10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended November 1, 2008

OR

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

For the transition period from              to             

Commission file number: 0-19714

PERFUMANIA HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Florida	65-0977964
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

35 Sawgrass Drive, Suite 2 Bellport, NY	11713
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (631) 866-4100

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.    Yes  x    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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer  ¨	Accelerated Filer  ¨
Non-Accelerated Filer  ¨	Smaller Reporting Company  x
(Do not check if a smaller reporting company)

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

The number of shares outstanding of the registrant’s common stock, as of the latest practicable date: At December 15, 2008 there were 8,966,417 outstanding shares of its common stock, $0.01 par value.

TABLE OF CONTENTS

PERFUMANIA HOLDINGS, INC. AND SUBSIDIARIES

PART I FINANCIAL INFORMATION
ITEM 1	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets as of November 1, 2008 and February 2, 2008 (unaudited)	3
	Condensed Consolidated Statements of Operations for the thirteen and thirty-nine weeks ended November 1, 2008 and the three and nine months ended October 31, 2007 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended November 1, 2008 and the nine months ended October 31, 2007 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 4T	CONTROLS AND PROCEDURES	28
PART II OTHER INFORMATION
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	29
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	30
ITEM 6	EXHIBITS	30
	SIGNATURES	32

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PERFUMANIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	November 1, 2008			February 2, 2008
	(unaudited)
ASSETS:
Current assets:
Cash	$	2,724		$	6,495
Accounts receivable, net of allowances of $444 and $147, as of November 1, 2008 and February 2, 2008, respectively		49,100			32,504
Deferred tax asset: current		10,550			2,527
Inventories, net		367,536			188,801
Advances to suppliers		1,327			974
Receivables from an affiliate		—			32,494
Prepaid expenses and other current assets		15,799			2,759
Total current assets		447,036			266,554
Property and equipment, net		46,411			2,643
Goodwill		20,434			20,434
Other assets, net		13,546			9,742
Total assets	$	527,427		$	299,373
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Revolving credit facility	$	208,890		$	—
Accounts payable		57,207			28,791
Accounts payable-affiliate		16,763			—
Accrued expenses and other liabilities		14,120			3,163
Income tax payable		1,808			1,880
Current portion of notes payable - affiliate		8,140			7,008
Subordinated convertible note payable - affiliate		5,000			—
Current portion of obligations under capital leases		705			210
Total current liabilities		312,633			41,052
Revolving credit facility		—			105,320
Notes payable - affiliate		84,146			61,700
Long-term portion of obligations under capital leases		7,143			52
Other long term debt		412			531
Total liabilities		404,334			208,655
Commitments and contingencies (see Note 10)
Shareholders’ equity:
Preferred stock, $.10 par value, 1,000,000 and no shares authorized, as of November 1, 2008 and February 2, 2008, respectively, none issued		—			—
Common stock, $.01 and no par value, respectively, 20,000,000 and 200 authorized; respectively, 9,859,666 and 111 shares issued as of November 1, 2008 and February 2, 2008, respectively		99			1
Additional paid-in capital		54,413			13,905
Retained earnings		77,158			78,287
Treasury stock, at cost, 898,249 and 14 shares as of November 1, 2008 and February 2, 2008, respectively		(8,577	)		(1,475	)
Total shareholders’ equity		123,093			90,718
Total liabilities and shareholders’ equity	$	527,427		$	299,373

See accompanying notes to condensed consolidated financial statements.

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PERFUMANIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share amounts)

	Thirteen Weeks Ended November 1, 2008			Three Months Ended October 31, 2007			Thirty-Nine Weeks Ended November 1, 2008			Nine Months Ended October 31, 2007
Net sales to:
Unaffiliated customers	$	126,399		$	84,554		$	235,863		$	206,040
Affiliates		—			8,273			15,439			19,191
		126,399			92,827			251,302			225,231
Cost of goods sold to:
Unaffiliated customers		81,975			61,588			172,189			139,432
Affiliates		—			8,145			—			22,480
		81,975			69,733			172,189			161,912
Gross profit		44,424			23,094			79,113			63,319
Operating expenses:
Selling, general and administrative expenses		41,332			14,834			66,609			40,571
Depreciation and amortization		2,706			251			3,597			996
Total operating expenses		44,038			15,085			70,206			41,567
Income from operations		386			8,009			8,907			21,752
Other expense:
Interest		(3,125	)		(3,666	)		(8,291	)		(9,415	)
Total other expense		(3,125	)		(3,666	)		(8,291	)		(9,415	)
(Loss) income before income tax (benefit) expense		(2,739	)		4,343			616			12,337
Income tax (benefit) expense		(1,101	)		1,649			270			4,847
Net (loss) income	$	(1,638	)	$	2,694		$	346		$	7,490
Net (loss) income per common share:
Basic	$	(0.19	)	$	0.46		$	0.05		$	1.27
Diluted	$	(0.19	)	$	0.46		$	0.05		$	1.27
Weighted average number of common shares outstanding:
Basic		8,690,451			5,900,000			6,830,150			5,900,000
Diluted		8,690,451			5,900,000			6,830,150			5,900,000

See accompanying notes to condensed consolidated financial statements.

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PERFUMANIA HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Thirty-Nine Weeks Ended November 1, 2008			Nine Months Ended October 31, 2007
Cash flows from operating activities:
Net income	$	346		$	7,490
Adjustments to reconcile net income to net cash used in operating activities:
Deferred income taxes		—			2,615
Recovery of provision on vendor advances		—			(2,367	)
Depreciation and amortization		3,597			996
Provision for losses on accounts receivable		475			50
Change in operating assets and liabilities:
Trade receivables		(14,027	)		(27,512	)
Receivables from affiliate		(11,988	)		(7,962	)
Inventories		(49,314	)		(43,941	)
Prepaid expenses and other assets		(7,914	)		449
Accounts payable-non affiliates		(3,023	)		9,403
Accounts payable-affiliates		2,429			(269	)
Accrued expenses and other liabilities		(1,521	)		1,362
Net cash used in operating activities		(80,940	)		(59,686	)
Cash flows from investing activities:
Additions to property and equipment		(5,432	)		(196	)
Other investing activities		(2,270	)		(1,539	)
Net cash used in investing activities		(7,702	)		(1,735	)
Cash flows from financing activities:
Net borrowings under bank line of credit		54,156			42,069
Proceeds from affiliated notes payable		29,946			23,770
Proceeds from (payments of) long-term debt and other		761			(3,106	)
Proceeds from exercise of stock options		8			—
Net cash provided by financing activities		84,871			62,733
(Decrease) increase in cash		(3,771	)		1,312
Cash at beginning of period		6,495			1,676
Cash at end of period	$	2,724		$	2,988
Supplemental Information:
Cash paid during the period for:
Interest	$	1,988		$	6,006
Income taxes	$	3,070		$	8,736
Accounts payable for property and equipment	$	464		$	—

See accompanying notes to condensed consolidated financial statements.

