located, (C) any United States withholding taxes payable with respect to payments under the Loan Documents under laws (including any statute, treaty or regulation) in effect on the Closing Date (or, in the case of (w) an Eligible Assignee which became a party to this Agreement after the Closing Date, the date of the Assignment and Acceptance or Assumption Agreement pursuant to which such Eligible Assignee became a party to this Agreement, (x) a successor Agent, the date of the appointment of such Agent, (y) a successor Issuer, the date such Issuer becomes an Issuer and (z) the designation of a new Applicable Lending Office) applicable to such Lender, such Issuer or such Agent, as the case may be, but not excluding any United States withholding taxes payable as a result of any change in such laws occurring after the Closing Date (or the date of such Assignment and Acceptance or Assumption Agreement or the date of such appointment of such Agent or the date such Issuer becomes an Issuer, as appropriate) and (D) all liabilities, penalties and interest with respect to any of the foregoing, (ii) in the case of each Agent, each Lender and each Issuer, taxes imposed on or measured by its net income or net profits, franchise and similar taxes imposed on it as a result of a present or former connection between such Agent, such Lender or such Issuer (as the case may be) and the jurisdiction of the Governmental Authority imposing such tax or taxing authority thereof or therein and (iii) in the case of each Agent, each Lender and each Issuer, taxes imposed as a result of the gross negligence or willful misconduct of such Agent, such Lender or such Issuer (as the case may be) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). Except as otherwise provided in this Section 2.16, if any Taxes shall be required by law to be deducted from or in respect of any sum payable under any Loan Document to any Lender, any Issuer or any Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Lender, such Issuer or such Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable Loan Party shall make such deductions, (iii) the Loan Parties shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) within 30 days after payment, the Loan Parties shall deliver to the Administrative Agent evidence of such payment.

(b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies imposed by any state, county, city or other political subdivision within the United States (but not United States federal taxes, payment with respect to which shall be governed by clause (a) above) or by any applicable foreign jurisdiction, and all liabilities with respect thereto, which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, “Other Taxes”).

(c) Each Loan Party will, jointly and severally, indemnify each Lender, each Issuer and each Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender, such Issuer or such Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender, such Issuer or such Agent (as the case may be) makes written demand therefor setting forth in reasonable detail the basis and calculations of such amounts.

(d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 11.8, the original or a certified copy of a receipt evidencing payment thereof.

(e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under the Guaranty, the agreements and obligations of the Loan Parties contained in this Section 2.16 shall survive the payment in full of the Secured Obligations.

(f) (i) Each Non-U.S. Lender or Non-U.S. Agent that is entitled to an exemption from U.S. withholding tax, or that is subject to such tax at a reduced rate under an applicable tax treaty, shall (v) on or prior to the Closing Date in the case of each Non-U.S. Lender or Non-U.S. Agent that is a signatory hereto, (w) on or prior to the date of the Assignment and Acceptance or Assumption Agreement pursuant to which such Non-U.S. Lender becomes a Lender, the date a successor Issuer becomes an Issuer or the date a successor Agent becomes an Agent hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it to the Borrower and the Administrative Agent, and (z) from time to time if requested by the Borrower or the Administrative Agent, provide the Administrative Agent and the Borrower with two completed originals of each of the following, as applicable:

(A) Form W-8ECI (claiming exemption from U.S. withholding tax because the income is effectively connected with a U.S. trade or business) or any successor form;

(B) Form W-8BEN (claiming exemption from, or a reduction of, U.S. withholding tax under an income tax treaty) or any successor form;

(C) Form W-8IMY (claiming exemption from, or a reduction of, U.S. withholding tax for foreign intermediaries, foreign flow-through entities or U.S. branches of certain foreign banks or foreign insurance companies) or any successor form;

(D) in the case of a Non-U.S. Lender or Non-U.S. Agent claiming exemption under Sections 871(h) or 881(c) of the Code, a Form W-8BEN (claiming exemption from U.S. withholding tax under the portfolio interest exemption) or any successor form and a certificate establishing such Non-U.S. Lender or Non-U.S. Agent’s entitlement to such exemption including, without limitation, certification that the Non-U.S. Lender or Non-U.S. Agent is not a bank receiving payments under this Agreement on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; and/or

(E) any other applicable form, certificate or document prescribed by the IRS certifying as to such Non-U.S. Lender’s or Non-U.S. Agent’s entitlement to such exemption from U.S. withholding tax or reduced rate with respect to all payments to be made to such Non-U.S. Lender or Non-U.S. Agent under the Loan Documents.

(ii) Each U.S. Lender shall (v) on or prior to the Closing Date in the case of each U.S. Lender that is a signatory hereto, (w) on or prior to the date of the Assignment and Acceptance or Assumption Agreement pursuant to which such U.S. Lender becomes a Lender, on or prior to the date a successor Issuer becomes an Issuer or on or prior to the date a successor Agent becomes a Agent hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it to the Borrower and the Administrative Agent, and (z) from time to time if requested by the Borrower or the Administrative Agent, provide the Administrative Agent and the Borrower with two completed originals of Form W-9 (certifying that such U.S. Lender is entitled to an exemption from U.S. backup withholding tax) or any successor form. Solely for purposes of this Section 2.16(f), a U.S. Lender shall not include a Lender, an Issuer or an Agent that may be treated as an exempt recipient based on the indicators described in Treasury Regulation section 1.6049-4(c)(1)(ii) except to the extent that such Person is required to deliver a withholding form under Treasury Regulation section 1.1441-1 to establish its withholding status.

(g) Unless the Borrower and the Administrative Agent have received forms, documents and/or other evidence satisfactory to them indicating that payments under any Loan Document to or for a U.S. Lender, Non-U.S. Lender or Non-U.S. Agent are not subject to U.S. withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Loan Parties and the Administrative Agent shall withhold amounts required to be withheld by Requirements of Law from such payments at the applicable statutory rate. For any period with respect to which an Agent, Lender or Issuer has failed to provide the Borrower with the appropriate forms required under Section 2.16(f), such Agent, such Lender or such Issuer shall not be entitled to indemnification or increased amounts under Section 2.16(a) or (c) with respect to Taxes imposed by the United States by reason of such failure except to the extent withholding is required as a result of a change in law occurring after the applicable time described in paragraph (f), in which case the Borrower shall be required to gross-up or indemnify for such amounts resulting solely from such change in law.

(h) Any Lender or Issuer claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which would be payable or may thereafter accrue and would not, in the sole determination of such Lender or Issuer, be otherwise disadvantageous to such Lender or Issuer.

(i) If any Lender or any Issuer changes its residence, place of business or Applicable Lending Office or takes any other similar action, and the effect of such change or action, as of the date thereof, would be to increase the additional amounts that the Loan Parties are obligated to pay under this Section 2.16, the Loan Parties shall not be obligated to pay the amount of such increase.

(j) If any Agent or Lender determines in its sole discretion that it has actually received any refund of tax in connection with any deduction or withholding or payment of any additional amount by the Loan Parties pursuant to this Section 2.16, such Person shall reimburse the Borrower in an amount equal to such refund, after tax, and net of all expenses incurred by such Person in connection with such refund. The Borrower shall return such amount to the applicable Person in the event that such Person is required to repay such refund of tax. Nothing contained in this paragraph shall interfere with the right of each of the Agents and the Lenders to arrange its tax affairs in whatever manner it thinks fit, nor to disclose any information or any computations relating to its tax affairs or to do anything that would prejudice its ability to benefit from other credits, relief, remissions or repayments to which it may be entitled.

Section 2.17 Substitution of Lenders. In the event that (a) (i) any Lender makes a claim under Section 2.14(c) or Section 2.15, or (ii) it becomes illegal for any Lender to continue to fund or make any Eurodollar Rate Loan and such Lender notifies the Borrower pursuant to Section 2.14(d), or (iii) the Borrower is required to make any payment pursuant to Section 2.16 that is attributable to any Lender, or (iv) any Lender is a Non-Funding Lender, (b) in the case of clause (a)(i) above, as a consequence of increased costs in respect of which such claim is made, the effective rate of interest payable to such Lender under this Agreement with respect to its Loans materially exceeds the effective average annual rate of interest payable to the Requisite Lenders under this Agreement and (c) except with respect to clause (a)(iii) above, Lenders holding at least 75% of the sum of the Revolving Credit Commitments are not subject to such increased costs or illegality, payment or proceedings (any such Lender, an “Affected Lender”), the Borrower may, at its sole cost and expense, substitute another financial institution for such Affected Lender hereunder, upon reasonable prior written notice (which written notice must be given within 90 days following the occurrence of any of the events described in clauses (a)(i), (ii), (iii) or (iv)) by the Borrower to the Administrative Agent and the Affected Lender that the Borrower intends to make such substitution, which substitute financial institution must be an Eligible Assignee and, if not a Lender, reasonably acceptable to the Administrative Agent; provided, however, that if more than one Lender claims increased costs, illegality or right to payment arising from the same act or condition and such claims are received by the Borrower within 30 days of each other then the Borrower may substitute all, but not (except to the extent the Borrower has already substituted one of such Affected Lenders before the Borrower’s receipt of the other Affected Lenders’ claims) less than all, Lenders making such claims. In the event that the proposed substitute financial institution or other entity is reasonably acceptable to the Administrative Agent, each Issuer and the written notice was properly issued under this Section 2.17, the Affected Lender shall sell and the substitute financial institution or other entity shall purchase, pursuant to an Assignment and Acceptance, all rights and claims of such Affected Lender under the Loan Documents (for a purchase price equal to the principal balance of all Loans held by such Affected Lender and all accrued and unpaid interest with respect thereto through the date of sale) and the substitute financial institution or other entity shall assume and the Affected Lender shall be relieved of its Commitments and all other prior unperformed obligations of the Affected Lender under the Loan Documents (other than in respect of any damages (other than exemplary or punitive damages, to the extent permitted by applicable law) in respect of any such unperformed obligations) and such sale and purchase shall be recorded in the Register maintained by the Administrative Agent. Upon the effectiveness of such sale, purchase and assumption (which, in any event shall be conditioned upon the payment in full by the Borrower to the Affected Lender in cash of all fees, unreimbursed costs and expenses and indemnities accrued and unpaid through such effective date), the substitute financial institution or other entity shall become a “Lender” hereunder for all purposes of this Agreement having a Commitment in the amount of such Affected Lender’s Commitment assumed by it and such Commitments of the Affected Lender shall be terminated, provided that all indemnities under the Loan Documents shall continue in favor of such Affected Lender. Notwithstanding the above, the Borrower may not exercise the substitution right under this Section 2.17 during the continuance of an Event of Default.

Section 2.18 Facility Increase.

(a) The Borrower may (no more frequently than three times after the Closing Date (in minimum increments of $50,000,000) during the term of the Revolving Credit Facility) request the Lenders or other Eligible Assignees acceptable to the Administrative Agent in its reasonable discretion to provide additional Commitments (a “Facility Increase”) up to an aggregate amount during the term of the Revolving Credit Facility not in excess of $200,000,000; provided, however, that (i) the Borrower shall have given the Administrative Agent at least 60 days’ written notice of its intention to effect the Facility Increase and the desired amount of such Facility Increase, (ii) there shall exist no Default or Event of Default as of the Facility Increase Effective Date (as defined below) or after giving effect to the Facility Increase to occur on that date and the other conditions precedent to a Borrowing set forth in Section 3.2 are satisfied as of the Facility Increase Effective Date, (iii) an opinion of counsel to the Loan Parties in form and substance and from counsel reasonably satisfactory to the Administrative Agent and addressed to the Facility Agents, the Issuers and the Lenders dated the Facility Increase Effective Date and addressing such matters as the Administrative Agent may reasonably request shall be delivered to the Administrative Agent, (iv) the Administrative Agent shall have received such other documents, agreements, certificates and writings with respect to the Facility Increase as the Administrative Agent shall reasonably request (including, without limitation, resolutions of the Borrower authorizing the borrowings under the Facility Increase and such amendments, modifications and/or supplements to the Collateral Documents as are necessary or, in the reasonable opinion of the Administrative Agent, desirable to ensure that the borrowings under the Facility Increase are secured by, and entitled to the benefits of, the Collateral Documents), (v) the Borrower shall have paid to the Administrative Agent a fee to be determined (but in any event reasonably acceptable to Group) and (vi) the Borrower shall have paid to the Lenders providing the Facility Increase a fee required in order to clear the market in an amount to be determined.

(b) The Borrower shall have the right to offer such increase to (x) the Lenders, and each Lender will have the right, but not the obligation, to commit to all or a portion of the proposed Facility Increase or (y) any institution that would be an Eligible Assignee and is acceptable to the Administrative Agent in its reasonable discretion; provided, however, that (i) the additional Revolving Credit Commitment of each Lender or Eligible Assignee is $5,000,000 or an incremental multiple of $1,000,000 in excess thereof, (ii) such Lender or Eligible Assignee executes an Assumption Agreement pursuant to which such Lender or Eligible Assignee agrees to commit to all or a portion of such Facility Increase and, in the case of an Eligible Assignee, to be bound by the terms of this Agreement as a Lender, (iii) the Borrower shall offer the proposed Facility Increase to each Lender (other than a Non-Funding Lender) prior to offering any portion of such Facility Increase to an Eligible Assignee and if the Borrower has not received commitments from the Lenders in an aggregate amount at least equal to the amount of the proposed Facility Increase, then the Borrower may request commitments for such Facility Increase from Eligible Assignees in an aggregate amount equal to such deficiency, (iv) the fees to be paid to any Eligible Assignee shall be no greater than those paid (or which were offered) to the then existing Lenders providing (or which were requested to provide) any portion of the proposed Facility Increase, (v) the Loans made pursuant to such Facility Increase shall have the same terms (including, without limitation, maturity date, Applicable Margin and Collateral) as the other Loans (including, without limitation, terms for the other Loans that are amended to reflect any otherwise better terms for the Loans made pursuant to such Facility Increase) and (vi) such Facility Increase shall be subject to the successful syndication of the entire amount of such proposed Facility Increase.

(c) On the effective date provided for in the Assumption Agreements providing for a Facility Increase (each a “Facility Increase Effective Date”), the Revolving Credit Commitments will be increased by the additional amount committed to by each Lender or Eligible Assignee on the Facility Increase Effective Date.

(d) In the event there are Lenders or Eligible Assignees that have committed to a Facility Increase in excess of the maximum amount requested (or permitted), then the Arrangers (with the consent of the Borrower which shall not be unreasonably withheld) shall have the right to allocate such commitments as among the committing Lenders or committing Eligible Assignees, as the case may be.

(e) On each Facility Increase Effective Date, the Administrative Agent will effect a settlement of all outstanding Loans among the Lenders (including, without limitation, those Eligible Assignees that become Lenders on such Facility Increase Effective Date) that will reflect the adjustments to the Commitments of such Lenders. Any interest, fees and other payments accrued to the Facility Increase Effective Date with respect to any Loans of a Lender transferred by such Lender in accordance with such settlement shall be for the account of the transferring Lender. Any interest, fees and other payments accrued on and after the Facility Increase Effective Date with respect to the interests and obligations acquired by a Lender hereunder as a result of such settlement shall be for the account of the acquiring Lender. On each Facility Increase Effective Date, the Administrative Agent shall notify the Lenders (including, without limitation, those Eligible Assignees that become Lenders on such Facility Increase Effective Date) and the Borrower of the occurrence of the Facility Increase to be effected on such Facility Increase Effective Date, the amount of Loans held by each Lender as a result thereof and the amount of the Commitment of each Lender as a result thereof.

Section 2.19 Special Cash Collateral Account. The Borrower may from time to time deposit into the Special Cash Collateral Account cash of the Borrower to be included in the calculation of the Borrowing Base; provided that (i) such deposit shall be made upon not less than 2 Business Days’ prior written notice to the Facility Agents and (ii) such deposit shall be made on the same day (or within one Business Day thereafter) as the day of the delivery of the Borrowing Base Certificate required by Section 6.12(a) (Borrowing Base Determination) (but in any event no more frequently than once per week). The Borrower may not make any such deposit if a Default or an Event of Default shall have occurred and is continuing unless the making of such deposit shall cure such Default or Event of Default. Funds on deposit in the Special Cash Collateral Account may be invested in Permitted Cash Equivalents at the direction of the Collateral Agent and, except during the continuance of an Event of Default (unless otherwise agreed to by the Administrative Agent in its sole discretion), the Collateral Agent agrees with the Borrower to make or cause to be made such investments in Permitted Cash Equivalents as requested by the Borrower; provided, however, that the Collateral Agent shall not have any responsibility for, or bear any risk of loss of, any such requested investment or income thereon and the Collateral Agent shall have no obligation to make or cause to be made any such investment absent a request by the Borrower for a specific investment in Permitted Cash Equivalents. The Borrower may request the Collateral Agent to withdraw monies from the Special Cash Collateral Account and deliver such withdrawn amounts to the Borrower by written notice to the Facility Agents delivered together with (but no more frequently than once per week) the delivery of the Borrowing Base Certificate required by Section 6.12(a) (Borrowing Base Determination); provided, that no withdrawal shall be permitted at the request of the Borrower if a Default or an Event of Default shall have occurred and is continuing (other than a withdrawal of monies by the Collateral Agent, at the request of the Borrower, to be applied directly to the immediate payment of the Loans and if paid in full then to the cash collateralization of Letter of Credit Obligations, and not to be delivered to the Borrower) or, after giving effect to such withdrawal, the aggregate principal amount of the Revolving Credit Outstandings will exceed the Maximum Credit. The parties hereto acknowledge and agree that the Special Cash Collateral Account is not a Cash Collateral Account and that all funds and Permitted Cash Equivalents in the Special Cash Collateral Account are collateral security for the payment of the Secured Obligations. The Administrative Agent may, in its sole discretion, from time to time apply funds and Permitted Cash Equivalents then held in the Special Cash Collateral Account to the payment of Secured Obligations which are past due.

ARTICLE III

CONDITIONS TO LOANS AND LETTERS OF CREDIT

Section 3.1 Conditions Precedent to Initial Loans and Letters of Credit. The obligation of each Lender to make the initial Loans requested to be made by it on or after the Closing Date and the obligation of each Issuer to Issue the initial Letters of Credit on or after the Closing Date is subject to the satisfaction of all of the following conditions precedent:

(a) Certain Documents. The Administrative Agent shall have received on the Closing Date each of the following, each dated the Closing Date unless otherwise indicated or agreed to by the Administrative Agent, in form and substance satisfactory to the Administrative Agent and each Lender and each of their respective counsel, in sufficient copies for each Lender:

(i) this Agreement, duly executed and delivered by the Borrower and Group;

(ii) the Fee Letters, duly executed and delivered by the Borrower;

(iii) [Intentionally Omitted];

(iv) the Guaranty, duly executed by each Guarantor;

(v) the Pledge and Security Agreement, duly executed by the Borrower and each Guarantor, together with each of the following:

(A) evidence satisfactory to the Administrative Agent that, upon the filing and recording of instruments delivered on the Closing Date, the Collateral Agent (for the benefit of the Secured Parties) shall have a valid and perfected security interest in the Collateral having the priority described in Section 4.20 of this Agreement and the Collateral Documents, including (x) such documents duly executed by each Loan Party as the Administrative Agent may request with respect to the perfection of the Collateral Agent’s security interests in the Collateral (including financing statements under the UCC, patent, trademark and copyright security agreements suitable for filing with the United States Patent and Trademark Office or the United States Copyright Office, as the case may be, and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens created by the Pledge and Security Agreement), (y) copies of UCC search reports as of a recent date listing all effective financing statements that name any Loan Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral, except for those that shall be terminated on the Closing Date or are otherwise permitted hereunder, and (z) copies of United States Patent and Trademark Office and United States Copyright Office searches as of a recent date with respect to any intellectual property of any Loan Party registered with either such office or for which an application for registration has been submitted to either such office, which searches shall not indicate any Liens on any such intellectual property, except for those that shall be terminated on the Closing Date or are otherwise permitted hereunder;

(B) all certificates, instruments and other documents representing all Pledged Stock being pledged pursuant to the Pledge and Security Agreement and undated stock powers for such certificates, instruments and other documents executed in blank;

(C) all instruments representing Pledged Debt Instruments being pledged pursuant to the Pledge and Security Agreement duly endorsed in favor of the Collateral Agent or in blank; and

(D) evidence reasonably satisfactory to the Administrative Agent of payment or arrangements for payment by the Borrower of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Collateral Documents necessary to perfect the Liens created by the Pledge and Security Agreement;

(vi) [Intentionally Omitted];

(vii) a Borrowing Base Certificate dated on or about the Closing Date;

(viii) a favorable opinion of Skadden, Arps, Slate, Meagher & Flom, LLP, counsel to the Loan Parties, in substantially the form of Exhibit G (Form of Opinion of Counsel for the Loan Parties), and addressing such other related matters as any Lender through the Administrative Agent may reasonably request, including opinions as to the enforceability of the Loan Documents, compliance with all laws and regulations (including Regulation U of the Board of Governors of the Federal Reserve System), the perfection of all security interests purported to be granted pursuant to the Collateral Documents and no conflicts with material agreements;

(ix) (i) (A) a copy of the articles or certificate of incorporation (or equivalent Constituent Document) of each Loan Party, certified as of a recent date by the Secretary of State (or local equivalent, if applicable) of its jurisdiction of organization and (B) a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying (1) the by-laws (or equivalent Constituent Document) of such Loan Party as in effect on the date of such certification, (2) the resolutions of such Loan Party’s Board of Directors (or equivalent governing body) approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which such Loan Party is a party and (3) that there have been no changes in the articles or certificate of incorporation (or equivalent Constituent Document) of such Loan Party from the articles or certificate of incorporation (or equivalent Constituent Document) of such Loan Party delivered pursuant to clause (A) above;

(ii) a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of each officer of such Loan Party who has been authorized to execute and deliver this Agreement and any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Loan Party; and

(iii) a good standing certificate from the applicable Governmental Authority of (A) each Loan Party’s jurisdiction of incorporation, organization or formation and (B) each jurisdiction in which it is qualified as a foreign corporation or other entity to do business and which, if it were not so qualified in such jurisdiction, could reasonably be expected to have a Material Adverse Effect, each dated a recent date prior to the Closing Date;

(x) a certificate of the chief financial officer of Group stating that the Borrower is Solvent and that the Borrower and the Subsidiary Guarantors (taken as a whole), are Solvent, in each case, after giving effect to the initial Loans and Letters of Credit, the application of the proceeds thereof in accordance with Section 7.9, the payment of all estimated legal, accounting and other fees related hereto and thereto and the consummation of the other transactions contemplated hereby;

(xi) a certificate of a Responsible Officer of Group to the effect that the conditions set forth in Section 3.1(g) and Section 3.2 have been satisfied;

(xii) evidence satisfactory to the Administrative Agent that the insurance policies required by Section 7.5 and any Collateral Document are in full force and effect, together with, unless otherwise agreed by the Administrative Agent, endorsements naming the Collateral Agent, on behalf of the Secured Parties, as an additional insured or loss payee under all insurance policies to be maintained with respect to the properties of each Loan Party;

(xiii) all other Collateral Documents and other Loan Documents and related certificates, instruments, documents and agreements required, pursuant to the Pledge and Security Agreement or this Agreement, to be delivered on the Closing Date (including, without limitation, Blocked Account Letters, Restricted Account Letters, Control Account Agreements, Landlord Waivers and Bailee Letters), duly executed by the parties thereto; and

(xiv) such other certificates, documents, agreements and information respecting any Loan Party or the Collateral as the Administrative Agent or any Lender, through the Administrative Agent, may reasonably request.

(b) Termination of Existing Credit Agreement. Group and its Subsidiaries shall have (i) repaid in full all Indebtedness and other obligations under or with respect to the Existing Credit Agreement and any related documents (or in the case of any such Indebtedness that is a guaranty, terminated such guaranty), (ii) terminated any commitments to lend or make other extensions of credit thereunder, (iii) delivered to the Administrative Agent a payoff letter with respect to the Existing Credit Agreement and all documents or instruments necessary to release all Liens securing the Indebtedness and other obligations of Group and its Subsidiaries under or with respect to the Existing Credit Agreement or any related documents (such payoff letter, documents and instruments to be in form and substance satisfactory to the Administrative Agent), and (iv) made arrangements reasonably satisfactory to the Administrative Agent with respect to the cancellation of any letters of credit outstanding under the Existing Credit Agreement (other than the Existing Rollover Letters of Credit) or the issuance of Letters of Credit to support the obligations of the Borrower with respect thereto.

(c) Financial Statements. The Lenders shall have received and be satisfied with (i) unaudited consolidated and consolidating (by business unit) income statement and balance sheet and audited consolidated financial statements of Group and its Subsidiaries for each fiscal quarter ending on or after January 1, 2008 for which such financial statements are available in final form (but in any event the financial statements of Group and its Subsidiaries for each such fiscal quarter through and including the fiscal quarter ending July 5, 2008) and (ii) Group’s projections which shall include a financial forecast on a monthly basis for the first twelve months after the Closing Date and on an quarterly basis thereafter through the year of the Revolving Loan Maturity Date prepared by Group’s management.

(d) Availability. As of the Closing Date, Available Credit shall be not less than $50,000,000 (after giving effect to the Borrowings, issuances of Letters of Credit and financial accommodations under the Canadian Facility, in each instance, requested or deemed requested to be made on the Closing Date).

(e) Consents, Etc. Each Warnaco Entity shall have received all material consents and authorizations required pursuant to any material Contractual Obligation with any other Person and shall have obtained all Permits of, and effected all notices to and filings with, any Governmental Authority, in each case, as may be necessary to allow each of the Warnaco Entities lawfully (i) to execute, deliver and perform, in all material respects, their respective obligations hereunder and under the other Loan Documents to which each of them, respectively, is, or shall be, a party and each other agreement or instrument to be executed and delivered by each of them, respectively, pursuant thereto or in connection therewith and (ii) to create and perfect the Liens on the Collateral owned by each of them in the manner and for the purpose contemplated by the Loan Documents or the transactions contemplated thereby (other than certain non-discretionary consents, authorizations, filings, registrations and other similar actions or approvals which by their nature may only be made after the Closing Date and which will be made as soon as practical after the Closing Date).

(f) Fees and Expenses Paid. There shall have been paid all fees and expenses (including reasonable fees and expenses of counsel) due and payable on or before the Closing Date (including all such fees described in the Fee Letters).

(g) No Material Adverse Effect. There shall have been no event, circumstance or change since December 29, 2007 that has had, either individually or in the aggregate, a Material Adverse Effect. There shall be no actions, suits, investigations, litigation or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority and no judgments, orders, injunctions or other restraints that (i) could reasonably be expected to have a Material Adverse Effect or (ii) can reasonably be expected to materially and adversely affect the Revolving Credit Facility or the transactions contemplated thereby.

(h) Audit and Other Due Diligence. The Administrative Agent shall have conducted a field examination and ordered an appraisal of each Loan Party’s Inventory and the Administrative Agent and the Lenders shall have had an opportunity, if they so choose, to examine the books of account and other records and files of the Loan Parties and to make copies thereof, and to conduct a pre-closing audit, which shall include, without limitation, verification of Receivables and the Borrowing Base of the Borrower and each other Loan Party, and to conduct such other due diligence with respect to the Loan Parties and the Collateral as the Administrative Agent and the Lenders require, and the results of such field examination, appraisal, examination, audit and other due diligence shall have been reasonably satisfactory to the Administrative Agent and the Lenders in all respects.

(i) Canadian Facility. The Canadian Facility shall have been executed by all the parties thereto.

Section 3.2 Conditions Precedent to Each Loan and Letter of Credit. The obligation of each Lender on any date (including the Closing Date) to make any Loan and of each Issuer on any date (including the Closing Date) to Issue any Letter of Credit is subject to the satisfaction of all of the following conditions precedent:

(a) Request for Borrowing or Issuance of Letter of Credit. With respect to (i) any Revolving Loan, the Administrative Agent shall have received a duly executed Notice of Borrowing, (ii) any Swing Loan, the Administrative Agent shall have received a duly executed Swing Loan Request and (iii) any Letter of Credit, the Administrative Agent and the Issuer shall have received a duly executed Letter of Credit Request, in each case, dated on or before such date.

(b) Representations and Warranties; No Defaults. The following statements shall be true on the date of such Loan or issuance of such Letter of Credit, both before and after giving effect thereto and, in the case of any Loan, to the application of the proceeds therefrom:

(i) the representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct on and as of the Closing Date and shall be true and correct in all material respects on and as of any such date after the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date; and

(ii) no Default or Event of Default has occurred and is continuing.

(c) Borrowing Base. The Borrower shall have delivered the Borrowing Base Certificate required to be delivered by Section 6.12. After giving effect to the Loans or the Letters of Credit requested to be made or Issued on any such date and the use of proceeds thereof, the Revolving Credit Outstandings shall not exceed the Maximum Credit at such time.

(d) No Legal Impediments. The making of the Loans or the issuance of such Letter of Credit on such date does not violate any Requirement of Law on the date of or immediately following such Loan or issuance of such Letter of Credit and is not enjoined, temporarily, preliminarily or permanently.

Each submission by the Borrower to the Administrative Agent of a Notice of Borrowing or a Swing Loan Request and the acceptance by the Borrower of the proceeds of each Loan requested therein, and each submission by the Borrower to an Issuer of a Letter of Credit Request and the issuance of each Letter of Credit requested therein, shall be deemed to constitute a representation and warranty by the Borrower as to the matters specified in Section 3.2(b) on the date of the making of such Loan or the issuance of such Letter of Credit.

Section 3.3 Determinations of Initial Borrowing Conditions. For purposes of determining compliance with the conditions specified in Section 3.1, each Lender shall be deemed to have consented to, approved, accepted or be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the initial Borrowing, borrowing of Swing Loans or Issuance or deemed Issuance hereunder specifying its objection thereto and such Lender shall not have made available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing or Swing Loans.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

To induce the Lenders, the Issuers, the Administrative Agent and the Collateral Agent to enter into this Agreement, Group represents and warrants as to each Warnaco Entity, and the Borrower represents and warrants as to itself and as to each of its Subsidiaries, to the Lenders, the Issuers, the Administrative Agent and the Collateral Agent that, on and as of the Closing Date, after giving effect to the making of the Loans and other financial accommodations on the Closing Date and on and as of each date as required by Section 3.2(b)(i):

Section 4.1 Corporate Existence; Compliance with Law. Each Warnaco Entity (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not, in the aggregate, have a Material Adverse Effect; (c) has all requisite power and authority and the legal right to own, pledge, mortgage and operate its properties, to lease the property it operates under lease and to conduct its business as now or currently proposed to be conducted; (d) is in compliance with its Constituent Documents; (e) is in compliance with all applicable Requirements of Law, except where the failure to be in compliance would not, in the aggregate, have a Material Adverse Effect; and (f) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for licenses, permits, consents, approvals or filings which can be obtained or made by the taking of ministerial action to secure the grant or transfer thereof or the failure to obtain or make would not, in the aggregate, have a Material Adverse Effect.

Section 4.2 Corporate Power; Authorization; Enforceable Obligations.

(a) The execution, delivery and performance by each Warnaco Entity of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby, including the obtaining of the Loans and the creation and perfection of the Liens on the Collateral as security therefor:

(i) are within such Warnaco Entity’s corporate, limited liability company, partnership or other powers;

(ii) have been or, at the time of delivery thereof pursuant to Article III will have been, duly authorized by all necessary corporate, limited liability company or partnership, as the case may be, action, including the consent of shareholders, partners and members where required;

(iii) do not and will not (A) contravene such Warnaco Entity’s or any of its Subsidiaries’ respective Constituent Documents, (B) violate any other Requirement of Law applicable to such Warnaco Entity (including Regulations T, U and X of the Federal Reserve Board), or any order or decree of any Governmental Authority or arbitrator applicable to such Warnaco Entity, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of such Warnaco Entity or any of its Subsidiaries, or (D) result in the creation or imposition of any Lien upon any of the property of such Warnaco Entity or any of its Subsidiaries, other than those in favor of the Secured Parties pursuant to the Loan Documents; and

(iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those listed on Schedule 4.2 (Consents) and which have been or will be, prior to the Closing Date, obtained or made (without the imposition of any conditions that are not reasonably acceptable to the Agents), copies of which have been or will be delivered to the Administrative Agent pursuant to Section 3.1, and each of which on the Closing Date will be in full force and effect and, with respect to the Collateral, filings required to perfect the Liens created by the Collateral Documents.

(b) This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof hereunder, duly executed and delivered by each Warnaco Entity party thereto.

(c) This Agreement is, and the other Loan Documents will be, when delivered hereunder, the legal, valid and binding obligation of each Warnaco Entity party thereto, enforceable against such Warnaco Entity in accordance with its terms.

(d) For so long as the Senior Note Indenture is in effect or any Senior Notes are outstanding, each Borrowing, Issuance of a Letter of Credit and financial accommodation made under the Canadian Facility and each delivery by the Borrower of a Borrowing Base Certificate constitutes a representation and warranty by each of Group and the Borrower that, as of the date of such Borrowing, Issuance, financial accommodation or delivery, as the case maybe (both before and after giving effect to such Borrowing, Issuance or financial accommodation, if applicable), the financial accommodations provided to the Borrower hereunder, both by themselves and together with the financial accommodations provided to the Canadian Borrower under the Canadian Facility and the guaranty by the Loan Parties under the Loan Party Canadian Facility Guaranty, do not violate the debt incurrence restrictions set forth in the Senior Note Indenture or any other Senior Note Document. Without limitation of the foregoing, each of Group and the Borrower represents and warrants that (i) each Borrowing (including each Borrowing under a Facility Increase), the Obligations with respect to each Letter of Credit and the guaranty by the Loan Parties of the Canadian Secured Obligations pursuant to the Loan Party Canadian Facility Guaranty is Permitted Debt (as defined in the Senior Note Indenture) and is permitted under Section 4.09 of the Senior Note Indenture, (ii) as of the Closing Date there are in existence no Credit Facilities (as defined in the Senior Note Indenture) other than this Agreement, the Canadian Facility and the Italian Debt Facility and (iii) as of the Closing Date each Credit Facility (as defined in the Senior Note Indenture) other than this Agreement and the Canadian Facility is permitted under Section 4.09 of the Senior Note Indenture (other than under clause (b) thereof).

Section 4.3 Ownership of Group, Borrower; Subsidiaries.

(a) The authorized capital stock of the Borrower consists of 100,000 shares of common stock, $1.00 par value per share, of which 100,000 shares are issued and outstanding. All of the outstanding capital stock of the Borrower has been validly issued, is fully paid and non-assessable and is owned beneficially and of record by Group, free and clear of all Liens other than the Lien in favor of the Collateral Agent for the benefit of the Secured Parties created under the Loan Documents. No Stock of the Borrower is subject to any option, warrant, right of conversion or purchase or any similar right. There are no agreements or understandings to which the Borrower is a party with respect to the voting, sale or transfer of any shares of Stock of the Borrower or any agreement restricting the transfer or hypothecation of any such shares.

(b) Set forth on Schedule 4.3 (Ownership of Warnaco Entities) is a complete and accurate list of all Subsidiaries of Group on the Closing Date, showing (as to each such Subsidiary) the jurisdiction of its incorporation or organization, the number of shares of each class of its Stock or Stock Equivalents authorized, and the number outstanding, on the Closing Date and the percentage of each such class of its Stock or Stock Equivalents owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All of the outstanding Stock or Stock Equivalents in each Subsidiary of Group has been validly issued, is fully paid and non-assessable and is owned by a Warnaco Entity (except as described on Schedule 4.3 (Ownership of Warnaco Entities)) free and clear of all Liens, except those created under the Loan Documents or the Loan Documents (as defined in the Canadian Facility). No Stock of any Warnaco Entity is subject to any outstanding option, warrant, right of conversion or purchase or any similar right. No Warnaco Entity is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any Stock of any such Subsidiary, other than the Loan Documents. Group does not own or hold, directly or indirectly, any Stock of any Person other than the Subsidiaries set forth on Schedule 4.3 (Ownership of Warnaco Entities) and the Investments permitted by Section 8.3.

Section 4.4 Financial Statements.

(a) (x) The consolidated balance sheet of Group and its Subsidiaries as at December 29, 2007, and the related consolidated statements of income, retained earnings and cash flows of Group and its Subsidiaries for the fiscal year then ended, certified by Deloitte & Touche LLP, (y) the unaudited consolidating balance sheets of Group and its Subsidiaries as at December 29, 2007, and the related consolidated statements of income, retained earnings and cash flows of Group and its Subsidiaries for the Fiscal Year then ended, and (z) the unaudited consolidated and consolidating balance sheets of Group and its Subsidiaries as at July 5, 2008, and the related consolidated statements of income, retained earnings and cash flows of Group and its Subsidiaries for the Fiscal Quarter then ended and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, copies of all of which have been furnished to each Lender, fairly present, subject, in the case of said interim financial statements under clause (z), to the absence of footnote disclosure and normal recurring year-end audit adjustments, the consolidated and consolidating, as the case may be, financial condition of Group and its Subsidiaries as at such dates and the consolidated and consolidating, as the case may be, results of the operations of Group and its Subsidiaries for the period ended on such dates, all in conformity with Agreement Accounting Principles.

(b) Neither Group nor any of its Subsidiaries has any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment which is not reflected in the Financial Statements referred to in clause(a) above, in the notes thereto or permitted by this Agreement.

(c) The Projections have been prepared by Group in light of the past operations of its business, and reflect projections for the fiscal periods covered thereby. The Projections are based upon estimates and assumptions stated therein, all of which Group believes to be reasonable and fair in light of current conditions and current facts known to Group and, as of the Closing Date, reflect Group’s good faith and reasonable estimates of the future financial performance of Group and its Subsidiaries and of the other information projected therein for the periods set forth therein.

Section 4.5 Material Adverse Change. Since December 29, 2007, there has been no Material Adverse Change and there have been no events or developments that in the aggregate have had a Material Adverse Effect.

Section 4.6 Solvency. Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or extended on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of the Borrower, and (c) the payment and accrual of all transaction costs in connection with the foregoing, the Borrower is Solvent and the Borrower and the Subsidiary Guarantors, taken as a whole, are Solvent.

Section 4.7 Litigation. There are no pending or, to the knowledge of Group or the Borrower, threatened actions, suits, investigations, litigation or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority that in the aggregate could reasonably be expected to have a Material Adverse Effect. The performance of any action by any Loan Party required or contemplated by any of the Loan Documents is not and could not reasonably be expected to be restrained or enjoined (either temporarily, preliminarily or permanently).

Section 4.8 Taxes.

(a) All federal and material state, local and foreign income, franchise and other tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by Group or any of its Tax Affiliates have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions reflected therein or which are material and otherwise due and payable have been paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of Group or such Tax Affiliate in conformity with Agreement Accounting Principles. Proper and accurate amounts have been withheld by Group and each of its Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective Governmental Authorities.

(b) None of Group or any of its Tax Affiliates has (i) executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for the filing of any Tax Return or the assessment or collection of any material taxes or other charges relating thereto; (ii) any obligation under any tax sharing agreement or arrangement other than that to which the Administrative Agent has a copy prior to the date hereof; or (iii) been a member of an affiliated, combined or unitary group other than the group of which Group (or its Tax Affiliate) is the common parent other than, prior to the acquisition by Group thereof, Warnaco Swimwear, Inc. and its Subsidiaries and Designer Holdings Limited and its Subsidiaries.

(c) Each Foreign Subsidiary owned directly or indirectly by Group is either a “controlled foreign corporation”, as defined under Section 957 of the Code, or owned, directly or indirectly, by one or more “controlled foreign corporations”.

Section 4.9 Full Disclosure. The written information prepared or furnished by or on behalf of any Warnaco Entity in connection with this Agreement or the consummation of the financing, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading. All facts known to Group or the Borrower which are material to an understanding of the financial condition, business, properties or prospects of Group and its Subsidiaries taken as one enterprise have been disclosed to the Lenders.

Section 4.10 Margin Regulations. No Warnaco Entity is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Federal Reserve Board), and no proceeds of any Borrowing will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock in contravention of Regulation T, U or X of the Federal Reserve Board.

Section 4.11 No Burdensome Restrictions; No Defaults.

(a) No Warnaco Entity (i) is a party to any Contractual Obligation the compliance with which would have a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, would result in the creation of a Lien (other than a Lien permitted under Section 8.2) on the property or assets of any thereof or (ii) is subject to any charter or corporate or other similar restriction that would have a Material Adverse Effect.

(d) To the best knowledge of Group and the Borrower, there is no Requirement of Law applicable to any Warnaco Entity the compliance with which by such Warnaco Entity would have a Material Adverse Effect.

Section 4.12 Investment Company Act. No Warnaco Entity is an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

Section 4.13 Use of Proceeds. The proceeds of the Revolving Loans and the Letters of Credit are being used by the Borrower (and, to the extent distributed by the Borrower, each other Warnaco Entity) solely as follows: (i) to refinance all amounts owing under the Existing Credit Agreement and to pay fees and expenses in connection with entering into the Loan Documents, (ii) to provide working capital from time to time for the Warnaco Entities and (iii) for other general and corporate purposes of the Warnaco Entities permitted hereunder.

Section 4.14 Insurance. All policies of insurance of any kind or nature of any Warnaco Entity, including policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by businesses of the size and character of such Person. No Warnaco Entity has been refused insurance for any material coverage which it had applied or, prior to the date hereof, had any policy of insurance terminated (other than at its request). Each insurance policy maintained by each Loan Party includes endorsements naming the Collateral Agent, on behalf of the Secured Parties, as an additional insured or loss payee thereunder.

Section 4.15 Labor Matters.

(a) There are no strikes, work stoppages, slowdowns or lockouts pending or threatened against or involving any Warnaco Entity, other than those which in the aggregate would not have a Material Adverse Effect.

(b) There are no unfair labor practices, grievances or complaints pending, or, to Group’s knowledge, threatened against or involving any Warnaco Entity, nor are there any arbitrations or grievances threatened involving any Warnaco Entity, other than those which, in the aggregate, if resolved adversely to such Warnaco Entity, would not have a Material Adverse Effect.

(c) Except as set forth on Schedule 4.15 (Labor Matters), as of the Closing Date, there is no collective bargaining agreement covering any employee of any Warnaco Entity.

(d) Schedule 4.15 (Labor Matters) sets forth, as of the Closing Date, all material consulting agreements, executive employment agreements, executive compensation plans, deferred compensation agreements, employee stock purchase and stock option plans and severance plans of any Warnaco Entity.

Section 4.16 ERISA.

(a) Schedule 4.16 (ERISA Matters) separately identifies as of the date hereof all Title IV Plans, all Multiemployer Plans and all of the employee benefit plans within the meaning of Section 3(3) of ERISA to which any Warnaco Entity has any obligation or liability, contingent or otherwise.

(b) Each employee benefit plan of each Warnaco Entity which is intended to qualify under Section 401 of the Code does so qualify, and any trust created thereunder is exempt from tax under the provisions of Section 501 of the Code, except where such failures in the aggregate would not have a Material Adverse Effect.

(c) Each Title IV Plan is in compliance with applicable provisions of ERISA, the Code and other Requirements of Law except for non-compliances that in the aggregate would not have a Material Adverse Effect.

(d) There has not been, nor is there reasonably expected to occur, any ERISA Event which would have a Material Adverse Effect

(e) Other than as set forth on Schedule 4.16 (ERISA Matters), there are no Unfunded Pension Liabilities.

(f) Other than as set forth on Schedule 4.16 (ERISA Matters), no Warnaco Entity or any ERISA Affiliate thereof would have any Withdrawal Liability as a result of a complete withdrawal as of the date hereof from any Multiemployer Plan.

Section 4.17 Environmental Matters.

(a) The operations and properties of each Warnaco Entity comply, except to the extent non-compliance would not have a Material Adverse Effect, with all applicable Environmental Laws and Environmental Permits, all material past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing material obligations or costs, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Warnaco Entity or any of their properties that could be reasonably expected to have a Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(b) None of the properties currently or formerly owned or operated by any Warnaco Entity is, to the knowledge of Group or the Borrower with respect to formerly owned or operated properties, listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property, except where such listing would not reasonably be expected to have a Material Adverse Effect; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Contaminants are being or have been treated, stored or disposed on any property currently owned or operated by any Warnaco Entity or, to the best of its knowledge, on any property formerly owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Material Adverse Effect; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Material Adverse Effect; and Contaminants have not been released, discharged or disposed of on any property currently or, to the best knowledge of Group and the Borrower, formerly owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Material Adverse Effect.

(c) No Warnaco Entity is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Contaminants at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law that in any case could reasonably be expected to have a Material Adverse Effect; and all Contaminants generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Warnaco Entity have been disposed of in a manner not reasonably expected to result in material liability to any Warnaco Entity.

Section 4.18 Intellectual Property; Material License.

(a) The Warnaco Entities own or license or otherwise have the right to use all Intellectual Property and other intellectual property rights that are necessary for the operations of their respective businesses, without, to the best of Group’s knowledge, infringing upon or conflict with the rights of any other Person with respect thereto, including all trade names associated with any private label brands of any Warnaco Entity. To Group’s knowledge, no Intellectual Property now employed by any Warnaco Entity infringes upon or conflicts with any rights owned by any other Person, and no claims or litigation regarding any of the foregoing are pending or threatened, where such infringements, conflicts, claims or litigation would have, in the aggregate, a Material Adverse Effect.

(b) Each Material License is in full force and effect as of the Closing Date.

Section 4.19 Title; Real Property.

(a) Each Warnaco Entity has good and marketable title to all Material Owned Real Property and good title to all personal property purported to be owned by it, including those reflected on the most recent Financial Statements delivered by Group, and none of such properties and assets is subject to any Lien, except Liens permitted under Section 8.2. Each Warnaco Entity has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Warnaco Entity’s right, title and interest in and to all such Material Owned Real Property.

(b) Set forth on Schedule 4.19 (Real Property) hereto is a complete and accurate list of all Material Owned Real Property and all Material Leased Property, showing as of the Closing Date, the street address, county or other relevant jurisdiction, state or province, and record owner.

(c) As of the Closing Date, no portion of any Material Owned Real Property or any Material Leased Property has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored. No portion of any Real Property owned or leased by any Warnaco Entity is located in a special flood hazard area as designated by any federal Governmental Authority (unless flood insurance has been obtained).

(d) All Permits required to have been issued or appropriate to enable all real property owned or leased by any Warnaco Entity to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those which, in the aggregate, would not have a Material Adverse Effect.

(e) No Warnaco Entity has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any Real Property owned or leased by any Warnaco Entity or any part thereof, except those which, in the aggregate, would not have a Material Adverse Effect.

Section 4.20 Perfection of Security Interests in the Collateral. The Collateral Documents create valid Liens on the Collateral purported to be covered thereby, which Liens are perfected Liens and prior to all other Liens (other than Customary Permitted Liens having priority over such Liens).

ARTICLE V

FINANCIAL COVENANTS

As long as any of the Obligations or the Commitments remain outstanding, unless the Requisite Lenders otherwise consent in writing, Group and the Borrower agree with the Lenders and the Facility Agents that:

Section 5.1 Minimum Fixed Charge Coverage Ratio. If a Trigger Event shall occur, Group shall maintain a Fixed Charge Coverage Ratio, for each Test Period with respect thereto, of at least 1.1 to 1.0.

ARTICLE VI

REPORTING COVENANTS

As long as any of the Obligations or Commitments remain outstanding, unless the Requisite Lenders otherwise consent in writing, Group and the Borrower agree with the Lenders and the Facility Agents that:

Section 6.1 Financial Statements. Group shall furnish to the Administrative Agent (with a copy for each Lender requesting same) the following:

(a) Monthly Reports. As soon as available and in any event within 40 days after the end of each of the first two months in each Fiscal Quarter, consolidated balance sheets of Group and its Subsidiaries as of the end of such month and consolidated statements of income and cash flow statements of Group and its Subsidiaries for the period commencing at the end of the previous month and ending with the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year and the corresponding figures for the corresponding period set forth in the Projections and duly certified (subject to year-end audit adjustments) by a Responsible Officer of Group as having been prepared in accordance with Agreement Accounting Principles;

(b) Quarterly Reports. As soon as available and in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, consolidated and consolidating balance sheets of Group and its Subsidiaries as of the end of such Fiscal Quarter and consolidated and consolidating statements of income and consolidated statements of cash flows of Group and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, and also setting forth a variance analysis of monthly results during such Fiscal Quarter as compared to monthly budgeted amounts specified in the forecast for such Fiscal Quarter previously delivered pursuant to clause (e) below, duly certified (subject to year-end audit adjustments) by a Responsible Officer of Group as having been prepared in accordance with Agreement Accounting Principles and certifying compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Article V (it being understood and agreed that if such certification is delivered with respect to a Fiscal Quarter for which Section 5.1 is not being tested for a fiscal period ending on the last day of such Fiscal Quarter due to no Trigger Event having occurred, such certification shall still provide the calculations for such Section 5.1 as if a Trigger Event had occurred and such Fiscal Quarter were the last Fiscal Quarter of a Test Period, but the certification shall not then be required to indicate whether or not Group was in compliance with such Section 5.1 as at the end of such Fiscal Quarter);

(c) Annual Consolidated Reports. As soon as available and in any event within 95 days after the end of each Fiscal Year of Group, (i) a copy of the annual audit report for such year for Group and its Subsidiaries, containing the consolidated balance sheet of Group and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of income and cash flows of Group and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion (without qualification as to the scope of the audit) of Deloitte & Touche LLP or by other independent public accountants reasonably acceptable to the Administrative Agent stating that (x) such financial statements fairly present the consolidated financial position of Group and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated in conformity with Agreement Accounting Principles applied on a basis consistent with prior years (except for changes with which such independent certified public accountants shall concur and which shall have been disclosed in the notes to the financial statements) and (y) to the extent permitted by accounting rules and guidelines, the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards, and a certificate of a Responsible Officer of Group as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Article V (it being understood and agreed that if such certificate is delivered with respect to a Fiscal Year for which Section 5.1 is not being tested for a fiscal period ending on the last day of such Fiscal Year due to no Trigger Event having occurred, such certificate shall still provide the calculations for such Section 5.1 as if a Trigger Event had occurred and such Fiscal Year were a Test Period, but the certificate shall not then be required to indicate whether or not Group was in compliance with such Section 5.1 as at the end of such Fiscal Year) and (ii) financial information regarding Group and its Subsidiaries consisting of consolidating balance sheets of Group and its Subsidiaries as of the end of such Fiscal Year and related consolidating statements of income and consolidated cash flows of Group and its Subsidiaries for such Fiscal Year, all prepared in conformity with Agreement Accounting Principles and certified by a Responsible Officer of Group as fairly presenting the financial position of Group and its Subsidiaries as at the end of such Fiscal Year and the results of their operations and cash flows for such Fiscal Year;

(d) Compliance Certificate. Together with each delivery of any financial statement pursuant to clauses (b) and (c) of this Section 6.1, a certificate of a Responsible Officer of Group substantially in the form of Exhibit H hereto (each, a “Compliance Certificate”) (i) showing in reasonable detail the calculations used in demonstrating compliance with each of the financial covenants contained in Article V which is tested on a quarterly basis (it being understood and agreed that if such certificate is delivered with respect to a Fiscal Quarter or Fiscal Year for which Section 5.1 is not being tested for a fiscal period ending on the last day of such Fiscal Quarter or Fiscal Year due to no Trigger Event having occurred, such certificate shall still provide the calculations for such Section 5.1 as if a Trigger Event had occurred and such Fiscal Quarter were the last Fiscal Quarter of a Test Period or such Fiscal Year were a Test Period, as the case may be, but the certificate shall not then be required to indicate whether or not Group was in compliance with such Section 5.1 as at the end of such Fiscal Quarter or Fiscal Year), (ii) showing in reasonable detail the calculations necessary to determine the Applicable Margin, (iii) stating that no Default or Event of Default has occurred and is continuing and no Default or Event of Default (as defined in the Canadian Facility) has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action which Group proposes to take with respect thereto and (iv) stating that the amount of the Available Credit at any time during the period covered by such certificate did not fall to an amount which would give rise to an Accelerated Borrowing Base Certificate Delivery Date and that the amount of the Available Credit at any time during the period covered by such certificate did not fall to an amount which would give rise to a Trigger Event, or, if the Available Credit fell to any such amount, the first date on which each such event occurred;

(e) Business Plan. Not later than 45 days after the end of each Fiscal Year (beginning with the end of Fiscal Year 2008), and containing substantially the types of financial information contained in the Projections, (i) the annual business plan of Group for the next succeeding Fiscal Year approved by the Board of Directors of Group with updates thereof provided to the Lenders prior to each July 31, (ii) schedules of all letters of credit, (iii) forecasts (including availability forecasts) prepared by management of Group for each fiscal month in each of the succeeding Fiscal Years through the Fiscal Year in which the Revolving Loan Maturity Date is scheduled to occur, and (iv) forecasts prepared by management of Group for each of the succeeding Fiscal Years through the Fiscal Year in which the Revolving Loan Maturity Date is scheduled to occur, including, in each instance described in clause (ii) and clause (iii) above, (A) a projected year-end consolidated balance sheet, income statement and statement of cash flows and (B) a statement of all of the material assumptions on which such forecasts are based and in each case prepared by management of Group and satisfactory in form to the Administrative Agent;

(f) Intercompany Loan Balances. Together with each delivery of any financial statement pursuant to clause (b) and clause (c) of this Section 6.1, a summary of the outstanding balance of all intercompany Indebtedness of any Subsidiary to any Loan Party as of the last day of the Fiscal Quarter or Fiscal Year covered by such financial statement, certified by a Responsible Officer of Group; provided that such balances between Loan Parties shall only be required to be delivered annually, as early as practicable;

(g) Corporate Chart. Together with each delivery of any Financial Statement pursuant to clause (c) above, a certificate of a Responsible Officer of Group certifying that the Corporate Chart attached thereto or the last Corporate Chart delivered pursuant to this clause (g) is true, correct, complete and current as of the date of such Financial Statement; and

(h) Trigger Event and Accelerated Borrowing Base Certificate Delivery Date. Promptly after the occurrence of a Trigger Event and/or Accelerated Borrowing Base Certificate Delivery Date, a written notice of a Responsible Officer of Group stating that a Trigger Event and/or Accelerated Borrowing Base Certificate Delivery Date has occurred and describing in reasonable detail such occurrence, including the date of such occurrence.

Section 6.2 Default Notices. As soon as practicable, and in any event within two Business Days after a Responsible Officer of any Loan Party has actual knowledge of the existence of any Default, Event of Default or any other event which has had a Material Adverse Effect or of the existence of any Default or Event of Default under and as defined in the Canadian Facility, Group shall give the Administrative Agent notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day.

Section 6.3 Litigation. Promptly after the commencement thereof, Group shall give the Administrative Agent written notice of the commencement of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, affecting any Warnaco Entity, which in the reasonable judgment of Group, if adversely determined, would be reasonable likely to have a Material Adverse Effect.

Section 6.4 Asset Sales. No later than 10 days prior to any Asset Sale anticipated to generate in excess of $15,000,000 (or its Dollar Equivalent) in net cash proceeds to the Loan Parties, Group shall send the Administrative Agent a notice (a) describing such Asset Sale or the nature and material terms and conditions of such transaction and (b) stating the estimated net cash proceeds anticipated to be received by Group or any of its Subsidiaries.

Section 6.5 Notices under Senior Note Documents. Promptly after the sending or filing thereof, the Borrower shall send the Administrative Agent copies of all material notices, certificates or reports delivered pursuant to, or in connection with, any Senior Note Document.

Section 6.6 SEC Filings; Press Releases. Promptly after the sending or filing thereof, Group shall send the Administrative Agent copies of (a) all reports which any Warnaco Entity sends to its security holders generally, (b) all reports and registration statements which any Warnaco Entity files with the Securities and Exchange Commission or any national securities exchange, (c) all press releases, (d) all other statements concerning material changes or developments in the business of any Warnaco Entity made available by any Warnaco Entity to the public and (e) all notices of investigation or proceedings received from the Securities and Exchange Commission or any national securities exchange.

Section 6.7 Labor Relations. Promptly after becoming aware of the same, Group shall give the Administrative Agent written notice of (a) any material labor dispute to which any Warnaco Entity is or may become a party, including any strikes, lockouts or other disputes relating to any of such Person’s plants and other facilities, and (b) any Worker Adjustment and Retraining Notification Act or related liability incurred with respect to the closing of any plant or other facility of any such Person.

Section 6.8 Tax Returns. Upon the request of the Administrative Agent or any Lender, through the Administrative Agent, Group will provide copies of all federal, state and local tax returns and reports (other than foreign tax returns and reports) filed by any Warnaco Entity in respect of taxes measured by income (excluding sales, use and like taxes).

Section 6.9 Insurance. As soon as is practicable and in any event within 90 days after the end of each Fiscal Year, Group will furnish the Administrative Agent (in sufficient copies for each of the Lenders and the Collateral Agent) with (a) a report in form and substance satisfactory to the Administrative Agent and the Lenders outlining all material insurance coverage maintained as of the date of such report by the Warnaco Entities and the duration of such coverage and (b) an insurance broker’s statement that all premiums then due and payable with respect to such coverage have been paid and that all such insurance names the Collateral Agent on behalf of the Secured Parties as additional insured or loss payee, as appropriate, and provides that no cancellation, material addition in amount or material change in coverage shall be effective until after 30 days’ written notice thereof to the Facility Agents.

Section 6.10 ERISA Matters. Group shall furnish the Administrative Agent (with a copy for each Lender requesting same):

(a) promptly and in any event within 30 days after any Warnaco Entity or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, written notice describing such event;

(b) promptly and in any event within 10 days after any Warnaco Entity or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a written statement of a Responsible Officer of Group describing such ERISA Event or waiver request and the action, if any, which such Warnaco Entity and the ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; and

(c) simultaneously with the date that any Warnaco Entity or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice.

Section 6.11 Environmental Matters. Group shall provide promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Warnaco Entity with any Environmental Law or Environmental Permit that would reasonably be expected to (i) have a Material Adverse Effect or (ii) cause any Material Real Property or Material Leased Property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law.

Section 6.12 Borrowing Base Determination. Until the Revolving Credit Termination Date:

(a) The Borrower shall deliver to the Administrative Agent as soon as available, but in any event within 15 days after the end of each calendar month, as of the end of such calendar month, and at such other times as may be reasonably requested by the Administrative Agent (but not more than one per week), a Borrowing Base Certificate executed by a Responsible Officer of Group; provided, that during each Accelerated Borrowing Base Certificate Delivery Period or during the existence of an Event of Default, the Borrower shall deliver to the Administrative Agent a Borrowing Base Certificate not less than once each week, as of the Business Day immediately prior to the day of delivery and executed by a Responsible Officer of Group. Concurrently with the delivery of any Borrowing Base Certificate to the Administrative Agent, the Borrower shall deliver to the Administrative Agent a certification in reasonable detail setting forth the Available Credit as of the date of such Borrowing Base Certificate.

(b) Group and the Borrower agree (i) that the Administrative Agent, on behalf of the Lenders, may appoint an independent or an internal third party appraiser to conduct and conclude two field audits in each calendar year (and additional field audits (not to exceed, in the case of clause (B) below, two additional field audits in such calendar year) if (A) an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or (B) Available Credit has been less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the Canadian Facility) for 5 or more consecutive Business Days at the time of the appointment of the appraiser) with respect to Inventory owned by any Loan Party and (ii) Group shall conduct, or shall cause to be conducted, and upon request of the Administrative Agent, and present to the Administrative Agent for approval, such appraisals and reviews as the Administrative Agent shall reasonably request, all upon notice and at such times during normal business hours and as often as may be reasonably requested, in each case at the expense of Group and for the purpose of determining the Borrowing Base. Group and the Borrower shall furnish to the Administrative Agent any information which the Administrative Agent may reasonably request regarding the determination and calculation of the Borrowing Base including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein. Group and the Borrower further agree to use their reasonable best efforts to assist each appraiser appointed by the Administrative Agent to conduct and conclude such field audits.

(c) The Administrative Agent may, at the sole cost and expense of Group and the Borrower, make test verifications of the Accounts in any manner and through any medium that the Administrative Agent considers advisable, and Group and the Borrower shall furnish all such assistance and information as the Administrative Agent may reasonably require in connection therewith.

(d) Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, use its reasonable best efforts to assist an independent third party appraiser appointed by the Administrative Agent to conduct and conclude (i) field audits with respect to Inventory owned by any Loan Party not more frequently than two times in any calendar year (and such additional times in any calendar year (not to exceed, in the case of clause (B) below, two additional field audits in such calendar year) if (A) an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or (B) Available Credit has been less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the Canadian Facility) for 5 or more consecutive Business Days at the time of the appointment of the appraiser) and (ii) Appraisals, as reasonably requested by the Administrative Agent (which, in the case of Inventory and Receivables, shall be conducted not less frequently than twice during each calendar year and may in any event be conducted if an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or if Available Credit is less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the Canadian Facility) in effect at the time of the appointment of the appraiser), in each case at the sole expense of the Group and the Borrower.

(e) Not less than once each month, the Borrower shall deliver to the Administrative Agent a certificate, as of the day immediately prior to the day of delivery and executed by a Responsible Officer of Group, that sets forth the aggregate amount of Cash Management Obligations owing to the Agents or Lenders or any Affiliates of any Agent or Lender (or such other Persons as the Administrative Agent may reasonably consent to) that constitute Secured Obligations as of such date;

(f) In connection with the consummation of a Permitted Acquisition, no Eligible Receivables or Eligible Inventory of any Proposed Acquisition Target acquired in connection with such Permitted Acquisition may be included in the Borrowing Base to the extent provided for in this Agreement unless and until the Administrative Agent shall have received the results of the appraisals, field audits, test verifications and other evaluations of such Collateral as it may reasonably request of the type specified in clauses (b), (c) and (d) above, at the sole cost and expense of Group and the Borrower.

Section 6.13 Material Licenses. Promptly after any Loan Party becoming aware of the same, the Borrower shall give the Administrative Agent written notice of any cancellation, termination or loss of any Material License.

Section 6.14 Communications and Amendments with respect to Canadian Facility. Group and the Borrower shall cause the Canadian Borrower to provide the Administrative Agent with copies of (i) all certificates (including, without limitation, borrowing base certificates), statements, notices and other communications provided by it or any of its Affiliates under or with respect to the Canadian Facility concurrently with the sending thereof to any other Person party to the Canadian Facility and (ii) all amendments, waivers and consents to or with respect to the Canadian Facility or any related documents promptly upon the Canadian Borrower’s receipt thereof.

Section 6.15 Other Information. Group and the Borrower shall provide the Administrative Agent or any Lender with such other information respecting the business, properties, condition, financial or otherwise, or operations of any Warnaco Entity as the Administrative Agent or any Lender, through the Administrative Agent, may from time to time reasonably request.

ARTICLE VII

AFFIRMATIVE COVENANTS

As long as any of the Obligations or Commitments remain outstanding, unless the Requisite Lenders otherwise consent in writing, each of Group and the Borrower agree with the Lenders and the Facility Agents that:

Section 7.1 Preservation of Corporate Existence, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, preserve and maintain its legal existence, rights (charter and statutory) and franchises, except as permitted by Section 8.3, Section 8.4 and Section 8.7; provided, however, no Warnaco Entity shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors (or equivalent governing body) of such Warnaco Entity shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Warnaco Entity and that the loss thereof is not disadvantageous in any material respect to the Warnaco Entities (taken as whole) or the Secured Parties.

Section 7.3 Conduct of Business. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, (a) conduct its business in the ordinary course and (b) use its reasonable efforts, in the ordinary course and consistent with past practice, to preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with any Warnaco Entity, except in each case where the failure to comply with the covenants in each of clauses (a) and (b) above would not, in the aggregate, have a Material Adverse Effect.

Section 7.4 Payment of Taxes, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, pay and discharge before the same shall become delinquent, all lawful governmental claims, federal and material state, local and non-U.S. taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings and adequate reserves therefor have been established on the books of the appropriate Warnaco Entity in conformity with Agreement Accounting Principles, unless and until any Liens resulting from such contested items attach to its property and become enforceable against its other creditors.

Section 7.5 Maintenance of Insurance. Each of Group and the Borrower shall (i) maintain, and cause to be maintained for each of its respective Subsidiaries, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Warnaco Entity operates, and such other insurance as may be reasonably requested by the Requisite Lenders, and, in any event, all insurance required by any Loan Document, and (ii) cause all such insurance to name the Collateral Agent on behalf of the Secured Parties as additional insured or loss payee, as appropriate, and to provide that no cancellation, material addition in amount or material change in coverage shall be effective until after 30 days’ written notice thereof to the Facility Agents.

Section 7.6 Access. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, from time to time permit each Facility Agent and the Lenders, or any agents or representatives thereof, within two Business Days after written notification of the same to the Borrower (except that during the continuance of an Event of Default, no such notice shall be required) to (a) examine and make copies of and abstracts from the records and books of account of any Warnaco Entity, (b) visit the properties of any Warnaco Entity, (c) discuss the affairs, finances and accounts of any Warnaco Entity with any of their respective officers or directors, and (d) communicate directly with any Warnaco Entity’s independent certified public accountants (or its equivalent in foreign jurisdictions) (with Group having the right to have a representative present at all such communications). Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, authorize its independent certified public accountants (or its equivalent in foreign jurisdictions) to disclose to any Facility Agent or any Lender any and all financial statements and other information of any kind, as such Facility Agent or Lender reasonably requests from any Warnaco Entity and which such accountants may have with respect to the business, financial condition, results of operations or other affairs of such Warnaco Entity or any of its Subsidiaries.

Section 7.7 Keeping of Books. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made in conformity with Agreement Accounting Principles of all financial transactions and the assets and business of such Warnaco Entity.

Section 7.8 Maintenance of Properties, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, maintain and preserve (a) all of its properties which are necessary in the conduct of its business in good working order and condition, (b) all rights, permits, licenses, approvals and privileges (including all Permits) which are used or useful or necessary in the conduct of its business, and (c) all Intellectual Property with respect to the business of the Warnaco Entities; except where the failure to so maintain and preserve would not in the aggregate have a Material Adverse Effect.

Section 7.9 Application of Proceeds. The Borrower (and, to the extent distributed by the Borrower, each other Warnaco Entity) shall use the proceeds of the Loans as provided in Section 4.13.

Section 7.10 Environmental.

(a) Each of Group and Borrower shall comply, and shall cause each of its respective Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all material Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Contaminants from any of its properties, in accordance with and to the extent required by all applicable Environmental Laws, to the extent the failure to do any of the foregoing would have a Material Adverse Effect; provided, however, that no Warnaco Entity shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances.

(b) At the request of the Administrative Agent after receipt of a notice of the type specified in Section 6.11, Group will provide to the Administrative Agent and each Lender within 60 days after such request, at the expense of Group and the Borrower, an environmental assessment report for the applicable property described in such notice, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence of Contaminants that could reasonably be expected to give rise to a material liability and the estimated cost of any compliance, removal or remedial action in connection with any Contaminants that could reasonably be expected to give rise to a material liability on such properties; without limiting the generality of the foregoing, if the Administrative Agent determines at any time that a material risk exists that any such report will not be provided within the time referred to above, the Administrative Agent may retain an environmental consulting firm to prepare such report at the expense of Group and the Borrower, and Group and the Borrower each hereby grants and agrees to cause any other Warnaco Entity that owns any property described in such request to grant at the time of such request to the Administrative Agent, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment, and to, or to cause its respective Subsidiaries to, cooperate in all reasonable respects with the preparation of such assessment.

Section 7.11 Additional Personal Property Collateral and Guaranties. To the extent not delivered to the applicable Facility Agents on or before the Closing Date (including in respect of after-acquired property and Persons that become Subsidiaries of any Loan Party after the Closing Date), each of Group and the Borrower agrees promptly to do, or cause each of its respective Subsidiaries to do, each of the following, unless otherwise agreed by the Administrative Agent:

(a) deliver to the Facility Agents such duly-executed supplements and amendments to the Guaranty, in each case in form and substance reasonably satisfactory to the Administrative Agent and as the Administrative Agent deems necessary or advisable, in order to ensure that each Domestic Subsidiary of Group (other than the Borrower) guaranties, as primary obligor and not as surety, the full and punctual payment when due of the Obligations;

(b) deliver to the Facility Agents such duly-executed joinder and amendments to the Pledge and Security Agreement and, if applicable, other Collateral Documents, in each case in form and substance reasonably satisfactory to the Administrative Agent and as the Administrative Agent deems necessary or advisable, in order to effectively grant to the Collateral Agent, for the benefit of the Secured Parties, a valid, perfected and enforceable security interest having the priority described in Section 4.20 of this Agreement and the Collateral Documents in all personal property interests and other assets (including the Stock and Stock Equivalents and other debt Securities, but, in the case of Real Property, limited to Material Owned Real Property) of each Loan Party; provided, however, that in no event shall any Warnaco Entity be required to pledge in excess of 65% of the outstanding Voting Stock of any Foreign Subsidiary that is a direct Subsidiary of a Loan Party, unless (x) the Borrower and the Administrative Agent otherwise agree; (y) such Voting Stock has been granted as security in respect of other Indebtedness of a Warnaco Entity having substantially similar tax consequences to the Loan Parties under Section 956 of the Code or (z) such pledge or grant can be made without resulting in any material adverse tax consequences for the Warnaco Entities, taken as a whole (including any Person that becomes a Loan Party as a result of such pledge or grant);

(c) to take such other actions necessary or advisable to ensure the validity or continuing validity of the guaranties required to be given pursuant to clause (a) above or to create, maintain or perfect the security interest required to be granted pursuant to clause (b) above, including the filing of UCC or equivalent financing statements in such jurisdictions as may be required by the Collateral Documents or by law or as may be reasonably requested by the Administrative Agent; and

(d) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

Section 7.12 [Intentionally Omitted].

Section 7.13 Real Property.

(a) Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, (i) provide the Administrative Agent with a copy of each notice of default under any Lease with respect to any Material Leased Property received by any Warnaco Entity immediately upon receipt thereof and deliver to the Administrative Agent a copy of each notice of default sent by any Warnaco Entity under any Lease with respect to any Material Leased Property simultaneously with its delivery of such notice under such Lease and (ii) notify the Administrative Agent at least 14 days prior to the date any Warnaco Entity takes possession of, or becomes liable under, any new Lease with respect to any Material Leased Property, whichever is earlier.

(b) At least 15 Business Days prior to acquiring any Material Owned Real Property, each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, provide the Administrative Agent written notice thereof and, upon written request of the Administrative Agent, each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, provide Phase I environmental reports on such Material Owned Real Property showing no condition that could give rise to material Environmental Liabilities and Costs.

Administrative Agent and such Material Owned Real Property is located in the United States, all Mortgage Supporting Documents relating thereto or (ii) otherwise, documents similar to Mortgage Supporting Documents deemed by the Administrative Agent to be appropriate in the applicable jurisdiction to obtain the equivalent in such jurisdiction of a first-priority mortgage on such Material Owned Real Property; provided, however, that in no event shall any Warnaco Entity that is not a Loan Party be required to enter into a Mortgage in respect of Material Owned Real Property, unless (x) the Borrower and the Administrative Agent otherwise agree, (y) such Mortgage has been provided as security in respect of other Indebtedness of a Warnaco Entity having substantially similar tax consequences under Section 956 of the Code or (z) such pledge or grant can be made without resulting in any material adverse tax consequences for the Warnaco Entities, taken as a whole (including any Person that becomes a Loan Party as a result of providing such Mortgage).

Section 7.14 Senior Notes. The Borrower shall, on or before the date 45 days prior to the scheduled maturity of the Senior Notes, repurchase (in accordance with Section 8.6(b)) or refinance (in accordance with Section 8.1(f)) all of the Senior Notes or cause the Legal Defeasance (as defined in the Senior Note Indenture) of all of the Senior Notes (in accordance with Article 8 of the Senior Note Indenture, including satisfaction of the conditions therefor under Section 8.04 thereof).

Section 7.15 Post Closing Matters. Each of Group and the Borrower shall, and shall cause each of their respective Subsidiaries to, satisfy the requirements set forth on Schedule 7.15 on or before the date set forth opposite such requirement or such later date as consented to by the Administrative Agent.

ARTICLE VIII

NEGATIVE COVENANTS

As long as any of the Obligations or Commitments remain outstanding, without the written consent of the Requisite Lenders, each of Group and the Borrower agrees with the Lenders and the Facility Agents that:

Section 8.1 Indebtedness. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:

(a) the Secured Obligations (other than in respect of Hedging Contracts);

(b) the Senior Notes in an aggregate outstanding principal amount not to exceed $160,890,000;

(d) (i) Guaranty Obligations incurred by a Loan Party in respect of Indebtedness of another Loan Party otherwise permitted by this Section 8.1, (ii) Guaranty Obligations incurred by any Foreign Subsidiary in respect of the Indebtedness of a Foreign Subsidiary otherwise permitted by this Section 8.1 and (iii) unsecured Guaranty Obligations incurred by a Loan Party in respect of the Indebtedness of a Foreign Subsidiary permitted by clause (g) of this Section 8.1;

(e) Capital Lease Obligations and purchase money Indebtedness incurred by a Warnaco Entity to finance the acquisition or construction of fixed assets in an aggregate outstanding principal amount not to exceed the Dollar Equivalent of $40,000,000 at any time;

(f) Renewals, extensions, refinancings and refundings of Indebtedness permitted by clauses (b), (c) and (e) of this Section 8.1 and of Indebtedness under the Canadian Facility; provided, however, that (A) any such renewal, extension, refinancing or refunding is in an aggregate principal amount not greater than the principal amount of, and is on terms not materially less favorable to the Warnaco Entity obligated thereunder (subject to market rates), including as to weighted average maturity and final maturity, than, the Indebtedness being renewed, extended, refinanced or refunded, (B) additionally with respect to any renewal, extension, refinancing or refunding of the Senior Notes, such renewal, extension, refinancing or refunding (i) is unsecured and not guaranteed by any Warnaco Entity that is not guaranteeing the Obligations, and (ii) has no payments of principal scheduled to be due and payable prior to three years after the Revolving Loan Maturity Date and (C) additionally with respect to any renewal, extension, refinancing or refunding of Indebtedness under the Canadian Facility, such renewal, extension, refinancing or refunding is not directly or indirectly guaranteed by, or secured by any assets of, any Loan Party;

(g) Indebtedness of the Foreign Subsidiaries of Group not otherwise permitted under this Section 8.1; provided, however, that the Dollar Equivalent of the aggregate outstanding principal amount of all such Indebtedness (other than under the Canadian Facility) shall not exceed $100,000,000 at any time (with such dollar limitation not to be applicable with respect to the incurrence of such Indebtedness if (x) at the time of incurrence of such Indebtedness the Leverage Ratio for Group is less than 3.5 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to such incurrence and the application of the proceeds thereof and (y) prior to the incurrence of such Indebtedness, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this parenthetical with respect to such incurrence and setting forth in reasonable detail the calculation of such Leverage Ratio);

(h) a Sale and Leaseback Transaction permitted pursuant to Section 8.16, to the extent such transaction would constitute Indebtedness;

(i) Indebtedness arising from intercompany loans from any Warnaco Entity to any other Warnaco Entity, provided, that such Investment is permitted to be made by such Warnaco Entity under Section 8.3(a);

(j) Indebtedness incurred for the sole purpose of financing the payment of insurance premiums in the ordinary course of business, in an aggregate amount not to exceed $15,000,000 at any one time outstanding;

(k) Indebtedness arising under any performance or surety bond entered into in the ordinary course of business;

(l) Obligations under Hedging Contracts permitted under Section 8.17;

(m) unsecured Earnout Obligations and Subordinated Indebtedness; and

(n) other Indebtedness the aggregate Dollar Equivalent of the principal amount of which shall not exceed $50,000,000 at any time (of which not greater than the aggregate Dollar Equivalent of $20,000,000 may be secured by Liens at any time).

Section 8.2 Liens, Etc. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, create or suffer to exist, any Lien upon or with respect to any of its properties or assets, whether now owned or hereafter acquired, or assign any right to receive income, except for:

(a) Liens created pursuant to the Loan Documents;

(b) Liens granted by a Foreign Subsidiary of Group securing the Indebtedness permitted under Section 8.1(g), which Liens for the avoidance of doubt shall not secure any Indebtedness under this Agreement;

(d) Customary Permitted Liens;

(e) purchase money Liens granted by a Warnaco Entity (including the interest of a lessor under a Capital Lease and purchase money Liens to which any property is subject at the time of such Warnaco Entity’s acquisition thereof or promptly thereafter) securing Indebtedness permitted under Section 8.1(e) and limited in each case to the property purchased with the proceeds of such purchase money Indebtedness or subject to such Capital Lease;

(f) any Lien securing the renewal, extension, refinancing or refunding of any Indebtedness secured by any Lien permitted by clause (c) or (e) of this Section 8.2 as long as such Lien does not cover any assets not subject to the Lien securing the Indebtedness being renewed, extended, refinanced or refunded;

(g) Liens in favor of lessors securing operating leases or, to the extent such transactions create a Lien thereunder, sale and leaseback transactions, in each case to the extent such operating leases or sale and leaseback transactions are permitted hereunder;

(h) Liens not otherwise permitted under this Section 8.2, other than in favor of the PBGC, arising out of judgments or awards in respect of which the applicable Warnaco Entity shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review; provided it shall have set aside on its books adequate reserves, in accordance with Agreement Accounting Principles, with respect to such judgment or award and; provided, further, that any such judgment shall not give rise to an Event of Default;

(i) Liens on any bills of lading, airway bills, receipts and other applicable documents of title (and inventory and goods covered thereby) delivered with respect to letters of credit issued for the benefit of suppliers of inventory pursuant to facilities provided to a Foreign Subsidiary and in respect of which all inventory and goods are located outside the United States;

(j) Liens securing Indebtedness incurred under Section 8.1(j); provided that such Liens shall only encumber Insurance Assets that relate directly to the Indebtedness such assets secure and that have an aggregate value not in excess of $15,000,000; and

(k) other Liens (not covering any Inventory, Accounts or other Receivables of any Loan Party or proceeds of any of the foregoing) not otherwise permitted under this Section 8.2, securing obligations in an amount not to exceed $20,000,000 in an aggregate amount outstanding at any time.

Section 8.3 Investments. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly make or maintain any Investment except:

(a) (i) Investments by any Warnaco Entity in any Warnaco Entity in an amount not exceeding the amount outstanding on the Closing Date and as set forth on Schedule 8.3, and (ii) additional Investments by (A) any Warnaco Entity in a Loan Party, (B) any Warnaco Entity that is not a Loan Party in any other Warnaco Entity, and (C) any Loan Party in a Warnaco Entity that is not a Loan Party (1) to the extent required by applicable law to fulfill statutory capital requirements in a maximum aggregate amount up to $10,000,000, and (2) solely for the purposes of funding (x) the operations of such Foreign Subsidiary (including Standby Letters of Credit Issued for the benefit of such Foreign Subsidiaries), not to exceed in the aggregate $25,000,000 at any time outstanding under this subclause (a)(ii)(C)(2)(x), and (y) the repayment of Indebtedness owed by such Warnaco Entity to any Loan Party and (3) to the extent necessary for such entity to pay taxes that are due and payable; provided, that in each case (other than investments made as capital contributions pursuant to subclause (ii)(C)(1)) such Investment shall be evidenced by a promissory note in form and substance satisfactory to the Administrative Agent, the Collateral Agent shall have a perfected security interest in such promissory note and no Event of Default shall have occurred and be continuing at the time such Investment is made or would result therefrom; provided, further, that in the case of investments made as capital contributions pursuant to subclause (ii)(C)(1) such Investment shall be permitted only to the extent that substantially concurrently with such Investment the Borrower shall have complied with the requirements of Section 7.11(b) (Additional Personal Property Collateral and Guaranties);

(d) Investments in payment intangibles, chattel paper (each as defined in the UCC) and Accounts, notes receivable (including but not limited to those notes receivable held by the Borrower or its Subsidiaries pursuant to clause (b) of Section 8.4) and similar items arising or acquired in the ordinary course of business consistent with the past practice of the Borrower and its Subsidiaries;

(e) Investments consisting of Stock or Stock Equivalents, obligations, securities or other property received in a bankruptcy proceeding or in settlement of claims arising in the ordinary course of business;

(f) (i) advances or loans to directors or employees of the Warnaco Entities that do not exceed $2,000,000 in the aggregate at any one time outstanding (other than any loans or advances to any director or executive officer (or equivalent thereof) that would be in violation of Section 402 of the United States Sarbanes-Oxley Act of 2002), and (ii) advances for employee travel, relocation and other similar and customary expenses incurred in the ordinary course of business that do not exceed $3,000,000 in the aggregate at any one time outstanding;

(g) Investments consisting of promissory notes received in connection with an Asset Sale permitted pursuant to Section 8.4(b); provided that such promissory notes are pledged to the Collateral Agent within three (3) Business Days’ of the receipt thereof by any Loan Party as additional Collateral pursuant to the Pledge and Security Agreement;

(h) Guaranty Obligations permitted by Section 8.1;

(i) Investments by the Borrower or any Subsidiary in Permitted Acquisitions;

(j) [Intentionally Omitted];

(k) other Investments in an aggregate amount invested not to exceed the Dollar Equivalent of $5,000,000 at any time; and

(l) other Investments so long as (i) no Default or Event of Default shall have occurred and be continuing at the time such Investment is made or after giving effect thereto, (ii) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to the making of such Investment (as if such Investment had been made on the first day of such period), (iii) after giving pro forma effect to such Investment Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and (iv) prior to the making of such Investment, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (l) with respect to such Investment and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio and Available Credit.