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PERFUMANIA HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – OPERATIONS AND BASIS OF PRESENTATION

On August 11, 2008, Perfumania Holdings, Inc. (formerly, E Com Ventures, Inc.) (the “Company”) completed its acquisition of Model Reorg, Inc. (“Model Reorg”) when Model Reorg merged into the Company’s wholly owned subsidiary, Model Reorg Acquisition LLC (“Model Acquisition”) (“the Merger”). Under the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 21, 2007 and amended on July 8, 2008, by and among the Company, Model Reorg, the shareholders of Model Reorg, and Model Acquisition, the Company issued to the Model Reorg shareholders 5,900,000 shares of the Company’s common stock and warrants exercisable for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $23.94 per share (the “Warrants”). The shares issued to the Model Reorg shareholders represent approximately 66% of the Company’s 8,959,041 outstanding shares following the Merger, and approximately 71% assuming exercise of all of the Warrants. The Company’s shareholders approved the issuance of the shares and Warrants at a special meeting on August 8, 2008.

For accounting purposes, Model Reorg is considered to be the acquirer. Accordingly, the Merger consideration has been allocated among the fair values of E Com Ventures’ (“E Com”) assets and liabilities and the historical financial statements reflect the historical results of Model Reorg prior to the transaction date of August 11, 2008 and those of the combined companies beginning August 11, 2008. However, the Company will continue to use the same fiscal year end, the Saturday closest to January 31, as E Com used before the Merger. Model Reorg’s fiscal year end before the Merger was October 31. The audited consolidated financial statements of Model Reorg as of October 31, 2007 and 2006 and for the years ended October 31, 2007, 2006 and 2005 were previously filed with the Securities and Exchange Commission (“SEC”). The audited consolidated financial statements of Model Reorg as of and for the thirteen weeks ended February 2, 2008 were also filed with the SEC. The unaudited consolidated financial statements of Model Reorg as of July 31, 2008 and for the three months and nine months ended July 31, 2008 and 2007 were included with the Company’s Form 8-K, amendment number 1, filed with the SEC on October 27, 2008.

The accompanying condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course. The Company has determined that it is not presently in compliance with a financial covenant of its revolving credit facility (see Note 6). Management believes that the Company will negotiate a waiver from the lending institutions; however there is no guarantee that we will be successful. These financial statements do not contain any adjustments to the carrying value of assets should the Company not be successful.

Subsequent to the Merger, the Company’s business model is as follows:

The Company’s wholesale business, which is conducted through its subsidiary, Quality King Fragrance, Inc. (“QFG”), distributes designer fragrances to mass market retailers, drug and other chain stores, retail wholesale clubs, traditional wholesalers, and other distributors throughout the United States. It sells principally to retailers such as Wal-Mart, Walgreens, Kohl’s, Sears, Marshalls, JCPenney, Target and TJ Maxx. The Company’s manufacturing division is operated by another subsidiary, Five Star Fragrance Company, Inc. (“Five Star”), which owns and licenses designer and other fragrance brands, paying royalties to the licensors based on a percentage of sales. Five Star also manufactures, on behalf of Perfumania, the Jerome Privee product line, which includes bath and body products and scented candles, and which is sold exclusively in Perfumania’s retail stores. Five Star’s owned and licensed brands are sold principally through the Company’s wholesale business, Scents of Worth’s (“SOW”) consignment business, and Perfumania’s retail stores. Five Star’s sales and results of operations are not significant to the Company’s results on a consolidated basis and are included within the Company’s wholesale business for reporting purposes.

The Company’s retail business is conducted through its subsidiaries, 1) Perfumania, a specialty retailer of fragrances and related products, 2) perfumania.com, Inc., an Internet retailer of fragrances and other specialty items and 3) Scents of Worth, which sells

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fragrances in retail stores on a consignment basis. Perfumania is a leading specialty retailer and distributor of a wide range of brand name and designer fragrances. As of November 1, 2008, Perfumania operated a chain of 339 retail stores specializing in the sale of fragrances and related products at discounted prices up to 75% below the manufacturers’ suggested retail prices. Prior to the Merger, Perfumania’s wholesale division distributed fragrances and related products primarily to Model Reorg. Perfumania.com offers a selection of our more popular products for sale over the Internet and serves as an alternative shopping experience to the Perfumania retail stores. SOW is the largest national designer fragrance consignment program, with contractual relationships to sell products on a consignment basis in approximately 3,200 stores, including more than 1,500 Kmart locations nationwide. Its other retail customers include Burlington Coat Factory, Filene’s Basement, Loehmann’s, Fred Meyer, Daffy’s and Duane Reade.

Prior to the Merger, Model Reorg was a diversified wholesale and retail fragrance company. QFG, Five Star and SOW were all part of Model Reorg before the Merger.

The condensed consolidated financial statements include the accounts of Model Reorg prior to the Merger and the results of the consolidated companies starting on the Merger date, August 11, 2008. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), have been condensed or omitted pursuant to those rules and regulations. The financial information presented herein, which is not necessarily indicative of results to be expected for the current fiscal year, reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the interim unaudited condensed consolidated financial statements. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008 and our Form 10-K Transition Report for the period from November 1, 2007 to February 2, 2008.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Significant accounting principles and practices used by the Company in the preparation of the accompanying condensed consolidated financial statements are as follows:

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates made by management in the accompanying condensed consolidated financial statements relate to the valuation of inventory balances, the valuation of allowances for bad debt on accounts receivable, self-insured health care accruals, sales allowance accruals, long-lived asset impairments and estimated useful lives of property and equipment, deferred tax assets and goodwill and other intangibles. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include accounts of Model Reorg prior to the Merger and the results of the consolidated companies starting on the Merger date. All intercompany balances and transactions have been eliminated in consolidation.

CASH

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

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ACCOUNTS RECEIVABLES

The Company’s accounts receivables consist primarily of trade receivables due from wholesale sales. Also included are credit card receivables and receivables due from consignment sales relating to the Company’s retail business segment. Generally, there are three to four days of retail sales transactions outstanding with third-party credit card vendors and approximately one to two weeks of consignment retail sales at any point in time. An allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the date of the financial statements, assessments of collectibility based on an evaluation of historical and anticipated trends, the financial condition of the Company’s customers and an evaluation of the impact of economic conditions.

INVENTORIES

Inventories, principally consisting of finished goods, are stated at the lower of cost or market with cost being determined on a weighted average method. The cost of inventory includes product cost and freight charges. Write offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, future sales forecasts and through specific identification of obsolete or damaged merchandise. Inventory shrinkage is estimated and accrued between physical inventory counts.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost, less accumulated depreciation and amortization. Depreciation for property and equipment, which includes assets under capital leases, is calculated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the term of the lease including one stated renewal period that is reasonably assured, and for which the Company would incur a substantial economic penalty, or the estimated useful lives of the improvements, generally ten years. Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs which do not extend the useful life of the asset are expensed when incurred. Gains or losses arising from sales or retirements are reflected in operations.

GOODWILL AND INTANGIBLES

In accordance with Statements of Financial Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”), goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually. The Company’s annual impairment test is performed at the end of the Company’s fiscal year or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not fully be recoverable. There is a two step process for impairment testing of goodwill. The first step of this test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment. Owned tradenames that have been determined to have indefinite lives are not subject to amortization but are reviewed at least annually for potential impairment in accordance with SFAS 142, as mentioned above. The fair values are estimated and compared to their carrying values.

Trademarks, including tradenames and owned licenses having finite lives are amortized over their respective lives to their estimated residual values and are also reviewed for impairment in accordance with Statement of Financial Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). The recoverability of the carrying values of all long-lived assets with finite lives is re-evaluated when changes in circumstances indicate the assets’ value may be impaired. Impairment testing is based on a review of forecasted operating cash flows and the profitability of the related brand.

Based on management’s most recent impairment review, there was no impairment identified in recorded goodwill and intangibles. However, during and subsequent to the thirteen week period ended November 1, 2008, the capital markets experienced substantial volatility and the Company’s stock price decreased significantly. It is not currently known if the market value of the Company will remain at the current depressed value. Accordingly, the Company will continually monitor both the expected future cash flows of its reporting units and long-term trends of its market capitalization for the purpose of assessing the carrying values of its goodwill and intangible assets, which could result in an impairment charge. In addition, as discussed in Note 1, the Company was not in compliance with a financial covenant of its revolving credit facility and if the Company is unable to negotiate a waiver from the lending institution, adjustments to the carrying value of the assets may be required.

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GIFT CARDS

Upon the purchase of a gift card by a retail customer, a liability is established for the cash value of the gift card. The liability is included in accrued expenses and other liabilities. The liability is relieved and revenue is recognized at the time of the redemption of the gift card. Over time, some portion of gift cards issued is not redeemed. This amount is recorded as a reduction of selling, general and administrative expenses, when it can be determined that the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (often referred to as gift card breakage). Gift cards issued by the Company do not have expiration dates.

ACCRUED EXPENSES

Accrued expenses for self insured employee medical benefits, contracted advertising, sales allowances, professional fees and other outstanding obligations are assessed based on claims experience and statistical trends, open contractual obligations and estimates based on projections and current requirements. If these trends change significantly, then actual results would likely be impacted.

REVENUE RECOGNITION

Revenue from wholesale transactions is recognized when title passes, which occurs either upon shipment of products or delivery to the customer. Revenue from retail sales is recorded, net of discounts, at the point of sale, and for consignment sales, when sale to the ultimate customer occurs. Revenue from Internet sales is recognized at the time products are delivered to customers. Shipping and handling revenue from our Internet sales is included as a component of net sales. Revenue from gift cards is recognized at the time of redemption. Returns of store and Internet sales are allowed within 30 days of purchase.

SALES AND ALLOWANCES

Allowances for sales returns are estimated and recorded as a reduction of sales based on our historical return patterns. Allowances provided for advertising, marketing and tradeshows are recorded as selling expenses since they are costs for services received from the customer which are separable from the customer’s purchase of the Company’s products. Accruals and allowances are estimated based on available information including third party and historical data.

COST OF GOODS SOLD

Cost of goods sold include the cost of merchandise sold, inventory valuation reserves, inventory shortages, damages and freight charges.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll and related benefits for our store operations, field management, distribution centers, purchasing and other corporate office and administrative personnel; rent, common area maintenance, real estate taxes and utilities for our stores, distribution centers and corporate office; advertising, consignment fees, sales promotion, insurance, supplies, professional fees and other administrative expenses.

INCOME TAXES

Income taxes are accounted for under Statements of Financial Standards No. 109 “Accounting for Income Taxes” (“SFAS 109”). In accordance with SFAS 109, deferred tax assets and liabilities are recognized for the differences between the financial reporting carrying values and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recognized to reduce net deferred tax assets to amounts that management believes are more likely than not expected to be realized. Significant judgment is required in determining the provision for income taxes. Changes in estimates may create volatility in the Company’s effective tax rate in future periods for various reasons including, but not limited to: changes in tax laws/rates, forecasted amounts and mix of pre-tax income/loss, settlements with various tax authorities, the expiration of the statute of limitations on some tax positions and obtaining new

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information about particular tax positions that may cause management to change its estimates. In the ordinary course of business, the ultimate tax outcome is uncertain for many transactions. It is the Company’s policy to recognize, at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority, the impact of an uncertain income tax position on its income tax return. The tax provisions are analyzed at least quarterly and adjustments are made as events occur that warrant adjustments to those provisions. The Company records interest expense and penalties payable to relevant tax authorities as income tax expense.

ASSET IMPAIRMENT

The carrying value of long-lived assets is evaluated whenever events or changes in circumstances indicate that the carrying values of such assets may be impaired. An evaluation of recoverability is performed by comparing the carrying values of the assets to projected future cash flows in addition to other quantitative and qualitative analyses, including management’s strategic plans and market trends. Upon indication that the carrying values of such assets may not be recoverable, the Company recognizes an impairment loss. The impairment loss is determined based on the difference between the net book value and the fair value of the assets. The estimated fair value is based on anticipated discounted future cash flows. Any impairment is charged to operations in the period in which it is identified. Property and equipment assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Cash flows for retail assets are identified at the individual store level.

SHARE BASED COMPENSATION

The Company accounts for share-based compensation in accordance with Statement of Financial Standards No. 123(R) “Share Based Payment” (“SFAS 123(R)”), requiring the recognition of compensation expense in the condensed consolidated statement of operations related to the fair value of employee share-based awards, including stock options. Determining the fair value of options at the grant date requires judgment, including estimating the expected term that the stock options will be outstanding prior to exercise, the associated volatility and the expected dividends.

PRE-OPENING EXPENSES

Pre-opening expenses related to new stores are expensed as incurred.

RENT EXPENSE

The Company leases retail stores as well as a corporate office and distribution centers under operating leases. Minimum rental expenses are recognized over the term of the lease on a straight-line basis. For purposes of recognizing minimum rental expenses, the Company uses the date when possession of the leased space is taken from the landlord, which includes a construction period of approximately two months prior to store opening. For tenant improvement allowances and rent holidays, the Company records a deferred rent liability in accrued expenses on the consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the consolidated statements of operations. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases on the consolidated statements of operations.