Section 8.4 Sale of Assets. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of, any of its assets or any interest therein (including the sale or factoring at maturity or collection of any Accounts) to any Person, or permit or suffer any other Person to acquire any interest in any of its assets or, in the case of any Subsidiary of Group, issue or sell any shares of such Subsidiary’s Stock or Stock Equivalent (any such disposition being an “Asset Sale”), except:

(a) the sale or disposition of inventory in the ordinary course of business;

(b) the sale of any asset or assets (including, without limitation, a Subsidiary’s Stock) by a Warnaco Entity as long as (i) the purchase price paid to such Warnaco Entity for such asset shall be no less than the Fair Market Value of such asset at the time of such sale, (ii) no less than 75% of the purchase price for such asset shall be paid in cash and the remaining amount paid in notes receivable (provided that in the case of an Asset Sale consummated when no Loan or Loans or unreimbursed amounts in respect of drawn Letters of Credit are outstanding (Loan, Loans and Letters of Credit being used in this proviso as defined in each of this Agreement and the Canadian Facility), 50% of the purchase price for such asset may be paid in cash and the remaining amount paid in notes receivable) (which notes receivable shall be in form and substance reasonably satisfactory to the Administrative Agent), (iii) neither the seller of such assets nor any of its Affiliates shall have any subsequent payment obligations in respect of such sale, other than customary and standard indemnity obligations and as set forth in subclause (ii)

above, (iv) no Default or Event of Default has occurred and is continuing at the time of such sale or would result from such sale, and (v) if the net cash proceeds received for all assets sold by the Loan Parties during any calendar year pursuant to this clause (b) shall exceed $10,000,000 in the aggregate, then (1) the Borrower shall prepay the Loans (first the Swing Loans until paid in full and then the Revolving Loans) promptly upon receipt of such net cash proceeds in the amount of all net cash proceeds received from time to time (including in respect of any note receivable) with respect to the sale that resulted in such excess occurring and all subsequent sales of assets by any Loan Party pursuant to this clause (b) during such calendar year and (2) with respect to the sale that resulted in such excess occurring and each subsequent sale of assets by any Loan Party pursuant to this clause (b) during such calendar year which results in net cash proceeds in excess of $500,000, the Borrower shall deliver to the Administrative Agent, no later than the date of such sale, a Borrowing Base Certificate as of the Business Day immediately preceding the date of such sale executed by a Responsible Officer of Group giving pro forma effect to such sale, which Borrowing Base Certificate shall show that the aggregate principal amount of Revolving Credit Outstandings does not exceed the Maximum Credit at such time(for purposes of this clause (v), net cash proceeds of an asset sale means proceeds of such asset sale received from time to time (including a payment on a note receivable) in cash or Cash Equivalents net of (x) the reasonable cash costs of sale, (y) taxes paid or payable as a result thereof and (z) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by a perfected Lien on the assets subject to such asset sale);

(c) transfers of assets from (i) any Loan Party to any other Loan Party, (ii) any Loan Party to any Warnaco Entity that is not a Loan Party, provided that the aggregate Fair Market Value of assets sold, leased, transferred or otherwise disposed of pursuant to this subclause (ii) (other than pursuant to the next proviso of this subclause (ii)) shall not exceed $20,000,000 in the aggregate plus the Fair Market Value of any equipment and inventory owned on the Closing Date by a Loan Party in connection with its domestic manufacturing operations that are subsequently transferred to a Foreign Subsidiary, and provided further that the Loan Parties may transfer the Calvin Klein Underwear trademark and/or rights to use such trademark to one or more Warnaco Entities that are not Loan Parties so long as (A) each such transfer shall be on arm’s-length terms and the price paid to the transferring Loan Parties shall be no less than the Fair Market Value of such trademark at the time of such transfer, (B) each such transfer is for cash, Cash Equivalents and/or a note (such note to be on arm’s-length terms at a market interest rate and otherwise reasonably acceptable to the Administrative Agent and pledged to the Collateral Agent for the benefit of the Secured Parties), (C) no Default or Event of Default has occurred and is continuing at the time of such transfer or would result from such transfer and (D) the transferee of such trademark shall have entered into an agreement on terms reasonably satisfactory to the Administrative Agent pursuant to which such transferee agrees that the Collateral Agent may dispose of Inventory utilizing such trademark without restriction or royalty payment to the transferee, and (iii) any Warnaco Entity that is not a Loan Party to any other Warnaco Entity;

(d) the licensing or sublicensing of trademarks and trade names by any Warnaco Entity; provided that (i) if the licensing or sublicensing is by a Loan Party, if the applicable trademark or trade name has generated sales in excess of $20,000,000 in the prior fiscal year, such license or sublicense (x) shall not have an initial term in excess of 7 years and (y) shall not have aggregate up-front payments and minimum guaranteed royalties in excess of $7,500,000 or, together with the aggregate up-front payments and minimum guaranteed royalties for all other such licenses and sublicenses, in an aggregate amount in excess of $25,000,000 and (ii) any such licensing or sublicensing to a Person other than a Loan Party shall take place on an arm’s-length basis;

(e) the rental by the Warnaco Entities, as lessors or sub-lessors, in the ordinary course of their respective businesses, on an arm’s-length basis, of real property and personal property, in each case under leases (other than Capital Leases);

(f) the sale or disposition of machinery and equipment no longer used or useful in the business of the Warnaco Entities;

(g) any sale of fixed assets not in connection with a Sale and Leaseback Transaction that were purchased in connection with a proposed lease financing transaction within 45 days of such Asset Sale, which assets are subsequently leased back by the Borrower or one of its Subsidiaries;

(h) any Asset Sale permitted by Section 8.7;

(i) any Asset Sale in connection with a Sale and Leaseback Transaction permitted pursuant to Section 8.16(b); and

(j) the sale of any asset listed on Schedule 8.4.

Section 8.5 Restricted Payments. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment except for the following:

(a) Restricted Payments by any Subsidiary of the Borrower to the Borrower or any Subsidiary of the Borrower that owns Stock of such Subsidiary;

(b) dividends and distributions declared and paid on the common Stock of Group and payable only in common Stock of Group;

(c) cash dividends on the Stock of the Borrower to Group paid and declared in any Fiscal Year solely for the purpose of funding the following:

(i) ordinary operating expenses of Group to cover, inter alia, fees and expenses of directors, directors’ and officers’ insurance, and costs associated with regulatory compliance, not in excess of $5,500,000 in the aggregate in any Fiscal Year; and

(ii) payments by Group in respect of foreign, federal, state or local taxes owing by Group in respect of the Warnaco Entities, but not greater than the amount that would be payable by the Borrower, on a consolidated basis, if the Borrower were the taxpayer; and

(d) other dividends and distributions on the Stock of Group and the Borrower and other redemptions, repurchases or other acquisitions of the Stock of Group and the Borrower, in each instance under this clause (d), so long as (i) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to the making of such Restricted Payment (as if such Restricted Payment had been made on the first day of such period), (ii) at the time such Restricted Payment is made and after giving effect thereto Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and (iii) prior to the making of such Restricted Payment, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (d) with respect to such Restricted Payment and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio and Available Credit;

provided, however, that the Restricted Payments described in subclause (c)(i) and clause (d) shall not be permitted if either (A) an Event of Default or Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom or (B) such Restricted Payment is prohibited under the terms of any Indebtedness (other than the Obligations) of any Warnaco Entity (as in effect on the Closing Date).

Section 8.6 Prepayment and Cancellation of Indebtedness.

(a) Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, cancel any claim or Indebtedness owed to any of them except in the ordinary course of business consistent with past practice; provided that this Section 8.6(a) shall not apply to intercompany Indebtedness disclosed on Schedule 8.1 (Existing Indebtedness).

(b) Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness; provided, however, that any Warnaco Entity may: (i) prepay the Obligations in accordance with the terms of this Agreement and prepay the Canadian Secured Obligations in accordance with the terms of the Canadian Facility, (ii) make regularly scheduled or otherwise required repayments or redemptions of Indebtedness, (iii) make permitted repayments of any Indebtedness permitted by Section 8.1 hereof solely to the extent that such Indebtedness is “revolving”, (iv) prepay any intercompany Indebtedness payable to the Borrower or any of its Subsidiaries by the Borrower or any of its Subsidiaries, (v) repurchase the Senior Notes in the open market using then available Cash On Hand in an aggregate amount not to exceed $10,000,000, (vi) renew, extend, refinance and refund Indebtedness, as long as such renewal, extension, refinancing or refunding is permitted under Section 8.1(f), and defease all of the Senior Notes on the terms set forth in Section 7.14 and (vii) prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof any Indebtedness of any Warnaco Entity so long as (A) no Default or Event of Default shall have occurred and be continuing at the time of any such prepayment, redemption, purchase, defeasance or satisfaction or after giving effect thereto, (B) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to such prepayment, redemption, purchase, defeasance or satisfaction (as if such prepayment, redemption, purchase, defeasance or satisfaction had been made on the first day of such period), (C) at the time of such prepayment, redemption, purchase, defeasance or satisfaction and after giving effect thereto Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and (D) prior to such prepayment, redemption, purchase, defeasance or satisfaction, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (vii) with respect to such prepayment, redemption, purchase, defeasance or satisfaction and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio and Available Credit.

Section 8.7 Restriction on Fundamental Changes. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, merge with any Person, consolidate with any Person, dissolve, acquire all or substantially all of the Stock or Stock Equivalents of any Person, acquire all or substantially all of the assets constituting a business, division, branch or other unit of operation or trademark of any Person, enter into any joint venture or partnership with any Person, or acquire or create any Subsidiary, except that:

(a) any Warnaco Entity may merge into or consolidate with any Loan Party; provided, however, that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a Loan Party and, if the Borrower is a party to any such merger or consolidation, the Borrower is the surviving entity of such merger or consolidation;

(b) any Warnaco Entity that is not a Loan Party may merge into or consolidate with any other Warnaco Entity that is not a Loan Party; provided, however, that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a Wholly Owned Subsidiary of Group;

(c) any Warnaco Entity may form a new Wholly Owned Subsidiary; provided, however, that if a Domestic Subsidiary is formed, such Domestic Subsidiary shall become a Loan Party;

(d) any Warnaco Entity which is inactive or dormant (meaning that on the date of determination and on a consolidated basis with its Subsidiaries, it has assets with an aggregate Fair Market Value of less than $100,000) may be dissolved, provided that if such Warnaco Entity is a Loan Party, all assets distributed upon dissolution shall be distributed to another Loan Party; and

(e) any Warnaco Entity may consummate any Investment permitted under Section 8.3, including any Permitted Acquisition;

provided, however, that in each case under this Section 8.7 both before and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom.

Section 8.8 Change in Nature of Business.

(a) Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, engage as its primary business in any material line of business substantially different from those lines of business conducted by Group and its Subsidiaries on the date hereof or any business reasonably related or ancillary thereto.

(b) Group shall not engage in any business or activity other than (i) holding shares in the Stock of the Borrower, (ii) paying taxes, (iii) preparing reports to Governmental Authorities, national securities exchanges and its shareholders and debt holders, (iv) maintaining its legal existence, holding directors and shareholders meetings, preparing corporate records and other corporate activities required to maintain its separate corporate structure, including the ability to incur fees, costs and expenses relating to such maintenance, (v) issuing Stock, (vi) performing its obligations and activities incidental thereto under the Loan Documents and under the Loan Documents (as defined in the Canadian Facility), (vii) making Restricted Payments and Investments to the extent permitted by this Agreement, (viii) entering into unsecured guaranties of Indebtedness and other obligations of its Subsidiaries to the extent permitted by Section 8.1(d) and (ix) activities incidental to the foregoing.

Section 8.9 Transactions with Affiliates. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, except as otherwise expressly permitted herein, do any of the following: (a) make any Investment in an Affiliate of Group which is not a Warnaco Entity; (b) transfer, sell, lease, assign or otherwise dispose of any asset to any Affiliate of Group which is not a Warnaco Entity; (c) merge into or consolidate with or purchase or acquire assets from any Affiliate of Group which is not a Warnaco Entity; (d) repay any Indebtedness to any Affiliate of Group which is not a Warnaco Entity; or (e) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate of Group which is not a Warnaco Entity (including guaranties and assumptions of obligations of any such Affiliate), except for (i) transactions in the ordinary course of business on a basis no less favorable to such Warnaco Entity as would be obtained in a comparable arm’s length transaction with a Person not an Affiliate and (ii) salaries and other employee compensation to officers or directors of any Warnaco Entity.

Section 8.10 Restrictions on Subsidiary Distributions; No New Negative Pledge. Other than (x) pursuant to the Loan Documents, the Senior Note Documents, the Canadian Facility, the documents governing any Indebtedness permitted under Section 8.1(g), any agreements governing any purchase money Indebtedness or Capital Lease Obligations permitted by Section 8.1(e) or any renewal, extension, refinancing or refunding of any such Indebtedness or Capital Lease Obligations permitted under Section 8.1(f) (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) or any agreement governing any renewal, extension, refinancing or refunding of the Senior Notes or the Canadian Facility permitted under Section 8.1(f) (in which case, any prohibition or limitation shall not be materially more restrictive than the corresponding prohibition or limitation in the Senior Note Indenture or the Canadian Facility, as applicable, as in effect on the date hereof), (y) any restrictions consisting of customary non-assignment provisions that are entered into in the ordinary course of business consistent with prior practice to the extent that such provisions restrict the transfer or assignment of such contract or (z) with respect to any asset that is subject to a contract of sale permitted by Section 8.4 or which contract acknowledges that a waiver under Section 8.4 is necessary, each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to:

(a) agree to enter into or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of such Subsidiary to pay dividends or make any other distribution or transfer of funds or assets or make loans or advances to or other Investments in, or pay any Indebtedness owed to, any other Warnaco Entity, or

(b) enter into or suffer to exist or become effective any agreement which prohibits or limits the ability of any Warnaco Entity to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, to secure the Secured Obligations, including any agreement which requires other Indebtedness or Contractual Obligation to be equally and ratably secured with the Secured Obligations.

Section 8.11 Modification of Constituent Documents. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, change its capital structure (including in the terms of its outstanding Stock) or otherwise amend its Constituent Documents, except for changes and amendments which do not materially and adversely affect the rights and privileges of any Warnaco Entity, or the interests of the Facility Agents or the Secured Parties under the Loan Documents or in the Collateral.

Section 8.12 Modification of Certain Documents and Certain Debt. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, alter, rescind, terminate, amend, supplement, waive or otherwise modify any provision of any document governing Indebtedness permitted pursuant to Section 8.1(b) or Section 8.1(g), except for modifications to the terms of such Indebtedness (or any indenture or agreement in connection therewith) permitted under Section 8.13 (Modification of Debt Agreements) and modifications that do not materially adversely affect the interests of the Secured Parties under the Loan Documents or in the Collateral. Neither Group nor the Borrower shall permit the Canadian Borrower to amend, supplement, waive or otherwise modify (or to consent to any amendment, supplement, waiver or modification of) the Canadian Facility so as to (i) increase the aggregate Commitments under and as defined in the Canadian Facility to an amount greater than $50,000,000 or (ii) increase any borrowing base advance rate percentage thereunder above the maximum borrowing base advance rate percentage therefor as in effect on the date of execution of the Canadian Facility.

Section 8.13 Modification of Debt Agreements. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, change or amend the terms of the Senior Note Documents (or any indenture, agreement or other material document entered into in connection therewith) if the effect of such amendment is to (a) increase the interest rate payable in cash on such Indebtedness, (b) change the dates upon which payments of principal or interest are due on such Indebtedness other than to extend such dates, (c) change any default or event of default other than to delete or make less restrictive any default provision therein, or add any covenant with respect to such Indebtedness unless a corresponding covenant is added hereunder, (d) change the subordination provisions, if any, of such Indebtedness, (e) change the redemption or prepayment provisions of such Indebtedness other than to extend the dates therefor or to reduce the premiums payable in connection therewith or (f) change or amend any term (including any covenant) if such change or amendment would increase the obligations of the obligor or confer additional rights to the holder of such Indebtedness or Security in a manner materially adverse to any Warnaco Entity, the Facility Agents or any Lender.

Section 8.14 Accounting Changes; Fiscal Year. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, change its (a) accounting treatment and reporting practices, except as required by Agreement Accounting Principles, the Financial Accounting Standards Board or any Requirement of Law and disclosed to the Lenders and the Administrative Agent or (b) Fiscal Year.

Section 8.15 Margin Regulations. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, use all or any portion of the proceeds of any credit extended hereunder to purchase or carry margin stock (within the meaning of Regulation U of the Federal Reserve Board) in contravention of Regulation U of the Federal Reserve Board.

Section 8.16 Sale and Leasebacks Transactions.

(a) [Intentionally Omitted].

(b) Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, enter into any Sale and Leaseback Transaction if, after giving effect to such Sale and Leaseback Transaction, the Dollar Equivalent of the aggregate Fair Market Value of all properties covered by Sale and Leaseback Transactions would exceed $10,000,000.

Section 8.17 No Speculative Transactions. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, engage in any speculative transaction or in any transaction involving Hedging Contracts except for the sole purpose of hedging in the normal course of business and consistent with industry practices.

Section 8.18 Compliance with ERISA. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, or cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event which could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event that would have a Material Adverse Effect.

Section 8.19 Environmental. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, allow a Release of any Contaminant in violation of any Environmental Law; provided, however, that no Warnaco Entity shall be deemed in violation of this Section 8.19 if, as the consequence of all such Releases, the Warnaco Entities would not incur Environmental Liabilities and Costs in excess of $5,000,000 in the aggregate.

ARTICLE IX

EVENTS OF DEFAULT

Section 9.1 Events of Default. Each of the following events shall be an Event of Default:

(a) The Borrower shall (i) fail to pay any principal of any Loan or any Reimbursement Obligation under any Loan Document when the same becomes due and payable or (ii) fail to pay interest or fees under any Loan Document when due and such payment default shall continue for three (3) Business Days; or

(b) any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or

(c) any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Article V, Section 6.1, Section 6.2, Section 6.12, Section 7.1, Section 7.6, Section 7.9, Section 7.11, Section 7.14, or Article VIII, or Section 4.7 of the Pledge and Security Agreement, or (ii) any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (ii) shall remain unremedied for 30 days after the earlier of the date on which (A) a Responsible Officer of Group or the Borrower becomes aware of such failure and (B) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

(d) (i) any Warnaco Entity shall fail to make any payment on any Indebtedness (other than the Obligations) of any Warnaco Entity (or any Guaranty Obligation in respect of Indebtedness of any other Person) having a principal amount of $25,000,000 or more, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness (or, in the case of the Canadian Facility under this clause (ii), if the effect of such event or condition is (x) to accelerate the maturity of the Indebtedness owing thereunder or (y) the declaration of an “Event of Default” under and as defined therein); or (iii) any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid or repurchased (other than by a regularly scheduled required prepayment or, in connection with the Senior Notes, a provision requiring a prepayment or repurchase in the event of the receipt by a Warnaco Entity of proceeds of a debt issuance, equity issuance or an Asset Sale), prior to the stated maturity thereof; or

(e) (i) any Warnaco Entity shall generally not pay its debts as such debts become due, shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors, (ii) any proceeding shall be instituted by or against any Warnaco Entity seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts, under any Requirement of Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property; provided, however, that, in the case of any such proceedings instituted against a Warnaco Entity (but not instituted by a Warnaco Entity), either such proceedings shall remain undismissed or unstayed for a period of 30 days or more or any action sought in such proceedings shall occur or (iii) any Warnaco Entity shall take any corporate action to authorize any action set forth in clauses (i) and (ii) above; or

(f) any provision of any Loan Document after delivery thereof shall for any reason fail or cease to be valid and binding on, or enforceable against, any Loan Party thereto, or any Loan Party shall so state in writing; or

(g) any Collateral Document shall for any reason fail or cease to create a valid and enforceable Lien on any Collateral purported to be covered thereby or, except as permitted by the Loan Documents, such Lien shall fail or cease to be a perfected Lien having the priority described in Section 4.20 of this Agreement and the Collateral Documents, or any Loan Party shall so state in writing; or

(h) one or more judgments or orders (or other similar process) involving, in any single case or in the aggregate, an amount in excess of $20,000,000 in the case of a money judgment, to the extent not covered by insurance, shall be rendered against one or more Warnaco Entity and shall remain unpaid and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) an ERISA Event shall occur and the amount of all liabilities and deficiencies resulting therefrom, whether or not assessed, exceeds $20,000,000 in the aggregate; or

(j) there shall occur a Change of Control; or

(k) a Warnaco Entity shall have entered into one or more consent or settlement decrees or agreements or similar arrangements with a Governmental Authority or one or more judgments, orders, decrees or similar actions shall have been entered against a Warnaco Entity based on or arising from the violation of or pursuant to any Environmental Law, or the generation, storage, transportation, treatment, disposal or Release of any Contaminant and, in connection with all the foregoing, the Warnaco Entities are likely to incur Environmental Liabilities and Costs in excess of $15,000,000 in the aggregate; or

(l) the declaration of an “Event of Default” under and as defined in the Canadian Facility.

Section 9.2 Remedies. During the continuance of any Event of Default,

(i) the Administrative Agent may, and at the request of the Requisite Lenders, shall, by notice to the Borrower, declare that all or any portion of the Commitments be terminated, whereupon the obligation of each Lender to make any Revolving Loan and each Issuer to Issue any Letter of Credit shall immediately terminate; and

(ii) the Administrative Agent shall at the request, or may with the consent, of the Requisite Lenders, by notice to the Borrower, declare the Revolving Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon all such Loans, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower;

provided, however, that upon the occurrence of any of the Events of Default specified in Section 9.1(e) with respect to any Loan Party, (x) the Commitments of each Lender to make Loans and the commitments of each Issuer to Issue Letters of Credit shall each automatically be terminated and (y) the Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower; and provided, further, that in addition to the remedies set forth above, the Facility Agents and the Lenders shall be entitled to exercise all of their respective rights and remedies under the Loan Documents, including, without limitation, in the case of the Collateral Agent, all rights and remedies with respect to the Collateral provided under the Collateral Documents and in the case of all Agents, any other remedies provided by applicable law.

Section 9.3 Actions in Respect of Letters of Credit. Upon the Revolving Credit Termination Date, or as required by Section 2.9, the Borrower shall pay to the Administrative Agent in immediately available funds at the Administrative Agent’s office referred to in Section 11.8, for deposit in a Cash Collateral Account, the amount required to ensure that, after such payment, the aggregate funds on deposit in the Cash Collateral Accounts equals or exceeds 105% of the sum of all outstanding Letter of Credit Obligations. The Administrative Agent may, from time to time after funds are deposited in any Cash Collateral Account, apply funds then held in such Cash Collateral Account to the payment of any amounts, in accordance with Section 2.13(h), as shall have become or shall become due and payable by the Borrower to the Issuers or the Lenders in respect of the Obligations. The Administrative Agent shall promptly give written notice of any such application; provided, however, that the failure to give such written notice shall not invalidate any such application.

ARTICLE X

THE FACILITY AGENTS

Section 10.1 Authorization and Action.

(a) (i) Each Lender and each Issuer hereby appoints BofA as the Administrative Agent hereunder and under the other Loan Documents and each Lender and each Issuer authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such agreements and to exercise such powers as are reasonably incidental thereto. Without limiting the foregoing, each Lender and each Issuer hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents.

(ii) The Administrative Agent, each Lender and each Issuer hereby appoints BofA as the Collateral Agent hereunder and under the other Loan Documents and the Administrative Agent, each Lender and each Issuer authorizes the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Collateral Agent under such agreements and to exercise such powers as are reasonably incidental thereto. Without limiting the foregoing, the Administrative Agent, each Lender and each Issuer hereby authorizes the Collateral Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Collateral Agent is a party, to exercise all rights, powers and remedies that the Collateral Agent may have under such Loan Documents and, in the case of the Collateral Documents, to act as agent for the Administrative Agent, the Lenders, each Issuer and the other Secured Parties under such Collateral Documents.

(b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including enforcement or collection), no Facility Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Requisite Lenders, and such instructions shall be binding upon all Lenders and each Issuer; provided, however, that no Facility Agent shall be required to take any action which (i) such Facility Agent in good faith believes exposes it to personal liability unless such Facility Agent receives an indemnification satisfactory to it from the Lenders and the Issuers with respect to such action or (ii) is contrary to this Agreement, any other Loan Document or applicable Requirements of Law. Each Facility Agent agrees to give to each other Facility Agent, each Lender and each Issuer, to the extent required hereunder, prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or the other Loan Documents.

(c) In performing its functions and duties hereunder and under the other Loan Documents, (i) the Administrative Agent is acting solely on behalf of the Lenders and the Issuers and (ii) the Collateral Agent is acting solely on behalf of the Administrative Agent, the Lenders and the Issuers, except, in the case of the Administrative Agent, to the limited extent provided in Section 2.7(b) and Section 11.2(c), and each of their respective duties are entirely administrative in nature. No Facility Agent assumes, and shall not be deemed to have assumed, any obligation other than as expressly set forth herein and in the other Loan Documents or any other relationship as agent, fiduciary or trustee of or for any other Agent, Lender, Issuer or holder of any other Obligation. Any Facility Agent may perform any of its duties under any of the Loan Documents by or through its agents or employees.

Section 10.2 Agent’s Reliance, Etc. None of the Facility Agents, any of their respective Affiliates, or any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or any of the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent and the Collateral Agent: (a) may rely on the Register to the extent set forth in Section 11.2(c); (b) may consult with legal counsel (including counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any other Agent, any Lender or any Issuer and shall not be responsible to any other Agent, any Lender or any Issuer for any statements, warranties or representations made by or on behalf of Group or any of its Subsidiaries in or in connection with this Agreement or any of the other Loan Documents; (d) shall not have any duty to ascertain or to inquire either as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default; (e) shall not be responsible to any other Agent, any Lender or any Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy or electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties.

Section 10.3 The Agents Individually. With respect to its Ratable Portion, BofA shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms “Lenders” or “Requisite Lenders” or any similar terms shall, unless the context clearly otherwise indicates, include each Facility Agent in its individual capacity as a Lender or as one of the Requisite Lenders, as the case may be. BofA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as a Facility Agent hereunder or under the other Loan Documents.

Section 10.4 Lender Credit Decision. Each Lender and each Issuer acknowledges that it shall, independently and without reliance upon any Facility Agent or any other Lender or Issuer, conduct its own independent investigation of the financial condition and affairs of the Borrower and each other Loan Party in connection with the making and continuance of the Loans and with the issuance of the Letters of Credit. Each Lender and each Issuer also acknowledges that it will, independently and without reliance upon any Facility Agent or any other Lender or Issuer and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents.

Section 10.5 Indemnification. Each Lender agrees to indemnify each of the Facility Agents and each of its respective Affiliates and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by a Loan Party and without limiting its obligation to do so) from and against such Lender’s aggregate Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including reasonable fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, any Facility Agent or any of its Affiliates, directors, officers, employees, agents or advisors in any way relating to or arising out of this Agreement, any of the other Loan Documents or any action taken or omitted by any Facility Agent under this Agreement or any of the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Facility Agent’s or such Affiliate’s gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse each Facility Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable fees and disbursements of legal counsel) incurred by such Facility Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or any of the other Loan Documents, to the extent that such Facility Agent is not reimbursed for such expenses by a Loan Party.

Section 10.6 Successor Agents.

(a) Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the other Facility Agents, the Lenders, the Issuers and the Borrower and shall, immediately upon giving such notice, be discharged from its duties and obligations under this Agreement and the other Loan Documents. Upon any such resignation by the Administrative Agent, the Requisite Lenders shall have the right to appoint a successor Administrative Agent, provided that such successor shall be a United States person as defined in Section 7701(a)(30) of the Code. If no successor Administrative Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuers, appoint a successor Administrative Agent, selected from among the Lenders. Such appointment shall be subject to the prior written approval of the Borrower (which approval may not be unreasonably withheld or delayed and shall not be required upon the occurrence and during the continuance of an Event of Default). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. Prior to any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents. At any time after the discharge of a retiring Administrative Agent from its duties and obligations under this Agreement and prior to any Person accepting its appointment as a successor Administrative Agent, the Requisite Lenders shall assume and perform all of the duties of such retiring Administrative Agent hereunder until such time, if any, as a successor Administrative Agent shall become the Administrative Agent hereunder. After its resignation, the retiring Administrative Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement or any of the other Loan Documents.

(b) Collateral Agent. The Collateral Agent may resign at any time by giving written notice thereof to the Administrative Agent, the Lenders, the Issuers and the Borrower. Upon any such resignation, the Administrative Agent shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed by the Administrative Agent and shall have accepted such appointment, within 30 days after the retiring Collateral Agent’s giving of notice of resignation, then the retiring Collateral Agent may, on behalf of the Secured Parties, appoint a successor Collateral Agent. Such appointment shall be subject to the prior written approval of the Borrower (which approval may not be unreasonably withheld or delayed and shall not be required upon the occurrence and during the continuance of an Event of Default). Upon the acceptance of any appointment as the Collateral Agent by a successor Collateral Agent, such successor Collateral Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. Promptly after any retiring Collateral Agent’s resignation hereunder as Collateral Agent, the retiring Collateral Agent shall take such action as may be reasonably necessary to assign to the successor Collateral Agent its rights as Collateral Agent under the Loan Documents and to protect and maintain the Liens held by the Collateral Agent for the benefit of the Secured Parties (including delivery of any Collateral in its possession to the successor Collateral Agent). If no Person has accepted appointment as a successor Collateral Agent within 30 days after the retiring Collateral Agent’s giving of notice of resignation, the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective, and the Administrative Agent shall assume and perform all of the duties of the retiring Collateral Agent hereunder until such time, if any, as the Administrative Agent shall appoint a successor Collateral Agent as provided for above. After its resignation, the retiring Collateral Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement or any of the other Loan Documents.

100

Section 10.7 Concerning the Collateral and the Collateral Documents.

(a) (i) Each Lender and each Issuer agrees that any action taken by the Administrative Agent or the Requisite Lenders (or, where required by the express terms of this Agreement, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents, and the exercise by the Administrative Agent or the Requisite Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders, the Issuers and the other applicable Secured Parties. Without limiting the generality of the foregoing, the Administrative Agent shall have the sole and exclusive right and authority to act as the disbursing and collecting agent for the Lenders and the Issuers with respect to all payments and collections arising in connection with the Revolving Credit Facility; provided, however, that notwithstanding anything to the contrary herein, the Administrative Agent shall have the right to manage, supervise and otherwise deal with the Collateral included in the Borrowing Base, including the right to make Protective Advances in an aggregate amount not to exceed the lesser of $25,000,000 and 10% of the Available U.S. Credit.

(ii) The Administrative Agent, each Lender and each Issuer agrees that any action taken by the Collateral Agent or the Requisite Lenders (or, where required by the express terms of this Agreement, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents, and the exercise by the Collateral Agent or the Requisite Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Administrative Agent, the Lenders, the Issuers and the other Secured Parties. Without limiting the generality of the foregoing, the Collateral Agent shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the Lenders and the Issuers with respect to all payments and collections arising in connection with the Collateral Documents; provided, that the Collateral Agent shall pay such amounts to the Administrative Agent for application in accordance with the provisions of this Agreement and the other Loan Documents, (ii) execute and deliver each Collateral Document and accept delivery of each such agreement delivered by Group or any of its Subsidiaries, (iii) act as collateral agent for the Administrative Agent, the Lenders, the Issuers and the other Secured Parties for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein; provided, however, that the Collateral Agent hereby appoints, authorizes and directs the Administrative Agent and each Lender and Issuer to act as collateral sub-agent for the Collateral Agent, the Administrative Agent, the Lenders and the Issuers for purposes of the perfection of all security interests and Liens with respect to the Collateral, including any Deposit Account maintained by a Loan Party with, and cash and Cash Equivalents held by, the Administrative Agent, such Lender or such Issuer, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Collateral Documents and (vi) except as may be otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all remedies given to the Collateral Agent, the Lenders, the Issuers and the other Secured Parties with respect to the Collateral under the Loan Documents relating thereto, applicable Requirements of Law or otherwise.

101

(b) At the request of the Borrower, the Collateral Agent shall, and each of the Administrative Agent, the Lenders and the Issuers hereby authorizes and directs the Collateral Agent (without any further notice to or consent of any such Person) to, promptly release (or, in the case of clause (ii) below, release or subordinate as required by the holders of any Lien specified thereunder) any Lien held by the Collateral Agent for the benefit of the Secured Parties against any of the following:

(i) all of the Collateral and all Loan Parties, upon receipt of a written notice from the Administrative Agent that the Commitments and the Commitments (as defined in the Canadian Facility) have been terminated and all Loans, all Reimbursement Obligations and all other Secured Obligations and Canadian Secured Obligations that the Administrative Agent has been notified in writing are then due and payable have been paid in full (and, in respect of contingent Letter of Credit Obligations (as defined in each of this Agreement and the Canadian Facility), with respect to which cash collateral has been deposited or a back-up letter of credit has been issued, in either case in the appropriate currency and on terms satisfactory to the Administrative Agent and the applicable Issuers(or, in the case of Letter of Credit Obligations (as defined in the Canadian Facility), satisfactory to the administrative agent and applicable letter of credit issuers under the Canadian Facility));

(ii) any part of the Collateral that is subject to a Lien permitted by Sections 8.2(c), (e) or (f); and

(iii) any part of the Collateral (A) sold or disposed of by a Loan Party if such sale or disposition is permitted by this Agreement (or permitted pursuant to a waiver or consent of a transaction otherwise prohibited by this Agreement) (other than an Asset Sale to a Loan Party) or (B) that constitutes Stock of a Subsidiary Guarantor if such Subsidiary Guarantor has been dissolved pursuant to Section 8.7(d).

(c) Each of the Administrative Agent, the Lenders and the Issuers hereby authorizes and directs the Collateral Agent to execute and deliver or file such termination and partial release statements and do such other things as are necessary to release (or subordinate) Liens to be released (or subordinated) pursuant to this Section 10.7 promptly upon the effectiveness of any such release (or subordination). Unless expressly permitted by a Loan Document (or permitted pursuant to a waiver of or consent to a transaction otherwise prohibited by this Agreement), the Collateral Agent shall not release any Lien or any Subsidiary Guarantor from its obligations under the Guaranty.

Section 10.8 Collateral Matters Relating to Related Obligations. The provisions of this Agreement and the other Loan Documents relating to the Collateral shall extend to and be available in respect of any Secured Obligation arising under any Hedging Contract or Cash Management Obligation or that is otherwise owed to Persons other than the Facility Agents, the Lenders and the Issuers (collectively, “Related Obligations”) solely on the condition and understanding, as among the Facility Agents and all Secured Parties, that (a) the Related Obligations shall be entitled to the benefit of the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Facility Agents shall hold, and have the right and power to act with respect to, the Guaranty and the Collateral on behalf of and as agent for the holders of the Related Obligations, but each Facility Agent is otherwise acting solely as agent for the Lenders and the Issuers and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations, (b) all matters, acts and omissions relating in any manner to the Guaranty, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation, (c) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the other Loan Documents, by any of the Facility

102

Agents and the Requisite Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby, (d) no holder of Related Obligations and no other Secured Party (except the Facility Agents, the Lenders and the Issuers, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the other Loan Documents and (e) no holder of any Related Obligation shall exercise any right of setoff, banker’s lien or similar right except to the extent provided in Section 11.6 and then only to the extent such right is provided for under the documents governing such Related Obligation and exercised in compliance with Section 11.7.

Section 10.9 Posting of Approved Electronic Communications.

(a) Each of the Agents, the Lenders, the Issuers and Group and the Borrower agree, and Group shall cause each other Loan Party to agree, that the Administrative Agent and the Collateral Agent may, but shall not be obligated to, make the Approved Electronic Communications available to the Lenders and Issuers by posting such Approved Electronic Communications on IntraLinks™ or a substantially similar electronic platform chosen by the Facility Agents to be their electronic transmission system (the “Approved Electronic Platform”).

(b) Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Facility Agents from time to time (including, as of the Closing Date, a dual firewall and a User ID/Password Authorization System) and the Approved Electronic Platform is secured through a single-user-per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders, the Issuers, Group and the Borrower acknowledges and agrees, and Group shall cause each other Loan Party to acknowledge and agree, that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution. In consideration for the convenience and other benefits afforded by such distribution and for the other consideration provided hereunder, the receipt and sufficiency of which is hereby acknowledged, each of the Facility Agents, the Lenders, the Issuers, Group and the Borrower hereby approves, and Group shall cause each other Loan Party to approve, distribution of the Approved Electronic Communications through the Approved Electronic Platform and understands and assumes, and Group shall cause each other Loan Party to understand and assume, the risks of such distribution.

(c) THE APPROVED ELECTRONIC PLATFORM AND THE APPROVED ELECTRONIC COMMUNICATIONS ARE PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF THE FACILITY AGENTS OR ANY OF THEIR AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (THE “AGENT AFFILIATES”) WARRANT THE ACCURACY, ADEQUACY OR COMPLETENESS OF THE APPROVED ELECTRONIC COMMUNICATIONS OR THE APPROVED ELECTRONIC PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC PLATFORM AND THE APPROVED ELECTRONIC COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY OF THE AGENT AFFILIATES IN CONNECTION WITH THE APPROVED ELECTRONIC PLATFORM OR THE APPROVED ELECTRONIC COMMUNICATIONS.

103

(d) Each of the Lenders, the Issuers, Group and the Borrower agrees, and Group shall cause each other Loan Party to agree, that each Facility Agent may, but (except as may be required by applicable law) shall not be obligated to, store the Approved Electronic Communications on the Approved Electronic Platform in accordance with such Agent’s generally-applicable document retention procedures and policies.

Section 10.10 Syndication Agent; Co-Documentation Agents; Arrangers; Joint Bookrunners. Neither the Syndication Agent, the Co-Documentation Agents, the Joint Bookrunners nor the Arrangers shall have any obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity. Without limiting the foregoing, none of the Syndication Agent, the Co-Documentation Agents, the Joint Bookrunners nor the Arrangers shall have or be deemed to have any fiduciary relationship with any Lender or Issuer. Each Lender and Issuer acknowledges and agrees that it has not relied, and will not rely, on any of the Arrangers, the Joint Bookrunners, the Syndication Agent, the Co-Documentation Agents or any of the other Lenders or Issuers in deciding whether to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Amendments, Waivers, Etc.

(a) No amendment or waiver of any provision of this Agreement or any other Loan Document nor consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be in writing and (x) in the case of any such waiver or consent, signed by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and (y) in the case of any other amendment, by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and the Borrower, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that:

(i) no amendment, waiver or consent with respect to the provisions contained in Section 2.13(h) shall be effective, unless in writing and signed by each Agent or Lender (and, in the case of clause tenth of such Section, the administrative agent under the Canadian Facility) required under the terms of such section to have consented thereto;

(ii) no amendment, waiver or consent under this Agreement shall be effective to add any category of Collateral to the Borrowing Base unless in writing and signed by the Administrative Agent and the Super-Majority Lenders;

(iii) no amendment, waiver or consent shall be effective to increase any Advance Rate above the applicable maximum set forth in the definition thereof, unless in writing and signed by each Lender;

(iv) no amendment, waiver or consent with respect to the terms and conditions of the Collateral Documents shall be effective, unless in writing and signed by the Collateral Agent;

104

(v) except to the extent any such amendment, waiver or consent would result in an increase of the aggregate Revolving Credit Commitments (it being understood that any Facility Increase does not constitute such an increase in Revolving Credit Commitments), no amendment, waiver or consent shall be effective with respect to the terms and provisions under Article II and any other provisions related solely to Revolving Credit Borrowings (including any conditions to such Borrowings or the Facility Increase and increases to interest rates and fees) and payment procedures under the Revolving Credit Facility, unless in writing and signed by the Administrative Agent and the Requisite Lenders;

(vi) [Intentionally Omitted]; and

(vii) no amendment, waiver or consent shall, unless in writing and signed by each Lender affected thereby, in addition to the Requisite Lenders, do any of the following:

(A) waive any of the conditions specified in Section 3.1 (subject to Section 3.3) or Section 3.2 except with respect to a condition based upon another provision hereof, the waiver of which requires only the concurrence of the Requisite Lenders;

(B) increase the Commitment of such Lender or subject such Lender to any additional obligation;

(C) extend the scheduled final maturity of any Loan owing to such Lender, or waive, reduce, or postpone any scheduled date fixed for, the payment of principal, interest or fees owing to such Lender (it being understood that Section 2.9 does not provide for scheduled dates fixed for payment) or for the reduction of such Lender’s Commitment;

(D) reduce the principal amount of any Loan or Reimbursement Obligation (other than by the payment or prepayment thereof) owing to such Lender;

(E) reduce the rate of interest on any Loan or Reimbursement Obligations owing to such Lender or any fee payable hereunder to such Lender or waive any such obligation (other than with respect to default interest);

(F) change the aggregate Ratable Portions of the Lenders which shall be required for the Lenders or any of them to take any action hereunder;

(G) release all or substantially all of the Collateral or release any Guarantor from its obligations under the Guaranty except as provided in Section 10.7 or as expressly provided under the Guaranty; or

(H) amend Section 11.7 or this Section 11.1 or the definition of the terms “Requisite Lenders,” “Ratable Portion” or “Super-Majority Lenders”; provided, that in connection with any Facility Increase, this Section 11.1 and the definition of “Ratable Portion,” “Requisite Lenders” and “Super-Majority Lenders” shall be deemed to be amended in order to provide the Lenders of such additional loans with voting rights proportionate to the Commitments of such new Lenders; and

105

provided, further, that:

(i) any modification of the application of payments to the Loans pursuant to Section 2.9 or the reduction of the Revolving Credit Commitments pursuant to Section 2.5 shall require the consent of the Requisite Lenders;

(ii) no amendment, waiver or consent shall, unless in writing and signed by any Special Purpose Vehicle that has been granted an option pursuant to Section 11.2(f), affect the grant or nature of such option or the right or duties of such Special Purpose Vehicle hereunder;

(iii) no amendment, waiver or consent shall, unless in writing and signed by the applicable Facility Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Facility Agent under this Agreement or any of the other Loan Documents; and

(iv) no amendment, waiver or consent shall, unless in writing and signed by the Swing Loan Lender in addition to the Lenders required above to take such action, affect the rights or duties of the Swing Loan Lender under this Agreement or any of the other Loan Documents; and

provided, further, that (i) the Administrative Agent may, with the consent of the Borrower, amend, modify or supplement this Agreement or any other Loan Document to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender or any Issuer, (ii) Schedule I (Commitments) may be amended from time to time by the Administrative Agent alone to reflect assignments of Commitments in accordance herewith and any increase in the Commitment of any Lender or any new Commitment of any Lender made in accordance herewith (including, without limitation, in accordance with clause (B) above or with respect to a Facility Increase) (with the Administrative Agent agreeing to remit to the Borrower a copy of any such amended Schedule I; provided, however, that the failure of the Administrative Agent to so remit such copy shall not affect any such assignment or any such increase in or new Commitment and shall not create any liability against the Administrative Agent), (iii) any Loan Documents may be amended from time to time by the Administrative Agent, the Collateral Agent and the relevant Loan Party alone (i.e. without any Lender consent or approval) to add a Subsidiary of Group as a Subsidiary Guarantor or as a grantor under a Collateral Document or to subject to the Lien of any applicable Loan Document assets or property not then subject to the Lien of such Loan Document and (iv) no amendment, waiver or consent shall, unless in writing and signed by the administrative agent under the Canadian Facility (so long as the Canadian Facility is in effect) in addition to the other Persons required above to take such action, (x) release, remove or eliminate any of the obligations of the Loan Parties under the Loan Party Canadian Facility Guaranty from the definition of Secured Obligations or otherwise from the obligations secured by the Collateral Documents, (y) change or delete the definition of Loan Party Canadian Facility Guaranty or (z) amend this Section 11.1 in a manner such that any such amendment, waiver or consent or any amendment, waiver or consent under clause (a)(i) above (as to clause tenth of Section 2.13(h)) would no longer require the written approval of the administrative agent under the Canadian Facility.

(b) The Administrative Agent may, but shall have no obligation to, with the written concurrence of any applicable Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

106

(c) In connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all affected Lenders or of the Super-Majority Lenders, if the consent of Requisite Lenders is obtained, but the consent of other applicable Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 11.1 being referred to as a “Non-Consenting Lender”), then, as long as the Lender that is acting as the Administrative Agent is not a Non-Consenting Lender and there is no continuing Event of Default, at the Borrower’s request (and at the Borrower’s sole cost and expense), the Administrative Agent or an Eligible Assignee that is acceptable to the Administrative Agent shall have the right with the Administrative Agent’s consent and in the Administrative Agent’s sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s request, sell and assign to the Lender that is acting as the Administrative Agent or such Eligible Assignee all of the Revolving Credit Commitments and Revolving Credit Outstandings of such Non-Consenting Lender for an amount equal to the principal balance of all Loans held by the Non-Consenting Lender and all accrued and unpaid interest and fees with respect thereto through the date of sale; provided, however, that such purchase and sale shall be recorded in the Register maintained by the Administrative Agent and not be effective until (x) the Administrative Agent shall have received from such Eligible Assignee an agreement in form and substance satisfactory to the Administrative Agent and the Borrower whereby such Eligible Assignee shall agree to be bound by the terms hereof and (y) such Non-Consenting Lender shall have received payments of all Loans held by it and all accrued and unpaid interest and fees with respect thereto through the date of the sale. Each Lender agrees that, if it becomes a Non-Consenting Lender, it shall execute and deliver to the Administrative Agent an Assignment and Acceptance to evidence such sale and purchase; provided, however, that the failure of any Non-Consenting Lender to execute an Assignment and Acceptance shall not render such sale and purchase (and the corresponding assignment) invalid and such assignment shall be recorded in the Register.

Section 11.2 Assignments and Participations.

(a) Each Lender may sell, transfer, negotiate or assign to one or more Eligible Assignees all or a portion of its rights and obligations hereunder (including all of its rights and obligations with respect to the Revolving Loans, the Swing Loans and the Letters of Credit); provided, however, that:

(i) if any such assignment shall be of the assigning Lender’s Revolving Credit Outstandings and Revolving Credit Commitment, such assignment shall cover the same percentage of such Lender’s Revolving Credit Outstandings and Revolving Credit Commitment;

(ii) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event (if less than the Assignor’s entire interest) be less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, except (I) with the consent of the Borrower and the Administrative Agent or (II) if such assignment is being made to a Lender or an Affiliate or Approved Fund of such Lender; and

(iii) if such Eligible Assignee is not, prior to the date of such assignment, a Lender or an Affiliate or Approved Fund of a Lender, such assignment shall be subject to the prior consent of the Administrative Agent, each Issuer and the Borrower (which consents shall not be unreasonably withheld or delayed);

107

and provided, further, that, notwithstanding any other provision of this Section 11.2, the consent of the Borrower shall not be required for any assignment occurring when any Event of Default shall have occurred and be continuing.

(b) The parties to each assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register (as defined in clause (c) below), an Assignment and Acceptance. Upon such execution, delivery, acceptance and recording in the Register and the receipt by the Administrative Agent from the assignee of an assignment fee in the amount of $3,500 (other than in the case of an assignment by a Lender to an Affiliate of such Lender or by any Agent or their respective Affiliates) from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender, and if such Lender were an Issuer, of such Issuer hereunder and thereunder, and (ii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).

(c) The Administrative Agent shall maintain at its address referred to in Section 11.8 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recording of the names and addresses of the Lenders and the Issuers, the Revolving Credit Commitments of and principal amount of the Revolving Loans, Swing Loans and Letter of Credit Obligations (specifying the Reimbursement Obligations) owing to each Lender and each Issuer from time to time (the “Revolving Credit Facility Register” or the “Register”). The entries in the Revolving Credit Facility Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Administrative Agent, the Lenders and the Issuers shall treat each Person whose name is recorded in the Revolving Credit Facility Register as a Lender or as an Issuer, as the case may be, for all purposes of this Agreement. The Revolving Credit Facility Register shall be available for inspection by the Borrower and the Facility Agents at any reasonable time and from time to time upon reasonable prior notice. No Revolving Loan, Swing Loan, Letter of Credit Obligation, Reimbursement Obligation, nor any Assignment and Acceptance or Assumption Agreement, shall be effective unless it is entered in the Register in due course.

(d) Notwithstanding anything to the contrary contained in clause (b) above, the Loans and drawn Letters of Credit are registered obligations and the right, title, and interest of the Lenders and Issuers, as the case may be, and their assignees in and to such Loans or drawn Letters of Credit, as the case may be, shall be transferable only upon notation of such transfer in the Register. This Section 11.2 shall be construed so that the Loans and drawn Letters of Credit are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related regulations (or any other relevant or successor provisions of the Code or such regulations). Solely for purposes of this Section 11.2 and for tax purposes only, the Administrative Agent shall act as the Borrower’s agent for purposes of maintaining the Register and such notations of transfer in the Register.

(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower.

108

(f) In addition to the other assignment rights provided in this Section 11.2, each Lender may do each of the following:

(i) grant to a Special Purpose Vehicle the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder and the exercise of such option by any such Special Purpose Vehicle and the making of Loans pursuant thereto shall satisfy (once and to the extent that such Loans are made) the obligation of such Lender to make such Loans thereunder, provided, however, that (x) nothing herein shall constitute a commitment or an offer to commit by such a Special Purpose Vehicle to make Loans hereunder and no such Special Purpose Vehicle shall be liable for any indemnity or other Obligation (other than the making of Loans for which such Special Purpose Vehicle shall have exercised an option, and then only in accordance with the relevant option agreement) and (y) such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain responsible to the other parties for the performance of its obligations under the terms of this Agreement and shall remain the holder of the Obligations for all purposes hereunder; and

(ii) assign, as collateral or otherwise, any of its rights under this Agreement, whether now owned or hereafter acquired (including rights to payments of principal or interest on the Loans), to (A) without notice to or consent of the Administrative Agent, any Issuer or the Borrower, any Federal Reserve Bank (pursuant to Regulation A of the Federal Reserve Board) and (B) without consent of the Administrative Agent, any Issuer or the Borrower, (1) any holder of, or trustee for the benefit of, the holders of such Lender’s Securities and (2) any Special Purpose Vehicle to which such Lender has granted an option pursuant to clause (i) above;

provided, however, that no such assignment or grant shall release such Lender from any of its obligations hereunder except as expressly provided in clause (i) above and except, in the case of a subsequent foreclosure pursuant to an assignment as collateral, if such foreclosure is made in compliance with the other provisions of this Section 11.2 other than this clause (f) or clause (g) below. Each party hereto acknowledges and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any such Special Purpose Vehicle, such party shall not institute against, or join any other Person in instituting against, any Special Purpose Vehicle that has been granted an option pursuant to this clause (f) any bankruptcy, reorganization, insolvency or liquidation proceeding (such agreement shall survive the payment in full of the Obligations). The terms of the designation of, or assignment to, such Special Purpose Vehicle shall not restrict such Lender’s ability to, or grant such Special Purpose Vehicle the right to, consent to any amendment or waiver to this Agreement or any other Loan Document or to the departure by the Borrower from any provision of this Agreement or any other Loan Document without the consent of such Special Purpose Vehicle except, as long as the Administrative Agent and the Lenders, Issuers and other Secured Parties shall continue to, and shall be entitled to continue to, deal solely and directly with such Lender in connection with such Lender’s obligations under this Agreement, to the extent any such consent would reduce the principal amount of, or the rate of interest on, any Obligations, amend this clause (f) or postpone any scheduled date of payment of such principal or interest. Each Special Purpose Vehicle shall be entitled to the benefits of Section 2.14(d), Section 2.15, and Section 2.16 as if it were such Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to make under Section 2.14(d), Section 2.15, or Section 2.16 to any such Special Purpose Vehicle and any such Lender any payment in excess of the amount the Borrower would have been obligated to pay to such Lender in respect of such interest if such Special Purpose Vehicle had not been assigned the rights of such Lender hereunder. In

109

addition, each Lender granting a Special Purpose Vehicle the option to make all or any part of any Loan that such Lender would otherwise be required to make pursuant to clause (i) above, (x) shall keep a register, meeting the requirements of Treasury Regulation Section 5f.103-1(c), of each Special Purpose Vehicle which has funded all or any part of any Loans that such Lender would otherwise be obligated to make pursuant to this Agreement, specifying such Special Purpose Vehicle’s entitlement to payments of principal and interest with respect to such Loans and (y) shall collect (and deliver copies thereof to each of the Administrative Agent and the Borrower), prior to the time such Special Purpose Vehicle receives payments with respect to such funded Loans, from each Special Purpose Vehicle the appropriate forms, certificates and statements described in Section 2.16(f) (and updated as required by Section 2.16(f)) as if such Special Purpose Vehicle were a Lender under Section 2.16(f).

(g) Each Lender may sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Revolving Loans and Letters of Credit). The terms of such participation shall not, in any event, require the participant’s consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights such Lender may have under or in respect of the Loan Documents (including the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would (i) reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation or (ii) result in the release of all or substantially all of the Collateral other than in accordance with Section 10.7(b). In the event of the sale of any participation by any Lender, (w) such Lender’s obligations under the Loan Documents shall remain unchanged, (x) such Lender shall remain solely responsible to the other parties for the performance of such obligations, (y) such Lender shall remain the holder of such Obligations for all purposes of this Agreement and (z) the Borrower, the Agents, the Issuers and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Each participant shall be entitled to the benefits of Sections 2.14(d), Section 2.15 and Section 2.16 as if it were a Lender; provided, however, that anything herein to the contrary notwithstanding, the Borrower shall not, at any time, be obligated to make any payment under Sections 2.14(d), Section 2.15 and Section 2.16 to the participants in the rights and obligations of any Lender (together with such Lender) in excess of the amount the Borrower would have been obligated to pay to such Lender in respect of such interest had such participation not been sold; and provided, further, that such participant in the rights and obligations of such Lender shall have no direct right to enforce any of the terms of this Agreement against the Borrower, any Agent or the other Lenders.

(h) Any Issuer may at any time assign its rights and obligations hereunder to any other Lender by an instrument in form and substance satisfactory to the Borrower, the Administrative Agent, such Issuer and such Lender, subject to the provisions under this Section 11.2 relating to notations of transfer in the Register.

(i) For purposes of this Section 11.2, with respect to each Letter of Credit, if an Issuer transfers its rights with respect to the Borrower’s Reimbursement Obligation with respect to a Letter of Credit such Issuer shall give notice of such transfer to the Administrative Agent for notation in the Revolving Credit Facility Register. If any Issuer ceases to be a Lender hereunder by virtue of any assignment made pursuant to this Section 11.2, then, as of the effective date of such cessation, such Issuer’s obligations to Issue Letters of Credit pursuant to Section 2.4 shall terminate and such Issuer shall be an Issuer hereunder only with respect to outstanding Letters of Credit Issued prior to such date.

110

Section 11.3 Costs and Expenses.

(a) Group and the Borrower agree, jointly and severally, upon demand to pay, or reimburse each Facility Agent and BAS for, all of such Facility Agent’s and BAS’s reasonable internal and external audit, legal, appraisal, valuation, filing, document duplication and reproduction and investigation expenses and for all other reasonable out-of-pocket costs and expenses of every type and nature (including the reasonable fees, expenses and disbursements of the Facility Agents’ counsel, Kaye Scholer LLP, local legal counsel, auditors, accountants, appraisers, printers, insurance advisers, and other consultants and agents) incurred by such Facility Agent or BAS in connection with (i) such Facility Agent’s or BAS’s audit and investigation of any of the Warnaco Entities in connection with the preparation, negotiation and execution of the Loan Documents and the Administrative Agent’s periodic audits of any of the Warnaco Entities, as the case may be; (ii) the preparation, negotiation, execution and interpretation of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any of the conditions set forth in Article III), the other Loan Documents and any proposal letter or commitment letter issued in connection therewith and the making of the Loans hereunder; (iii) the creation, perfection or protection of the Liens under the Loan Documents (including, without limitation, any reasonable fees and expenses for local counsel in various jurisdictions); (iv) the ongoing administration of this Agreement and the Loans, including consultation with attorneys in connection therewith and with respect to the rights and responsibilities of each Facility Agent hereunder and under the other Loan Documents; (v) the protection, collection or enforcement of any of the Secured Obligations or the enforcement of any of the Loan Documents; (vi) the commencement, defense or intervention in any court proceeding relating in any way to any of the Secured Obligations, any Warnaco Entity, this Agreement or any of the other Loan Documents; (vii) the response to, and preparation for, any subpoena or request for document production with which any Facility Agent or BAS is served or deposition or other proceeding in which any Facility Agent or BAS is called to testify, in each case, relating in any way to any of the Obligations, any Warnaco Entity, this Agreement or any of the other Loan Documents; and (viii) any amendments, consents, waivers, assignments, restatements, or supplements to any of the Loan Documents and the preparation, negotiation, and execution of the same.

(b) Group and the Borrower further agree, jointly and severally, to pay or reimburse each Arranger, each Agent and each of the Lenders and Issuers upon demand for all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees (including allocated costs of internal counsel and costs of settlement), incurred by such Arranger, such Agent, such Lender or such Issuer (i) in enforcing any Loan Document, any Secured Obligation or any security therefor or exercising or enforcing any other right or remedy available by reason of an Event of Default; (ii) in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or in any insolvency or bankruptcy proceeding; (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to any of the Secured Obligations, any Warnaco Entity and related to or arising out of any of the transactions contemplated hereby or by any of the other Loan Documents; and (iv) in taking any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) described in any of clauses (i) through (iii) above.

111

Section 11.4 Indemnities.

(a) Group and the Borrower agree, jointly and severally, to indemnify and hold harmless each Arranger, each Agent, each Lender and each Issuer and each of their respective Affiliates, and each of the directors, officers, employees, agents, representative, attorneys, consultants and advisors of or to any of the foregoing (including those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each such Person being an “Indemnitee”) from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including reasonable fees and disbursements of counsel to any such Indemnitee) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of this Agreement, any other Loan Document, any Secured Obligation, any Letter of Credit or any act, event or transaction related or attendant to any thereof, or the use or intended use of the proceeds of any of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the “Indemnified Matters”); provided, however, that neither Group nor the Borrower shall not have any obligation under this Section 11.4 (i) to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order, (ii) with respect to taxes (and amounts relating thereto), the indemnification for which shall be governed solely and exclusively by Section 2.16, and (iii) to an Indemnitee with respect to any Indemnified Matter that does not involve an act or omission of any Warnaco Entity or affiliate thereof and is brought by one Indemnitee against another Indemnitee. Without limiting the foregoing, Indemnified Matters include (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of any Warnaco Entity involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or any contiguous real estate; (ii) any costs or liabilities incurred in connection with any Remedial Action concerning any Warnaco Entity; (iii) any costs or liabilities incurred in connection with any Environmental Lien; (iv) any costs or liabilities incurred in connection with any other matter under any Environmental Law, including CERCLA and applicable state property transfer laws, whether, with respect to any of such matters, such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor in interest to any Warnaco Entity, or the owner, lessee or operator of any property of any Warnaco Entity by virtue of foreclosure, except, with respect to those matters referred to in clauses (i), (ii), (iii) and (iv) above, to the extent incurred following (A) foreclosure by any Facility Agent, any Lender or any Issuer, or any Facility Agent, any Lender or any Issuer having become the successor in interest to any Warnaco Entity, and (B) attributable solely to acts of the Arrangers, the Facility Agents, such Lender or such Issuer or any agent on behalf of the Facility Agents or such Lender.

(b) Group and the Borrower shall, jointly and severally, indemnify each Agent, each Arranger, each Lender and each Issuer for, and hold each Agent, each Arranger, each Lender and each Issuer harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against any Agent, Arranger, Lender or any Issuer for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Warnaco Entity in connection with the transactions contemplated by this Agreement.

(c) Group and the Borrower agree, jointly and severally, that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this Section 11.4) or any other Loan Document shall (i) survive payment in full of the Secured Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document.

112

Section 11.5 Limitation of Liability.

(a) Group and the Borrower agree, jointly and severally, that no Indemnitee shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any Warnaco Entity or any equity holders or creditors of any Warnaco Entity for or in connection with the transactions contemplated hereby and in the other Loan Documents, except to the extent such liability is found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnitee’s gross negligence or willful misconduct. In no event, however, shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages and each of Group and the Borrower hereby waives, releases and agrees (for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

(b) IN NO EVENT SHALL ANY AGENT AFFILIATE HAVE ANY LIABILITY TO ANY LOAN PARTY, LENDER, ISSUER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT OR CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY OR ANY AGENT AFFILIATE’S TRANSMISSION OF APPROVED ELECTRONIC COMMUNICATIONS THROUGH THE INTERNET OR ANY USE OF THE APPROVED ELECTRONIC PLATFORM, EXCEPT TO THE EXTENT SUCH LIABILITY OF ANY AGENT AFFILIATE IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FORM SUCH AGENT AFFILIATE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

Section 11.6 Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, each Lender and each Affiliate of a Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or its Affiliates to or for the credit or the account of a Loan Party against any and all of the Secured Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Secured Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender or its Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.6 are in addition to the other rights and remedies (including other rights of set-off) which such Lender may have.

Section 11.7 Sharing of Payments, Etc.

(a) If any Lender (directly or through an Affiliate thereof) shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) on account of the Loans owing to it (including any interest or fees in respect thereof or amounts due pursuant to Section 11.3 or Section 11.4) or derived from Collateral (in each case, other than pursuant to Section 2.14, Section 2.15 or Section 2.16) in excess of its Ratable Portion of payments obtained by all the Lenders on account of such Obligations, such Lender (each, a “Purchasing Lender”) shall forthwith purchase from the other Lenders (each, a “Selling Lender”) such participations in their Loans or other Obligations as shall be necessary to cause such Purchasing Lender to share the excess payment ratably with each of them.

113

(b) If any Lender shall, after the sharing of payments as set forth in clause (a) above, hold payments in excess of its Loans, such Lender shall pay such amounts to the Administrative Agent for application pursuant to Section 2.13(h).

(c) If all or any portion of any payment received by a Purchasing Lender is thereafter recovered from such Lender, such purchase from each applicable Selling Lender shall be rescinded and such Lender shall repay to such Purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Selling Lender’s ratable share (according to the proportion of (i) the amount of such Selling Lender’s required repayment to (ii) the total amount so recovered from such Purchasing Lender) of any interest or other amount paid or payable by such Purchasing Lender in respect of the total amount so recovered.

(d) The Borrower agrees that any Purchasing Lender so purchasing a participation from a Selling Lender pursuant to this Section 11.7 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.

Section 11.8 Notices, Etc.

(a) Notices. All notices, demands, requests and other communications provided for in this Agreement shall be given in writing, or by any telecommunication device capable of creating a written record, and addressed to the party to be notified as follows:

	(i)		if to Group or the Borrower:

			c/o The Warnaco Group Inc. 501 7th Avenue New York, NY 10018 Attention: Chief Financial Officer Telecopy No: (212) 287-8546

			with a copy to the Assistant General Counsel of Group Email: ealford@warnaco.com

(ii) if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II (Applicable Lending Offices and Addresses for Notices) or on the signature page of any applicable Assignment and Acceptance or Assumption Agreement;

(iii) if to any Issuer, at the address set forth under its name on Schedule II (Applicable Lending Offices and Addresses for Notices);

	(iv)		if to the Administrative Agent:

			Bank of America, N.A. 335 Madison Avenue New York, New York 10017 Attention: Business Capital- Account Executive Email: kevin.w.corcoran@bankofamerica.com Telecopy No.: (212) 503-7350

114

with a copy to:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Legal Department
Email: girolamo.m.saccone@bankofamerica.com
Telecopy No.: (212) 503-7350

and

	(v)		if to the Collateral Agent:

			Bank of America, N.A. 335 Madison Avenue New York, New York 10017 Attention: Business Capital- Account Executive Email: kevin.w.corcoran@bankofamerica.com Telecopy No.: (212) 503-7350

with a copy to:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Legal Department
Email: girolamo.m.saccone@bankofamerica.com
Telecopy No.: (212) 503-7350

or at such other address as shall be notified in writing (i) in the case of Group, the Borrower and the Facility Agents, to the other parties and (ii) in the case of all other parties, to the Borrower and the Facility Agents. All such notices and communications shall be effective upon (1) personal delivery (if delivered by hand, including any overnight courier service), (2) when deposited in the mails (if sent by mail), (3) if delivered by posting to an Approved Electronic Platform, an internet website or a similar telecommunication device requiring a user prior access to such Approved Electronic Platform, website or other device, when such notice, demand, request, consent and other communication shall have been made generally available on such Approved Electronic Platform, Internet website or similar device to the class of Person being notified (regardless of whether any such Person must accomplish, and whether or not any such Person shall have accomplished, any action prior to obtaining access to such items, including registration, disclosure of contact information, compliance with a standard user agreement or undertaking a duty of confidentiality) and (4) if delivered by electronic mail or any other telecommunications device, when transmitted to an electronic mail address (or by another means of electronic delivery) as provided above; provided, however, that notices and communications to the Administrative Agent pursuant to Article II or Article X shall not be effective until received by the Administrative Agent.

115

(b) Use of Electronic Platform. Notwithstanding clause (a) above (unless the Administrative Agent requests that the provisions of clause (a) above be followed) and any other provision in this Agreement or any other Loan Document providing for the delivery of any Approved Electronic Communication by any other means, the Loan Parties shall deliver all Approved Electronic Communications to the Facility Agents by transmitting such Approved Electronic Communications electronically (in a format acceptable to the applicable Facility Agent) to kevin.w.corcoran@bankofamerica.com or such other electronic mail address (or similar means of electronic delivery) as such Facility Agent may notify the Borrower. Nothing in this clause (b) shall prejudice the right of any Facility Agent or any Lender or Issuer to deliver any Approved Electronic Communication to any Loan Party in any manner prescribed in this Agreement.

Section 11.9 No Waiver; Remedies. No failure on the part of any Lender, Issuer or any Facility Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 11.10 Binding Effect. This Agreement shall become effective when it shall have been executed by Group, the Borrower and the Facility Agents and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of Group, the Borrower, the Facility Agents and each Lender and their respective successors and assigns, except that neither Group nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.

Section 11.11 Governing Law. This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the internal law of the State of New York.

Section 11.12 Submission to Jurisdiction; Service of Process.

(a) Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, Group and the Borrower hereby each accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) Each of Group and the Borrower hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Agreement or any of the other Loan Documents by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to Group and the Borrower at its address specified in Section 11.8. Each of Group and the Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) Nothing contained in this Section 11.12 shall affect the right of any Facility Agent or any Lender to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Borrower or any other Loan Party in any other jurisdiction.

116

(d) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agents could purchase Dollars with such other currency at the spot rate of exchange quoted by the Administrative Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter.

Section 11.13 Waiver of Jury Trial. Each Facility Agent, each of the Lenders, the Issuers, Group and the Borrower irrevocably waives trial by jury in any action or proceeding with respect to this Agreement or any other Loan Document.

Section 11.14 Marshaling; Payments Set Aside. None of the Facility Agents, any Lender or any Issuer shall be under any obligation to marshal any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent that any Loan Party makes a payment or payments to any Facility Agent, the Lenders or the Issuers or any of such Persons receives payment from the proceeds of the Collateral or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefore, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

Section 11.15 Section Titles. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

Section 11.16 [Intentionally Omitted].

Section 11.17 [Intentionally Omitted].

Section 11.18 Entire Agreement. This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed signature page of this Agreement by facsimile transmission, electronic mail or by posting on the Approved Electronic Platform shall be as effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all parties shall be lodged with the Borrower and the Administrative Agent. In the event of any conflict between the terms of this Agreement and any other Loan Document, the terms of this Agreement shall govern.

117

Section 11.19 Confidentiality.

(a) No Agent or any Lender may disclose to any Person any confidential, proprietary or non-public information of the Warnaco Entities furnished to the Agents or the Lenders by Group or the Borrower (such information being referred to collectively herein as the “Borrower Information”), except that each of the Agents and each of the Lenders may disclose Borrower Information (i) to its and its Affiliates’ employees, officers, directors, agents and advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Borrower Information and instructed to keep such Borrower Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) if reasonably necessary in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 11.19, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement, (vii) to the extent such Borrower Information (A) is or becomes generally available to the public on a non-confidential basis other than as a result of a breach of this Section 11.19 by such Agent or such Lender, or (B) is or becomes available to such Agent or such Lender on a nonconfidential basis from a source other than a Warnaco Entity and (viii) with the prior written consent of Group or the Borrower.

(b) Neither Group nor the Borrower may disclose to any Person the amount or terms of any fees payable to any Agent, any Arranger or any Lender (such information being collectively referred to herein as the “Facility Information”), except that Group or the Borrower may disclose the Facility Information (i) to its and its respective Affiliates’ employees, officers, directors, agents and advisors who have a need to know the Facility Information in connection with this Agreement and the transactions contemplated hereby or (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process.

Section 11.20 Patriot Act Notice. The Agents, the Issuers and the Lenders hereby notify Group and the Borrower that, pursuant to the requirements of the Patriot Act, the Agents, the Issuers and the Lenders are required to obtain, verify and record information that identifies each of Group, the Borrower and the other Loan Parties, including its legal name, address, tax ID number and other information that will allow the Agents, the Issuers and the Lenders to identify it in accordance with the Patriot Act. The Agents, the Issuers and the Lenders may require information regarding Group’s, the Borrower’s and other Loan Parties’ management and owners, such as legal name, social security number and date of birth.

118

TABLE OF CONTENTS


	Page

ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS		1
*Section 1.1 Defined Terms*		1
*Section 1.2 Computation of Time Periods*		38
*Section 1.3 Accounting Terms and Principles*		38
*Section 1.4 Conversion of Foreign Currencies*		38
*Section 1.5 Certain Terms*		39
ARTICLE II THE REVOLVING CREDIT FACILITY		39
*Section 2.1 The Commitments*		39
*Section 2.2 Borrowing Procedures*		40
*Section 2.3 Swing Loans*		41
*Section 2.4 Letters of Credit*		42
*Section 2.5 Reduction and Termination of the Commitments*		47
*Section 2.6 Repayment of Loans*		47
*Section 2.7 Evidence of Debt*		47
*Section 2.8 Optional Prepayments*		47
*Section 2.9 Mandatory Prepayments*		47
*Section 2.10 Interest*		49
*Section 2.11 Conversion/Continuation Option*		50
*Section 2.12 Fees*		50
*Section 2.13 Payments and Computations*		51
*Section 2.14 Special Provisions Governing Eurodollar Rate Loans*		54
*Section 2.15 Capital Adequacy*		55
*Section 2.16 Taxes*		56
*Section 2.17 Substitution of Lenders*		59
*Section 2.18 Facility Increase*		60
*Section 2.19 Special Cash Collateral Account*		61
ARTICLE III CONDITIONS TO LOANS AND LETTERS OF CREDIT		62
*Section 3.1 Conditions Precedent to Initial Loans and Letters of Credit*		62
*Section 3.2 Conditions Precedent to Each Loan and Letter of Credit*		66
*Section 3.3 Determinations of Initial Borrowing Conditions*		66

TABLE OF CONTENTS
(continued)


	Page

ARTICLE IV REPRESENTATIONS AND WARRANTIES		67
*Section 4.1 Corporate Existence; Compliance with Law*		67
*Section 4.2 Corporate Power; Authorization; Enforceable Obligations*		67
*Section 4.3 Ownership of Group, Borrower; Subsidiaries*		68
*Section 4.4 Financial Statements*		69
*Section 4.5 Material Adverse Change*		69
*Section 4.6 Solvency*		70
*Section 4.7 Litigation*		70
*Section 4.8 Taxes*		70
*Section 4.9 Full Disclosure*		70
*Section 4.10 Margin Regulations*		71
*Section 4.11 No Burdensome Restrictions; No Defaults*		71
*Section 4.12 Investment Company Act; Public Utility Holding Company Act*		71
*Section 4.13 Use of Proceeds*		71
*Section 4.14 Insurance*		71
*Section 4.15 Labor Matters*		71
*Section 4.16 ERISA*		72
*Section 4.17 Environmental Matters*		72
*Section 4.18 Intellectual Property; Material License*		73
*Section 4.19 Title; Real Property*		73
*Section 4.20 Perfection of Security Interests in the Collateral*		74
ARTICLE V FINANCIAL COVENANTS		74
*Section 5.1 Minimum Fixed Charge Coverage Ratio*		74
ARTICLE VI REPORTING COVENANTS		74
*Section 6.1 Financial Statements*		74
*Section 6.2 Default Notices*		77
*Section 6.3 Litigation*		77
*Section 6.4 Asset Sales*		77
*Section 6.5 Notices under Senior Note Documents*		77
*Section 6.6 SEC Filings; Press Releases*		77
*Section 6.7 Labor Relations*		77

TABLE OF CONTENTS
(continued)


	Page

*Section 6.8 Tax Returns*		77
*Section 6.9 Insurance*		78
*Section 6.10 ERISA Matters*		78
*Section 6.11 Environmental Matters*		78
*Section 6.12 Borrowing Base Determination*		78
*Section 6.13 Material Licenses*		80
*Section 6.14 Communications and Amendments with respect to Canadian Facility*		80
*Section 6.15 Other Information*		80
ARTICLE VII AFFIRMATIVE COVENANTS		80
*Section 7.1 Preservation of Corporate Existence, Etc.*		80
*Section 7.2 Compliance with Laws, Etc.*		80
*Section 7.3 Conduct of Business*		80
*Section 7.4 Payment of Taxes, Etc.*		81
*Section 7.5 Maintenance of Insurance*		81
*Section 7.6 Access*		81
*Section 7.7 Keeping of Books*		81
*Section 7.8 Maintenance of Properties, Etc.*		81
*Section 7.9 Application of Proceeds*		82
*Section 7.10 Environmental*		82
*Section 7.11 Additional Personal Property Collateral and Guaranties*		82
*Section 7.12 [Intentionally Omitted]*		83
*Section 7.13 Real Property*		83
*Section 7.14 Senior Notes*		84
*Section 7.15 Post Closing Matters*		84
ARTICLE VIII NEGATIVE COVENANTS		84
*Section 8.1 Indebtedness*		84
*Section 8.2 Liens, Etc.*		86
*Section 8.3 Investments*		87
*Section 8.4 Sale of Assets*		88
*Section 8.5 Restricted Payments*		90
*Section 8.6 Prepayment and Cancellation of Indebtedness*		91

iii

TABLE OF CONTENTS
(continued)


	Page

*Section 8.7 Restriction on Fundamental Changes*		91
*Section 8.8 Change in Nature of Business*		92
*Section 8.9 Transactions with Affiliates*		92
*Section 8.10 Restrictions on Subsidiary Distributions; No New Negative Pledge*		93
*Section 8.11 Modification of Constituent Documents*		93
*Section 8.12 Modification of Certain Documents and Certain Debt*		93
*Section 8.13 Modification of Debt Agreements*		94
*Section 8.14 Accounting Changes; Fiscal Year*		94
*Section 8.15 Margin Regulations*		94
*Section 8.16 Sale and Leasebacks Transactions*		94
*Section 8.17 No Speculative Transactions*		94
*Section 8.18 Compliance with ERISA*		94
*Section 8.19 Environmental*		95
ARTICLE IX EVENTS OF DEFAULT		95
*Section 9.1 Events of Default*		95
*Section 9.2 Remedies*		96
*Section 9.3 Actions in Respect of Letters of Credit*		97
ARTICLE X THE FACILITY AGENTS		97
*Section 10.1 Authorization and Action*		97
*Section 10.2 Agent’s Reliance, Etc*.		98
*Section 10.3 The Agents Individually*		99
*Section 10.4 Lender Credit Decision*		99
*Section 10.5 Indemnification*		99
*Section 10.6 Successor Agents*		100
*Section 10.7 Concerning the Collateral and the Collateral Documents*		101
*Section 10.8 Collateral Matters Relating to Related Obligations*		102
*Section 10.9 Posting of Approved Electronic Communications*		103
*Section 10.10 Syndication Agent; Co-Documentation Agents; Arrangers*		104
ARTICLE XI MISCELLANEOUS		104
*Section 11.1 Amendments, Waivers, Etc.*		104
*Section 11.2 Assignments and Participations*		107

EXHIBIT A
TO
CREDIT AGREEMENT

FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE dated as of _____, 20_____ between [NAME OF ASSIGNOR] (the “Assignor”) and [NAME OF ASSIGNEE] (the “Assignee”).

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Warnaco Inc., as borrower (the “Borrower”), The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers (together with the Administrative Agent, the “Facility Agents”), and the other Persons party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Assignor and the Assignee hereby agree as follows:

As of the Effective Date (as defined below), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the Assignor’s rights and obligations under the Credit Agreement to the extent related to the amounts and percentages specified on Section 1 of Schedule I hereto.

The Assignor (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim, (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Warnaco Entity or the performance or observance by any Loan Party of any of its obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto.

The Assignee (a) agrees that it will, independently and without reliance upon the Facility Agents, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, (b) appoints and authorizes each Facility Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to each such Facility Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (c) agrees that it will perform in accordance with their terms all of the obligations that, by the terms of the Credit Agreement, are required to be performed by it as a Lender, (d) represents and warrants that it is an Eligible Assignee, (e) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance, (f) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof and (g) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee’s status for purposes of determining exemption from, or a reduced rate of withholding of, United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement if required to establish such exemption or reduction of withholding for such Assignee.

Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent (together with an assignment fee in the amount of $3,500 payable by the Assignee to the Administrative Agent pursuant to Section 11.2(b)(Assignments and Participations)) for acceptance and recording in the Register by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the effective date specified in Section 2 of Schedule I hereto (the “Effective Date”).

Upon such acceptance and recording in the Register by the Administrative Agent, then, as of the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations under the Credit Agreement of a Lender and, if such Lender were an Issuer, of such Issuer and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights (except those surviving the payment in full of the Obligations) and be released from its obligations under the Loan Documents other than those relating to events or circumstances occurring prior to the Effective Date.

EXHIBIT B
TO
CREDIT AGREEMENT

FORM OF NOTICE OF BORROWING

BANK OF AMERICA, N.A.,

as Administrative Agent under the

Credit Agreement referred to below

335 Madison Avenue
New York, New York 10017

___, 20__


Attention:

Re: Warnaco Inc. (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.2 (Borrowing Procedures) of the Credit Agreement that the undersigned hereby requests a Borrowing of Revolving Loans under the Credit Agreement and, in that connection, sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.2 (Borrowing Procedures) of the Credit Agreement:

	(a)		The date of the Proposed Borrowing is _____, 20_____ (the “*Funding Date*”).

	(b)		The aggregate amount of the Proposed Borrowing is $ , of which amount [$ consists of Base Rate Loans] [and $ consists of Eurodollar Rate Loans having an initial Interest Period of [one] [two] [three] [six] month[s]].

	(c)		The Available U.S. Credit (after giving effect to the Proposed Borrowing) is $ .

EXHIBIT C
TO
CREDIT AGREEMENT

FORM OF SWING LOAN REQUEST

BANK OF AMERICA, N.A.,

as Administrative Agent under the

Credit Agreement referred to below

335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:

Re: Warnaco Inc. (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.3(b) (Swing Loans) of the Credit Agreement that the undersigned hereby requests a Swing Loan under the Credit Agreement and, in that connection, sets forth below the information relating to such Swing Loan (the “Proposed Swing Loan”) as required by Section 2.3(b) (Swing Loans) of the Credit Agreement:

	(c)		The date of the Proposed Swing Loan is _____, 20_____ (the “*Funding Date*”).

	(d)		The amount of the Proposed Swing Loan is $ .

	(e)		The Available U.S. Credit (after giving effect to the Proposed Swing Loan) is $ .

EXHIBIT D
TO
CREDIT AGREEMENT

FORM OF LETTER OF CREDIT REQUEST

BANK OF AMERICA, N.A.,

as Administrative Agent under the
Credit Agreement referred to below

335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:

Re: Warnaco Inc. (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.4(c) (Letters of Credit) of the Credit Agreement that the undersigned requests the issuance of a Letter of Credit by [Name of Issuer] in the form of a [standby] [documentary] letter of credit for the benefit of [Name of Beneficiary], in the amount of [$ ] [Amount in Alternative Currency (the Dollar Equivalent of which is as of the date hereof)], to be issued on , (the “Issue Date”) and having an expiration date of , _____.

The form of the requested Letter of Credit is attached hereto.

The undersigned hereby certifies that the following statements are true on the date hereof (with respect to clauses (d) and (e) only) and shall be true on the Issue Date both before and after giving effect to the issuance of the Letter of Credit requested hereby:

(c) the aggregate amount of the Letter of Credit Obligations then outstanding will not exceed the Letter of Credit Sub-Limit;

EXHIBIT F
TO
CREDIT AGREEMENT

FORM OF NOTICE OF CONVERSION OR CONTINUATION

BANK OF AMERICA, N.A.,

as Administrative Agent under the
Credit Agreement referred to below

335 Madison Avenue
New York, New York 10017

___, 20__


Attention:

Re: Warnaco Inc. (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.11 (Conversion/Continuation Option) of the Credit Agreement that the undersigned hereby requests a [conversion] [continuation] on , _____ of $ in principal amount of presently outstanding Revolving Loans that are [Base Rate Loans] [Eurodollar Rate Loans having an Interest Period ending on , ][to] [as] [Base Rate][Eurodollar Rate] Loans. [The Interest Period for such amount requested to be converted to or continued as Eurodollar Rate Loans is [[one] [two] [three] [six] month[s]].

EXHIBIT H
TO
CREDIT AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Warnaco Inc., a Delaware corporation, as borrower (the “Borrower”), The Warnaco Group, Inc. (“Group”), the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein without definition have the meanings ascribed to them in the Credit Agreement. This Compliance Certificate is submitted concurrently with the [quarterly][annual] financial statements of Group for the period ended _____, 20 _____ [(the “Fiscal Period End Date”)]⁹. Pursuant to Section 6.1(d) of the Credit Agreement, the undersigned hereby certifies that he/she is a Responsible Officer of Group and further certifies on behalf of Group as follows:

1. The calculations attached hereto as Annex A with respect to the covenant set forth in Section 5.1 of the Credit Agreement [(as if a Trigger Event had occurred and the Fiscal Period End Date were the last day of a Test Period)]¹⁰ and the Applicable Margin are true, accurate and complete, and are made in accordance with the terms and provisions of the Credit Agreement.

2. [No Default or Event of Default has occurred and is continuing and no Default or Event of Default (as defined in the Canadian Facility) has occurred and is continuing.] [A Default or Event of Default or a Default or Event of Default (as defined in the Canadian Facility) has occurred and is continuing. The nature thereof and the action which Group proposes to take with respect thereto is as follows: ].

3. [The amount of the Available Credit at any time during the period covered by this Compliance Certificate did not fall to an amount which gave rise to an Accelerated Borrowing Base Certificate Delivery Date or a Trigger Event.] [During the period covered by this Compliance Certificate, the Available Credit fell to an amount which gave rise to an Accelerated Borrowing Base Certificate Delivery Date and/or a Trigger Event.] [Describe which occurred and date when first occurred]].

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand on this day of , _____


⁹		Bracketed text to be used only if no Trigger Event has occurred and therefore Section 5.1 financial covenant not currently being tested.

¹⁰		Bracketed text to be used only if no Trigger Event has occurred and therefore Section 5.1 financial covenant not currently being tested.

Exhibit 10.2

Execution Copy

Guaranty, dated as of August 26, 2008 (this “Guaranty”), by The Warnaco Group, Inc., a Delaware corporation (“Group”), and each of the other entities listed on the signature pages hereof or that becomes a party hereto pursuant to Section 25 (Additional Guarantors) hereof (each a “Subsidiary Guarantor” and, together with Group, collectively, the “Guarantors” and individually a “Guarantor”), in favor of the Administrative Agent, the Collateral Agent, each Lender, each Issuer and each other holder of an Obligation (as each such term is defined in the Credit Agreement referred to below) (each, a “Guarantied Party” and, collectively, the “Guarantied Parties”).

W i t n e s s e t h:

Whereas, Warnaco Inc., a Delaware corporation (the “Borrower”), Group, the Lenders and Issuers party thereto from time to time, Bank of America, N.A. (“BofA”), as administrative agent (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers (together with the Administrative Agent, the “Facility Agents”), Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, Banc of America Securities LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as joint bookrunners, Deutsche Bank Securities Inc., as sole syndication agent, and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset Finance Inc., as co-documentation agents, have entered into the Credit Agreement, dated as of August 26, 2008 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein but not defined herein are used with the meanings given to them in the Credit Agreement);

Whereas, it is condition precedent to the effectiveness of the Credit Agreement that the Guarantors shall have executed and delivered this Guaranty to the Collateral Agent for the benefit of the Guarantied Parties;

Whereas, Group is the sole shareholder of the Borrower and each Subsidiary Guarantor is a direct or indirect Subsidiary of the Borrower; and

Whereas, each Guarantor will receive substantial direct and indirect benefits from the making of the Loans, the issuance of the Letters of Credit and the granting of the other financial accommodations to the Borrower under the Credit Agreement;

Now, Therefore, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1 Guaranty

(a) To induce the Lenders to make the Loans and the Issuers to issue Letters of Credit, each Guarantor hereby absolutely, unconditionally and irrevocably guarantees, jointly with the other Guarantors and severally, as primary obligor and not merely as surety, the full and punctual payment when due and in the currency due, whether at stated maturity or earlier, by reason of acceleration, mandatory prepayment or otherwise in accordance herewith or any other Loan Document, of all the Obligations, whether or not from time to time reduced or extinguished or hereafter increased or incurred, whether or not recovery may be or hereafter may become barred by any statute of limitations, whether or not enforceable as against the Borrower, whether now or hereafter existing, and whether due or to become due, including principal, interest (including interest at the contract rate applicable upon default accrued or accruing after the commencement of any proceeding under the Bankruptcy Code, or any applicable provisions of comparable state or foreign law, whether or not such interest is an allowed claim in such proceeding), fees and costs of collection. This Guaranty constitutes a guaranty of payment and not of collection. Notwithstanding the foregoing, Calvin Klein Jeanswear Company shall not be required to make any payment hereunder until the 30th day after written demand therefor has been given by the Collateral Agent in accordance with the terms of the Credit Agreement.

Guaranty
Warnaco Inc.

(b) Each Guarantor further agrees that, if (i) any payment made by Borrower or any other Person and applied to the Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or (ii) any proceeds of Collateral are required to be returned by any Guarantied Party to the Borrower, its estate, trustee, receiver or any other party, including any Guarantor, under any bankruptcy law, equitable cause or any other Requirement of Law, then, to the extent of such payment or repayment, any such Guarantor’s liability hereunder (and any Lien or other Collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made. If, prior to any of the foregoing, this Guaranty shall have been cancelled or surrendered (and if any Lien or other Collateral securing such Guarantor’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender), this Guaranty (and such Lien or other Collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of any such Guarantor in respect of the amount of such payment (or any Lien or other Collateral securing such obligation).

Section 2 Limitation of Guaranty

Any term or provision of this Guaranty or any other Loan Document to the contrary notwithstanding, the maximum aggregate amount of the Obligations for which any Subsidiary Guarantor shall be liable shall not exceed the maximum amount for which such Subsidiary Guarantor can be liable without rendering this Guaranty or any other Loan Document, as it relates to such Subsidiary Guarantor, subject to avoidance under applicable law relating to fraudulent conveyance or fraudulent transfer (including Section 548 of the Bankruptcy Code or any applicable provisions of comparable state law) (collectively, “Fraudulent Transfer Laws”), in each case after giving effect (a) to all other liabilities of such Subsidiary Guarantor, contingent or otherwise, that are relevant under such Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Subsidiary Guarantor in respect of intercompany Indebtedness to the Borrower to the extent that such Indebtedness would be discharged in an amount equal to the amount paid by such Subsidiary Guarantor hereunder) and (b) to the value as assets of such Subsidiary Guarantor (as determined under the applicable provisions of such Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights held by such Subsidiary Guarantor pursuant to (i) applicable Requirements of Law, (ii) Section 3 (Contribution) of this Guaranty or (iii) any other Contractual Obligations providing for an equitable allocation among such Subsidiary Guarantor and other Subsidiaries or Affiliates of the Borrower of obligations arising under this Guaranty or other guaranties of the Obligations by such parties.

Guaranty
Warnaco Inc.

Section 3 Contribution

To the extent that any Subsidiary Guarantor shall be required hereunder to pay a portion of the Obligations exceeding the greater of (a) the amount of the economic benefit actually received by such Subsidiary Guarantor from the Loans and the other financial accommodations provided to the Borrower under the Loan Documents and (b) the amount such Subsidiary Guarantor would otherwise have paid if such Subsidiary Guarantor had paid the aggregate amount of the Obligations (excluding the amount thereof repaid by the Borrower and Group) in the same proportion as such Subsidiary Guarantor’s net worth at the date enforcement is sought hereunder bears to the aggregate net worth of all the Subsidiary Guarantors at the date enforcement is sought hereunder, then such Guarantor shall be reimbursed by such other Subsidiary Guarantors for the amount of such excess, pro rata, based on the respective net worths of such other Subsidiary Guarantors at the date enforcement hereunder is sought.

Section 4 Authorization; Other Agreements

The Guarantied Parties are hereby authorized, without notice to, or demand upon, any Guarantor, which notice and demand requirements each are expressly waived hereby, and without discharging or otherwise affecting the obligations of such Guarantor hereunder (which obligations shall remain absolute and unconditional notwithstanding any such action or omission to act), from time to time, to do each of the following:

(a) supplement, renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, the Obligations, or any part of them, or otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument (including any of the other Loan Documents) now or hereafter executed by the Borrower and delivered to the Guarantied Parties or any of them, including any increase or decrease of principal or the rate of interest thereon;

(b) waive or otherwise consent to noncompliance with any provision of any instrument evidencing the Obligations, or any part thereof, or any other instrument or agreement in respect of any of the Obligations (including any of the other Loan Documents) now or hereafter executed by the Borrower and delivered to the Guarantied Parties or any of them;

(d) receive, take and hold additional security or collateral for the payment of the Obligations or any part of them and exchange, enforce, waive, substitute, liquidate, terminate, abandon, fail to perfect, subordinate, transfer, otherwise alter and release any such additional security or collateral;

(e) settle, release, compromise, collect or otherwise liquidate any of the Obligations or accept, substitute, release, exchange or otherwise alter, affect or impair any security or collateral for the Obligations or any part of them or any other guaranty therefor, in any manner;

(f) add, release or substitute any one or more other guarantors, makers or endorsers of the Obligations or any part of them and otherwise deal with the Borrower or any other guarantor, maker or endorser;

Guaranty
Warnaco Inc.

(g) apply to the Obligations any payment or recovery (x) from the Borrower, from any other guarantor, maker or endorser of the Obligations or any part of them or (y) from any Guarantor in such order as provided herein, in each case whether such Obligations are secured or unsecured or guaranteed or not guaranteed by others;

(h) apply to the Obligations any payment or recovery from any Guarantor of any of the Obligations or any sum realized from security furnished by such Guarantor upon its indebtedness or obligations to the Guarantied Parties or any of them, in each case whether or not such indebtedness or obligations relate to the Obligations; and

(i) refund at any time any payment received by any Guarantied Party in respect of any Obligation, and payment to such Guarantied Party of the amount so refunded shall be fully guaranteed hereby even though prior thereto this Guaranty shall have been cancelled or surrendered (or any release or termination of any Collateral by virtue thereof), and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of any Guarantor hereunder in respect of the amount so refunded (and any Collateral so released or terminated shall be reinstated with respect to such obligations); even if any right of reimbursement or subrogation or other right or remedy of any Guarantor is extinguished, affected or impaired by any of the foregoing (including any election of remedies by reason of any judicial, non-judicial or other proceeding in respect of any of the Obligations that impairs any subrogation, reimbursement or other right of such Guarantor).

Section 5 Guaranty Absolute and Unconditional

To the fullest extent permitted by applicable law, each Guarantor hereby waives any defense of a surety or guarantor or any other obligor on any obligations arising in connection with or in respect of any of the following and hereby agrees that its obligations under this Guaranty are absolute and unconditional and shall not be discharged or otherwise affected as a result of any of the following:

(a) the invalidity or unenforceability of any of the Borrower’s obligations under the Credit Agreement or any other Loan Document or any other agreement or instrument relating thereto, or any security for, or other guaranty of the Obligations or any part of them, or the lack of perfection or continuing perfection or failure of priority of any security for the Obligations or any part of them;

(b) the absence of any attempt to collect the Obligations or any part of them from the Borrower or other action to enforce the same;

(c) failure by any Guarantied Party to take any steps to perfect and maintain any Lien on, or to preserve any rights to, any Collateral;

(d) any Guarantied Party’s election, in any proceeding instituted under chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code or any applicable provisions of comparable state or foreign law;

(e) any borrowing or grant of a Lien by the Borrower, as debtor-in-possession, or extension of credit, under Section 364 of the Bankruptcy Code or any applicable provisions of comparable state or foreign law;

Guaranty
Warnaco Inc.

(f) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of any Guarantied Party’s claim (or claims) for repayment of the Obligations ;

(g) any use of cash collateral under Section 363 of the Bankruptcy Code;

(h) any agreement or stipulation as to the provision of adequate protection in any bankruptcy proceeding;

(i) the avoidance of any Lien in favor of the Guarantied Parties or any of them for any reason;

(j) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against the Borrower, any Guarantor or any of the Borrower’s other Subsidiaries, including any discharge of, or bar or stay against collecting, any Obligation (or any part of them or interest thereon) in or as a result of any such proceeding;

(k) failure by any Guarantied Party to file or enforce a claim against the Borrower or its estate in any bankruptcy or insolvency case or proceeding;

(l) any action taken by any Guarantied Party if such action is authorized hereby;

(m) any election following the occurrence of an Event of Default by any Guarantied Party to proceed separately against the personal property Collateral in accordance with such Guarantied Party’s rights under the UCC or, if the Collateral consists of both personal and real property, to proceed against such personal and real property in accordance with such Guarantied Party’s rights with respect to such real property; or

(n) any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor or any other obligor on any obligations, other than the indefeasible payment in full of the Obligations.

Section 6 Waivers

To the fullest extent permitted by applicable law, each Guarantor hereby waives diligence, promptness, presentment, demand for payment or performance and protest and notice of protest, notice of acceptance and any other notice in respect of the Obligations or any part of them, and any defense arising by reason of any disability or other defense of the Borrower. Each Guarantor shall not, until the Obligations are irrevocably paid in full and the Commitments have been terminated, assert any claim or counterclaim it may have against the Borrower or set off any of its obligations to the Borrower against any obligations of the Borrower to it. In connection with the foregoing, each Guarantor covenants that its obligations hereunder shall not be discharged, except by complete performance.

Guaranty
Warnaco Inc.

Section 7 Reliance

Each Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower and any endorser and other guarantor of all or any part of the Obligations, and of all other circumstances bearing upon the risk of nonpayment of the Obligations, or any part thereof, that diligent inquiry would reveal, and each Guarantor hereby agrees that no Guarantied Party shall have any duty to advise any Guarantor of information known to it regarding such condition or any such circumstances. In the event any Guarantied Party, in its sole discretion, undertakes at any time or from time to time to provide any such information to any Guarantor, such Guarantied Party shall be under no obligation (a) to undertake any investigation not a part of its regular business routine, (b) to disclose any information that such Guarantied Party, pursuant to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (c) to make any other or future disclosures of such information or any other information to any Guarantor.

Section 8 Waiver of Subrogation and Contribution Rights

Until the Obligations have been irrevocably paid in full and the Commitments have been terminated, the Guarantors shall not enforce or otherwise exercise any right of subrogation to any of the rights of the Guarantied Parties or any part of them against the Borrower or any right of reimbursement or contribution or similar right against the Borrower by reason of this Guaranty or by any payment made by any Guarantor in respect of the Obligations.

Section 9 Subordination

Each Guarantor hereby agrees that any Indebtedness of the Borrower now or hereafter owing to any Guarantor, whether heretofore, now or hereafter created (the “Guarantor Subordinated Debt”), is hereby subordinated to all of the Obligations and that, except as permitted under Section 8.6 (Prepayment and Cancellation of Indebtedness) of the Credit Agreement, the Guarantor Subordinated Debt shall not be paid in whole or in part until the Obligations have been paid in full and this Guaranty is terminated and of no further force or effect. No Guarantor shall accept any payment of or on account of any Guarantor Subordinated Debt at any time in contravention of the foregoing. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay to the Collateral Agent any payment of all or any part of the Guarantor Subordinated Debt and any amount so paid to the Collateral Agent shall be applied to payment of the Obligations as provided in the Credit Agreement. Each payment on the Guarantor Subordinated Debt received in violation of any of the provisions hereof shall be deemed to have been received by such Guarantor as trustee for the Guarantied Parties and shall be paid over to the Collateral Agent immediately on account of the Obligations, but without otherwise affecting in any manner such Guarantor’s liability hereof. Each Guarantor agrees to file all claims against the Borrower in any bankruptcy or other proceeding in which the filing of claims is required by law in respect of any Guarantor Subordinated Debt, and the Collateral Agent shall be entitled to all of such Guarantor’s rights thereunder. If for any reason a Guarantor fails to file such claim at least ten Business Days prior to the last date on which such claim should be filed, such Guarantor hereby irrevocably appoints the Collateral Agent as its true and lawful attorney-in-fact and is hereby authorized to act as attorney-in-fact in such Guarantor’s name to file such claim or, in the Collateral Agent’s discretion, to assign such claim to and cause proof of claim to be filed in the name of the Collateral Agent or its nominee. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to the Collateral Agent the full amount payable on the claim in the proceeding, and, to the full extent necessary for that purpose, each Guarantor hereby assigns to the Collateral Agent all of such Guarantor’s rights to any such payments or distributions to which such Guarantor otherwise would be entitled. If the amount so paid is greater than such Guarantor’s liability hereunder, the Collateral Agent shall pay the excess amount to the party entitled thereto. In addition, each Guarantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact to exercise all of such Guarantor’s voting rights in connection with any bankruptcy proceeding or any plan for the reorganization of the Borrower.

Guaranty
Warnaco Inc.

Section 10 Default; Remedies

The obligations of each Guarantor hereunder are independent of and separate from the Obligations. If any Obligation is not paid when due, or upon any Event of Default or upon any default by the Borrower as provided in any other instrument or document evidencing all or any part of the Obligations, the Collateral Agent may, at its sole election, proceed directly and at once, without notice, against any Guarantor to collect and recover the full amount or any portion of the Obligations then due, without first proceeding against the Borrower or any other guarantor of any of the Obligations, or against any Collateral under the Loan Documents or joining the Borrower or any other guarantor in any proceeding against any Guarantor. At any time after maturity of any of the Obligations, the Collateral Agent may (unless the Obligations have been irrevocably paid in full), without notice to any Guarantor and regardless of the acceptance of any Collateral for the payment hereof, appropriate and apply toward the payment of the Obligations (a) any indebtedness due or to become due from any Guarantied Party to such Guarantor and (b) any moneys, credits or other property belonging to such Guarantor at any time held by or coming into the possession of any Guarantied Party or any of its respective Affiliates.

Section 11 Irrevocability

This Guaranty shall be irrevocable as to the Obligations (or any part thereof) until the Commitments have been terminated and all monetary Obligations then outstanding have been irrevocably repaid in cash, at which time this Guaranty shall automatically be cancelled. Upon such cancellation and at the written request of any Guarantor or its successors or assigns, and at the cost and expense of such Guarantor or its successors or assigns, the Collateral Agent shall execute in a timely manner and deliver to the Guarantors a satisfaction of this Guaranty and such instruments, documents or agreements as are necessary or desirable to evidence the termination of this Guaranty.

Section 12 Setoff

Upon the occurrence and during the continuance of an Event of Default, each Guarantied Party and each Affiliate of a Guarantied Party may, without notice to any Guarantor and regardless of the acceptance of any security or collateral for the payment hereof, appropriate and apply toward the payment of all or any part of the Obligations (a) any indebtedness due or to become due from such Guarantied Party or Affiliate to such Guarantor and (b) any moneys, credits or other property belonging to such Guarantor, at any time held by, or coming into, the possession of such Guarantied Party or Affiliate.

Section 13 No Marshalling

Each Guarantor consents and agrees that no Guarantied Party or Person acting for or on behalf of any Guarantied Party shall be under any obligation to marshal any assets in favor of any Guarantor or against or in payment of any or all of the Obligations.

Guaranty
Warnaco Inc.

Section 14 Enforcement; Amendments; Waivers

No delay on the part of any Guarantied Party in the exercise of any right or remedy arising under this Guaranty, the Credit Agreement, any other Loan Document or otherwise with respect to all or any part of the Obligations, the Collateral or any other guaranty of or security for all or any part of the Obligations shall operate as a waiver thereof, and no single or partial exercise by any such Person of any such right or remedy shall preclude any further exercise thereof. No modification or waiver of any provision of this Guaranty shall be binding upon any Guarantied Party, except as expressly set forth in a writing duly signed and delivered by the Facility Agents (in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement). Failure by any Guarantied Party at any time or times hereafter to require strict performance by the Borrower, any Guarantor, any other guarantor of all or any part of the Obligations or any other Person of any provision, warranty, term or condition contained in any Loan Document now or at any time hereafter executed by any such Persons and delivered to any Guarantied Party shall not waive, affect or diminish any right of any Guarantied Party at any time or times hereafter to demand strict performance thereof and such right shall not be deemed to have been waived by any act or knowledge of any Guarantied Party, or its respective agents, officers or employees, unless such waiver is contained in an instrument in writing, directed and delivered to the Borrower or such Guarantor, as applicable, specifying such waiver, and is signed by the party or parties necessary to give such waiver under the Credit Agreement. No waiver of any Event of Default by any Guarantied Party shall operate as a waiver of any other Event of Default or the same Event of Default on a future occasion, and no action by any Guarantied Party permitted hereunder shall in any way affect or impair any Guarantied Party’s rights and remedies or the obligations of any Guarantor under this Guaranty. Any determination by a court of competent jurisdiction of the amount of any principal or interest owing by the Borrower to a Guarantied Party shall be conclusive and binding on each Guarantor irrespective of whether such Guarantor was a party to the suit or action in which such determination was made.

Section 15 [Intentionally Omitted]

Section 16 Successors and Assigns

This Guaranty shall be binding upon each Guarantor and upon the successors and assigns of such Guarantors and shall inure to the benefit of the Guarantied Parties and their respective successors and assigns; all references herein to the Borrower and to the Guarantors shall be deemed to include their respective successors and assigns. The successors and assigns of the Guarantors and the Borrower shall include, without limitation, their respective receivers, trustees and debtors-in-possession. All references to the singular shall be deemed to include the plural where the context so requires.

Section 17 Representations and Warranties; Covenants

Each Guarantor hereby (a) represents and warrants that the representations and warranties as to it made by the Borrower in Article IV (Representations and Warranties) of the Credit Agreement are true and correct on each date as required by Section 3.2(b)(i) (Conditions Precedent to Each Loan and Letter of Credit) of the Credit Agreement and (b) agrees to take, or refrain from taking, as the case may be, each action necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor.

Guaranty
Warnaco Inc.

Section 18 Governing Law

This Guaranty and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the internal law of the State of New York.

Section 19 Submission to Jurisdiction; Service of Process

(a) Any legal action or proceeding with respect to this Guaranty, and any other Loan Document, may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) Each Guarantor hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Guaranty or any other Loan Document by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to such Guarantor in the care of the Borrower at the Borrower’s address specified in Section 11.8 (Notices, Etc.) of the Credit Agreement. Each Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) Nothing contained in this Section 19 (Submission to Jurisdiction; Service of Process) shall affect the right of the Collateral Agent or any other Guarantied Party to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against a Guarantor in any other jurisdiction.

(d) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Collateral Agent could purchase Dollars with such other currency at the spot rate of exchange quoted by the Collateral Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter.

Section 20 Waiver of Judicial Bond

To the fullest extent permitted by applicable law, each Guarantor waives the requirement to post any bond that otherwise may be required of any Guarantied Party in connection with any judicial proceeding to enforce such Guarantied Party’s rights to payment hereunder, security interest in or other rights to any of the Collateral or in connection with any other legal or equitable action or proceeding arising out of, in connection with, or related to this Guaranty or any Loan Documents to which it is a party.

Guaranty
Warnaco Inc.

Section 21 Certain Terms

The following rules of interpretation shall apply to this Guaranty: (a) the terms “herein,” “hereof,” “hereto” and “hereunder” and similar terms refer to this Guaranty as a whole and not to any particular Article, Section, subsection or clause in this Guaranty, (b) unless otherwise indicated, references herein to an Exhibit, Article, Section, subsection or clause refer to the appropriate Exhibit to, or Article, Section, subsection or clause in this Guaranty and (c) the term “including” means “including without limitation” except when used in the computation of time periods.

Section 22 Waiver of Jury Trial

Each of the Collateral Agent, the other Guarantied Parties and each Guarantor irrevocably waives trial by jury in any action or proceeding with respect to this Guaranty or any other Loan Document.

Section 23 Notices

Any notice or other communication herein required or permitted shall be given as provided in Section 11.8 (Notices, Etc.) of the Credit Agreement and, in the case of any Guarantor, to such Guarantor in care of the Borrower.

Section 24 Severability

Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty.

Section 25 Additional Guarantors

Each of the Guarantors agrees that, if, pursuant to Section 7.11(a) (Additional Personal Property Collateral and Guaranties) of the Credit Agreement, Group or the Borrower shall be required to cause any Subsidiary thereof that is not a Guarantor to become a Guarantor hereunder, or if for any reason Group or the Borrower desires any such Subsidiary to become a Guarantor hereunder, such Subsidiary shall execute and deliver to the Collateral Agent a Guaranty Supplement in substantially the form of Exhibit A (Guaranty Supplement) attached hereto and shall thereafter for all purposes be a party hereto and have the same rights, benefits and obligations as a Guarantor party hereto on the Closing Date.

Section 26 Collateral

Each Guarantor hereby acknowledges and agrees that its obligations under this Guaranty are secured pursuant to the terms and provisions of the Collateral Documents executed by it in favor of the Collateral Agent, for the benefit of the Secured Parties, and covenants that it shall not grant any Lien with respect to its property in favor, or for the benefit, of any Person other than the Collateral Agent, for the benefit of the Secured Parties except as otherwise permitted by Section 8.2 (Liens, Etc.) of the Credit Agreement.

Guaranty
Warnaco Inc.

Section 27 Costs and Expenses

In accordance with the provisions of Section 11.3 (Costs and Expenses) of the Credit Agreement, each Guarantor agrees to pay or reimburse the Collateral Agent and each of the other Guarantied Parties upon demand for all out-of-pocket costs and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel and costs of settlement), incurred by the Collateral Agent and such other Guarantied Parties in enforcing this Guaranty against such Guarantor or any security therefor or exercising or enforcing any other right or remedy available in connection herewith or therewith.

Section 28 Waiver of Consequential Damages

Each Guarantor hereby irrevocably and unconditionally waives, to the maximum extent not prohibited by law, any right it may have to claim or recover any special, exemplary, punitive or consequential damage in any legal action or proceeding in respect of this Guaranty or any other Loan Document.

Section 29 Entire Agreement

This Guaranty, taken together with all of the other Loan Documents executed and delivered by the Guarantors, represents the entire agreement and understanding of the parties hereto and supersedes all prior understandings, written and oral, relating to the subject matter hereof.

Section 30 Counterparts

(a) This Guaranty may be executed in any number of separate counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed counterpart by facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart

[Signature Pages Follow]

This Pledge and Security Agreement (this “Agreement”), dated as of August 26, 2008, by Warnaco Inc., a Delaware corporation (the “Borrower”), and each of the other entities listed on the signature pages hereof or that becomes a party hereto pursuant to Section 7.11 (Additional Grantors) (each a “Grantor” and, collectively, the “Grantors”), in favor of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (as defined below) (in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Whereas, the Borrower, The Warnaco Group, Inc. (“Group”), the lenders and issuers party thereto from time to time, BofA, as administrative agent for the Lenders and the Issuers (in such capacity, the “Administrative Agent”) and as Collateral Agent (together with the Administrative Agent, the “Agents”), Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers, Banc of America Securities LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as joint bookrunners, Deutsche Bank Securities Inc., as sole syndication agent, and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset Finance Inc., as co-documentation agents, have entered into a certain Credit Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”);

Whereas, the Grantors other than the Borrower are party to the Guaranty pursuant to which they have guaranteed the Obligations of the Borrower under the Credit Agreement;

Whereas, Warnaco of Canada Company, a Canadian corporation (the “Canadian Borrower”), the lenders and issuers party thereto from time to time, BofA, as administrative agent and as collateral agent, and certain other persons have entered into or will enter into a certain Credit Agreement (as amended, supplemented or otherwise modified from time to time, the “Canadian Facility”);

Whereas, in connection with the Canadian Facility, the Grantors will enter into the Loan Party Canadian Facility Guaranty pursuant to which they will guarantee the Canadian Secured Obligations of the Canadian Borrower under the Canadian Facility;

Whereas, it is a condition precedent to the effectiveness of the Credit Agreement and of the Canadian Facility that the Grantors shall have executed and delivered this Agreement to the Collateral Agent;

Whereas, each Grantor will receive substantial direct and indirect benefits from the making of the Loans, the issuance of the Letters of Credit and the granting of the other financial accommodations to the Borrower under the Credit Agreement and from the granting of the financial accommodations to the Canadian Borrower under the Canadian Facility;

Now, therefore, in consideration of the premises and to induce the Lenders, the Issuers, the Administrative Agent and the Collateral Agent to enter into the Credit Agreement and to induce the Lenders and the Issuers to make their respective extensions of credit to the Borrower thereunder and to induce the lenders and issuers to be party to the Canadian Facility to enter into the Canadian Facility and to make their respective extensions of credit to the Canadian Borrower thereunder, each Grantor hereby agrees with the Collateral Agent as follows:

ARTICLE I. Defined Terms

Section 1.1 Definitions

(a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein have the meanings given to them in the Credit Agreement.

(b) Terms used herein without definition that are defined in the UCC have the meanings given to them in the UCC, including the following terms (which are capitalized herein):

“Account”
“Account Debtor”
“Certificated Security”
“Chattel Paper”
“Commercial Tort Claim”
“Commodity Account”
“Control Account”
“Deposit Account”
“Documents”
“Entitlement Holder”
“Entitlement Order”
“Equipment”
“Financial Asset”
“General Intangibles”
“Goods”
“Instruments”
“Inventory”
“Investment Property”
“Letter-of-Credit Right”
“Proceeds”
“Securities Account”
“Securities Intermediary”
“Security”
“Security Entitlement”
“Supporting Obligation”

“Additional Pledged Collateral” means any Pledged Collateral acquired by any Grantor after the date hereof and in which a security interest is granted pursuant to Section 2.2 (Grants of Security Interests in Collateral), including, to the extent a security interest is granted therein pursuant to Section 2.2 (Grants of Security Interests in Collateral), (i) all Stock and Stock Equivalents of any Person that are acquired by any Grantor after the date hereof, together with all certificates, instruments or other documents representing any of the foregoing and all Security Entitlements of any Grantor in respect of any of the foregoing, (ii) all additional Indebtedness from time to time owed to any Grantor by any obligor on the Pledged Debt Instruments and the Instruments evidencing such Indebtedness and (iii) all interest, cash, Instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing. “Additional Pledged Collateral” may be General Intangibles (including Intellectual Property), Instruments or Investment Property.

“Agents” has the meaning specified in the recitals to this Agreement.

“Agreement” means this Pledge and Security Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time).

“Blocked Account” means a deposit account maintained by any Grantor with a Blocked Account Bank which account is the subject of an effective Blocked Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Blocked Account.

“Blocked Account Bank” means a financial institution approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which a Grantor has delivered to the Collateral Agent an executed Blocked Account Letter.

“Blocked Account Letter” means a letter agreement, substantially in the form of Annex I-A (Form of Blocked Account Letter) to this Agreement (with such changes thereto as may be agreed to by the Administrative Agent), executed by the relevant Grantor and the Collateral Agent and acknowledged and agreed to by the relevant Blocked Account Bank.

“Cash Collateral Account” means any Deposit Account or Securities Account that is (a) established by the Collateral Agent from time to time in its sole discretion to receive cash and Cash Equivalents (or purchase cash or Cash Equivalents with funds received) from any one or more of the Grantors or their Subsidiaries or Affiliates or Persons acting on their behalf pursuant to the Loan Documents, (b) with such depositaries and securities intermediaries as the Collateral Agent may determine in its sole discretion, (c) in the name of the Collateral Agent (although such account may also have words referring to the Borrower and the account’s purpose), (d) under the control of the Collateral Agent and (e) in the case of a Securities Account, with respect to which the Collateral Agent shall be the Entitlement Holder and the only Person authorized to give Entitlement Orders with respect thereto, except as otherwise provided in Section 2.3. Notwithstanding the foregoing, the Special Cash Collateral Account shall not constitute a Cash Collateral Account.

“Collateral” has the meaning specified in Section 2.1 (Collateral).

“Collateral Agent” shall include, in addition to the Collateral Agent referred to in the preamble hereto, any successors and assigns to the Collateral Agent appointed pursuant to the Credit Agreement and means the “Collateral Agent” in its capacity as collateral agent for the benefit of the Secured Parties with respect to the Secured Obligations.

“Control Account” means a securities account maintained by any Grantor with the relevant Approved Securities Intermediary (as defined in Annex 2 (Form of Control Account Agreement)) which account is the subject of an effective Control Account Agreement, and includes all monies and other assets on deposit or otherwise held therein.

“Control Account Agreement” means a letter agreement, substantially in the form of Annex 2 (with such changes as may be agreed to by the Administrative Agent), executed by the relevant Grantor, the Collateral Agent and the relevant Approved Securities Intermediary (as defined in Annex 2 (Form of Control Account Agreement) hereto).

“Copyright Licenses” means any agreement, whether written or oral, providing for the grant by or to any Grantor of any right under any Copyright, including the grant of any right to use, copy, publicly perform, display, create derivative works of, manufacture, distribute, exploit or sell materials derived from any Copyright.

“Copyrights” means (a) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications for registration or recording in connection therewith, including all registrations, recordings and applications for registration or recording in the United States Copyright Office or in any foreign counterparts thereof, and (b) the right to obtain all renewals, reversions and extensions thereof.

“Discharge of Lender Claims” means the payment in full in cash of the principal of, interest and premium, if any, on all Secured Obligations and Canadian Secured Obligations and, with respect to Hedging Obligations, Hedging Obligations (as defined in the Canadian Facility) or letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with the terms hereof, of the Credit Agreement and of the Canadian Facility, in each case after or concurrently with termination of all Commitments and Commitments (as defined in the Canadian Facility), and payment in full in cash of any other Secured Obligations and Canadian Secured Obligations that are due and payable at or prior to the time such principal and interest are paid.

“Excluded Equity” means, collectively, any Voting Stock of any direct Foreign Subsidiary of any Grantor in excess of 65% of the total outstanding Voting Stock of such Subsidiary. For the purposes of this definition, “Voting Stock” means, as to any issuer, the issued and outstanding shares of each class of capital stock or other ownership interests of such issuer entitled to vote (within the meaning of Treasury Regulations § 1.956-2(c)(2)).

“Excluded Property” means, collectively, (i) Excluded Equity, (ii) any permit, lease, license, contract, instrument or other agreement held by any Grantor that validly prohibits the creation by such Grantor of a Lien thereon, or any permit, lease, license, contract, instrument or other agreement held by any Grantor to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, in each case, to the extent, and for so long as, such prohibition is not removed, terminated or rendered unenforceable or otherwise deemed ineffective by the UCC or any other Requirement of Law; and (iii) any Equipment owned by any Grantor that is Purchase-Money Collateral (as defined in the UCC) or subject to a Capital Lease if the contract or other agreement in which such Lien is granted (or in the documentation providing for such Capital Lease) prohibits or requires the consent of any Person other than any Grantor as a condition to the creation of any other Lien on such Equipment; provided, however, “Excluded Property” shall not include any Proceeds, substitutions or replacements of Excluded Property (unless such Proceeds, substitutions or replacements would constitute Excluded Property).

“Foreign Person” means any Person not organized under the laws of any state of the United States of America or the District of Columbia.

“Grantor” has the meaning specified in the recitals to this Agreement.

“Hedging Obligations” means all obligations of any Person under any Hedging Contract.

“Intellectual Property” means, collectively, (a) all right, title and interest of any Grantor in intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, trade secrets, Internet domain names, Websites, advertising rights, rights in designs, including registrations thereof, and rights in data, and (b) all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under and with respect thereto, including all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

“LLC” means each limited liability company in which a Grantor has an equity interest, including those set forth on.

“LLC Agreement” means each operating agreement with respect to a LLC, as each agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified from time to time.

“Material Intellectual Property” means Intellectual Property owned by or licensed to a Grantor and material to any Grantor’s business.

“Partnership” means each partnership in which a Grantor has an equity interest, including those set forth on.

“Partnership Agreement” means each partnership agreement governing a Partnership, as each such agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified.

“Patent License” means all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, have manufactured, use, import, lease, sell or offer for sale any product, design or process covered in whole or in part by a Patent.

“Patents” means (a) all patents of the United States or any other country or patent rights arising under multinational laws, (b) all applications for patents of the United States or any other country or patent rights arising under multinational laws and (c) all rights to obtain any reissues, extensions, divisions, continuations and continuations-in-part of the foregoing.

“Pledged Certificated Stock” means all Certificated Securities and any other Stock and Stock Equivalent of a Person evidenced by a certificate, Instrument or other equivalent document, in each case owned by any Grantor, including all Stock listed on, but excluding Excluded Equity.

“Pledged Collateral” means, collectively, the Pledged Stock, Pledged Debt Instruments, any other Investment Property of any Grantor (other than Pledged Stock, Pledged Debt Instruments and other Investment Property whose value, in the aggregate, does not exceed $1,000,000), all chattel paper, certificates or other Instruments representing any of the foregoing and all Security Entitlements of any Grantor in respect of any of the foregoing. Pledged Collateral may be General Intangibles, Instruments or Investment Property.

“Pledged Debt Instruments” means all right, title and interest of any Grantor in Instruments evidencing any Indebtedness owed to such Grantor, including all Indebtedness described on, issued by the obligors named therein.

“Pledged Stock” means all Pledged Certificated Stock and all Pledged Uncertificated Stock.

“Pledged Uncertificated Stock” means any Stock or Stock Equivalent of any Person that is not a Pledged Certificated Stock (excluding Excluded Equity), including all right, title and interest of any Grantor as a limited or general partner in any Partnership or as a member of any LLC and all right, title and interest of any Grantor in, to and under any Partnership Agreement or LLC Agreement to which it is a party.

“Restricted Account” means a deposit account maintained by any Grantor with a Restricted Account Bank which account is the subject of an effective Restricted Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Restricted Account.

“Restricted Account Bank” means a financial institution selected or approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which a Grantor has delivered an executed Restricted Account Letter.

“Restricted Account Letter” means a letter agreement, substantially in the form of Annex I-B (Form of Restricted Account Letter) or as otherwise acceptable to the Administrative Agent, executed by the relevant Grantor.

“Securities Act” means the Securities Act of 1933, as amended.

“Secured Parties” has the meaning specified in the Credit Agreement.

“Third Party Intellectual Property Rights” means any right, title or interest of any Person under patent, copyright, trademark or trade secret law or any other statutory provision or common law doctrine relating to intellectual property or proprietary rights.

“Trademark License” means any agreement, whether written or oral, providing for the grant by or to any Grantor of any right under any Trademark.

“Trademarks” means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, service marks, logos and other source or business identifiers, and, in each case, all goodwill associated therewith, whether now existing or hereafter adopted or acquired, all registrations and recordings thereof and all applications for registration or recording in connection therewith, in each case whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof and all common-law rights related thereto, and (b) the right to obtain all renewals thereof.

“UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York; provided, however, that, in the event that, by reason of mandatory provisions of law, any of the perfection or priority of the Collateral Agent’s (for the benefit of the Secured Parties) security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” (as it applies to such security interest) shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions related to such provisions.

“Vehicles” means all vehicles covered by a certificate of title law of any state of the United States of America or the District of Columbia.

Certain Other Terms

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

(b) The terms “herein,” “hereof,” “hereto” and “hereunder” and similar terms refer to this Agreement as a whole and not to any particular Article, Section, subsection or clause in this Agreement.

(c) References herein to an Annex, Schedule, Article, Section, subsection or clause refer to the appropriate Annex or Schedule to, or Article, Section, subsection or clause in, this Agreement.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(e) Where the context requires, provisions relating to any Collateral, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or any relevant part thereof.

(f) Any reference in this Agreement to a Loan Document shall include all appendices, exhibits and schedules thereto, and, unless specifically stated otherwise, all amendments, restatements, supplements or other modifications thereto, and as the same may be in effect at any time such reference becomes operative.

(g) The term “including” means “including without limitation” except when used in the computation of time periods.

(h) The terms “Lender,” “Issuer,” “Administrative Agent,” “Collateral Agent” and “Secured Party” include their respective successors.

(i) References in this Agreement to any statute shall be to such statute as amended or modified and in effect from time to time.

Section 2.2 Grants of Security Interests in Collateral

Each Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of such Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the Collateral of such Grantor; provided, however, that the foregoing grant of security interest shall not include a security interest in any Excluded Property; and provided, further, that, if and when any property shall cease to be Excluded Property, the Collateral Agent for the benefit of the Secured Parties shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

Section 2.3 Cash Collateral Accounts

The Collateral Agent may establish one or more Cash Collateral Accounts with such depositaries and Securities Intermediaries as it in its sole discretion shall determine. Each Grantor agrees that each such Cash Collateral Account shall be under the control of the Collateral Agent and that the Collateral Agent shall be the Entitlement Holder with respect to each such Cash Collateral Account that is a Securities Account and the only Person authorized to give Entitlement Orders with respect to each such Securities Account. Without limiting the foregoing, funds on deposit in any Cash Collateral Account may be invested in Permitted Cash Equivalents at the direction of the Collateral Agent and, except during the continuance of an Event of Default (unless otherwise agreed to by the Administrative Agent in its sole discretion), the Collateral Agent agrees with each Grantor to issue Entitlement Orders for such investments in Permitted Cash Equivalents as requested by the Borrower; provided, however, that the Collateral Agent shall not have any responsibility for, or bear any risk of loss of, any such requested investment or income thereon and the Collateral Agent shall have no obligation to make or cause to be made any such investment absent a request by the Borrower for a specific investment in Permitted Cash Equivalents. Neither any Warnaco Entity nor any other Person claiming on behalf of or through any Warnaco Entity shall have any right to demand payment of any funds held in any Cash Collateral Account at any time prior to Discharge of Lender Claims, except (i) as provided in Section 2.9(f) of the Credit Agreement and (ii) that the Borrower may request that the Collateral Agent apply funds in any Cash Collateral Account directly to the immediate payment of the Loans and if paid in full then to the cash collateralization of Letter of Credit Obligations (and not to be delivered to any Warnaco Entity). The Collateral Agent shall apply all funds on deposit in a Cash Collateral Account as provided in Section 2.9(f) of the Credit Agreement.

ARTICLE III. Representations and Warranties

To induce the Lenders, the Issuers, the Collateral Agent and the Administrative Agent to enter into the Credit Agreement, each Grantor hereby represents and warrants each of the following to the Lenders, the Issuers, the Collateral Agent, the Administrative Agent and the other Secured Parties:

Section 3.1 Title; No Other Liens

Except for the Liens granted to the Collateral Agent pursuant to this Agreement and the other Liens permitted to exist on the Collateral under the Credit Agreement, such Grantor (a) is the record and beneficial owner of the Pledged Collateral pledged by it hereunder constituting Instruments or Certificated Securities, (b) is the Entitlement Holder of all such Pledged Collateral constituting Investment Property held in a Securities Account and (c) has rights in or the power to collaterally transfer each other item of Collateral in which a Lien is granted by it hereunder, free and clear of any Lien (other than Liens for taxes not yet due and payable).

Section 3.2 Perfection and Priority

The security interests granted pursuant to this Agreement shall constitute valid and continuing perfected security interests in favor of the Collateral Agent in the Collateral for which perfection is governed by the UCC or filing with the United States Copyright Office or with the United States Patent and Trademark Office upon (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on (which, in the case of all filings and other documents referred to on such schedule, have been delivered to the Collateral Agent in completed and duly executed form), (ii) the delivery to the Collateral Agent of all Collateral consisting of Instruments and Certificated Securities, in each case properly endorsed for transfer to the Collateral Agent or in blank, (iii) the execution of Control Account Agreements with respect to Investment Property not in certificated form, (iv) the execution of a Blocked Account Letter with respect to all Deposit Accounts of a Grantor as specified in Section 4.7(a)(i) hereto, (v) all appropriate filings having been made with the United States Copyright Office and (vi) the receipt by the Collateral Agent of the consent of the issuer or nominated person with respect to each Letter-of-Credit Right that is not a Supporting Obligation. Such security interests shall be prior to all other Liens on the Collateral except for Customary Permitted Liens having priority over the Collateral Agent’s Liens by operation of law or otherwise as permitted hereunder or under the Credit Agreement.

Section 3.3 Jurisdiction of Organization; Chief Executive Office

On the Closing Date, such Grantor’s jurisdiction of organization, legal name, organizational identification number, if any, and the location of such Grantor’s chief executive office or sole place of business is specified on and, to the extent different from that on the Closing Date, such also lists all jurisdictions of organization, legal names and locations of such Grantor’s chief executive office or sole place of business for the period beginning five years preceding the date hereof.

Section 3.4 Inventory and Equipment

Schedule 4 (Location of Inventory and Equipment) sets forth each location at which such Grantor’s Inventory and Equipment (other than mobile goods and Inventory or Equipment in transit) is kept on the Closing Date.

Section 3.5 Pledged Collateral

(a) The Pledged Stock that constitutes Pledged Collateral pledged hereunder by such Grantor is listed on and constitutes that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on.

(b) All of the Pledged Stock (other than Pledged Stock in limited liability companies and partnerships) that constitutes Pledged Collateral has been duly and validly issued and are fully paid and nonassessable.

(c) All Pledged Collateral and, if applicable, any Additional Pledged Collateral, consisting of Certificated Securities or Instruments has been delivered to the Collateral Agent in accordance with Section 4.4(a) (Pledged Collateral) and Section 7.11 of the Credit Agreement.

(d) Subject to Section 4.7, all Pledged Collateral held by a Securities Intermediary in a Securities Account is subject to a Control Account Agreement.

(e) Other than Pledged Stock constituting General Intangibles, there is no Pledged Collateral other than (i) that represented by Certificated Securities or (ii) Instruments in the possession of the Collateral Agent or that consisting of Financial Assets held in a Securities Account that is subject to a Control Account Agreement.

(f) The Constituent Documents of any Person governing any Pledged Stock do not prohibit (i) the Collateral Agent, upon the occurrence and during the continuance of an Event of Default, from exercising all of the rights of the Grantor granting the security interest therein, and (ii) a transferee or assignee of Stock of such Person from becoming a member, partner or, as the case may be, other holder of such Pledged Stock to the same extent as the Grantor entitled to participate in the management of such Person and, pursuant to the Constituent Documents of any Person governing any Pledged Stock, upon the transfer of the entire interest of such Grantor, such Grantor shall cease to be a member, partner or, as the case may be, other holder of such Pledged Stock.

Section 3.6 Deposit Accounts; Securities Accounts

The only Deposit Accounts, Securities Accounts or Commodity Accounts maintained by any Grantor on the Closing Date are those listed on Schedule 7 (Deposit Accounts and Securities Accounts), which sets forth such information separately for each Grantor and which clearly identifies each Deposit Account which is maintained as a concentration account by such Grantor.

Section 3.7 Accounts

No amount payable to such Grantor under or in connection with any Account is evidenced by any Instrument or Chattel Paper that has not been delivered to the Collateral Agent, properly endorsed for transfer, to the extent delivery is required by Section 4.5 (Delivery of Instruments and Chattel Paper).

Section 3.8 Intellectual Property

(a) (i) sets forth a true and complete list of all Intellectual Property of such Grantor on the date hereof (other than licenses to commercial off-the-shelf software), separately identifying that owned by such Grantor and that licensed by or to such Grantor and (ii) sets forth a true and complete list of all Material Intellectual Property owned by or licensed to such Grantor on the date hereof (other than licenses to commercial off-the-shelf software), separately identifying that owned by such Grantor and that licensed by or to such Grantor. The Material Intellectual Property set forth on constitutes all of the material intellectual property rights necessary for the Grantors to conduct their business as currently and as proposed to be conducted.

(b) On the date hereof, all Material Intellectual Property owned by such Grantor is valid, in full force and effect, subsisting, unexpired and enforceable, has not been adjudged invalid and has not been abandoned. To the knowledge of such Grantor, the business of such Grantor, and the use of the Material Intellectual Property in connection therewith, does not infringe, misappropriate, dilute or violate any Third Party Intellectual Property Rights. Such Grantor is not party to or the subject of any pending or, to such Grantor’s knowledge, threatened claim of infringement, misappropriation, dilution or violation of any Third Party Intellectual Property Rights, and there are no facts or circumstances that such Grantor reasonably believes are likely to form the basis for any such claim, and such Grantor has not received written notice of any such claim, or a written offer of a license to any Third Party Intellectual Property Rights, or any written notice regarding the existence of any Third Party Intellectual Property Rights that would be likely to have a Material Adverse Effect on any Grantor or otherwise would impair any Material Intellectual Property.

(c) Except as set forth in (c), on the date hereof, none of the Material Intellectual Property owned by such Grantor is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.

(d) No holding, decision or judgment has been rendered by any Governmental Authority challenging such Grantor’s rights in the Material Intellectual Property or that would limit or otherwise impair the ownership, use, validity or enforceability of any Material Intellectual Property.

(e) No action or proceeding challenging such Grantor’s rights in the Intellectual Property or the ownership, use, validity or enforceability of any Material Intellectual Property owned by such Grantor is on the date hereof pending or, to the knowledge of such Grantor, threatened. There are no claims, judgments or settlements to be paid by such Grantor relating to the Material Intellectual Property. To such Grantor’s knowledge, no Person has been or is infringing, misappropriating, diluting or violating the Material Intellectual Property owned by such Grantor.

(f) No Grantor is in material breach of any Copyright License, Patent License or Trademark License and no Grantor in breach of any Material License. The consummation of the transactions contemplated by this Agreement shall not impair any of such Grantor’s right in, cause a breach of, or impair the validity or enforceability of, any Material Intellectual Property.

Section 3.9 Commercial Tort Claims

The only Commercial Tort Claims (with a reasonable expectation of recovery of at least $1,000,000) of any Grantor existing on the Closing Date (regardless of whether the amount, defendant or other material facts can be determined and regardless of whether such Commercial Tort Claim has been asserted, threatened or has otherwise been made known to the obligee thereof or whether litigation has been commenced for such claims) are those listed on 6, which sets forth such information separately for each Grantor.

ARTICLE IV. Covenants

Each Grantor agrees with the Collateral Agent to the following, as long as any Secured Obligation, Canadian Secured Obligation, Commitment or Commitment (as defined in the Canadian Facility) remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:

Section 4.1 Generally

Such Grantor shall (a) except for the security interest created by this Agreement, not create or suffer to exist any Lien upon or with respect to any Collateral, except Liens permitted under Section 8.2 (Liens, Etc.) of the Credit Agreement, (b) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement, any other Loan Document, any Requirement of Law or any policy of insurance covering the Collateral, (c) not sell, transfer or assign (by operation of law or otherwise) any Collateral except as permitted under the Credit Agreement, (d) not enter into any agreement or undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell, assign or transfer any Collateral except in connection with an Asset Sale (i) that is permitted under Section 8.4 of the Credit Agreement or (ii) that is pursuant to a contract which contains a condition precedent that consent under the Credit Agreement be obtained.

Section 4.2 Maintenance of Perfected Security Interest; Further Documentation

(a) Such Grantor shall maintain the security interests created by this Agreement as perfected security interests having at least the priority described in Section 3.2 (Perfection and Priority) and shall defend such security interests and such priority against the claims and demands of all Persons.

(b) Such Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request in writing, all in detail and in form and substance reasonably satisfactory to the Collateral Agent.

(c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor shall promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further action as the Collateral Agent may reasonably request (or be directed to request by the Administrative Agent at the Administrative Agent’s reasonable request) for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statement under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and the execution and delivery of Blocked Account Letters or Restricted Account Letters and Control Account Agreements.

Section 4.3 Changes in Locations, Name, Etc.

(a) Except upon 15 or more days’ prior written notice to the Collateral Agent and delivery to the Collateral Agent of (i) all additional financing statements and other documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests provided for herein and (ii) if applicable, a written supplement to showing (A) any additional locations at which Inventory or Equipment shall be kept or (B) any changes in any location where Inventory or Equipment shall be kept that would require the Collateral Agent to take any action to maintain perfected security interests in such Collateral, such Grantor shall not do any of the following:

(i) permit any Inventory or Equipment to be kept at a location other than those listed on, except for Inventory or Equipment in transit;

(ii) change its jurisdiction of organization from that referred to in Section 3.3 (Jurisdiction of Organization; Chief Executive Office); or

(iii) change its legal name, or organizational identification number, if any, or corporation, limited liability company or other organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.

(b) Such Grantor shall keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.

Section 4.4 Pledged Collateral

(a) Such Grantor shall (i) deliver to the Collateral Agent for the benefit of the Secured Parties, all certificates and Instruments representing or evidencing any Pledged Collateral (including Additional Pledged Collateral), whether now existing or hereafter acquired, in suitable form for transfer by delivery or, as applicable, accompanied by such Grantor’s endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent, together, in respect of any Additional Pledged Collateral, with a Pledge Amendment, duly executed by the Grantor, in substantially the form of 3, an acknowledgment and agreement to a Joinder Agreement duly executed by any new Grantor, in substantially the form in the form of 4, or such other documentation acceptable to the Collateral Agent and (ii) maintain all other Pledged Collateral constituting Investment Property in a Securities Account subject to a Control Account Agreement. Such Grantor authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement. The Collateral Agent shall have the right, following an Event of Default and without notice to the Grantor, to transfer to or to register in its name or in the name of its nominees any Pledged Collateral. The Collateral Agent shall have the right at any time to exchange any certificate or instrument representing or evidencing any Pledged Collateral for certificates or instruments of smaller or larger denominations.

(b) Except as provided in ARTICLE V (Remedial Provisions), such Grantor shall be entitled to receive all cash dividends paid in respect of the Pledged Collateral (other than liquidating or distributing dividends). Any sums paid upon or in respect of any Pledged Collateral upon the liquidation or dissolution of any issuer of any Pledged Collateral, any distribution of capital made on or in respect of any Pledged Collateral or any property distributed upon or with respect to any Pledged Collateral pursuant to the recapitalization or reclassification of the capital of any issuer of Pledged Collateral or pursuant to the reorganization thereof (except, in each case, to the extent resulting in cash being distributed to a Grantor) shall, unless otherwise subject to a perfected security interest (with the priorities contemplated herein) in favor of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations. If any sum of money or property so paid or distributed in respect of any Pledged Collateral shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Collateral Agent, segregated from other funds of such Grantor, as additional security for the Secured Obligations.

(c) Except as provided in ARTICLE V (Remedial Provisions), such Grantor shall be entitled to exercise all voting, consent and corporate, partnership, limited liability company and similar rights with respect to the Pledged Collateral; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by such Grantor that would impair the Collateral, be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document or, without prior notice to the Collateral Agent, enable or permit any issuer of Pledged Collateral to issue any Stock or other equity Securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any Stock or other equity Securities of any nature of any issuer of Pledged Collateral.

(d) Such Grantor shall not grant “control” (within the meaning of such term under Article 9-106 of the UCC) over any Investment Property to any Person other than the Collateral Agent.

(e) In the case of each Grantor that is an issuer of Pledged Collateral, such Grantor agrees to be bound by the terms of this Agreement relating to the Pledged Collateral issued by it and shall comply with such terms insofar as such terms are applicable to it. In the case of any Grantor that is a holder of any Stock or Stock Equivalent in any Person that is an issuer of Pledged Collateral, such Grantor consents to (i) the exercise of the rights granted to the Collateral Agent hereunder (including those described in Section 5.3 (Pledged Collateral)), and (ii) the pledge by each other Grantor, pursuant to the terms hereof, of the Pledged Stock in such Person and to the transfer of such Pledged Stock to the Collateral Agent or its nominee and to the substitution of the Collateral Agent or its nominee as a holder of such Pledged Stock with all the rights, powers and duties of other holders of Pledged Stock of the same class and, if the Grantor having pledged such Pledged Stock hereunder had any right, power or duty at the time of such pledge or at the time of such substitution beyond that of such other holders, with all such additional rights, powers and duties. Such Grantor agrees to execute and deliver to the Collateral Agent such certificates, agreements and other documents as may be necessary to evidence, formalize or otherwise give effect to the consents given in this clause (e).

(f) Such Grantor shall not, and shall not permit any of its Subsidiaries (to the extent the Stock of such Subsidiary constitutes Collateral), without the consent of the Collateral Agent, agree to any amendment of any Constituent Document that in any way adversely affects the perfection of the security interest of the Collateral Agent in the Pledged Collateral pledged by such Grantor hereunder, including any amendment electing to treat any membership interest or partnership interest that is part of the Pledged Collateral as a “security” under Section 8-103 of the UCC, or any election to turn any previously uncertificated Stock that is part of the Pledged Collateral into certificated Stock.

Section 4.5 Delivery of Instruments and Chattel Paper

If any amount in excess of $250,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced by an Instrument or Chattel Paper, such Grantor shall promptly deliver such Instrument or Chattel Paper to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, or, if consented to by the Collateral Agent, shall mark all such Instruments and Chattel Paper with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of Bank of America, N.A., as Collateral Agent for the benefit of the Secured Parties” (which legend shall be modified to reflect successor Collateral Agents).

Section 4.6 Intellectual Property

(a) Such Grantor (either itself or through licensees) shall (and shall cause all licensees or sublicensees thereof to) (i) continue to use each Trademark that is Material Intellectual Property in order to maintain such Trademark in full force and effect with respect to each class of goods for which such Trademark is currently used, free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) execute and file all documents necessary to perfect a security interest pursuant to this Agreement in favor of the Collateral Agent promptly upon adopting or using any mark that is confusingly similar or a colorable imitation of such Trademark and (v) not do any act or knowingly omit to do any act (and not permit or direct by express act or omission any licensee or sublicensee thereof to do any act) whereby such Trademark (or any goodwill associated therewith) may become destroyed, invalidated, impaired or harmed in any way; provided, however, that (i)-(iii) and (v) above shall be subject to the good faith exercise by such Grantor of its reasonable business judgment consistent with past practices.

(b) Such Grantor shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act, or omit to do any act, whereby any Patent that is Material Intellectual Property may become forfeited, abandoned or dedicated to the public.

(c) Such Grantor (i) shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act or omit to do any act whereby any portion of the Copyrights that is Material Intellectual Property may become invalidated or otherwise impaired and (ii) shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act whereby any portion of the Copyrights that is Material Intellectual Property may fall into the public domain.

(d) Such Grantor shall not knowingly (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act, or knowingly omit to do any act, whereby any trade secret that is Material Intellectual Property may become publicly available or otherwise unprotectable.

(e) Such Grantor shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act that knowingly infringes, misappropriates, dilutes or violates any Third Party Intellectual Property Rights.

(f) Such Grantor shall notify the Collateral Agent immediately if it knows, or has reason to know, that any application for registration or recording, registration or recording relating to any Material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor’s ownership of, right to use, interest in, or the validity or enforceability of, any Material Intellectual Property or such Grantor’s right to register the same or to own and maintain the same.

(g) As set forth below, whenever such Grantor, either by itself or through its counsel or any agent or designee, shall file an application for the registration or recording of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency within or outside the United States or register any Internet domain name, such Grantor shall report such filing to the Collateral Agent within five Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request of the Collateral Agent, such Grantor shall execute and deliver, and have recorded, all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent’s security interest in any such Copyright, Patent, Trademark or Internet domain name and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.

(h) Such Grantor shall take all reasonable actions that are (i) necessary (subject to the good faith exercise by such Grantor of its reasonable business judgment consistent with past practices) or (ii) requested by the Collateral Agent, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency and any Internet domain name registrar, to maintain and pursue each application for registration or recording (and to obtain the relevant registration or recording) and to maintain each registration and recording of any Copyright, Trademark, Patent or Internet domain name that is Material Intellectual Property, including filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition and interference and cancellation proceedings.

(i) In the event that any Material Intellectual Property is infringed, misappropriated, diluted or violated by a third party, such Grantor shall notify the Collateral Agent promptly after such Grantor learns thereof. Such Grantor shall take appropriate action in response to any infringement, misappropriation, dilution or violation of the Material Intellectual Property, including promptly bringing suit for infringement, misappropriation, dilution or violation and to recover all damages for such infringement, misappropriation, dilution or violation, and shall take such other actions may be appropriate under the circumstances to protect such Intellectual Property; provided, however, that the foregoing shall be subject to the good faith exercise by such Grantor of its reasonable business judgment consistent with past practices.

(j) Unless otherwise agreed to by the Collateral Agent such Grantor shall execute and deliver to the Collateral Agent for filing in (i) the United States Copyright Office a short-form copyright security agreement in the form attached hereto as 5 for all Copyrights of such Grantor, (ii) in the United States Patent and Trademark Office a short-form patent security agreement in the form attached hereto as 6 for all Patents of such Grantor, (iii) the United States Patent and Trademark Office and with the appropriate department or division of all appropriate States of the United States a short-form trademark security agreement in form attached hereto as 7 for all Trademarks of such Grantor and (iv) with the appropriate Internet domain name registrar, a duly executed form of assignment of all Internet domain names of such Grantor to the Collateral Agent (together with appropriate supporting documentation as may be requested by the Collateral Agent) in form and substance reasonably acceptable to the Collateral Agent. In the case of clause (iv) above, such Grantor hereby authorizes the Collateral Agent to file such assignment in such Grantor’s name and to otherwise perform in the name of such Grantor all other necessary actions to complete such assignment, and each Grantor agrees to perform all appropriate actions deemed necessary by the Collateral Agent for the Collateral Agent to ensure such Internet domain name is registered in the name of the Collateral Agent.

Section 4.7 Cash Management; Deposit Accounts

(a) On the Closing Date (or such later date as agreed by the Collateral Agent), each Grantor shall cause to be delivered (i) to the Collateral Agent, a duly executed and effective Blocked Account Letter for each existing Deposit Account identified as a concentration account on Schedule 7 maintained by any Grantor and (ii) to each Restricted Account Bank (with a copy to the Collateral Agent), a Restricted Account Letter for each other Deposit Account (subject only to clause (b) below) duly executed by the appropriate Grantor to each such Deposit Account.

(b) Each Grantor shall (i) deposit in a Blocked Account or Restricted Account all cash and all Proceeds received by such Grantor and (ii) not establish or maintain any Deposit Account with any financial or other institution other than a Blocked Account Bank, a Restricted Account Bank, the Collateral Agent or the Administrative Agent; provided, however, that the Warnaco Entities may at any time maintain the following accounts not subject to this Section 4.7(b) (i) Deposit Accounts or Securities Accounts (or their foreign equivalents) located outside of the United States with cash or Cash Equivalents not in excess of an aggregate amount of $30,000,000, (ii) Deposit Accounts or Securities Accounts located in the United States with cash or Cash Equivalents not in excess of an aggregate amount of $10,000,000 and (iii) payroll, withholding tax and other fiduciary accounts as required for operations in the ordinary course of business.

(c) Each Grantor shall instruct each Account Debtor or other Person obligated to make a payment to such Grantor to make payment, or to continue to make payment, as the case may be, to a lock-box linked to a Blocked Account or a Restricted Account, as the case may be, and each Grantor shall deposit in a Blocked Account or a Restricted Account all Proceeds received by such Grantor from any other Person immediately upon receipt.

(d) In the event (i) any Grantor or a Blocked Account Bank or Restricted Account Bank shall, after the date hereof, terminate an agreement with respect to the maintenance of a Blocked Account or Restricted Account, as the case may be, for any reason, (ii) the Collateral Agent shall demand termination of a Blocked Account Letter or a Restricted Account Letter as a result of the failure of a Blocked Account Bank or Restricted Account Bank, as the case may be, to comply with the terms of the applicable letter agreement or (iii) the Collateral Agent determines in its sole discretion that the financial condition of a Blocked Account Bank or Restricted Account Bank has materially deteriorated, then, in each case, Group shall, or shall cause the applicable Grantor to, notify all of its Account Debtors that were making payments to such terminated Blocked Account Bank or Restricted Account Bank to make all future payments to such other Blocked Account Bank or Restricted Account Bank, as specified by the Collateral Agent.

(e) The Collateral Agent agrees that it shall not deliver to any Blocked Account Bank a Sweep Activation Notice under and as defined in any Blocked Account Letter with such Blocked Account Bank unless there has occurred and is continuing an Event of Default or Available Credit has been less than 15% of the Aggregate Borrowing Limit for five or more consecutive Business Days.

Section 4.8 Vehicles

Upon the request of the Collateral Agent, within 30 days after the date of such request and, with respect to any Vehicle acquired by such Grantor subsequent to the date of any such request, within 30 days after the date of acquisition thereof, such Grantor shall file all applications for certificates of title or ownership indicating the Collateral Agent’s first priority security interest in the Vehicle covered by such certificate and any other necessary documentation, in each office in each jurisdiction that the Collateral Agent shall deem advisable to perfect its security interests in the Vehicles; provided, however, that the aggregate value of all Vehicles excepted from the application of this Section 4.8 shall not exceed $1,000,000.

Section 4.9 Payment of Obligations

Such Grantor shall pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with Agreement Accounting Principles with respect thereto have been provided on the books of such Grantor and such proceedings could not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein.

Section 4.10 Notice of Commercial Tort Claims

Such Grantor agrees that, if it shall acquire any interest in any Commercial Tort Claim with a reasonable expectation of recovery of at least $1,000,000 (whether from another Person or because such Commercial Tort Claim shall have come into existence), (i) such Grantor shall, immediately upon such acquisition, deliver to the Collateral Agent, in each case in form and substance satisfactory to the Collateral Agent, a notice of the existence and nature of such Commercial Tort Claim and deliver a supplement to 6 containing a specific description of such Commercial Tort Claim, (ii) the provision of Section 2.1 (Collateral) shall apply to such Commercial Tort Claim and (iii) such Grantor shall execute and deliver to the Collateral Agent, in each case in form and substance satisfactory to the Collateral Agent, any certificate, agreement and other document, and take all other action, deemed by the Collateral Agent to be reasonably necessary or appropriate for the Collateral Agent to obtain, on behalf of the Secured Parties, a first-priority, perfected security interest in all such Commercial Tort Claims. Any supplement to 6 delivered pursuant to this Section 4.10 (Notice of Commercial Tort Claims) shall, after the receipt thereof by the Collateral Agent, become part of 6 for all purposes hereunder other than in respect of representations and warranties made prior to the date of such receipt.

ARTICLE V. Remedial Provisions

Section 5.1 Code and Other Remedies

During the continuance of an Event of Default, the Collateral Agent may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to any of the Secured Obligations, all rights and remedies of a secured party under the UCC or any other applicable law. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon any Collateral, and may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver any Collateral (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent and any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by the UCC and other applicable law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption of any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Collateral Agent’s request, to assemble the Collateral and make it available to the Collateral Agent at places that the Collateral Agent shall reasonably select, whether at such Grantor’s premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.1, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and any other Secured Party hereunder, including reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Credit Agreement shall prescribe, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, need the Collateral Agent, as the case may be, account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the exercise by any of them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

Section 5.2 Accounts and Payments in Respect of General Intangibles

(a) In addition to, and not in substitution for, any similar requirement in the Credit Agreement, if required by the Collateral Agent at any time during the continuance of an Event of Default, any payment of Accounts or payment in respect of General Intangibles, when collected by any Grantor, shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent, in a Blocked Account or a Cash Collateral Account, subject to withdrawal by the Collateral Agent as provided in Section 5.4 (Proceeds to be Turned Over To Collateral Agent). Until so turned over, such payment shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor. Each such deposit of Proceeds of Accounts and payments in respect of General Intangibles shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

(b) At the Collateral Agent’s request, during the continuance of an Event of Default, each Grantor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions that gave rise to the Accounts or payments in respect of General Intangibles, including all original orders, invoices and shipping receipts.

(c) Subject to the terms of the Credit Agreement, the Collateral Agent may, without notice, at any time during the continuance of an Event of Default, limit or terminate the authority of a Grantor to collect its Accounts or amounts due under General Intangibles or any thereof.

(d) The Collateral Agent in its own name or in the name of others may at any time during the continuance of an Event of Default communicate with Account Debtors to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any Account or amounts due under any General Intangible.

(e) Upon the request of the Collateral Agent at any time during the continuance of an Event of Default, each Grantor shall notify Account Debtors that it has granted to the Collateral Agent a lien on and security interest in, all of its right, title and interest in, to and under the Accounts or General Intangibles that have been collaterally assigned to the Collateral Agent and that payments in respect thereof shall be made directly to the Collateral Agent. In addition, the Collateral Agent may at any time during the continuance of an Event of Default, to the extent permitted by applicable law, enforce such Grantor’s rights against such Account Debtors and obligors of General Intangibles.

(f) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Accounts and payments in respect of General Intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any agreement giving rise to an Account or a payment in respect of a General Intangible by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Party of any payment relating thereto, nor shall the Collateral Agent nor any other Secured Party be obligated in any manner to perform any obligation of any Grantor under or pursuant to any agreement giving rise to an Account or a payment in respect of a General Intangible, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

Section 5.3 Pledged Collateral

(a) During the continuance of an Event of Default, upon notice by the Collateral Agent to the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to receive any Proceeds of the Pledged Collateral and make application thereof to the Secured Obligations in the order set forth in the Credit Agreement and (ii) the Collateral Agent or its nominee may exercise (A) any voting, consent, corporate and other right pertaining to the Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (B) any right of conversion, exchange and subscription and any other right, privilege or option pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any issuer of Pledged Stock and the right to deposit and deliver any Pledged Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it; provided, however, that the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(b) In order to permit the Collateral Agent to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all such proxies, dividend payment orders and other instruments as the Collateral Agent may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, such Grantor hereby grants to the Collateral Agent an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other person (including the issuer of such Pledged Collateral or any officer or agent thereof) during the continuance of an Event of Default and which proxy shall only terminate upon Discharge of Lender Claims.

(c) Each Grantor hereby expressly authorizes and instructs each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with any instruction received by it from the Collateral Agent in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that such issuer shall be fully protected in so complying and (ii) unless otherwise expressly permitted hereby, pay any dividend or other payment with respect to the Pledged Collateral directly to the Collateral Agent

Section 5.4 Proceeds to be Turned Over To Collateral Agent

Unless otherwise expressly provided in the Credit Agreement, all Proceeds received by the Collateral Agent hereunder in cash or Cash Equivalents shall be held by the Collateral Agent in a Cash Collateral Account. All Proceeds constituting Reinvestment Prepayment Amounts (as defined in the Credit Agreement) or the cash collateralization of Letters of Credit (as defined in the Credit Agreement) while held by the Collateral Agent in a Cash Collateral Account (or by such Grantor in trust for the Collateral Agent) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in the Credit Agreement.

Section 5.5 Registration Rights

(a) During the continuance of an Event of Default, if the Collateral Agent shall determine to exercise its right to sell any of the Pledged Collateral pursuant to Section 5.1 (Code and Other Remedies), and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Collateral, or any portion thereof, registered under the provisions of the Securities Act, the relevant Grantor shall use its reasonable efforts to cause the issuer thereof to (i) execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Collateral Agent, necessary or advisable to register the Pledged Collateral, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its reasonable efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Collateral, or that portion thereof to be sold and (iii) make all amendments thereto or to the related prospectus that, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such issuer to comply with the provisions of the securities or “Blue Sky” laws of any jurisdiction that the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act.

(b) Each Grantor recognizes that the Collateral Agent may be unable to effect a public sale of any Pledged Collateral by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise or may determine that a public sale is impracticable or not commercially reasonable and, accordingly, may resort to one or more private sales thereof to a restricted group of purchasers that shall be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such issuer would agree to do so.

(c) During the continuance of an Event of Default, each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Collateral pursuant to this Section 5.5 valid and binding and in compliance with all other applicable Requirements of Law. Each Grantor further agrees that a breach of any covenant contained in this Section 5.5 will cause irreparable injury to the Collateral Agent and the other Secured Parties, that the Collateral Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 5.5 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defense against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement.

Section 5.6 Deficiency

Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorney employed by the Collateral Agent or any other Secured Party to collect such deficiency.

ARTICLE VI. The Collateral Agent

Section 6.1 Collateral Agent’s Appointment as Attorney-in-Fact

(a) Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any appropriate action and to execute any document or instrument that may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any of the following:

(i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any check, draft, note, acceptance or other instrument for the payment of moneys due under any Account or General Intangible or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any such moneys due under any Account or General Intangible or with respect to any other Collateral whenever payable;

(ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any agreement, instrument, document or paper as the Collateral Agent may request to evidence the Collateral Agent’s security interests in such Intellectual Property and the goodwill and General Intangibles of such Grantor relating thereto or represented thereby;

(iii) pay or discharge taxes and Liens levied or placed on or threatened against any of the Collateral, effect any repair or pay any insurance called for by the terms of this Agreement (including all or any part of the premiums therefor and the costs thereof);

(iv) execute, in connection with any sale provided for in Section 5.1 (Code and Other Remedies) or Section 5.5 (Registration Rights), any endorsement, assignment or other instrument of conveyance or transfer with respect to any of the Collateral; or

(v) (A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct, (B) ask or demand for, collect, and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) sign and indorse any invoice, freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice and other document in connection with any Collateral, (D) commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (E) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral, (F) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may deem appropriate, (G) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Trademark pertains) throughout the world for such term or terms, on such conditions, and in such manner as the Collateral Agent shall in its sole discretion determine, including the execution and filing of any document necessary to effectuate or record such assignment and (H) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things that the Collateral Agent deems necessary to protect, preserve or realize upon any or all of the Collateral and the Collateral Agent’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

Anything in this clause (a) to the contrary notwithstanding, the Collateral Agent agrees that it shall not exercise any right under the power of attorney provided for in this clause (a) unless an Event of Default shall be continuing.

(b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

(c) The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 6.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Revolving Loans that are Base Rate Loans under the Credit Agreement, from the date of payment by the Collateral Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Agent on demand.

(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

Section 6.2 Duty of Collateral Agent

The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. Neither the Collateral Agent, any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to any Collateral. The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent’s and the Secured Parties’ respective interests in the Collateral and shall not impose any duty upon the Collateral Agent or any other Secured Party to exercise any such powers. The Collateral Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their respective officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

Section 6.3 Authorization of Financing Statements

Each Grantor authorizes the Collateral Agent and each of its Affiliates, counsel and other representatives, at any time and from time to time until Discharge of Lender Claims, to file or record financing statements, amendments to financing statements, and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement, and such financing statements and amendments may described the Collateral covered thereby as “all assets of the debtor”, “all personal property of the debtor”, in each case, “in which the debtor now has or at any time in the future may acquire any right, title or interest” or words of similar effect. Each Grantor hereby also authorizes the Collateral Agent and each of its Affiliates, counsel and other representatives, at any time and from time to time, to file continuation statements with respect to previously filed financing statements. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.

Section 6.4 Authority of Collateral Agent

(a) Each Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the Collateral Agent and the other Secured Parties, with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

(b) Each Grantor and the Collateral Agent hereby agrees and acknowledges that, to the extent that the Collateral Agent has a security interest in or possession of any Collateral, the Collateral Agent is holding, and shall hold, such Collateral (and the security interest therein) for the benefit of and on behalf of each Secured Party (including the Collateral Agent) in accordance with Section 8-301(a)(2), 9-313(a) and 9-313(c) of the UCC, if applicable.

ARTICLE VII. Miscellaneous

Section 7.1 Amendments in Writing

None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that annexes to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released) through Pledge Amendments and Joinder Agreements, in substantially the form of 3 and 4 respectively, in each case duly executed by the Collateral Agent and each Grantor directly affected thereby.

Section 7.2 Notices

All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in Section 11.8 (Notices, Etc.) of the Credit Agreement; provided, however, that any such notice, request or demand to or upon any Grantor shall be addressed to the Borrower’s notice address set forth in such Section 11.8.

Section 7.3 No Waiver by Course of Conduct; Cumulative Remedies

Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 7.1 (Amendments in Writing)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

Section 7.4 Effectiveness

This Agreement shall not become effective until the Closing Date.

Section 7.5 Successors and Assigns

This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and each other Secured Party and their successors and assigns; provided, however, that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.

Section 7.6 Counterparts

This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed counterpart by telecopy or electronic transmission (in pdf format) shall be effective as delivery of a manually executed counterpart.

Section 7.7 Severability

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 7.8 Section Headings

The Article and Section titles contained in this Agreement are, and shall be, without substantive meaning or content of any kind whatsoever and are not part of the agreement of the parties hereto.

Section 7.9 Entire Agreement

This Agreement, together with the other Loan Documents, represents the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereto concerning the Secured Obligations.

Section 7.10 Governing Law

This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the internal law of the State of New York.

Section 7.11 Additional Grantors

If, pursuant to Section 7.11 (Additional Personal Property Collateral and Guaranties) of the Credit Agreement, the Borrower shall be required to cause any Subsidiary that is not a Grantor to become a Grantor hereunder, such Subsidiary shall execute and deliver to the Collateral Agent a Joinder Agreement substantially in the form of 4 and shall thereafter for all purposes be a party hereto and have the same rights, benefits and obligations as a Grantor party hereto on the Closing Date.

Section 7.12 Release of Collateral

(a) At the time provided in Section 10.7(b)(i) of the Credit Agreement, the Collateral shall be released from the Liens hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to such Grantor any Collateral of such Grantor held by the Collateral Agent hereunder and execute and deliver to such Grantor, at the sole expense of the Borrower, such documents as such Grantor shall reasonably request to evidence such termination.

(b) If the Collateral Agent shall be directed or permitted pursuant to Section 10.7(b)(ii) or (iii) of the Credit Agreement to release any Lien created hereby upon any Collateral (including any Collateral sold or disposed of by any Grantor in a transaction permitted by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, Section 10.7(b)(ii) or (iii) of the Credit Agreement. In connection therewith but subject to the terms of the Credit Agreement, the Collateral Agent, at the request and sole expense of the Borrower, shall execute and deliver to the Borrower, all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral.

(c) At the request and sole expense of the Grantors, a Grantor shall be released from its obligations hereunder in the event that all the capital stock of such Grantor shall be so sold or disposed (but only so long as such sale or other disposition is permitted under the Credit Agreement and such sale or other disposition is not to another Grantor); provided, however, that the Borrower shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower in form and substance satisfactory to the Collateral Agent stating that such transaction is in compliance with the Loan Documents.

Section 7.13 Reinstatement

Each Grantor further agrees that, if any payment made by any Loan Party or other Person and applied to any of the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral are required to be returned by any Secured Party to such Loan Party or other Person, its estate, trustee, receiver or any other party, including any Grantor, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if such payment had never been made or, if prior thereto the Lien granted hereby or other Collateral securing such liability hereunder shall have been released or terminated, such Lien or other Collateral shall be reinstated in full force and effect, and such prior release or termination shall not diminish, release, discharge, impair or otherwise affect any Lien or other Collateral securing the obligations of any Grantor in respect of the amount of such payment.

Section 7.14 Submission to Jurisdiction; Service of Process

(a) Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each Grantor hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Grantor hereby irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) Each Grantor hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Agreement by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to such Grantor at the address specified in Section 7.2 (Notices, Etc.). Each of the Grantors agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) Nothing contained in this Section 7.14 shall affect the right of the Collateral Agent or any other Secured Party to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against any Grantor in any other jurisdiction.

TABLE OF CONTENTS


	Page

ARTICLE I. Defined Terms		2
Section 1.1 Definitions		2

ARTICLE II. Grant of Security Interest		9
Section 2.1 Collateral		9
Section 2.2 Grants of Security Interests in Collateral		10
Section 2.3 Cash Collateral Accounts		10

ARTICLE III. Representations and Warranties		11
Section 3.1 Title; No Other Liens		11
Section 3.2 Perfection and Priority		11
Section 3.3 Jurisdiction of Organization; Chief Executive Office		11
Section 3.4 Inventory and Equipment		12
Section 3.5 Pledged Collateral		12
Section 3.6 Deposit Accounts; Securities Accounts		13
Section 3.7 Accounts		13
Section 3.8 Intellectual Property		13
Section 3.9 Commercial Tort Claims		14

ARTICLE IV. Covenants		14
Section 4.1 Generally		14
Section 4.2 Maintenance of Perfected Security Interest; Further Documentation		15
Section 4.3 Changes in Locations, Name, Etc.		15
Section 4.4 Pledged Collateral		16
Section 4.5 Delivery of Instruments and Chattel Paper		18
Section 4.6 Intellectual Property		18
Section 4.7 Cash Management; Deposit Accounts		20
Section 4.8 Vehicles		22
Section 4.9 Payment of Obligations		22
Section 4.10 Notice of Commercial Tort Claims		22

ARTICLE V. Remedial Provisions		23
Section 5.1 Code and Other Remedies		23
Section 5.2 Accounts and Payments in Respect of General Intangibles		24
Section 5.3 Pledged Collateral		25
Section 5.4 Proceeds to be Turned Over To Collateral Agent		26
Section 5.5 Registration Rights		26
Section 5.6 Deficiency		27

ARTICLE VI. The Collateral Agent		28
Section 6.1 Collateral Agent’s Appointment as Attorney-in-Fact		28
Section 6.2 Duty of Collateral Agent		29
Section 6.3 Authorization of Financing Statements		30
Section 6.4 Authority of Collateral Agent		30

Annex 1-A to
Pledge and Security Agreement

Form of Blocked Account Letter

__, ____

[Deposit Account Bank]
[Address]

Ladies and Gentlemen:

Reference is made to account no. [_____] maintained with you (the “Bank”) by [____] (the “Company”) into which funds are deposited from time to time (the “Account”).

[The Company][Warnaco Inc.] has entered into a Credit Agreement, dated as of August 26, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among [the Company][Warnaco Inc.], The Warnaco Group, Inc., the Lenders and Issuers party thereto, Bank of America, N.A., as Collateral Agent for the Lenders and Issuers (in such capacity, together with any successor in such capacity, the “Collateral Agent”) and Administrative Agent, and the other parties thereto.

Pursuant to the Pledge and Security Agreement, dated as of August 26, 2008 relating to the Credit Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”; capitalized terms defined in the Security Agreement used (but not otherwise defined) herein shall have the meanings ascribed to them in the Security Agreement), the Company has granted separately to the Collateral Agent, for the benefit of the Secured Parties, a security interest in certain property of the Company, including, among other things, accounts, inventory, equipment, instruments, general intangibles and all proceeds thereof (the “Collateral”). Payments with respect to the Collateral are or hereafter may be made to the Account.

By your execution of this letter agreement, you (i) agree that you shall comply with instructions originated by the Collateral Agent directing disposition of the funds and other property on deposit in the Account without further consent of the Company, (ii) acknowledge that the Collateral Agent now has exclusive control of the Account, and (iii) acknowledge that all funds in the Account shall be transferred to the Collateral Agent as provided herein (except as otherwise provided in clause [(B)][(D)] below), that the Account is being maintained by you for the benefit of the Collateral Agent and that all amounts and other property therein are held by you as custodian for the Collateral Agent.

Except as provided in [clause (C)][clauses (C)(iii) and (E)] below, the Account shall not be subject to deduction, set-off, banker’s lien, counterclaim, defense, recoupment or any other right in favor of any person or entity other than the Collateral Agent. By your execution of this letter agreement, you also acknowledge that, as of the date hereof, you have received no notice of any other pledge or assignment of the Account and have not executed any agreements with third parties covering the disposition of funds in the Account. You agree with the Collateral Agent as follows:

A. Notwithstanding anything to the contrary or any other agreement relating to the Account, the Account is and shall be maintained for the benefit of the Collateral Agent, shall be entitled “Bank of America, N.A. [name of Company] Account” and shall be subject to written instructions only from an authorized officer of the Collateral Agent.

B. [A post office box (the “Lockbox”) has been rented in the name of the Company at the [_____] post office and the address to be used for such Lockbox is:

[Insert address]

C. Your authorized representatives shall have access to the Lockbox under the authority given by the Company to the post office and shall make regular pick-ups from the Lockbox timed to gain maximum benefit of early presentation and availability of funds. You shall endorse and process all checks received in the Lockbox and deposit such checks (to the extent eligible) in the Account in accordance with the procedures set forth below .

(i) You shall follow your usual operating procedures for the handling of any checks received from the Lockbox or other remittance received in the Account that contains restrictive endorsements, irregularities (such as a variance between the written and numerical amounts), undated or postdated items, missing signatures, incorrect payees and the like.