Certain leases provide for contingent rents, which are primarily determined as a percentage of gross sales in excess of specified levels and are not measurable at inception. The Company records a contingent rent liability in accrued expenses on the consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.

NOTE 3 – ACQUISITION OF MODEL REORG

As discussed in Note 1 above, on August 11, 2008, we issued 5,900,000 shares of our common stock and Warrants to purchase an additional 1,500,000 shares in exchange for the shares of Model Reorg, which merged into our wholly owned subsidiary, Model Reorg Acquisition LLC. Due to a number of factors, including that the shares issued to the Model Reorg shareholders amounted to approximately 66% of our shares outstanding after the transaction (71% assuming exercise of all Warrants), the transaction has been accounted for as a “reverse acquisition,” and Model Reorg is being treated as the “accounting acquirer” in accordance with US GAAP. Accordingly, our historical financial statements reflect the historical results of Model Reorg prior to the transaction date of August 11, 2008 and those of the combined companies beginning August 11, 2008.

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In accordance with the accounting for reverse acquisitions pursuant to Statement of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS 141”), the total estimated purchase price, calculated as described below, has been allocated to the net tangible and intangible assets acquired and liabilities assumed of E Com in connection with the transaction, based on their estimated fair values as of August 11, 2008, while the assets and liabilities of Model Reorg are reflected at historical cost in the Company’s condensed consolidated balance sheet. The Company has engaged an independent valuation firm to assist in determining the fair value of the assets acquired and liabilities assumed. The final purchase price allocation may be materially different than presented below and may be adjusted at a later date. There can be no assurance that such adjustments, if any, will not be material to the consolidated financial statements.

Since Model Reorg is deemed to be the accounting acquirer for accounting purposes, the total purchase price was determined based on the fair value of the outstanding shares of E Com as of August 11, 2008, plus the Model Reorg transaction costs.

	(in thousands)
Fair value of E Com common stock (1)	$	76,384
Model Reorg transaction costs		5,945
Total purchase price	$	82,329

(1) 3,059,041 E Com common shares outstanding as of August 11, 2008 at $24.97 per share, representing the average closing market price over the two days prior to and two days after December 21, 2007, the day the Merger was agreed to and announced.

The total purchase price has been initially allocated as follows.

	(in thousands)
Current assets	$	142,302
Property and equipment, net		40,846
Other assets		7,306
Tradename		4,500
Liabilities assumed		(112,625	)
Total purchase price	$	82,329

The following table presents pro forma results of operations and gives effect to the transaction as if the acquisition of Model Reorg was consummated at the beginning of the periods presented. The unaudited pro forma results of operations are not necessarily indicative of what would have occurred had the transaction been completed at the beginning of the period or of the results that may occur in the future.

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	Thirty-Nine Weeks Ended November 1, 2008			Nine Months Ended October 31, 2007
	($ in thousands, except per share amounts)
Net sales	$	323,979		$	351,206
Income from operations	$	3,550		$	18,677
Net (loss) income	$	(4,306	)	$	3,656
Net (loss) income per share:
Basic	$	(0.48	)	$	0.41
Diluted	$	(0.48	)	$	0.41

NOTE 4 – GOODWILL AND INTANGIBLES

In accordance with SFAS 142, goodwill and intangible assets with indefinite lives are not amortized, but rather tested for impairment at least annually. The Company’s annual impairment test is performed at the end of the Company’s fiscal year or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not fully be recoverable. There is a two step process for impairment testing of goodwill. The first step of this test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment. Owned tradenames that have been determined to have indefinite lives are not subject to amortization but are reviewed at least annually for potential impairment in accordance with SFAS 142, as mentioned above. The fair values are estimated and compared to their carrying values

Trademarks, including tradenames and owned licenses having finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment in accordance with SFAS 144. The recoverability of the carrying values of all long-lived assets with finite lives is re-evaluated when changes in circumstances indicate the assets’ value may be impaired. Impairment testing is based on a review of forecasted operating cash flows and the profitability of the related brand. Included in other assets, net, on the accompanying condensed consolidated balance as of November 1, 2008 are $4.5 million related to the estimated value of the Perfumania tradename and $4.8 million for trademarks and licenses of Five Star.

Based on management’s most recent impairment review, there was no impairment identified in recorded goodwill and intangibles. However, during and subsequent to the thirteen week period ended November 1, 2008, the capital markets experienced substantial volatility and the Company’s stock price decreased significantly. It is not currently known if the market value of the Company will remain at the current depressed value. Accordingly, the Company will continually monitor both the expected future cash flows of its reporting units and long-term trends of its market capitalization for the purpose of assessing the carrying values of its goodwill and intangible assets, which could result in an impairment charge. In addition, as discussed in Note 1, the Company was not in compliance with a financial covenant of its revolving credit facility and if the Company is unable to negotiate a waiver from the lending institution, adjustments to the carrying value of the assets may be required.

NOTE 5 – ACCOUNTING FOR SHARE-BASED PAYMENT

The Company has two stock option plans, which provide for equity-based awards to its employees and directors (collectively, the “Plans”). Under the Plans, the Company has reserved 1,165,000 shares of common stock, of which 875,000 options have been granted and 255,000 options are outstanding. All stock options have an exercise price that is equal to the fair value of the Company’s stock on the date the options were granted. The term of the stock option awards is ten years from the date of grant.

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The following is a summary of the stock option activity during the thirty-nine weeks ended November 1, 2008:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding and exercisable as of February 2, 2008	147,696		$	12.80	6.17	$	1,732,000
Granted	110,250			4.79
Exercised	(2,376	)		2.00
Forfeited	(376	)		2.00
Outstanding as of November 1, 2008	255,194		$	9.46	7.45	$	9,000
Exercisable as of November 1, 2008	218,194		$	10.25	7.02	$	—

The aggregate intrinsic value in the table above is the amount before applicable income taxes which would have been received by the optionees based on the Company’s closing stock price as of the last business day of the respective period had all options been exercised on that date.

We compute share based compensation pursuant to SFAS No. 123 (R). During the thirty-nine week period ended November 1, 2008 the Company recognized share based compensation expense of approximately $175,000. During the nine months ended October 31, 2007, the Company did not recognize any share based compensation expense in the condensed consolidated financial statements.