(ii) You shall endorse and process all eligible checks and other remittance items not covered by clause (iii) below and deposit such checks and remittance items in the Account.

(iii) You shall mail all checks returned unpaid because of uncollected or insufficient funds under appropriate advice to the Company (with a copy of the notification of return to the Collateral Agent). You may charge the Account for the amounts of any returned check that has been previously credited to the Account. To the extent insufficient funds remain in the Account to cover any such returned check, the Company shall indemnify you for the uncollected amount of such returned check upon your demand.

(iv) You shall maintain a record of all checks and other remittance items received in the Account and, in addition to providing the Company with photostatic copies thereof, vouchers, enclosures and the like of such checks and remittance items on a daily basis, furnish to the Collateral Agent a monthly statement of the Account to Bank of America, N.A., as Collateral Agent, at the following address: 335 Madison Avenue, New York, New York 10017, Attention: Business Capital — Account Executive, with a copy to the Company.]

D. Unless and until the Collateral Agent notifies you to the contrary pursuant to a notice substantially in the form of Exhibit 1 hereto (a “Sweep Activation Notice”), you shall make such transfers from the Account at such times and in such manner as the Company shall from time to time instruct. From and after your receipt of a Sweep Activation Notice, (i) you shall no longer make any transfers from the Account based upon instructions of the Company and (ii) you shall transfer (by wire transfer or other method of transfer mutually acceptable to you and the Collateral Agent) to the Collateral Agent, in same day funds, on each business day, the entire balance in the Account to the following account:

Bank of America, N.A.
100 West 33^rd Street
New York, New York
ABA Number: 0260-0959-3
Account Name: Bank of America Business Capital
Account Number: [_____]
Reference: Bank of America Business Capital and Warnaco
Attn: Terry Boldt

or to such other account as the Collateral Agent may from time to time designate in writing (the “Collateral Agent Concentration Account”).

E. All customary service charges and fees with respect to the Account shall be debited to the Account. In the event insufficient funds remain in the Account to cover such customary service charges and fees, the Company shall pay and indemnify you for the amounts of such customary service charges and fees.

This letter agreement shall be binding upon and shall inure to the benefit of you, the Company, the Collateral Agent, the Secured Parties, and the respective successors, transferees and assigns of any of the foregoing until the payment in full of the Secured Obligations and Canadian Secured Obligations and termination of the Commitments and Commitments (as defined in the Canadian Facility). You may terminate the letter agreement only upon 30 days’ prior written notice to the Company and the Collateral Agent. The Collateral Agent may terminate this letter agreement upon 10 days’ prior written notice to you and the Company. Upon such termination, you shall close the Account and transfer all funds in the Account to the Collateral Agent Concentration Account or as otherwise directed by the Collateral Agent. After any such termination, you shall nonetheless remain obligated promptly to transfer to the Collateral Agent Concentration Account or as the Collateral Agent may otherwise direct all funds and other property received in respect of the Account.

Any notice, demand or other communication required or permitted to be given hereunder shall be in writing and may be (a) personally served, (b) sent by courier service, (c) telecopied or (d) sent by United States mail and shall be deemed to have been given when received. For the purposes hereof, the addresses of the parties hereto shall be as set forth below each party’s name below, or, as to each party, at such other address as may be designated by such party in a written notice to each other party.

This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this letter agreement by telecopier or electronic transmission (in pdf format) shall be effective as delivery of a manually executed counterpart of this letter agreement.

This letter agreement supersedes all prior agreements, oral or written, with respect to the subject matter hereof and may not be amended, modified or supplemented except by a writing signed by the Collateral Agent, the Company and you.

The Company hereby agrees to indemnify and hold you, your directors, officers, agents and employees harmless against all claims, causes of action, liabilities, lawsuits, demands and damages, including, without limitation, all court costs and reasonable attorney fees, in each case in any way related to or arising out of or in connection with this letter agreement or any action taken or not taken pursuant hereto, except to the extent caused by your gross negligence or willful misconduct.

This letter agreement shall be governed by, and construed in accordance with, the internal law of the State of New York. Regardless of any provision in any other agreement, for purposes of the Uniform Commercial Code as in effect in the State of New York, New York shall be deemed to be your jurisdiction (within the meaning of Section 9-304 of the UCC).

[Signature Page Follows]

Annex 1-B to
Pledge and Security Agreement

Form of Restricted Account Letter

__, ____

[Deposit Account Bank]
[Address]

Ladies and Gentlemen:

Reference is made to account no. [ ] maintained with you (the “Bank”) by [ ] (the “Company”) into which funds are deposited from time to time (the “Account”).

You are advised that the Company hereby transfers to the Collateral Agent, for the Secured Parties, exclusive control of the Account and all funds and other property on deposit therein. From the date hereof until you receive written notice from the Collateral Agent withdrawing these instructions, all funds in the Account shall be transferred as provided herein or otherwise as directed by the Collateral Agent and you will comply with any other instructions originated by the Collateral Agent directing disposition of the funds and other property on deposit in the Account without further consent of the Company. The Account is hereafter being maintained by you for the benefit of the Collateral Agent and all amounts and other property therein are held by you as custodian for the Collateral Agent. Notwithstanding anything to the contrary or any other agreement relating to the Account, the Account shall be subject to written instructions only from an authorized officer of the Collateral Agent.

Except as provided in clauses (B)(iii) and (D) below, the Account shall not be subject to deduction, set-off, banker’s lien, counterclaim, defense, recoupment or any other right in favor of any person or entity other than the Collateral Agent.

You are hereby advised as follows:

A. A post office box (the “Lockbox”)¹ has been rented in the name of the Company at the [ ] post office and the address to be used for such Lockbox is:

[Insert address]

B. Your authorized representatives shall have access to the Lockbox under the authority given by the Company to the post office and shall make regular pick-ups from the Lockbox timed to gain maximum benefit of early presentation and availability of funds. You shall endorse and process all checks received in the Lockbox and deposit such checks (to the extent eligible) in the Account in accordance with the procedures set forth below:

(i) You shall follow your usual operating procedures for the handling of any [checks received from the Lockbox or other] remittance received in the Account that contains restrictive endorsements, irregularities (such as a variance between the written and numerical amounts), undated or postdated items, missing signatures, incorrect payees and the like.

(ii) You shall endorse and process all eligible checks and other remittance items not covered by clause (iii) below and deposit such checks and remittance items in the Account.


¹		Modify if no Lockbox for the Account.

C. You shall transfer (by wire transfer or other method of transfer mutually acceptable to you and the Company) to the Company, in same day funds, on each Tuesday and each Thursday that is a business day (or otherwise as directed by the Collateral Agent), the entire balance in the Account to the following account:

ABA Number:
[Bank and Address]

Account Name:

Concentration Account

Account Number:
Reference:
Attn:

or to such other account as the Collateral Agent may from time to time designate in writing (the “Concentration Account”).

D. All customary service charges and fees with respect to the Account shall be debited to the Account. In the event insufficient funds remain in the Account to cover such customary service charges and fees, the Company shall pay and indemnify you for the amounts of such customary service charges and fees.

This letter agreement shall inure to the benefit of you, the Company, the Collateral Agent, the Secured Parties and the respective successors, transferees and assigns of any of the foregoing until the payment in full of the Secured Obligations and Canadian Secured Obligations and termination of the Commitments and Commitments (as defined in the Canadian Facility).

The Collateral Agent may terminate this letter agreement upon 10 days’ prior written notice to you and the Company. Upon such termination, you shall close the Account and transfer all funds in the Account to the Concentration Account or as otherwise directed by the Collateral Agent. After any such termination, you shall nonetheless promptly transfer to the Concentration Account or as the Collateral Agent may otherwise direct all funds and other property received in respect of the Account.

Annex 2 to
Pledge and Security Agreement

Form of Control Account Agreement

[Name and Address
of Approved Securities
Intermediary]

__, 20__

Ladies and Gentlemen:

The undersigned (the “Pledgor”) together with certain of its affiliates are party to a Pledge and Security Agreement dated as of August 26, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Pledge and Security Agreement”) in favor of Bank of America, N.A., as collateral agent for the Secured Parties referred to therein (together with its successors and assigns in such capacity, the “Collateral Agent” and in its capacity as pledgee hereunder, the “Pledgee”) pursuant to which security interests are granted by the Pledgor in all present and future Assets (hereinafter defined) in Account No. (the “Account”) of the Pledgor (the “Pledge”).

In connection therewith, the Pledgor hereby instructs you (the “Approved Securities Intermediary”) to do all of the following:

maintain the Account as “_____ - Bank of America Control Account”;

hold in the Account the assets, including, without limitation, all financial assets, securities, security entitlements and all other property and rights now or hereafter received in such Account (collectively the “Assets”), including, without limitation, those assets listed on Schedule A (List of Assets) attached hereto and made a part hereof;

provide to the Pledgee, with a duplicate copy to the Pledgor, a monthly statement of Assets and a confirmation statement of each transaction effected in the Account after such transaction is effected; and

honor only the instructions or entitlement orders in regard to or in connection with the Account given by an Authorized Officer of the Pledgee without further consent by the Pledgor, except that until such time as the Pledgee gives a written notice to the Approved Securities Intermediary that the Pledgor’s rights under this sentence have been terminated (on which notice the Approved Securities Intermediary may rely exclusively), the Pledgor acting through an Authorized Officer of the Pledgor may (a) exercise any voting right that it may have with respect to any Asset, (b) give instructions to enter into purchase or sale transactions in the Account and (c) withdraw and receive for its own use all regularly scheduled interest [and dividends] paid with respect to the Assets [and all cash proceeds of any sale of Assets] (“Permitted Withdrawals”); provided, however, that, unless the Pledgee has consented to the specific transaction, the Pledgor shall not instruct the Approved Securities Intermediary to deliver and, except as may be required by law or by court order, the Approved Securities Intermediary shall not deliver, cash, securities, other Assets or proceeds from the sale of, or distributions on, any Assets out of the Account to the Pledgor or to any other person or entity other than Permitted Withdrawals.

By its signature below, the Approved Securities Intermediary agrees to comply with the entitlement orders and instructions of an Authorized Officer of the Pledgee (including, without limitation, any instruction with respect to sales, trades, transfers and withdrawals of cash or other of the Assets) without the consent of the Pledgor or any other person (it being understood and agreed by the Pledgor that the Approved Securities Intermediary shall have no duty or obligation whatsoever of any kind or character to have knowledge of the terms of the Pledge and Security Agreement or to determine whether or not an event of default exists thereunder). The Pledgor hereby agrees to indemnify and hold harmless the Approved Securities Intermediary, its affiliates, officers and employees from and against all claims, causes of action, liabilities, lawsuits, demands and damages, including, without limitation, all court costs and reasonable attorney’s fees, that may result by reason of the Approved Securities Intermediary complying with such instructions of the Pledgee.

The Authorized Officer of the Pledgee who shall give oral instructions hereunder shall confirm the same in writing to the Approved Securities Intermediary within five days after such oral instructions are given.

For the purpose of this Agreement, the term “Authorized Officer of the Pledgor” shall refer in the singular to or (each of whom is, on the date hereof, an officer or director of the Pledgor) and “Authorized Officer of the Pledgee” shall refer in the singular to any person who is a vice president or managing director of the Pledgee. In the event that the Pledgor shall find it advisable to designate a replacement for any of its Authorized Officers, written notice of any such replacement shall be given to the Approved Securities Intermediary and the Pledgee.

Except with respect to the obligations and duties as set forth herein, this Agreement shall not impose or create any obligation or duty upon the Approved Securities Intermediary greater than or in addition to the customary and usual obligations and duties of the Approved Securities Intermediary to the Pledgor.

As long as the Assets are pledged to the Pledgee, (i) the Approved Securities Intermediary shall not invade the Assets to cover margin debits or calls in any other account of the Pledgor and (ii) the Approved Securities Intermediary agrees that, except for liens resulting from customary commissions, fees, or charges based upon transactions in the Account, it subordinates in favor of the Pledgee any security interest, lien or right of setoff the Approved Securities Intermediary may have. The Approved Securities Intermediary acknowledges that it has not received notice of any other security interest in the Account or any of the Assets. In the event any such notice is received, the Approved Securities Intermediary shall promptly notify the Pledgee. The Pledgor herein represents that the Assets are free and clear of any lien or encumbrance and agrees that, with the exception of the security interest granted to the Approved Securities Intermediary (as described in Clause (ii) above) and Pledgee, no lien or encumbrance shall be placed by it on the Assets without the express written consent of the Pledgee and the Approved Securities Intermediary.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and it and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, and the law of the Approved Securities Intermediary’s jurisdiction for the purposes of Section 8-110 of the Uniform Commercial Code in effect in the State of New York (the “UCC”) shall be, the law of the State of New York.

The Approved Securities Intermediary shall treat all property at any time held by the Approved Securities Intermediary in the Account as financial assets within the meaning of the UCC. The Approved Securities Intermediary acknowledges that this Agreement constitutes written notification to the Approved Securities Intermediary, pursuant to the UCC and any applicable federal regulations for the Federal Reserve Book Entry System, of the Pledgee’s security interest in the Assets. The Pledgor, Pledgee and Approved Securities Intermediary are entering into this Agreement to provide for the Pledgee’s control of the Assets and to confirm the first priority of the Pledgee’s security interest in the Assets. The Approved Securities Intermediary agrees to promptly make and thereafter maintain all necessary entries or notations in its books and records to reflect the Pledgee’s security interest in the Assets.

If any term or provision of this Agreement is determined to be invalid or unenforceable, the remainder of this Agreement shall be construed in all respects as if the invalid or unenforceable term or provision were omitted. This Agreement may not be altered or amended in any manner without the express written consent of the Pledgor, the Pledgee and the Approved Securities Intermediary. This Agreement may be executed in any number of counterparts, all of which shall constitute one original agreement.

The Pledgor hereby agrees to indemnify and hold you, your directors, officers, agents and employees harmless against all claims, causes of action, liabilities, lawsuits, demands and damages, including, without limitation, all court costs and reasonable attorney fees, in each case in any way related to or arising out of or in connection with this letter agreement or any action taken or not taken pursuant hereto, except to the extent caused by your gross negligence or willful misconduct.

Annex 3
to
Pledge and Security Agreement

This Pledge Amendment, dated as of _____ __, 20_____, is delivered pursuant to Section 4.4(a) (Pledged Collateral) of the Pledge and Security Agreement, dated as of August 26, 2008, by Warnaco Inc. (the “Borrower”), The Warnaco Group, Inc. and the [undersigned Grantor and the other] Subsidiaries of The Warnaco Group, Inc. from time to time party thereto as Grantors in favor of Bank of America, N.A., as collateral agent for the Secured Parties, each as referred to therein (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Pledge and Security Agreement”) and the undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge and Security Agreement and that the Pledged Collateral listed on this Pledge Amendment shall be and become part of the Collateral referred to in the Pledge and Security Agreement and shall secure all Secured Obligations of the undersigned. Capitalized terms used herein but not defined herein are used herein with the meaning given them in the Pledge and Security Agreement.


	[Grantor]
	By:
		Name:
		Title:

Pledged Stock


				Number of
				Shares,
		Certificate		Units or
Issuer	Class	No(s).	Par Value	Interests

Pledged Debt Instruments


	Description	Certificate	Final	Principal
Issuer	of Debt	No(s).	Maturity	Amount

Annex 4
to

Pledge and Security Agreement

This Joinder Agreement, dated as of _____ __, 20_____, is delivered pursuant to Section 7.11 (Additional Grantors) of the Pledge and Security Agreement, dated as of August 26, 2008, by Warnaco Inc. (the “Borrower”), The Warnaco Group, Inc. and the other Subsidiaries of The Warnaco Group, Inc. party thereto from time to time in favor of Bank of America, N.A., as collateral agent for the Secured Parties (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Pledge and Security Agreement”). Capitalized terms used herein but not defined herein are used with the meanings given them in the Pledge and Security Agreement.

By executing and delivering this Joinder Agreement, the undersigned, as provided in Section 7.11 (Additional Grantors) of the Pledge and Security Agreement, hereby becomes a party to the Pledge and Security Agreement as a Grantor thereunder with the same force and effect as if originally named as a Grantor therein and, without limiting the generality of the foregoing, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the undersigned, the undersigned hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the Collateral of the undersigned and expressly assumes all obligations and liabilities of a Grantor thereunder.

The information set forth in Annex 1-A is hereby added to the information set forth in Schedules 1 through 6 to the Pledge and Security Agreement. The undersigned hereby agrees that this Joinder Agreement may be attached to the Pledge and Security Agreement and that the Pledged Collateral listed on Annex 1-A to this Joinder Agreement shall be and become part of the Collateral referred to in the Pledge and Security Agreement and shall secure all Secured Obligations of the undersigned.

The undersigned hereby represents and warrants that each of the representations and warranties contained in ARTICLE III (Representations and Warranties) of the Pledge and Security Agreement applicable to it is true and correct on and as the date hereof as if made on and as of such date.

This Joinder Agreement shall be governed by, and construed and interpreted in accordance with, the internal law of the State of New York.

The undersigned agrees that:

(a) Any legal action or proceeding with respect to this Joinder Agreement may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Joinder Agreement, the undersigned hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The undersigned irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) The undersigned hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in the United States of America arising out of or in connection with this Joinder Agreement by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to the undersigned at the address specified in Section 7.2 (Notices, Etc.) of the Pledge and Security Agreement. The undersigned agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c) Nothing contained herein shall affect the right of any Agent or any other Secured Party to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the undersigned in any other jurisdiction.

[Signature page follows]

Annex 5
To
Pledge and Security Agreement

Copyright Security Agreement, dated as of August _____, 2008, by each of the entities listed on the signature pages hereof (each a “Grantor” and, collectively, the “Grantors”) in favor of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Whereas, pursuant to a Credit Agreement, dated as of August 26, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Warnaco Inc. (the “Borrower”), The Warnaco Group, Inc. (“Group”), the Lenders and Issuers party thereto, BofA, as administrative agent and collateral agent for the Lenders and Issuers, and certain other parties thereto, the Lenders and the Issuers have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

Whereas, the Grantors other than the Borrower are party to a Guaranty pursuant to which they have guaranteed the Obligations of the Borrower under the Credit Agreement; and

Whereas, all the Grantors are party to a Pledge and Security Agreement, dated as of August 26, 2008. in favor of the Collateral Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) pursuant to which the Grantors are required to execute and deliver this Copyright Security Agreement;

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

Section 2. Grant of Security Interest in Copyright Collateral

(a) all of its Copyrights and Copyright Licenses pursuant to which it has been granted any exclusive rights to Copyrights, including, without limitation, those referred to on Schedule I hereto;

(b) all renewals, reversions and extensions of the foregoing; and

(c) all Proceeds of any or all of the foregoing, including, without limitation, all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under any Copyright and with respect thereto, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

Section 3. Security Agreement

The security interest granted pursuant to this Copyright Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Copyright Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

[Signature Pages Follow]

Annex 6
to

Pledge and Security Agreement

Patent Security Agreement, dated as of August _____, 2008, by each of the entities listed on the signature pages hereof (each a “Grantor” and, collectively, the “Grantors”) in favor of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (as defined in the Credit Agreement referred to below) (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Whereas, the Grantors other than the Borrower are party to a Guaranty pursuant to which they have guaranteed the Obligations of the Borrower under the Credit Agreement; and

Whereas, all the Grantors are party to a Pledge and Security Agreement, dated as of August 26, 2008, in favor of the Collateral Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) pursuant to which the Grantors are required to execute and deliver this Patent Security Agreement;

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Patent Collateral

(a) all of its Patents, including, without limitation, those referred to on Schedule I hereto;

(b) all reissues, continuations, divisions, continuations, renewals and extensions of the foregoing; and

(c) all Proceeds of any or all of the foregoing, including, without limitation, all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under any Patent and with respect thereto, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

Section 3. Security Agreement

The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Patent Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

[Signature Pages Follow]

Annex 7
to
Pledge and Security Agreement

Trademark Security Agreement, dated as of August _____, 2008, by each of the entities listed on the signature pages hereof (each a “Grantor” and, collectively, the “Grantors”) in favor of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (as defined in the Credit Agreement referred to below) (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Whereas, the Grantors other than the Borrower are party to a Guaranty pursuant to which they have guaranteed the Obligations of the Borrower under the Credit Agreement; and

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Trademark Collateral

1. all of its Trademarks, including, without limitation, those referred to on Schedule I hereto;

2. all renewals and extensions of the foregoing;

3. all goodwill of the business connected with the use of, and symbolized by, each such Trademark; and

4. all Proceeds of any or all of the foregoing, including, without limitation, all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under any Trademark and with respect thereto, including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof.

Section 3. Security Agreement

The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and each Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

[Signature Pages Follow]

Credit Agreement, dated as of August 26, 2008, among Warnaco of Canada Company, a Nova Scotia unlimited liability company (the “Borrower”), The Warnaco Group, Inc., a Delaware corporation (“Group”), the Lenders (as defined below), the Issuers (as defined below), Bank of America, N.A. (“BofA”), as administrative agent for the Revolving Credit Facility (as defined below) (in such capacity, the “Administrative Agent”) and as collateral agent for the Lenders and the Issuers (in such capacity, the “Collateral Agent”), Banc of America Securities LLC (“BAS”) and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers (in such capacities, the “Arrangers”), and Deutsche Bank Securities Inc., as sole syndication agent for the Lenders and the Issuers (in such capacity, the “Syndication Agent” and together with the Administrative Agent and the Collateral Agent, collectively, the “Agents“).

W i t n e s s e t h:

Whereas, the Lenders and Issuers are willing to make available to the Borrower such revolving credit and letter of credit facility upon the terms and subject to the conditions set forth herein;

Now, Therefore, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

“Account” has the meaning specified in the PPSA (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Account Debtor” means a Person obligated on an Account (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, has the meaning specified in the U.S. Pledge and Security Agreement).

“Administrative Agent” has the meaning specified in the preamble to this Agreement.

“Advance Rate” means, for each category of Collateral set forth below, the rate set forth below (as a percentage of book value) opposite such category of Collateral:


Category	Rate
Eligible Receivables		85	%
Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit)		80	%

provided, that (a) if at any time the product of (i) the Adjusted Orderly Liquidation Value Rate and (ii) the sum of Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) of each Canadian Loan Party (valued, in each case, at the lower of cost and market on a first-in, first-out basis) is less than the aggregate Borrowing Base attributable to such Inventory under clause (a)(ii)(x) of the definition of Borrowing Base (calculated using the above Advance Rate), then, at the sole discretion of the Administrative Agent, exercised reasonably, the effective Advance Rate for Eligible Inventory will be adjusted (until delivery of the next Appraisal) to a level that would cause such Advance Rate to effectively equal the Adjusted Orderly Liquidation Value Rate; and (b) any reduction in the foregoing advance rates (or any increase up to the rates set forth above) shall be determined by the Administrative Agent in its sole discretion exercised reasonably and shall take effect 10 Business Days (or, if pursuant to clause (a) above, three (3) Business Days) after the Administrative Agent delivers written notice thereof to the Borrower.

“Agent Affiliate” has the meaning specified in Section 10.9(c).

“Agents” has the meaning specified in the preamble to this Agreement.

“Agreement” means this Credit Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Agreement Accounting Principles” means, subject to Section 1.3, GAAP or, if (x) the U.S. Securities and Exchange Commission requires or permits United States reporting companies to utilize the IFRS in lieu of GAAP for reporting purposes and (y) Group adopts the IFRS with the agreement of its independent public accountants, the IFRS, each as in effect from time to time, applied in a manner consistent with that used in the preparation of the audited annual Financial Statements referred to in Section 6.1(c); provided that if the adoption by Group of the IFRS results in a change in any of the calculations required by Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by Group and the Borrower or the determination of the “Applicable Margin” or the calculation of the Fixed Charge Coverage Ratio in the definition of “Permitted Acquisition” shall be the same after such adoption as if such adoption had not been made; and provided, further, that the adoption of the IFRS (to the extent that such adoption would affect a calculation that measures compliance with any covenant contained in Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”) shall not be given effect until such provisions are amended to reflect such adoption.

“Aggregate Borrowing Base” means, at any time, the aggregate of the Borrowing Base and the Borrowing Base (as defined in the U.S. Facility) at such time.

“Aggregate Borrowing Limit” means, at any time, the lesser of (i) the sum of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the U.S. Facility) in effect at such time and (ii) the Aggregate Borrowing Base at such time.

“Alternative Currency” means the lawful currency of each of the European Union, the United Kingdom, the United States of America and Hong Kong, provided that in each case such currency is freely transferable into U.S. Dollars.

“Anniversary Date” means each anniversary of the Closing Date.

“Applicable Margin” means, as of any date of determination, (a) from and after the Closing Date but prior to the date 10 Business Days after delivery by Group to the Administrative Agent of Financial Statements pursuant to Section 6.1(b) for the Fiscal Quarter ending on or about March 31, 2009, a per annum rate equal to 1.75% (in the case of BA Rate Loans) and .75% (in the case of Prime Rate Loans) and (b) from and after the date 10 Business Days after delivery by Group to the Administrative Agent of Financial Statements pursuant to Section 6.1(b) for the Fiscal Quarter ending on or about March 31, 2009, a per annum rate equal to the rate set forth below opposite the applicable type of Loan and the then applicable Leverage Ratio of Group (determined on the last day of the most recent Fiscal Quarter for which Financial Statements have been delivered pursuant to Section 6.1(b) or Section 6.1(c)) set forth below:


	Prime Rate
Leverage Ratio	Loans			BA Rate Loans
Greater than 1.75 to 1		1.00	%		2.00	%
Less than or equal to 1.75 to 1 and greater than 0.50 to 1		.75	%		1.75	%
Less than or equal to 0.50 to 1		.50	%		1.50	%


	Average
Level	Revolver Usage	Unused Commitment Fee

Level 1	Less than 50%		0.50	%

Level 2	Equal to or \|greater than 50%		0.375	%

“Approved Electronic Communications” means each notice, demand, communication, information, document and other material that any Loan Party is obligated to, or otherwise chooses to, provide to any Agent pursuant to any Loan Document or the transactions contemplated therein, including (a) any supplement to the Guaranty or the U.S. Loan Party Canadian Facility Guaranty, any joinder to the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement or the U.S. Pledge and Security Agreement and any other written Contractual Obligation delivered or required to be delivered in respect of any Loan Document or the transactions contemplated therein and (b) any Financial Statement, financial and other report, notice, request, certificate and other information material, provided, however, that, “Approved Electronic Communication” shall exclude (i) any Notice of Borrowing, Letter of Credit Request, Swing Loan Request, Notice of Conversion or Continuation, and any other notice, demand, communication, information, document and other material relating to a request for a new, or a conversion of an existing, Borrowing (other than a Notice of Borrowing, Swing Loan Request or Notice of Conversion or Continuation sent by e-mail in accordance with the terms hereof; provided, that (A) the Borrower shall confirm each such notice by prompt delivery to the Administrative Agent of a Notice of Borrowing, Swing Loan Request or Notice of Conversion or Continuation, as applicable, in a manner permitted by Section 11.8 (other than by electronic mail, Approved Electronic Platform, internet website or other electronic transmission), but if it differs in any material respect from the action taken by any Facility Agent or Lender, the records of the applicable Facility Agents and Lenders shall govern, (B) each Facility Agent and Lender shall be entitled to rely on such e-mail notice (and regardless of whether any confirmation is received by the Administrative Agent) and (C) no Facility Agent or Lender shall have any liability for any loss suffered by the Borrower or any other Loan Party as a result of a Facility Agent or any Lender acting upon such e-mailed instructions), (ii) any notice pursuant to Section 2.8 or Section 2.9 and any other notice relating to the payment of any principal or other amount due under any Loan Document prior to the scheduled date therefor, (iii) any notice of any Default or Event of Default and (iv) any notice, demand, communication, information, document and other material required to be delivered to satisfy any of the conditions set forth in Article II or Section 2.4(a) or any other condition to any Borrowing or other extension of credit hereunder or any condition precedent to the effectiveness of this Agreement.

“Approved Electronic Platform” has the meaning specified in Section 10.9.

“Arrangers” has the meaning specified in the preamble to this Agreement.

“Asset Sale” has the meaning specified in Section 8.4.

“Availability Reserves” means, as of three (3) Business Days after the date of written notice of any determination thereof to the Borrower by the Administrative Agent (except that no such advance notice shall be required with respect to any amounts established on or prior to the Closing Date, so long as the Administrative Agent notifies the Borrower of such amounts on or prior to the Closing Date, which amounts shall be in effect as of the Closing Date), such amounts as the Administrative Agent may from time to time establish against the Revolving Credit Facility, in the Administrative Agent’s sole discretion exercised reasonably, in order to (a) preserve the value of the Collateral or the Collateral Agent’s Lien thereon and/or (b) provide for the payment of unanticipated liabilities of any of the Loan Parties arising after the Closing Date and, to the extent that the Administrative Agent is not aware of same on the Closing Date, arising on or prior to the Closing Date and/or (c) provide for the effect, or anticipated effect, of the loss of the benefit to the Warnaco Entities of a Material License.

“Available Canadian Credit” means, at any time, (a) the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base at such time minus (b) the sum of (i) the U.S. Dollar Equivalent of the aggregate Revolving Credit Outstandings at such time and (ii) the U.S. Dollar Equivalent of the aggregate amount of any Availability Reserve in effect at such time.

“Available Credit” means, at any time, the sum of the U.S. Dollar Equivalent of the Available Canadian Credit at such time and the Available U.S. Credit (as defined in the U.S. Facility) at such time; provided that in no event shall the U.S. Dollar Equivalent of the amount of Available Canadian Credit included in the determination of “Available Credit” at any time exceed 25% of the Available Credit at such time.

“Average Revolver Usage” means, for any period, an amount equal to (i) the quotient of (x) the sum of the U.S. Dollar Equivalent of the Revolving Credit Outstandings (excluding the U.S. Dollar Equivalent of the amount of any outstanding Swing Loans) for each day during such period, divided by (y) the number of days in such period, divided by (ii) the quotient of (x) the sum of the Revolving Credit Commitments of the Lenders for each day during such period, divided by (y) the number of days in such period, all as determined by the Administrative Agent.

“BA Rate” means, for any Interest Period, with respect to any BA Rate Loan, the rate of interest per annum equal to the annual rate of interest quoted on the Business Day which is the first day of such Interest Period by BofA Canada Branch in accordance with its normal practice as being its rate of interest for bankers’ acceptances in Dollars for a face amount similar to the amount of such BA Rate Loan and for a term similar to such Interest Period.

“BA Rate Loan” means any Revolving Loan that, for an Interest Period, bears interest based on the BA Rate.

“Bankruptcy Code” means title 11, United States Code, as amended from time to time.

“BAS” has the meaning specified in the preamble to this Agreement.

“Blocked Account” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Blocked Account Bank” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Blocked Account Letter” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“BofA” has the meaning specified in the preamble to this Agreement.

“BofA Canada Branch” means Bank of America, N.A. (acting through its Canada branch).

“Borrower” has the meaning specified in the preamble to this Agreement.

“Borrowing” means a Revolving Credit Borrowing.

“Borrowing Base” means, at any time, the U.S. Dollar Equivalent of (a) the sum of (i) the product of the Advance Rate then in effect for Eligible Receivables and the face amount of all Eligible Receivables of each Canadian Loan Party (calculated net of all finance charges, late fees and other fees which are unearned, sales, excise or similar taxes, and credits or allowances granted at such time), (ii) the sum of (x) the product of the Advance Rate then in effect for Eligible Inventory and the value of the Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) of each Canadian Loan Party (valued, in each case, at the lower of cost and market on a first-in, first-out basis) and (y) subject to the proviso in the last sentence of the definition of Eligible Inventory, the product of the Adjusted Orderly Liquidation Value Rate then in effect and the sum of (1) the value of the Eligible Inventory consisting of Documented Non-Letter of Credit Inventory of each Canadian Loan Party (valued, in each case, at the lower of cost and market on a first-in, first out basis) and (2) the value of the Eligible Inventory consisting of Inventory covered by Documentary Letters of Credit of each Canadian Loan Party (which value under this clause (2) shall be deemed to be the aggregate undrawn amount of such Documentary Letters of Credit at such time) and (iii) the lesser of (x) U.S.$10,000,000 and (y) the U.S. Dollar Equivalent of the aggregate amount of cash and Permitted Cash Equivalents held in the Special Cash Collateral Account at such time (but only so long as such cash, Permitted Cash Equivalents and account are subject to a valid and perfected first priority Lien in favor of the Collateral Agent) minus (b) any Eligibility Reserve, and, in the case of Eligible Receivables, any Dilution Reserve then in effect.

“Borrowing Base Certificate” means a certificate to be executed and delivered from time to time by the Borrower to the Administrative Agent substantially in the form of Exhibit E.

“Business Day” means a day of the year on which banks are not required or authorized to close in New York, New York or Charlotte, North Carolina (and when used in connection with a Loan or a Letter of Credit (including without limitation, with respect to notices, determinations, fundings, issuances and payments relating thereto), additionally Toronto, Ontario, Canada), and, (a) in the case of Letters of Credit Issued in Euros or within the European Union, in London and (b) in the case of Letters of Credit Issued in Hong Kong dollars or in Hong Kong, in Hong Kong.

“Canadian Loan Party” means the Borrower and each Canadian Subsidiary Guarantor.

“Canadian Plan” means any pension or other employee benefit plan and which is: (a) a plan maintained by the Borrower or any other Canadian Loan Party; (b) a plan to which the Borrower or any other Canadian Loan Party contributes or is required to contribute; (c) a plan to which the Borrower or any other Canadian Loan Party was required to make contributions at any time during the five (5) calendar years preceding the date of this Agreement; or (d) any other plan with respect to which the Borrower or any other Canadian Loan Party has incurred or may incur liability, including contingent liability either to such plan or to any Person, administration or Governmental Authority, including the FSCO.

“Canadian Pledge Agreement” means a pledge agreement, in form and substance reasonably satisfactory to the Administrative Agent, executed by the Borrower and each Guarantor that is a Canadian Subsidiary, pursuant to which each such Person pledges to the Collateral Agent all of its right, title and interest in and to all Stock of each Subsidiary in which it has an interest, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Canadian Priority Payables” means, at any time, with respect to the Borrowing Base:

(a) the amount past due and owing by the Borrower or any other Canadian Loan Party, or the accrued amount for which the Borrower or any other Canadian Loan Party has an obligation to remit to a Governmental Authority or other Person pursuant to any applicable law, rule or regulation, in respect of (i) pension fund obligations; (ii) employment insurance; (iii) goods and services taxes, sales taxes, employee income taxes and other taxes payable or to be remitted or withheld; (iv) workers’ compensation; (v) vacation pay; and (vi) other like charges and demands, in each case, in respect of which any Governmental Authority or other Person may claim a security interest, hypothec, prior claim, lien, trust or other claim or Lien ranking or capable of ranking in priority to or pari passu with one or more of the Liens granted in any of the Collateral Documents; and

(b) the aggregate amount of any other liabilities of the Borrower or any other Canadian Loan Parties (i) in respect of which a trust has been or may be imposed on any Collateral to provide for payment or (ii) which are secured by a security interest, hypothec, prior claim, pledge, lien, charge, right, or claim or other Lien on any Collateral, in each case, pursuant to any applicable law, rule or regulation and which trust, security interest, hypothec, prior claim, pledge, lien, charge, right, claim or Lien ranks or is capable of ranking in priority to or pari passu with one or more of the Liens granted in any of the Collateral Documents.

“Canadian Security Agreement” means a general security agreement, in form and substance reasonably satisfactory to the Administrative Agent, executed by the Borrower and each Guarantor that is a Canadian Subsidiary, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Canadian Subsidiary” means any Subsidiary of Group organized under the laws of Canada or any province or territory thereof.

“Canadian Subsidiary Guarantor” means each Canadian Subsidiary party to or that becomes party to the Guaranty.

“Cash Collateral Account” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Cash Equivalents” means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof (including, without limitation, the Federal Home Loan Mortgage Association, the Federal Home Loan Bank, the Federal National Mortgage Association and the Governmental National Mortgage Association) or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States or, in the case of a Foreign Subsidiary, securities issued or fully guaranteed or insured by the federal government of the country under which such Foreign Subsidiary was formed or any agency thereof or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of such federal government, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers’ acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least “A-1” by Standard & Poor’s Rating Services (“S&P”) or “P-1” by Moody’s Investors Services, Inc. (“Moody’s”), (c) commercial paper of an issuer rated at least “A-1” by S&P or “P-1” by Moody’s, and (d) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than U.S.$500,000,000 and (iii) is rated at least “A-1” by S&P or “P-1” by Moody’s; provided, however, that the maturities of all obligations of the type specified in clauses (a) through (c) above shall not exceed 365 days.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

“Change of Control” means any of the following: (a) Group shall at any time cease to have legal and beneficial ownership of 100% of the capital stock of the U.S. Borrower, or, directly or indirectly, any other Loan Party (except if such other Loan Party shall be disposed of pursuant to an Asset Sale permitted by Section 8.4 or if such parties shall merge, liquidate or dissolve in accordance with Section 8.7); or (b) any Person, or two or more Persons acting in concert, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Group (or other securities convertible into such Voting Stock) representing 35% or more of the combined voting power of all Voting Stock of Group; or (c) any Person, or two or more Persons acting in concert, shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, the power to exercise, directly or indirectly, a controlling influence over the management or policies of Group, or control over Voting Stock of Group (or other securities convertible into such securities) representing 35% or more of combined voting power of all Voting Stock of Group or (d) so long as the Senior Note Indenture is in effect or any Senior Notes are outstanding, any “Change of Control” as defined in the Senior Note Indenture.

“Chargeback” means a deduction from a Receivable taken by a customer.

“Chattel Paper” has the meaning specified in the PPSA (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Closing Date” means August 26, 2008.

“Code” means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time.

“Collateral Agent” has the meaning specified in the preamble to this Agreement.

“Collateral Documents” means the Canadian Security Agreement, the Canadian Pledge Agreement, the Deed of Hypothec, other pledge or security agreements, the Mortgages, the Blocked Account Letters, the Restricted Account Letters, the Control Account Agreements, the Collateral Documents (as defined in the U.S. Facility) and any other document executed and delivered by a Loan Party granting a Lien on any of its property to secure payment of any of the Secured Obligations.

“Commitment” means, with respect to any Lender, such Lender’s Revolving Credit Commitment and “Commitments” means the aggregate Revolving Credit Commitments of all Lenders.

“Compliance Certificate” has the meaning specified in Section 6.1(d).

“Contractual Obligation” of any Person means any obligation, agreement, undertaking or similar provision of any Security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, hypothecation, deed of trust or other instrument (excluding a Loan Document) to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject.

“Control Account” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Control Account Agreement” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Corporate Chart” means a corporate organizational chart, list or other similar document in each case in form reasonably acceptable to the Administrative Agent and setting forth, for each Person that is a Loan Party, that is subject to Section 7.11 or that is a Subsidiary of any of them, (a) the full legal name of such Person (and any trade name, fictitious name or other name such Person may have had or operated under), (b) the jurisdiction of organization, the organizational number (if any) and the tax identification number (if any) of such Person, (c) the location of such Person’s chief executive office (or domicile or sole place of business) and (d) the number of shares of each class of such Person’s Stock authorized (if applicable), the number outstanding as of the date of delivery and the number and percentage of such outstanding shares for each such class owned (directly or indirectly) by any Loan Party or any Subsidiary of any of them.

“Credit and Collection Policy” means, as the context may require, those receivables credit and collection policies and practices of the Canadian Loan Parties in effect on the Closing Date and as disclosed in writing to the Lenders, as such credit and collection policies and practices may be modified in any material respect with the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) and with a copy of any such modification (whether material or not) to be delivered to the Administrative Agent promptly after its effectiveness.

“Customary Permitted Liens” means, with respect to any Person, any of the following Liens:

(b) Liens of landlords arising by statute and Liens of suppliers, mechanics, carriers, materialmen, warehousemen, processors or workmen and other like Liens imposed by law or otherwise incurred, in each instance, in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by Agreement Accounting Principles, or deposits or pledges to obtain the release of any such Liens;

(c) deposits made in the ordinary course of business in connection with worker’s compensation, unemployment or employment insurance or other types of social security benefits or to secure the performance of bids, tenders, sales, contracts (other than for the repayment of borrowed money), public or statutory obligations, and surety, stay, appeal, customs or performance bonds, or similar obligations arising in each case in the ordinary course of business;

(d) encumbrances arising by reason of zoning restrictions, easements, servitudes, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar encumbrances or such other matters as disclosed in Mortgagee’s Title Insurance Policy on the use of Real Property which do not materially detract from the value of such Real Property or interfere with the ordinary conduct of the business conducted and proposed to be conducted at such Real Property;

(f) financing statements of a lessor’s rights in and to personal property leased to such Person in the ordinary course of such Person’s business.

“Deed of Hypothec” means a deed of hypothec, in form and substance reasonably satisfactory to the Administrative Agent, executed by the Borrower and each Guarantor that is a Canadian Subsidiary granting a Lien as required for Quebec law purposes on any of its property to secure payment of any of the Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Default” means any event which with the passing of time or the giving of notice or both would become an Event of Default.

“Defaulted Receivable” means a Receivable:

(a) in the case of a Receivable that is not an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment,

(b) in the case of a Receivable that is an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 30 days or more from the original due date for such payment,

(c) unless otherwise agreed in writing by the Administrative Agent in its sole discretion exercised reasonably, the Account Debtor of such Receivable (or any other Person obligated thereon or owning any Related Security with respect thereto) has: (i) filed a petition for bankruptcy or any other relief under any of the Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors; (ii) made an assignment for the benefit of creditors; (iii) had filed against it any petition or other application for relief under any of the Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or any such other law; (iv) has failed, suspended business operations, become insolvent, called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation; or (v) had or suffered a receiver or a trustee to be appointed for all or a significant portion of its assets or affairs, or

(d) which, has been, or, consistent with the Credit and Collection Policy would be, written off a Canadian Loan Party’s books as uncollectible.

“Deposit Account” means a demand, time, savings, passbook or similar account maintained with a bank (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, has the meaning given to such term in the UCC).

“Dilution” means, at any given time in respect of all Accounts of the Canadian Loan Parties, 100 times a quotient, (a) the numerator of which is the sum (for the most recent twelve months) of any net credits, rebates, markdowns, freight charges, cash discounts, volume, early payment and other discounts, cooperative advertising expenses, warranties, warehouse and other allowances, disputes, chargebacks, defective returns, other returned or repossessed goods, reductions in balance in respect of billing errors or adjustments to estimated billing settlements for defective products or other reasons, allowances for early payments and other similar allowances that are made or coordinated with the usual practices of the Canadian Loan Party owning such Account and (b) the denominator of which is the sum (for the most recent twelve months) of the gross amount of any sales made on account (including, without limitation, the original balances of such Accounts).

“Document” means a “document of title” as defined in the PPSA (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, has the meaning specified in Article 9 of the UCC).

“Documentary Letter of Credit” means any Letter of Credit Issued by an Issuer pursuant to Section 2.4 for the account of the Borrower, which is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by a Canadian Loan Party in the ordinary course of its business.

“Documented Non-Letter of Credit Inventory” means Inventory of a Canadian Loan Party (i) that is not covered by a Documentary Letter of Credit, (ii) that is in transit from a vendor from outside Canada, (iii) that is subject to a valid and perfected first priority Lien in favor of the Collateral Agent under the PPSA and (iv) as to which such other conditions (including, without limitation, receipt of documentation) as the Administrative Agent shall request, in its sole discretion exercised reasonably, have been satisfied.

“Dollars” and the sign “$” each mean the lawful money of Canada.

“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule II (Domestic Lending Offices and Addresses for Notices) or on the Assignment and Acceptance by which it became a Lender or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.

“Domestic Subsidiary” means any Subsidiary of Group organized under the laws of any state of the United States of America or the District of Columbia.

“EBITDA” means, with respect to any Person for any period, an amount equal to (a) Consolidated Net Income of such Person for such period plus (b) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items, (iv) loss from the sale, exchange or other disposition of capital assets, (v) depreciation, depletion and amortization of intangibles or financing or acquisition costs, (vi) all other non-cash charges and non-cash losses for such period, including non-cash charges relating to any change in the methodology of estimating reserves against Receivables and Inventory and non-cash charges for employee stock compensation, and (vii) any restructuring charges not to exceed U.S.$20,000,000 in the aggregate in any Fiscal Year minus (c) the sum of, in each case to the extent included in the calculation of such Consolidated Net Income but without duplication, (i) any credit for income tax, (ii) interest income, (iii) gains from extraordinary items for such period, (iv) any aggregate net gain from the sale, exchange or other disposition of capital assets by such Person, (v) any other non-cash gains which have been added in determining Consolidated Net Income and (vi) cash payments for charges that have been reserved.

“Eligibility Reserve” means, effective as of three (3) Business Days after the date of written notice of any determination thereof to the Borrower by the Administrative Agent (except that no such advance notice shall be required with respect to amounts established on or prior to the Closing Date, which amounts shall be in effect as of the Closing Date), such amounts as the Administrative Agent, in its sole discretion exercised reasonably, may from time to time establish against the gross amounts of Eligible Receivables or Eligible Inventory, to reflect (a) risks or contingencies which may affect any one or class of such items and which have not already been taken into account in the calculation of the Borrowing Base, (b) Cash Management Obligations owing to any of the Facility Agents that constitute Secured Obligations, (c) (i) at any time that Available Credit is less than U.S.$50,000,000 or during an Event of Default, upon the written request of any Lender that is (or whose Affiliate is) party to a Hedging Contract, the aggregate obligations of the Borrower or any other Canadian Loan Party under such Hedging Contract calculated on a mark to market basis or (ii) at any time that any such Hedging Contract has been terminated, the amount due and owing pursuant to such Hedging Contract and (d) the unpaid or unremitted Canadian Priority Payables by any of the Canadian Loan Parties which would give rise to a Lien with priority under applicable laws over the Lien of the Collateral Agent under any of the Loan Documents.

“Eligible Assignee” means (a) a Lender or an Affiliate or Approved Fund of any Lender or Agent, (b) a commercial bank having total assets whose U.S. Dollar Equivalent exceeds U.S.$5,000,000,000, (c) a finance company or insurance company, in each case reasonably acceptable to the Administrative Agent, and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, whose U.S. Dollar Equivalent exceeds U.S.$500,000,000 (or, to the extent net worth is less than such amount, a finance company or insurance company, reasonably acceptable to the Administrative Agent), (d) a savings and loan association or savings bank organized under the laws of Canada or any province or territory thereof having a net worth, determined in accordance with GAAP, whose U.S. Dollar Equivalent exceeds U.S.$500,000,000 or (e) any other financial institution or Fund, in each case reasonably acceptable to the Administrative Agent and each Issuer, and regularly engaged in making, purchasing or investing in loans and having a net worth, determined in accordance with GAAP, whose U.S. Dollar Equivalent exceeds U.S.$500,000,000 (or, to the extent net worth is less than such amount, any other financial institution or Fund, reasonably acceptable to the Administrative Agent and each Issuer), in each case under clauses (a) through (e), that is dealing at arms’ length from the Borrower within the meaning of the Income Tax Act (Canada) and that is either a resident of Canada or is an “authorized foreign bank” as defined in section 2 of the Bank Act (Canada) or is a lender whose activities are not regulated by the Bank Act (Canada).

“Eligible Foreign Account Debtor” means an Account Debtor (i) who is organized under the laws of a country other than Canada or any province or territory thereof, (ii) whose Receivables are denominated and payable only in Dollars or U.S. Dollars in Canada, and (iii) the obligations of which are supported by a letter of credit which letter of credit names the Collateral Agent as beneficiary for the benefit of the Secured Parties or in respect of which the issuer has consented to the assignment to the Collateral Agent of the proceeds thereof.

“Eligible Inventory” means the Inventory of a Canadian Loan Party (other than any Inventory which has been consigned by such Canadian Loan Party) consisting of finished goods:

(a) which is owned solely by such Canadian Loan Party,

(b) with respect to which the Collateral Agent has a valid and perfected first priority Lien,

(d) which is not, in the Administrative Agent’s sole discretion exercised reasonably, obsolete or unmerchantable,

(e) with respect to which (in respect of any Inventory labeled with a brand name or trademark and sold by such Canadian Loan Party pursuant to a trademark owned by a Loan Party or a license granted to a Loan Party) the Collateral Agent would have rights pursuant to this Agreement or any other agreement satisfactory to the Administrative Agent to sell such Inventory in connection with a liquidation thereof, and

No Inventory of a Canadian Loan Party shall be Eligible Inventory if such Inventory consists of (i) goods returned or rejected by customers other than goods that are undamaged or are resalable in the normal course of business, (ii) goods to be returned to suppliers, (iii) goods in transit (other than goods in transit from one location of a Canadian Loan Party to another location of a Canadian Loan Party and Documented Non-Letter of Credit Inventory) or goods located outside of Canada (other than Documented Non-Letter of Credit Inventory) or (iv) goods located, stored, used or held at the premises of a third party unless (A) the Collateral Agent shall have received a Landlord Waiver or Bailee’s Letter or (B) in the case of Inventory located at a leased premises, an Eligibility Reserve in an amount equal to the aggregate of three months gross lease payments or otherwise satisfactory to the Administrative Agent shall have been established with respect thereto. Notwithstanding the foregoing, Eligible Inventory shall at any time be deemed to include Eligible Inventory of a Canadian Loan Party covered by Documentary Letters of Credit in an amount equal to the aggregate undrawn amount of such Documentary Letters of Credit at such time; provided, however, that if the Available Credit shall be less than 25% of the Aggregate Borrowing Limit for 5 consecutive Business Days and until Available Credit shall thereafter be at least 25% of the Aggregate Borrowing Limit for 45 consecutive days, the Administrative Agent may, in its sole discretion and upon not less than 3 Business Days prior written notice to the Borrower, exclude from the calculation of the Borrowing Base any such Inventory which does not satisfy the Documentary Letter of Credit Inventory Conditions.

“Eligible Receivable” means, at any time, any Receivable:

(a) in respect of which the Account Debtor (i) (A) is organized under the laws of Canada or any province or territory thereof and has its principal place of business located in Canada or (B) is an Eligible Foreign Account Debtor and (ii) is not an Affiliate of Group or any of its Subsidiaries,

(c) that arises under a duly authorized Sales Contract for the sale and delivery of goods and services in the ordinary course of any Canadian Loan Party’s business,

(d) that is a legal, valid and binding obligation of the related Account Debtor, enforceable against such Account Debtor in accordance with its terms,

(e) that conforms in all material respects with all Requirements of Law,

(f) that is not the subject of any dispute, offset, holdback, defense, Lien (other than a Customary Permitted Lien) or other claim other than such adjustments in the ordinary course of the applicable Canadian Loan Party’s business as such Canadian Loan Party’s business is conducted on the date hereof (such Receivable to be ineligible to the extent of such dispute, offset, holdback, defense, Lien or claim),

(g) that satisfies all applicable requirements of the applicable Credit and Collection Policy,

(h) that has not been modified, waived or restructured since its creation,

(i) in which a Canadian Loan Party owns good and marketable title, free and clear of any Lien (other than a Customary Permitted Lien and Liens created by the Loan Documents), and that is freely assignable by the Canadian Loan Party (including without any consent of the related Account Debtor),

(k) that constitutes an account as defined in the PPSA, and that is not evidenced by Instruments or Chattel Paper,

(l) that is not a Defaulted Receivable,

(m) [Intentionally Omitted],

(o) which is denominated and payable only in Dollars or U.S. Dollars in Canada,

(p) that represents amounts earned and payable by the Account Debtor that are not subject to the performance of additional services by any Canadian Loan Party,

(q) that has not been rewritten, canceled or rebilled or is not a Receivable that has resulted from a rewritten, canceled or rebilled Receivable,

(r) that, when taken together with all other Eligible Receivables owed by such Account Debtor to the Canadian Loan Parties, does not exceed 20% of the Eligible Receivables of the Canadian Loan Parties at such time (it being understood that only the excess of such Eligible Receivables over such 20% threshold shall be deemed ineligible pursuant to this clause, unless such Eligible Receivable is covered by credit insurance acceptable to the Administrative Agent, in which case that portion of such Eligible Receivable in excess of the deductible for such credit insurance shall not be deemed ineligible pursuant to this clause), and

(s) that is not owed by the government of the United States of America, Canada or any other foreign country or sovereign state, or of any state, province, territory, municipality or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof;

provided, however, that in no event shall any Chargeback qualify as an Eligible Receivable.

“Environmental Laws” means all applicable Requirements of Law, now or hereafter in effect and as amended or supplemented from time to time, relating to pollution or the regulation and protection of human health, safety, the environment or natural resources, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. § 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control Act, as amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. § 7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et seq.); the Environmental Protection Act (Canada); and each of their state, provincial, territorial, municipal and local counterparts or equivalents and any transfer of ownership notification or approval statute, including the Industrial Site Recovery Act (N.J. Stat. Ann. § 13:1K-6 et seq.).

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time.

“ERISA Event” means (a) a reportable event described in Section 4043(b) or 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title IV Plan or a Multiemployer Plan; (b) the withdrawal of the U.S. Borrower, any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of the U.S. Borrower, any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (d) notice of reorganization or insolvency of a Multiemployer Plan; (e) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (f) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to make any required contribution to a Title IV Plan or Multiemployer Plan; (h) the imposition of a lien under Section 412 of the Code or Section 302 of ERISA on Group or any of its Subsidiaries or any ERISA Affiliate; or (i) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA.

“Event of Default” has the meaning specified in Section 9.1.

“Existing Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of January 31, 2006, among the U.S. Borrower, Group, the financial institutions from time to time party thereto as lenders, the financial institutions from time to time party thereto as letter of credit issuers, Citicorp North America, Inc., as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as syndication agent, and BofA, The CIT Group/Commercial Services, Inc., and Wachovia Capital Finance Corporation (Central) f/k/a Congress Financial Corporation (Central), as co-documentation agents, as amended, supplemented or otherwise modified from time to time prior to the date hereof.

“Facility Agents” means, collectively, the Administrative Agent and the Collateral Agent.

“Fair Market Value” means (a) with respect to any asset or group of assets (other than a marketable Security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset (provided that in the case of assets with a net book value in excess of the U.S. Dollar Equivalent of U.S.$5,000,000, the “Fair Market Value” thereof shall be as reasonably determined pursuant to the foregoing criteria by the Board of Directors of Group) or, if such asset shall have been the subject of a relatively contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, the value set forth in such appraisal, and (b) with respect to any marketable Security at any date, the closing sale price of such Security on the Business Day next preceding such date, as appearing in any published list of any national securities exchange or the NASDAQ Stock Market or, if there is no such closing sale price of such Security, the final price for the purchase of such Security at face value quoted on such Business Day by a financial institution of recognized standing regularly dealing in Securities of such type and selected by the Administrative Agent.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any successor thereto.

“Financial Statements” means the financial statements of Group and its Subsidiaries delivered in accordance with Section 4.4 and Section 6.1.

“Fiscal Quarter” means each of the three-month fiscal periods ending on or about March 31, June 30, September 30 and December 31.

“Fiscal Year” means the twelve-month fiscal period ending on or about December 31.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of (a) EBITDA of such Person for such period minus (x) Capital Expenditures of such Person for such period and (y) cash consideration paid during such period by such Person or any of its Subsidiaries in respect of a Permitted Acquisition for such period (but only to the extent such cash consideration is funded from proceeds of Loans, as defined herein or in the U.S. Facility) minus the total income tax liability actually payable by such Person and its Subsidiaries in respect of such period to (b) the Fixed Charges of such Person for such period.

“Foreign Plan” means an employee benefit plan (other than a Canadian Plan) to which any Warnaco Entity or any ERISA Affiliate has any obligation or liability (contingent or otherwise) with respect to employees who are not employed in the United States.

“Foreign Subsidiary” means a Subsidiary of Group incorporated under the laws of a jurisdiction that is not within the United States of America.

“FSCO” means the Financial Services Commission of Ontario and any Person succeeding to the functions thereof and includes the Superintendent under such statute and any other Governmental Authority empowered or created by the Supplemental Pensions Act (Québec) or the Pension Benefits Act (Ontario) or any Governmental Authority of any other Canadian jurisdiction exercising similar functions in respect of any Canadian Plan of the Borrower or any other Canadian Loan Party and any Governmental Authority succeeding to the functions thereof.

“General Intangible” means an “intangible” as defined in the PPSA (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, has the meaning specified in the U.S. Pledge and Security Agreement).

“Global Material Adverse Change” means a material adverse change in any of (a) the business, condition (financial or otherwise), operations, performance or properties of the Loan Parties, taken as a whole, or Group and its Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform their respective obligations under the Loan Documents or (c) the ability of the Administrative Agent, the Collateral Agent or the Lenders to enforce the Loan Documents.

“Global Material Adverse Effect” means an effect that results in or causes, or could reasonably be expected to result in or cause, a Global Material Adverse Change.

“Governmental Authority” means any nation, sovereign or government, any state, province, territory, municipality or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Group” has the meaning specified in the preamble to this Agreement.

“Guarantor” means Group, each Domestic Subsidiary of Group and each Canadian Subsidiary Guarantor.

“Guaranty” means the guarantee, in form and substance reasonably satisfactory to the Administrative Agent, executed by the Canadian Subsidiary Guarantors, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Guaranty Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness of another Person, if the purpose or intent of such Person in incurring the Guaranty Obligation is to provide assurance to the obligee of such Indebtedness that such Indebtedness will be paid or discharged, that any agreement relating thereto will be complied with, or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof, including (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of Indebtedness of another Person and (b) any liability of such Person for Indebtedness of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor or to provide funds for the payment or discharge of such Indebtedness (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss or (v) to supply funds to, or in any other manner invest in, such other Person (including to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under clause (b)(i), (ii), (iii), (iv) or (v) above the primary purpose or intent thereof is to provide assurance that Indebtedness of another Person will be paid or discharged, that any agreement relating thereto will be complied with or that any holder of such Indebtedness will be protected (in whole or in part) against loss in respect thereof. The amount of any Guaranty Obligation shall be equal to the amount of the Indebtedness so guaranteed or otherwise supported.

“IFRS” means the International Financial Reporting Standards set by the International Accounting Standards Board as in effect from time to time.

“Indemnitees” has the meaning specified in Section 11.4.

“Instrument” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Intellectual Property” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Interest Period” means, in the case of any BA Rate Loan, (a) initially, the period commencing on the date such BA Rate Loan is made or on the date of conversion of a Prime Rate Loan to such BA Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its Notice of Borrowing or Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.2 or Section 2.11, and (b) thereafter, if such Loan is continued, in whole or in part, as a BA Rate Loan pursuant to Section 2.11, a period commencing on the last day of the immediately preceding Interest Period therefor and ending one, two, three or six months thereafter, as selected by the Borrower in its Notice of Conversion or Continuation given to the Administrative Agent pursuant to Section 2.11; provided, however, that all of the foregoing provisions relating to Interest Periods in respect of BA Rate Loans are subject to the following:

(iii) the Borrower may not select any Interest Period that ends after the Revolving Loan Maturity Date;

(iv) the Borrower may not select any Interest Period in respect of Loans having an aggregate principal amount of less than $3,000,000; and

(v) there shall be outstanding at any one time no more than five (5) Interest Periods in the aggregate for all Loans.

“Interest Rate Contracts” means all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and interest rate insurance.

“Inventory” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“IRS” means the Internal Revenue Service of the United States or any successor thereto.

“Italian Debt Facility” means the Italian Debt Facility (as defined in Schedule 8.1 (Existing Indebtedness)).

“Letter of Credit” means any letter of credit Issued pursuant to Section 2.4(d).

“Letter of Credit Obligations” means, at any time, the U.S. Dollar Equivalent of the aggregate of all liabilities at such time of the Borrower to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, and includes the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of Credit Undrawn Amounts at such time; in each case, the U.S. Dollar Equivalent of Letter of Credit Obligations denominated in an Alternative Currency (other than U.S. Dollars) shall be determined on each day on which a Borrowing Base Certificate is delivered pursuant to Section 6.12.

“Letter of Credit Reimbursement Agreement” has the meaning specified in Section 2.4(e).

“Letter of Credit Request” has the meaning specified in Section 2.4(c).

“Letter of Credit Sub-Limit” means, at any time, U.S.$20,000,000.

“Letter of Credit Undrawn Amounts” means, at any time, the aggregate undrawn amount of all Letters of Credit outstanding at such time.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, prior claim, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement that has been authorized by the applicable debtor under the UCC or the PPSA or comparable law of any jurisdiction naming the owner of the asset to which such Lien relates as debtor.

“Loan” means any loan made by any Lender pursuant to this Agreement.

“Loan Documents” means, collectively, this Agreement, the Guaranty, the U.S. Loan Party Canadian Facility Guaranty, each Letter of Credit Reimbursement Agreement, the Collateral Documents and each certificate, agreement or document executed by a Loan Party and delivered to any Facility Agent or any Lender in connection with or pursuant to any of the foregoing (it being understood and agreed that as a matter of clarification the U.S. Facility is not a Loan Document).

“Loan Party” means the Borrower, Group, each Subsidiary Guarantor and each other Domestic Subsidiary or Canadian Subsidiary of Group that executes and delivers a Loan Document.

“Material Adverse Change” means a material adverse change in any of (a) the business, condition (financial or otherwise), operations, performance or properties of the Canadian Loan Parties, taken as a whole, or the Loan Parties, taken as a whole, or Group and its Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform their respective obligations under the Loan Documents or (c) the ability of the Administrative Agent, the Collateral Agent or the Lenders to enforce the Loan Documents.

“Material Adverse Effect” means an effect that results in or causes, or could reasonably be expected to result in or cause, a Material Adverse Change.

“Material Owned Real Property” means all fee-owned real property of any Loan Party having a fair market value in excess of U.S.$2,000,000 as of the Closing Date, or if later, the date of acquisition thereof.

“Maximum Credit” means, at any time, (a) the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base at such time, minus (b) the U.S. Dollar Equivalent of the aggregate amount of any Availability Reserve in effect at such time.

“Mortgagee’s Title Insurance Policy” has the meaning specified in the definition of Mortgage Supporting Documents.

“Mortgage Supporting Documents” means, with respect to a Mortgage for a parcel of Material Owned Real Property, each of the following:

(c) an opinion of counsel in each state or province in which any such Mortgage is to be recorded in form and substance and from counsel reasonably satisfactory to the Administrative Agent; and

“Mortgages” means the mortgages, deeds of hypothec, deeds of trust or other real estate security documents made or required herein to be made by a Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent.

“Net Cash Proceeds” means proceeds received by any Canadian Loan Party after the Closing Date in cash or Cash Equivalents from any (a) Asset Sale (other than an Asset Sale permitted under clauses (a), (c) and (h) of Section 8.4) of Receivables or Inventory net of (i) the reasonable cash costs of sale, assignment or other disposition, (ii) taxes paid or payable as a result thereof and (iii) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by a perfected Lien on the assets subject to such Asset Sale; provided, however, that the evidence of each of (i), (ii) and (iii) are provided to the Administrative Agent in form and substance satisfactory to it and, if such Asset Sale includes assets in addition to Receivables and Inventory, only such portion of the amounts in clauses (i), (ii) and (iii) reasonably allocable to Receivables and Inventory sold may be deducted under such clauses (i), (ii) and (iii); or (b) Property Loss Event with respect to Inventory.

“Non-Funding Lender” has the meaning specified in Section 2.2(d).

“Notice of Borrowing” has the meaning specified in Section 2.2(a).

“Notice of Conversion or Continuation” has the meaning specified in Section 2.11(b).

“NPL” means the National Priorities List under CERCLA.

“Orderly Liquidation Value Rate” means (i) with respect to Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit), the U.S. Dollar Equivalent of the orderly liquidation value (net of costs and expenses incurred in connection with liquidation) of such Eligible Inventory, divided by the U.S. Dollar Equivalent of the aggregate value of such Eligible Inventory, in each case, determined by reference to the most recent Appraisal received by the Administrative Agent and (ii) with respect to Eligible Inventory consisting of Documented Non-Letter of Credit Inventory or Inventory covered by Documentary Letters of Credit, the U.S. Dollar Equivalent of the orderly liquidation value (net of costs and expenses incurred in connection with liquidation) of such Eligible Inventory, divided by the U.S. Dollar Equivalent of the aggregate value of such Eligible Inventory, in each case, determined by reference to the most recent Appraisal received by the Administrative Agent. The Orderly Liquidation Value Rate with respect to Eligible Inventory (other than Documented Non-Letter of Credit Inventory and Inventory covered by Documentary Letters of Credit) shall initially be 83.5% and the Orderly Liquidation Value Rate with respect to Eligible Inventory consisting of Documented Non-Letter of Credit Inventory or Inventory covered by Documentary Letters of Credit shall initially be 61.0%.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Permit” means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law.

“Permitted Acquisition” means any Proposed Acquisition subject to the satisfaction of each of the following conditions:

(ii) such Proposed Acquisition shall have been approved by the applicable board of directors of the Person constituting or owning the Proposed Acquisition Target;

(iii) no additional Indebtedness or other liabilities shall be incurred, assumed or otherwise be reflected on a consolidated balance sheet of Group and the Proposed Acquisition Target after giving effect to such Proposed Acquisition, except (i) loans made under the U.S. Facility, (ii) ordinary course trade payables, contingent obligations and accrued expenses and (iii) Indebtedness of the Proposed Acquisition Target (or any such Indebtedness assumed by a Warnaco Entity in connection with such Proposed Acquisition) permitted under Section 8.1;

(iv) both (x) after giving pro forma effect to such Proposed Acquisition and to any Facility Increase (as defined in the U.S. Facility) to be effective on the date of the consummation of such Proposed Acquisition Available Credit is at least 20% of the Aggregate Borrowing Limit at such time and (y) prior to the consummation of such Proposed Acquisition, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of such requirement with respect to such Proposed Acquisition and setting forth in reasonable detail the calculation of such Available Credit;

“Permitted Cash Equivalents” means time deposits of, or certificates of deposit issued by, BofA or BofA Canada Branch that, in each instance, are acceptable to the Administrative Agent.

“Pledged Debt Instruments” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Pledged Stock” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“PPSA” means the Personal Property Security Act (Ontario) (or any successor statute) or similar legislation of any other jurisdiction (including, without limitation, the Civil Code of Quebec), the laws of which are required by such legislation to be applied in connection with the issue, perfection, effect of perfection, enforcement, enforceability, opposability, validity or effect of security interests or other applicable Liens on any assets of a Canadian Loan Party.

“Prime Rate” means the rate of interest publicly announced from time to time by BofA Canada Branch as its reference rate of interest for loans made in Dollars and designated as its “prime” rate. The Prime Rate is a rate set by BofA Canada Branch based upon various factors, including BofA Canada Branch’s costs and desired return, general economic conditions and other factors and is used as a reference point for pricing some loans. Any change in the prime rate announced by BofA Canada Branch shall take effect at the opening of business on the day specified in the public announcement of such change. Each interest rate based on the Prime Rate hereunder shall be adjusted simultaneously with any change in the Prime Rate. In the event that BofA Canada Branch (including any successor or assignor) does not at any time publicly announce a prime rate, the “Prime Rate” shall mean the “prime rate” publicly announced by a Schedule 1 chartered bank in Canada selected by BofA Canada Branch.

“Prime Rate Loan” means any Loan during any period in which it bears interest based on the Prime Rate.

“Property Loss Event” means any loss of or damage to property of any Canadian Loan Party that results in the receipt by such Person of proceeds of insurance in excess of U.S.$2,000,000 or any taking of property of Group or any Subsidiary thereof that results in the receipt by such Person of a compensation payment in respect thereof in excess of U.S.$2,000,000.

“Proposed Acquisition” means the proposed acquisition by the U.S. Borrower or any of its Subsidiaries of all or substantially all of the assets or Stock of any Proposed Acquisition Target, or the merger or amalgamation of any Proposed Acquisition Target with or into the U.S. Borrower or any Subsidiary of the U.S. Borrower (and, in the case of a merger or amalgamation with the Borrower, with the Borrower being the surviving and continuing corporation).

“Ratable Portion” or (other than in the expression “equally and ratably”) “ratably” means, with respect to any Lender, the percentage obtained by dividing (i) the Revolving Credit Commitment of such Lender by (ii) the aggregate Revolving Credit Commitments of all Lenders (or, at any time after the Revolving Credit Termination Date, the percentage obtained by dividing the U.S. Dollar Equivalent of the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to such Lender by the U.S. Dollar Equivalent of the aggregate outstanding principal balance of the Revolving Credit Outstandings owing to all Lenders).

“Register” has the meaning specified in Section 11.2(c).

“Reimbursement Obligations” means all matured reimbursement or repayment obligations of the Borrower to any Issuer with respect to amounts drawn under Letters of Credit.

“Reinvestment Deferred Amount” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the portion of such Net Cash Proceeds subject to a Reinvestment Notice.

“Reinvestment Event” means any Asset Sale or Property Loss Event in respect of which the Borrower has delivered a Reinvestment Notice.

“Reinvestment Notice” means a written notice executed by a Responsible Officer of the Borrower stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through one of the other Canadian Loan Parties) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Property Loss Event to consummate a Permitted Acquisition (in the case of an Asset Sale only) or to acquire replacement or fixed assets useful in its or one of the other Canadian Loan Parties’ businesses or, in the case of a Property Loss Event, to effect repairs or replacements.

“Reinvestment Prepayment Amount” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the Reinvestment Deferred Amount for such Net Cash Proceeds less any amount expended or required to be expended pursuant to a Contractual Obligation entered into prior to the relevant Reinvestment Prepayment Date for such Net Cash Proceeds to consummate, to the extent otherwise permitted hereunder, a Permitted Acquisition (in the case of an Asset Sale only) or to acquire, to the extent otherwise permitted hereunder, replacement or fixed assets useful in the business of the Borrower or any of the other Canadian Loan Parties or, in the case of a Property Loss Event, to effect repairs or replacements.

“Reinvestment Prepayment Date” means, with respect to any Net Cash Proceeds of any Reinvestment Event, the earlier of (a) the date occurring 180 days after such Reinvestment Event and (b) the date that is five Business Days after the date on which the Borrower shall have notified the Administrative Agent of the Borrower’s determination not to consummate a Permitted Acquisition (in the case of an Asset Sale only) or to acquire replacement or fixed assets useful in the Borrower’s or another Canadian Loan Party’s business (or, in the case of a Property Loss Event, not to effect repairs or replacements) with all or any portion of the relevant Reinvestment Deferred Amount for such Net Cash Proceeds.

“Related Security” means, with respect to any Receivable:

(a) all of each Canadian Loan Party’s interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable,

(b) all Instruments and Chattel Paper that may evidence such Receivable,

(c) all other Liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Sales Contract related to such Receivable or otherwise, together with all UCC and PPSA financing statements or similar filings relating thereto, and

(d) all of each Canadian Loan Party’s rights, interests and claims under the Sales Contracts and all guaranties, indemnities and other agreements (including the related Sales Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Sales Contract related to such Receivable or otherwise.

“Requirement of Law” means, with respect to any Person, the common and civil law and all federal, state, provincial, territorial, local, municipal and foreign laws, rules and regulations, orders, judgments, decrees and other legal requirements or determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Requisite Lenders” means, collectively, (a) on and prior to the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the aggregate outstanding amount of the Revolving Credit Commitments and (b) after the Revolving Credit Termination Date, Lenders having more than fifty percent (50%) of the U.S. Dollar Equivalent of the aggregate Revolving Credit Outstandings. A Non-Funding Lender shall not be included in the calculation of “Requisite Lenders”.

“Restricted Account” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Restricted Account Letter” has the meaning specified in the Canadian Security Agreement (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, specified in the U.S. Pledge and Security Agreement).

“Revolving Credit Borrowing” means a borrowing consisting of Revolving Loans made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments.

“Revolving Credit Commitment” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire interests in other Revolving Credit Outstandings in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I (Commitments) under the caption “Revolving Credit Commitment,” as amended to reflect each Assignment and Acceptance executed by such Lender and as such amount may be adjusted pursuant to this Agreement.

“Revolving Credit Facility” means the Revolving Credit Commitments and the provisions herein related to the Revolving Loans, Swing Loans and Letters of Credit.

“Revolving Credit Facility Register” has the meaning specified in Section 11.2(c).

“Revolving Loan” has the meaning specified in Section 2.1.

“Revolving Loan Maturity Date” means the fifth anniversary of the Closing Date.

“Secured Obligations” means, (a) in the case of the Borrower, the Obligations, (b) in the case of each Guarantor, the obligations of such Loan Party under the Guaranty, the U.S. Loan Party Canadian Facility Guaranty and the other Loan Documents to which it is a party, and (c) in the case of each Canadian Loan Party, (i) the obligations of such Canadian Loan Party under any Hedging Contract entered into with any Agent, Lender or any Affiliate of any thereof, and (ii) any Cash Management Obligations owing by such Canadian Loan Party to any Agent, Lender or any Affiliate of any thereof.

“Secured Parties” means the Lenders (including the Swing Loan Lender), the Issuers, the Administrative Agent, the Collateral Agent, each of their respective successors and assigns, and any other holder of any Secured Obligation, including the beneficiaries of each indemnification obligation undertaken by any of the Loan Parties and the Facility Agents.

“Securities Account” has the meaning given to such term in the PPSA (or, if such defined term is used with respect to or otherwise applicable to a U.S. Loan Party, the UCC).

“Senior Note Indenture” means the indenture, dated as of June 12, 2003, among the U.S. Borrower, as issuer, Group and each Domestic Subsidiary thereof (other than the U.S. Borrower), as guarantors, and the Senior Note Indenture Trustee.

“Senior Note Indenture Trustee” means Wells Fargo Bank Minnesota, National Association, in its capacity as indenture trustee for the Senior Noteholders and each successor thereto.

“Senior Noteholders” means each holder of a Senior Note.

“Senior Notes” means the 8-7/8% senior notes due 2013 issued by the U.S. Borrower pursuant to the Senior Note Indenture.

“Special Cash Collateral Account” means an account maintained with BofA or an affiliate or branch thereof for the purpose of providing cash collateral as part of the Borrowing Base, which account shall be subject to a control agreement in form and substance reasonably satisfactory to the Facility Agents and shall be a segregated account holding only cash of the Borrower deposited into such account in accordance with Section 2.19, investments of such cash in Permitted Cash Equivalents and investment income derived from such investments.

“Special Purpose Vehicle” means any special purpose funding vehicle identified in writing as such by any Lender to the Administrative Agent.

“Standby Letter of Credit” means any letter of credit Issued pursuant to Section 2.4 which is not a Documentary Letter of Credit.

“Stock” means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company, unlimited liability company or equivalent entity, whether voting or non-voting.

“Subordinated Indebtedness” means Indebtedness of a U.S. Loan Party that satisfies all of the following requirements: (i) interest on such Indebtedness is not payable in cash prior to the date that is six months after the Revolving Loan Maturity Date, (ii) such Indebtedness does not mature and does not require any scheduled or mandatory prepayments prior to the date that is six months after the Revolving Loan Maturity Date, (iii) such Indebtedness is not secured and is not guaranteed by any Warnaco Entity that is not guaranteeing the Obligations and (iv) such Indebtedness (and any guarantee thereof) is subordinated to the Secured Obligations (as defined in the U.S. Facility) on terms reasonably satisfactory to the Administrative Agent.

“Subsidiary Guarantor” means each Canadian Subsidiary Guarantor and each U.S. Subsidiary Guarantor.

“Swing Loan” has the meaning specified in Section 2.3.

“Swing Loan Availability” means the Dollar Equivalent of an aggregate principal amount at any time outstanding of Swing Loans not to exceed U.S.$3,000,000.

“Swing Loan Lender” means BofA Canada Branch or any other Person who becomes the Administrative Agent (or who is an affiliate or branch thereof) or who agrees with the approval of the Administrative Agent and the Borrower to act as the Swing Loan Lender hereunder.

“Swing Loan Request” has the meaning specified in Section 2.3(b).

“Syndication Agent” has the meaning specified in the preamble to this Agreement.

“Tax Return” has the meaning specified in Section 4.8(a).

“Taxes” has the meaning specified in Section 2.16(a).

“Trigger Amount” means, at any time, (i) prior to the first Anniversary Date, the greater of (x) 10% of the Aggregate Borrowing Base at such time and (y) U.S.$30,000,000, (ii) on or after the first Anniversary Date and prior to the second Anniversary Date, the greater of (x) 12.5% of the Aggregate Borrowing Base at such time and (y) U.S.$35,000,000 and (iii) on or after the second Anniversary Date, the greater of (x) 15% of the Aggregate Borrowing Base at such time and (y) U.S.$40,000,000.

“Trigger Event” means for any reason Available Credit is less than the Trigger Amount at any time.

“UCC” has the meaning specified in the U.S. Pledge and Security Agreement.

“Unused Commitment Fee” has the meaning specified in Section 2.12(a).

“U.S. Borrower” means Warnaco Inc., a Delaware corporation.

“U.S. Dollar Equivalent” of any amount means, at the time of determination thereof, (a) if such amount is expressed in U.S. Dollars, such amount, (b) if such amount is expressed in Dollars or an Alternative Currency (other than U.S. Dollars), the equivalent of such amount in U.S. Dollars determined by using the mid-range rate of exchange quoted by the Wall Street Journal for Dollars or such Alternative Currency, as applicable, under its “Exchange Rates” column on the Business Day preceding the date of determination and (c) if such amount is denominated in any other currency, the equivalent of such amount in U.S. Dollars as determined by the Administrative Agent using any method of determination it reasonably deems appropriate; provided, however, if such amount is expressed in an Alternative Currency (other than U.S. Dollars) and such amount relates to the Issuance of a Letter of Credit by any Issuer, the “U.S. Dollar Equivalent” shall mean the equivalent of such amount in U.S. Dollars as determined by such Issuer using any customary method of determination it reasonably deems appropriate.

“U.S. Dollars” and the sign “U.S.$” each mean the lawful money of the United States of America.

“U.S. Facility” means the Credit Agreement, dated as of the date hereof, among the U.S. Borrower, Group, the lenders and letter of credit issuers party thereto from time to time, BofA, as administrative agent and as collateral agent, and the other agents party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“U.S. Loan Party” means Group, the U.S. Borrower and each other U.S. Subsidiary Guarantor.

“U.S. Loan Party Canadian Facility Guaranty” means the U.S. Loan Party Canadian Facility Guaranty, dated as of the date hereof, by the U.S. Loan Parties with respect to the guarantee of the payment of the Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“U.S. Pledge and Security Agreement” means the Pledge and Security Agreement (as defined in the U.S. Facility).

“U.S. Secured Obligations” means the Secured Obligations (as defined in the U.S. Facility).

“U.S. Subsidiary Guarantor” means the U.S. Borrower and each other Domestic Subsidiary of Group party to or that becomes party to the U.S. Loan Party Canadian Facility Guaranty.

“Warnaco Entity” means Group or any Subsidiary thereof.

“Withdrawal Liability” means, with respect to the U.S. Borrower at any time, the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA.

Section 1.3 Accounting Terms and Principles.

(b) If any change in the accounting principles used in the preparation of the most recent Financial Statements referred to in Section 6.1 is hereafter required or permitted by the rules, regulations, pronouncements and opinions of the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or the International Accounting Standards Board, in the case of the IFRS) (or any successors thereto) and such change is adopted by the U.S. Borrower or Group with the agreement of its independent public accountants and results in a change in any of the calculations required by Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition”, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such change with the desired result that the criteria for evaluating compliance with such covenants by Group and the Borrower or the determination of the “Applicable Margin” or the calculation of the Fixed Charge Coverage Ratio in the definition of “Permitted Acquisition” shall be the same after such change as if such change had not been made; provided, however, that no change in Agreement Accounting Principles that would affect a calculation that measures compliance with any covenant contained in Article V, Article VI or Article VIII or in the definition of “Applicable Margin” or “Permitted Acquisition” shall be given effect until such provisions are amended to reflect such changes in Agreement Accounting Principles.

Section 1.4 Conversion of Foreign Currencies.

(a) Financial Covenant Debt. Financial Covenant Debt denominated in any currency other than U.S. Dollars shall be calculated using the U.S. Dollar Equivalent thereof as of the date of the Financial Statements on which such Financial Covenant Debt is reflected.

(b) U.S. Dollar Equivalents. The Administrative Agent shall determine the U.S. Dollar Equivalent of any amount as required hereby, and a determination thereof by the Administrative Agent shall be conclusive absent manifest error. The Administrative Agent may, but shall not be obligated to, rely on any determination made by any Loan Party in any document delivered to the Administrative Agent. The Administrative Agent may determine or redetermine the U.S. Dollar Equivalent of any amount on any date either in its own discretion or upon the request of any applicable Lender or Issuer.

(c) Rounding-Off. The Administrative Agent may set up appropriate rounding off mechanisms or otherwise round-off amounts hereunder to the nearest higher or lower amount in whole Dollar or U.S. Dollar, as applicable, or cent to ensure amounts owing by any party hereunder or that otherwise need to be calculated or converted hereunder are expressed in whole Dollars or U.S. Dollars, as applicable, or in whole cents, as may be necessary or appropriate.

(d) Judgment Currency. If for the purpose of obtaining judgment in any court it is necessary to convert an amount due hereunder in the currency in which it is due (the “Original Currency”) into another currency (the “Second Currency”), the rate of exchange applied shall be that at which, in accordance with normal banking procedures, the Administrative Agent could purchase in the New York foreign exchange market, the Original Currency with the Second Currency on the date two (2) Business Days preceding that on which judgment is given. Each of Group and the Borrower agrees that its obligation in respect of any Original Currency due from it hereunder shall, notwithstanding any judgment or payment in such other currency, be discharged only to the extent that, on the Business Day following the date the Administrative Agent receives payment of any sum so adjudged to be due hereunder in the Second Currency, the Administrative Agent may, in accordance with normal banking procedures, purchase, in the New York foreign exchange market, the Original Currency with the amount of the Second Currency so paid; and if the amount of the Original Currency so purchased or could have been so purchased is less than the amount originally due in the Original Currency, each of Group and the Borrower agrees as a separate obligation and notwithstanding any such payment or judgment to indemnify the Administrative Agent and the applicable Secured Parties against such loss. The term “rate of exchange” in this Section 1.4(d) means the spot rate at which the Administrative Agent, in accordance with normal practices, is able on the relevant date to purchase the Original Currency with the Second Currency, and includes any premium and costs of exchange payable in connection with such purchase.