NOTE 6 – REVOLVING CREDIT FACILITY, NOTES PAYABLE TO AFFILIATES AND SUBORDINATED CONVERTIBLE NOTE PAYABLE TO AFFILIATE

The revolving credit facility, notes payable to affiliates and subordinated convertible note payable to affiliate consist of the following:

	November 1, 2008		February 2, 2008
	(in thousands)
Revolving credit facility interest payable monthly, secured by a pledge of substantially all of the Company’s assets	$	208,890	$	105,320
Subordinated convertible note payable-affiliate		5,000		—
Notes payable - affiliate		92,286		68,708
		306,176		174,028
Less current portion		222,030		7,008
Total long-term debt	$	84,146	$	167,020

On August 11, 2008, in conjunction with the Merger with Model Reorg, the Company and certain of its subsidiaries entered into a new $250 million revolving credit facility with a syndicate of banks for which General Electric Capital Corporation serves as Agent, Collateral Agent and Lender, GE Capital Markets, Inc. serves as Joint Lead Arranger and Book Runner and Wachovia Capital Markets serves as Joint Lead Arranger (the “Senior Credit Facility”). The Senior Credit Facility is used for the Company’s general corporate purposes and those of its subsidiaries, including working capital. The Company and certain of its subsidiaries are co-borrowers under the Senior Credit Facility, and the Company’s other subsidiaries have guaranteed all of their obligations thereunder.

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The Senior Credit Facility is scheduled to expire on August 11, 2011, when all amounts will be due and payable in full. The Senior Credit Facility does not require amortization of principal and may be paid before maturity in whole or in part at the Company’s option without penalty or premium; provided that, if the Company permanently reduces the revolving commitment in connection with a prepayment, on or before August 11, 2009, it must pay a prepayment fee equal to 1% of the amount of such reduction, or after such date and on or before August 11, 2010, it must pay a prepayment fee equal to 0.5% of the prepayment.

The initial proceeds of the Senior Credit Facility were used to pay amounts incurred in connection with the Merger and to satisfy amounts outstanding under the Company’s and Model Reorg’s previous senior credit facilities.

Revolving loans under the Senior Credit Facility may be drawn, repaid and reborrowed up to the amount available under a borrowing base calculated with reference to a specified percentage of the borrowers’ eligible accounts and a specified percentage of the borrowers’ eligible inventory from time to time. The Senior Credit Facility also includes a sub-limit of $25 million for letters of credit and a sub-limit of $12.5 million for swing line loans (that is, same-day loans from the lead or agent bank).

Interest under the Senior Credit Facility is, at the Company’s election unless an Event of Default exists, at either (i) the higher of The Wall Street Journal corporate “base rate” or the federal funds rate plus 0.50% (the “Base Rate”) or (ii) the applicable London interbank offered rate (“LIBOR”), plus in each case, specified margins. These margins are determined based upon the Company’s excess availability (that is, at any time, an amount equal to (a) the lesser of the aggregate revolving commitments and the borrowing base at such time minus (b) the revolving exposure of all lenders) from time to time. Interest rate margins have initially been set at 2.50% per annum for LIBOR borrowings and 1.25% for Base Rate borrowings. Following the first fiscal quarter ending at least six months after the closing of the Senior Credit Facility, the interest rate margins will range from 2.25% to 2.75% for LIBOR borrowings and from 1.00% to 1.50% for Base Rate borrowings. The Company is also required to pay fees equal to 0.375% of the unused amount of the Senior Credit Facility and the outstanding amount of letters of credit under that facility.

All obligations of the Company under the Senior Credit Facility and under any interest rate protection or other hedging arrangements entered into in connection with the Senior Credit Facility are secured by a first priority perfected security interest in all existing and after-acquired personal property and owned real property owned by the Company and its subsidiaries, which are co-borrowers or guarantors, including, without limitation, 100% (or, in the case of excluded foreign subsidiaries, 66%) of the outstanding equity interests in their subsidiaries.

The Senior Credit Facility limits the Company’s and its subsidiaries’ ability to, among other things: incur additional indebtedness; incur liens or guarantee obligations; pay dividends and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except for certain existing arrangements under which the Company leases space and obtains certain business services from affiliated companies and other arrangements in the ordinary course of business.

The Senior Credit Facility provides that advances to suppliers by the Company and its subsidiaries may not exceed $8 million with respect to all suppliers or $5 million with respect to any one supplier (together with its affiliates). In addition, under the Senior Credit Facility, the Company and its subsidiaries must maintain certain financial ratios, as specified in the agreement. As of November 1, 2008, the Company was not in compliance with the Maximum Leverage Ratio under the terms of the Senior Credit Facility. Such noncompliance permits the lenders to accelerate the indebtedness and terminate the credit facility which would result in all amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. Management has requested a waiver of non-compliance from the lenders and while Management believes that it will receive such waiver, there can be no assurance that the waiver will be received or that there will not be a material cost for a waiver. Failure to receive the waiver could result in our having to refinance the Senior Credit Facility and obtain an alternative source of financing. Due to the current weakness in the credit markets, there is no assurance that such financing would be obtained, or if such refinancing is obtained, that the terms of a new facility would be on terms comparable to the current Senior Credit Facility. If the Company is unable to obtain alternative financing, its operations and financial condition would be materially adversely impacted and it would be forced to seek an alternative source of liquidity, such as by selling additional securities, to continue operations.

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The Senior Credit Facility also includes other customary events of default that would permit the lenders to accelerate the indebtedness and terminate the credit facility.

At the closing of the Merger, six estate planning trusts established by Glenn, Stephen and Arlene Nussdorf (the “Nussdorf Trusts”) loaned an aggregate of approximately $55 million to Model Acquisition contemporaneously with the consummation of the Merger pursuant to unsecured subordinated promissory notes executed by Model Acquisition in favor of the Nussdorf Trusts. At the same time, Model Acquisition issued an unsecured subordinated promissory note in the principal amount of $35 million to Quality King Distributors, Inc. (“Quality King”). Glenn, Stephen and Arlene Nussdorf are principal stockholders of the Company, and Quality King is wholly owned by them.

All of the subordinated promissory notes issued to the Nussdorf Trusts and Quality King are subordinated to the Senior Credit Facility. The maturity date of the subordinated promissory notes payable to the Nussdorf Trusts is February 8, 2012 and the subordinated promissory note payable to Quality King debt will amortize quarterly beginning in January 2009 at the rate of $2.5 million per quarter, with the balance due June 30, 2012. The subordinated promissory notes payable to the Nussdorf Trusts bear interest at a rate equal to 2% over the rate in effect from time to time on the revolving loans under the Senior Credit Facility, and the subordinated promissory note payable to Quality King bears interest at a rate equal to 1% over the rate in effect from time to time on the revolving loans under the Senior Credit Facility. No interest payments will be required under any of the subordinated notes until January 2009.