Section 1.5 Certain Terms.

(d) References in this Agreement to any statute shall be to such statute as amended or modified and in effect at the time any such reference is operative.

(e) The term “including” when used in any Loan Document means “including without limitation”, except when used in the computation of time periods.

(f) The terms “Lender,” “Issuer” and “Agent” include their respective successors.

(g) Upon the appointment of any successor Facility Agent pursuant to Section 10.6, references to BofA or BofA Canada Branch in Section 10.3 to the extent applicable to such Facility Agent and to BofA or BofA Canada Branch in the definitions of Prime Rate, BA Rate, U.S. Dollar Equivalent, Permitted Cash Equivalents and Special Cash Collateral Account to the extent applicable to such Facility Agent shall be deemed to refer to the financial institution then acting as such Facility Agent or one of its Affiliates or branches if it so designates.

(h) Terms not otherwise defined herein and defined in the PPSA (the UCC if such term is used with respect to or otherwise applicable to a U.S. Loan Party) are used herein with the meanings specified in the PPSA (or the UCC as aforesaid).

(i) For purposes of any Collateral located in the Province of Quebec or charged by any deed of hypothec (or any other Loan Document) and for all other purposes pursuant to which the interpretation or construction of a Loan Document may be subject to the laws of the Province of Quebec or a court or tribunal exercising jurisdiction in the Province of Quebec, (i) “personal property” shall be deemed to include “movable property”, (ii) “real property” shall be deemed to include “immovable property” and an “easement” shall be deemed to include a “servitude”, (iii) “tangible property” shall be deemed to include “corporeal property”, (iv) “intangible property” shall be deemed to include “incorporeal property”, (v) “security interest” and “mortgage” shall be deemed to include a “hypothec”, (vi) all references to filing, registering or recording under the PPSA or UCC shall be deemed to include publication under the Civil Code of Quebec, and all references to releasing any Lien shall be deemed to include a release, discharge and mainlevee of a hypothec, (vii) all references to “perfection” of or “perfected” Liens shall be deemed to include a reference to the “opposability” of such Liens to third parties, (viii) any “right of offset”, “right of setoff” or similar expression shall be deemed to include a “right of compensation”, (ix) “goods” shall be deemed to include “corporeal movable property” other than chattel paper, documents of title, instruments, money and securities, and (x) an “agent” shall be deemed to include a “mandatary”.

ARTICLE II

THE REVOLVING CREDIT FACILITY

Section 2.1 The Commitments. On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make loans in Dollars (each a “Revolving Loan”) to the Borrower from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date in an aggregate principal amount not to exceed at any time outstanding for all such loans by such Lender such Lender’s Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Loan (i) in excess of such Lender’s Ratable Portion of the Available Canadian Credit or (ii) to the extent that the aggregate Revolving Credit Outstandings, after giving effect to such Revolving Loan, would exceed the Maximum Credit in effect at such time. Within the limits of the Revolving Credit Commitment of each Lender, amounts of Revolving Loans repaid may be reborrowed under this Section 2.1.

Section 2.2 Borrowing Procedures.

(a) Each Borrowing shall be made on notice given by the Borrower to the Administrative Agent not later than 11:00 a.m. (New York City time) (i) one Business Day, in the case of a Borrowing of Prime Rate Loans and (ii) three (3) Business Days, in the case of a Borrowing of BA Rate Loans, prior to the date of the proposed Borrowing. Each such notice shall be in writing in substantially the form of Exhibit B (a “Notice of Borrowing”), specifying (A) the date of such proposed Borrowing, (B) the aggregate amount of such proposed Borrowing, (C) whether any portion of such Borrowing will be of Prime Rate Loans or BA Rate Loans, (D) the initial Interest Period or Periods for any such BA Rate Loans, and (E) the Available Canadian Credit (after giving effect to the proposed Borrowing). Revolving Loans shall be made as Prime Rate Loans unless (subject to Section 2.14) the Notice of Borrowing specifies that all or a portion thereof shall be BA Rate Loans. Each Revolving Credit Borrowing shall be in an aggregate amount of not less than $1,000,000 or an integral multiple of $250,000 in excess thereof.

(b) The Administrative Agent shall give to each Lender prompt notice of the Administrative Agent’s receipt of a Notice of Borrowing and, if BA Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate determined pursuant to Section 2.14(a). Each Lender shall, before 11:00 a.m. (New York City time) on the date of the proposed Borrowing, make available to the Administrative Agent at its address referred to in Section 11.8 in immediately available funds, such Lender’s Ratable Portion of such proposed Borrowing. After the Administrative Agent’s receipt of such funds and (i) on the Closing Date, upon fulfillment of the applicable conditions set forth in Section 3.1 and (ii) at any time (including the Closing Date), upon fulfillment of the applicable conditions set forth Section 3.2, the Administrative Agent will make such funds available to the Borrower.

(c) Unless the Administrative Agent shall have received notice from any Lender prior to the date of any proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender’s Ratable Portion of such Borrowing, the Administrative Agent may assume that such Lender has made such Ratable Portion available to the Administrative Agent on the date of such Borrowing in accordance with this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Prime Rate for the first Business Day and thereafter at the interest rate applicable at the time to the Loans comprising such Borrowing. If such Lender shall repay to the Administrative Agent such corresponding amount, such corresponding amount so repaid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement. If the Borrower shall repay to the Administrative Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have hereunder to the Borrower.

Section 2.3 Swing Loans.

(a) On the terms and subject to the conditions contained in this Agreement, the Swing Loan Lender may in its sole discretion make loans in Dollars (each a “Swing Loan”) otherwise available to the Borrower under the Revolving Credit Facility from time to time on any Business Day during the period from the Closing Date until the Revolving Credit Termination Date in an aggregate amount at any time outstanding at any time not to exceed the Swing Loan Availability; provided, however, that the Swing Loan Lender shall not make any Swing Loan to the extent that, after giving effect to such Swing Loan, the aggregate Revolving Credit Outstandings would exceed the Maximum Credit. The Swing Loan Lender shall be entitled to rely on the most recent Borrowing Base Certificate delivered to the Administrative Agent. Each Swing Loan shall be a Prime Rate Loan and must be repaid in full within one Business Day of any demand by the Swing Loan Lender therefor and shall in any event mature and become due and payable on the Revolving Credit Termination Date. Within the limits set forth in the first sentence of this Section 2.3(a), amounts of Swing Loans prepaid or repaid may be reborrowed under this Section 2.3(a).

(f) Upon the occurrence of a Default under Section 9.1(e), each Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Loan otherwise required to be repaid by such Lender pursuant to clause (e) above, which participation shall be in a principal amount equal to such Lender’s Ratable Portion of such Swing Loan, by paying to the Swing Loan Lender on the date on which such Lender would otherwise have been required to make a payment in respect of such Swing Loan pursuant to clause (e) above, in immediately available funds, an amount equal to such Lender’s Ratable Portion of such Swing Loan. If all or part of such amount is not in fact made available by such Lender to the Swing Loan Lender on such date, the Swing Loan Lender shall be entitled to recover any such unpaid amount on demand from such Lender together with interest accrued from such date at the Prime Rate for the first Business Day after such payment was due and thereafter at the rate of interest then applicable to Prime Rate Loans.

Section 2.4 Letters of Credit.

(iii) after giving effect to the issuance of such Letter of Credit, the aggregate Revolving Credit Outstandings would exceed the Maximum Credit at such time;

(iv) after giving effect to the issuance of such Letter of Credit, the aggregate amount of Letter of Credit Obligations then outstanding would exceed the Letter of Credit Sublimit;

(v) any fees due and payable in connection with a requested issuance have not been paid; or

(vi) such Letter of Credit is not denominated in Dollars or in an Alternative Currency.

None of the Lenders (other than the Issuers in their capacity as such) shall have any obligation to Issue any Letter of Credit.

(c) In connection with the issuance of each Letter of Credit, the Borrower shall give the relevant Issuer and the Administrative Agent at least two Business Days’ (or such shorter period as may be agreed by such Issuer) prior written notice, in substantially the form of Exhibit D (or in such other written or electronic form as is acceptable to the Issuer), of the requested issuance of such Letter of Credit (a “Letter of Credit Request”). Such notice shall be irrevocable and shall (i) specify (A) the Issuer of such Letter of Credit, the stated amount of the Letter of Credit requested, which stated amount (or, if such Letter of Credit is to be denominated in Dollars or an Alternative Currency (other than U.S. Dollars), the U.S. Dollar Equivalent of such stated amount) shall not be less than U.S.$5,000 (or such lesser amount as may be agreed to by such Issuer), (B) the date of issuance of such requested Letter of Credit (which day shall be a Business Day), (C) the date on which such Letter of Credit is to expire (which date shall be a Business Day), and (D) the Person for whose benefit the requested Letter of Credit is to be Issued and (ii) certify that, after issuance of the requested Letter of Credit, (A) the aggregate amount of the Letter of Credit Obligations then outstanding will not exceed the Letter of Credit Sub-Limit and (B) the sum of the aggregate principal or undrawn amount of the then-outstanding (I) Letter of Credit Obligations, (II) Revolving Loans and (III) Swing Loans, will not exceed the Maximum Credit then in effect. Such notice, to be effective, must be received by the relevant Issuer and the Administrative Agent not later than 11:00 a.m. (New York City time) on the second (2^nd) Business Day (or such shorter period as agreed by the relevant Issuer) prior to the requested issuance of such Letter of Credit.

(f) Each Issuer shall:

Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuer the amount of such Lender’s Ratable Portion of such payment in Dollars (or, if such payment was made in an Alternative Currency, an amount in Dollars equal to the Dollar equivalent thereof as determined by the Administrative Agent in accordance with its normal banking procedures) and in immediately available funds. If the Administrative Agent so notifies such Lender prior to 11:00 a.m. (New York City time) on any Business Day, such Lender shall make available to the Administrative Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds. Upon such payment by a Lender, such Lender shall notwithstanding whether or not the conditions precedent set forth in Section 3.2 shall have been satisfied (which conditions precedent the Lenders hereby irrevocably waive) be deemed to have made a Revolving Loan to the Borrower in the principal amount of such payment. Whenever any Issuer receives from the Borrower a payment of a Reimbursement Obligation as to which the Administrative Agent has received for the account of such Issuer any payment from a Lender pursuant to this clause (h), such Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Lender, in immediately available funds, an amount equal to such Lender’s Ratable Portion of the amount of such payment adjusted, if necessary, to reflect the respective amounts the Lenders have paid in respect of such Reimbursement Obligation.

(i) If and to the extent such Lender shall not have so made its Ratable Portion of the amount of the payment required by clause (h) above available to the Administrative Agent for the account of such Issuer, such Lender agrees to pay to the Administrative Agent for the account of such Issuer forthwith on demand any such unpaid amount together with interest thereon, for the first Business Day after payment was first due at the Prime Rate and, thereafter, until such amount is repaid to the Administrative Agent for the account of such Issuer, at a rate per annum equal to the rate applicable to Prime Rate Loans under the Revolving Credit Facility. The failure of any Lender to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent for the account of such Issuer its Ratable Portion of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent for the account of the Issuer such other Lender’s Ratable Portion of any such payment.

(i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein;

(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document;

(v) payment by the Issuer under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; and

(k) Letters of Credit may be Issued in favor of a beneficiary that is a creditor of a Subsidiary of Group provided that the account party with respect to such Letter of Credit is the Borrower.

(l) The amount of Revolving Credit Commitments utilized by Letters of Credit denominated in an Alternative Currency (other than U.S. Dollars) shall be measured by a determination by the applicable Issuer of the U.S. Dollar Equivalent of such Letters of Credit on each day on which a Borrowing Base Certificate is delivered. The applicable Issuers shall notify the Administrative Agent and the Borrower of the aggregate U.S. Dollar Equivalent of such utilization in respect of the Letters of Credit Issued by it.

Section 2.5 Reduction and Termination of the Commitments. The Borrower may, upon at least five Business Days’ prior notice to the Administrative Agent, terminate in whole or reduce in part ratably the unused portions of the respective Revolving Credit Commitments of the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof and, in the case of any reduction of the Revolving Credit Commitments, the requirements of Section 2.9(e) shall have been satisfied. The Borrower acknowledges and agrees that the Revolving Credit Commitments shall terminate in their entirety concurrently with the termination in their entirety of the Revolving Credit Commitments under and as defined in the U.S. Facility.

Section 2.7 Evidence of Debt.

(b) The Administrative Agent shall establish and maintain a Register pursuant to Section 11.2(c) and accounts therein in accordance with its usual practice in which it will record (i) the amount of each applicable Loan made and, if a BA Rate Loan, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable by the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof, if applicable.

Section 2.8 Optional Prepayments. The Borrower may prepay the outstanding principal amount of the Revolving Loans and Swing Loans in whole or in part at any time; provided, however, that if any prepayment of any BA Rate Loan is made by the Borrower other than on the last day of an Interest Period for such Loan, the Borrower shall also pay any amount owing pursuant to Section 2.14(e).

Section 2.9 Mandatory Prepayments.

(a) [Intentionally Omitted].

(b) Subject to clause (c) below, upon receipt by any Canadian Loan Party of Net Cash Proceeds (but only if at the time of such receipt the Available Credit is less than 25% of the Aggregate Borrowing Limit at such time), the Borrower shall within one Business Day after such receipt prepay the Loans (or provide cash collateral in respect of Letters of Credit as set forth in clause (d) below) in an amount equal to 100% of such Net Cash Proceeds as set forth in clause (d) below.

(c) Notwithstanding clause (b) above, as long as no Event of Default shall have occurred or be continuing on the date Net Cash Proceeds are received by any Canadian Loan Party, the Borrower shall not be required to so apply an amount equal to Net Cash Proceeds arising from a Reinvestment Event to the extent that all Net Cash Proceeds from all Reinvestment Events do not exceed $5,000,000 (in the aggregate since the Closing Date) and are actually used (or have been contractually committed to be used) to consummate a Permitted Acquisition or to purchase replacement or fixed assets (in the case of an Asset Sale) or repair or replace (in the case of a Property Loss Event) the sold, damaged or taken property within 180 days of the receipt of such Net Cash Proceeds by a Canadian Loan Party and, pending application of such proceeds, the Borrower has either (i) paid an amount equal to such Net Cash Proceeds to the Administrative Agent to be held by the Administrative Agent in a Cash Collateral Account designated by the Administrative Agent or (ii) applied an amount equal to such Net Cash Proceeds in repayment of the Revolving Loans and the Administrative Agent shall have established an Availability Reserve in the amount of such repayment, which reserve shall abate on the Reinvestment Prepayment Date applicable to such Net Cash Proceeds or earlier to the extent that Revolving Loans up to the amount of such Net Cash Proceeds are used as set forth in the Reinvestment Notice with respect thereto; provided, however, that to the extent any asset subject to such Asset Sale or Property Loss Event constituted Collateral, any replacement, fixed or alternative assets acquired with Net Cash Proceeds shall, upon acquisition thereof by a Canadian Loan Party, be subject to a perfected Lien in favor of the Collateral Agent, for the benefit of the Secured Parties, in each case, having the priority described in Section 4.20 of this Agreement and the Collateral Documents (but, in the case of a Permitted Acquisition, only to the extent required by clause (v) of the definition thereof); provided further, however, in the event an Event of Default has occurred and is continuing after the provisions in this clause (c) become operative, the Administrative Agent may, or shall at the direction of the Requisite Lenders, apply all amounts in the Cash Collateral Account referred to above to the Obligations.

(e) If at any time the aggregate principal amount of Revolving Credit Outstandings exceed the Maximum Credit at such time (other than as a result of fluctuations in currency exchange rates of the Dollar against the U.S. Dollar to the extent the last two sentences of this Section 2.9(e) shall be applicable), the Borrower shall, as soon as possible, but in any event within one Business Day, prepay first the Swing Loans and then the Revolving Loans then outstanding in an amount equal to such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and the Revolving Loans, the Borrower shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Section 9.3 to the extent required to eliminate such excess. If at any time following one or more fluctuations in the exchange rate of the Dollar against the U.S. Dollar, (a) the U.S. Dollar Equivalent of the aggregate principal amount of Revolving Credit Outstandings exceeds the Revolving Credit Commitments, (b) the U.S. Dollar Equivalent of the aggregate principal amount of Swing Loans exceeds the Swing Loan Availability, (c) the U.S. Dollar Equivalent of the Letter of Credit Obligations outstanding exceed the Letter of Credit Sub-Limit, (d) the U.S. Dollar Equivalent of any component of the Borrowing Base exceeds any limit based on U.S. Dollars or (e) the U.S. Dollar Equivalent of any other Obligations exceeds any other limit based on U.S. Dollars set forth herein for such Obligations, the Borrower shall, as soon as possible, but in any event within seven Business Days, prepay first the Swing Loans and then the Revolving Loans then outstanding in an amount equal to such excess. If any such excess remains after repayment in full of the aggregate outstanding Swing Loans and the Revolving Loans, the Borrower shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Section 9.3 to the extent required to eliminate such excess.

Section 2.10 Interest.

(i) if a Prime Rate Loan or such other Obligation, at a rate per annum equal to the sum of (A) the Prime Rate as in effect from time to time and (B) the Applicable Margin for such Loans; and

(ii) if a BA Rate Loan, at a rate per annum equal to the sum of (A) the BA Rate determined for the applicable Interest Period and (B) the Applicable Margin in effect from time to time during such Interest Period.

(b) Interest Payments. Interest accrued:

(i) on each Prime Rate Loan shall be payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the making of such Prime Rate Loan and (B) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such Prime Rate Loan;

(iii) on each BA Rate Loan shall be payable in arrears (A) on the last day of each Interest Period applicable to such Loan and if such Interest Period has a duration of more than three months, on each day during such Interest Period which occurs every three months from the first day of such Interest Period, (B) upon the payment or prepayment thereof in full or in part, and (C) if not previously paid in full, at maturity (whether by acceleration or otherwise) of such BA Rate Loan; and

(iv) on the amount of all other Obligations shall be payable on demand after the time such Obligation becomes due and payable (whether by acceleration or otherwise).

(d) Interest Act (Canada). As regards the Borrower and any other Canadian Loan Party, for the purposes of the Interest Act (Canada), (i) whenever any interest or fees under this Agreement or any other Loan Document is calculated using a rate based on a year of 360 days, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the applicable rate, (y) multiplied by the actual number of days in the calendar year in which the period for which such interest is payable (or compounded) ends, and (z) divided by 360, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.

Section 2.11 Conversion/Continuation Option.

(a) The Borrower may elect (i) on any Business Day to convert Prime Rate Loans (other than Swing Loans) or any portion thereof to BA Rate Loans, or (ii) at the end of any applicable Interest Period, to convert BA Rate Loans or any portion thereof into Prime Rate Loans or to continue such BA Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate amount of the BA Rate Loans for each Interest Period must be in the amount of $3,000,000 or an integral multiple of $1,000,000 in excess thereof. Each conversion or continuation shall be allocated among the Loans of each Lender in accordance with such Lender’s Ratable Portion.

(b) Each such election shall be in substantially the form of Exhibit F hereto (a “Notice of Conversion or Continuation”) and shall be made by giving the Administrative Agent at least three (3) Business Days’ prior written notice specifying (i) the amount and type of Loan being converted or continued, (ii) in the case of a conversion to or a continuation of BA Rate Loans, the applicable Interest Period, and (iii) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from BA Rate Loans, shall also be the last day of the applicable Interest Period). The Administrative Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the options selected therein.

(c) Notwithstanding the foregoing, no conversion in whole or in part of Prime Rate Loans to BA Rate Loans, and no continuation in whole or in part of BA Rate Loans upon the expiration of any applicable Interest Period, shall be permitted at any time at which (A) a Default or an Event of Default shall have occurred and be continuing or (B) the continuation of, or conversion into, would violate any of the provisions of Section 2.14.

(d) If, within the time period required under the terms of this Section 2.11, the Administrative Agent does not receive a Notice of Conversion or Continuation from the Borrower containing a permitted election to continue any Loan that is a BA Rate Loan for an additional Interest Period or to convert any such Loan, then, upon the expiration of the applicable Interest Period, such Loan will be automatically converted to a Prime Rate Loan.

(e) Each Notice of Conversion or Continuation shall be irrevocable.

Section 2.12 Fees.

(a) Unused Commitment Fee. The Borrower agrees to pay to each Lender a commitment fee (the “Unused Commitment Fee”) on the average amount by which the Revolving Credit Commitment of such Lender exceeds such Lender’s Ratable Portion of the U.S. Dollar Equivalent of the Revolving Credit Outstandings (excluding the U.S. Dollar Equivalent of the amount of any outstanding Swing Loans) from the Closing Date until the Revolving Credit Termination Date at the Applicable Unused Commitment Fee Rate, payable in arrears on the first Business Day of each calendar quarter, commencing on the first such day following the Closing Date, and on the Revolving Credit Termination Date.

(b) Letter of Credit Fees. The Borrower agrees to pay the following amounts with respect to Letters of Credit Issued by any Issuer:

(ii) to the Administrative Agent for the ratable benefit of the Lenders, with respect to each Letter of Credit, a fee accruing at a rate per annum equal to the Applicable Margin for Revolving Loans that are BA Rate Loans of the maximum amount available from time to time to be drawn under such Letter of Credit, payable in arrears (A) on the first Business Day of each calendar quarter, commencing on the first such day following the issuance of such Letter of Credit, and (B) on the Revolving Credit Termination Date; provided, however, that during the continuance of an Event of Default, such fee shall be increased by two percent per annum and shall be payable on demand; and

Section 2.13 Payments and Computations.

(a) The Borrower shall make each payment hereunder (including fees and expenses) not later than 11:00 a.m. (New York City time) on the day when due, in Dollars, to the Administrative Agent at its address referred to in Section 11.8 in immediately available funds without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed immediately available funds relating to the payment of principal or interest or fees (to the extent payable to the Lenders) to the Lenders, in accordance with the application of payments set forth in clauses (g) and (h) of this Section 2.13, as applicable, for the account of their respective Domestic Lending Offices; provided, however, that amounts payable pursuant to Section 2.14(c), Section 2.14(e), Section 2.15 or Section 2.16 shall be paid only to the affected Lender or Lenders and amounts payable with respect to Swing Loans shall be paid only to the Swing Loan Lender. Payments received by the Administrative Agent after 11:00 a.m. (New York City time) shall be deemed to be received on the next succeeding Business Day.

(b) All computations of interest and of fees shall be made by the Administrative Agent on the basis of a year of 365/366 days (360 days in the case of fees), in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination by the Administrative Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

(e) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any BA Rate Loan to be made in the next calendar month, such payment shall be made on the immediately preceding Business Day. All repayments of any Revolving Loans shall be applied first to repay such Loans outstanding as Prime Rate Loans and then to repay such Loans outstanding as BA Rate Loans with those BA Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods.

(f) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each relevant Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have made such payment in full to the Administrative Agent, each relevant Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon at the Prime Rate, for the first Business Day, and, thereafter, at the rate applicable to Prime Rate Loans, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent.

second, to pay interest on and then principal of any Swing Loan;

third, to pay Secured Obligations in respect of any expense reimbursements (including indemnities) or Cash Management Obligations then due to the Facility Agents;

fourth, to pay Secured Obligations in respect of any expense reimbursements (including indemnities) then due to the Lenders and the Issuers;

fifth, to pay Secured Obligations in respect of any fees then due to the Facility Agents, the Lenders and the Issuers;

sixth, to pay interest then due and payable in respect of the Loans and Reimbursement Obligations;

ninth, to the ratable (based on the proportional amounts thereof) payment of all other Secured Obligations; and

tenth, as directed by the Borrower;

provided, however, that if sufficient funds are not available to fund all payments to be made in respect of any of the Obligations described in any of the foregoing clauses first through ninth, the available funds being applied with respect to any such Obligation (unless otherwise specified in such clause) shall be allocated to the payment of such Obligations ratably, based on the proportion of the applicable Agent’s and each applicable Lender’s or Issuer’s interest in the aggregate outstanding Obligations described in such clause; and provided, however, that payments that would otherwise be allocated to the Lenders shall be allocated first to repay Protective Advances and Swing Loans pro rata and then to the Lenders. The order of priority set forth in clauses first through ninth of this Section 2.13(h) may at any time and from time to time be changed by the agreement of the Requisite Lenders and each adversely affected Lender without necessity of notice to or consent of or approval by the Borrower, any Secured Party that is not a Lender or an Issuer, or any other Person. The order of priority set forth in clauses first through fifth of this Section 2.13(h) may be changed only with the prior written consent of the Administrative Agent in addition to the Requisite Lenders.

Section 2.14 Special Provisions Governing BA Rate Loans.

(a) Determination of Interest Rate. The BA Rate for each Interest Period for BA Rate Loans shall be determined by the Administrative Agent as set forth in the definition of “BA Rate.”

(b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that: (i) the Administrative Agent determines that adequate and fair means do not exist for ascertaining the applicable interest rates by reference to which the BA Rate then being determined is to be fixed; or (ii) the Requisite Lenders notify the Administrative Agent that the BA Rate for any Loans for any Interest Period will not adequately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon each BA Rate Loan will automatically, on the last day of the current Interest Period for such Loan, convert into a Prime Rate Loan and the obligations of the Lenders to make BA Rate Loans or to convert Prime Rate Loans into BA Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower that the Administrative Agent (in the case of clause (i) above) or the Requisite Lenders (in the case of clause (ii) above) has or have determined that the circumstances causing such suspension no longer exist.

(c) Increased Costs. If at any time any Lender shall determine that due to the introduction of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order (other than any change by way of imposition or increase of reserve requirements included in determining the BA Rate or with respect to taxes (payment with respect to which shall be governed by Section 2.16)) or the compliance by such Lender with any guideline, request or directive from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any BA Rate Loans, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error.

(d) Illegality. Notwithstanding any other provision of this Agreement, if any Lender determines that the introduction of or any change in or in the interpretation of any law, treaty or governmental rule, regulation or order after the date of this Agreement shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to make BA Rate Loans or to continue to fund or maintain BA Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (i) the obligation of such Lender to make or to continue BA Rate Loans and to convert Prime Rate Loans into BA Rate Loans shall be suspended, and each such Lender shall make a Prime Rate Loan as part of any requested Borrowing of BA Rate Loans and (ii) if the affected BA Rate Loans are then outstanding, the Borrower shall immediately convert each such Loan into a Prime Rate Loan. If at any time after a Lender gives notice under this Section 2.14(d) such Lender determines that it may lawfully make BA Rate Loans, such Lender shall promptly give notice of that determination to the Borrower and the Administrative Agent, and the Administrative Agent shall promptly transmit the notice to each other Lender. The Borrower’s right to request, and such Lender’s obligation, if any, to make BA Rate Loans shall thereupon be restored.

(e) Breakage Costs. In addition to all amounts required to be paid by the Borrower pursuant to Section 2.10, the Borrower shall compensate each Lender, upon demand (with a copy of such demand to the Administrative Agent), for all losses, expenses and liabilities (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Lender’s BA Rate Loans to the Borrower but excluding any loss of the Applicable Margin on the relevant Loans) which such Lender may sustain (i) if for any reason a proposed Borrowing, conversion into or continuation of BA Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion or Continuation given by the Borrower or in a telephonic request by it for borrowing or conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.11, (ii) if for any reason any BA Rate Loan is prepaid (including mandatorily pursuant to Section 2.9) on a date which is not the last day of the applicable Interest Period, (iii) as a consequence of a required conversion of a BA Rate Loan to a Prime Rate Loan as a result of any of the events indicated in Section 2.14(d), or (iv) as a consequence of any failure by the Borrower to repay BA Rate Loans when required by the terms hereof. The Lender making demand for such compensation shall deliver to the Borrower and the Administrative Agent concurrently with such demand a written statement as to such losses, expenses and liabilities, and this statement shall be conclusive as to the amount of compensation due to that Lender, absent manifest error.

Section 2.16 Taxes.

(a) Except as otherwise provided in this Section 2.16, any and all payments by any Loan Party under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) in the case of each Lender, each Issuer and each Agent (A) taxes imposed on or measured by its net income or net profits and franchise taxes imposed on such Person by an applicable Governmental Authority, and similar taxes imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, such Issuer or such Agent (as the case may be) is organized, in which its principal office is located, or in which it is otherwise doing business, or, in the case of any Lender, in which its Domestic Lending Office is located, (B) any branch profits taxes imposed by an applicable Governmental Authority or any similar tax imposed by any jurisdiction in which any Loan Party is located, (C) any withholding taxes payable with respect to payments under the Loan Documents under laws (including any statute, treaty or regulation) in effect on the Closing Date (or, in the case of (w) an Eligible Assignee which became a party to this Agreement after the Closing Date, the date of the Assignment and Acceptance pursuant to which such Eligible Assignee became a party to this Agreement, (x) a successor Agent, the date of the appointment of such Agent, (y) a successor Issuer, the date such Issuer becomes an Issuer and (z) the designation of a new Domestic Lending Office) applicable to such Lender, such Issuer or such Agent, as the case may be, but not excluding any withholding taxes payable as a result of any change in such laws occurring after the Closing Date (or the date of such Assignment and Acceptance or the date of such appointment of such Agent or the date such Issuer becomes an Issuer, as appropriate) and (D) all liabilities, penalties and interest with respect to any of the foregoing, (ii) in the case of each Agent, each Lender and each Issuer, taxes imposed on or measured by its net income or net profits, franchise and similar taxes imposed on it as a result of a present or former connection between such Agent, such Lender or such Issuer (as the case may be) and the jurisdiction of the Governmental Authority imposing such tax or taxing authority thereof or therein and (iii) in the case of each Agent, each Lender and each Issuer, taxes imposed as a result of the gross negligence or willful misconduct of such Agent, such Lender or such Issuer (as the case may be) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). Except as otherwise provided in this Section 2.16, if any Taxes shall be required by law to be deducted from or in respect of any sum payable under any Loan Document to any Lender, any Issuer or any Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Lender, such Issuer or such Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable Loan Party shall make such deductions, (iii) the Loan Parties shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) within 30 days after payment, the Loan Parties shall deliver to the Administrative Agent evidence of such payment.

(b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies imposed by any Governmental Authority (but not taxes the payment of which is governed by clause (a) above), and all liabilities with respect thereto, which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, “Other Taxes”).

(f) [Intentionally Omitted].

(g) [Intentionally Omitted].

(h) Any Lender or Issuer claiming any additional amounts payable pursuant to this Section 2.16 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Domestic Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which would be payable or may thereafter accrue and would not, in the sole determination of such Lender or Issuer, be otherwise disadvantageous to such Lender or Issuer.

(i) If any Lender or any Issuer changes its residence, place of business or Domestic Lending Office or takes any other similar action, and the effect of such change or action, as of the date thereof, would be to increase the additional amounts that the Loan Parties are obligated to pay under this Section 2.16, the Loan Parties shall not be obligated to pay the amount of such increase.

Section 2.17 Substitution of Lenders. In the event that (a) (i) any Lender makes a claim under Section 2.14(c) or Section 2.15, or (ii) it becomes illegal for any Lender to continue to fund or make any BA Rate Loan and such Lender notifies the Borrower pursuant to Section 2.14(d), or (iii) the Borrower is required to make any payment pursuant to Section 2.16 that is attributable to any Lender, or (iv) any Lender is a Non-Funding Lender, (b) in the case of clause (a)(i) above, as a consequence of increased costs in respect of which such claim is made, the effective rate of interest payable to such Lender under this Agreement with respect to its Loans materially exceeds the effective average annual rate of interest payable to the Requisite Lenders under this Agreement and (c) except with respect to clause (a)(iii) above, Lenders holding at least 75% of the sum of the Revolving Credit Commitments are not subject to such increased costs or illegality, payment or proceedings (any such Lender, an “Affected Lender”), the Borrower may, at its sole cost and expense, substitute another financial institution for such Affected Lender hereunder, upon reasonable prior written notice (which written notice must be given within 90 days following the occurrence of any of the events described in clauses (a)(i), (ii), (iii) or (iv)) by the Borrower to the Administrative Agent and the Affected Lender that the Borrower intends to make such substitution, which substitute financial institution must be an Eligible Assignee and, if not a Lender, reasonably acceptable to the Administrative Agent; provided, however, that if more than one Lender claims increased costs, illegality or right to payment arising from the same act or condition and such claims are received by the Borrower within 30 days of each other then the Borrower may substitute all, but not (except to the extent the Borrower has already substituted one of such Affected Lenders before the Borrower’s receipt of the other Affected Lenders’ claims) less than all, Lenders making such claims. In the event that the proposed substitute financial institution or other entity is reasonably acceptable to the Administrative Agent and the written notice was properly issued under this Section 2.17, the Affected Lender shall sell and the substitute financial institution or other entity shall purchase, pursuant to an Assignment and Acceptance, all rights and claims of such Affected Lender under the Loan Documents (for a purchase price equal to the principal balance of all Loans held by such Affected Lender and all accrued and unpaid interest with respect thereto through the date of sale) and the substitute financial institution or other entity shall assume and the Affected Lender shall be relieved of its Commitments and all other prior unperformed obligations of the Affected Lender under the Loan Documents (other than in respect of any damages (other than exemplary or punitive damages, to the extent permitted by applicable law) in respect of any such unperformed obligations) and such sale and purchase shall be recorded in the Register maintained by the Administrative Agent. Upon the effectiveness of such sale, purchase and assumption (which, in any event shall be conditioned upon the payment in full by the Borrower to the Affected Lender in cash of all fees, unreimbursed costs and expenses and indemnities accrued and unpaid through such effective date), the substitute financial institution or other entity shall become a “Lender” hereunder for all purposes of this Agreement having a Commitment in the amount of such Affected Lender’s Commitment assumed by it and such Commitments of the Affected Lender shall be terminated, provided that all indemnities under the Loan Documents shall continue in favor of such Affected Lender. Notwithstanding the above, the Borrower may not exercise the substitution right under this Section 2.17 during the continuance of an Event of Default.

Section 2.18 [Intentionally Omitted].

Section 2.19 Special Cash Collateral Account. The Borrower may from time to time deposit into the Special Cash Collateral Account cash of the Borrower to be included in the calculation of the Borrowing Base; provided that (i) such deposit shall be made upon not less than 2 Business Days’ prior written notice to the Facility Agents and (ii) such deposit shall be made on the same day (or within one Business Day thereafter) as the day of the delivery of the Borrowing Base Certificate required by Section 6.12(a) (Borrowing Base Determination) (but in any event no more frequently than once per week). The Borrower may not make any such deposit if a Default or an Event of Default shall have occurred and is continuing unless the making of such deposit shall cure such Default or Event of Default. Funds on deposit in the Special Cash Collateral Account may be invested in

Permitted Cash Equivalents at the direction of the Collateral Agent and, except during the continuance of an Event of Default (unless otherwise agreed to by the Administrative Agent in its sole discretion), the Collateral Agent agrees with the Borrower to make or cause to be made such investments in Permitted Cash Equivalents as requested by the Borrower; provided, however, that the Collateral Agent shall not have any responsibility for, or bear any risk of loss of, any such requested investment or income thereon and the Collateral Agent shall have no obligation to make or cause to be made any such investment absent a request by the Borrower for a specific investment in Permitted Cash Equivalents. The Borrower may request the Collateral Agent to withdraw monies from the Special Cash Collateral Account and deliver such withdrawn amounts to the Borrower by written notice to the Facility Agents delivered together with (but no more frequently than once per week) the delivery of the Borrowing Base Certificate required by Section 6.12(a) (Borrowing Base Determination); provided, that no withdrawal shall be permitted at the request of the Borrower if a Default or an Event of Default shall have occurred and is continuing (other than a withdrawal of monies by the Collateral Agent, at the request of the Borrower, to be applied directly to the immediate payment of the Loans and if paid in full then to the cash collateralization of Letter of Credit Obligations, and not to be delivered to the Borrower) or, after giving effect to such withdrawal, the aggregate principal amount of the Revolving Credit Outstandings will exceed the Maximum Credit. The parties hereto acknowledge and agree that the Special Cash Collateral Account is not a Cash Collateral Account and that all funds and Permitted Cash Equivalents in the Special Cash Collateral Account are collateral security for the payment of the Secured Obligations. The Administrative Agent may, in its sole discretion, from time to time apply funds and Permitted Cash Equivalents then held in the Special Cash Collateral Account to the payment of Secured Obligations which are past due.

ARTICLE III

CONDITIONS TO LOANS AND LETTERS OF CREDIT

Section 3.1 Conditions Precedent to Initial Loans and Letters of Credit. The obligation of each Lender to make the initial Loans requested to be made by it on or after the Closing Date and the obligation of each Issuer to Issue the initial Letters of Credit on or after the Closing Date is subject to the satisfaction of all of the following conditions precedent:

(a) Certain Documents. The Administrative Agent shall have received on the Closing Date each of the following, each dated the Closing Date unless otherwise indicated or agreed to by the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent and each Lender and each of their respective counsel, in sufficient copies for each Lender:

(i) this Agreement, duly executed and delivered by the Borrower and Group;

(ii) the U.S. Loan Party Canadian Facility Guaranty, duly executed and delivered by each U.S. Loan Party;

(iii) [Intentionally Omitted];

(iv) the Guaranty, duly executed by each Canadian Subsidiary Guarantor;

(v) the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement and the U.S. Pledge and Security Agreement, duly executed by the Loan Parties intended to be parties thereto, together with each of the following:

(A) evidence reasonably satisfactory to the Administrative Agent that, upon the filing and recording of instruments delivered on the Closing Date, the Collateral Agent (for the benefit of the Secured Parties) shall have a valid and perfected security interest in the Collateral having the priority described in Section 4.20 of this Agreement and the Collateral Documents, including (x) such documents duly executed by each Loan Party as the Administrative Agent may request with respect to the perfection of the Collateral Agent’s security interests in the Collateral (including financing statements under the UCC and PPSA, patent, trademark and copyright security agreements suitable for filing with the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office, as the case may be, and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens created by the above Collateral Documents), (y) copies of UCC and PPSA search reports as of a recent date listing all effective financing statements that name any Loan Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral, except for those that shall be terminated on the Closing Date or are otherwise permitted hereunder, and (z) copies of United States Patent and Trademark Office, United States Copyright Office and Canadian Intellectual Property Office searches as of a recent date with respect to any intellectual property of any Loan Party registered with any such office or for which an application for registration has been submitted to any such office, which searches shall not indicate any Liens on any such intellectual property, except for those that shall be terminated on the Closing Date or are otherwise permitted hereunder;

(B) all certificates, instruments and other documents representing all Pledged Stock being pledged pursuant to any of the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement or the U.S. Pledge and Security Agreement and undated stock powers for such certificates, instruments and other documents executed in blank;

(C) all instruments representing Pledged Debt Instruments being pledged pursuant to any of the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement or the U.S. Pledge and Security Agreement duly endorsed in favor of the Collateral Agent or in blank; and

(D) evidence reasonably satisfactory to the Administrative Agent of payment or arrangements for payment by the Borrower or the U.S. Borrower, as the case may be, of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Collateral Documents necessary to perfect the Liens created by each of the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement and the U.S. Pledge and Security Agreement;

(vi) [Intentionally Omitted];

(vii) a Borrowing Base Certificate dated on or about the Closing Date;

(viii) favorable opinions of Skadden, Arps, Slate, Meagher & Flom, LLP, counsel to the U.S. Loan Parties, and Robinson Sheppard Shapiro LLP, counsel to the Canadian Loan Parties (and their respective local counsels), and addressing such matters as any Lender through the Administrative Agent may reasonably request, including opinions as to the enforceability of the Loan Documents, compliance with all laws and regulations, the perfection of all Liens purported to be granted pursuant to the Collateral Documents and no conflicts with material agreements;

(ix) (i) (A) a copy of the articles or certificate of incorporation (or equivalent Constituent Document) of each Loan Party, certified as of a recent date by the applicable Governmental Authority of its jurisdiction of organization and (B) a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying (1) the by-laws (or equivalent Constituent Document) of such Loan Party as in effect on the date of such certification, (2) the resolutions of such Loan Party’s Board of Directors (or equivalent governing body) approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which such Loan Party is a party and (3) that there have been no changes in the articles or certificate of incorporation (or equivalent Constituent Document) of such Loan Party from the articles or certificate of incorporation (or equivalent Constituent Document) of such Loan Party delivered pursuant to clause (A) above;

(iii) a good standing certificate from the applicable Governmental Authority of (A) each Loan Party’s jurisdiction of incorporation, organization or formation and (B) each jurisdiction in which it is qualified as a foreign corporation or other entity to do business and which, if it were not so qualified in such jurisdiction, could reasonably be expected to have a Global Material Adverse Effect, each dated a recent date prior to the Closing Date;

(xi) a certificate of a Responsible Officer of Group to the effect that the conditions set forth in Section 3.1(g) and Section 3.2 have been satisfied;

(xiii) all other Collateral Documents and other Loan Documents and related certificates, instruments, documents and agreements required, pursuant to any of the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement, the U.S. Pledge and Security Agreement or this Agreement, to be delivered on the Closing Date (including, without limitation, Blocked Account Letters, Restricted Account Letters, Control Account Agreements, Landlord Waivers and Bailee Letters), duly executed by the parties thereto; and

(b) Termination of Existing Credit Agreement. Group and its Subsidiaries shall have (i) repaid in full all Indebtedness and other obligations under or with respect to the Existing Credit Agreement and any related documents (or in the case of any such Indebtedness that is a guaranty, terminated such guaranty), (ii) terminated any commitments to lend or make other extensions of credit thereunder, (iii) delivered to the Administrative Agent a payoff letter with respect to the Existing Credit Agreement and all documents or instruments necessary to release all Liens securing the Indebtedness and other obligations of Group and its Subsidiaries under or with respect to the Existing Credit Agreement or any related documents (such payoff letter, documents and instruments to be in form and substance satisfactory to the Administrative Agent), and (iv) made arrangements reasonably satisfactory to the Administrative Agent with respect to the cancellation of any letters of credit outstanding under the Existing Credit Agreement (other than the Existing Rollover Letters of Credit, as defined in the U.S. Facility) or the issuance of Letters of Credit (as defined in the U.S. Facility) to support the obligations of the U.S. Borrower with respect thereto.

(d) Availability. As of the Closing Date, Available Credit shall be not less than U.S.$50,000,000 (after giving effect to the Borrowings, issuances of Letters of Credit and financial accommodations under the U.S. Facility, in each instance, requested or deemed requested to be made on the Closing Date).

(f) Fees and Expenses Paid. There shall have been paid all fees and expenses (including reasonable fees and expenses of counsel) due and payable on or before the Closing Date.

(g) No Global Material Adverse Effect. There shall have been no event, circumstance or change since December 29, 2007 that has had, either individually or in the aggregate, a Global Material Adverse Effect. There shall be no actions, suits, investigations, litigation or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority and no judgments, orders, injunctions or other restraints that (i) could reasonably be expected to have a Global Material Adverse Effect or (ii) can reasonably be expected to materially and adversely affect the Revolving Credit Facility or the transactions contemplated thereby.

(h) Audit and Other Due Diligence. The Administrative Agent shall have conducted a field examination and ordered an appraisal of each Loan Party’s Inventory and the Administrative Agent and the Lenders shall have had an opportunity, if they so choose, to examine the books of account and other records and files of the Loan Parties and to make copies thereof, and to conduct a pre-closing audit, which shall include, without limitation, verification of Receivables and the Borrowing Base of the Borrower and each other Canadian Loan Party, and to conduct such other due diligence with respect to the Loan Parties and the Collateral as the Administrative Agent and the Lenders require, and the results of such field examination, appraisal, examination, audit and other due diligence shall have been reasonably satisfactory to the Administrative Agent and the Lenders in all respects.

(i) U.S. Facility. The U.S. Facility shall have closed pursuant to documentation reasonably satisfactory to the Administrative Agent and the Borrower and all conditions precedent to the making of any financial accommodations thereunder (other than the closing of the Revolving Credit Facility) shall have been satisfied.

(ii) no Default or Event of Default has occurred and is continuing.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.1 Corporate Existence; Compliance with Law. Each Warnaco Entity (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where such qualification is necessary, except where the failure to be so qualified or in good standing would not, in the aggregate, have a Global Material Adverse Effect; (c) has all requisite power and authority and the legal right to own, pledge, mortgage and operate its properties, to lease the property it operates under lease and to conduct its business as now or currently proposed to be conducted; (d) is in compliance with its Constituent Documents; (e) is in compliance with all applicable Requirements of Law, except where the failure to be in compliance would not, in the aggregate, have a Material Adverse Effect; and (f) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for licenses, permits, consents, approvals or filings which can be obtained or made by the taking of ministerial action to secure the grant or transfer thereof or the failure to obtain or make would not, in the aggregate, have a Global Material Adverse Effect.

Section 4.2 Corporate Power; Authorization; Enforceable Obligations.

(i) are within such Warnaco Entity’s corporate, limited liability company, partnership or other powers;

(ii) have been or, at the time of delivery thereof pursuant to Article III will have been, duly authorized by all necessary corporate, limited liability company, unlimited liability company or partnership, as the case may be, action, including the consent of shareholders, partners and members where required;

(b) This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof hereunder, duly executed and delivered by each Warnaco Entity party thereto.

(d) For so long as the Senior Note Indenture is in effect or any Senior Notes are outstanding, each Borrowing, Issuance of a Letter of Credit and financial accommodation made under the U.S. Facility and each delivery by the Borrower of a Borrowing Base Certificate constitutes a representation and warranty by each of Group and the Borrower that, as of the date of such Borrowing, Issuance, financial accommodation or delivery, as the case maybe (both before and after giving effect to such Borrowing, Issuance or financial accommodation, if applicable), the financial accommodations provided to the Borrower hereunder, both by themselves and together with the financial accommodations provided to the U.S. Borrower under the U.S. Facility and the guaranty by the U.S. Loan Parties under the U.S. Loan Party Canadian Facility Guaranty, do not violate the debt incurrence restrictions set forth in the Senior Note Indenture or any other Senior Note Document. Without limitation of the foregoing, each of Group and the Borrower represents and warrants that (i) each Borrowing, the Obligations with respect to each Letter of Credit and the guaranty by the U.S. Loan Parties of the Secured Obligations pursuant to the U.S. Loan Party Canadian Facility Guaranty is Permitted Debt (as defined in the Senior Note Indenture) and is permitted under Section 4.09 of the Senior Note Indenture, (ii) as of the Closing Date there are in existence no Credit Facilities (as defined in the Senior Note Indenture) other than this Agreement, the U.S. Facility and the Italian Debt Facility and (iii) as of the Closing Date each Credit Facility (as defined in the Senior Note Indenture) other than this Agreement and the U.S. Facility is permitted under Section 4.09 of the Senior Note Indenture (other than under clause (b) thereof).

Section 4.3 Ownership of Group, Borrower; Subsidiaries.

(a) As of the Closing Date, the authorized capital stock of the Borrower consists of 100,000,000 common shares and 100,000,000 non-cumulative redeemable preferred shares, both without nominal or par value, of which 101 common shares and 1960 preferred shares are issued and outstanding. All of the outstanding capital stock of the Borrower has been validly issued, is fully paid and non-assessable and, as of the Closing Date, is owned beneficially and of record by Warnaco Netherlands B.V., free and clear of all Liens. No Stock of the Borrower is subject to any option, warrant, right of conversion or purchase or any similar right. There are no agreements or understandings to which the Borrower is a party with respect to the voting, sale or transfer of any shares of Stock of the Borrower or any agreement restricting the transfer or hypothecation of any such shares.

(b) Set forth on Schedule 4.3 (Ownership of Warnaco Entities) is a complete and accurate list of all Subsidiaries of Group on the Closing Date, showing (as to each such Subsidiary) the jurisdiction of its incorporation or organization, the number of shares of each class of its Stock or Stock Equivalents authorized, and the number outstanding, on the Closing Date and the percentage of each such class of its Stock or Stock Equivalents owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All of the outstanding Stock or Stock Equivalents in each Subsidiary of Group has been validly issued, is fully paid and non-assessable and is owned by a Warnaco Entity (except as described on Schedule 4.3 (Ownership of Warnaco Entities)) free and clear of all Liens, except those created under the Loan Documents. No Stock of any Warnaco Entity is subject to any outstanding option, warrant, right of conversion or purchase or any similar right. No Warnaco Entity is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any Stock of any such Subsidiary, other than the Loan Documents. Group does not own or hold, directly or indirectly, any Stock of any Person other than the Subsidiaries set forth on Schedule 4.3 (Ownership of Warnaco Entities) and the Investments permitted by Section 8.3.

Section 4.4 Financial Statements.

Section 4.5 Global Material Adverse Change. Since December 29, 2007, there has been no Global Material Adverse Change and there have been no events or developments that in the aggregate have had a Global Material Adverse Effect.

Section 4.7 Litigation. There are no pending or, to the knowledge of Group or the Borrower, threatened actions, suits, investigations, litigation or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority that in the aggregate could reasonably be expected to have a Global Material Adverse Effect. The performance of any action by any Loan Party required or contemplated by any of the Loan Documents is not and could not reasonably be expected to be restrained or enjoined (either temporarily, preliminarily or permanently).

Section 4.8 Taxes.

(a) All federal, provincial and material state, local, municipal and foreign income, franchise and other tax returns, reports and statements (collectively, the “Tax Returns”) required to be filed by Group or any of its Tax Affiliates have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions reflected therein or which are material and otherwise due and payable have been paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of Group or such Tax Affiliate in conformity with Agreement Accounting Principles. Proper and accurate amounts have been withheld by Group and each of its Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective Governmental Authorities.

(b) None of Group or any of its Tax Affiliates has (i) executed or filed with the IRS, the Canada Revenue Agency or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for the filing of any Tax Return or the assessment or collection of any material taxes or other charges relating thereto; (ii) any obligation under any tax sharing agreement or arrangement other than that to which the Administrative Agent has a copy prior to the date hereof; or (iii) been a member of an affiliated, combined or unitary group other than the group of which Group (or its Tax Affiliate) is the common parent other than, prior to the acquisition by Group thereof, Warnaco Swimwear, Inc. and its Subsidiaries and Designer Holdings Limited and its Subsidiaries.

Section 4.11 No Burdensome Restrictions; No Defaults.

(a) No Warnaco Entity (i) is a party to any Contractual Obligation the compliance with which would have a Global Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, would result in the creation of a Lien (other than a Lien permitted under Section 8.2) on the property or assets of any thereof or (ii) is subject to any charter or corporate or other similar restriction that would have a Global Material Adverse Effect.

(b) No Warnaco Entity is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of Group and the Borrower, no other party is in default under or with respect to any Contractual Obligation owed to any Warnaco Entity, other than, in either case, those defaults which in the aggregate would not have a Global Material Adverse Effect. No Canadian Loan Party is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of Group and the Borrower, no other party is in default under or with respect to any Contractual Obligation owed to any Canadian Loan Party, other than, in either case, those defaults which in the aggregate would not have a Material Adverse Effect.

(d) To the best knowledge of Group and the Borrower, there is no Requirement of Law applicable to any Warnaco Entity the compliance with which by such Warnaco Entity would have a Global Material Adverse Effect. To the best knowledge of Group and the Borrower, there is no Requirement of Law applicable to any Canadian Loan Party the compliance with which by such Canadian Loan Party would have a Material Adverse Effect.

Section 4.13 Use of Proceeds. The proceeds of the Revolving Loans are being used by the Borrower solely as follows: (i) to provide working capital from time to time for the Canadian Loan Parties and (ii) for other general and corporate purposes of the Canadian Loan Parties permitted hereunder. The Letters of Credit are being used by the Borrower solely for general and corporate purposes of the Warnaco Entities permitted hereunder.

Section 4.15 Labor Matters.

(c) Except as set forth on Schedule 4.15 (Labor Matters), as of the Closing Date, there is no collective bargaining agreement covering any employee of any Warnaco Entity.

Section 4.16 ERISA.

(d) There has not been, nor is there reasonably expected to occur, any ERISA Event which would have a Global Material Adverse Effect

(e) Other than as set forth on Schedule 4.16 (ERISA Matters), there are no Unfunded Pension Liabilities.

(g) With respect to the Canadian Plans:

(i) Neither the Borrower nor any other Canadian Loan Party has any Canadian Plan other than those listed on Schedule 4.16 (ERISA Matters).

(ii) No Canadian Plan has been terminated or partially terminated or is insolvent or in reorganization, nor have any proceedings been instituted to terminate, in whole or in part, or reorganize any Canadian Plan.

(iii) Neither the Borrower nor any other Canadian Loan Party has ceased to participate (in whole or in part) as a participating employer in any Canadian Plan which is a pension plan or has withdrawn from any Canadian Plan which is a pension plan in a complete or partial withdrawal, nor has a condition occurred which if continued would result in a complete or partial withdrawal.

(iv) Neither the Borrower nor any other Canadian Loan Party has any unfunded liability on windup or withdrawal liability, including contingent withdrawal or windup liability, to any Canadian Plan or any solvency deficiency in respect of any Canadian Plan.

(v) Neither the Borrower nor any other Canadian Loan Party has any unfunded liability on windup or any liability in respect of any Canadian Plan (including to the FSCO) other than for required insurance premiums or contributions or remittances which have been paid, contributed and remitted when due.

(vi) The Borrower and each other Canadian Loan Party has made all contributions to its Canadian Plans required by law or the terms thereof to be made by it when due, and it is not in arrears in the payment of any contribution, payment, remittance or assessment or in default in filing any reports, returns, statements, and similar documents in respect of the Canadian Plans required to be made or paid by it pursuant to any Canadian Plan, any law, act, regulation, directive or order or any employment, union, pension, deferred profit sharing, benefit, bonus or other similar agreement or arrangement.

(vii) Neither the Borrower nor any other Canadian Loan Party is liable or, to the best of its knowledge, alleged to be liable, to any employee or former employee, director or former director, officer or former officer or other Person resulting from any violation or alleged violation of any Canadian Plan, any fiduciary duty, any law or agreement in relation to any Canadian Plan or has any unfunded pension or like obligations or solvency deficiency (including any past service or experience deficiency funding liabilities), other than accrued obligations not yet due, for which it has made full provision in its books and records.

(viii) All vacation pay, bonuses, salaries and wages, to the extent accruing due, are properly reflected in the Borrower’s, each other Canadian Loan Parties and their respective Subsidiaries’ books and records.

(ix) Without limiting the foregoing, all of the Borrower’s and the other Canadian Loan Parties’ Canadian Plans are duly registered where required by, and are in compliance and good standing in all material respects under, all applicable laws, acts, statutes, regulations, orders, directives and agreements, including, without limitation, the Income Tax Act (Canada), the Supplemental Pensions Act (Quebec) and the Pension Benefits Act (Ontario), any successor legislation thereto, and other applicable pension laws of any jurisdiction.

(x) Neither the Borrower nor any other Canadian Loan Party has made any application for a funding waiver or extension of any amortization period in respect of any Canadian Plan.

(xi) There has been no prohibited transaction or violation of any fiduciary responsibilities with respect to any Canadian Plan.

(xii) There are no outstanding or pending or threatened investigations, claims, suits or proceedings in respect of any Canadian Plans (including to assert rights or claims to benefits) that could give rise to a Material Adverse Effect.

Section 4.17 Environmental Matters.

(a) The operations and properties of each Warnaco Entity comply, except to the extent non-compliance would not have a Global Material Adverse Effect, with all applicable Environmental Laws and Environmental Permits, all material past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing material obligations or costs, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Warnaco Entity or any of their properties that could be reasonably expected to have a Global Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law.

(b) None of the properties currently or formerly owned or operated by any Warnaco Entity is, to the knowledge of Group or the Borrower with respect to formerly owned or operated properties, listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property, except where such listing would not reasonably be expected to have a Global Material Adverse Effect; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Contaminants are being or have been treated, stored or disposed on any property currently owned or operated by any Warnaco Entity or, to the best of its knowledge, on any property formerly owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Global Material Adverse Effect; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Global Material Adverse Effect; and Contaminants have not been released, discharged or disposed of on any property currently or, to the best knowledge of Group and the Borrower, formerly owned or operated by any Warnaco Entity that in any case could reasonably be expected to have a Global Material Adverse Effect.

(c) No Warnaco Entity is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Contaminants at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law that in any case could reasonably be expected to have a Global Material Adverse Effect; and all Contaminants generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Warnaco Entity have been disposed of in a manner not reasonably expected to result in material liability to any Warnaco Entity.

Section 4.18 Intellectual Property; Material License.

(b) Each Material License is in full force and effect as of the Closing Date.

Section 4.19 Title; Real Property.

ARTICLE V

FINANCIAL COVENANTS

ARTICLE VI

REPORTING COVENANTS

Section 6.1 Financial Statements. Group shall furnish to the Administrative Agent (with a copy for each Lender requesting same) the following:

(d) Compliance Certificate. Together with each delivery of any financial statement pursuant to clauses (b) and (c) of this Section 6.1, a certificate of a Responsible Officer of Group substantially in the form of Exhibit H hereto (each, a “Compliance Certificate”) (i) showing in reasonable detail the calculations used in demonstrating compliance with each of the financial covenants contained in Article V which is tested on a quarterly basis (it being understood and agreed that if such certificate is delivered with respect to a Fiscal Quarter or Fiscal Year for which Section 5.1 is not being tested for a fiscal period ending on the last day of such Fiscal Quarter or Fiscal Year due to no Trigger Event having occurred, such certificate shall still provide the calculations for such Section 5.1 as if a Trigger Event had occurred and such Fiscal Quarter were the last Fiscal Quarter of a Test Period or such Fiscal Year were a Test Period, as the case may be, but the certificate shall not then be required to indicate whether or not Group was in compliance with such Section 5.1 as at the end of such Fiscal Quarter or Fiscal Year), (ii) showing in reasonable detail the calculations necessary to determine the Applicable Margin, (iii) stating that no Default or Event of Default has occurred and is continuing and no Default or Event of Default (as defined in the U.S. Facility) has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action which Group proposes to take with respect thereto and (iv) stating that the amount of the Available Credit at any time during the period covered by such certificate did not fall to an amount which would give rise to an Accelerated Borrowing Base Certificate Delivery Date and that the amount of the Available Credit at any time during the period covered by such certificate did not fall to an amount which would give rise to a Trigger Event, or, if the Available Credit fell to any such amount, the first date on which each such event occurred;

(f) Intercompany Loan Balances. Together with each delivery of any financial statement pursuant to clause (b) and clause (c) of this Section 6.1, a summary of the outstanding balance of all intercompany Indebtedness of any Subsidiary to any Loan Party as of the last day of the Fiscal Quarter or Fiscal Year covered by such financial statement, certified by a Responsible Officer of Group; provided that such balances between U.S. Loan Parties or between Canadian Loan Parties shall only be required to be delivered annually, as early as practicable;

Section 6.2 Default Notices. As soon as practicable, and in any event within two Business Days after a Responsible Officer of any Loan Party has actual knowledge of the existence of any Default, Event of Default or any other event which has had a Material Adverse Effect or of the existence of any Default or Event of Default under and as defined in the U.S. Facility, Group shall give the Administrative Agent notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given by telephone, shall be promptly confirmed in writing on the next Business Day.

Section 6.4 Asset Sales. No later than 10 days prior to any Asset Sale anticipated to generate in excess of U.S.$15,000,000 (or its U.S. Dollar Equivalent) in net cash proceeds to the U.S. Loan Parties (or in excess of the U.S. Dollar Equivalent of U.S.$5,000,000 in net cash proceeds to the Canadian Loan Parties), Group shall send the Administrative Agent a notice (a) describing such Asset Sale or the nature and material terms and conditions of such transaction and (b) stating the estimated net cash proceeds anticipated to be received by Group or any of its Subsidiaries.

Section 6.5 Notices under Senior Note Documents. Promptly after the sending or filing thereof, Group shall send the Administrative Agent copies of all material notices, certificates or reports delivered pursuant to, or in connection with, any Senior Note Document.

Section 6.6 Securities Exchange Filings; Press Releases. Promptly after the sending or filing thereof, Group shall send the Administrative Agent copies of (a) all reports which any Warnaco Entity sends to its security holders generally, (b) all reports and registration statements which any Warnaco Entity files with the U.S. Securities and Exchange Commission or any United States or Canadian securities exchange, (c) all press releases, (d) all other statements concerning material changes or developments in the business of any Warnaco Entity made available by any Warnaco Entity to the public and (e) all notices of investigation or proceedings received from the U.S. Securities and Exchange Commission or any United States or Canadian securities exchange.

Section 6.7 Labor Relations. Promptly after becoming aware of the same, Group shall give the Administrative Agent written notice of (a) any material labor dispute to which any Warnaco Entity is or may become a party, including any strikes, lockouts or other disputes relating to any of such Person’s plants and other facilities, and (b) any Worker Adjustment and Retraining Notification Act or related liability or any liability under applicable Canadian law incurred with respect to the closing of any plant or other facility of any such Person.

Section 6.8 Tax Returns. Upon the request of the Administrative Agent or any Lender, through the Administrative Agent, Group will provide copies of all U.S. and Canadian federal, state, provincial, territorial, municipal and local tax returns and reports filed by any Warnaco Entity in respect of taxes measured by income or revenue (excluding, other than in the case of the Canadian Loan Parties, sales, use, goods and services and like taxes).

Section 6.10 ERISA Matters. Group shall furnish the Administrative Agent (with a copy for each Lender requesting same):

(a) promptly and in any event within 30 days after any Warnaco Entity or any ERISA Affiliate knows or has reason to know that any ERISA Event or similar event in respect of any Canadian Plan has occurred, written notice describing such event;

(b) promptly and in any event within 10 days after any Warnaco Entity or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan or any similar event in respect of any Canadian Plan, a written statement of a Responsible Officer of Group describing such ERISA Event or waiver request and the action, if any, which such Warnaco Entity and the ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; and

Section 6.11 Environmental Matters. Group shall provide promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Warnaco Entity with any Environmental Law or Environmental Permit that would reasonably be expected to (i) have a Global Material Adverse Effect or (ii) cause any Material Real Property or Material Leased Property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law.

Section 6.12 Borrowing Base Determination. Until the Revolving Credit Termination Date:

(a) The Borrower shall deliver to the Administrative Agent as soon as available, but in any event within 15 days after the end of each calendar month, as of the end of such calendar month, and at such other times as may be reasonably requested by the Administrative Agent (but not more than one per week), a Borrowing Base Certificate executed by a Responsible Officer of Group; provided, that during each Accelerated Borrowing Base Certificate Delivery Period or during the existence of an Event of Default, the Borrower shall deliver to the Administrative Agent a Borrowing Base Certificate not less than once each week, as of the Business Day immediately prior to the day of delivery and executed by a Responsible Officer of Group. Concurrently with the delivery of any Borrowing Base Certificate to the Administrative Agent, the Borrower shall deliver, or cause to be delivered, to the Administrative Agent a certification in reasonable detail setting forth the Available Credit as of the date of such Borrowing Base Certificate.

(b) Group and the Borrower agree (i) that the Administrative Agent, on behalf of the Lenders, may appoint an independent or an internal third party appraiser to conduct and conclude two field audits in each calendar year (and additional field audits (not to exceed, in the case of clause (B) below, two additional field audits in such calendar year) if (A) an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or (B) Available Credit has been less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the U.S. Facility) for 5 or more consecutive Business Days at the time of the appointment of the appraiser) with respect to Inventory owned by any Canadian Loan Party and (ii) Group shall conduct, or shall cause to be conducted, and upon request of the Administrative Agent, and present to the Administrative Agent for approval, such appraisals and reviews as the Administrative Agent shall reasonably request, all upon notice and at such times during normal business hours and as often as may be reasonably requested, in each case at the expense of Group and for the purpose of determining the Borrowing Base. Group and the Borrower shall furnish to the Administrative Agent any information which the Administrative Agent may reasonably request regarding the determination and calculation of the Borrowing Base including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein. Group and the Borrower further agree to use their reasonable best efforts to assist each appraiser appointed by the Administrative Agent to conduct and conclude such field audits.

(d) Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, use its reasonable best efforts to assist an independent third party appraiser appointed by the Administrative Agent to conduct and conclude (i) field audits with respect to Inventory owned by any Canadian Loan Party not more frequently than two times in any calendar year (and such additional times in any calendar year (not to exceed, in the case of clause (B) below, two additional field audits in such calendar year) if (A) an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or (B) Available Credit has been less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the U.S. Facility) for 5 or more consecutive Business Days at the time of the appointment of the appraiser) and (ii) Appraisals, as reasonably requested by the Administrative Agent (which, in the case of Inventory and Receivables, shall be conducted not less frequently than twice during each calendar year and may in any event be conducted if an Event of Default has occurred and is continuing at the time of the appointment of the appraiser or if Available Credit is less than 15% of the aggregate of the Revolving Credit Commitments and Revolving Credit Commitments (as defined in the U.S. Facility) in effect at the time of the appointment of the appraiser), in each case at the sole expense of the Group and the Borrower.

Section 6.14 Communications and Amendments with respect to U.S. Facility. Group and the Borrower shall cause the U.S. Borrower to provide the Administrative Agent with copies of (i) all certificates (including, without limitation, borrowing base certificates), statements, notices and other communications provided by it or any of its Affiliates under or with respect to the U.S. Facility concurrently with the sending thereof to any other Person party to the U.S. Facility and (ii) all amendments, waivers and consents to or with respect to the U.S. Facility or any related documents promptly upon the U.S. Borrower’s receipt thereof.

ARTICLE VII

AFFIRMATIVE COVENANTS

Section 7.2 Compliance with Laws, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, comply with all applicable Requirements of Law, Contractual Obligations and Permits, except where the failure so to comply would not, in the aggregate, have a Global Material Adverse Effect. The Borrower shall, and shall cause each of its Subsidiaries and each other Canadian Loan Party to, comply with all applicable Requirements of Law, Contractual Obligations and Permits, except where the failure so to comply would not, in the aggregate, have a Material Adverse Effect.

Section 7.3 Conduct of Business. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, (a) conduct its business in the ordinary course and (b) use its reasonable efforts, in the ordinary course and consistent with past practice, to preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with any Warnaco Entity, except in each case where the failure to comply with the covenants in each of clauses (a) and (b) above would not, in the aggregate, have a Global Material Adverse Effect. The Borrower shall, and shall cause each of its Subsidiaries and each other Canadian Loan Party to, (a) conduct its business in the ordinary course and (b) use its reasonable efforts, in the ordinary course and consistent with past practice, to preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with the Borrower, any of its Subsidiaries or any other Canadian Loan Party, except in each case where the failure to comply with the covenants in each of clauses (a) and (b) above would not, in the aggregate, have a Material Adverse Effect.

Section 7.4 Payment of Taxes, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, pay, remit and discharge before the same shall become delinquent, all lawful governmental claims, U.S. and Canadian federal, provincial (in the case of provincial, if the amount thereof exceeds $5,000) and material state, municipal, local and non-U.S. and Canadian taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings and adequate reserves therefor have been established on the books of the appropriate Warnaco Entity in conformity with Agreement Accounting Principles, unless and until any Liens resulting from such contested items attach to its property and become enforceable against its other creditors.

Section 7.5 Maintenance of Insurance. Each of Group and the Borrower shall (i) maintain, and cause to be maintained for each of its respective Subsidiaries, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Warnaco Entity operates, and such other insurance as may be reasonably requested by the Requisite Lenders, and, in any event, all insurance required by any Loan Document, and (ii) cause all such insurance to name the Collateral Agent on behalf of the Secured Parties as additional insured or loss payee, as appropriate, and to provide that no cancellation, material addition in amount or material change in coverage shall be effective until after 30 days’ written notice thereof to the Facility Agents.

Section 7.6 Access. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, from time to time permit each Facility Agent and the Lenders, or any agents or representatives thereof, within two Business Days after written notification of the same to the Borrower (except that during the continuance of an Event of Default, no such notice shall be required) to (a) examine and make copies of and abstracts from the records and books of account of any Warnaco Entity, (b) visit the properties of any Warnaco Entity, (c) discuss the affairs, finances and accounts of any Warnaco Entity with any of their respective officers or directors, and (d) communicate directly with any Warnaco Entity’s independent certified public accountants (or its equivalent in foreign jurisdictions) (with Group having the right to have a representative present at all such communications). Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, authorize its independent certified public accountants (or its equivalent in foreign jurisdictions) to disclose to any Facility Agent or any Lender any and all financial statements and other information of any kind, as such Facility Agent or Lender reasonably requests from any Warnaco Entity and which such accountants may have with respect to the business, financial condition, results of operations or other affairs of such Warnaco Entity or any of its Subsidiaries.

Section 7.7 Keeping of Books. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made in conformity with Agreement Accounting Principles of all financial transactions and the assets and business of such Warnaco Entity.

Section 7.8 Maintenance of Properties, Etc. Each of Group and the Borrower shall, and shall cause each of its respective Subsidiaries to, maintain and preserve (a) all of its properties which are necessary in the conduct of its business in good working order and condition, (b) all rights, permits, licenses, approvals and privileges (including all Permits) which are used or useful or necessary in the conduct of its business, and (c) all Intellectual Property with respect to the business of the Warnaco Entities; except where the failure to so maintain and preserve would not in the aggregate have a Global Material Adverse Effect.

Section 7.9 Application of Proceeds. The Borrower shall use the proceeds of the Loans as provided in Section 4.13.

Section 7.10 Environmental.

(a) Each of Group and Borrower shall comply, and shall cause each of its respective Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all material Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Contaminants from any of its properties, in accordance with and to the extent required by all applicable Environmental Laws, to the extent the failure to do any of the foregoing would have a Global Material Adverse Effect; provided, however, that no Warnaco Entity shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances.

Section 7.11 Additional Personal Property Collateral and Guaranties. To the extent not delivered to the applicable Facility Agents on or before the Closing Date (including in respect of after-acquired property and Persons that become Subsidiaries of any Loan Party after the Closing Date), each of Group and the Borrower agrees promptly to do, or cause each of its respective Subsidiaries to do, each of the following, unless otherwise agreed by the Administrative Agent:

(a) deliver to the Facility Agents such duly-executed supplements and amendments to the Guaranty (in the case of a Canadian Subsidiary) or the U.S. Loan Party Canadian Facility Guaranty (in the case of a Domestic Subsidiary), in each case in form and substance reasonably satisfactory to the Administrative Agent and as the Administrative Agent deems necessary or advisable, in order to ensure that each Domestic Subsidiary of Group and each Canadian Subsidiary of Group (other than the Borrower) guaranties, as primary obligor and not as surety, the full and punctual payment when due of the Obligations; provided, however that a U.S. Loan Party acquired or formed after the Closing Date shall not be required to guarantee the obligations of the Borrower under the U.S. Loan Party Canadian Facility Guaranty if such U.S. Loan Party is not required to guarantee the obligations of the U.S. Borrower under the Guaranty (as defined in the U.S. Facility);

(b) deliver to the Facility Agents such duly-executed joinder and amendments to the Canadian Security Agreement, the Deed of Hypothec, the Canadian Pledge Agreement and the U.S. Pledge and Security Agreement and, if applicable, other Collateral Documents, in each case in form and substance reasonably satisfactory to the Administrative Agent and as the Administrative Agent deems necessary or advisable, in order to effectively grant to the Collateral Agent, for the benefit of the Secured Parties, a valid, perfected and enforceable security interest having the priority described in Section 4.20 of this Agreement and the Collateral Documents in all personal property interests and other assets (including the Stock and Stock Equivalents and other debt Securities, but, in the case of Real Property, limited to Material Owned Real Property) of each Loan Party; provided, however, that in no event shall any U.S. Loan Party be required to pledge in excess of 65% of the outstanding Voting Stock of any Foreign Subsidiary that is a direct Subsidiary of such U.S. Loan Party, unless (x) the U.S. Borrower and the Administrative Agent otherwise agree; (y) such Voting Stock has been granted as security in respect of other Indebtedness of a Warnaco Entity having substantially similar tax consequences to the U.S. Loan Parties under Section 956 of the Code or (z) such pledge or grant can be made without resulting in any material adverse tax consequences for the Warnaco Entities, taken as a whole (including any Person that becomes a Loan Party as a result of such pledge or grant);

(c) to take such other actions necessary or advisable to ensure the validity or continuing validity of the guaranties required to be given pursuant to clause (a) above or to create, maintain or perfect the security interest required to be granted pursuant to clause (b) above, including the filing of UCC, PPSA or equivalent financing statements in such jurisdictions as may be required by the Collateral Documents or by law or as may be reasonably requested by the Administrative Agent; and

Section 7.12 Canadian Plans. Each of Group and the Borrower shall cause each of the Canadian Plans to be duly qualified and administered in all material respects in compliance with, as applicable, the Supplemental Pensions Act (Québec) and the Pension Benefits Act (Ontario) and all other applicable laws (including regulations, orders and directives), and the terms of the Canadian Plans and any agreements relating thereto. Each of Group and the Borrower shall ensure that:

(a) the Canadian Loan Parties have no unfunded, solvency, or deficiency on windup liability and no accumulated funding deficiency (whether or not waived), or any amount of unfunded benefit liabilities in respect of any Canadian Plan, including any Canadian Plan to be established and administered by it or them;

(b) all amounts required to be paid by it or them with respect to any Canadian Plan are paid when due;

(c) no liability upon the Borrower or any other Canadian Loan Party or Lien on any of its or their property arises or exists in respect of any Canadian Plan;

(d) the Borrower and the other Canadian Loan Parties make all required contributions to any Canadian Plan when due;

(e) the Borrower and the other Canadian Loan Parties not engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Canadian Plan that could reasonably be expected to result in liability; and

(f) the Borrower and the other Canadian Loan Parties have no Lien on any of its or their property that arises or exists in respect of any Canadian Plan.

Section 7.13 Real Property.

(c) To the extent not previously delivered to the Collateral Agent or the Administrative Agent, upon written request of the Administrative Agent, each of Group and the Borrower shall, and shall cause each other Loan Party to, execute and deliver to the Collateral Agent and the Administrative Agent, promptly and in any event not later than 45 days after receipt of such request (or such later date agreed to by the Administrative Agent in its sole discretion), a Mortgage in favor of the Collateral Agent, for the benefit of the Secured Parties, on the Material Owned Real Property of such Loan Party, together with (i) if requested by the Administrative Agent and such Material Owned Real Property is located in the United States, all Mortgage Supporting Documents relating thereto or (ii) otherwise, documents similar to Mortgage Supporting Documents deemed by the Administrative Agent to be appropriate in the applicable jurisdiction to obtain the equivalent in such jurisdiction of a first-priority mortgage on such Material Owned Real Property; provided, however, that in no event shall any Warnaco Entity that is not a Loan Party be required to enter into a Mortgage in respect of Material Owned Real Property, unless (x) the U.S. Borrower and the Administrative Agent otherwise agree, (y) such Mortgage has been provided as security in respect of other Indebtedness of a Warnaco Entity having substantially similar tax consequences under Section 956 of the Code or (z) such pledge or grant can be made without resulting in any material adverse tax consequences for the Warnaco Entities, taken as a whole (including any Person that becomes a Loan Party as a result of providing such Mortgage).

Section 7.14 Senior Notes. Group shall cause the U.S. Borrower, on or before the date 45 days prior to the scheduled maturity of the Senior Notes, to repurchase (in accordance with Section 8.6(b)) or refinance (in accordance with Section 8.1(f)) all of the Senior Notes or cause the Legal Defeasance (as defined in the Senior Note Indenture) of all of the Senior Notes (in accordance with Article 8 of the Senior Note Indenture, including satisfaction of the conditions therefor under Section 8.04 thereof).

Section 7.15 Post Closing Matters. Each of Group and the Borrower shall, and shall cause each of their respective Subsidiaries to, satisfy the requirements set forth on Schedule 7.15 on or before the date set forth opposite such requirement or such later date as consented to by the Administrative Agent.

ARTICLE VIII

NEGATIVE COVENANTS

Section 8.1 Indebtedness. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except:

(a) the Secured Obligations (other than in respect of Hedging Contracts) and the U.S. Secured Obligations (other than in respect of Hedging Contracts);

(b) the Senior Notes in an aggregate outstanding principal amount not to exceed U.S.$160,890,000;

(d) (i) Guaranty Obligations incurred by a U.S. Loan Party in respect of Indebtedness of another U.S. Loan Party otherwise permitted by this Section 8.1, (ii) Guaranty Obligations incurred by any Foreign Subsidiary (other than a Canadian Loan Party) in respect of the Indebtedness of a Foreign Subsidiary otherwise permitted by this Section 8.1, (iii) unsecured Guaranty Obligations incurred by a U.S. Loan Party in respect of the Indebtedness of a Foreign Subsidiary permitted by clause (g) of this Section 8.1 and (iv) unsecured Guaranty Obligations incurred by a Canadian Loan Party in respect of Indebtedness of another Canadian Loan Party otherwise permitted by this Section 8.1;

(f) Renewals, extensions, refinancings and refundings of Indebtedness permitted by clauses (b), (c) and (e) of this Section 8.1; provided, however, that (A) any such renewal, extension, refinancing or refunding is in an aggregate principal amount not greater than the principal amount of, and is on terms not materially less favorable to the Warnaco Entity obligated thereunder (subject to market rates), including as to weighted average maturity and final maturity, than, the Indebtedness being renewed, extended, refinanced or refunded and (B) additionally with respect to any renewal, extension, refinancing or refunding of the Senior Notes, such renewal, extension, refinancing or refunding (i) is unsecured and not guaranteed by any Warnaco Entity that is not guaranteeing the Obligations, and (ii) has no payments of principal scheduled to be due and payable prior to three years after the Revolving Loan Maturity Date;

(g) Indebtedness of the Foreign Subsidiaries of Group (other than the Canadian Loan Parties) not otherwise permitted under this Section 8.1; provided, however, that the U.S. Dollar Equivalent of the aggregate outstanding principal amount of all such Indebtedness shall not exceed U.S.$100,000,000 at any time (with such dollar limitation not to be applicable with respect to the incurrence of such Indebtedness if (x) at the time of incurrence of such Indebtedness the Leverage Ratio for Group is less than 3.5 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to such incurrence and the application of the proceeds thereof and (y) prior to the incurrence of such Indebtedness, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this parenthetical with respect to such incurrence and setting forth in reasonable detail the calculation of such Leverage Ratio);

(h) a Sale and Leaseback Transaction permitted pursuant to Section 8.16, to the extent such transaction would constitute Indebtedness;

(j) Indebtedness incurred for the sole purpose of financing the payment of insurance premiums in the ordinary course of business, in an aggregate amount not to exceed the U.S. Dollar Equivalent of U.S.$15,000,000 at any one time outstanding;

(k) Indebtedness arising under any performance or surety bond entered into in the ordinary course of business;

(l) Obligations under Hedging Contracts permitted under Section 8.17;

(m) unsecured Earnout Obligations and Subordinated Indebtedness; and

(n) other Indebtedness the aggregate U.S. Dollar Equivalent of the principal amount of which shall not exceed U.S.$50,000,000 (U.S.$20,000,000 in the aggregate for the Canadian Loan Parties) at any time (of which not greater than the aggregate U.S. Dollar Equivalent of U.S.$20,000,000 (U.S.$10,000,000 in the aggregate for the Canadian Loan Parties) may be secured by Liens permitted by Section 8.2 at any time).

Section 8.2 Liens, Etc. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, create or suffer to exist, any Lien upon or with respect to any of its properties or assets, whether now owned or hereafter acquired, or assign any right to receive income, except for:

(a) Liens created pursuant to the Loan Documents and the U.S. Facility;

(b) Liens granted by a Foreign Subsidiary of Group (other than a Canadian Loan Party) securing the Indebtedness permitted under Section 8.1(g);

(d) Customary Permitted Liens;

(i) Liens on any bills of lading, airway bills, receipts and other applicable documents of title (and inventory and goods covered thereby) delivered with respect to letters of credit issued for the benefit of suppliers of inventory pursuant to facilities provided to a Foreign Subsidiary (other than a Canadian Loan Party) and in respect of which all inventory and goods are located outside the United States;

(k) other Liens (not covering any Inventory, Accounts or other Receivables of any Loan Party or proceeds of any of the foregoing) not otherwise permitted under this Section 8.2, securing obligations in an amount not to exceed the U.S. Dollar Equivalent of U.S.$20,000,000 in an aggregate (U.S.$10,000,000 in the aggregate for the Canadian Loan Parties) amount outstanding at any time.