In March 2004, Glenn and Stephen Nussdorf provided a $5 million subordinated secured demand loan to Perfumania. The demand loan required quarterly interest payments at the prime rate plus 1%. There were no prepayment penalties and the loan was subordinate to all bank related indebtedness. On December 9, 2004, E Com issued a Subordinated Convertible Note (the “Convertible Note”) in exchange for the $5 million subordinated secured demand loan. The Convertible Note bears interest at the prime rate plus 1%, requires quarterly interest payments and was secured by E Com’s assets. In connection with the August 11, 2008 financing transactions, Glenn and Stephen Nussdorf released and terminated their security interest. There are no prepayment penalties and the Convertible Note is subordinate to all bank related indebtedness. The Convertible Note was originally payable in January 2007; however it was modified in January 2006 to extend the due date to January 2009. The Note allows Glenn and Stephen Nussdorf to convert the Convertible Note into shares of the Company’s common stock at a conversion price of $11.25, which equaled the closing market price of E Com’s common stock on the date of the exchange. See Note 11 for discussion of transactions between E Com and Model Reorg.

NOTE 7 – ACCOUNTING FOR INCOME TAXES

The Company conducts business throughout the United States and Puerto Rico and as a result, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions and Puerto Rico. In the normal course of business the Company is subject to examinations in these jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, local or Puerto Rico income tax examinations for fiscal years prior to 2005. State and foreign income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Model Acquisition is currently under IRS examination for Model Reorg’s June 2005 and June 2006 tax years. The Company is not currently under examination in any state or foreign jurisdictions.

As of November 1, 2008 and February 2, 2008, the Company did not record any significant liability for income tax associated with uncertain tax positions. At the date of the Merger the Company realized approximately $2.5 million of additional deferred tax assets resulting primarily from the realization of net operating losses at the date of the Merger. The Company fully anticipates the future utilization of the net operating losses.

The Company accrues interest related to unrecognized tax benefits as well as any related penalties in operating expenses in its condensed consolidated statements of operations, which is consistent with the recognition of these items in prior reporting periods. No accrual for interest and penalties related to uncertain tax positions was required as of November 1, 2008 or February 2, 2008.

The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months, however the ultimate outcome of tax matters is uncertain and unforeseen results can occur.

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NOTE 8 – BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per common share has been computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Due to the reverse merger accounting treatment for the Merger with Model Reorg, the weighted average shares outstanding for purposes of presenting basic and diluted income (loss) per share on a comparative basis has been retroactively restated for all periods presented. Accordingly, the 5,900,000 common shares of the Company issued as part of the Merger consideration have been considered outstanding for all periods presented in this Form 10-Q.

Diluted net income per common share includes, in periods in which they are dilutive, the effect of those common stock equivalents where the average market price of the common stock exceeds the exercise prices for the respective periods. All common stock equivalents, which include outstanding stock options, the subordinated convertible note payable to affiliate and warrants outstanding were not included in diluted net income for any period presented because the results would be anti-dilutive.

NOTE 9 – SHAREHOLDERS’ EQUITY

Activity for the thirty-nine weeks ended November 1, 2008 in common stock, additional paid-in capital, retained earnings and treasury stock, at cost is summarized as follows:

($ in thousands)

	Common Stock					Additional Paid-In Capital		Treasury Stock					Retained Earnings
	Shares		Amount					Shares		Amount						Total
Balance at February 2, 2008	111		$	1		$	13,905	14		$	(1,475	)	$	78,287		$	90,718
Retirement of Model Reorg treasury stock								(14	)		1,475			(1,475	)		0
Cancellation of Model Reorg common stock	(111	)		(1	)												(1	)
Reverse merger with E Com Ventures, Inc.	8,959,041			99			40,328	898,249			(8,577	)					31,850
Exercise of stock options	2,376						5										5
Share based compensation expense							175										175
Net income														346			346
Balance at November 1, 2008	8,961,417		$	99		$	54,413	898,249		$	(8,577	)	$	77,158		$	123,093

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes that the ultimate resolution of these matters will not have a materially adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

NOTE 11 – RELATED PARTY TRANSACTIONS

Glenn and Stephen Nussdorf and their sister, Arlene Nussdorf, owned an aggregate 6,349,476 shares or approximately 71% of the total number of shares of the Company’s common stock as of November 1, 2008, excluding shares issuable upon conversion of the Warrants discussed in Note 1 or the Convertible Note discussed in Note 6, and not assuming the exercise of any outstanding options held by the Company’s officers and directors. Stephen Nussdorf has served as the Chairman of the Company’s Board of Directors since February 2004.

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The Nussdorfs are officers and principals of Quality King, which distributes pharmaceuticals and health and beauty care products. Before the Merger with Model Reorg, the Company’s President and Chief Executive Officer, Michael W. Katz (“Mr. Katz”) was, and he continues to be, an executive of Quality King. Before the Merger, the Nussdorfs were also shareholders, and Stephen and Glenn Nussdorf were executives, of Model Reorg. Mr. Katz was also an executive of Model Reorg.

Effective August 1, 2008, the 2003 Stockholder Agreement between Model Reorg and Mr. Katz was amended and restated (the “Agreement”) and a $1.9 million promissory note payable to Mr. Katz was issued. This amount was fully accrued at August 1, 2008 and was reflected in accrued expenses and other liabilities. The note, which bears interest at 4% and is payable in equal monthly installments of $53,333 commencing September 1, 2008 and terminating August 1, 2011, was issued in consideration for the termination of a prior arrangement between Mr. Katz and Model Reorg which provided for stock ownership and an earnings participation in Model Reorg. The Agreement includes certain non-compete, non-solicitation and confidentiality covenants. The note payable is included in notes payable - affiliate as of November 1, 2008.

Sales To and Purchases From Affiliated Companies

Model Reorg sold approximately $8.3 million of wholesale merchandise to E Com in the three months ended October 31, 2007. For the periods February 3, 2008 to August 10, 2008 and nine months ended October 31, 2007, Model Reorg’s sales of wholesale merchandise to E Com were approximately $15.4 million and $19.2 million, respectively. These wholesale sales are included in net sales to affiliates in the accompanying condensed consolidated statements of operations. There were approximately $32.5 million of accounts receivable due to Model Reorg from E Com as of February 2, 2008.

Model Reorg’s purchases of product from E Com for the three months ended October 31, 2007 were approximately $22.1 million. Model Reorg’s purchases from E Com for the periods February 3, 2008 to August 10, 2008 and nine months ended October 31, 2007 were approximately $15.2 million and $46.8 million, respectively. Effective with the Merger on August 11, 2008, all transactions between Model Reorg and E Com are eliminated in consolidation.