Section 8.3 Investments. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly make or maintain any Investment except:

(a) (i) Investments by any Warnaco Entity in any other Warnaco Entity in an amount not exceeding the amount outstanding on the Closing Date and as set forth on Schedule 8.3, and (ii) additional Investments by (A) any Warnaco Entity (other than a Canadian Loan Party) in a U.S. Loan Party or a Canadian Loan Party and by the Canadian Loan Parties in other Warnaco Entities which are not Canadian Loan Parties in the maximum aggregate amount of U.S.$10,000,000, (B) any Warnaco Entity that is not a U.S. Loan Party (other than a Canadian Loan Party) in any other Warnaco Entity and by any Canadian Loan Party in another Canadian Loan Party, and (C) any U.S. Loan Party in a Warnaco Entity that is not a U.S. Loan Party (1) to the extent required by applicable law to fulfill statutory capital requirements in a maximum aggregate amount up to U.S.$10,000,000, and (2) solely for the purposes of funding (x) the operations of such Foreign Subsidiary (including Standby Letters of Credit Issued for the benefit of such Foreign Subsidiaries), not to exceed in the aggregate U.S.$25,000,000 at any time outstanding under this subclause (a)(ii)(C)(2)(x), and (y) the repayment of Indebtedness owed by such Warnaco Entity to any U.S. Loan Party and (3) to the extent necessary for such entity to pay taxes that are due and payable; provided, that in each case (other than investments made as capital contributions pursuant to subclause (ii)(C)(1)) such Investment shall be evidenced by a promissory note in form and substance satisfactory to the Administrative Agent, the Collateral Agent shall have a perfected security interest in such promissory note and no Event of Default shall have occurred and be continuing at the time such Investment is made or would result therefrom; provided, further, that in the case of investments made as capital contributions pursuant to subclause (ii)(C)(1) such Investment shall be permitted only to the extent that substantially concurrently with such Investment Group and the Borrower shall have complied with the requirements of Section 7.11(b) (Additional Personal Property Collateral and Guaranties);

(b) Investments in (i) cash and Cash Equivalents; provided that such cash and Cash Equivalents held by a Loan Party are held in a Blocked Account, a Restricted Account, a Control Account or otherwise in compliance with Section 3.8 of the Canadian Security Agreement (in the case of a Canadian Loan Party) or Section 4.7 of the U.S. Pledge and Security Agreement (in the case of a U.S. Loan Party), and (ii) Investment Grade Debt Securities; provided that Investment Grade Debt Securities held by a Loan Party are held in a Securities Account or otherwise in compliance with Section 3.5 of the Canadian Security Agreement (in the case of a Canadian Loan Party) or Section 4.4 of the U.S. Pledge and Security Agreement (in the case of a U.S. Loan Party);

(d) Investments in payment intangibles, chattel paper (each as defined in the PPSA or, in the case of the U.S. Loan Parties, the UCC) and Accounts, notes receivable (including but not limited to those notes receivable held by the U.S. Borrower or its Subsidiaries pursuant to clause (b) of Section 8.4) and similar items arising or acquired in the ordinary course of business consistent with the past practice of the U.S. Borrower and its Subsidiaries;

(f) (i) advances or loans to directors or employees of the Warnaco Entities that do not exceed U.S.$2,000,000 in the aggregate at any one time outstanding (other than any loans or advances to any director or executive officer (or equivalent thereof) that would be in violation of applicable law, including, without limitation, Section 402 of the United States Sarbanes-Oxley Act of 2002), and (ii) advances for employee travel, relocation and other similar and customary expenses incurred in the ordinary course of business that do not exceed U.S.$3,000,000 in the aggregate at any one time outstanding;

(h) Guaranty Obligations permitted by Section 8.1;

(i) Investments by the U.S. Borrower or any Subsidiary in Permitted Acquisitions;

(j) [Intentionally Omitted];

(k) other Investments in an aggregate amount invested not to exceed the U.S. Dollar Equivalent of U.S.$5,000,000 at any time; and

(l) other Investments so long as (i) no Default or Event of Default shall have occurred and be continuing at the time such Investment is made or after giving effect thereto, (ii) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to the making of such Investment (as if such Investment had been made on the first day of such period), (iii) after giving pro forma effect to such Investment Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and additionally, if any such Investment is made by a Canadian Loan Party, Available Canadian Credit is at least 10% of the lesser of (x) the Revolving Credit Commitments in effect at such time and (y) the Borrowing Base at such time and (iv) prior to the making of such Investment, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (l) with respect to such Investment and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio, Available Credit and, if applicable, Available Canadian Credit.

Section 8.4 Sale of Assets. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of, any of its assets or any interest therein (including the sale or factoring at maturity or collection of any Accounts) to any Person, or permit or suffer any other Person to acquire any interest in any of its assets or, in the case of any Subsidiary of Group, issue or sell any shares of such Subsidiary’s Stock or Stock Equivalent (any such disposition being an “Asset Sale”), except:

(a) the sale or disposition of inventory in the ordinary course of business;

(b) the sale of any asset or assets (including, without limitation, a Subsidiary’s Stock, but excluding the Stock of the Borrower) by a Warnaco Entity as long as (i) the purchase price paid to such Warnaco Entity for such asset shall be no less than the Fair Market Value of such asset at the time of such sale, (ii) no less than 75% of the purchase price for such asset shall be paid in cash and the remaining amount paid in notes receivable (provided that in the case of an Asset Sale consummated when no Loan or Loans or unreimbursed amounts in respect of drawn Letters of Credit are outstanding (Loan, Loans and Letters of Credit being used in this proviso as defined in each of this Agreement and the U.S. Facility), 50% of the purchase price for such asset may be paid in cash and the remaining amount paid in notes receivable) (which notes receivable shall be in form and substance reasonably satisfactory to the Administrative Agent), (iii) neither the seller of such assets nor any of its Affiliates shall have any subsequent payment obligations in respect of such sale, other than customary and standard indemnity obligations and as set forth in subclause (ii) above, (iv) no Default or Event of Default has occurred and is continuing at the time of such sale or would result from such sale, (v) in the case of a sale of assets by a U.S. Loan Party, Section 8.4(b)(v) of the U.S. Facility shall have been complied with and (vi) if the net cash proceeds received for all assets sold by the Canadian Loan Parties during any calendar year pursuant to this clause (b) shall exceed the U.S. Dollar Equivalent of U.S.$5,000,000 in the aggregate, then (1) the Borrower shall prepay the Loans (first the Swing Loans until paid in full and then the Revolving Loans) promptly upon receipt of such net cash proceeds in the amount of all net cash proceeds received from time to time (including in respect of any note receivable) with respect to the sale that resulted in such excess occurring and all subsequent sales of assets by any Canadian Loan Party pursuant to this clause (b) during such calendar year and (2) with respect to the sale that resulted in such excess occurring and each subsequent sale of assets by any Canadian Loan Party pursuant to this clause (b) during such calendar year which results in net cash proceeds in excess of the U.S. Dollar Equivalent of U.S.$500,000, the Borrower shall deliver to the Administrative Agent, no later than the date of such sale, a Borrowing Base Certificate as of the Business Day immediately preceding the date of such sale executed by a Responsible Officer of Group giving pro forma effect to such sale, which Borrowing Base Certificate shall show that the aggregate principal amount of Revolving Credit Outstandings does not exceed the Maximum Credit at such time(for purposes of this clause (vi), net cash proceeds of an asset sale means proceeds of such asset sale received from time to time (including a payment on a note receivable) in cash or Cash Equivalents net of (x) the reasonable cash costs of sale, (y) taxes paid or payable as a result thereof and (z) any amount required to be paid or prepaid on Indebtedness (other than the Obligations) secured by a perfected Lien on the assets subject to such asset sale);

(c) transfers of assets from (i) any U.S. Loan Party to any other U.S. Loan Party, (ii) any U.S. Loan Party to any Warnaco Entity that is not a U.S. Loan Party, provided that the aggregate Fair Market Value of assets sold, leased, transferred or otherwise disposed of pursuant to this subclause (ii) (other than pursuant to the next proviso of this subclause (ii)) shall not exceed U.S.$20,000,000 in the aggregate plus the Fair Market Value of any equipment and inventory owned on the Closing Date by a U.S. Loan Party in connection with its domestic manufacturing operations that are subsequently transferred to a Foreign Subsidiary, and provided further that the U.S. Loan Parties may transfer the Calvin Klein Underwear trademark and/or rights to use such trademark to one or more Warnaco Entities that are not U.S. Loan Parties so long as (A) each such transfer shall be on arm’s-length terms and the price paid to the transferring U.S. Loan Parties shall be no less than the Fair Market Value of such trademark at the time of such transfer, (B) each such transfer is for cash, Cash Equivalents and/or a note (such note to be on arm’s-length terms at a market interest rate and otherwise reasonably acceptable to the Administrative Agent and pledged to the Collateral Agent for the benefit of the Secured Parties), (C) no Default or Event of Default has occurred and is continuing at the time of such transfer or would result from such transfer and (D) the transferee of such trademark shall have entered into an agreement on terms reasonably satisfactory to the Administrative Agent pursuant to which such transferee agrees that the Collateral Agent may dispose of Inventory utilizing such trademark without restriction or royalty payment to the transferee, (iii) any Warnaco Entity that is not a Loan Party to any other Warnaco Entity and (iv) any Canadian Loan Party to any other Canadian Loan Party;

(d) the licensing or sublicensing of trademarks and trade names by any Warnaco Entity; provided that (i) if the licensing or sublicensing is by a U.S. Loan Party, if the applicable trademark or trade name has generated sales in excess of U.S.$20,000,000 in the prior fiscal year, such license or sublicense (x) shall not have an initial term in excess of 7 years and (y) shall not have aggregate up-front payments and minimum guaranteed royalties in excess of U.S.$7,500,000 or, together with the aggregate up-front payments and minimum guaranteed royalties for all other such licenses and sublicenses, in an aggregate amount in excess of U.S$25,000,000 and (ii) any such licensing or sublicensing to a Person other than a U.S. Loan Party shall take place on an arm’s-length basis;

(f) the sale or disposition of machinery and equipment no longer used or useful in the business of the Warnaco Entities;

(h) any Asset Sale permitted by Section 8.7;

(i) any Asset Sale in connection with a Sale and Leaseback Transaction permitted pursuant to Section 8.16(b); and

(j) the sale of any asset listed on Schedule 8.4.

Section 8.5 Restricted Payments. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment except for the following:

(a) Restricted Payments by any Subsidiary of the U.S. Borrower to the U.S. Borrower or any Subsidiary of the U.S. Borrower that owns Stock of such Subsidiary, provided that the Borrower shall not be permitted to make a Restricted Payment if an Event of Default or Default shall have occurred and be continuing at the date of declaration or payment thereof or would result therefrom;

(b) dividends and distributions declared and paid on the common Stock of Group and payable only in common Stock of Group;

(c) cash dividends on the Stock of the U.S. Borrower to Group paid and declared in any Fiscal Year solely for the purpose of funding the following:

(i) ordinary operating expenses of Group to cover, inter alia, fees and expenses of directors, directors’ and officers’ insurance, and costs associated with regulatory compliance, not in excess of U.S.$5,500,000 in the aggregate in any Fiscal Year; and

(ii) payments by Group in respect of foreign, federal, state or local taxes owing by Group in respect of the Warnaco Entities, but not greater than the amount that would be payable by the U.S. Borrower, on a consolidated basis, if the U.S. Borrower were the taxpayer; and

(d) other dividends and distributions on the Stock of Group and the U.S. Borrower and other redemptions, repurchases or other acquisitions of the Stock of Group and the U.S. Borrower, in each instance under this clause (d), so long as (i) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to the making of such Restricted Payment (as if such Restricted Payment had been made on the first day of such period), (ii) at the time such Restricted Payment is made and after giving effect thereto Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and (iii) prior to the making of such Restricted Payment, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (d) with respect to such Restricted Payment and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio and Available Credit;

Section 8.6 Prepayment and Cancellation of Indebtedness.

(b) Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness; provided, however, that any Warnaco Entity may: (i) prepay the Obligations in accordance with the terms of this Agreement and prepay the U.S. Secured Obligations in accordance with the terms of the U.S. Facility, (ii) make regularly scheduled or otherwise required repayments or redemptions of Indebtedness, (iii) make permitted repayments of any Indebtedness permitted by Section 8.1 hereof solely to the extent that such Indebtedness is “revolving”, (iv) prepay any intercompany Indebtedness payable to the U.S. Borrower or any of its Subsidiaries by the U.S. Borrower or any of its Subsidiaries, (v) repurchase the Senior Notes in the open market using then available Cash On Hand in an aggregate amount not to exceed U.S.$10,000,000, (vi) renew, extend, refinance and refund Indebtedness, as long as such renewal, extension, refinancing or refunding is permitted under Section 8.1(f), and defease all of the Senior Notes on the terms set forth in Section 7.14 and (vii) prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof any Indebtedness of any Warnaco Entity so long as (A) no Default or Event of Default shall have occurred and be continuing at the time of any such prepayment, redemption, purchase, defeasance or satisfaction or after giving effect thereto, (B) the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most recent four Fiscal Quarter period for which Financial Statements have been delivered pursuant to Section 6.1 on a pro forma basis after giving effect to such prepayment, redemption, purchase, defeasance or satisfaction (as if such prepayment, redemption, purchase, defeasance or satisfaction had been made on

the first day of such period), (C) at the time of such prepayment, redemption, purchase, defeasance or satisfaction and after giving effect thereto Available Credit is at least 25% of the Aggregate Borrowing Limit at such time and additionally, if a Canadian Loan Party is making such prepayment, redemption, purchase, defeasance or satisfaction, Available Canadian Credit is at least 10% of the lesser of (x) the Revolving Credit Commitments in effect at such time and (y) the Borrowing Base at such time and (D) prior to such prepayment, redemption, purchase, defeasance or satisfaction, Group has delivered to the Administrative Agent a certificate executed by a Responsible Officer of Group certifying the satisfaction of the requirements under this clause (vii) with respect to such prepayment, redemption, purchase, defeasance or satisfaction and setting forth in reasonable detail the calculation of such Fixed Charge Coverage Ratio, Available Credit and, if applicable, Available Canadian Credit.

Section 8.7 Restriction on Fundamental Changes. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, merge with any Person, consolidate with any Person, dissolve, acquire all or substantially all of the Stock or Stock Equivalents of any Person, acquire all or substantially all of the assets constituting a business, division, branch or other unit of operation or trademark of any Person, enter into any joint venture or partnership with any Person, or acquire or create any Subsidiary, except that:

(a) any Warnaco Entity (other than any Canadian Loan Party) may merge into or consolidate with any U.S. Loan Party; provided, however, that, in the case of any such merger or consolidation, the Person formed or continued by such merger or consolidation shall be a U.S. Loan Party and, if the U.S. Borrower is a party to any such merger or consolidation, the U.S. Borrower is the surviving entity of such merger or consolidation;

(b) any Warnaco Entity that is not a U.S. Loan Party may merge into or consolidate or amalgamate with any other Warnaco Entity that is not a U.S. Loan Party; provided, however, that, in the case of any such merger, consolidation or amalgamation, the Person formed or continued by such merger, consolidation or amalgamation shall be a Wholly Owned Subsidiary of Group and, if the Borrower is a party to any such merger, consolidation or amalgamation, the Borrower is the surviving entity of such merger, consolidation or amalgamation and any Canadian Loan Party (if not the Borrower) may only be merged, consolidated or amalgamated with the Borrower or a Canadian Subsidiary of the Borrower wholly-owned, directly or indirectly, by the Borrower;

(c) any Warnaco Entity may form a new Wholly Owned Subsidiary; provided, however, if a Domestic Subsidiary or a Canadian Subsidiary is formed, such Domestic Subsidiary or Canadian Subsidiary shall become a Loan Party;

(d) any Warnaco Entity which is inactive or dormant (meaning that on the date of determination and on a consolidated basis with its Subsidiaries, it has assets with an aggregate Fair Market Value of less than the U.S. Dollar Equivalent of U.S.$100,000) may be dissolved, provided that if such Warnaco Entity is a Loan Party, all assets distributed upon dissolution shall be distributed to another Loan Party; and

(e) any Warnaco Entity may consummate any Investment permitted under Section 8.3, including any Permitted Acquisition;

Section 8.8 Change in Nature of Business.

(b) Group shall not engage in any business or activity other than (i) holding shares in the Stock of the U.S. Borrower, (ii) paying taxes, (iii) preparing reports to Governmental Authorities, national securities exchanges and its shareholders and debt holders, (iv) maintaining its legal existence, holding directors and shareholders meetings, preparing corporate records and other corporate activities required to maintain its separate corporate structure, including the ability to incur fees, costs and expenses relating to such maintenance, (v) issuing Stock, (vi) performing its obligations and activities incidental thereto under the Loan Documents and under the Loan Documents (as defined in the U.S. Facility), (vii) making Restricted Payments and Investments to the extent permitted by this Agreement, (viii) entering into unsecured guaranties of Indebtedness and other obligations of its Subsidiaries to the extent permitted by Section 8.1(d) and (ix) activities incidental to the foregoing.

Section 8.9 Transactions with Affiliates. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, except as otherwise expressly permitted herein, do any of the following: (a) make any Investment in an Affiliate of Group which is not a Warnaco Entity; (b) transfer, sell, lease, assign or otherwise dispose of any asset to any Affiliate of Group which is not a Warnaco Entity; (c) merge into or consolidate with or purchase or acquire assets from any Affiliate of Group which is not a Warnaco Entity; (d) repay any Indebtedness to any Affiliate of Group which is not a Warnaco Entity; or (e) enter into any other transaction directly or indirectly with or for the benefit of any Affiliate of Group which is not a Warnaco Entity (including guaranties and assumptions of obligations of any such Affiliate), except for (i) transactions in the ordinary course of business on a basis no less favorable to such Warnaco Entity as would be obtained in a comparable arm’s length transaction with a Person not an Affiliate and (ii) salaries and other employee compensation to officers or directors of any Warnaco Entity.

Section 8.10 Restrictions on Subsidiary Distributions; No New Negative Pledge. Other than (x) pursuant to the Loan Documents, the Senior Note Documents, the U.S. Facility, the documents governing any Indebtedness permitted under Section 8.1(g), any agreements governing any purchase money Indebtedness or Capital Lease Obligations permitted by Section 8.1(e) or any renewal, extension, refinancing or refunding of any such Indebtedness or Capital Lease Obligations permitted under Section 8.1(f) (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) or any agreement governing any renewal, extension, refinancing or refunding of the Senior Notes permitted under Section 8.1(f) (in which case, any prohibition or limitation shall not be materially more restrictive than the corresponding prohibition or limitation in the Senior Note Indenture as in effect on the date hereof), (y) any restrictions consisting of customary non-assignment provisions that are entered into in the ordinary course of business consistent with prior practice to the extent that such provisions restrict the transfer or assignment of such contract or (z) with respect to any asset that is subject to a contract of sale permitted by Section 8.4 or which contract acknowledges that a waiver under Section 8.4 is necessary, each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to:

Section 8.11 Modification of Constituent Documents. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, change its capital structure (including in the terms of its outstanding Stock) or otherwise amend its Constituent Documents, except for changes and amendments which do not materially and adversely affect the rights and privileges of any Warnaco Entity, or the interests of the Facility Agents or the Secured Parties under the Loan Documents or in the Collateral.

Section 8.12 Modification of Certain Documents and Certain Debt. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, alter, rescind, terminate, amend, supplement, waive or otherwise modify any provision of any document governing Indebtedness permitted pursuant to Section 8.1(b) or Section 8.1(g), except for modifications to the terms of such Indebtedness (or any indenture or agreement in connection therewith) permitted under Section 8.13 (Modification of Debt Agreements) and modifications that do not materially adversely affect the interests of the Secured Parties under the Loan Documents or in the Collateral. Group shall not, and shall not permit the U.S. Borrower to, amend, supplement, waive or otherwise modify (or consent to any amendment, supplement, waiver or modification of) the U.S. Facility so as to (i) eliminate or modify any requirement contained in the U.S. Facility as in effect on the date hereof for the consent of the Administrative Agent (including, without limitation, any requirement in Section 2.13(h) or Section 11.1 thereof) or (ii) increase any borrowing base advance rate percentage thereunder above the maximum borrowing base advance rate percentage therefor as in effect on the date of execution of the U.S. Facility.

Section 8.13 Modification of Debt Agreements. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, change or amend the terms of the Senior Note Documents (or any indenture, agreement or other material document entered into in connection therewith) if the effect of such amendment is to (a) increase the interest rate payable in cash on such Indebtedness, (b) change the dates upon which payments of principal or interest are due on such Indebtedness other than to extend such dates, (c) change any default or event of default other than to delete or make less restrictive any default provision therein, or add any covenant with respect to such Indebtedness unless a corresponding covenant is added hereunder, (d) change the subordination provisions, if any, of such Indebtedness, (e) change the redemption or prepayment provisions of such Indebtedness other than to extend the dates therefor or to reduce the premiums payable in connection therewith or (f) change or amend any term (including any covenant) if such change or amendment would increase the obligations of the obligor or confer additional rights to the holder of such Indebtedness or Security in a manner materially adverse to any Warnaco Entity, the Facility Agents or any Lender.

Section 8.14 Accounting Changes; Fiscal Year. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, change its (a) accounting treatment and reporting practices, except as required by Agreement Accounting Principles, the Financial Accounting Standards Board or any Requirement of Law and disclosed to the Lenders and the Administrative Agent or (b) Fiscal Year.

Section 8.15 Margin Regulations. Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, use all or any portion of the proceeds of any credit extended hereunder to purchase or carry margin stock (within the meaning of Regulation U of the Federal Reserve Board) in contravention of Regulation U of the Federal Reserve Board.

Section 8.16 Sale and Leasebacks Transactions.

(a) [Intentionally Omitted].

(b) Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, enter into any Sale and Leaseback Transaction if, after giving effect to such Sale and Leaseback Transaction, the U.S. Dollar Equivalent of the aggregate Fair Market Value of all properties covered by Sale and Leaseback Transactions would exceed U.S.$10,000,000.

Section 8.17 No Speculative Transactions. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, engage in any speculative transaction or in any transaction involving Hedging Contracts except for the sole purpose of hedging in the normal course of business and consistent with industry practices.

Section 8.18 Compliance with ERISA. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, or cause or permit any ERISA Affiliate to, cause or permit to occur (a) an event which could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (b) an ERISA Event that would have a Global Material Adverse Effect.

Section 8.19 Environmental. Each of Group and the Borrower will not, and will not permit any of its respective Subsidiaries to, allow a Release of any Contaminant in violation of any Environmental Law; provided, however, that no Warnaco Entity shall be deemed in violation of this Section 8.19 if, as the consequence of all such Releases, the Warnaco Entities would not incur Environmental Liabilities and Costs in excess of the U.S. Dollar Equivalent of U.S.$5,000,000 in the aggregate.

ARTICLE IX

EVENTS OF DEFAULT

Section 9.1 Events of Default. Each of the following events shall be an Event of Default:

(c) any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Article V, Section 6.1, Section 6.2, Section 6.12, Section 7.1, Section 7.6, Section 7.9, Section 7.11, Section 7.14, or Article VIII, or Section 3.8 of the Canadian Security Agreement or Section 4.7 of the U.S. Pledge and Security Agreement, or (ii) any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (ii) shall remain unremedied for 30 days after the earlier of the date on which (A) a Responsible Officer of Group or the Borrower becomes aware of such failure and (B) written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or

(d) (i) any Warnaco Entity shall fail to make any payment on any Indebtedness (other than the Obligations) of any Warnaco Entity (or any Guaranty Obligation in respect of Indebtedness of any other Person) having a U.S. Dollar Equivalent principal amount of U.S.$25,000,000 or more, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or (iii) any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid or repurchased (other than by a regularly scheduled required prepayment or, in connection with the Senior Notes, a provision requiring a prepayment or repurchase in the event of the receipt by a Warnaco Entity of proceeds of a debt issuance, equity issuance or an Asset Sale), prior to the stated maturity thereof; or

(e) (i) any Warnaco Entity shall generally not pay its debts as such debts become due, shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors, (ii) any proceeding shall be instituted by or against any Warnaco Entity seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts, under any Requirement of Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, interim receiver, receiver-manager, trustee, monitor or other similar official for it or for any substantial part of its property; provided, however, that, in the case of any such proceedings instituted against a Warnaco Entity (but not instituted by a Warnaco Entity), either such proceedings shall remain undismissed or unstayed for a period of 30 days or more or any action sought in such proceedings shall occur or (iii) any Warnaco Entity shall take any corporate action to authorize any action set forth in clauses (i) and (ii) above; or

(h) one or more judgments or orders (or other similar process) involving, in any single case or in the aggregate, an amount in excess of the U.S. Dollar Equivalent of U.S.$20,000,000 in the case of a money judgment, to the extent not covered by insurance, shall be rendered against one or more Warnaco Entity and shall remain unpaid and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) an ERISA Event shall occur and the amount of all liabilities and deficiencies resulting therefrom, whether or not assessed, exceeds U.S.$20,000,000 in the aggregate; or

(j) there shall occur a Change of Control; or

(l) any one or more events or conditions shall occur or exist with respect to any Canadian Plans that could, in the Administrative Agent’s good faith judgment, subject the Borrower or any other Canadian Loan Party to any tax, penalty or other liabilities under the Supplemental Pensions Act (Québec), the Pension Benefits Act (Ontario) or any other applicable laws and which could reasonably be expected to give rise to a Material Adverse Effect, or if the Borrower or any other Canadian Loan Party is in default with respect to required payments to a Canadian Plan or any Lien arises (save for contribution amounts not yet due) in connection with any Canadian Plan; or

(m) an “Event of Default” shall occur and be continuing under the U.S. Facility.

Section 9.2 Remedies. During the continuance of any Event of Default,

Section 9.3 Actions in Respect of Letters of Credit. Upon the Revolving Credit Termination Date, or as required by Section 2.9, the Borrower shall pay to the Administrative Agent in immediately available funds at the Administrative Agent’s office referred to in Section 11.8, for deposit in a Cash Collateral Account, the amount required to ensure that, after such payment, the aggregate funds on deposit in the Cash Collateral Accounts equals or exceeds 105% of the sum of all outstanding Letter of Credit Obligations. The Administrative Agent may, from time to time after funds are deposited in any Cash Collateral Account, apply funds then held in such Cash Collateral Account to the payment of any amounts, in accordance with Section 2.13(h), as shall have become or shall become due and payable by the Borrower to the Issuers or the Lenders in respect of the Obligations. The Administrative Agent shall promptly give written notice of any such application; provided, however, that the failure to give such written notice shall not invalidate any such application.

ARTICLE X

THE FACILITY AGENTS

Section 10.1 Authorization and Action.

(iii) For the purposes of creating a solidarité active in accordance with Article 1541 of the Civil Code of Quebec between each Lender, each Issuer and each other Secured Party, taken individually, on the one hand, and each Facility Agent, on the other hand, each Loan Party and each such Lender, Issuer and other Secured Party acknowledges and agrees with each Facility Agent that such Lender, Issuer, other Secured Party and Facility Agent are hereby conferred the legal status of solidary creditors of each such Loan Party in respect of all Secured Obligations owed by each such Loan Party to each Facility Agent and each Lender, Issuer and other Secured Party hereunder and under the other Loan Documents (collectively, the “Solidary Claim”) and that, accordingly, but subject (for the avoidance of doubt) to Article 1542 of the Civil Code of Quebec, each such Loan Party is irrevocably bound towards each Facility Agent and each Lender, Issuer and other Secured Party in respect of the entire Solidary Claim of each Facility Agent and such. As a result of the foregoing, the parties hereto acknowledge that each Facility Agent and each Lender, Issuer and other Secured Party shall at all times have a valid and effective right of action for the entire Solidary Claim of each Facility Agent and such Lender, Issuer and other Secured Party and the right to give full acquittance for it. Accordingly, and without limiting the generality of the foregoing, each Facility Agent, as solidary creditor with each Lender, Issuer and other Secured Party, shall at all times have a valid and effective right of action in respect of the Solidary Claim and the right to give a full acquittance for same. By its execution of the Loan Documents to which it is a party, each such Loan Party not a party hereto shall also be deemed to have accepted the stipulations hereinabove provided. The parties further agree and acknowledge that such Liens (hypothecs) under the Collateral Documents and the other Loan Documents shall be granted to the Collateral Agent, for its own benefit and for the benefit of the Lenders, Issuers and other Secured Parties, as solidary creditor as hereinabove set forth.

100

Section 10.2 Agent’s Reliance, Etc. None of the Facility Agents, any of their respective Affiliates, or any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or any of the other Loan Documents, except for its, his, her or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent and the Collateral Agent: (a) may rely on the Register to the extent set forth in Section 11.2(c); (b) may consult with legal counsel (including counsel to the Borrower or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any other Agent, any Lender or any Issuer and shall not be responsible to any other Agent, any Lender or any Issuer for any statements, warranties or representations made by or on behalf of Group or any of its Subsidiaries in or in connection with this Agreement or any of the other Loan Documents; (d) shall not have any duty to ascertain or to inquire either as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents or the financial condition of any Loan Party, or the existence or possible existence of any Default or Event of Default; (e) shall not be responsible to any other Agent, any Lender or any Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, this Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy or electronic mail) or any telephone message believed by it to be genuine and signed or sent by the proper party or parties.

101

Section 10.3 The Agents Individually. With respect to its Ratable Portion, BofA Canada Branch shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms “Lenders” or “Requisite Lenders” or any similar terms shall, unless the context clearly otherwise indicates, include each Facility Agent in its individual capacity as a Lender or as one of the Requisite Lenders, as the case may be. BofA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not acting as a Facility Agent hereunder or under the other Loan Documents.

Section 10.4 Lender Credit Decision. Each Lender and each Issuer acknowledges that it shall, independently and without reliance upon any Facility Agent or any other Lender or Issuer, conduct its own independent investigation of the financial condition and affairs of the Borrower and each other Loan Party in connection with the making and continuance of the Loans and with the issuance of the Letters of Credit. Each Lender and each Issuer also acknowledges that it will, independently and without reliance upon any Facility Agent or any other Lender or Issuer and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents.

Section 10.5 Indemnification. Each Lender agrees to indemnify each of the Facility Agents and each of its respective Affiliates and each of their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by a Loan Party and without limiting its obligations to do so) from and against such Lender’s aggregate Ratable Portion of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including reasonable fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, any Facility Agent or any of its Affiliates, directors, officers, employees, agents or advisors in any way relating to or arising out of this Agreement, any of the other Loan Documents or any action taken or omitted by any Facility Agent under this Agreement or any of the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Facility Agent’s or such Affiliate’s gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse each Facility Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable fees and disbursements of legal counsel) incurred by such Facility Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or any of the other Loan Documents, to the extent that such Facility Agent is not reimbursed for such expenses by a Loan Party.

102

Section 10.6 Successor Agents.

(a) Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the other Facility Agents, the Lenders, the Issuers and the Borrower and shall, immediately upon giving such notice, be discharged from its duties and obligations under this Agreement and the other Loan Documents. Upon any such resignation by the Administrative Agent, the Requisite Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuers, appoint a successor Administrative Agent, selected from among the Lenders. Such appointment shall be subject to the prior written approval of the Borrower (which approval may not be unreasonably withheld or delayed and shall not be required upon the occurrence and during the continuance of an Event of Default). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. Prior to any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents. At any time after the discharge of a retiring Administrative Agent from its duties and obligations under this Agreement and prior to any Person accepting its appointment as a successor Administrative Agent, the Requisite Lenders shall assume and perform all of the duties of such retiring Administrative Agent hereunder until such time, if any, as a successor Administrative Agent shall become the Administrative Agent hereunder. After its resignation, the retiring Administrative Agent shall continue to have the benefit of this Article X as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement or any of the other Loan Documents.

103

Section 10.7 Concerning the Collateral and the Collateral Documents.

104

(b) At the request of the Borrower (but subject to clause (d) below), the Collateral Agent shall, and each of the Administrative Agent, the Lenders and the Issuers hereby authorizes and directs the Collateral Agent (without any further notice to or consent of any such Person) to, promptly release (or, in the case of clause (ii) below, release or subordinate as required by the holders of any Lien specified thereunder) any Lien held by the Collateral Agent for the benefit of the Secured Parties (in each instance with respect to any Lien granted by a U.S. Loan Party, only to the extent that such Lien secures Secured Obligations) against any of the following:

(i) all of the Collateral and all Loan Parties, upon receipt of a written notice from the Administrative Agent that the Commitments have been terminated and all Loans, all Reimbursement Obligations and all other Secured Obligations that the Administrative Agent has been notified in writing are then due and payable have been paid in full (and, in respect of contingent Letter of Credit Obligations, with respect to which cash collateral has been deposited or a back-up letter of credit has been issued, in either case in the appropriate currency and on terms satisfactory to the Administrative Agent and the applicable Issuers);

(ii) any part of the Collateral that is subject to a Lien permitted by Sections 8.2(c), (e) or (f); and

(d) Notwithstanding anything herein or in any other Loan Document to the contrary, (i) the release or subordination of any Lien held by the Collateral Agent in any Collateral granted by a U.S. Loan Party to secure any Secured Obligations shall be governed by the U.S. Facility, except that, in addition to any such release or subordination of any Lien in such Collateral, the Collateral Agent may, with the prior written consent of the Requisite Lenders or of all the Lenders (as applicable), agree that the Lien of the Collateral Agent in any Collateral granted by a U.S. Loan Party shall no longer secure Secured Obligations and (ii) the Collateral Agent shall have no authority or obligation to release or subordinate any Lien in any Collateral granted by a U.S. Loan Party to the extent such Collateral secures U.S. Secured Obligations (other than under the U.S. Loan Party Canadian Facility Guaranty) (such release or subordination to be governed by the U.S. Facility and not this Agreement).

105

Section 10.8 Collateral Matters Relating to Related Obligations. The provisions of this Agreement and the other Loan Documents relating to the Collateral shall extend to and be available in respect of any Secured Obligation arising under any Hedging Contract or Cash Management Obligation or that is otherwise owed to Persons other than the Facility Agents, the Lenders and the Issuers (collectively, “Related Obligations”) solely on the condition and understanding, as among the Facility Agents and all Secured Parties, that (a) the Related Obligations shall be entitled to the benefit of the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Facility Agents shall hold, and have the right and power to act with respect to, the Guaranty, the U.S. Loan Party Canadian Facility Guaranty and the Collateral on behalf of and as agent for the holders of the Related Obligations, but each Facility Agent is otherwise acting solely as agent for the Lenders and the Issuers and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations, (b) all matters, acts and omissions relating in any manner to the Guaranty, the U.S. Loan Party Canadian Facility Guaranty, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation, (c) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the other Loan Documents, by any of the Facility Agents and the Requisite Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby, (d) no holder of Related Obligations and no other Secured Party (except the Facility Agents, the Lenders and the Issuers, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the other Loan Documents and (e) no holder of any Related Obligation shall exercise any right of setoff, banker’s lien or similar right except to the extent provided in Section 11.6 and then only to the extent such right is provided for under the documents governing such Related Obligation and exercised in compliance with Section 11.7.

Section 10.9 Posting of Approved Electronic Communications.

106

Section 10.10 Syndication Agent; Arrangers. Neither the Syndication Agent nor the Arrangers shall have any obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity. Without limiting the foregoing, none of the Syndication Agent nor the Arrangers shall have or be deemed to have any fiduciary relationship with any Lender or Issuer. Each Lender and Issuer acknowledges and agrees that it has not relied, and will not rely, on any of the Arrangers, the Syndication Agent or any of the other Lenders or Issuers in deciding whether to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE XI

MISCELLANEOUS

Section 11.1 Amendments, Waivers, Etc.

(a) No amendment or waiver of any provision of this Agreement or any other Loan Document nor consent to any departure by any Loan Party therefrom (other than any amendment or waiver of any provision of any Collateral Document (as defined in the U.S. Facility) or any consent to any departure by any U.S. Loan Party therefrom, which amendment, waiver or consent shall be governed by the U.S. Facility) shall in any event be effective unless the same shall be in writing and (x) in the case of any such waiver or consent, signed by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and (y) in the case of any other amendment, by the Requisite Lenders (or by the Administrative Agent with the consent of the Requisite Lenders) and the Borrower, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that:

(i) no amendment, waiver or consent with respect to the provisions contained in Section 2.13(h) shall be effective, unless in writing and signed by each Agent or Lender required under the terms of such section to have consented thereto;

107

(iii) no amendment, waiver or consent shall be effective to increase any Advance Rate above the applicable maximum set forth in the definition thereof, unless in writing and signed by each Lender;

(iv) no amendment, waiver or consent with respect to the terms and conditions of the Collateral Documents shall be effective, unless in writing and signed by the Collateral Agent;

(v) except to the extent any such amendment, waiver or consent would result in an increase of the aggregate Revolving Credit Commitments, no amendment, waiver or consent shall be effective with respect to the terms and provisions under Article II and any other provisions related solely to Revolving Credit Borrowings (including any conditions to such Borrowings and increases to interest rates and fees) and payment procedures under the Revolving Credit Facility, unless in writing and signed by the Administrative Agent and the Requisite Lenders;

(vi) [Intentionally Omitted]; and

(vii) no amendment, waiver or consent shall, unless in writing and signed by each Lender affected thereby, in addition to the Requisite Lenders, do any of the following:

(B) increase the Commitment of such Lender or subject such Lender to any additional obligation;

(D) reduce the principal amount of any Loan or Reimbursement Obligation (other than by the payment or prepayment thereof) owing to such Lender;

(F) change the aggregate Ratable Portions of the Lenders which shall be required for the Lenders or any of them to take any action hereunder;

108

(G) release all or substantially all of the Collateral or release any Guarantor from its obligations under the Guaranty or the U.S. Loan Party Canadian Facility Guaranty except as provided in Section 10.7 or as expressly provided under the Guaranty or the U.S. Loan Party Canadian Facility Guaranty; or

(H) amend Section 11.7 or this Section 11.1 or the definition of the terms “Requisite Lenders”, “Ratable Portion” or “Super-Majority Lenders”; and

provided, further, that:

provided, further, that (i) the Administrative Agent may, with the consent of the Borrower, amend, modify or supplement this Agreement or any other Loan Document to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender or any Issuer, (ii) Schedule I (Commitments) may be amended from time to time by the Administrative Agent alone to reflect assignments of Commitments in accordance herewith and any increase in the Commitment of any Lender or any new Commitment of any Lender made in accordance herewith (including, without limitation, in accordance with clause (B) above) (with the Administrative Agent agreeing to remit to the Borrower a copy of any such amended Schedule I; provided, however, that the failure of the Administrative Agent to so remit such copy shall not affect any such assignment or any such increase in or new Commitment and shall not create any liability against the Administrative Agent), (iii) any Loan Documents may be amended from time to time by the Administrative Agent, the Collateral Agent and the relevant Loan Party alone (i.e. without any Lender consent or approval) to add a Subsidiary of Group as a Subsidiary Guarantor or as a grantor under a Collateral Document or to subject to the Lien of any applicable Loan Document assets or property not then subject to the Lien of such Loan Document and (iv) in the event that the U.S. Facility is amended, or a waiver is granted thereunder, and such amendment or waiver concerns one or more of the provisions contained in the U.S. Facility analogous to Sections 6.1, 6.11, 6.13, 7.1, 7.2, 7.3, 7.13, 7.14, or 8.8 - 8.19 hereof or any of the definitions contained therein, then such Section(s) of this Agreement or definitions (but only as to such Sections), as applicable, shall be amended or waived to conform to such amendment or waiver of the U.S. Facility, mutatis mutandis, (but only to the extent applicable to a Warnaco Entity other than a Canadian Loan Party) without any vote required from the Lenders or any Agent (and each Lender hereby authorizes the Administrative Agent to execute any and all documents to evidence any such amendment or waiver under this Agreement without the consent of such Lender).

109

Section 11.2 Assignments and Participations.

(ii) the aggregate amount being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event (if less than the Assignor’s entire interest) be less than U.S.$3,000,000 or an integral multiple of U.S.$1,000,000 in excess thereof, except (I) with the consent of the Borrower and the Administrative Agent or (II) if such assignment is being made to a Lender or an Affiliate or Approved Fund of such Lender; and

110

(b) The parties to each assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register (as defined in clause (c) below), an Assignment and Acceptance. Upon such execution, delivery, acceptance and recording in the Register and the receipt by the Administrative Agent from the assignee of an assignment fee in the amount of U.S.$3,500 (other than in the case of an assignment by a Lender to an Affiliate of such Lender or by any Agent or their respective Affiliates) from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender, and if such Lender were an Issuer, of such Issuer hereunder and thereunder, and (ii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).

(c) The Administrative Agent shall maintain at its address referred to in Section 11.8 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recording of the names and addresses of the Lenders and the Issuers, the Revolving Credit Commitments of and principal amount of the Revolving Loans, Swing Loans and Letter of Credit Obligations (specifying the Reimbursement Obligations) owing to each Lender and each Issuer from time to time (the “Revolving Credit Facility Register” or the “Register”). The entries in the Revolving Credit Facility Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Administrative Agent, the Lenders and the Issuers shall treat each Person whose name is recorded in the Revolving Credit Facility Register as a Lender or as an Issuer, as the case may be, for all purposes of this Agreement. The Revolving Credit Facility Register shall be available for inspection by the Borrower and the Facility Agents at any reasonable time and from time to time upon reasonable prior notice. No Revolving Loan, Swing Loan, Letter of Credit Obligation, Reimbursement Obligation, nor any Assignment and Acceptance, shall be effective unless it is entered in the Register in due course.

111

(f) In addition to the other assignment rights provided in this Section 11.2, each Lender may do each of the following:

112

113

Section 11.3 Costs and Expenses.

(a) The Borrower agrees upon demand to pay, or reimburse each Facility Agent and BAS for, all of such Facility Agent’s and BAS’s reasonable internal and external audit, legal, appraisal, valuation, filing, document duplication and reproduction and investigation expenses and for all other reasonable out-of-pocket costs and expenses of every type and nature (including the reasonable fees, expenses and disbursements of the Facility Agents’ counsel, each of Kaye Scholer LLP and Ogilvy Renault LLP, local legal counsel, auditors, accountants, appraisers, printers, insurance advisers, and other consultants and agents) incurred by such Facility Agent or BAS in connection with (i) such Facility Agent’s or BAS’s audit and investigation of any of the Warnaco Entities in connection with the preparation, negotiation and execution of the Loan Documents and the Administrative Agent’s periodic audits of any of the Warnaco Entities, as the case may be; (ii) the preparation, negotiation, execution and interpretation of this Agreement (including, without limitation, the satisfaction or attempted satisfaction of any of the conditions set forth in Article III), the other Loan Documents and any proposal letter or commitment letter issued in connection therewith and the making of the Loans hereunder; (iii) the creation, perfection or protection of the Liens under the Loan Documents (including, without limitation, any reasonable fees and expenses for local counsel in various jurisdictions); (iv) the ongoing administration of this Agreement and the Loans, including consultation with attorneys in connection therewith and with respect to the rights and responsibilities of each Facility Agent hereunder and under the other Loan Documents; (v) the protection, collection or enforcement of any of the Secured Obligations or the enforcement of any of the Loan Documents; (vi) the commencement, defense or intervention in any court proceeding relating in any way to any of the Secured Obligations, any Warnaco Entity, this Agreement or any of the other Loan Documents; (vii) the response to, and preparation for, any subpoena or request for document production with which any Facility Agent or BAS is served or deposition or other proceeding in which any Facility Agent or BAS is called to testify, in each case, relating in any way to any of the Obligations, any Warnaco Entity, this Agreement or any of the other Loan Documents; and (viii) any amendments, consents, waivers, assignments, restatements, or supplements to any of the Loan Documents and the preparation, negotiation, and execution of the same.

(b) The Borrower further agrees to pay or reimburse each Arranger, each Agent and each of the Lenders and Issuers upon demand for all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees (including allocated costs of internal counsel and costs of settlement), incurred by such Arranger, such Agent, such Lender or such Issuer (i) in enforcing any Loan Document, any Secured Obligation or any security therefor or exercising or enforcing any other right or remedy available by reason of an Event of Default; (ii) in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out” or in any insolvency or bankruptcy proceeding; (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to any of the Secured Obligations, any Warnaco Entity and related to or arising out of any of the transactions contemplated hereby or by any of the other Loan Documents; and (iv) in taking any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) described in any of clauses (i) through (iii) above.

114

Section 11.4 Indemnities.

(a) The Borrower agrees to indemnify and hold harmless each Arranger, each Agent, each Lender and each Issuer and each of their respective Affiliates, and each of the directors, officers, employees, agents, representative, attorneys, consultants and advisors of or to any of the foregoing (including those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each such Person being an “Indemnitee”) from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including reasonable fees and disbursements of counsel to any such Indemnitee) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of this Agreement, any other Loan Document, any Secured Obligation, any Letter of Credit or any act, event or transaction related or attendant to any thereof, or the use or intended use of the proceeds of any of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the “Indemnified Matters”); provided, however, that the Borrower shall not have any obligation under this Section 11.4 (i) to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order, (ii) with respect to taxes (and amounts relating thereto), the indemnification for which shall be governed solely and exclusively by Section 2.16, and (iii) to an Indemnitee with respect to any Indemnified Matter that does not involve an act or omission of any Warnaco Entity or affiliate thereof and is brought by one Indemnitee against another Indemnitee. Without limiting the foregoing, Indemnified Matters include (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of any Warnaco Entity involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or any contiguous real estate; (ii) any costs or liabilities incurred in connection with any Remedial Action concerning any Warnaco Entity; (iii) any costs or liabilities incurred in connection with any Environmental Lien; (iv) any costs or liabilities incurred in connection with any other matter under any Environmental Law, including CERCLA and applicable property transfer laws, whether, with respect to any of such matters, such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor in interest to any Warnaco Entity, or the owner, lessee or operator of any property of any Warnaco Entity by virtue of foreclosure, except, with respect to those matters referred to in clauses (i), (ii), (iii) and (iv) above, to the extent incurred following (A) foreclosure by any Facility Agent, any Lender or any Issuer, or any Facility Agent, any Lender or any Issuer having become the successor in interest to any Warnaco Entity, and (B) attributable solely to acts of the Arrangers, the Facility Agents, such Lender or such Issuer or any agent on behalf of the Facility Agents or such Lender.

(b) The Borrower shall indemnify each Agent, each Arranger, each Lender and each Issuer for, and hold each Agent, each Arranger, each Lender and each Issuer harmless from and against, any and all claims for brokerage commissions, fees and other compensation made against any Agent, Arranger, Lender or any Issuer for any broker, finder or consultant with respect to any agreement, arrangement or understanding made by or on behalf of any Warnaco Entity in connection with the transactions contemplated by this Agreement.

(c) The Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including pursuant to this Section 11.4) or any other Loan Document shall (i) survive payment in full of the Secured Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document.

115

Section 11.5 Limitation of Liability.

Section 11.6 Right of Set-off. Upon the occurrence and during the continuance of any Event of Default, each Lender and each Affiliate of a Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or its Affiliates to or for the credit or the account of a Loan Party against any and all of the Secured Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Secured Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender or its Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.6 are in addition to the other rights and remedies (including other rights of set-off) which such Lender may have.

Section 11.7 Sharing of Payments, Etc.

116

Section 11.8 Notices, Etc.

(i) if to Group or the Borrower:

c/o The Warnaco Group Inc.
501 7th Avenue
New York, NY 10018
Attention: Chief Financial Officer
Telecopy No: (212) 287-8546

with a copy to the Assistant General Counsel of Group
Email: ealford@warnaco.com

(ii) if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II (Domestic Lending Offices and Addresses for Notices) or on the signature page of any applicable Assignment and Acceptance;

(iii) if to any Issuer, at the address set forth under its name on Schedule II (Domestic Lending Offices and Addresses for Notices);

(iv) if to the Administrative Agent:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Business Capital-
Account Executive
Email: kevin.w.corcoran@bankofamerica.com
Telecopy No.: (212) 503-7350

117

with a copy to:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Legal Department
Email: girolamo.m.saccone@bankofamerica.com
Telecopy No.: (212) 503-7350

and

(v) if to the Collateral Agent:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Business Capital-
Account Executive
Email: kevin.w.corcoran@bankofamerica.com
Telecopy No.: (212) 503-7350

with a copy to:

Bank of America, N.A.
335 Madison Avenue
New York, New York 10017
Attention: Legal Department
Email: girolamo.m.saccone@bankofamerica.com
Telecopy No.: (212) 503-7350

118

Section 11.9 No Waiver; Remedies. No failure on the part of any Lender, Issuer or any Facility Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 11.10 Binding Effect. This Agreement shall become effective when it shall have been executed by Group, the Borrower and the Facility Agents and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of Group, the Borrower, the Facility Agents and each Lender and their respective successors and assigns, except that neither Group nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.

Section 11.11 Governing Law. This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the internal law of the Province of Ontario, Canada.

Section 11.12 Submission to Jurisdiction; Service of Process.

(a) Any legal action or proceeding with respect to (i) this Agreement or any other Loan Document governed by laws other than the laws of the United States of America or any state thereof may be brought in the courts located in the city of Toronto, Ontario, Canada and (ii) any Loan Document governed by the laws of the United States of America or any state thereof may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, Group and the Borrower hereby each accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) Each of Group and the Borrower hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding arising out of or in connection with this Agreement or any of the other Loan Documents by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to Group and the Borrower at its address specified in Section 11.8. Each of Group and the Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

119

Section 11.13 Waiver of Jury Trial. Each Facility Agent, each of the Lenders, the Issuers, Group and the Borrower irrevocably waives trial by jury in any action or proceeding with respect to this Agreement or any other Loan Document.

Section 11.14 Marshaling; Payments Set Aside. None of the Facility Agents, any Lender or any Issuer shall be under any obligation to marshal any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent that any Loan Party makes a payment or payments to any Facility Agent, the Lenders or the Issuers or any of such Persons receives payment from the proceeds of the Collateral or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefore, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

Section 11.15 Section Titles. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

Section 11.16 [Intentionally Omitted].

Section 11.17 [Intentionally Omitted].

Section 11.18 Entire Agreement. This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed signature page of this Agreement by facsimile transmission, electronic mail or by posting on the Approved Electronic Platform shall be as effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all parties shall be lodged with the Borrower and the Administrative Agent. In the event of any conflict between the terms of this Agreement and any other Loan Document, the terms of this Agreement shall govern.

120

Section 11.19 Confidentiality.

Section 11.20 Patriot Act Notice. The Agents, the Issuers and the Lenders hereby notify Group and the Borrower that, pursuant to the requirements of the Patriot Act, the Agents, the Issuers and the Lenders are required to obtain, verify and record information that identifies each of Group, the Borrower and the other Loan Parties, including its legal name, address, tax ID number and other information that will allow the Agents, the Issuers and the Lenders to identify it in accordance with the Patriot Act. The Agents, the Issuers and the Lenders may require information regarding Group’s, the Borrower’s and other Loan Parties’ management and owners, such as legal name, social security number and date of birth.

Section 11.21 Language. The parties have requested that this Agreement and the other documents contemplated hereby or relating hereto be drawn up in the English language. Les parties ont requis que cette convention ainsi que tous les documents qui y sont envisagés ou qui s’y rapportent soient rédigés en langue anglaise.

121

TABLE OF CONTENTS


	Page

ARTICLE I DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS		1
Section 1.1 Defined Terms		1
Section 1.2 Computation of Time Periods		39
Section 1.3 Accounting Terms and Principles		39
Section 1.4 Conversion of Foreign Currencies		40
Section 1.5 Certain Terms		40
ARTICLE II THE REVOLVING CREDIT FACILITY		41
Section 2.1 The Commitments		41
Section 2.2 Borrowing Procedures		42
Section 2.3 Swing Loans		43
Section 2.4 Letters of Credit		44
Section 2.5 Reduction and Termination of the Commitments		49
Section 2.6 Repayment of Loans		49
Section 2.7 Evidence of Debt		49
Section 2.8 Optional Prepayments		49
Section 2.9 Mandatory Prepayments		49
Section 2.10 Interest		51
Section 2.11 Conversion/Continuation Option		52
Section 2.12 Fees		53
Section 2.13 Payments and Computations		53
Section 2.14 Special Provisions Governing BA Rate Loans		56
Section 2.15 Capital Adequacy		58
Section 2.16 Taxes		58
Section 2.17 Substitution of Lenders		60
Section 2.18 [Intentionally Omitted]		60
Section 2.19 Special Cash Collateral Account		60
ARTICLE III CONDITIONS TO LOANS AND LETTERS OF CREDIT		61
Section 3.1 Conditions Precedent to Initial Loans and Letters of Credit		61
Section 3.2 Conditions Precedent to Each Loan and Letter of Credit		65
Section 3.3 Determinations of Initial Borrowing Conditions		66

TABLE OF CONTENTS
(continued)


	Page

ARTICLE IV REPRESENTATIONS AND WARRANTIES		66
Section 4.1 Corporate Existence; Compliance with Law		66
Section 4.2 Corporate Power; Authorization; Enforceable Obligations		67
Section 4.3 Ownership of Group, Borrower; Subsidiaries		68
Section 4.4 Financial Statements		68
Section 4.5 Material Adverse Change		69
Section 4.6 Solvency		69
Section 4.7 Litigation		69
Section 4.8 Taxes		69
Section 4.9 Full Disclosure		70
Section 4.10 Margin Regulations		70
Section 4.11 No Burdensome Restrictions; No Defaults		70
Section 4.12 Investment Company Act		71
Section 4.13 Use of Proceeds		71
Section 4.14 Insurance		71
Section 4.15 Labor Matters		71
Section 4.16 ERISA		71
Section 4.17 Environmental Matters		73
Section 4.18 Intellectual Property; Material License		74
Section 4.19 Title; Real Property		74
Section 4.20 Perfection of Security Interests in the Collateral		75
ARTICLE V FINANCIAL COVENANTS		75
Section 5.1 Minimum Fixed Charge Coverage Ratio		75
ARTICLE VI REPORTING COVENANTS		75
Section 6.1 Financial Statements		75
Section 6.2 Default Notices		78
Section 6.3 Litigation		78
Section 6.4 Asset Sales		78
Section 6.5 Notices under Senior Note Documents		78
Section 6.6 Securities Exchange Filings; Press Releases		78
Section 6.7 Labor Relations		78

TABLE OF CONTENTS
(continued)


	Page

Section 8.7 Restriction on Fundamental Changes		94
Section 8.8 Change in Nature of Business		95
Section 8.9 Transactions with Affiliates		95
Section 8.10 Restrictions on Subsidiary Distributions; No New Negative Pledge		95
Section 8.11 Modification of Constituent Documents		96
Section 8.12 Modification of Certain Documents and Certain Debt		96
Section 8.13 Modification of Debt Agreements		96
Section 8.14 Accounting Changes; Fiscal Year		96
Section 8.15 Margin Regulations		97
Section 8.16 Sale and Leasebacks Transactions		97
Section 8.17 No Speculative Transactions		97
Section 8.18 Compliance with ERISA		97
Section 8.19 Environmental		97
ARTICLE IX EVENTS OF DEFAULT		97
Section 9.1 Events of Default		97
Section 9.2 Remedies		99
Section 9.3 Actions in Respect of Letters of Credit		100
ARTICLE X THE FACILITY AGENTS		100
Section 10.1 Authorization and Action		100
Section 10.2 Agent’s Reliance, Etc.		101
Section 10.3 The Agents Individually		102
Section 10.4 Lender Credit Decision		102
Section 10.5 Indemnification		102
Section 10.6 Successor Agents		103
Section 10.7 Concerning the Collateral and the Collateral Documents		104
Section 10.8 Collateral Matters Relating to Related Obligations		106
Section 10.9 Posting of Approved Electronic Communications		106
Section 10.10 Syndication Agent; Arrangers		107
ARTICLE XI MISCELLANEOUS		107
Section 11.1 Amendments, Waivers, Etc.		107
Section 11.2 Assignments and Participations		110

EXHIBIT A
TO
CREDIT AGREEMENT

FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE dated as of _____, 20_____ between [NAME OF ASSIGNOR] (the “Assignor”) and [NAME OF ASSIGNEE] (the “Assignee”).

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Warnaco of Canada Company, as borrower (the “Borrower”), The Warnaco Group, Inc., as a guarantor, the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers (together with the Administrative Agent, the “Facility Agents”), and the other Persons party thereto. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Assignor and the Assignee hereby agree as follows:

The Assignee (a) agrees that it will, independently and without reliance upon the Facility Agents, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, (b) appoints and authorizes each Facility Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to each such Facility Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and confirms that, in accordance with Section 10.1(a)(iii) for purposes of creating a solidarité active in accordance with Article 1541 of the Civil Code of Quebec, it has been conferred the status of solidary creditor with each Facility Agent and each other Lender, Issuer and Secured Party, (c) agrees that it will perform in accordance with their terms all of the obligations that, by the terms of the Credit Agreement, are required to be performed by it as a Lender, (d) represents and warrants that it is an Eligible Assignee, (e) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance, and (f) specifies as its Domestic Lending Office (and address for notices) the office set forth beneath its name on the signature pages hereof.

Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent (together with an assignment fee in the amount of U.S.$3,500 payable by the Assignee to the Administrative Agent pursuant to Section 11.2(b)(Assignments and Participations)) for acceptance and recording in the Register by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the effective date specified in Section 2 of Schedule I hereto (the “Effective Date”).

Upon such acceptance and recording in the Register by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Loan Documents in respect of the interest assigned hereby (a) to the Assignee, in the case of amounts accrued with respect to any period on or after the Effective Date, and (b) to the Assignor, in the case of amounts accrued with respect to any period prior to the Effective Date.

This Assignment and Acceptance shall be governed by, and be construed and interpreted in accordance with, the internal law of the Province of Ontario.

This Assignment and Acceptance may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Assignment and Acceptance by telecopier or electronic transmission (in pdf format) shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.

[SIGNATURE PAGES FOLLOW]

EXHIBIT B
TO
CREDIT AGREEMENT

FORM OF NOTICE OF BORROWING

BANK OF AMERICA, N.A.,
as Administrative Agent under the
Credit Agreement referred to below
335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:		Re: Warnaco of Canada Company (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., as a guarantor, the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

(a)

The date of the Proposed Borrowing is _____ __, 20_____ (the “Funding Date”).

(b)

The aggregate amount of the Proposed Borrowing is $_____, of which amount [$_____ consists of Prime Rate Loans] [and $_____ consists of BA Rate Loans having an initial Interest Period of [one] [two] [three] [six] month[s]].

(c)

The Available Canadian Credit (after giving effect to the Proposed Borrowing) is $_____.

EXHIBIT C
TO
CREDIT AGREEMENT

FORM OF SWING LOAN REQUEST

BANK OF AMERICA, N.A.,
as Administrative Agent under the
Credit Agreement referred to below
335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:		Re: Warnaco of Canada Company (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., as a guarantor, the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

(c)

The date of the Proposed Swing Loan is _____ __, 20___ (the “Funding Date”).

(d)

The amount of the Proposed Swing Loan is $_____.

(e)

The Available Canadian Credit (after giving effect to the Proposed Swing Loan) is $_____.

EXHIBIT D
TO
CREDIT AGREEMENT

FORM OF LETTER OF CREDIT REQUEST

BANK OF AMERICA, N.A.,
as Administrative Agent under the
Credit Agreement referred to below
335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:		Re: Warnaco of Canada Company (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., as a guarantor, the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.4(c) (Letters of Credit) of the Credit Agreement that the undersigned requests the issuance of a Letter of Credit by [Name of Issuer] in the form of a [standby] [documentary] letter of credit for the benefit of [Name of Beneficiary], in the amount of [$_____] [Amount in Alternative Currency] (the U.S. Dollar Equivalent of which is _____ as of the date hereof), to be issued on _____, _____ (the “Issue Date”) and having an expiration date of _____, _____.

The form of the requested Letter of Credit is attached hereto.

(c) the aggregate amount of the Letter of Credit Obligations then outstanding will not exceed the Letter of Credit Sub-Limit;

EXHIBIT F
TO
CREDIT AGREEMENT

FORM OF NOTICE OF CONVERSION OR CONTINUATION

BANK OF AMERICA, N.A.,
as Administrative Agent under the
Credit Agreement referred to below
335 Madison Avenue
New York, New York 10017

_____________ ___, 20__


Attention:		Re: Warnaco of Canada Company (the “Borrower”)

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, The Warnaco Group, Inc., as a guarantor, the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.

The Borrower hereby gives you notice, irrevocably, pursuant to Section 2.11 (Conversion/Continuation Option) of the Credit Agreement that the undersigned hereby requests a [conversion] [continuation] on _____, _____ of $_____ in principal amount of presently outstanding Revolving Loans that are [Prime Rate Loans] [BA Rate Loans having an Interest Period ending on _____, _____] [to] [as] [Prime Rate][BA Rate] Loans. [The Interest Period for such amount requested to be converted to or continued as BA Rate Loans is [[one] [two] [three] [six] month[s]].

EXHIBIT H
TO
CREDIT AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

Reference is made to the Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Warnaco of Canada Company, a Nova Scotia unlimited liability company, as borrower (the “Borrower”), The Warnaco Group, Inc., as a guarantor (“Group”), the Lenders and Issuers party thereto, Bank of America, N.A., as administrative agent for the Revolving Credit Facility and as Collateral Agent for the Lenders and the Issuers, and certain other Persons. Capitalized terms used herein without definition have the meanings ascribed to them in the Credit Agreement. This Compliance Certificate is submitted concurrently with the [quarterly][annual] financial statements of Group for the period ended _____ ___, 20_____ [(the “Fiscal Period End Date”)]⁹. Pursuant to Section 6.1(d) of the Credit Agreement, the undersigned hereby certifies that he/she is a Responsible Officer of Group and further certifies on behalf of Group as follows:

2. [No Default or Event of Default has occurred and is continuing and no Default or Event of Default (as defined in the U.S. Facility) has occurred and is continuing.] [A Default or Event of Default or a Default or Event of Default (as defined in the U.S. Facility) has occurred and is continuing. The nature thereof and the action which Group proposes to take with respect thereto is as follows: _____].


⁹		Bracketed text to be used only if no Trigger Event has occurred and therefore Section 5.1 financial covenant not currently being tested.

¹⁰		Bracketed text to be used only if no Trigger Event has occurred and therefore Section 5.1 financial covenant not currently being tested.

Exhibit 10.5

Execution Copy

U.S. Loan Party Canadian Facility Guaranty, dated as of August 26, 2008 (this “Guaranty”), by The Warnaco Group, Inc., a Delaware corporation (“Group”), and each of the other entities listed on the signature pages hereof or that becomes a party hereto pursuant to Section 25 (Additional Guarantors) hereof (each a “Subsidiary Guarantor” and, together with Group, collectively, the “Guarantors” and individually a “Guarantor”), in favor of the Administrative Agent, the Collateral Agent, each Lender, each Issuer and each other holder of an Obligation (as each such term is defined in the Credit Agreement referred to below) (each, a “Guarantied Party” and, collectively, the “Guarantied Parties”).

W i t n e s s e t h:

Whereas, Warnaco of Canada Company, a Nova Scotia unlimited liability company (the “Borrower”), Group, the Lenders and Issuers party thereto from time to time, Bank of America, N.A. (“BofA”), as administrative agent (in such capacity, the “Administrative Agent”) and as Collateral Agent for the Lenders and the Issuers (together with the Administrative Agent, the “Facility Agents”), Banc of America Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers, and Deutsche Bank Securities Inc., as sole syndication agent, have entered into the Credit Agreement, dated as of August 26, 2008 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein but not defined herein are used with the meanings given to them in the Credit Agreement);

Whereas, Group is the ultimate parent of the Borrower and each Subsidiary Guarantor is a direct or indirect Subsidiary of Group and an Affiliate of the Borrower; and

Section 1 Guaranty

U.S. Loan Party
Canadian Facility Guaranty

Section 2 Limitation of Guaranty

Section 3 Contribution

U.S. Loan Party
Canadian Facility Guaranty

Section 4 Authorization; Other Agreements

U.S. Loan Party
Canadian Facility Guaranty

Section 5 Guaranty Absolute and Unconditional

(b) the absence of any attempt to collect the Obligations or any part of them from the Borrower or other action to enforce the same;

(c) failure by any Guarantied Party to take any steps to perfect and maintain any Lien on, or to preserve any rights to, any Collateral;

U.S. Loan Party
Canadian Facility Guaranty

(f) the disallowance, under Section 502 of the Bankruptcy Code or any applicable provisions of comparable state or foreign law, of all or any portion of any Guarantied Party’s claim (or claims) for repayment of the Obligations;

(g) any use of cash collateral under Section 363 of the Bankruptcy Code or any applicable provisions of comparable state or foreign law;

(h) any agreement or stipulation as to the provision of adequate protection in any bankruptcy proceeding;

(i) the avoidance of any Lien in favor of the Guarantied Parties or any of them for any reason;

(k) failure by any Guarantied Party to file or enforce a claim against the Borrower or its estate in any bankruptcy or insolvency case or proceeding;

(l) any action taken by any Guarantied Party if such action is authorized hereby;

(m) any election following the occurrence of an Event of Default by any Guarantied Party to proceed separately against the personal property Collateral in accordance with such Guarantied Party’s rights under the UCC or the PPSA or, if the Collateral consists of both personal and real property, to proceed against such personal and real property in accordance with such Guarantied Party’s rights with respect to such real property; or

Section 6 Waivers

U.S. Loan Party
Canadian Facility Guaranty

Section 7 Reliance

Section 8 Waiver of Subrogation and Contribution Rights

Section 9 Subordination

U.S. Loan Party
Canadian Facility Guaranty

Section 10 Default; Remedies

Section 11 Irrevocability

Section 12 Setoff

U.S. Loan Party
Canadian Facility Guaranty

Section 13 No Marshalling

Section 14 Enforcement; Amendments; Waivers

Section 15 [Intentionally Omitted]

Section 16 Successors and Assigns

U.S. Loan Party
Canadian Facility Guaranty

Section 17 Representations and Warranties; Covenants

Each Guarantor hereby (a) represents and warrants that the representations and warranties as to it made by Group in Article IV (Representations and Warranties) of the Credit Agreement are true and correct on each date as required by Section 3.2(b)(i) (Conditions Precedent to Each Loan and Letter of Credit) of the Credit Agreement and (b) agrees to take, or refrain from taking, as the case may be, each action necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor.

Section 18 Governing Law

This Guaranty and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the internal law of the State of New York.

Section 19 Submission to Jurisdiction; Service of Process

(d) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Collateral Agent could purchase Dollars with such other currency at the spot rate of exchange quoted by the Collateral Agent at 11:00 a.m. (New York time) on the Business Day preceding that on which final judgment is given, for the purchase of Dollars, for delivery two Business Days thereafter.

U.S. Loan Party
Canadian Facility Guaranty

Section 20 Waiver of Judicial Bond

Section 21 Certain Terms

Section 22 Waiver of Jury Trial

Each of the Collateral Agent, the other Guarantied Parties and each Guarantor irrevocably waives trial by jury in any action or proceeding with respect to this Guaranty or any other Loan Document.

Section 23 Notices

Section 24 Severability

Section 25 Additional Guarantors

U.S. Loan Party
Canadian Facility Guaranty

Section 26 Collateral

Section 27 Costs and Expenses

Section 28 Waiver of Consequential Damages

Section 29 Entire Agreement

Section 30 Counterparts

[Signature Pages Follow]

Exhibit 10.7

GENERAL SECURITY AGREEMENT

EXECUTED by the parties as of the 26^th day of August, 2008.


TO:		BANK OF AMERICA, N.A.,

		on its own behalf as Lender (acting through its Canada branch) and as Collateral Agent, for itself and on behalf of the Secured Parties (as such term is defined in the Credit Agreement, hereinafter defined) 335 Madison Avenue, New York, New York 10017

		(hereinafter the “Collateral Agent”)

GRANTED BY:		WARNACO OF CANADA COMPANY

		Having its registered office at 1959 Upper Water Street, Halifax, Nova Scotia, Canada, B3J 3N2 and its principal place of business at 20600 Clark Graham Blvd., Baie d’Urfé, Québec, Canada, H9X 4B6

		(hereinafter the “Debtor”)

SECTION 1 — GRANT OF SECURITY INTEREST

1.1 Security Interest

As a general and continuing security for the payment and performance of the Secured Obligations (as such term is defined in the Credit Agreement, hereinafter defined) of the Debtor, the Debtor, IN CONSIDERATION OF THE SECURED OBLIGATIONS and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby grants, bargains, assigns and transfers to the Collateral Agent (for itself and on behalf of the Secured Parties), and grants to the Collateral Agent (for itself and on behalf of the Secured Parties) a continuing security interest in all of the Debtor’s right, title and interest in and to all the personal property, assets and undertakings of the Debtor of whatsoever nature and kind, whether now owned or hereafter-acquired by or on behalf of the Debtor, wherever located (the “Collateral”) including, without limitation:

(a) Accounts Receivable

All debts, book debts, accounts, claims, demands, moneys and choses in action whatsoever including, without limitation, claims against the Crown and claims under insurance policies, which are now owned by or are due, owing or accruing due to the Debtor or which may hereafter be owned by or become due, owing or accruing due to the Debtor together with all contracts, securities, bills, notes, lien notes, judgments, chattel mortgages, mortgages and all other rights, benefits and documents now or hereafter taken, vested in or held by the Debtor in respect of or as security for the same and the full benefit and advantage thereof, and all rights of action or claims which the Debtor now has or may at any time hereafter have against any person or persons, firm or corporation in respect thereof (all of the foregoing being herein collectively called the “Accounts Receivable”);

General Security Agreement — Warnaco of Canada Company (2008)

(b) Inventory

All inventory of whatever kind now or hereafter owned by the Debtor or in which the Debtor now or hereinafter has an interest or right of any kind, and all accessions thereto and products thereof, including, without limitation, all goods, merchandise, raw materials, goods in process, finished goods, packaging and packing material and other tangible personal property now or hereafter held for sale, lease, rental or resale or that are to be furnished or have been furnished under a contract of service or that are to be used or consumed in the business of the Debtor (all of the foregoing being herein collectively called the “Inventory”);

All goods now or hereafter owned by the Debtor which are not inventory or consumer goods as defined in the PPSA (as hereinafter defined) including, without limitation, all fixtures, equipment, machinery, tools, furniture, vehicles and other tangible personal property (all of the foregoing being herein collectively called the “Equipment”);

(d) Chattel Paper, Instruments, Securities, etc.

All chattel paper, instruments, warehouse receipts, bills of lading and other documents of title, whether negotiable or non-negotiable, shares, stock, warrants, bonds, debentures, debenture stock or other securities (including, without limitation, those described in Schedule “2” hereto), now or hereafter owned by the Debtor;

(e) Intangibles

All intangibles now or hereafter owned by the Debtor including, without limitation, all contractual rights, goodwill, patents, trade marks, trade names, copyrights, industrial designs and other industrial or intellectual property or rights therein, including, without limitation, those described in Schedule “5” hereto;

(f) Books and Accounts, etc.

With respect to the personal property described in Paragraphs (a) to (e) inclusive, all books, accounts, invoices, deeds, documents, writings, letters, papers, security certificates and other records in any form evidencing or relating thereto and all contracts, securities, instruments and other rights and benefits in respect thereof;

General Security Agreement — Warnaco of Canada Company (2008)

(g) Other Property

The uncalled capital, money, rights, bills of exchange, negotiable and non-negotiable instruments, judgments and securities not otherwise described in Paragraphs (a) to (f) inclusive;

(h) Replacements, etc.

With respect to the personal property described in Paragraphs (a) to (g) inclusive, all substitutions and replacements thereof, increases, additions and accessions thereto and any interest of the Debtor therein; and

(i) Proceeds

With respect to the personal property described in Paragraphs (a) to (h) inclusive, personal property in any form or fixtures derived directly or indirectly from any dealing with such property or that indemnifies or compensates for such property destroyed or damaged and proceeds of proceeds whether of the same type, class or kind as the original proceeds; provided, however, that the foregoing grant of security interest shall not include a security interest in any Excluded Property; and provided, further, that, if and when any property shall cease to be Excluded Property, the Collateral Agent for the benefit of the Secured Parties shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

1.2 Definitions and Interpretation

In the present General Security Agreement (this “Agreement”):

(a)

Terms used herein and defined in the Personal Property Security Act (Ontario) or similar legislation of any other Canadian jurisdiction, the laws of which are required by such legislation to be applied in connection with the issue, perfection, enforcement, opposability, validity or effect of security interests (collectively the “PPSA”) shall have the same meanings as in the PPSA unless the context otherwise requires;

(b)

Terms used herein and defined in the Securities Transfer Act (Ontario) (the “STA”) shall have the same meanings as in the STA unless the context otherwise requires;

(c)

Capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Credit Agreement, unless the context otherwise requires;

(d)

Any reference to “Collateral” shall, unless the context otherwise requires, refer to “Collateral or any part thereof”;

(e)

The term “security interest” and the grant of the “security interest” herein provided for shall include, without limitation, a fixed mortgage, hypothecation, pledge, charge and assignment of the Collateral in favour of the Collateral Agent (for itself and on behalf of the Secured Parties);

General Security Agreement — Warnaco of Canada Company (2008)

(f)

“Additional Pledged Collateral” means any Pledged Collateral acquired by the Debtor after the date hereof and in which a security interest is granted pursuant to Section 1 (Grant of Security Interest), including, to the extent a security interest is granted therein pursuant to Section 1 (Grant of Security Interest), (i) all Stock and Stock Equivalents of any Person that are acquired by the Debtor after the date hereof, together with all certificates, instruments or other documents representing any of the foregoing and all Security Entitlements of the Debtor in respect of any of the foregoing, (ii) all additional Indebtedness from time to time owed to the Debtor by any obligor on the Pledged Debt Instruments and the Instruments evidencing such Indebtedness and (iii) all interest, cash, Instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing. “Additional Pledged Collateral” may be Intangibles (including Intellectual Property), Instruments or Investment Property;

(g)

“Blocked Account” means a deposit account maintained by the Debtor with a Blocked Account Bank which account is the subject of an effective Blocked Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Blocked Account;

(h)

“Blocked Account Bank” means a financial institution approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which the Debtor has delivered to the Collateral Agent an executed Blocked Account Letter (hereinafter defined);

(i)

“Blocked Account Letter” means a letter agreement in a form acceptable to the Collateral Agent, executed by the Debtor and the Collateral Agent and acknowledged and agreed to by the relevant Blocked Account Bank;

	(j)		“Cash Collateral Account” means any deposit account or Securities Account that is (a) established by the Collateral Agent from time to time in its sole discretion to receive cash and Cash Equivalents (or purchase cash or Cash Equivalents with funds received) from the Debtor or any other Loan Party or their Subsidiaries or Affiliates or Persons acting on their behalf pursuant to the Loan Documents, (b) with such depositaries and securities intermediaries as the Collateral Agent may determine in its sole discretion, (c) in the name of the Collateral Agent (although such account may also have words referring to the Debtor and the account’s purpose), (d) under the control of the Collateral Agent and (e) in the case of a Securities Account, with respect to which the Collateral Agent shall be the Entitlement Holder and the only Person authorized to give Entitlement Orders with respect thereto, except as otherwise provided in Section 3.9 hereof. Notwithstanding the foregoing, the Special Cash Collateral Account shall not constitute a Cash Collateral Account;

	(k)		“CCQ” means the Civil Code of Quebec;

	(l)		“Certificated Security” has the meaning given to such term in the PPSA;

	(m)		“CIPO” means the Canadian Intellectual Property Office;

(n)

“Collateral” has the meaning specified in Section 1.1 hereof;

General Security Agreement — Warnaco of Canada Company (2008)

(o)

“Collateral Agent” shall include, in addition to the Collateral Agent referred to in the preamble of the Credit Agreement, any successors and assigns to the Collateral Agent appointed pursuant to the Credit Agreement and means the “Collateral Agent” in its capacity as collateral agent for the benefit of the Secured Parties with respect to the Secured Obligations;

(p)

“Control Account” means a securities account maintained by the Debtor with the relevant approved Securities Intermediary which account is the subject of an effective Control Account Agreement, and includes all monies and other assets on deposit or otherwise held therein;

(q)

“Control Account Agreement” means a letter agreement in a form acceptable to the Collateral Agent, executed by the Debtor, the Collateral Agent and the relevant approved Securities Intermediary;

(r)

“Copyright License” means any agreement, whether written or oral, providing for the grant by or to the Debtor of any right under any Copyright, including the grant of any right to use, copy, publicly perform, display, create derivative works of, manufacture, distribute, exploit or sell materials derived from any Copyright;

(s)

“Copyrights” means (a) all copyrights arising under the laws of Canada, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications for registration or recording in connection therewith, including all registrations, recordings and applications for registration or recording with CIPO or in any foreign counterparts thereof, and (b) the right to obtain all renewals, reversions and extensions thereof;

(t)

“Credit Agreement” shall mean that certain Credit Agreement dated the date hereof among, inter alia, the Debtor, as borrower, the financial institutions, together with their respective successors and assigns, listed on the signature pages thereof from time to time, as Lenders, and the Collateral Agent, as the same may be amended, supplemented, revised, restated or replaced from time to time;

(u)

“Discharge of Lender Claims” means the payment in full in cash of the principal of, interest and premium, if any, on all Secured Obligations and, with respect to Hedging Obligations, Hedging Obligations or letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with the terms hereof, of the Credit Agreement, in each case after or concurrently with termination of all Commitments, and payment in full in cash of any other Secured Obligations that are due and payable at or prior to the time such principal and interest are paid;

(v) “Entitlement Holder” has the meaning given to such term in the PPSA;

(w) “Entitlement Order” has the meaning given to such term in the PPSA;

General Security Agreement — Warnaco of Canada Company (2008)

	(x)		“Excluded Property” means, collectively, (i) any permit, lease, license, contract, instrument or other agreement held by the Debtor that validly prohibits the creation by the Debtor of a Lien thereon, or any permit, lease, license, contract, instrument or other agreement held by the Debtor to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, in each case, to the extent, and for so long as, such prohibition is not removed, terminated or rendered unenforceable or otherwise deemed ineffective by the PPSA or any other Requirement of Law; and (ii) any Equipment owned by the Debtor that is charged by a “purchase-money security interest” (as defined in the PPSA) or subject to a Capital Lease if the contract or other agreement in which such Lien is granted (or in the documentation providing for such Capital Lease) prohibits or requires the consent of any Person other than the Debtor as a condition to the creation of any other Lien on such Equipment; provided, however, “Excluded Property” shall not include any Proceeds, substitutions or replacements of Excluded Property (unless such Proceeds, substitutions or replacements would constitute Excluded Property);

	(y)		“Financial Assets” has the meaning given to such term in the PPSA;

(z)

“Hedging Obligations” means all obligations of any Person under any Hedging Contract;

(aa) “Instrument” has the meaning given to such term in the PPSA;

	(bb)		“Intellectual Property” means, collectively, (a) all right, title and interest of the Debtor in intellectual property, whether arising under Canadian, multinational or foreign laws or otherwise, including Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, trade secrets, Internet domain names, Websites, advertising rights, rights in designs, including registrations thereof, and rights in data, and (b) all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under and with respect thereto, including all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof;

	(cc)		“Investment Property” has the meaning given to such term in the PPSA;

(dd)

“LLC” means each limited liability company in which the Debtor has an equity interest, including those set forth on;

(ee)

“LLC Agreement” means each operating agreement with respect to a LLC, as each agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified from time to time;

(ff)

“Material Intellectual Property” means Intellectual Property owned by or licensed to the Debtor and material to Debtor’s business;

(gg)

“Partnership” means each partnership in which the Debtor has an equity interest, including those set forth on;

(hh)

“Partnership Agreement” means each partnership agreement governing a Partnership, as each such agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified;

(ii)

“Patent License” means all agreements, whether written or oral, providing for the grant by or to the Debtor of any right to manufacture, have manufactured, use, import, lease, sell or offer for sale any product, design or process covered in whole or in part by a Patent;

General Security Agreement — Warnaco of Canada Company (2008)

(jj)

“Patents” means (a) all patents of Canada or any other country or patent rights arising under multinational laws, (b) all applications for patents of Canada or any other country or patent rights arising under multinational laws and (c) all rights to obtain any reissues, extensions, divisions, continuations and continuations-in-part of the foregoing;

(kk)

“Pledged Certificated Stock” means all Certificated Securities and any other Stock and Stock Equivalent of a Person evidenced by a certificate, Instrument or other equivalent document, in each case owned by the Debtor, including all Stock listed on;

(ll)

“Pledged Collateral” means, collectively, the Pledged Stock, Pledged Debt Instruments, any other Investment Property of the Debtor (other than Pledged Stock, Pledged Debt Instruments and other Investment Property whose value, in the aggregate, does not exceed $1,000,000), all chattel paper, certificates or other Instruments representing any of the foregoing and all Security Entitlements of the Debtor in respect of any of the foregoing. Pledged Collateral may be Intangibles, Instruments or Investment Property;

(mm)

“Pledged Debt Instrument” means all right, title and interest of the Debtor in Instruments evidencing any Indebtedness owed to the Debtor, including all Indebtedness described on, issued by the obligors named therein;

(nn)

“Pledged Stock” means all Pledged Certificated Stock and all Pledged Uncertificated Stock;

	(oo)		“Pledged Uncertificated Stock” means any Stock or Stock Equivalent of any Person that is not a Pledged Certificated Stock, including all right, title and interest of the Debtor as a limited or general partner in any Partnership or as a member of any LLC and all right, title and interest of the Debtor in, to and under any Partnership Agreement or LLC Agreement to which it is a party;

	(pp)		“Receiver” shall have the meaning provided to such term in Section 6.4 hereof;

(qq)

“Registerable Intellectual Property” means any Intellectual Property in respect of which ownership, title, security interests, hypothecs, charges or encumbrances are capable of registration, recording or notation with any applicable authority pursuant to applicable law;

(rr)

“Restricted Account” means a deposit account maintained by the Debtor with a Restricted Account Bank which account is the subject of an effective Restricted Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Restricted Account;

(ss)

“Restricted Account Bank” means a financial institution selected or approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which the Debtor has delivered an executed Restricted Account Letter;

General Security Agreement — Warnaco of Canada Company (2008)

(tt)

“Restricted Account Letter” means a letter agreement in a form acceptable to the Administrative Agent, executed by the Debtor;

	(uu)		“Securities Intermediaries” has the meaning given to such term in the PPSA;

	(vv)		“Securities Account” has the meaning given to such term in the PPSA;

	(ww)		“Security Entitlement” has the meaning given to such term in the PPSA;

(xx)

“Security Interest” means, collectively, each security interest, mortgage, charge, assignment or transfer in or of Collateral granted or created by the Debtor under this Agreement;

(yy)

“Third Party Intellectual Property Rights” means any right, title or interest of any Person under patent, copyright, trademark or trade secret law or any other statutory provision or common law doctrine relating to intellectual property or proprietary rights;

(zz)

“Trademark License” means any agreement, whether written or oral, providing for the grant by or to the Debtor of any right under any Trademark.;

(aaa)

“Trademarks” means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, service marks, logos and other source or business identifiers, and, in each case, all goodwill associated therewith, whether now existing or hereafter adopted or acquired, all registrations and recordings thereof and all applications for registration or recording in connection therewith, in each case whether in CIPO or in any similar office or agency of Canada, any Province or Territory thereof or any other country or any political subdivision thereof and all common-law rights related thereto, and (b) the right to obtain all renewals thereof; and

(bbb)

“UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

1.3 Leases

The last day of the term of any lease, oral or written, or any agreement therefor, now held or hereafter acquired by the Debtor, shall be excepted from the security interest hereby granted and shall not form part of the Collateral, but the Debtor shall stand possessed of such one day remaining, upon trust to assign and dispose of the same as the Collateral Agent or any assignee of such lease or agreement shall direct. If any such lease or agreement therefor contains a provision which provides in effect that such lease or agreement may not be assigned, sub-leased, charged or encumbered without the leave, license, consent or approval of the lessor, the application of the security interest created hereby to any such lease or agreement shall be conditional upon such leave, license, consent or approval having been obtained.

General Security Agreement — Warnaco of Canada Company (2008)

1.4 Debtor Remains Liable

Notwithstanding anything herein to the contrary:

(a)

the Debtor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all its duties and obligations thereunder to the same extent as if this Agreement had not been executed;

(b)

the exercise by the Collateral Agent of any of the rights or remedies hereunder shall not release the Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral; and

(c)

the Collateral Agent shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of the Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

SECTION 2 — REPRESENTATIONS AND WARRANTIES

To induce the Lenders, the Issuers, the Collateral Agent and the Administrative Agent to enter into the Credit Agreement, the Debtor hereby represents and warrants each of the following to the Lenders, the Issuers, the Collateral Agent, the Administrative Agent and the other Secured Parties:

2.1 Title; No Other Liens

Except for the Liens granted to the Collateral Agent pursuant to this Agreement and the other Liens permitted to exist on the Collateral under the Credit Agreement, the Debtor (a) is the record and beneficial owner of the Pledged Collateral pledged by it hereunder constituting Instruments or Certificated Securities, (b) is the Entitlement Holder of all such Pledged Collateral constituting Investment Property held in a Securities Account and (c) has rights in or the power to collaterally transfer each other item of Collateral in which a Lien is granted by it hereunder, free and clear of any Lien (other than Liens for taxes not yet due and payable).

2.2 Perfection and Priority

The security interests granted pursuant to this Agreement shall constitute valid and continuing perfected security interests in favour of the Collateral Agent in the Collateral for which perfection is governed by the PPSA or filing with CIPO upon (i) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the PPSA, the completion of the filings and other actions specified on (which, in the case of all filings and other documents referred to on such schedule, have been delivered to the Collateral Agent in completed and duly executed form), (ii) the delivery to the Collateral Agent of all Collateral consisting of Instruments and Certificated Securities, in each case properly endorsed for transfer to the Collateral Agent or in blank, (iii) the execution of Control Account Agreements with respect to Investment Property not in certificated form, (iv) the execution of a Blocked Account Letter with respect to all deposit accounts of the Debtor as specified in Section 3.8(a)(i) hereto, (v) all appropriate filings having been made with CIPO and (vi) the receipt by the Collateral Agent of the consent of the issuer or nominated person with respect to each letter-of-credit right. Such security interests shall be prior to all other Liens on the Collateral except for Customary Permitted Liens having priority over the Collateral Agent’s Liens by operation of law or otherwise as permitted hereunder or under the Credit Agreement.

General Security Agreement — Warnaco of Canada Company (2008)

2.3 Jurisdiction of Organization; Chief Executive Office

On the Closing Date, the Debtor’s jurisdiction of organization, legal name, organizational identification number, if any, and the location of its chief executive office or sole place of business is specified on and, to the extent different from that on the Closing Date, such also lists all jurisdictions of organization, legal names and locations of such Debtor’s chief executive office or sole place of business for the period beginning five years preceding the date hereof.

2.4 Inventory and Equipment

Schedule 4 (Location of Inventory and Equipment) sets forth each location at which the Debtor’s Inventory and Equipment (other than mobile goods and Inventory or Equipment in transit) is kept on the Closing Date.

2.5 Pledged Collateral

(a)

The Pledged Stock that constitutes Pledged Collateral pledged hereunder by the Debtor is listed on and constitutes that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on.

(b)

All of the Pledged Stock (other than Pledged Stock in limited liability companies and partnerships) that constitutes Pledged Collateral has been duly and validly issued and are fully paid and nonassessable.

(c)

All Pledged Collateral and, if applicable, any Additional Pledged Collateral, consisting of Certificated Securities or Instruments has been delivered to the Collateral Agent in accordance with Section 3.5(a) (Pledged Collateral) hereof, and Section 7.11 of the Credit Agreement and such other pledge agreement or other Collateral Documents entered into by the Debtor in favour of the Collateral Agent.

(d)

Subject to Section 3.5(a), all Pledged Collateral held by a Securities Intermediary in a Securities Account is subject to a Control Account Agreement.

(e)

Other than Pledged Stock constituting Intangibles, there is no Pledged Collateral other than (i) that represented by Certificated Securities or (ii) Instruments in the possession of the Collateral Agent or that consisting of Financial Assets held in a Securities Account that is subject to a Control Account Agreement.

General Security Agreement — Warnaco of Canada Company (2008)

(f)

The Constituent Documents of any Person governing any Pledged Stock do not prohibit (i) the Collateral Agent, upon the occurrence and during the continuance of an Event of Default, from exercising all of the rights of the Debtor granting the security interest therein, and (ii) a transferee or assignee of Stock of such Person from becoming a member, partner or, as the case may be, other holder of such Pledged Stock to the same extent as the Debtor entitled to participate in the management of such Person and, pursuant to the Constituent Documents of any Person governing any Pledged Stock, upon the transfer of the entire interest of the Debtor, the Debtor shall cease to be a member, partner or, as the case may be, other holder of such Pledged Stock.

2.6 Deposit Accounts; Securities Accounts

The only deposit accounts or Securities Accounts maintained by the Debtor on the Closing Date are those listed on Schedule 7 (Deposit Accounts and Securities Accounts), which sets forth such information for the Debtor and which clearly identifies each deposit account which is maintained as a concentration account by the Debtor.

2.7 Accounts

No amount payable to the Debtor under or in connection with any account is evidenced by any Instrument or Chattel Paper that has not been delivered to the Collateral Agent, properly endorsed for transfer, to the extent delivery is required by Section 3.6 (Delivery of Instruments and Chattel Paper).

2.8 Intellectual Property

(a)

(i) sets forth a true and complete list of all Intellectual Property of the Debtor on the date hereof (other than licenses to commercial off-the-shelf software), separately identifying that owned by the Debtor and that licensed by or to such Debtor and (ii) sets forth a true and complete list of all Material Intellectual Property owned by or licensed to the Debtor on the date hereof (other than licenses to commercial off-the-shelf software), separately identifying that owned by the Debtor and that licensed by or to the Debtor. The Material Intellectual Property set forth on constitutes all of the material intellectual property rights necessary for the Debtor to conduct its business as currently and as proposed to be conducted.

(b)

On the date hereof, all Material Intellectual Property owned by the Debtor is valid, in full force and effect, subsisting, unexpired and enforceable, has not been adjudged invalid and has not been abandoned. To the knowledge of the Debtor, the business of the Debtor, and the use of the Material Intellectual Property in connection therewith, does not infringe, misappropriate, dilute or violate any Third Party Intellectual Property Rights. The Debtor is not party to or the subject of any pending or, to the Debtor’s knowledge, threatened claim of infringement, misappropriation, dilution or violation of any Third Party Intellectual Property Rights, and there are no facts or circumstances that the Debtor reasonably believes are likely to form the basis for any such claim, and the Debtor has not received written notice of any such claim, or a written offer of a license to any Third Party Intellectual Property Rights, or any written notice regarding the existence of any Third Party Intellectual Property Rights that would be likely to have a Material Adverse Effect on the Debtor or otherwise would impair any Material Intellectual Property.

General Security Agreement — Warnaco of Canada Company (2008)

(c)

Except as set forth in (c), on the date hereof, none of the Material Intellectual Property owned by the Debtor is the subject of any licensing or franchise agreement pursuant to which the Debtor is the licensor or franchisor.

(d)

No holding, decision or judgment has been rendered by any Governmental Authority challenging the Debtor’s rights in the Material Intellectual Property or that would limit or otherwise impair the ownership, use, validity or enforceability of any Material Intellectual Property.

(e)

No action or proceeding challenging the Debtor’s rights in the Intellectual Property or the ownership, use, validity or enforceability of any Material Intellectual Property owned by the Debtor is on the date hereof pending or, to the knowledge of the Debtor, threatened. There are no claims, judgments or settlements to be paid by the Debtor relating to the Material Intellectual Property. To the Debtor’s knowledge, no Person has been or is infringing, misappropriating, diluting or violating the Material Intellectual Property owned by the Debtor.

(f)

The Debtor is not in material breach of any Copyright License, Patent License or Trademark License nor in breach of any Material License. The consummation of the transactions contemplated by this Agreement shall not impair any of the Debtor’s right in, cause a breach of, or impair the validity or enforceability of, any Material Intellectual Property.

SECTION 3 — COVENANTS OF THE DEBTOR

The Debtor agrees with the Collateral Agent to the following, as long as any Secured Obligation or Commitment remains outstanding and, in each case, unless the Requisite Lenders otherwise consent in writing:

3.1 Generally

The Debtor shall (a) except for the security interest created by this Agreement, not create or suffer to exist any Lien upon or with respect to any Collateral, except Liens permitted under Section 8.2 (Liens, Etc.) of the Credit Agreement, (b) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement, any other Loan Document, any Requirement of Law or any policy of insurance covering the Collateral, (c) not sell, transfer or assign (by operation of law or otherwise) any Collateral except as permitted under the Credit Agreement, (d) not enter into any agreement or undertaking restricting the right or ability of the Debtor or the Collateral Agent to sell, assign or transfer any Collateral except in connection with an Asset Sale (i) that is permitted under Section 8.4 of the Credit Agreement or (ii) that is pursuant to a contract which contains a condition precedent that consent under the Credit Agreement be obtained.

General Security Agreement — Warnaco of Canada Company (2008)

3.2 Maintenance of Perfected Security Interest; Further Documentation

(a)

The Debtor shall maintain the security interests created by this Agreement as perfected security interests having at least the priority described in Section 2.2 (Perfection and Priority) and shall defend such security interests and such priority against the claims and demands of all Persons.

(b)

The Debtor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request in writing, all in detail and in form and substance reasonably satisfactory to the Collateral Agent.

(c)

At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of the Debtor, the Debtor shall promptly and duly execute and deliver to the Collateral Agent, and have recorded, such further instruments and documents and take such further action as the Collateral Agent may reasonably request (or be directed to request by the Administrative Agent at the Administrative Agent’s reasonable request) for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statement under the PPSA (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and the execution and delivery of Blocked Account Letters or Restricted Account Letters and Control Account Agreements.

3.3 Changes in Locations, Name, Etc.

(a)

Except upon 15 or more days’ prior written notice to the Collateral Agent and delivery to the Collateral Agent of (i) all additional financing statements and other documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests provided for herein and (ii) if applicable, a written supplement to showing (A) any additional locations at which Inventory or Equipment shall be kept or (B) any changes in any location where Inventory or Equipment shall be kept that would require the Collateral Agent to take any action to maintain perfected security interests in such Collateral, the Debtor shall not do any of the following:

(i)

permit any Inventory or Equipment to be kept at a location other than those listed on, except for Inventory or Equipment in transit;

(ii)

change its jurisdiction of organization from that referred to in Section 2.3 (Jurisdiction of Organization; Chief Executive Office); or

(iii)

change its legal name, or organizational identification number, if any, or corporation, unlimited liability company, limited liability company or other organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.

General Security Agreement — Warnaco of Canada Company (2008)

(b)

The Debtor shall keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.

3.4 Control

The Debtor shall not cause nor shall it permit any Person other than the Collateral Agent to have control (as determined pursuant to the STA) of any Financial Asset or Investment Property constituting part of the Collateral.

3.5 Pledged Collateral

(a)

The Debtor shall (i) deliver to the Collateral Agent for the benefit of the Secured Parties, all certificates and Instruments representing or evidencing any Pledged Collateral (including Additional Pledged Collateral), whether now existing or hereafter acquired, in suitable form for transfer by delivery or, as applicable, accompanied by such Debtor’s endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Collateral Agent, together, in respect of any Additional Pledged Collateral, with a pledge amendment, duly executed by the Debtor, in a form reasonably acceptable to the Collateral Agent, an acknowledgment, or such other documentation acceptable to the Collateral Agent and (ii) maintain all other Pledged Collateral constituting Investment Property in a Securities Account subject to a Control Account Agreement. The Collateral Agent shall have the right, following an Event of Default and without notice to the Debtor, to transfer to or to register in its name or in the name of its nominees any Pledged Collateral. The Collateral Agent shall have the right at any time to exchange any certificate or instrument representing or evidencing any Pledged Collateral for certificates or instruments of smaller or larger denominations.

(b)

Except as provided in Section 6 (Remedies on Default), the Debtor shall be entitled to receive all cash dividends paid in respect of the Pledged Collateral (other than liquidating or distributing dividends). Any sums paid upon or in respect of any Pledged Collateral upon the liquidation or dissolution of any issuer of any Pledged Collateral, any distribution of capital made on or in respect of any Pledged Collateral or any property distributed upon or with respect to any Pledged Collateral pursuant to the recapitalization or reclassification of the capital of any issuer of Pledged Collateral or pursuant to the reorganization thereof (except, in each case, to the extent resulting in cash being distributed to the Debtor) shall, unless otherwise subject to a perfected security interest (with the priorities contemplated herein) in favour of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations. If any sum of money or property so paid or distributed in respect of any Pledged Collateral shall be received by the Debtor, the Debtor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Collateral Agent, segregated from other funds of the Debtor, as additional security for the Secured Obligations.

General Security Agreement — Warnaco of Canada Company (2008)

(c)

Except as provided in Section 6 (Remedies on Default), the Debtor shall be entitled to exercise all voting, consent and corporate, partnership, unlimited liability company, limited liability company and similar rights with respect to the Pledged Collateral; provided, however, that no vote shall be cast, consent given or right exercised or other action taken by the Debtor that would impair the Collateral, be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document or, without prior notice to the Collateral Agent, enable or permit any issuer of Pledged Collateral to issue any Stock or other equity Securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any Stock or other equity Securities of any nature of any issuer of Pledged Collateral.

(d)

The Debtor shall not grant control (within the meaning of such term under the STA) over any Investment Property to any Person other than the Collateral Agent.

(e)

In the case the Debtor is an issuer of Pledged Collateral, the Debtor agrees to be bound by the terms of this Agreement relating to the Pledged Collateral issued by it and shall comply with such terms insofar as such terms are applicable to it. In the case the Debtor is a holder of any Stock or Stock Equivalent in any Person that is an issuer of Pledged Collateral, the Debtor consents to (i) the exercise of the rights granted to the Collateral Agent hereunder (including those described in Section 6.10 (Pledged Collateral)), and to the transfer of such Pledged Stock to the Collateral Agent or its nominee and to the substitution of the Collateral Agent or its nominee as a holder of such Pledged Stock with all the rights, powers and duties of other holders of Pledged Stock of the same class and, if the Debtor having pledged such Pledged Stock hereunder had any right, power or duty at the time of such pledge or at the time of such substitution beyond that of such other holders, with all such additional rights, powers and duties. The Debtor agrees to execute and deliver to the Collateral Agent such certificates, agreements and other documents as may be necessary to evidence, formalize or otherwise give effect to the consents given in this clause (e).

(f)

The Debtor shall not, and shall not permit any of its Subsidiaries (to the extent the Stock of such Subsidiary constitutes Collateral), without the consent of the Collateral Agent, agree to any amendment of any Constituent Document that in any way adversely affects the perfection of the security interest of the Collateral Agent in the Pledged Collateral pledged by the Debtor hereunder or any election to turn any previously uncertificated Stock that is part of the Pledged Collateral into certificated Stock.

3.6 Delivery of Instruments and Chattel Paper

If any amount in excess of $250,000 payable under or in connection with any Collateral owned by the Debtor shall be or become evidenced by an Instrument or Chattel Paper, the Debtor shall promptly deliver such Instrument or Chattel Paper to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, or, if consented to by the Collateral Agent, shall mark all such Instruments and Chattel Paper with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the security interest of Bank of America, N.A., as Collateral Agent for the benefit of the Secured Parties” (which legend shall be modified to reflect successor Collateral Agents).

General Security Agreement — Warnaco of Canada Company (2008)

3.7 Intellectual Property

(a)

The Debtor (either itself or through licensees) shall (and shall cause all licensees or sublicensees thereof to) (i) continue to use each Trademark that is Material Intellectual Property in order to maintain such Trademark in full force and effect with respect to each class of goods for which such Trademark is currently used, free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) execute and file all documents necessary to perfect a security interest pursuant to this Agreement in favour of the Collateral Agent promptly upon adopting or using any mark that is confusingly similar or a colorable imitation of such Trademark and (v) not do any act or knowingly omit to do any act (and not permit or direct by express act or omission any licensee or sublicensee thereof to do any act) whereby such Trademark (or any goodwill associated therewith) may become destroyed, invalidated, impaired or harmed in any way; provided, however, that (i) to (iii) and (v) above shall be subject to the good faith exercise by the Debtor of its reasonable business judgment consistent with past practices.

(b)

The Debtor shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act, or omit to do any act, whereby any Patent that is Material Intellectual Property may become forfeited, abandoned or dedicated to the public.

(c)

The Debtor (i) shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act or omit to do any act whereby any portion of the Copyrights that is Material Intellectual Property may become invalidated or otherwise impaired and (ii) shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act whereby any portion of the Copyrights that is Material Intellectual Property may fall into the public domain.

(d)

The Debtor shall not knowingly (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act, or knowingly omit to do any act, whereby any trade secret that is Material Intellectual Property may become publicly available or otherwise unprotectable.

(e)

The Debtor shall not (and shall not permit or direct by express act or omission any licensee or sublicensee thereof to) do any act that knowingly infringes, misappropriates, dilutes or violates any Third Party Intellectual Property Rights.

(f)

The Debtor shall promptly inform the Collateral Agent in writing of the acquisition by the Debtor of any Registerable Intellectual Property, and the Debtor shall execute and deliver, at its own expense, from time to time amendments to this Agreement or additional security agreements or schedules as may be required by the Collateral Agent in order that the Security Interest shall attach to such Registerable Intellectual Property.

General Security Agreement — Warnaco of Canada Company (2008)

(g)

The Debtor shall notify the Collateral Agent immediately if it knows, or has reason to know, that any application for registration or recording, registration or recording relating to any Material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in CIPO, the Federal Court of Canada or any other court or tribunal in any other country) regarding Debtor’s ownership of, right to use, interest in, or the validity or enforceability of, any Material Intellectual Property or Debtor’s right to register the same or to own and maintain the same.

(h)

As set forth below, whenever the Debtor, either by itself or through its counsel or any agent or designee, shall file an application for the registration or recording of any Intellectual Property with CIPO or any similar office or agency within or outside Canada or register any Internet domain name, the Debtor shall report such filing to the Collateral Agent within five Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request of the Collateral Agent, the Debtor shall execute and deliver, and have recorded, all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent’s security interest in any such Copyright, Patent, Trademark or Internet domain name and the goodwill and intangibles of the Debtor relating thereto or represented thereby.

(i)

The Debtor shall take all reasonable actions that are (i) necessary (subject to the good faith exercise by the Debtor of its reasonable business judgment consistent with past practices) or (ii) requested by the Collateral Agent, including in any proceeding before CIPO or any similar office or agency and any Internet domain name registrar, to maintain and pursue each application for registration or recording (and to obtain the relevant registration or recording) and to maintain each registration and recording of any Copyright, Trademark, Patent or Internet domain name that is Material Intellectual Property, including filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition and interference and cancellation proceedings.

(j)

In the event that any Material Intellectual Property is infringed, misappropriated, diluted or violated by a third party, the Debtor shall notify the Collateral Agent promptly after the Debtor learns thereof. The Debtor shall take appropriate action in response to any infringement, misappropriation, dilution or violation of the Material Intellectual Property, including promptly bringing suit for infringement, misappropriation, dilution or violation and to recover all damages for such infringement, misappropriation, dilution or violation, and shall take such other actions may be appropriate under the circumstances to protect such Intellectual Property; provided, however, that the foregoing shall be subject to the good faith exercise by the Debtor of its reasonable business judgment consistent with past practices.

General Security Agreement — Warnaco of Canada Company (2008)

(k)

Unless otherwise agreed to by the Collateral Agent the Debtor shall execute and deliver to the Collateral Agent for filing in (i) the United States Copyright Office or any similar office or agency a short-form copyright security agreement in the form attached hereto as for all Copyrights of the Debtor registered therein from time to time, (ii) in the United States Patent and Trademark Office or any similar office or agency a short-form patent security agreement in the form attached hereto as for all Patents of the Debtor registered therein from time to time, (iii) the United States Patent and Trademark Office or any similar office or agency and with the appropriate department or division of all appropriate States of the United States a short-form trademark security agreement in form attached hereto as for all Trademarks of the Debtor registered therein from time to time and (iv) with the appropriate Internet domain name registrar, a duly executed form of assignment of all Internet domain names of the Debtor to the Collateral Agent (together with appropriate supporting documentation as may be requested by the Collateral Agent) in form and substance reasonably acceptable to the Collateral Agent. In the case of clause (iv) above, the Debtor hereby authorizes the Collateral Agent to file such assignment in the Debtor’s name and to otherwise perform in the name of the Debtor all other necessary actions to complete such assignment, and the Debtor agrees to perform all appropriate actions deemed necessary by the Collateral Agent for the Collateral Agent to ensure such Internet domain name is registered in the name of the Collateral Agent.

3.8 Cash Management; Deposit Accounts

(a)

On the Closing Date (or such later date as agreed by the Collateral Agent), the Debtor shall cause to be delivered (i) to the Collateral Agent, a duly executed and effective Blocked Account Letter for each existing deposit account identified as a concentration account on Schedule 7 maintained by the Debtor and (ii) to each Restricted Account Bank (with a copy to the Collateral Agent), a Restricted Account Letter for each other deposit account (subject only to clause (b) below) duly executed by the Debtor to each such deposit account.

(b)

The Debtor shall (i) deposit in a Blocked Account or Restricted Account all cash and all Proceeds received by the Debtor and (ii) not establish or maintain any deposit account with any financial or other institution other than a Blocked Account Bank, a Restricted Account Bank, the Collateral Agent or the Administrative Agent; provided, however, that the Debtor may at any time maintain the following accounts not subject to this Section 3.8(b)(i) deposit accounts or Securities Accounts (or their foreign equivalents) located outside of Canada with cash or Cash Equivalents not in excess of an aggregate amount of $3,000,000, (ii) deposit accounts or Securities Accounts located in Canada with cash or Cash Equivalents not in excess of an aggregate amount of $1,000,000 and (iii) payroll tax, employee deductions at source, withholding tax, goods and services and sales tax, and other fiduciary accounts as required for operations in the ordinary course of business.

General Security Agreement — Warnaco of Canada Company (2008)

(c)

The Debtor shall instruct each account debtor or other Person obligated to make a payment to the Debtor to make payment, or to continue to make payment, as the case may be, to a lock-box linked to a Blocked Account or a Restricted Account, as the case may be, and the Debtor shall deposit in a Blocked Account or a Restricted Account all Proceeds received by the Debtor from any other Person immediately upon receipt.

(d)

In the event (i) the Debtor or a Blocked Account Bank or Restricted Account Bank shall, after the date hereof, terminate an agreement with respect to the maintenance of a Blocked Account or Restricted Account, as the case may be, for any reason, (ii) the Collateral Agent shall demand termination of a Blocked Account Letter or a Restricted Account Letter as a result of the failure of a Blocked Account Bank or Restricted Account Bank, as the case may be, to comply with the terms of the applicable letter agreement or (iii) the Collateral Agent determines in its sole discretion that the financial condition of a Blocked Account Bank or Restricted Account Bank has materially deteriorated, then, in each case, the Debtor shall notify all of its account debtors that were making payments to such terminated Blocked Account Bank or Restricted Account Bank to make all future payments to such other Blocked Account Bank or Restricted Account Bank, as specified by the Collateral Agent.

(e)

The Collateral Agent agrees that it shall not deliver to any Blocked Account Bank a sweep activation notice under any Blocked Account Letter with such Blocked Account Bank unless there has occurred and is continuing an Event of Default or Available Credit has been less than 15% of the Aggregate Borrowing Limit for five or more consecutive Business Days.

3.9 Cash Collateral Accounts

(a)

General Security Agreement — Warnaco of Canada Company (2008)

Agent shall have no obligation to make or cause to be made any such investment absent a request by the Borrower for a specific investment in Permitted Cash Equivalents. Neither any Warnaco Entity nor any other Person claiming on behalf of or through any Warnaco Entity shall have any right to demand payment of any funds held in any Cash Collateral Account at any time prior to Discharge of Lender Claims, except (i) as provided in Section 2.9(f) of the Credit Agreement and (ii) that the Debtor may request that the Collateral Agent apply funds in any Cash Collateral Account directly to the immediate payment of the Loans and if paid in full then to the cash collateralization of Letter of Credit Obligations (and not to be delivered to any Warnaco Entity). The Collateral Agent shall apply all funds on deposit in a Cash Collateral Account as provided in Section 2.9(f) of the Credit Agreement.

3.10 Vehicles

Upon the request of the Collateral Agent, within 30 days after the date of such request and, with respect to any vehicle acquired by the Debtor subsequent to the date of any such request, within 30 days after the date of acquisition thereof, the Debtor shall file all applications for certificates of title or ownership indicating the Collateral Agent’s first priority security interest in the vehicle covered by such certificate and any other necessary documentation, in each office in each jurisdiction that the Collateral Agent shall deem advisable to perfect its security interests in the vehicles; provided, however, that the aggregate value of all vehicles excepted from the application of this Section 3.10 shall not exceed $1,000,000.

3.11 Payment of Obligations

The Debtor shall pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with Agreement Accounting Principles with respect thereto have been provided on the books of the Debtor and such proceedings could not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest therein.

SECTION 4 — SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

All representations, warranties, covenants, agreements, undertakings and conditions made in the Loan Documents, which, if not true, accurate and complete when made and which, if not performed in accordance with the terms thereof, are material, shall be considered to have been relied on by the Agents and the Secured Parties and shall survive the execution and delivery of this Agreement or any investigation made at any time by or on behalf of the Agents and any disposition or payment of the Secured Obligations until repayment and performance in full of the Secured Obligations and termination of all rights of the Debtor that, if exercised, would result in the existence of Secured Obligations.

General Security Agreement — Warnaco of Canada Company (2008)

SECTION 5 — DEFAULT

5.1 Default

The Secured Obligations secured by this Agreement shall be immediately due and payable in full and the security interests hereby constituted shall become enforceable upon the occurrence and during the continuance of an Event of Default (herein called a “Default”).

5.2 Demand Nature of Secured Obligations

The Debtor agrees that the provision of defaults in section 5.1 shall not derogate from any demand nature of the Secured Obligations as provided in the Credit Agreement as at any time without restriction, whether or not the Debtor has complied with the provisions of this Agreement or any other agreement or instrument between it and the Collateral Agent or any other Secured Party. The Debtor agrees that upon the occurrence and during the continuance of a Default under section 5.1, the security interests hereby constituted shall become enforceable and the Collateral Agent shall be entitled to exercise and enforce any or all of the remedies herein provided or which may otherwise be available to the Collateral Agent by statute, at law or in equity and, upon demand by the Administrative Agent pursuant to Section 9.2 (Remedies) of the Credit Agreement, all amounts secured hereby shall immediately be paid to the Collateral Agent (for itself and on behalf of the Secured Parties) by the Debtor.

SECTION 6 — REMEDIES ON DEFAULT

If the security interest hereby constituted becomes enforceable, the Collateral Agent shall have, in addition to any other rights, remedies and powers which it may have at law, in equity or under the PPSA, the CCQ or the UCC (whether or not the CCQ or the UCC applies to the affected Collateral) the following rights, remedies and powers upon the occurrence and during the continuance of an Event of Default:

6.1 Power of Entry

The Debtor shall forthwith upon demand assemble and deliver to the Collateral Agent possession of all of the Collateral at such place or places as may be reasonably specified by the Collateral Agent. The Collateral Agent may take such steps as it considers necessary or desirable to obtain possession of all or any part of the Collateral and, to that end, the Debtor agrees that the Collateral Agent, its servants or agents or Receiver (as hereinafter defined) may, at any time, during the day or night, enter upon lands and premises where the Collateral may be found for the purpose of taking possession of and/or removing the Collateral or any part thereof. In the event of the Collateral Agent taking possession of the Collateral, or any part thereof, the Collateral Agent shall have the right to maintain the same upon the premises on which the Collateral may then be situate. The Collateral Agent may take such action or do such things as to render any Equipment unusable.

General Security Agreement — Warnaco of Canada Company (2008)

6.2 Power of Sale

The Collateral Agent may sell, lease or otherwise dispose of all or any part of the Collateral, as a whole or in separate parcels, by public auction, private tender or by private contract, with or without notice, except as otherwise required by applicable law, with or without advertising and without any other formality, all of which are hereby waived by the Debtor. Such sale, lease or disposition shall be on such terms and conditions as to credit and otherwise and as to upset or reserve bid or price as to the Collateral Agent, in its sole discretion, may seem advantageous. If such sale, transfer or disposition is made on credit or part cash and part credit, the Collateral Agent need only credit against the Secured Obligations the actual cash received at the time of the sale. Any payments made pursuant to any credit granted at the time of the sale shall be credited against the Secured Obligations as they are received. The Collateral Agent may buy in or rescind or vary any contract for sale of all or any of the Collateral and may resell without being answerable for any loss occasioned thereby. Any such sale, lease or disposition may take place whether or not the Collateral Agent has taken possession of the Collateral. The Collateral Agent may, before any such sale, lease or disposition, perform any commercially reasonable repair, processing or preparation for disposition and the amount so paid or expended shall be deemed advanced to the Debtor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Agreement.

6.3 Validity of Sale

No person dealing with the Collateral Agent or its servants or agents shall be concerned to inquire whether the security hereby constituted has become enforceable, whether the powers which the Collateral Agent is purporting to exercise have become exercisable, whether any money remains due on the security of the Collateral, as to the necessity or expedience of the stipulations and conditions subject to which any sale, lease or disposition shall be made, otherwise as to the propriety or regularity of any sale or any other dealing by the Collateral Agent with the Collateral or to see to the application of any money paid to the Collateral Agent. In the absence of fraud on the part of such persons, such dealings shall be deemed, so far as regards the safety and protection of such person, to be within the powers hereby conferred and to be valid and effective accordingly.

6.4 Receiver-Manager

The Collateral Agent may, in addition to any other rights it may have, appoint by instrument in writing a receiver or receiver and manager (both of which are herein called a “Receiver”) of all or any part of the Collateral or may institute proceedings in any court of competent jurisdiction for the appointment of such a Receiver. Any such Receiver is hereby given and shall have the same powers and rights and exclusions and limitations of liability as the Collateral Agent has under this Agreement, at law or in equity. In exercising any such powers, any such Receiver shall, to the extent permitted by law, act as and for all purposes shall be deemed to be the agent of the Debtor and the Collateral Agent and the Secured Parties shall not be responsible for any act or default of any such Receiver. The Collateral Agent may appoint one or more Receivers hereunder and may remove any such Receiver or Receivers and appoint another or others in his or their stead from time to time. Any Receiver so appointed may be an officer or employee of the Collateral Agent. A court need not appoint, ratify the appointment by the Collateral Agent of or otherwise supervise in any manner the actions of any Receiver. Upon the Debtor receiving notice from the Collateral Agent of the taking of possession of the Collateral or the appointment of a Receiver, all powers, functions, rights and privileges of each of the directors and officers of the Debtor with respect to the Collateral shall cease, unless specifically continued by the written consent of the Collateral Agent.

General Security Agreement — Warnaco of Canada Company (2008)

6.5 Carrying on Business

The Collateral Agent may carry on, or concur in the carrying on of, all or any part of the business or undertaking of the Debtor, may, to the exclusion of all others, including the Debtor, enter upon, occupy and use all or any of the premises, buildings, plant and undertaking of or occupied or used by the Debtor and may use all or any of the tools, machinery, equipment and intangibles of the Debtor for such time as the Collateral Agent sees fit, free of charge, to carry on the business of the Debtor and, if applicable, to manufacture or complete the manufacture of any Inventory and to pack and ship the finished product.

6.6 Dealing with Collateral

The Collateral Agent may seize, collect, realize, dispose of, enforce, release to third parties or otherwise deal with the Collateral or any part thereof in such manner, upon such terms and conditions and at such time or times as may seem to it advisable, all of which without notice to the Debtor except as otherwise required by any applicable law. The Collateral Agent may demand, sue for and receive any Accounts Receivable with or without notice to the Debtor, give such receipts, discharges and extensions of time and make such compromises in respect of any Accounts Receivable which may, in the Agent’s absolute discretion, seem bad or doubtful. The Collateral Agent may charge on its own behalf and pay to others, sums for costs and expenses incurred including, without limitation, legal fees and expenses on a solicitor and his own client scale and Receivers’ and accounting fees, in or in connection with seizing, collecting, realizing, disposing, enforcing or otherwise dealing with the Collateral and in connection with the protection and enforcement of the rights of the Collateral Agent hereunder including, without limitation, in connection with advice with respect to any of the foregoing. The amount of such sums shall be deemed advanced to the Debtor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Agreement.

6.7 Right to Use

For the purposes of enabling the Collateral Agent to exercise its rights and remedies under this Agreement (including, without limiting the terms of this Section 6, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale, complete production of, advertise for sale and sell or otherwise dispose of the Collateral) at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, the Debtor hereby grants to the Collateral Agent (for itself and on behalf of the Secured Parties) an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Debtor) to use, license or sublicense all of the Debtor’s present and future property, whether real or personal, including, without limitation, all labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, services marks, and advertising matter, or any other property of any nature or of a similar nature now owned or hereafter acquired by the Debtor, and wherever the same may be located, and including such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and all of the Debtor’s rights under all licenses and all franchise agreements shall inure to the Collateral Agent.

General Security Agreement — Warnaco of Canada Company (2008)

6.8 Retention of Collateral

Upon notice to the Debtor and subject to any obligation to dispose of any of the Collateral, as provided in the PPSA, the Collateral Agent may elect to retain all or any part of the Collateral in satisfaction of the Secured Obligations or any of them.

6.9 Accounts and Payments in Respect of Intangibles

(a)

In addition to, and not in substitution for, any similar requirement in the Credit Agreement, if required by the Collateral Agent at any time during the continuance of an Event of Default, any payment of Accounts Receivable or payment in respect of Intangibles, when collected by the Debtor, shall be forthwith (and, in any event, within two Business Days) deposited by the Debtor in the exact form received, duly indorsed by the Debtor to the Collateral Agent, in a Blocked Account or a Cash Collateral Account, subject to withdrawal by the Collateral Agent as provided in Section 6.11 (Proceeds to be Turned Over To Collateral Agent). Until so turned over, such payment shall be held by the Debtor in trust for the Collateral Agent, segregated from other funds of the Debtor. Each such deposit of Proceeds of Accounts Receivable and payments in respect of Intangibles shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

(b)

At the Collateral Agent’s request, during the continuance of an Event of Default, the Debtor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions that gave rise to the Accounts Receivable or payments in respect of Intangibles, including all original orders, invoices and shipping receipts.

(c)

Subject to the terms of the Credit Agreement, the Collateral Agent may, without notice, at any time during the continuance of an Event of Default, limit or terminate the authority of the Debtor to collect its Accounts Receivable or amounts due under Intangibles or any thereof.

(d)

The Collateral Agent in its own name or in the name of others may at any time during the continuance of an Event of Default communicate with account debtors to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any Account or amounts due under any Intangible.

(e)

Upon the request of the Collateral Agent at any time during the continuance of an Event of Default, the Debtor shall notify account debtors that it has granted to the Collateral Agent a lien on and security interest in, all of its right, title and interest in, to and under the Accounts Receivable or Intangibles that have been collaterally assigned to the Collateral Agent and that payments in respect thereof shall be made directly to the Collateral Agent. In addition, the Collateral Agent may at any time during the continuance of an Event of Default, to the extent permitted by applicable law, enforce the Debtor’s rights against such account debtors and obligors of Intangibles.

General Security Agreement — Warnaco of Canada Company (2008)

(f)

Anything herein to the contrary notwithstanding, the Debtor shall remain liable under each of the Accounts Receivable and payments in respect of Intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any agreement giving rise to an Account or a payment in respect of an Intangible by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Party of any payment relating thereto, nor shall the Collateral Agent nor any other Secured Party be obligated in any manner to perform any obligation of the Debtor under or pursuant to any agreement giving rise to an Account or a payment in respect of an Intangible, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

6.10 Pledged Collateral

(a)

During the continuance of an Event of Default, upon notice by the Collateral Agent to the Debtor, (i) the Collateral Agent shall have the right to receive any Proceeds of the Pledged Collateral and make application thereof to the Secured Obligations in the order set forth in the Credit Agreement and (ii) the Collateral Agent or its nominee may exercise (A) any voting, consent, corporate and other right pertaining to the Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of Pledged Collateral or otherwise and (B) any right of conversion, exchange and subscription and any other right, privilege or option pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any issuer of Pledged Stock and the right to deposit and deliver any Pledged Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it; provided, however, that the Collateral Agent shall have no duty to the Debtor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

General Security Agreement — Warnaco of Canada Company (2008)

(b)

In order to permit the Collateral Agent to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) the Debtor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all such proxies, dividend payment orders and other instruments as the Collateral Agent may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, the Debtor hereby grants to the Collateral Agent an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other person (including the issuer of such Pledged Collateral or any officer or agent thereof) during the continuance of an Event of Default and which proxy shall only terminate upon Discharge of Lender Claims.

(c)

The Debtor hereby expressly authorizes and instructs each issuer of any Pledged Collateral pledged hereunder by the Debtor to (i) comply with any instruction received by it from the Collateral Agent in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Debtor, and the Debtor agrees that such issuer shall be fully protected in so complying and (ii) unless otherwise expressly permitted hereby, pay any dividend or other payment with respect to the Pledged Collateral directly to the Collateral Agent

6.11 Proceeds to be Turned Over To Collateral Agent

Unless otherwise expressly provided in the Credit Agreement, all Proceeds received by the Collateral Agent hereunder in cash or Cash Equivalents shall be held by the Collateral Agent in a Cash Collateral Account. All Proceeds constituting Reinvestment Prepayment Amounts (as defined in the Credit Agreement) or the cash collateralization of Letters of Credit (as defined in the Credit Agreement) while held by the Collateral Agent in a Cash Collateral Account (or by the Debtor in trust for the Collateral Agent) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in the Credit Agreement.

6.12 Registration Rights

(a)

During the continuance of an Event of Default, if the Collateral Agent shall determine to exercise its right to sell any of the Pledged Collateral, and if in the reasonable opinion of the Collateral Agent it is necessary or advisable to have the Pledged Collateral, or any portion thereof, registered under the provisions of the STA or any similar securities laws in any other applicable jurisdiction (the “Securities Act”), the Debtor shall use its reasonable efforts to cause the issuer thereof to (i) execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Collateral Agent, necessary or advisable to register the Pledged Collateral, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its reasonable efforts to cause the registration statement relating thereto to

General Security Agreement — Warnaco of Canada Company (2008)

become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Collateral, or that portion thereof to be sold and (iii) make all amendments thereto or to the related prospectus that, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of any securities commission applicable thereto. The Debtor agrees to cause such issuer to comply with the provisions of the applicable securities laws of any jurisdiction that the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) satisfying the provisions of the Securities Act.

(b)

The Debtor recognizes that the Collateral Agent may be unable to effect a public sale of any Pledged Collateral by reason of certain prohibitions contained in the Securities Act and applicable regulations or otherwise or may determine that a public sale is impracticable or not commercially reasonable and, accordingly, may resort to one or more private sales thereof to a restricted group of purchasers that shall be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Debtor acknowledges and agrees that any such private sale may result in prices and other terms less favourable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register such securities for public sale under the Securities Act, even if such issuer would agree to do so.

(c)

During the continuance of an Event of Default, the Debtor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Collateral pursuant to this Section 6.12 valid and binding and in compliance with all other applicable Requirements of Law. The Debtor further agrees that a breach of any covenant contained in this Section 6.12 will cause irreparable injury to the Collateral Agent and the other Secured Parties, that the Collateral Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.12 shall be specifically enforceable against the Debtor, and the Debtor hereby waives and agrees not to assert any defense against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement.

6.13 Pay Encumbrances

The Collateral Agent may pay any encumbrance that may exist or be threatened against the Collateral. In addition, the Collateral Agent may borrow money required for the maintenance, preservation or protection of the Collateral or for the carrying on of the business or undertaking of the Debtor and may grant further security interests in the Collateral in priority to the security interest created hereby as security for the money so borrowed. In every such case the amounts so paid or borrowed together with costs, charges and expenses incurred in connection therewith shall be deemed to have been advanced to the Debtor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Agreement.

General Security Agreement — Warnaco of Canada Company (2008)

6.14 Application of Payments Against Secured Obligations

Any and all payments made in respect of the Secured Obligations from time to time and moneys realized on the Collateral shall be applied in accordance with Section 2.13 of the Credit Agreement. Any insurance moneys received by the Collateral Agent pursuant to this Agreement may, at the option of the Collateral Agent, be applied to rebuilding or repairing the Collateral or be applied against the Secured Obligations in accordance with the provisions of this Section.

6.15 Set-Off

The Secured Obligations will be paid by the Debtor without regard to any equities between the Debtor and the Collateral Agent and/or any Secured Party or any right of set-off or cross-claim. Any indebtedness owing by the Collateral Agent and/or any Secured Party to the Debtor may be set off and applied by the Collateral Agent against the Secured Obligations at any time or from time to time either before or after maturity, without demand upon or notice to anyone.

6.16 Deficiency

The Debtor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations and the reasonable fees and disbursements of any attorney employed by the Collateral Agent or any other Secured Party to collect such deficiency.

6.17 Agent Not Liable

Neither the Collateral Agent nor any of the other Secured Parties shall be (a) liable or accountable for any failure to seize, collect, realize, dispose of, enforce or otherwise deal with the Collateral, (b) bound to institute proceedings for any such purposes or for the purpose of preserving any rights of the Collateral Agent, the Debtor or any other person, firm or corporation in respect of the Collateral, or (c) liable or responsible for any loss, cost or damage whatsoever which may arise in respect of any such failure including, without limitation, resulting from the negligence of the Collateral Agent or any of its officers, servants, agents, solicitors, attorneys, Receivers or otherwise except for its, his, her or their gross negligence or willful misconduct. Neither the Collateral Agent nor any of the other Secured Parties, nor their respective officers, servants, agents or Receivers shall be liable by reason of any entry into possession of the Collateral or any part thereof, to account as a mortgagee in possession, for anything except actual receipts, for any loss on realization, for any act or omission for which a mortgagee in possession might be liable, for any negligence in the carrying on or occupation of the business or undertaking of the Debtor as provided in Section 6.5 or for any loss, cost, damage or expense whatsoever which may arise in respect of any such actions, omissions or negligence except for its, his, her or their gross negligence or willful misconduct.

General Security Agreement — Warnaco of Canada Company (2008)

6.18 Extensions of Time

The Collateral Agent and any of the Secured Parties may grant renewals, extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges, perfect or fail to perfect any securities, release any part of the Collateral to third parties and otherwise deal or fail to deal with the Debtor, debtors of the Debtor, guarantors, sureties and others and with the Collateral and other securities as they may see fit, all without prejudice to the liability of the Debtor to the Collateral Agent and the Secured Parties or the Collateral Agent’s and Secured Parties’ rights and powers under this Agreement.

6.19 Rights in Addition

The rights and powers conferred by this Section 6 are in supplement of and in addition to and not in substitution for any other rights or powers the Collateral Agent may have from time to time under this Agreement or under applicable law. The Collateral Agent may proceed by way of any action, suit, remedy or other proceeding at law or in equity and no such remedy for the enforcement of the rights of the Collateral Agent shall be exclusive of or dependent on any other such remedy. Any one or more of such remedies may from time to time be exercised separately or in combination.

SECTION 7 — DEALING WITH COLLATERAL BY THE DEBTOR

7.1 Sale of Inventory

Prior to the occurrence of a Default, the Debtor may, to the extent permitted hereunder or as permitted in the Credit Agreement, in the ordinary course of its business and on customary trade terms, lease or sell items of Inventory, so that the purchaser thereof takes title clear of the security interest hereby created. If such sale or lease results in an Account Receivable, such Account Receivable shall be subject to the security interest hereby created.

SECTION 8 — GENERAL

8.1 Security in Addition

The security hereby constituted is not in substitution for any other security for the Secured Obligations or for any other agreement between the parties creating a security interest or hypothec in all or part of the Collateral, whether heretofore or hereafter made, and such security and such agreements shall be deemed to be continued and not affected hereby unless expressly provided to the contrary in writing and signed by the Collateral Agent and the Debtor. The taking of any action or proceedings or refraining from so doing, or any other dealing with any other security for the Secured Obligations or any part thereof, shall not release or affect the security interest created by this Agreement and the taking of the security interest hereby created or any proceedings hereunder for the realization of the security interest hereby created shall not release or affect any other security held by the Collateral Agent for the repayment of or performance of the Secured Obligations.

General Security Agreement — Warnaco of Canada Company (2008)

8.2 Amendments in Writing

None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that annexes to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released except as provided in Section 8.11) through amendments in a form reasonably acceptable to the Collateral Agent, in each case duly executed by the Collateral Agent and the Debtor.

8.3 Notices

All notices, requests and demands to or upon the Collateral Agent or the Debtor hereunder shall be effected in the manner provided for in Section 11.8 (Notices, Etc.) of the Credit Agreement; provided, however, that any such notice, request or demand to or upon the Debtor shall be addressed to the Debtor’s notice address set forth in such Section 11.8 or to its principal place of business as set forth herein.

8.4 No Waiver by Course of Conduct; Cumulative Remedies

Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 8.2 (Amendments in Writing)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

8.5 Successors and Assigns

This Agreement shall be binding upon the successors and assigns of the Debtor and shall inure to the benefit of the Collateral Agent and each other Secured Party and their successors and assigns; provided, however, that the Debtor may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.

8.6 Counterparts

General Security Agreement — Warnaco of Canada Company (2008)

8.7 Severability

8.8 Section Headings

The Section titles and subtitles contained in this Agreement are, and shall be, without substantive meaning or content of any kind whatsoever and are not part of the agreement of the parties hereto.

8.9 Entire Agreement

8.10 Additional Debtors

Pursuant to Section 7.11 (Additional Personal Property Collateral and Guaranties) of the Credit Agreement, the Debtor shall be required to cause any Subsidiary to execute and deliver to the Collateral Agent a General Security Agreement substantially in the form hereof unless otherwise agreed by the Administrative Agent.

8.11 Release of Collateral

(a)

At the time provided in Section 10.7(b)(i) of the Credit Agreement, the Collateral shall be released from the Liens hereby and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and the Debtor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Debtor. At the request and sole expense of the Debtor following any such termination, the Collateral Agent shall deliver to the Debtor any Collateral of the Debtor held by the Collateral Agent hereunder and execute and deliver to the Debtor, at the sole expense of the Debtor, such documents as the Debtor shall reasonably request to evidence such termination.

General Security Agreement — Warnaco of Canada Company (2008)

(b)

If the Collateral Agent shall be directed or permitted pursuant to Section 10.7(b)(ii) or (iii) of the Credit Agreement to release any Lien created hereby upon any Collateral (including any Collateral sold or disposed of by the Debtor in a transaction permitted by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, Section 10.7(b)(ii) or (iii) of the Credit Agreement. In connection therewith but subject to the terms of the Credit Agreement, the Collateral Agent, at the request and sole expense of the Debtor, shall execute and deliver to the Debtor, all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral.

(c)

At the request and sole expense of the Debtor, the Debtor shall be released from its obligations hereunder in the event that all the capital stock of the Debtor shall be so sold or disposed (but only so long as such sale or other disposition is permitted under the Credit Agreement); provided, however, that the Debtor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the Debtor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Debtor in form and substance satisfactory to the Collateral Agent stating that such transaction is in compliance with the Loan Documents.

8.12 Reinstatement

The Debtor further agrees that, if any payment made by any Loan Party or other Person and applied to any of the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral are required to be returned by any Secured Party to such Loan Party or other Person, its estate, trustee, receiver or any other party, including the Debtor, under any bankruptcy law, provincial or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if such payment had never been made or, if prior thereto the Lien granted hereby or other Collateral securing such liability hereunder shall have been released or terminated, such Lien or other Collateral shall be reinstated in full force and effect, and such prior release or termination shall not diminish, release, discharge, impair or otherwise affect any Lien or other Collateral securing the obligations of the Debtor in respect of the amount of such payment.

8.13 Submission to Jurisdiction; Service of Process

(a)

Any legal action or proceeding with respect to this Agreement may be brought in the courts of the Province of Ontario, and, by execution and delivery of this Agreement, the Debtor hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid court. The Debtor hereby irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

General Security Agreement — Warnaco of Canada Company (2008)

(b)

The Debtor hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in Canada arising out of or in connection with this Agreement by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to the Debtor at the address specified in Section 11.8 (Notices, Etc.) of the Credit Agreement. The Debtor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c)

Nothing contained in this Section 8.13 shall affect the right of the Collateral Agent or any other Secured Party to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Debtor in any other jurisdiction.

8.14 Further Assurances

The Debtor shall at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all and singular every such further acts, deeds, conveyances, instruments, transfers, assignments, security agreements and assurances as the Collateral Agent may reasonably require in order to give effect to the provisions and purposes of this Agreement including, without limitation, in respect of the Collateral Agent’s enforcement of the security and its realization on the Collateral, and for the better granting, transferring, assigning, charging, setting over, assuring, confirming and/or perfecting the security interest of the Collateral Agent in the Collateral pursuant to this Agreement. The Debtor hereby constitutes and appoints any officer of the Collateral Agent at its above address, or any Receiver appointed by the Court or the Collateral Agent as provided herein, the true and lawful attorney of the Debtor irrevocably with full power of substitution to do, make and execute all such assignments, documents, acts, matters or things with the right to use the name of the Debtor whenever and wherever it may be deemed necessary or expedient. The Debtor hereby authorizes the Collateral Agent to file such proofs of claim and other documents as may be necessary or advisable in order to prove its claim in any bankruptcy, proposed winding-up or other proceeding relating to the Debtor. Notwithstanding anything to the contrary in this paragraph, the Collateral Agent agrees that it shall not exercise any right under the power of attorney provided for in this paragraph unless an Event of Default shall be continuing.

Without limiting the generality of the foregoing, the Debtor:

(a)

shall, upon receipt of notice to do so by the Collateral Agent, mark conspicuously each chattel paper evidencing or relating to Accounts Receivable and each related contract and, at the request of the Collateral Agent, each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such chattel paper, related contract or Collateral is subject to the security interests granted hereby;

(b)

shall, if any Accounts Receivable shall be evidenced by a promissory note or other instrument or chattel paper, deliver and pledge to the Collateral Agent hereunder such note, instrument or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent;

General Security Agreement — Warnaco of Canada Company (2008)

(c)

shall execute and file such financing or continuation statements, or amendments, thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby;

(d)

hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Debtor, where permitted by law; and

(e)

shall furnish to the Collateral Agent from time to time, upon request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

8.15 Continuing Security Interest and Discharge

This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until payment and performance in full of the Secured Obligations and the termination of the Credit Agreement, notwithstanding any dealing between the Collateral Agent and the Debtor or any guarantor in respect of the Secured Obligations or any release, exchange, non-perfection, amendment, waiver, consent or departure from or in respect of any or all of the terms or provision of any security held for the Secured Obligations.

8.16 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interests hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the Province of Ontario.

8.17 Provisions Reasonable

The Debtor expressly acknowledges and agrees that the provisions of this Agreement and, in particular, those respecting remedies and powers of the Collateral Agent against the Debtor, its business and the Collateral upon default, are commercially reasonable and not manifestly unreasonable.

8.18 Precedence

In the event that any provisions of this Agreement contradict, are inconsistent with and are otherwise incapable of being construed in conjunction with the provisions (including any rights, remedies and covenants therein) of the Credit Agreement, the provisions of the Credit Agreement shall take precedence over those contained in this Agreement. Notwithstanding the foregoing, in the event that any provision of the Credit Agreement relating to the grant or perfection of a security interest in Collateral, if any, conflict with, contradict, are inconsistent and are otherwise incapable of being construed in conjunction with the provisions of this Agreement, such provisions of this Agreement shall take precedence over those contained in the Credit Agreement.

General Security Agreement — Warnaco of Canada Company (2008)

8.19 Number and Gender

In this Agreement, words importing the singular number include the plural and vice-versa and words importing gender include all genders.

8.20 Indemnity and Expenses

(a)

The Debtor agrees to indemnify and save harmless the Collateral Agent and the Secured Parties from and against any and all claims, losses and liabilities arising out of or resulting out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement).

(b)

The Debtor will upon demand pay to the Collateral Agent the amount of any and all expenses, including the fees and disbursements of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights or remedies of the Collateral Agent hereunder or (iv) the failure by the Debtor to perform or observe any of the provisions hereunder.

8.21 Judgment Currency

If, for the purposes of obtaining or enforcing judgment in any court or for any other purpose hereunder or in connection herewith, it is necessary to convert a sum due hereunder in any currency into another currency, such conversion shall be carried out to the extent and in the manner provided in the Credit Agreement.

8.22 Language

The parties hereto acknowledge that they have requested and are satisfied that this Agreement, as well as all notices, actions and legal proceedings be drawn up in the English language. Les parties à cette convention reconnaissent qu’elles ont exigé que cette convention ainsi que tous avis, actions et procédures légales soient rédigés et exécutés en anglais et s’en déclarent satisfaites.

[the remainder of this page is intentionally left blank]

[signature page follows]

General Security Agreement — Warnaco of Canada Company (2008)

Annex 1
To
General Security Agreement

Form of Short Form Copyright Security Agreement

Copyright Security Agreement, dated as of August _____, 2008, by [Warnaco of Canada Company or 4278941 Canada Inc.] (the “Grantor”) in favour of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Whereas, pursuant to a Credit Agreement, dated as of August _____, 2008 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among, inter alia, Warnaco of Canada Company (the “Borrower”), the Lenders and Issuers party thereto, BofA, as administrative agent and collateral agent for the Lenders and Issuers, the Lenders and the Issuers have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

Section 2. Grant of Security Interest in Copyright Collateral

The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the Grantor, hereby conveys, mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of the Grantor (the “Copyright Collateral”):

(a) all of its Copyrights and Copyright Licenses pursuant to which it has been granted any exclusive rights to Copyrights, including, without limitation, those referred to on Schedule I hereto;

(b) all renewals, reversions and extensions of the foregoing; and

Annex 2
to
General Security Agreement

Form of Short Form Patent Security Agreement

Patent Security Agreement, dated as of August _____, 2008, by [Warnaco of Canada Company or 4278941 Canada Inc.] (the “Grantor”) in favour of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (as defined in the Credit Agreement referred to below) (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Patent Collateral

(a) all of its Patents, including, without limitation, those referred to on Schedule I hereto;

Annex 3
to
General Security Agreement

Form of Short Form Trademark Security Agreement

Trademark Security Agreement, dated as of August _____, 2008, by [Warnaco of Canada Company or 4278941 Canada Inc.] (the “Grantor”) in favour of Bank of America, N.A. (“BofA”), as collateral agent for the Secured Parties (as defined in the Credit Agreement referred to below) (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”).

W i t n e s s e t h:

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Trademark Collateral

The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of the Grantor (the “Trademark Collateral”):

1. all of its Trademarks, including, without limitation, those referred to on Schedule I hereto;

Exhibit 10.8

GENERAL SECURITY AGREEMENT

EXECUTED by the parties as of the 26^th day of August, 2008.


TO:		BANK OF AMERICA, N.A.,

		on its own behalf as Lender (acting through its Canada branch) and as Collateral Agent, for itself and on behalf of the Secured Parties (as such term is defined in the Credit Agreement, hereinafter defined) 335 Madison Avenue, New York, New York 10017

		(hereinafter the “Collateral Agent”)

GRANTED BY:		4278941 CANADA INC.

		Having its registered office at 20600 Clark Graham Blvd., Baie d’Urfé, Québec, Canada, H9X 4B6,

		(hereinafter the “Debtor”)

SECTION 1 — GRANT OF SECURITY INTEREST

1.1

Security Interest

As a general and continuing security for the payment and performance of the Secured Obligations (as such term is defined in the Credit Agreement, hereinafter defined) of the Debtor and Warnaco of Canada Company (the “Borrower”), the Debtor, IN CONSIDERATION OF THE SECURED OBLIGATIONS and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby grants, bargains, assigns and transfers to the Collateral Agent (for itself and on behalf of the Secured Parties), and grants to the Collateral Agent (for itself and on behalf of the Secured Parties) a continuing security interest in all of the Debtor’s right, title and interest in and to all the personal property, assets and undertakings of the Debtor of whatsoever nature and kind, whether now owned or hereafter-acquired by or on behalf of the Debtor, wherever located (the “Collateral”) including, without limitation:

(a)

Accounts Receivable

General Security Agreement — 4278941 Canada Inc. (2008)

(b)

Inventory

(c)

Equipment

(d)

Chattel Paper, Instruments, Securities, etc.

(e)

Intangibles

(f)

Books and Accounts, etc.

General Security Agreement — 4278941 Canada Inc. (2008)

(g)

Other Property

The uncalled capital, money, rights, bills of exchange, negotiable and non-negotiable instruments, judgments and securities not otherwise described in Paragraphs (a) to (f) inclusive;

(h)

Replacements, etc.

(i)

Proceeds

1.2

Definitions and Interpretation

In the present General Security Agreement (this “Agreement”):

	(a)		Terms used herein and defined in the Personal Property Security Act (Ontario) or similar legislation of any other Canadian jurisdiction, the laws of which are required by such legislation to be applied in connection with the issue, perfection, enforcement, opposability, validity or effect of security interests (collectively the “PPSA”) shall have the same meanings as in the PPSA unless the context otherwise requires;

	(b)		Terms used herein and defined in the Securities Transfer Act (Ontario) (the “STA”) shall have the same meanings as in the STA unless the context otherwise requires;

	(c)		Capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Credit Agreement, unless the context otherwise requires;

	(d)		Any reference to “Collateral” shall, unless the context otherwise requires, refer to “Collateral or any part thereof”;

	(e)		The term “security interest” and the grant of the “security interest” herein provided for shall include, without limitation, a fixed mortgage, hypothecation, pledge, charge and assignment of the Collateral in favour of the Collateral Agent (for itself and on behalf of the Secured Parties);

General Security Agreement — 4278941 Canada Inc. (2008)

	(f)		“Additional Pledged Collateral” means any Pledged Collateral acquired by the Debtor after the date hereof and in which a security interest is granted pursuant to Section 1 (Grant of Security Interest), including, to the extent a security interest is granted therein pursuant to Section 1 (Grant of Security Interest), (i) all Stock and Stock Equivalents of any Person that are acquired by the Debtor after the date hereof, together with all certificates, instruments or other documents representing any of the foregoing and all Security Entitlements of the Debtor in respect of any of the foregoing, (ii) all additional Indebtedness from time to time owed to the Debtor by any obligor on the Pledged Debt Instruments and the Instruments evidencing such Indebtedness and (iii) all interest, cash, Instruments and other property or Proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing. “Additional Pledged Collateral” may be Intangibles (including Intellectual Property), Instruments or Investment Property;

	(g)		“Blocked Account” means a deposit account maintained by the Debtor with a Blocked Account Bank which account is the subject of an effective Blocked Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Blocked Account;

	(h)		“Blocked Account Bank” means a financial institution approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which the Debtor has delivered to the Collateral Agent an executed Blocked Account Letter (hereinafter defined);

	(i)		“Blocked Account Letter” means a letter agreement in a form acceptable to the Collateral Agent, executed by the Debtor and the Collateral Agent and acknowledged and agreed to by the relevant Blocked Account Bank;

	(j)		“Cash Collateral Account” means any deposit account or Securities Account that is (a) established by the Collateral Agent from time to time in its sole discretion to receive cash and Cash Equivalents (or purchase cash or Cash Equivalents with funds received) from the Debtor or any other Loan Party or their Subsidiaries or Affiliates or Persons acting on their behalf pursuant to the Loan Documents, (b) with such depositaries and securities intermediaries as the Collateral Agent may determine in its sole discretion, (c) in the name of the Collateral Agent (although such account may also have words referring to the Debtor and the account’s purpose), (d) under the control of the Collateral Agent and (e) in the case of a Securities Account, with respect to which the Collateral Agent shall be the Entitlement Holder and the only Person authorized to give Entitlement Orders with respect thereto, except as otherwise provided in Section 3.9 hereof. Notwithstanding the foregoing, the Special Cash Collateral Account shall not constitute a Cash Collateral Account;

	(k)		“CCQ” means the Civil Code of Quebec;

	(l)		“Certificated Security” has the meaning given to such term in the PPSA;

	(m)		“CIPO” means the Canadian Intellectual Property Office;

	(n)		“Collateral” has the meaning specified in Section 1.1 hereof;

General Security Agreement — 4278941 Canada Inc. (2008)

	(o)		“Collateral Agent” shall include, in addition to the Collateral Agent referred to in the preamble of the Credit Agreement, any successors and assigns to the Collateral Agent appointed pursuant to the Credit Agreement and means the “Collateral Agent” in its capacity as collateral agent for the benefit of the Secured Parties with respect to the Secured Obligations;

	(p)		“Control Account” means a securities account maintained by the Debtor with the relevant approved Securities Intermediary which account is the subject of an effective Control Account Agreement, and includes all monies and other assets on deposit or otherwise held therein;

	(q)		“Control Account Agreement” means a letter agreement in a form acceptable to the Collateral Agent, executed by the Debtor, the Collateral Agent and the relevant approved Securities Intermediary;

	(r)		“Copyright License” means any agreement, whether written or oral, providing for the grant by or to the Debtor of any right under any Copyright, including the grant of any right to use, copy, publicly perform, display, create derivative works of, manufacture, distribute, exploit or sell materials derived from any Copyright;

	(s)		“Copyrights” means (a) all copyrights arising under the laws of Canada, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications for registration or recording in connection therewith, including all registrations, recordings and applications for registration or recording with CIPO or in any foreign counterparts thereof, and (b) the right to obtain all renewals, reversions and extensions thereof;

	(t)		“Credit Agreement” shall mean that certain Credit Agreement dated the date hereof among, inter alia, the Debtor, as borrower, the financial institutions, together with their respective successors and assigns, listed on the signature pages thereof from time to time, as Lenders, and the Collateral Agent, as the same may be amended, supplemented, revised, restated or replaced from time to time;

	(u)		“Discharge of Lender Claims” means the payment in full in cash of the principal of, interest and premium, if any, on all Secured Obligations and, with respect to Hedging Obligations, Hedging Obligations or letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with the terms hereof, of the Credit Agreement, in each case after or concurrently with termination of all Commitments, and payment in full in cash of any other Secured Obligations that are due and payable at or prior to the time such principal and interest are paid;

	(v)		“Entitlement Holder” has the meaning given to such term in the PPSA;

	(w)		“Entitlement Order” has the meaning given to such term in the PPSA;

General Security Agreement — 4278941 Canada Inc. (2008)

	(x)		“Excluded Property” means, collectively, (i) any permit, lease, license, contract, instrument or other agreement held by the Debtor that validly prohibits the creation by the Debtor of a Lien thereon, or any permit, lease, license, contract, instrument or other agreement held by the Debtor to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, in each case, to the extent, and for so long as, such prohibition is not removed, terminated or rendered unenforceable or otherwise deemed ineffective by the PPSA or any other Requirement of Law; and (ii) any Equipment owned by the Debtor that is charged by a “purchase-money security interest” (as defined in the PPSA) or subject to a Capital Lease if the contract or other agreement in which such Lien is granted (or in the documentation providing for such Capital Lease) prohibits or requires the consent of any Person other than the Debtor as a condition to the creation of any other Lien on such Equipment; provided, however, “Excluded Property” shall not include any Proceeds, substitutions or replacements of Excluded Property (unless such Proceeds, substitutions or replacements would constitute Excluded Property);

	(y)		“Financial Assets” has the meaning given to such term in the PPSA;

	(z)		“Hedging Obligations” means all obligations of any Person under any Hedging Contract;

	(aa)		“Instrument” has the meaning given to such term in the PPSA;

	(bb)		“Intellectual Property” means, collectively, (a) all right, title and interest of the Debtor in intellectual property, whether arising under Canadian, multinational or foreign laws or otherwise, including Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, trade secrets, Internet domain names, Websites, advertising rights, rights in designs, including registrations thereof, and rights in data, and (b) all rights to income, royalties, proceeds and damages now or hereafter due and/or payable under and with respect thereto, including all rights to sue and recover at law or in equity for any past, present and future infringement, misappropriation, dilution, violation or other impairment thereof;

	(cc)		“Investment Property” has the meaning given to such term in the PPSA;

	(dd)		“LLC” means each limited liability company in which the Debtor has an equity interest, including those set forth on;

	(ee)		“LLC Agreement” means each operating agreement with respect to a LLC, as each agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified from time to time;

	(ff)		“Material Intellectual Property” means Intellectual Property owned by or licensed to the Debtor and material to Debtor’s business;

	(gg)		“Partnership” means each partnership in which the Debtor has an equity interest, including those set forth on;

	(hh)		“Partnership Agreement” means each partnership agreement governing a Partnership, as each such agreement has heretofore been, and may hereafter be, amended, restated, supplemented or otherwise modified;

	(ii)		“Patent License” means all agreements, whether written or oral, providing for the grant by or to the Debtor of any right to manufacture, have manufactured, use, import, lease, sell or offer for sale any product, design or process covered in whole or in part by a Patent;

General Security Agreement — 4278941 Canada Inc. (2008)

	(jj)		“Patents” means (a) all patents of Canada or any other country or patent rights arising under multinational laws, (b) all applications for patents of Canada or any other country or patent rights arising under multinational laws and (c) all rights to obtain any reissues, extensions, divisions, continuations and continuations-in-part of the foregoing;

	(kk)		“Pledged Certificated Stock” means all Certificated Securities and any other Stock and Stock Equivalent of a Person evidenced by a certificate, Instrument or other equivalent document, in each case owned by the Debtor, including all Stock listed on;

	(ll)		“Pledged Collateral” means, collectively, the Pledged Stock, Pledged Debt Instruments, any other Investment Property of the Debtor (other than Pledged Stock, Pledged Debt Instruments and other Investment Property whose value, in the aggregate, does not exceed $1,000,000), all chattel paper, certificates or other Instruments representing any of the foregoing and all Security Entitlements of the Debtor in respect of any of the foregoing. Pledged Collateral may be Intangibles, Instruments or Investment Property;

	(mm)		“Pledged Debt Instrument” means all right, title and interest of the Debtor in Instruments evidencing any Indebtedness owed to the Debtor, including all Indebtedness described on, issued by the obligors named therein;

	(nn)		“Pledged Stock” means all Pledged Certificated Stock and all Pledged Uncertificated Stock;

	(oo)		“Pledged Uncertificated Stock” means any Stock or Stock Equivalent of any Person that is not a Pledged Certificated Stock, including all right, title and interest of the Debtor as a limited or general partner in any Partnership or as a member of any LLC and all right, title and interest of the Debtor in, to and under any Partnership Agreement or LLC Agreement to which it is a party;

	(pp)		“Receiver” shall have the meaning provided to such term in Section 6.4 hereof;

	(qq)		“Registerable Intellectual Property” means any Intellectual Property in respect of which ownership, title, security interests, hypothecs, charges or encumbrances are capable of registration, recording or notation with any applicable authority pursuant to applicable law;

	(rr)		“Restricted Account” means a deposit account maintained by the Debtor with a Restricted Account Bank which account is the subject of an effective Restricted Account Letter, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Restricted Account;

	(ss)		“Restricted Account Bank” means a financial institution selected or approved (such approval not to be unreasonably withheld) by the Administrative Agent and with respect to which the Debtor has delivered an executed Restricted Account Letter;

General Security Agreement — 4278941 Canada Inc. (2008)

	(tt)		“Restricted Account Letter” means a letter agreement in a form acceptable to the Administrative Agent, executed by the Debtor;

	(uu)		“Securities Intermediaries” has the meaning given to such term in the PPSA;

	(vv)		“Securities Account” has the meaning given to such term in the PPSA;

	(ww)		“Security Entitlement” has the meaning given to such term in the PPSA;

	(xx)		“Security Interest” means, collectively, each security interest, mortgage, charge, assignment or transfer in or of Collateral granted or created by the Debtor under this Agreement;

	(yy)		“Third Party Intellectual Property Rights” means any right, title or interest of any Person under patent, copyright, trademark or trade secret law or any other statutory provision or common law doctrine relating to intellectual property or proprietary rights;

	(zz)		“Trademark License” means any agreement, whether written or oral, providing for the grant by or to the Debtor of any right under any Trademark.;

	(aaa)		“Trademarks” means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, service marks, logos and other source or business identifiers, and, in each case, all goodwill associated therewith, whether now existing or hereafter adopted or acquired, all registrations and recordings thereof and all applications for registration or recording in connection therewith, in each case whether in CIPO or in any similar office or agency of Canada, any Province or Territory thereof or any other country or any political subdivision thereof and all common-law rights related thereto, and (b) the right to obtain all renewals thereof; and

	(bbb)		“UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

1.3

Leases

General Security Agreement — 4278941 Canada Inc. (2008)

1.4

Debtor Remains Liable

Notwithstanding anything herein to the contrary:

	(a)		the Debtor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all its duties and obligations thereunder to the same extent as if this Agreement had not been executed;

	(b)		the exercise by the Collateral Agent of any of the rights or remedies hereunder shall not release the Debtor from any of its duties or obligations under the contracts and agreements included in the Collateral; and

	(c)		the Collateral Agent shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of the Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

SECTION 2 — REPRESENTATIONS AND WARRANTIES

2.1

Title; No Other Liens

2.2

Perfection and Priority

General Security Agreement — 4278941 Canada Inc. (2008)

2.3

Jurisdiction of Organization; Chief Executive Office

2.4

Inventory and Equipment

2.5

Pledged Collateral

	(a)		The Pledged Stock that constitutes Pledged Collateral pledged hereunder by the Debtor is listed on and constitutes that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on.

	(b)		All of the Pledged Stock (other than Pledged Stock in limited liability companies and partnerships) that constitutes Pledged Collateral has been duly and validly issued and are fully paid and nonassessable.

	(c)		All Pledged Collateral and, if applicable, any Additional Pledged Collateral, consisting of Certificated Securities or Instruments has been delivered to the Collateral Agent in accordance with Section 3.5(a) (Pledged Collateral) hereof, and Section 7.11 of the Credit Agreement and such other pledge agreement or other Collateral Documents entered into by the Debtor in favour of the Collateral Agent.

	(d)		Subject to Section 3.5(a), all Pledged Collateral held by a Securities Intermediary in a Securities Account is subject to a Control Account Agreement.

	(e)		Other than Pledged Stock constituting Intangibles, there is no Pledged Collateral other than (i) that represented by Certificated Securities or (ii) Instruments in the possession of the Collateral Agent or that consisting of Financial Assets held in a Securities Account that is subject to a Control Account Agreement.

	(f)		The Constituent Documents of any Person governing any Pledged Stock do not prohibit (i) the Collateral Agent, upon the occurrence and during the continuance of an Event of Default, from exercising all of the rights of the Debtor granting the security interest therein, and (ii) a transferee or assignee of Stock of such Person from becoming a member, partner or, as the case may be, other holder of such Pledged Stock to the same extent as the Debtor entitled to participate in the management of such Person and, pursuant to the Constituent Documents of any Person governing any Pledged Stock, upon the transfer of the entire interest of the Debtor, the Debtor shall cease to be a member, partner or, as the case may be, other holder of such Pledged Stock.

General Security Agreement — 4278941 Canada Inc. (2008)

2.6

Deposit Accounts; Securities Accounts

2.7

Accounts

2.8

Intellectual Property

(a)

(b)

General Security Agreement — 4278941 Canada Inc. (2008)

(c)

(d)

(e)

(f)

SECTION 3 — COVENANTS OF THE DEBTOR

3.1

Generally

General Security Agreement — 4278941 Canada Inc. (2008)

3.2

Maintenance of Perfected Security Interest; Further Documentation

(a)

(b)

(c)

3.3

Changes in Locations, Name, Etc.

(a)

	(i)		permit any Inventory or Equipment to be kept at a location other than those listed on, except for Inventory or Equipment in transit;

	(ii)		change its jurisdiction of organization from that referred to in Section 2.3 (Jurisdiction of Organization; Chief Executive Office); or

	(iii)		change its legal name, or organizational identification number, if any, or corporation, unlimited liability company, limited liability company or other organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.

General Security Agreement — 4278941 Canada Inc. (2008)

(b)

3.4

Control

3.5

Pledged Collateral

(a)

(b)

General Security Agreement — 4278941 Canada Inc. (2008)

(c)

(d)

The Debtor shall not grant control (within the meaning of such term under the STA) over any Investment Property to any Person other than the Collateral Agent.

(e)

(f)

3.6

Delivery of Instruments and Chattel Paper

General Security Agreement — 4278941 Canada Inc. (2008)

3.7

Intellectual Property

(a)

(b)

(c)

(d)

(e)

(f)

General Security Agreement — 4278941 Canada Inc. (2008)

(g)

(h)

(i)

(j)

General Security Agreement — 4278941 Canada Inc. (2008)

(k)

Unless otherwise agreed to by the Collateral Agent the Debtor shall execute and deliver to the Collateral Agent for filing in (i) the United States Copyright Office or any similar office or agency a short-form copyright security agreement in the form attached hereto as 1 for all Copyrights of the Debtor registered therein from time to time, (ii) in the United States Patent and Trademark Office or any similar office or agency a short-form patent security agreement in the form attached hereto as 2 for all Patents of the Debtor registered therein from time to time, (iii) the United States Patent and Trademark Office or any similar office or agency and with the appropriate department or division of all appropriate States of the United States a short-form trademark security agreement in form attached hereto as 3 for all Trademarks of the Debtor registered therein from time to time and (iv) with the appropriate Internet domain name registrar, a duly executed form of assignment of all Internet domain names of the Debtor to the Collateral Agent (together with appropriate supporting documentation as may be requested by the Collateral Agent) in form and substance reasonably acceptable to the Collateral Agent. In the case of clause (iv) above, the Debtor hereby authorizes the Collateral Agent to file such assignment in the Debtor’s name and to otherwise perform in the name of the Debtor all other necessary actions to complete such assignment, and the Debtor agrees to perform all appropriate actions deemed necessary by the Collateral Agent for the Collateral Agent to ensure such Internet domain name is registered in the name of the Collateral Agent.

3.8

Cash Management; Deposit Accounts

(a)

(b)

General Security Agreement — 4278941 Canada Inc. (2008)

(c)

(d)

(e)

3.9

Cash Collateral Accounts

(a)

The Collateral Agent may establish one or more Cash Collateral Accounts with such depositaries and Securities Intermediaries as it in its sole discretion shall determine. The Debtor agrees that each such Cash Collateral Account shall be under the control of the Collateral Agent and that the Collateral Agent shall be the Entitlement Holder with respect to each such Cash Collateral Account that is a Securities Account and the only Person authorized to give Entitlement Orders with respect to each such Securities Account. Without limiting the foregoing, funds on deposit in any Cash Collateral Account may be invested in Permitted Cash Equivalents at the direction of the Collateral Agent and, except during the continuance of an Event of Default (unless otherwise agreed to by the Administrative Agent in its sole discretion), the Collateral Agent agrees with the Debtor to issue Entitlement Orders for such investments in Permitted Cash Equivalents as requested by the Debtor; provided, however, that the Collateral Agent shall not have any responsibility for, or bear any risk of loss of, any such requested investment or income thereon and the Collateral Agent shall have no obligation to make or cause to be made any such investment absent a request by the Borrower for a specific investment in Permitted Cash Equivalents. Neither any Warnaco Entity nor any other Person claiming on behalf of or through any Warnaco Entity shall have any right to demand payment of any funds held in any Cash Collateral Account at any time prior to Discharge of Lender Claims, except (i) as provided in Section 2.9(f) of the Credit Agreement and (ii) that the Debtor may request that the Collateral Agent apply funds in any Cash Collateral Account directly to the immediate payment of the Loans and if paid in full then to the cash collateralization of Letter of Credit Obligations (and not to be delivered to any Warnaco Entity). The Collateral Agent shall apply all funds on deposit in a Cash Collateral Account as provided in Section 2.9(f) of the Credit Agreement.

General Security Agreement — 4278941 Canada Inc. (2008)

3.10

Vehicles

3.11

Payment of Obligations

SECTION 4 — SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

General Security Agreement — 4278941 Canada Inc. (2008)

SECTION 5 — DEFAULT

5.1

Default

5.2

Demand Nature of Secured Obligations

SECTION 6 — REMEDIES ON DEFAULT

6.1

Power of Entry

General Security Agreement — 4278941 Canada Inc. (2008)

6.2

Power of Sale

6.3

Validity of Sale

6.4

Receiver-Manager

General Security Agreement — 4278941 Canada Inc. (2008)

6.5

Carrying on Business

6.6

Dealing with Collateral

6.7

Right to Use

For the purposes of enabling the Collateral Agent to exercise its rights and remedies under this Agreement (including, without limiting the terms of this Section 6, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale, complete production of, advertise for sale and sell or otherwise dispose of the Collateral) at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, the Debtor hereby grants to the Collateral Agent (for itself and on behalf of the Secured Parties) an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Debtor) to use, license or sublicense all of the Debtor’s present and future property, whether real or personal, including, without limitation, all labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, services marks, and advertising matter, or any other property of any nature or of a similar nature now owned or hereafter acquired by the Debtor, and wherever the same may be located, and including such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and all of the Debtor’s tights under all licenses and all franchise agreements shall inure to the Collateral Agent.

General Security Agreement — 4278941 Canada Inc. (2008)

6.8

Retention of Collateral

6.9

Accounts and Payments in Respect of Intangibles

(a)

(b)

(c)

(d)

(e)

General Security Agreement — 4278941 Canada Inc. (2008)

(f)

6.10

Pledged Collateral

(a)

General Security Agreement — 4278941 Canada Inc. (2008)

(b)

(c)

6.11

Proceeds to be Turned Over To Collateral Agent

Unless otherwise expressly provided in the Credit Agreement, all Proceeds received by the Collateral Agent hereunder in cash or Cash Equivalents shall be held by the Collateral Agent in a Cash Collateral Account. All Proceeds constituting Reinvestment Prepayment Amounts (as defined in the Credit Agreement) or the cash collateralization of Letters of Credit (as defined in the Credit Agreement) while held by the Collateral Agent in a Cash Collateral Account (or by the Debtor in trust for the Collateral Agent) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in the Credit Agreement.

6.12

Registration Rights

(a)

General Security Agreement — 4278941 Canada Inc. (2008)

(b)

(c)

6.13

Pay Encumbrances

General Security Agreement — 4278941 Canada Inc. (2008)

6.14

Application of Payments Against Secured Obligations

6.15

Set-Off

6.16

Deficiency

6.17

Agent Not Liable

General Security Agreement — 4278941 Canada Inc. (2008)

6.18

Extensions of Time

6.19

Rights in Addition

SECTION 7 — DEALING WITH COLLATERAL BY THE DEBTOR

7.1

Sale of Inventory

SECTION 8 — GENERAL

8.1

Security in Addition

General Security Agreement — 4278941 Canada Inc. (2008)

8.2

Amendments in Writing

None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that annexes to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released except as provided in Section 8.10) through amendments in a form reasonably acceptable to the Collateral Agent, in each case duly executed by the Collateral Agent and the Debtor.

8.3

Notices

8.4

No Waiver by Course of Conduct; Cumulative Remedies

8.5

Successors and Assigns

8.6

Counterparts

General Security Agreement — 4278941 Canada Inc. (2008)

8.7

Severability

8.8

Section Headings

The Section titles and subtitles contained in this Agreement are, and shall be, without substantive meaning or content of any kind whatsoever and are not part of the agreement of the parties hereto.

8.9

Entire Agreement

8.10

Release of Collateral

(a)

(b)

General Security Agreement — 4278941 Canada Inc. (2008)

(c)

8.11

Reinstatement

8.12

Submission to Jurisdiction; Service of Process

(a)

(b)

The Debtor hereby irrevocably consents to the service of any and all legal process, summons, notices and documents in any suit, action or proceeding brought in Canada arising out of or in connection with this Agreement by the mailing (by registered or certified mail, postage prepaid) or delivering of a copy of such process to the Debtor at Debtor’s registered office as set forth herein.. The Debtor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c)

Nothing contained in this Section 8.12 shall affect the right of the Collateral Agent or any other Secured Party to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against the Debtor in any other jurisdiction.

General Security Agreement — 4278941 Canada Inc. (2008)

8.13

Further Assurances

Without limiting the generality of the foregoing, the Debtor:

(a)

(b)

(c)

(d)

(e)

General Security Agreement — 4278941 Canada Inc. (2008)

8.14

Continuing Security Interest and Discharge

8.15

Governing Law

8.16

Provisions Reasonable

8.17

Precedence

8.18

Number and Gender

In this Agreement, words importing the singular number include the plural and vice-versa and words importing gender include all genders.

General Security Agreement — 4278941 Canada Inc. (2008)

8.19

Indemnity and Expenses

(a)

(b)

8.20

Judgment Currency

8.21

Language

[the remainder of this page is intentionally left blank]

[signature page follows]

General Security Agreement — 4278941 Canada Inc. (2008)

Annex 1
To
General Security Agreement

W i t n e s s e t h:

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

Section 2. Grant of Security Interest in Copyright Collateral

(a) all of its Copyrights and Copyright Licenses pursuant to which it has been granted any exclusive rights to Copyrights, including, without limitation, those referred to on Schedule I hereto;

(b) all renewals, reversions and extensions of the foregoing; and

Annex 2
to
General Security Agreement

W i t n e s s e t h:

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Patent Collateral

(a) all of its Patents, including, without limitation, those referred to on Schedule I hereto;

(b) all reissues, continuations, divisions, continuations, renewals and extensions of the foregoing; and

Annex 3

General Security Agreement

W i t n e s s e t h:

Section 1. Defined Terms

Unless otherwise defined herein, terms defined in the Credit Agreement or in the Security Agreement and used herein have the meaning given to them in the Credit Agreement or the Security Agreement.

Section 2. Grant of Security Interest in Trademark Collateral

The Grantor, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations of the Grantor, hereby mortgages, pledges and hypothecates to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent for the benefit of the Secured Parties a lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of the Grantor (the “Trademark Collateral”):

1. all of its Trademarks, including, without limitation, those referred to on Schedule I hereto;

2. all renewals and extensions of the foregoing;

3. all goodwill of the business connected with the use of, and symbolized by, each such Trademark; and

Section 3. Security Agreement

The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Collateral Agent pursuant to the Security Agreement and the Grantor hereby acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the security interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

[Signature Pages Follow]

SECURITIES PLEDGE AGREEMENT

Securities Pledge Agreement dated as of August 26, 2008 made by Warnaco of Canada Company (the “Company”) to and in favour of the Collateral Agent (as hereinafter defined).