Glenn Nussdorf beneficially owns approximately 12% of the outstanding common stock of Parlux Fragrances, Inc. (“Parlux”), a manufacturer and distributor of prestige fragrances and beauty products. Purchases of merchandise from Parlux aggregated approximately $18.7 million for the thirteen weeks ended November 1, 2008. The amount due to Parlux at November 1, 2008 was approximately $16.7 million. This amount is non-interest bearing and is included in accounts payable-affiliate in the accompanying condensed consolidated balance sheet. Purchases from related parties are generally payable in 90 days, however, due to the seasonality of the Company’s business, these terms are generally extended. Related party accounts are historically brought closer to terms at the end of the holiday season, however, the Company has been dependent upon these extended terms for a portion of its liquidity during the year.

On August 2, 2007, Model Reorg entered into an Information Technology Services Agreement (the “IT Services Agreement”) with its then affiliate E Com, whereby among other services, E Com managed and monitored the IT systems of Model Reorg in exchange for a monthly service fee of $25,000 plus expenses. The IT Services Agreement terminated 30 days after the effective date of the Merger. During the thirty-nine weeks ended November 1, 2008, Model Reorg recorded expense of $150,000 representing the pre merger period related to the IT Services Agreement, which is included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Quality King occupies a leased 560,000 square foot facility in Bellport, NY. Model Reorg began occupying approximately half of this facility in December 2007 under a sublease that terminates on September 30, 2027, and this is now the location of the Company’s principal offices. The monthly sublease payments of approximately $192,000 increase by 3% annually.

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Model Reorg historically received shared services from Quality King pursuant to a service agreement. The agreement with Quality King provided for the allocation of expenses which were calculated based on various assumptions and methods. The methods employed utilized various allocation bases including the number of transactions processed, estimated delivery miles, warehouse square footage, payroll dollars and sales and inventory ratios. Effective with the Merger on August 11, 2008, the Company and Quality King executed a new Services Agreement providing for the Company’s participation in certain third party arrangements, including 401(k), medical, dental, and flex spending plans, at the Company’s respective share of Quality King’s cost, including allocated overhead, plus a 2% administrative fee, and the provision of legal services. The Company will also share with Quality King the economic benefit of the bulk rate contract that the Company has with UPS to ship Quality King’s merchandise and related items. The new Services Agreement will terminate on thirty days’ written notice from either party. During the thirteen weeks ended November 1, 2008 and three months ended October 31, 2007, respectively, the expenses allocated under these arrangements to the Company and Model Reorg, as the case may be, were $0.5 million and $0.8 million, and for the thirty-nine weeks ended November 1, 2008 and nine months ended October 31, 2007, respectively, they were $2.4 million and $2.2 million.

NOTE 12 – SEGMENT INFORMATION

The Company operates in two industry segments, wholesale distribution and specialty retail sales of designer fragrance and related products. Management reviews segment information by segment and on a consolidated basis each month. Retail sales include sales through Perfumania retail stores, the Scents of Worth consignment business and the Company’s internet site, perfumania.com. Transactions between Five Star and unrelated customers are included in our wholesale segment information. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2. The Company’s chief operating decision maker assesses segment performance by reference to gross profit. Each of the segments has its own assets, liabilities, revenues and cost of goods sold. While each segment has certain unallocated operating expenses, these expenses are not reviewed by the chief operating decision maker on a segment basis but rather on a consolidated basis. Financial information for these segments is summarized in the following table.

		Thirteen Weeks Ended November 1, 2008					Three Months Ended October 31, 2007			Thirty-Nine Weeks Ended November 1, 2008		Nine Months Ended October 31, 2007
							(in thousands)
Net sales:
Wholesale		$	65,221				$	77,291		$	157,439	$	179,327
Retail			61,178					15,536			93,863		45,904
		$	126,399				$	92,827		$	251,302	$	225,231
Gross profit:
Wholesale		$	15,656				$	16,796		$	36,764	$	44,808
Retail			28,768					6,298			42,349		18,511
		$	44,424				$	23,094		$	79,113	$	63,319
		November 1, 2008					February 2, 2008
Goodwill:
Wholesale		$	15,078				$	15,078
Retail		$	5,356				$	5,356
Total assets:
Wholesale		$	453,227				$	340,171
Retail		$	298,165				$	70,607
		$	751,392				$	410,778
Eliminations	(a)		(223,965	)	(a	)		(111,405	)
Consolidated assets		$	527,427				$	299,373

(a) Adjustment to eliminate intercompany receivables and investment in subsidiaries

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NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to remove the hierarchy of generally accepted accounting principles from the auditing standards. The Company does not expect the adoption of SFAS 162 to impact its results of operations, financial position or cash flows.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures regarding derivatives and hedging activities, including: (a) the manner in which an entity uses derivative instruments; (b) the manner in which derivative instruments and related hedged items are accounted for under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”; and (c) the effect of derivative instruments and related hedged items on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As SFAS 161 relates specifically to disclosures, it will have no impact on the Company’s results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, the goodwill acquired, and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable the evaluation of the nature and financial effect of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The Company is in the process of evaluating the effect that the adoption of SFAS 141(R) will have on its results of operations, financial position, and cash flows.

In December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company is in the process of evaluating the effect that the adoption of SFAS 160 will have on its results of operations, financial position, and cash flows.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal 2008. The adoption of SFAS 159 did not have any effect on the Company’s results of operations, financial position or cash flows.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. SFAS 157 is effective for the first interim period beginning in fiscal 2008 for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. In November 2007, the FASB provided a one year deferral for the implementation of SFAS 157 for other nonfinancial assets and liabilities. The adoption of SFAS 157 did not have a material effect on the Company’s results of operations, financial position or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On August 11, 2008, we issued 5,900,000 shares of our common stock and Warrants to purchase an additional 1,500,000 shares in exchange for the shares of Model Reorg, which merged into our wholly-owned subsidiary, Model Reorg Acquisition LLC. Because the shares issued to the Model Reorg shareholders amount to approximately 66% of our shares outstanding after the issuance, the transaction has been accounted for as a “reverse acquisition,” and Model Reorg is being treated as the “accounting acquirer.” Accordingly, our historical financial statements reflect the historical results of Model Reorg prior to the transaction date of August 11, 2008 and those of the combined companies beginning effective August 11, 2008. The Company is continuing to use the same fiscal year end, the Saturday closest to January 31, as E Com used before the Merger. Model Reorg’s fiscal year end before the Merger was October 31. The audited consolidated financial statements of Model Reorg as of October 31, 2007 and 2006 and for the years ended October 31, 2007, 2006 and 2005 were previously filed with the SEC. The audited consolidated financial statements of Model Reorg as of and for the thirteen weeks ended February 2, 2008 and the unaudited financial statements of Model Reorg as of July 31, 2008 and for the three months and nine months ended July 31, 2008 and 2007 have been filed with the SEC as well.

Comparison of the Thirteen Weeks Ended November 1, 2008 with the Three Months Ended October 31, 2007.