RECITALS:

WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof among, inter alia, Warnaco of Canada Company, as borrower (together with its successors and permitted assigns, the “Borrower”), the financial institutions, together with their respective successors and assigns, listed on the signature pages thereof from time to time, as Lenders, and the Collateral Agent, as the same may be amended, supplemented, revised, restated or replaced from time to time (the “Credit Agreement”), the Lenders have agreed to make Loans available to and for the benefit of the Borrower; unless otherwise defined herein, all capitalized words and expressions when used herein shall have the same meaning as ascribed thereto in the Credit Agreement

WHEREAS, the Collateral Agent is to hold for its own benefit and is to act as agent under the Credit Agreement, inter alia, to hold as agent for the rateable benefit of itself and the other Secured Parties, any and all security for the payment and performance of the obligations of the Company under the Credit Agreement and the other Loan Documents.

WHEREAS, the Company has agreed to execute and deliver this agreement to and in favour of the Collateral Agent as security for the payment and performance of the Company’s obligations to the Collateral Agent and the Secured Parties under the Credit Agreement and the other Loan Documents.

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Company, the Company and the Collateral Agent agree as follows:

ARTICLE I — SECURITY

1.1 Definitions and Interpretation

(a)

Terms defined in the Personal Property Security Act (Ontario) (as amended from time to time, the “PPSA”) and used in this agreement have the same meanings.

(b)

Any reference to the “STA” in this agreement means the Securities Transfer Act (Ontario), as amended from time to time.

(c)

Any references to the “General Security Agreement” shall mean that certain General Security Agreement dated as of or about the date hereof between the Company, as grantor, and the Collateral Agent, as same may be amended, supplemented, revised, restated or replaced from time to time.

(d)

Pledge Agreement — Warnaco of Canada Company (2008)

1.2 Grant of Security.

(a)

The Company assigns, mortgages, charges, hypothecates and pledges to the Collateral Agent, for its own benefit as a Lender (acting through its Canada branch) and as agent for the rateable benefit of itself and the other Secured Parties and grants to the Collateral Agent, for its own benefit as a Lender (acting through its Canada branch) and as agent for the rateable benefit of itself and the other Secured Parties, a security interest in the following property and assets (collectively, the “Collateral”): (i) all certificated and uncertificated securities registered in the name of the Company including those as described in Schedule “A” (collectively, the “Pledged Securities”), (ii) all securities accounts of the Company including those described in Schedule “B” (collectively, the “Pledged Securities Accounts”), all cash balances in the Pledged Securities Accounts and all security entitlements in respect of financial assets from time to time listed or described on the Pledged Securities Accounts or any statement in respect thereof, (the “Pledged Securities Entitlements”) (iv) all options, warrants and rights, whether as an addition to, in substitution of, or in exchange for, the Pledged Securities, the Pledged Security Accounts or the financial assets and other property subject to the Pledged Security Entitlements, (v) all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any such Pledged Securities, Pledged Security Entitlements, Pledged Securities Accounts, options, warrants and rights; (vi) all other rights and claims of the Company in respect of, or in connection with, the foregoing and (vii) all proceeds arising out of the foregoing; provided, however, that the foregoing grant of security interest shall not include a security interest in any Excluded Property; and provided, further, that, if and when any property shall cease to be Excluded Property, the Collateral Agent for the benefit of the Secured Parties shall have, and at all times from and after the date hereof be deemed to have had, a security interest in such property.

(b)

For greater certainty, the Collateral includes any substitutions or additions arising out of any consolidation, subdivision, reclassification, stock dividend or similar increase or decrease in, or alteration to, the capital of any issuer of the Pledged Securities or the financial assets and other property subject to the Pledged Security Entitlements or otherwise held in any Pledged Securities Account.

1.3 Obligations Secured.

(a)

The assignments, mortgages, charges, hypothecations, pledges and security interests granted hereby (the “Security Interest”) secure the payment and performance by the Borrower of the Secured Obligations (as such term is defined in the Credit Agreement) (collectively, and together with the expenses, costs and charges set out in Section 1.3(b), the “Obligations”).

Pledge Agreement — Warnaco of Canada Company (2008)

- 2 -

(b)

All expenses, costs and charges incurred by or on behalf of the Collateral Agent and the Secured Parties in connection with this agreement, the Security Interest or the realization of the Collateral including all legal fees, court costs, receiver’s or agent’s remuneration and other expenses of, or of taking or defending any action in connection with, taking possession of, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral or other lawful exercise of the powers conferred by the Credit Agreement and the other Loan Documents are to be added to and form a part of the Obligations.

1.4 Attachment, Perfection and Control.

(a)

The Company acknowledges that (i) value has been given, (ii) it has rights in the Collateral (other than after-acquired Collateral), (iii) it has not agreed to postpone the time of attachment of the Security Interest, and (iv) it has received a duplicate original copy of this agreement.

(b)

The Company will deliver to the Collateral Agent, immediately upon receipt thereof, any and all certificates representing the Pledged Securities and, to the extent applicable, the other Collateral, in each case accompanied by a duly executed stock power of attorney or similar transfer form constituting an effective endorsement.

(c)

If the Company becomes entitled to receive or receives any certificate (including, without limitation, any certificate representing a stock dividend or any certificate issued in connection with any reclassification, increase or reduction of capital or any reorganization), option, warrant or right (if in deliverable form) in respect of the Collateral, whether in addition to, in substitution for, as a conversion of, or in exchange for, any of the Collateral, the Company will accept it as the agent of the Collateral Agent and hold the same in trust for the Collateral Agent and the Secured Parties in the form received, and will immediately deliver it to the Collateral Agent together with a duly executed stock power of attorney or transfer form constituting an effective endorsement, as applicable.

(d)

If and to the extent any of the Pledged Securities are or become uncertificated, the Company will enter into and cause the issuer of such Pledged Securities to enter into a Control Account Agreement (as such term is defined in the General Security Agreement) in order to ensure that the Collateral Agent has control (as such term is used in the STA and the PPSA) of the uncertificated Pledged Securities.

(e)

If and to the extent the Company now or hereafter has one or more Pledged Securities Accounts, it shall take all action necessary to cause the relevant securities intermediary to enter into a Control Account Agreement (as such term is defined in the General Security Agreement) with the Collateral Agent pursuant to which the securities intermediary will agree, among other things, to comply with entitlement orders originated by the Collateral Agent or its nominee without further consent of the Company or any other Person.

Pledge Agreement — Warnaco of Canada Company (2008)

- 3 -

(f)

At the election of the Collateral Agent and immediately upon written notice being provided by the Collateral Agent to the Company, the Company will take all action required to (i) permit the Pledged Securities to be transferred into and registered in the name of the Collateral Agent or as it may direct, and (ii) cause the Pledged Securities Account and Pledged Security Entitlements recorded therein to be transferred to the Collateral Agent or as it may direct so that it or its nominee becomes the entitlement holder thereof. The Company covenants that, at the time of any such transfer, it will provide all required consents and approvals and cause the issuer of the Pledged Securities or the securities intermediary, as the case may be, to make appropriate notations on its share register or in the relevant securities account, as applicable.

1.5 Care and Custody of Collateral.

The Collateral Agent is not required to see to the collection of dividends on, or exercise any option or right in connection with, the Collateral. It has no obligation to protect or preserve the Collateral from depreciating in value or becoming worthless and is hereby released from all responsibility for any loss or diminution of value. The Collateral Agent is bound to exercise in the physical keeping of the Collateral only the same degree of care as it would exercise with respect to its own investment property kept at the same place.

1.6 Absence of Fiduciary Relationship

No implied agreements, covenants or obligations on the part of the Collateral Agent or any of the Secured Parties with respect to the Company, a securities intermediary or an issuer of any of the Collateral are to be read into this Agreement against the Collateral Agent or any of the Secured Parties. The Collateral Agent and the Secured Parties do not owe any fiduciary duty to the Company, any issuer of the Collateral, any securities intermediary or any other Person.

1.7 Representations and Warranties of the Company.

The Company represents and warrants that:

(a)

it is the registered, legal and beneficial owner of the Collateral;

(b)

the Collateral is free and clear of all liens, mortgages, charges and security interests whatsoever other than those created in favour of the Collateral Agent;

(c)

Schedule “A” correctly sets out the issuer, the certificate number and the number and class of the Pledged Securities as at the date hereof and the Pledged Securities represent all of the issued and outstanding certificated and uncertificated securities owned by the Company at the date hereof.

(d)

the Pledged Securities have been validly issued and are fully paid and non-assessable;

Pledge Agreement — Warnaco of Canada Company (2008)

- 4 -

(e)

Schedule “B” correctly sets out the entitlement holder, securities intermediary and securities accounts particulars with respect to each Pledged Securities Account as at the date hereof, the Pledged Securities Accounts are the only securities accounts of the Company as at the date hereof and all Pledged Security Entitlements are properly and completely described in the Pledged Securities Accounts;

(f)

this agreement creates a legal, valid and binding agreement of the Company enforceable in accordance with its terms and the Security Interest in the Collateral is a perfected security interest for purposes of the PPSA;

(g)

the Collateral Agent has control of the Collateral that consists of investment property (including financial assets carried in the Pledged Securities Account) (“Controlled Assets”) and the Collateral Agent is a protected purchaser within the meaning of the PPSA;

(h)

no Person other than the Collateral Agent has control or has the right to obtain control of any Controlled Assets;

(i)

no Person, has any option, warrant, call, commitment, conversion, right of exchange or other agreement or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an option, warrant, right, call, commitment, conversion right, right of exchange or other agreement to acquire any right or interest in the Collateral;

(j)

there are no restrictions on the voting rights associated with any of the Collateral and there are no restrictions on the right to transfer the Collateral; and

(k)

the Company is not bound by nor is it a party to any unanimous shareholder agreement or declaration (as such terms are defined in the Canada Business Corporations Act) relating to the Pledged Securities.

In addition to and not in substitution for any representation and warranty contained in this deed, the Company does hereby represent and warrant to and in favour of the Collateral Agent and the Secured Parties that each representation and warranty made in the Credit Agreement and the General Security Agreement, inasmuch as applicable, is hereby reiterated and restated by the Company and each such representation and warranty is hereby incorporated by reference, mutatis mutandis, and is hereby confirmed as true and correct as of the date hereof.

All representations and warranties made by the Company in this agreement (a) are material, (b) have been relied on by the Collateral Agent and the Secured Parties, (c) will remain true and correct, and (d) will survive the execution and delivery of this agreement, any investigation made at any time by or on behalf of the Collateral Agent and the Secured Parties and any disposition or payment of the Obligations.

Pledge Agreement — Warnaco of Canada Company (2008)

- 5 -

1.8 Covenants of the Company.

The Company will not cause or permit any Person other than the Collateral Agent to have control of any financial asset or investment property constituting part of the Collateral.

The Company will not, without the prior written consent of the Collateral Agent, sell, exchange, release, abandon or otherwise dispose of, absolutely or by way of security, any of its right, title or interest in and to the Collateral, except as permitted by the Credit Agreement.

The Company will promptly deliver to the Collateral Agent copies of all notices or other communications received by it in respect of the Collateral.

In addition to and not in substitution for any covenant, agreement, undertaking and condition contained in this deed, the Company does hereby covenant and agree with the Collateral Agent and the Secured Parties, that it shall comply with, and ensure the compliance of, all covenants, agreements, undertakings and conditions given under the Credit Agreement and the General Security Agreement, inasmuch as applicable, and each such covenant, agreement, undertaking and condition is hereby incorporated by reference, mutatis mutandis.

1.9 Rights of the Company.

(a)

Until the Security Interest becomes enforceable, the Company may vote the Pledged Securities, give consents, ratifications or waivers, make entitlement orders, exercise all rights of conversion or other similar rights with respect to the Collateral and receive all cash dividends and other distributions, money or property relating to the Collateral. Whenever the Security Interest becomes enforceable, all rights of the Company to vote, make entitlement orders, give consents, ratifications or waivers, exercise other rights or receive dividends or other money or property will cease and all such rights will become vested solely and absolutely in the Collateral Agent, for and on behalf of the Lenders.

(b)

Any dividends or other distributions received by the Company contrary to Section 1.9(a) are received by the Company as trustee for the Collateral Agent and the Secured Parties and will be immediately paid over to the Collateral Agent.

(c)

In order to permit the Collateral Agent to exercise the voting and other rights which it may be entitled to exercise hereunder and receive all dividends and other distributions, money and property which it may be entitled to receive, the Company shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all such proxies, dividend payment orders and other instruments as the Collateral Agent may from time to time request.

ARTICLE II — ENFORCEMENT

2.1 Enforcement.

The Security Interest shall be and become enforceable against the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Credit Agreement).

Pledge Agreement — Warnaco of Canada Company (2008)

- 6 -

2.2 Remedies.

Whenever the Security Interest becomes enforceable, the Collateral Agent may, at any time in its sole discretion:

(a)

realize upon or otherwise dispose of or contract to dispose of the Collateral by sale, transfer, delivery or otherwise;

(b)

obtain possession or control of any Collateral which it does not already hold or control, by any method permitted by law;

(c)

notify any parties obligated in respect of any Collateral to make payment thereof to the Collateral Agent or as it may direct;

(d)

file proofs of claim and other documents in order to have the claims of the Collateral Agent and the Secured Parties lodged in any bankruptcy, winding-up or other judicial proceeding relating to the Company;

(e)

exchange any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of any issuer thereof, or upon the exercise by any issuer of any right, privilege or option pertaining to any of the Collateral, and in connection therewith, deposit and deliver or direct the sale or other disposition of any of the Collateral with any committee, depositary, securities intermediary, clearing house (whether CDS or otherwise), transfer agent, registrar or other designated agency upon such terms and conditions as it may determine; or

(f)

exercise and enforce all rights and remedies of a holder of the Collateral as if the Collateral Agent were the absolute owner thereof (including, if necessary, causing the Collateral to be registered in the name of the Collateral Agent if not already done), all without demand of performance or other demand, advertisement or notice of any kind to or upon the Company.

Any remedy may be exercised separately or in combination and is in addition to, and not in substitution for, any other rights the Collateral Agent and the Secured Parties may have, however created. The Collateral Agent shall not be bound to exercise any right or remedy, and the exercise of rights and remedies is without prejudice to the rights of the Collateral Agent and the Secured Parties in respect of the Obligations including the right to claim for any deficiency.

2.3 Standards of Sale.

Without prejudice to the ability of the Collateral Agent to dispose of the Collateral in any manner which is commercially reasonable, the Company acknowledges that a disposition of Collateral by the Collateral Agent which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable:

(a)

Collateral may be disposed of in whole or in part;

(b)

Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality;

(c)

any assignee of such Collateral may be the Collateral Agent, a Lender or a customer or client of such Person;

Pledge Agreement — Warnaco of Canada Company (2008)

- 7 -

(d)

any sale conducted by the Collateral Agent shall be at such time and place, on such notice and in accordance with such procedures as the Collateral Agent, in its sole discretion, may deem advantageous;

(e)

Collateral may be disposed of in any manner and on any terms necessary to avoid violation of applicable law or in order to obtain any required approval of the disposition (or of the resulting purchase) by any governmental or regulatory authority or official;

(f)

the Collateral Agent may establish an upset or reserve bid or price in respect of the Collateral; and

(g)

a disposition of Collateral may be on such terms and conditions as to credit or otherwise as the Collateral Agent, in its sole discretion, may deem advantageous.

2.4 Dealing with the Collateral.

(a)

The Collateral Agent and the Secured Parties are not obliged to exhaust their recourse against the Company or any other Person or against any other security they may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Collateral Agent may consider desirable.

(b)

The Collateral Agent and the Secured Parties may grant extensions or other indulgences, take and give up security, accept compositions, grant releases and discharges and otherwise deal with the Company and with other Persons, sureties or security as they may see fit without prejudice to the Obligations, the liability of the Company or the rights of the Collateral Agent and the Secured Parties in respect of the Collateral.

(c)

The Collateral Agent and the Secured Parties are not (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral, (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of any Persons, (iii) responsible for any loss occasioned by any sale or other dealing with the Collateral or by the retention of or failure to sell or otherwise deal with the Collateral, or (iv) bound to protect the Collateral from depreciating in value or becoming worthless.

2.5 Appointment of Attorney.

The Company irrevocably appoints the Collateral Agent (and its officers) as attorney of the Company (with full power of substitution) to do, make, execute and deliver in the name of and on behalf of the Company upon the occurrence and during the continuance of an Event of Default all such acts, documents, deeds and things which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this agreement including the endorsement and delivery of the Collateral to the Collateral Agent and its transferees. The Collateral Agent is empowered to exercise all rights and powers and to perform all acts of ownership with respect to the Collateral to the same extent as the Company might do. This power of attorney is in addition to, and not in substitution for, any stock power of attorney delivered by the Company and such powers of attorney may be relied upon by the Collateral Agent severally or in combination. All acts of the attorney are hereby ratified and approved, and the attorney shall not be liable for any act, failure to act or any other matter or thing in connection therewith, except to the extent caused by its own gross negligence or wilful misconduct. This appointment and power of substitution, being coupled with an interest, are irrevocable and will not terminate upon the bankruptcy, dissolution, winding up or insolvency of the Company.

Pledge Agreement — Warnaco of Canada Company (2008)

- 8 -

2.6 Dealings by Third Parties.

(a)

No Person dealing with the Collateral Agent, any of the Secured Parties or an agent or receiver thereof is required to determine (i) whether the Security Interest has become enforceable, (ii) whether the powers which such Person is purporting to exercise have become exercisable, (iii) whether any money remains due to the Collateral Agent or any of the Secured Parties by the Company, (iv) the necessity or expediency of the stipulations and conditions subject to which any sale, lease or other disposition is made, (v) the propriety or regularity of any sale or other dealing by the Collateral Agent, any Secured Parties or any other Person with the Collateral, or (vi) how any money paid to the Collateral Agent, any Secured Party or agent or receiver has been applied.

(b)

Any purchaser of Collateral from the Collateral Agent or the Lenders shall hold the Collateral absolutely, free from any claim or right of any kind whatever, including any equity of redemption, of the Company. The Company waives (to the fullest extent permitted by law) as against any such purchaser, all rights of redemption, stay or appraisal which the Company has or may have under any rule of law or statute now existing or hereafter adopted.

2.7 Application of Proceeds

Any and all moneys realized by the Collateral Agent, whether pursuant to this agreement or otherwise, shall be applied by the Collateral Agent in accordance with Section 2.13 of the Credit Agreement.

2.8 Company Liable for Deficiency

The Company is liable to the Collateral Agent and the Secured Parties for any deficiency after the proceeds of any sale or other disposition of Collateral are received by the Collateral Agent.

Pledge Agreement — Warnaco of Canada Company (2008)

- 9 -

ARTICLE III — GENERAL

3.1 Notices.

All notices, requests and demands to or upon the Collateral Agent or the Company hereunder shall be effected in the manner provided for in Section 11.8 (Notices, Etc.) of the Credit Agreement; provided, however, that any such notice, request or demand to or upon the Company shall be addressed to the Company’s notice address set forth in such Section 11.8.

3.2 No Waiver by Course of Conduct; Cumulative Remedies

Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 3.4 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

3.3 Release of Collateral

(a)

At the time provided in Section 10.7(b)(i) of the Credit Agreement, the Collateral shall be released from the Liens hereby and this agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and the Company hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Company. At the request and sole expense of the Company following any such termination, the Collateral Agent shall deliver to the Company any Collateral of the Company held by the Collateral Agent hereunder and execute and deliver to the Company, at the sole expense of the Company, such documents as the Company shall reasonably request to evidence such termination.

(b)

If the Collateral Agent shall be directed or permitted pursuant to Section 10.7(b)(ii) or (iii) of the Credit Agreement to release any Lien created hereby upon any Collateral (including any Collateral sold or disposed of by the Company in a transaction permitted by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, Section 10.7(b)(ii) or (iii) of the Credit Agreement. In connection therewith but subject to the terms of the Credit Agreement, the Collateral Agent, at the request and sole expense of the Company, shall execute and deliver to the Company, all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral.

At the request and sole expense of the Company, the Company shall be released from its obligations hereunder in the event that all the capital stock of the Company shall be so sold or disposed (but only so long as such sale or other disposition is permitted under the Credit Agreement); provided, however, that the Company shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the Company and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Company in form and substance reasonably satisfactory to the Collateral Agent stating that such transaction is in compliance with the Loan Documents.

Pledge Agreement — Warnaco of Canada Company (2008)

- 10 -

3.4 Amendments; Waivers; Cumulative Remedies.

(a)

None of the terms or provisions of this agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that schedules to this agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released) through amendments in a form reasonably acceptable to the Collateral Agent, in each case duly executed by the Collateral Agent and the Company.

(b)

Neither the Collateral Agent nor any Lender shall by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any Lender, any right, power or privilege hereunder operates as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder precludes any other or further exercise thereof or the exercise of any other right, power or privilege.

(c)

A waiver by the Collateral Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Lender would otherwise have on any future occasion.

3.5 No Merger.

This agreement does not operate by way of merger of any of the Obligations and no judgment recovered by the Collateral Agent or any of the Secured Parties will operate by way of merger of, or in any way affect, the Security Interest, which is in addition to, and not in substitution for, any other security now or hereafter held by the Collateral Agent and the Secured Parties in respect of the Obligations.

3.6 Further Assurances.

The Company shall from time to time, whether before or after the Security Interest has become enforceable, do all acts and things and execute and deliver all transfers, assignments and agreements as the Collateral Agent may reasonably require for (i) protecting the Collateral, (ii) perfecting the Security Interest, (iii) obtaining control of the Collateral, (iv) exercising all powers, authorities and discretions conferred upon the Collateral Agent, and (v) otherwise enabling the Collateral Agent to obtain the full benefits of this agreement and the rights and powers herein granted. The Company shall, from time to time after the Security Interest has become enforceable, do all acts and things and execute and deliver all transfers, assignments and agreements as the Collateral Agent may require for facilitating the sale or other disposition of the Collateral in connection with its realization.

Pledge Agreement — Warnaco of Canada Company (2008)

- 11 -

3.7 Supplemental Security.

This agreement is in addition to, and without prejudice to, all other security now held or which may hereafter be held by the Collateral Agent and the Secured Parties.

3.8 Successors and Assigns.

This agreement is binding upon the Company, its successors and assigns, and enures to the benefit of the Collateral Agent and its successors and assigns. All rights of the Collateral Agent are assignable and in any action brought by an assignee to enforce any such right, the Company will not assert against the assignee any claim or defence which the Company now has or hereafter may have against the Collateral Agent or any of the Lenders. Neither this agreement nor any rights, duties or obligations under this agreement are assignable or transferable by the Company.

3.9 Headings, etc.

The division of this agreement into articles and sections and the insertion of headings are for convenient reference only and are not to affect or be used in the construction or interpretation of this agreement.

3.10 Gender and Number

Any reference in this agreement to gender includes all genders and words importing the singular include the plural and vice versa.

3.11 Severability.

If any provision of this agreement is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be severed from this agreement and be ineffective to the extent of such illegality, invalidity or unenforceability and the remaining provisions will continue in full force and effect.

3.12 Governing Law and Submission to Jurisdiction.

(a)

This agreement is governed by and is to be interpreted, construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to conflict of law principles.

(b)

The Company irrevocably and unconditionally (i) submits to the non-exclusive jurisdiction of the courts of Ontario, (ii) agrees that all claims in respect of any suit, action or proceeding may be heard and determined in such court, (iii) waives, to the fullest extent permitted by law, any objection which it may have based upon doctrines of venue or forum inconveniens.

Pledge Agreement — Warnaco of Canada Company (2008)

- 12 -

Exhibit 10.10

DEED OF HYPOTHEC
ON THE UNIVERSALITY OF MOVABLE PROPERTY

EXECUTED by the parties hereto as of the 26^th day of August, 2008.


BETWEEN:		WARNACO OF CANADA COMPANY, a company duly amalgamated under the laws of Nova Scotia, having its registered office at 1959 Upper Water Street, Halifax, Nova Scotia, Canada, B3J 3N2 and its principal place of business at 20600 Clark Graham Blvd., Baie d’Urfé, Québec, Canada, H9X 4B6,

		(hereinafter referred to as the “Grantor”)

AND:		BANK OF AMERICA, N.A., a national banking association organized under the federal laws of the United States of America, having a place of business at 335 Madison Avenue, New York, New York 10017 herein acting (i) for its own benefit as Lender (acting through its Canada branch) and as Collateral Agent for its own benefit and the benefit of the other present and future Secured Parties, and (ii) as solidary creditor of such other present and future Secured Parties, and any successors thereto in such capacities,

		(hereinafter referred to as the “Collateral Agent”)

THE PARTIES HERETO HAVE AGREED AS FOLLOWS:

1. SECURED OBLIGATIONS

The hypothec granted by this deed secures the performance of the following obligations (hereinafter collectively called the “Secured Obligations”):

1.1

the prompt payment, as and when due and payable, of all the Secured Obligations (as such term is defined in the Credit Agreement, hereinafter defined) of the Grantor; for the purposes of this deed, the term “Credit Agreement” shall mean that certain credit agreement dated on or about the date hereof among, inter alia, the Grantor, as Borrower, the financial institutions, together with their respective successors and assigns, listed on the signature pages thereof from time to time, as Lenders, and the Collateral Agent, as the same may be amended, supplemented, revised, restated or replaced from time to time; unless otherwise defined herein, all capitalized words and expressions when used herein shall have the same meaning as ascribed thereto in the Credit Agreement;

Deed of Hypothec — Warnaco of Canada Company (2008)

1.2

the strict performance and observance by the Grantor of all the agreements, warranties, representations, covenants, conditions and obligations made pursuant to this deed, the Credit Agreement or the other Loan Documents, all as now in effect or as hereafter entered into or amended; and

1.3

the prompt payment, as and when due and payable, of all other amounts now or hereafter owing by the Grantor to the Collateral Agent or any other Secured Party under the Credit Agreement or the other Loan Documents, including by way of guarantee or indemnity, whether now existing or hereafter incurred, matured or unmatured, direct, indirect or contingent, including any extensions and renewals thereof and including the payment of all amounts payable hereunder and the legitimate costs (including, without limitation, all reasonable fees, charges and disbursements of counsel) that the Collateral Agent may incur to recover the obligations secured hereby and to preserve the Hypothecated Property (as such expression is hereinbelow defined).

2. HYPOTHEC

2.1 Amount of Hypothec

To secure the performance of the Secured Obligations, the Grantor hereby hypothecates in favour of the Collateral Agent the property described in Section 2.2 hereof for the sum of Fifty Million Canadian dollars (Cdn$50,000,000.00) bearing interest at the rate of Twenty-Five percent (25%) per annum from the date hereof, compounded annually.

2.2 Description of Hypothecated Property

The hypothec charges the universality of all the Grantor’s movable property, present and future, corporeal and incorporeal, of whatsoever nature and kind and wheresoever situated (hereinafter collectively called the “Hypothecated Property”), including, without limitation, all tools and equipment pertaining to the enterprises of the Grantor, all claims and customer accounts, all securities (including, without limitation, those described in Schedule “B” hereto), all patents, trademarks and other intellectual property rights (including, without limitation, those described in Schedule “A” hereto) and all corporeal movables included in the assets of any of the Grantor’s enterprises kept for sale, lease or processing in the manufacture or transformation of property intended for sale, for lease or for use in providing a service.

2.3 Interpretation

The parties hereto acknowledge and confirm as follows:

2.3.1

that “General Security Agreement” shall mean that certain General Security Agreement dated on or about the date hereof between the Grantor, as Debtor, and the Collateral Agent, as same may be amended, supplemented, revised, restated or replaced from time to time;

Deed of Hypothec — Warnaco of Canada Company (2008)

2.3.2

that the hypothec created on the Hypothecated Property pursuant to this deed is not and shall not be construed as a floating hypothec within the meaning of articles 2715 et seq. of the Civil Code of Québec;

2.3.3

that the hypothec constituted hereunder will remain in full force and effect for the full amount stipulated in Section 2.1 hereof until such time as an express written discharge is executed by the Collateral Agent and delivered to the Grantor. The hypothec, security and rights hereby created in favour of the Collateral Agent will not be extinguished, reduced, novated or otherwise affected by any payments made to or amounts received by the Collateral Agent, directly or indirectly, from the Grantor or any other party or as a result of any insurance indemnities arising from loss or damage to any of the Hypothecated Property or by reason of the collection of any claims hypothecated hereunder; and

2.3.4

that should the Secured Obligations at any time be fully extinguished without an express discharge of the hypothec created hereunder having been granted, and should any new Secured Obligations arise, the security created hereunder will secure such new Secured Obligations in the same manner and to the same extent as if there had never occurred an extinction of any of the Secured Obligations and the Grantor is and shall remain obligated under the provisions hereof. The Grantor shall be deemed to have obligated itself for such new Secured Obligations pursuant to the provisions hereof and the hypothec herein created shall secure such new Secured Obligations as contemplated by Article 2797 of the Civil Code of Québec.

3. GRANTOR’S UNDERTAKINGS

3.1 Alienation

			The Grantor agrees not to alienate, lease or otherwise dispose of any of the Hypothecated Property outside the ordinary course of business of its enterprise unless the Collateral Agent gives its prior written consent or unless otherwise permitted under the Credit Agreement (each, an “Authorized Transaction”).

			In the event of any alienation or rental other than an Authorized Transaction, the Grantor (who shall not be relieved of any default resulting from such alienation or rental) shall immediately inform the Collateral Agent of the details of such alienation or rental and shall in particular provide the Collateral Agent with a description of the alienated or leased property and any property acquired in replacement, the name and address of the acquirer or lessee, as well as details concerning the proceeds of such alienation or rental.

Deed of Hypothec — Warnaco of Canada Company (2008)

3.2 Transformation

The Grantor may not, without the Collateral Agent’s prior written consent, or unless otherwise permitted under the Credit Agreement, transform any of the movables forming part of the Hypothecated Property either by incorporating such movables into an immovable or by combining or mixing them with other movables so as to form new property, unless such immovable or new property are themselves subject or made subject to the hypothec hereby granted or unless such transformation is made in the ordinary course of operating an enterprise of the Grantor that is engaged in the business of manufacturing or transforming property. In no event, however, may the Grantor transform any such property where such transformation would result in the Collateral Agent’s security or rights hereunder, including in particular their rank, being diminished.

In the event of any such transformation, even without the Collateral Agent’s authorization, the Grantor (who shall not be relieved of the default resulting from the failure to obtain authorization) shall immediately inform the Collateral Agent of the details of such transformation and shall in particular provide the Collateral Agent with a description of the property thereby affected, the name and address of the owner of the property that may result therefrom and the address where such property is located.

3.3 Notice of Change of Registered/Head Office

The Grantor shall not change the location of its registered head office or domicile except in accordance with the Credit Agreement.

4. PROVISIONS APPLICABLE TO THE HYPOTHEC ON CLAIMS

The following provisions apply to claims owed to the Grantor and hypothecated in favour of the Collateral Agent, including present and future rents payable under current and future leases affecting all or part of the Hypothecated Property.

4.1 Collection

Except for those claims consisting of securities pledged to the Collateral Agent, the Grantor shall have authority to collect payments of interest and repayments of capital made on the claims included in the Hypothecated Property hypothecated in favour of the Collateral Agent pursuant to this deed, as they fall due. The Collateral Agent may withdraw this authorization by written notice upon the occurrence of an Event of Default or an event which, with the giving of notice or passage of time, or both, would constitute an Event of Default. Notwithstanding the foregoing, the Collateral Agent may at any time take all necessary steps to set up this hypothec against the debtors of the hypothecated claims. In such event, the Grantor undertakes to remit to the Collateral Agent, upon request, all titles, documents, registers, invoices and accounts evidencing the claims or relating thereto, whatever the nature of their medium and whatever the form in which they are accessible, whether written, graphic, taped, filmed, computerized, or other.

Deed of Hypothec — Warnaco of Canada Company (2008)

Any payment received by the Grantor on account of any hypothecated claim other than pursuant to the foregoing authorization shall be received for the Collateral Agent’s account, and, during the continuance of an Event of Default, shall not entitle the Grantor to the amounts collected and shall be kept separate from the Grantor’s other property at all times and remitted forthwith by the Grantor to the Collateral Agent without compensation.

Notwithstanding the provisions of Section 3.1 hereof, the Grantor is not authorized to alienate any claim forming a part of a universality of claims hypothecated in favour of the Collateral Agent without the latter’s prior written consent, or unless otherwise permitted under the Credit Agreement.

4.2 Collateral Agent’s Rights

The Collateral Agent shall not be obliged to exercise its rights to the hypothecated claims or to ensure their recovery from the Grantor, whether by legal proceedings or otherwise. Should the Collateral Agent decide to collect the hypothecated claims, it shall be at liberty following the occurrence and during the continuance of an Event of Default to negotiate such arrangements as it deems appropriate with the Grantor or third parties, to enter into agreements with them with respect to the claims and any security securing the claims, and even to waive the claims and such security, the whole without the Grantor’s consent or intervention, and the Collateral Agent shall not thereby incur any liability toward or be accountable to the Grantor. Unless the Grantor so requests in writing, the Collateral Agent shall not be obliged to inform the Grantor of any irregularity in the payment of any amounts due on the claims. Apart from its obligation to remit to the Grantor any sums collected over and above the amount of the Secured Obligations in principal, interest and costs, the Collateral Agent shall not be accountable to the Grantor with respect to the status of the collections made or any transactions and arrangements entered into.

4.3 Information

The Collateral Agent may, at its discretion, verify the existence and status of the claims at any time. The Grantor shall provide the necessary assistance and information for this purpose and shall take such action in this respect as the Collateral Agent may reasonably request: in particular, consistent with Section 7.6 of the Credit Agreement, it shall allow the Collateral Agent and its agents to enter the premises occupied by the Grantor and to consult the Grantor’s accounting books and registers as well as any document relating to the claims and make copies thereof.

Deed of Hypothec — Warnaco of Canada Company (2008)

The Grantor specifically authorizes the Collateral Agent to communicate with any third party in order to obtain or transmit any personal information and any information relating to the claims and to the Grantor for the purpose of verifying and collecting the claims.

Where the hypothec granted by this deed affects a claim that is itself secured by a registered hypothec, the Grantor shall inform the Collateral Agent accordingly and shall supply all the information that the Collateral Agent may request in this connection.

4.4 Financial Administration Act (Canada)

Where any of the claims are subject to the provisions of the Financial Administration Act (Canada), the Grantor hereby sells, assigns and transfers the same absolutely to the Collateral Agent so that, upon a withdrawal of authorization as referred to in Section 4.1 hereof, the Collateral Agent shall be free to complete the formalities required to make such assignment fully enforceable.

5. PROVISIONS APPLICABLE TO THE HYPOTHEC ON SECURITIES

5.1 Interpretation

Unless otherwise indicated by the context, “securities” means bills of exchange, notes, shares, warrants, bonds, debentures and other securities considered or acknowledged as securities, as well as the renewals, substitutions and additions to which they are subject and the securities and other property received or issued pursuant to any transformation of such securities, along with all income derived and all rights arising therefrom.

5.2 Delivery

The Grantor shall deliver to the Collateral Agent, or to a mutually agreed upon third party, for the benefit of the Secured Parties, all certificates and instruments representing or evidencing any securities, whether now existing or hereafter acquired, in suitable form for transfer by delivery or, as applicable, accompanied by such Grantor’s endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent.

The Collateral Agent shall have the right, following an Event of Default and without notice to the Grantor, to transfer to or to register in its name or in the name of its nominees any hypothecated securities. The Collateral Agent shall have the right at any time to exchange any certificate or instrument representing or evidencing any hypothecated securities for certificates or instruments of smaller or larger denominations.

Deed of Hypothec — Warnaco of Canada Company (2008)

The Grantor further undertakes to turn over to the Collateral Agent or to such third party, as soon as the Grantor becomes entitled thereto, the renewals, substitutions and additions to which such securities are subject and the securities and other property received or issued upon the purchase, redemption, conversion, cancellation or any other transformation thereof, along with any income derived and any rights arising therefrom, the same, where applicable, to be duly endorsed in blank for transfer and accompanied by any power of attorney, document and confirmation that the Collateral Agent may reasonably require for such purpose.

5.3 Dividends and other Distributions

Unless an Event of Default has occurred and is continuing, the Grantor may collect all cash dividends payable in respect of the securities, provided that all cash dividends payable in respect of the securities which are determined by the Collateral Agent, in its absolute discretion, to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital, shall be paid to the Collateral Agent and retained by it as part of the Hypothecated Property. The Collateral Agent shall be entitled to receive directly, and to retain as part of the Hypothecated Property;

(a)

all other or additional stock or securities or property (other than cash) paid or distributed by way of dividend in respect of the securities;

(b)

all other or additional stock or other securities or property (including cash) paid or distributed in respect of the securities by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and

(c)

all other or additional stock or other securities or property which may be paid in respect of the securities by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization or other disposition of securities.

If any sum of money or property so paid or distributed in respect of any Pledged Collateral shall be received by the Grantor, the Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Collateral Agent, segregated from other funds of the Grantor, as additional security for the Secured Obligations, except as otherwise permitted by the Credit Agreement.

Deed of Hypothec — Warnaco of Canada Company (2008)

5.4 Voting, etc.

Until the occurrence of an Event of Default, the Grantor shall be entitled to vote any and all securities and to give consents, waivers or ratifications in respect thereof; provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate or be inconsistent with any of the terms of the Credit Agreement or this deed or any other instrument or agreement or document relating to the Secured Obligations (including any Loan Document) or which would have the effect of materially impairing the position or interests of the Collateral Agent. All such rights of the Grantor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing whereupon the Collateral Agent shall be entitled, without limiting its other rights and remedies hereunder, to vote all or any part of the securities whether or not transferred in the Collateral Agent’s name and give all consents, waivers and ratifications in respect of the securities and otherwise act with respect thereto as though it were the outright owner thereof.

5.5 Subsidiaries

The Grantor shall not, and shall not permit any of its Subsidiaries (to the extent the Stock of such Subsidiary constitutes Collateral), without the consent of the Collateral Agent, agree to any amendment of any Constituent Document that in any way adversely affects the perfection or opposability of the security interest or hypothecation or pledge of the Collateral Agent in, on or of the hypothecated securities hypothecated by the Grantor hereunder or any election to turn any previously uncertificated Stock that is part of the Pledged Collateral into certificated Stock.

5.6 Standard of Care

The Collateral Agent shall not be:

(a)

obliged to protest a security, or take steps or institute proceedings to interrupt prescription or protect the securities against depreciation or devaluation or make them productive;

(b)

obliged to protect the Grantor against loss relating to a security; or

(c)

obliged to vote with respect to a security or a subscription, conversion or other right pertaining thereto, or to any merger, consolidation, reorganization, receiving order, bankruptcy, insolvency proceedings, compromise or arrangement, or concerning the deposit of a security or otherwise, and shall not be obliged to participate in or take any action in relation to such matters, except where the Grantor has provided the Collateral Agent with written instructions to do so and where, in the Collateral Agent’s opinion, the security and the rights conferred hereunder would not be thereby diminished, and upon payment of such indemnity or remuneration as the Collateral Agent may require.

Deed of Hypothec — Warnaco of Canada Company (2008)

6. POSSESSION OF PROPERTY

This deed creates a hypothec without delivery notwithstanding the undertakings contained in Section 5.2 hereof.

7. DEFAULT

7.1 Events of Default

The Grantor shall be considered in default hereunder upon the occurrence of an Event of Default under the Credit Agreement.

7.2 Effects

Without limiting its right, at any time and at its discretion, to demand payment of any Secured Obligations payable on demand and without prejudice to any rights and remedies which it has pursuant to agreements with the Grantor or at law (in particular with respect to hypothecated claims), the Collateral Agent, upon the occurrence of an Event of Default under the Credit Agreement, may demand immediate and full payment of the amounts owing on account of the Secured Obligations, which shall forthwith become due and payable, and exercise, at its discretion, without restriction and without any prior notice other than such notices as are required by law, any rights and remedies which it has pursuant to this deed or at law, including, in particular, the following hypothecary rights:

•

taking of possession for purposes of administration;

•

taking in payment;

•

sale by the Collateral Agent;

•

sale by judicial authority.

Deed of Hypothec — Warnaco of Canada Company (2008)

7.3 Collateral Agent’s Rights

Irrespective of the particular remedy exercised by the Collateral Agent in the event of a default hereunder, the following provisions shall apply in addition to any provisions that may by law apply in the circumstances, the Grantor expressly agreeing thereto:

7.3.1

the Grantor undertakes to assemble and voluntarily surrender the Hypothecated Property to the Collateral Agent upon request, at such place or places as may be specified by the Collateral Agent, and agrees not to put any impediment in the way of, but rather to facilitate by all legal means, the exercise of the powers hereby granted to the Collateral Agent and not to interfere therewith; in addition, the Collateral Agent may, but shall not be obliged to, conduct a verification of the Hypothecated Property, assemble or move any of such property or take proceedings or do or take any act or action in relation to the Hypothecated Property that it may deem advisable, the whole at the Grantor’s expense. The Collateral Agent may take such steps as it considers necessary or desirable to obtain possession of all or any part of the Hypothecated Property and, to that end, the Grantor agrees that the Collateral Agent, its servants or Collateral Agents or Receiver (as hereinafter defined) may enter upon lands and premises where the Hypothecated Property may be found for the purpose of taking possession of and/or removing the Hypothecated Property or any part thereof. In the event of the Collateral Agent taking possession of the Hypothecated Property, or any part thereof, the Collateral Agent shall have the right to maintain the same upon the premises on which the Hypothecated Property may then be situated. The Collateral Agent may, in a reasonable manner, take such action or do such things as to render any Hypothecated Property unusable;

7.3.2

the Collateral Agent may, in addition, at its discretion and at the Grantor’s expense, whether after the Grantor has surrendered the Hypothecated Property and until the Collateral Agent has exercised the hypothecary right which it intends to exercise, or whether after the Collateral Agent has chosen to take possession of the Hypothecated Property for purposes of administration, use or operate all or any part of the Hypothecated Property (without being obliged to make such property productive), change the destination of or alienate such property by onerous title (except for Hypothecated Property of little value) or charge such property with a hypothec or other real right, enter into or renew any leases for such amounts and on such terms and conditions as the Collateral Agent reasonably deems appropriate, make any repairs or renovations or undertake or complete any work;

7.3.3

the Collateral Agent may, in the exercise of its rights, renounce any right belonging to the Grantor, even where no valuable consideration is received;

7.3.4

the Collateral Agent shall not be bound to make an inventory, take out insurance or furnish other security to secure the performance of its obligations;

Deed of Hypothec — Warnaco of Canada Company (2008)

7.3.5

the Collateral Agent may, at its discretion, take possession, through its officers, agents or mandataries, of all or any part of the Hypothecated Property, with full power to carry on, manage and conduct the Grantor’s business; the Collateral Agent may use the Hypothecated Property or any information that it obtains by reason of its administration for its own benefit;

7.3.6

the Grantor, through its officers and directors, shall forthwith execute such documents and transfers as may be necessary to place the Collateral Agent in legal possession of the Hypothecated Property and the business of the Grantor in connection therewith, and thereupon all the powers, functions, rights and privileges of each and every one of the directors and officers of the Grantor shall cease and terminate with respect to the Hypothecated Property;

7.3.7

the Collateral Agent shall not be obliged to render an account with respect to its actions in the exercise of its hypothecary rights, except as stipulated by law. Should the Collateral Agent see fit to render an account, it may do so in summary fashion;

7.3.8

for the purpose of exercising any of its rights, the Collateral Agent may make use of any premises on which the Hypothecated Property is located, the whole at the Grantor’s expense;

7.3.9

the Collateral Agent may, at its discretion, decide to sell and dispose of the Hypothecated Property as a whole or in separate parcels, by tender, public auction or private contract, on such date and on such terms and conditions as the Collateral Agent may stipulate, after giving such prior notices as are required by articles 2784 and following of the Civil Code of Québec, and the Collateral Agent may make such sale for cash or credit upon such reasonable conditions as to upset or reserve bid or price and as to terms of payment as it may deem proper, and may rescind or vary any contract of sale that may have been entered into and resell such property under any of the powers conferred by this deed, adjourn any such sale from time to time and execute and deliver to the purchaser or purchasers of the said property or any part thereof good and sufficient deed or deeds for the same, the Grantor hereby giving the Collateral Agent an irrevocable power of attorney for the purpose of making such sale and executing such deeds, and any such sale made as aforesaid shall be a perpetual bar in law and in equity against the Grantor and its assigns and against any other persons who may claim the said property or any part thereof from the Grantor or its assigns;

7.3.10

the Collateral Agent, or its agents or representatives, may become purchasers at any sale of the Hypothecated Property, whether made under the power of sale herein contained or pursuant to foreclosure or other legal proceedings; and

Deed of Hypothec — Warnaco of Canada Company (2008)

7.3.11

the Collateral Agent may, in addition to any other rights it may have, appoint by instrument in writing a receiver or receiver and manager (both of which are herein called a “Receiver”) of all or any part of the Hypothecated Property or may institute proceedings in any court of competent jurisdiction for the appointment of such a Receiver. Any such Receiver is hereby given and shall have the same powers and rights and exclusions and limitations of liability as the Collateral Agent has under this deed or at law. In exercising any such powers, any such Receiver shall, to the extent permitted by law, act as and for all purposes shall be deemed to be the agent of the Grantor and the Collateral Agent shall not be responsible for any act or default of any such Receiver. The Collateral Agent may appoint one or more Receivers hereunder and may remove any such Receiver or Receivers and appoint another or others in his or their stead from time to time. Any Receiver so appointed may be an officer or employee of the Collateral Agent. A court need not appoint, ratify the appointment by the Collateral Agent of or otherwise supervise in any manner the actions of any Receiver. Upon the Grantor receiving notice from the Collateral Agent of the taking of possession of the Hypothecated Property or the appointment of a Receiver, all powers, functions, rights and privileges of each of the directors and officers of the Grantor with respect to the Hypothecated Property shall cease, unless specifically continued by the written consent of the Collateral Agent.

7.3.12

In addition to any of Collateral Agent’s rights contained in this deed, the Grantor does hereby agree with the Collateral Agent and the Secured Parties, that the Collateral Agent shall have any other rights, remedies and powers given to the Collateral Agent under Section 6 of the General Security Agreement, inasmuch as applicable to the Grantor in the Province of Quebec, and each such right, remedy and power is hereby incorporated by reference, mutatis mutandis.

8. REPRESENTATIONS, WARRANTIES AND COVENANTS

8.1 Representations and Warranties

In addition to and not in substitution for any representation and warranty contained in this deed, the Grantor does hereby represent and warrant to and in favour of the Collateral Agent and the Secured Parties that each representation and warranty made in the Credit Agreement and the General Security Agreement, inasmuch as applicable to the Grantor, is hereby reiterated and restated by the Grantor and each such representation and warranty is hereby incorporated by reference, mutatis mutandis, and is hereby confirmed as true and correct as of the date hereof.

Deed of Hypothec — Warnaco of Canada Company (2008)

8.2 Covenants and Agreements

In addition to and not in substitution for any covenant, agreement, undertaking and condition contained in this deed, the Grantor does hereby covenant and agree with the Collateral Agent and the Secured Parties, that it shall comply with, and ensure the compliance of, all covenants, agreements, undertakings and conditions given under the Credit Agreement and the General Security Agreement, inasmuch as applicable to the Grantor, and each such covenant, agreement, undertaking and condition is hereby incorporated by reference, mutatis mutandis.

8.3 Survival

All representations, warranties, covenants, agreements, undertakings and conditions made in the Loan Documents, which, if not true, accurate and complete when made and which, if not performed in accordance with the terms thereof, are material, shall be considered to have been relied on by the Collateral Agent and the Secured Parties and shall survive the execution and delivery of this deed or any investigation made at any time by or on behalf of the Collateral Agent and any disposition or payment of the Secured Obligations until repayment and performance in full of the Secured Obligations and termination of all rights of the Grantor that, if exercised, would result in the existence of Secured Obligations.

9. MISCELLANEOUS PROVISIONS

9.1 Nature of the Secured Obligations

Each of the Secured Obligations of the Grantor is indivisible.

9.2 Nullity of a Provision

In the event that any provision of this deed is declared null and void or is deemed not to have been written, the other provisions of this deed shall be severable from such provision and shall continue to have full force and effect.

9.3 Application of Payments

Any insurance indemnity, as well as any other amount or other property received by the Collateral Agent in the exercise of the rights conferred upon it by this deed or by law or in any other manner with respect to any of the Hypothecated Property, may be retained by the Collateral Agent as Hypothecated Property or applied to the payment of the Secured Obligations, whether or not they are due. Any amount collected by the Collateral Agent, even on account of the voluntary performance of the Secured Obligations, shall be applied in accordance with Section 2.13 of the Credit Agreement.

Should any of the Hypothecated Property or its proceeds be in a currency different from that of the Secured Obligations, the Collateral Agent is hereby authorized to convert the amount or the claim in question into the currency of the Secured Obligations at the Collateral Agent’s rate of exchange for the currencies concerned on the date the payment is applied.

Deed of Hypothec — Warnaco of Canada Company (2008)

9.4 Rights Cumulative and Exercise of Remedies

The rights hereby created are in addition to and not in substitution for any other right or security held by the Collateral Agent. The exercise by the Collateral Agent of any of its rights and remedies shall not prevent it from exercising any other right or remedy conferred upon it by this deed or any other security or by law.

The Collateral Agent may, separately or successively, exercise the rights conferred upon it by this deed on any part of the Hypothecated Property, without being obliged to do so on the entire Hypothecated Property and without prejudice to its rights and remedies with respect to the remaining Hypothecated Property, and it shall not be in any way obliged to exercise its rights and remedies against any other person liable for the Secured Obligations or to realize any other security securing the Secured Obligations.

The Collateral Agent may delegate the exercise of its rights or the performance of its obligations arising from this deed to another person upon written notice to the Grantor and may in such case, subject to Section 11.19 (Confidentiality) of the Credit Agreement, supply to such other person any information that it holds on the Grantor or on the Hypothecated Property.

9.5 Amendments in Writing

None of the terms or provisions of this deed may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that schedules to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released except as provided in Section 9.18 hereof) through amendments in a form reasonably acceptable to the Collateral Agent, in each case duly executed by the Collateral Agent and the Grantor.

9.6 Notices

All notices, requests and demands to or upon the Collateral Agent or the Grantor hereunder shall be effected in the manner provided for in Section 11.8 (Notices, Etc.) of the Credit Agreement; provided, however, that any such notice, request or demand to or upon the Grantor shall be addressed to the Grantor’s notice address set forth in such Section 11.8 or to its principal place of business as set forth herein.

Deed of Hypothec — Warnaco of Canada Company (2008)

9.7 Notice of Default

The mere expiry of the time limit for performing any of the Secured Obligations shall serve to put the Grantor in default, without any notice or demand being required for that purpose.

9.8 No Waiver by Course of Conduct; Cumulative Remedies

Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 9.5 (Amendments in Writing)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

9.9 Successors and Assigns

This Agreement shall be binding upon the successors and assigns of the Grantor and shall inure to the benefit of the Collateral Agent and each other Secured Party and their successors and assigns; provided, however, that the Grantor may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.

9.10 Power of Attorney

The Grantor hereby grants to the Collateral Agent and each of its officers, agents, correspondents or mandataries, including any depositary or Receiver (as hereinafter defined), an irrevocable power of attorney with full powers of substitution and revocation, to do, make and execute, for the Grantor and in its name, all such deeds, documents, transfers, assignments, hypothecs, assurances, consents and things as the Collateral Agent may deem necessary or appropriate to be done, made or executed by the Grantor to protect the Collateral Agent’s rights hereunder and/or preserve the Hypothecated Property and to give effect to all the provisions of this deed and the documents and other acts, matters and things that the Grantor has agreed to do, make and execute or that may be required in the exercise of the powers conferred upon the Collateral Agent by this deed, and in particular, without limiting the generality of the foregoing, to endorse or transfer all or any part of the securities, if any, included in the Hypothecated Property over to the Collateral Agent or its officers, agents, correspondents or mandataries, including any depositary, so that the Collateral Agent or its officers, agents, correspondents or mandataries may be registered as sole owners of such securities, and to obtain from any taxation authority at any time, if deemed useful, any information necessary to allow the Collateral Agent to determine the amount of the Grantor’s indebtedness to such taxation authorities. The Grantor also grants to each of such persons holding its power of attorney the right to use its name whenever they may deem it necessary or appropriate to do so for the purposes hereof and the Grantor further ratifies and confirms, and undertakes to ratify and confirm, all acts and actions done or taken by each of such persons in connection herewith. Notwithstanding anything to the contrary in this paragraph, the Collateral Agent agrees that it shall not exercise any right under the power of attorney provided for in this paragraph unless an Event of Default shall be continuing.

Deed of Hypothec — Warnaco of Canada Company (2008)

9.11 Indemnification

The Grantor hereby agrees and undertakes to indemnify the Collateral Agent and the other Secured Parties and save and hold it harmless from and against any and all losses, expenses, costs and liabilities (including reasonable legal fees and disbursements) that the Collateral Agent and the other Secured Parties or any of its or their agents, mandataries or persons holding its or their power of attorney may sustain or incur in the exercise of the powers and rights conferred upon the Collateral Agent hereunder.

9.12 Interpretation

References herein to gender shall include all genders and the singular shall include the plural and vice versa, as required by the context.

9.13 Further Assurances

The Grantor hereby agrees to do, make and execute, at its own expense, all such deeds, documents and things as may be necessary or advisable, in the opinion of the Collateral Agent’s legal counsel, to give effect to the provisions of this deed, including without limiting the generality of the foregoing, in order that a valid and enforceable hypothec be created and maintained on any property forming part of the Hypothecated Property as of the execution of this deed or at any time in the future.

9.14 Divisions and Titles

The division of this deed into sections, sections and subsections and the insertion of titles are for ease of reference only and shall not influence its meaning or construction.

Deed of Hypothec — Warnaco of Canada Company (2008)

9.15 Entire Agreement

This deed, together with the other Loan Documents, represents the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereto concerning the Secured Obligations.

9.16 Applicable Law

This deed shall be governed and construed in accordance with the laws in force in the Province of Quebec. It must also be interpreted so that any Hypothecated Property located in another jurisdiction be affected by a valid security under the applicable law of such other jurisdiction.

9.17 Additional Grantors

Pursuant to Section 7.11 (Additional Personal Property Collateral and Guaranties) of the Credit Agreement, the Grantor shall be required to cause any Subsidiary to execute and deliver to the Collateral Agent a Deed of Hypothec substantially in the form hereof unless otherwise agreed by the Administrative Agent.

9.18 Release of Collateral

(a)

At the time provided in Section 10.7(b)(i) of the Credit Agreement, the Collateral shall be released from the Liens hereby and this deed and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and the Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantor. At the request and sole expense of the Grantor following any such termination, the Collateral Agent shall deliver to the Grantor any Collateral of the Grantor held by the Collateral Agent hereunder and execute and deliver to the Grantor, at the sole expense of the Grantor, such documents as the Grantor shall reasonably request to evidence such termination.

(b)

If the Collateral Agent shall be directed or permitted pursuant to Section 10.7(b)(ii) or (iii) of the Credit Agreement to release any Lien created hereby upon any Collateral (including any Collateral sold or disposed of by the Grantor in a transaction permitted by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, Section 10.7(b)(ii) or (iii) of the Credit Agreement. In connection therewith but subject to the terms of the Credit Agreement, the Collateral Agent, at the request and sole expense of the Grantor, shall execute and deliver to the Grantor, all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral.

(c)

At the request and sole expense of the Grantor, the Grantor shall be released from its obligations hereunder in the event that all the capital stock of the Grantor shall be so sold or disposed (but only so long as such sale or other disposition is permitted under the Credit Agreement); provided, however, that the Grantor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the Grantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Grantor in form and substance reasonably satisfactory to the Collateral Agent stating that such transaction is in compliance with the Loan Documents.

Deed of Hypothec — Warnaco of Canada Company (2008)

9.19 Reinstatement

The Grantor further agrees that, if any payment made by any Loan Party or other Person and applied to any of the Secured Obligations is at any time annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of Collateral are required to be returned by any Secured Party to such Loan Party or other Person, its estate, trustee, receiver or any other party, including the Grantor, under any bankruptcy law, provincial or federal law, common law or equitable cause, then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full force and effect, as fully as if such payment had never been made or, if prior thereto the Lien granted hereby or other Collateral securing such liability hereunder shall have been released or terminated, such Lien or other Collateral shall be reinstated in full force and effect, and such prior release or termination shall not diminish, release, discharge, impair or otherwise affect any Lien or other Collateral securing the obligations of the Grantor in respect of the amount of such payment.

9.20 Explanation of Contract

The Grantor confirms that the Collateral Agent has provided it with adequate explanations concerning the nature and scope of this deed and that it has had an opportunity to consult a lawyer, notary or other adviser in connection therewith.

9.21 Acknowledgement

The Grantor hereby acknowledges that it has received and taken cognizance of an original executed copy of the Loan Documents and is familiar with all the provisions thereof.

9.22 Precedence

Except as limited herein, in the event that any provisions of this deed contradict, are inconsistent with and are otherwise incapable of being construed in conjunction with the provisions of the Credit Agreement or the General Security Agreement, the provisions of the Credit Agreement or the General Security Agreement, as applicable, shall take precedence over those contained in this deed. Notwithstanding the foregoing, in the event that granting of security interest provisions in the Credit Agreement or the General Security Agreement contradict and are otherwise incapable of being construed in conjunction with the provisions of this deed, such provisions of this deed shall take precedence over those contained in the Credit Agreement or the General Security Agreement.

Deed of Hypothec — Warnaco of Canada Company (2008)

Exhibit 10.11

DEED OF HYPOTHEC
ON THE UNIVERSALITY OF MOVABLE PROPERTY

EXECUTED by the parties hereto as of the 26^th day of August, 2008.


BETWEEN:		4278941 CANADA INC., a company duly constituted under the laws of Canada, having its registered office at 20600 Clark Graham Blvd., Baie d’Urfé, Québec, Canada, H9X 4B6,

		(hereinafter referred to as the “Grantor”)

AND:		BANK OF AMERICA, N.A., a national banking association organized under the federal laws of the United States of America, having a place of business at 335 Madison Avenue, New York, New York 10017 herein acting (i) for its own benefit as Lender (acting through its Canada branch) and as Collateral Agent for its own benefit and the benefit of the other present and future Secured Parties, and (ii) as solidary creditor of such other present and future Secured Parties, and any successors thereto in such capacities,

		(hereinafter referred to as the “Collateral Agent”)

THE PARTIES HERETO HAVE AGREED AS FOLLOWS:

1. SECURED OBLIGATIONS

The hypothec granted by this deed secures the performance of the following obligations (hereinafter collectively called the “Secured Obligations”):

1.1

the prompt payment, as and when due and payable, of all the Secured Obligations (as such term is defined in the Credit Agreement, hereinafter defined) of the Grantor and Warnaco of Canada Company (the “Borrower”); for the purposes of this deed, the term “Credit Agreement” shall mean that certain credit agreement dated on or about the date hereof among, inter alia, the Borrower, the financial institutions, together with their respective successors and assigns, listed on the signature pages thereof from time to time, as Lenders, and the Collateral Agent, as the same may be amended, supplemented, revised, restated or replaced from time to time; unless otherwise defined herein, all capitalized words and expressions when used herein shall have the same meaning as ascribed thereto in the Credit Agreement;

Deed of Hypothec — 4278941 Canada Inc. (2008)

1.2

1.3

2. HYPOTHEC

2.1 Amount of Hypothec

2.2 Description of Hypothecated Property

2.3 Interpretation

The parties hereto acknowledge and confirm as follows:

2.3.1

Deed of Hypothec — 4278941 Canada Inc. (2008)

2.3.2

2.3.3

2.3.4

3. GRANTOR’S UNDERTAKINGS

3.1 Alienation

The Grantor agrees not to alienate, lease or otherwise dispose of any of the Hypothecated Property outside the ordinary course of business of its enterprise unless the Collateral Agent gives its prior written consent or unless otherwise permitted under the Credit Agreement (each, an “Authorized Transaction”).

In the event of any alienation or rental other than an Authorized Transaction, the Grantor (who shall not be relieved of any default resulting from such alienation or rental) shall immediately inform the Collateral Agent of the details of such alienation or rental and shall in particular provide the Collateral Agent with a description of the alienated or leased property and any property acquired in replacement, the name and address of the acquirer or lessee, as well as details concerning the proceeds of such alienation or rental.

Deed of Hypothec — 4278941 Canada Inc. (2008)

3.2 Transformation

3.3 Notice of Change of Registered/Head Office

The Grantor shall not change the location of its registered head office or domicile except in accordance with the Credit Agreement.

4. PROVISIONS APPLICABLE TO THE HYPOTHEC ON CLAIMS

4.1 Collection

Deed of Hypothec — 4278941 Canada Inc. (2008)

4.2 Collateral Agent’s Rights

4.3 Information

Deed of Hypothec — 4278941 Canada Inc. (2008)

4.4 Financial Administration Act (Canada)

5. PROVISIONS APPLICABLE TO THE HYPOTHEC ON SECURITIES

5.1 Interpretation

5.2 Delivery

Deed of Hypothec — 4278941 Canada Inc. (2008)

5.3 Dividends and other Distributions

(a)

all other or additional stock or securities or property (other than cash) paid or distributed by way of dividend in respect of the securities;

(b)

(c)

Deed of Hypothec — 4278941 Canada Inc. (2008)

5.4 Voting, etc.

5.5 Subsidiaries

5.6 Standard of Care

The Collateral Agent shall not be:

(a)

obliged to protest a security, or take steps or institute proceedings to interrupt prescription or protect the securities against depreciation or devaluation or make them productive;

(b)

obliged to protect the Grantor against loss relating to a security; or

(c)

Deed of Hypothec — 4278941 Canada Inc. (2008)

6. POSSESSION OF PROPERTY

This deed creates a hypothec without delivery notwithstanding the undertakings contained in Section 5.2 hereof.

7. DEFAULT

7.1 Events of Default

The Grantor shall be considered in default hereunder upon the occurrence of an Event of Default under the Credit Agreement.

7.2 Effects

	•		taking of possession for purposes of administration;

	•		taking in payment;

	•		sale by the Collateral Agent;

	•		sale by judicial authority.

Deed of Hypothec — 4278941 Canada Inc. (2008)

7.3 Collateral Agent’s Rights

7.3.1

7.3.2

7.3.3

the Collateral Agent may, in the exercise of its rights, renounce any right belonging to the Grantor, even where no valuable consideration is received;

7.3.4

the Collateral Agent shall not be bound to make an inventory, take out insurance or furnish other security to secure the performance of its obligations;

Deed of Hypothec — 4278941 Canada Inc. (2008)

7.3.5

7.3.6

7.3.7

7.3.8

for the purpose of exercising any of its rights, the Collateral Agent may make use of any premises on which the Hypothecated Property is located, the whole at the Grantor’s expense;

7.3.9

the Collateral Agent may, at its discretion, decide to sell and dispose of the Hypothecated Property as a whole or in separate parcels, by tender, public auction or private contract, on such date and on such terms and conditions as the Collateral Agent may stipulate, after giving such prior notices as are required by articles 2784 and following of the Civil Code of Québec, and the Collateral Agent may make such sale for cash or credit upon such reasonable conditions as to upset or reserve bid or price and as to terms of payment as it may deem proper, and may rescind or vary any contract of sale that may have been entered into and resell such property under any of the powers conferred by this deed, adjourn any such sale from time to time and execute and deliver to the purchaser or purchasers of the said property or any part thereof good and sufficient deed or deeds for the same, the Grantor hereby giving the Collateral Agent an irrevocable power of attorney for the purpose of making such sale and executing such deeds, and any such sale made as aforesaid shall be a perpetual bar in law and in equity against the Grantor and its assigns and against any other persons who may claim the said property or any part thereof from the Grantor or its assigns;

7.3.10

Deed of Hypothec — 4278941 Canada Inc. (2008)

7.3.11

7.3.12

8. REPRESENTATIONS, WARRANTIES AND COVENANTS

8.1 Representations and Warranties

Deed of Hypothec — 4278941 Canada Inc. (2008)

8.2 Covenants and Agreements

8.3 Survival

All representations, warranties, covenants, agreements, undertakings and conditions made in the Loan Documents, which, if not true, accurate and complete when made and which, if not performed in accordance with the terms thereof, are material, shall be considered to have been relied on by the Collateral Agent and the Secured Parties and shall survive the execution and delivery of this deed or any investigation made at any time by or on behalf of the Collateral Agent and any disposition or payment of the Secured Obligations until repayment and performance in full of the Secured Obligations and termination of all rights of the Grantor that, if exercised, would result in the existence of Secured Obligations.

9. MISCELLANEOUS PROVISIONS

9.1 Nature of the Secured Obligations

Each of the Secured Obligations of the Grantor is indivisible.

9.2 Nullity of a Provision

9.3 Application of Payments

Deed of Hypothec — 4278941 Canada Inc. (2008)

9.4 Rights Cumulative and Exercise of Remedies

9.5 Amendments in Writing

None of the terms or provisions of this deed may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 (Amendments, Waivers, Etc.) of the Credit Agreement; provided, however, that schedules to this Agreement may be supplemented (but no existing provisions may be modified and no Collateral may be released except as provided in Section 9.17 hereof) through amendments in a form reasonably acceptable to the Collateral Agent, in each case duly executed by the Collateral Agent and the Grantor.

9.6 Notices

Deed of Hypothec — 4278941 Canada Inc. (2008)

9.7 Notice of Default

The mere expiry of the time limit for performing any of the Secured Obligations shall serve to put the Grantor in default, without any notice or demand being required for that purpose.

9.8 No Waiver by Course of Conduct; Cumulative Remedies

9.9 Successors and Assigns

9.10 Power of Attorney

Deed of Hypothec — 4278941 Canada Inc. (2008)

9.11 Indemnification

9.12 Interpretation

References herein to gender shall include all genders and the singular shall include the plural and vice versa, as required by the context.

9.13 Further Assurances

9.14 Divisions and Titles

The division of this deed into sections, sections and subsections and the insertion of titles are for ease of reference only and shall not influence its meaning or construction.

Deed of Hypothec — 4278941 Canada Inc. (2008)

9.15 Entire Agreement

9.16 Applicable Law

9.17 Release of Collateral

(a)

(b)

If the Collateral Agent shall be directed or permitted pursuant to Section 10.7(b)(ii) or (iii) of the Credit Agreement to release any Lien created hereby upon any Collateral (including any Collateral sold or disposed of by the Grantor in a transaction permitted by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, Section 10.7(b)(ii) or (iii) of the Credit Agreement. In connection therewith but subject to the terms of the Credit Agreement, the Collateral Agent, at the request and sole expense of the Grantor, shall execute and deliver to the Grantor, all releases or other documents reasonably necessary or desirable for the release of the Lien created hereby on such Collateral.

(c)

Deed of Hypothec — 4278941 Canada Inc. (2008)

9.18 Reinstatement

9.19 Explanation of Contract

9.20 Acknowledgement

The Grantor hereby acknowledges that it has received and taken cognizance of an original executed copy of the Loan Documents and is familiar with all the provisions thereof.

9.21 Precedence

Deed of Hypothec — 4278941 Canada Inc. (2008)

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Joseph R. Gromek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Warnaco Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 5, 2010	By:	/s/ Joseph R. Gromek
		Joseph R. Gromek
		Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lawrence R. Rutkowski, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Warnaco Group, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 5, 2010	By:	/s/ Lawrence R. Rutkowski
		Lawrence R. Rutkowski
		Chief Financial Officer

EXHIBIT 32

CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF THE WARNACO GROUP, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of The Warnaco Group, Inc. (the “Company”) for the quarterly period ended July 3, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph R. Gromek, as Chief Executive Officer of the Company, and Lawrence R. Rutkowski, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, based upon a review of the Report:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Joseph R. Gromek		/s/ Lawrence R. Rutkowski

Name: Joseph R. Gromek		Name: Lawrence R. Rutkowski
Title: Chief Executive Officer		Title: Chief Financial Officer
Date: August 5, 2010		Date: August 5, 2010


	PAGE
	NUMBER
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Condensed Balance Sheets as of July 3, 2010, January 2, 2010 and July 4, 2009		1

Consolidated Condensed Statements of Operations for the Three and Six Months Ended July 3, 2010 and for the Three and Six Months Ended July 4, 2009		2

Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Six Months Ended July 3, 2010 and for the Six Months Ended July 4, 2009		3

Consolidated Condensed Statements of Cash Flows for the Six Months Ended July 3, 2010 and for the Six Months Ended July 4, 2009		4

Notes to Consolidated Condensed Financial Statements		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3. Quantitative and Qualitative Disclosures About Market Risk		58

Item 4. Controls and Procedures		60

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		61

Item 1A. Risk Factors		61

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		61

Item 3. Defaults Upon Senior Securities		61

Item 4. Reserved		62

Item 5. Other Information		62

Item 6. Exhibits		62

SIGNATURES		64

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


	THE WARNACO GROUP, INC.
Date: August 5, 2010	/s/ Joseph R. Gromek
	Joseph R. Gromek
	President and Chief Executive Officer

Date: August 5, 2010	/s/ Lawrence R. Rutkowski
	Lawrence R. Rutkowski
	Executive Vice President and Chief Financial Officer


Warnaco Inc., as Borrower
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Executive Vice President and CFO

The Warnaco Group, Inc., as Group
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Executive Vice President and CFO

Bank of America, N.A., as Administrative Agent and Collateral Agent
By:	/s/ Kevin W. Corcoran
	Name:	Kevin W. Corcoran
	Title:	Vice President


Issuers Bank of America, N.A.
By:	/s/ Kevin W. Corcoran
	Name:	Kevin W. Corcoran
	Title:	Vice President

The Bank of Nova Scotia
By:	/s/ Brian S. Allen
	Name:	Brian S. Allen
	Title:	Managing Director


Lenders Bank of America, N.A.
By:	/s/ Kevin W. Corcoran
	Name:	Kevin W. Corcoran
	Title:	Vice President

DEUTSCHE BANK TRUST COMPANY AMERICAS

By:	/s/ Marguerite Sutton
	Name:	Marguerite Sutton
	Title:	Director

By:	/s/ Enrique Landaeta
	Name:	Enrique Landaeta
	Title:	Vice President


HSBC BUSINESS CREDIT (USA) INC.
By:	/s/ Kysha Pierre-Louis
	Name:	Kysha Pierre-Louis
	Title:	Vice President

JP MORGAN CHASE BANK, N.A.
By:	/s/ Tony Yung
	Name:	Tony Yung
	Title:	Vice President

RBS BUSINESS CAPITAL, A DIVISION OF RBS ASSET FINANCE INC.
By:	/s/ Jennifer Mannila
	Name:	Jennifer Mannila
	Title:	Vice President

U.S. BANK NATIONAL ASSOCIATION
By:	/s/ Jeffrey D. Patton
	Name:	Jeffrey D. Patton
	Title:	Asset-Based Loan Officer

TD BANK, N.A.
By:	/s/ Matthew Leighton
	Name:	Matthew Leighton
	Title:	Vice President

BRANCH BANKING AND TRUST COMPANY
By:	/s/ Roberts A. Bass
	Name:	Roberts A. Bass
	Title:	Senior Vice President


CAPITAL ONE LEVERAGE FINANCE CORP.
By:	/s/ Michael S. Burns
	Name:	Michael S. Burns
	Title:	Senior Vice President

THE BANK OF NOVA SCOTIA
By:	/s/ Brian S. Allen
	Name:	Brian S. Allen
	Title:	Managing Director

UBS LOAN FINANCE LLC
By:	/s/ David B. Julie
	Name:	David B. Julie
	Title:	Associate Director Banking Products Services, US

By:	/s/ Irja R. Olsa
	Name:	Irja R. Olsa
	Title:	Associate Director Banking Products Services, US

UPS CAPITAL CORPORATION
By:	/s/ John P. Holloway
	Name:	John P. Holloway
	Title:	Director of Portfolio Management

INTENSA SANPAOLO S.P.A. NEW YORK BRANCH
By:	/s/ Frank Maffei
	Name:	Frank Maffei
	Title:	Vice President

By:	/s/ Francesco Di Mario
	Name:	Francesco Di Mario
	Title:	FVP, Credit Manager

ISRAEL DISCOUNT BANK OF NEW YORK
By:	/s/ Virginia J. Pulverenti
	Name:	Virginia J. Pulverenti
	Title:	Senior Vice President



By:	/s/ Paul P. Neydavood
	Name:	Paul P. Neydavood
	Title:	Assistant Vice President


	Page

*Section 11.3 Costs and Expenses*		111
*Section 11.4 Indemnities*		112
*Section 11.5 Limitation of Liability*		113
*Section 11.6 Right of Set-off*		113
*Section 11.7 Sharing of Payments, Etc.*		113
*Section 11.8 Notices, Etc.*		114
*Section 11.9 No Waiver; Remedies*		116
*Section 11.10 Binding Effect*		116
*Section 11.11 Governing Law*		116
*Section 11.12 Submission to Jurisdiction; Service of Process*		116
*Section 11.13 Waiver of Jury Trial*		117
*Section 11.14 Marshaling; Payments Set Aside*		117
*Section 11.15 Section Titles*		117
*Section 11.16 [Intentionally Omitted]*		117
*Section 11.17 [Intentionally Omitted]*		117
*Section 11.18 Entire Agreement*		117
*Section 11.19 Confidentiality*		118
*Section 11.20 Patriot Act Notice*		118


Schedule I	–	Commitments
Schedule II	–	Applicable Lending Offices and Addresses for Notices
Schedule 2.4	–	Existing Rollover Letters of Credit
Schedule 4.2	–	Consents
Schedule 4.3	–	Ownership of Warnaco Entities
Schedule 4.15	–	Labor Matters
Schedule 4.16	–	ERISA Matters
Schedule 4.19	–	Real Property
Schedule 7.15	–	Post Closing Matters
Schedule 8.1	–	Existing Indebtedness
Schedule 8.2	–	Existing Liens
Schedule 8.3	–	Existing Investments
Schedule 8.4	–	Specified Asset Sales

Exhibits

Exhibit A	–	Form of Assignment and Acceptance
Exhibit B	–	Form of Notice of Borrowing
Exhibit C	–	Form of Swing Loan Request
Exhibit D	–	Form of Letter of Credit Request
Exhibit E	–	Form of Borrowing Base Certificate
Exhibit F	–	Form of Notice of Conversion or Continuation
Exhibit G	–	Form of Opinion of Counsel for the Loan Parties
Exhibit H	–	Form of Compliance Certificate
Exhibit I	–	Form of Pledge and Security Agreement
Exhibit J	–	Form of Guaranty


	[NAME OF ASSIGNOR], as Assignor
	By:
		Name:
		Title:

	[NAME OF ASSIGNEE], as Assignee
	By:
		Name:
		Title:


Ratable Portion assigned to Assignee:		%

Revolving Credit Commitment assigned to Assignee:	$

Aggregate Outstanding Principal Amount of Revolving Loans Assigned to Assignee:	$


²		Insert for any Proposed Borrowing after the Closing Date.

³		Insert only for Proposed Borrowing on the Closing Date.


The Warnaco Group, Inc., as Guarantor
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Executive Vice President and CFO

Authentic Fitness On-Line, Inc. Calvin Klein Jeanswear Company CCC Acquisition Corp. CKJ Holdings, Inc. Designer Holdings Ltd. Ocean Pacific Apparel Corp. Warnaco Puerto Rico, Inc. Warnaco Retail Inc. Warnaco Swimwear Inc. Warnaco Swimwear Products Inc. CKU.com Inc. Warnaco U.S., Inc., as Guarantors
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Vice President


Acknowledged and Agreed as of the date first above written:

BANK OF AMERICA, N.A., as Collateral Agent

By:		/s/ Kevin W. Corcoran Name: Kevin W. Corcoran
		Title: Vice President


Warnaco Inc., as Grantor
By:	/s/ Lawrence R. Rutowsk
	Name:	Lawrence R. Rutowski
	Title:	Executive Vice President and CFO

The Warnaco Group, Inc., as Grantor
By:	/s/ Lawrence R. Rutowsk
	Name:	Lawrence R. Rutowski
	Title:	Executive Vice President and CFO


Accepted and Agreed as of the date first above written:

Bank of America, N.A., as Collateral Agent for the Secured Parties,

By:		/s/ Kevin W. Corcoran Name: Kevin W. Corcoran
		Title: Vice President


	Page

ARTICLE VII. Miscellaneous		31
Section 7.1 Amendments in Writing		31
Section 7.2 Notices		31
Section 7.3 No Waiver by Course of Conduct; Cumulative Remedies		31
Section 7.4 Effectiveness		31
Section 7.5 Successors and Assigns		31
Section 7.6 Counterparts		32
Section 7.7 Severability		32
Section 7.8 Section Headings		32
Section 7.9 Entire Agreement		32
Section 7.10 Governing Law		32
Section 7.11 Additional Grantors		32
Section 7.12 Release of Collateral		33
Section 7.13 Reinstatement		34


		Page
Annex 1-A	Form of Blocked Account Letter
Annex 1-B	Form of Restricted Account Letter
Annex 2	Form of Control Account Agreement
Annex 3	Form of Pledge Amendment
Annex 4	Form of Joinder Agreement
Annex 5	Form of Short Form Copyright Security Agreement
Annex 6	Form of Short Form Patent Security Agreement
Annex 7	Form of Short Form Trademark Security Agreement

Schedule 1	Jurisdiction of Organization; Principal Executive Office
Schedule 2	Pledged Collateral
Schedule 3	Filings
Schedule 4	Location of Inventory and Equipment
Schedule 5	Intellectual Property
Schedule 6	Commercial Tort Claims
Schedule 7	Deposit Accounts and Securities Accounts


Very truly yours,

[NAME OF GRANTOR]

By:

	Name:
	Title:

Address:


Attention:

Telecopy #:

Bank of America, N.A., as Collateral Agent

By:

	Name:
	Title:

335 Madison Avenue
New York, New York 10017
Attention:		Business Capital - Account Executive
Telecopy #:		(212) 503-7350


Acknowledged and Agreed as of the date first above written:

[Deposit Account Bank]

By:

		Name:
		Title:

Address:


Attention:

Telecopy #:


	Very truly yours, [Name of Grantor]
	By:
		Name:
		Title:

	Bank of America, N.A., as Collateral Agent
	By:
		Name:
		Title:


	[Name of Pledgor]
	By:
		Name:
		Title:

	Bank of America, N.A., as Collateral Agent
	By:
		Name:
		Title:


Accepted and Agreed as of the date first above written:

[Approved Financial Intermediary]

By:
		Name:
		Title:

A.		REGISTERED COPYRIGHTS

		[Include Copyright Title, Country, Author, Claimant, Registration Number and Date]

B.		COPYRIGHT APPLICATIONS

		[Include Copyright Title, Country, Claimant and Date Filed]

C.		EXCLUSIVE COPYRIGHT LICENSES

A.		PATENTS

		[Include Patent Title, Patent Number, Country, Owner and Issue Date]

B.		PATENT APPLICATIONS

		[Include Patent Title, Serial Number, Country, Owner and Filing Date]

A.		REGISTERED TRADEMARKS

		[Include Trademark, Country, Owner, Registration Number and Date of Registration]

B.		TRADEMARK APPLICATIONS

		[Include Trademark, Country, Owner, Application Number and Date of Filing]


Warnaco Of Canada Company, as Borrower
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Vice President

The Warnaco Group, Inc., as Group
By:	/s/ Lawrence R. Rutkowski
	Name:	Lawrence R. Rutkowski
	Title:	Executive Vice President and CFO

Bank of America, N.A., as Administrative Agent and Collateral Agent
By:	/s/ Kevin W. Corcoran
	Name:	Kevin W. Corcoran
	Title:	Vice President


Issuers Bank of America, N.A. (acting through its Canada branch)
By:	/s/ Medina Sales de Andrade
	Name:	Medina Sales de Andrade
	Title:	Vice President

The Bank of Nova Scotia
By:	/s/ Rose Porter
	Name:	Rose Porter
	Title:	Director


Lenders Bank of America, N.A. (acting through its Canada branch)
By:	/s/ Medina Sales de Andrade
	Name:	Medina Sales de Andrade
	Title:	Vice President

DEUTSCHE BANK AG, CANADA BRANCH
By:	/s/ Robert A. Johnston
	Name:	Robert A. Johnston
	Title:	Director

By:	/s/ Renate Engel
	Name:	Renate Engel
	Title:	Assistant Vice President


	Page

Section 6.8 Tax Returns		78
Section 6.9 Insurance		78
Section 6.10 ERISA Matters		79
Section 6.11 Environmental Matters		79
Section 6.12 Borrowing Base Determination		79
Section 6.13 Material Licenses		81
Section 6.14 Communications and Amendments with respect to U.S. Facility		81
Section 6.15 Other Information		81
ARTICLE VII AFFIRMATIVE COVENANTS		81
Section 7.1 Preservation of Corporate Existence, Etc.		81
Section 7.2 Compliance with Laws, Etc.		81
Section 7.3 Conduct of Business		82
Section 7.4 Payment of Taxes, Etc.		82
Section 7.5 Maintenance of Insurance		82
Section 7.6 Access		82
Section 7.7 Keeping of Books		83
Section 7.8 Maintenance of Properties, Etc.		83
Section 7.9 Application of Proceeds		83
Section 7.10 Environmental		83
Section 7.11 Additional Personal Property Collateral and Guaranties		84
Section 7.12 Canadian Plans		85
Section 7.13 Real Property		85
Section 7.14 Senior Notes		86
Section 7.15 Post Closing Matters		86
ARTICLE VIII NEGATIVE COVENANTS		86
Section 8.1 Indebtedness		86
Section 8.2 Liens, Etc.		88
Section 8.3 Investments		89
Section 8.4 Sale of Assets		90
Section 8.5 Restricted Payments		92
Section 8.6 Prepayment and Cancellation of Indebtedness		93