Net Sales

	Thirteen Weeks Ended November 1, 2008		Percentage of Net Sales		Three Months Ended October 31, 2007		Percentage of Net Sales
			($ in thousands)
Wholesale	$	65,221	51.6	%	$	77,291	83.3	%
Retail		61,178	48.4	%		15,536	16.7	%
Total net sales	$	126,399	100.0	%	$	92,827	100.0	%

Net sales increased 36.2% from $92.8 million in the three months ended October 31, 2007 to $126.4 million in the thirteen weeks ended November 1, 2008. Excluding the sales from Perfumania’s retail division which are included in the above sales information for the period from August 11, 2008 through November 1, 2008, net sales decreased by $11.9 million or 12.8%. Excluding Perfumania’s results, the decrease in sales was primarily due to a decrease in wholesale sales of $12.1 million.

Approximately $8.3 million of the $12.1 million decrease in wholesale sales are represented by affiliate sales to Perfumania in the three months ended October 31, 2007. As a result of the Merger on August 11, 2008, wholesale sales to Perfumania became intercompany transactions and all intercompany sales occurring subsequent to the Merger date are therefore eliminated in consolidation. The remaining decrease in wholesale sales of $3.8 million is the result of the continuing tightening of credit resources generally, which decreases customers’ ability to purchase. Also, the reduction in consumer spending and the weak global economy has caused wholesale customers to reduce their demand for fragrance for the 2008 holiday season.

As discussed above, because the Merger with Model is treated as a reverse acquisition for accounting purposes, Perfumania’s retail sales are included in our condensed consolidated financial statements only for the period August 11, 2008 through November 1, 2008. Perfumania’s retail sales for the thirteen weeks ended November 1, 2008 increased by 0.6% to $51.0 million versus the comparative period in 2007. Perfumania’s comparable store sales decreased by 7.2% during the thirteen weeks ended November 1, 2008. Comparable store sales measure sales from stores that have been open for one year or more. We exclude stores that are closed for renovation from comparable store sales from the month during which renovation commences until the first full month after reopening. The average retail price per unit sold during the thirteen weeks ended November 1, 2008 increased 7% from the prior year’s comparable period and the total number of units sold decreased by 6%. We attribute the increase in the average retail price per unit sold to changes in our product mix and promotions resulting in more sales of higher priced merchandise. The number of units sold was affected by softness in the United States economy, declining consumer confidence and the resulting weak mall traffic. The average number of stores operated was 320 in the thirteen week period ended 2008, versus 285 in the prior year’s comparable period, which resulted in the increase in retail sales.

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We expect the softness in wholesale and retail sales to continue for the foreseeable future until consumer confidence and the United States economy improve.

Gross Profit

	Thirteen Weeks Ended November 1, 2008		Three Months Ended October 31, 2007
	(in thousands)
Wholesale	$	15,656	$	16,796
Retail		28,768		6,298
Total gross profit	$	44,424	$	23,094

Gross Profit Percentages

	Thirteen Weeks Ended November 1, 2008		Three Months Ended October 31, 2007
Wholesale	24.0	%	21.7	%
Retail	47.0	%	40.5	%
Total gross profit percentage	35.1	%	24.9	%

Gross profit increased 92.4% from $23.1 million in the three months ended October 31, 2007 (24.9% of total net sales) to $44.4 million in the thirteen weeks ended November 1, 2008 (35.1% of total net sales). Excluding the gross profit from Perfumania’s retail division which are included in the above gross profit information for the period from August 11, 2008 through November 1, 2008, gross profit decreased by $0.6 million. Excluding Perfumania’s results, the decrease in gross profit was due to a decrease in wholesale sales volume as discussed above offset by an increase in retail gross profit due to sales of a larger ratio of higher margin products.

Perfumania’s retail gross profit for the thirteen weeks ended November 1, 2008 increased by 1.7% to $23.9 million versus the comparative period in 2007. For these same periods, Perfumania’s retail gross margins were 46.8% and 46.3%, respectively.

Selling, general and administrative expenses include payroll and related benefits for our distribution centers, sales, store operations, field management, purchasing and other corporate office and administrative personnel; rent, common area maintenance, real estate taxes and utilities for our stores, distribution centers and corporate office; advertising, consignment fees, sales promotion, insurance, supplies, freight out, and other administrative expenses. Selling, general and administrative expenses increased by $26.5 from $14.8 million in the three months ended October 31, 2007 to $41.3 million in the thirteen weeks ended November 1, 2008. Excluding the selling, general administrative expenses of Perfumania’s retail division of $24.9, which are included for the period from August 11, 2008 through November 1, 2008, selling, general and administrative expenses increased by $1.6 million or 11.0%. This increase includes a reversal of a reserve on vendor advances of approximately $2.4 million in the three months ending October 31, 2007. Gross selling, general and administrative expenses, excluding the $2.4 million reversal, decreased $0.8 million or 4.7%. Included in selling, general and administrative expenses are expenses in connection with the service agreements with Quality King, which were $0.5 million for the thirteen weeks ended November 1, 2008 compared with $0.8 million for the three months ended October 31, 2007. See further discussion at Note 11 to these condensed consolidated financial statements.

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Perfumania’s selling, general and administrative expenses for the thirteen weeks ended November 1, 2008 increased by 15.6% to $27.2 million compared to $23.5 million in the same period of 2007. The increase was largely attributable to the additional payroll, occupancy and store opening expenses needed to operate the 47 net new stores opened over the past year.

Depreciation and amortization was approximately $2.7 million in the thirteen weeks ended November 1, 2008 compared to $0.3 million for the three months ended October 31, 2007. Approximately $1.7 million of the total increase is attributable to Perfumania’s retail division. Of the remaining $1.0 million increase, $0.5 million relates to amortization of deferred financing costs and $0.5 million relates to depreciation of asset purchases for the new building.

Interest expense was approximately $3.1 million for the thirteen weeks ended November 1, 2008 compared with approximately $3.7 million in the comparable period of 2007. Excluding Perfumania’s interest expense, which is included in interest expense for the period from August 11, 2008 through November 1, 2008, interest expense decreased by $2.3 million or 61.5%. The decrease in interest expense relates to a decrease in the interest rates on total variable interest debt of approximately 2.20% during the thirteen weeks ended November 1, 2008 as compared to the same period in the prior year.

An income tax benefit of $1.1 million was recorded as a result of the Company’s net loss during the thirteen weeks ended November 1, 2008 compared with an income tax provision of $1.6 million during the comparable period of 2007. The Company’s effective tax rate for the thirteen week period ended November 1, 2008 and the three month period ended October 31, 2007 was 40.2% and 38.0%, respectively.

As a result of the foregoing, we realized a net loss of approximately $1.6 million in the thirteen weeks ended November 1, 2008, of which $4.1 million is attributable to Perfumania for the period August 11, 2008 to November 1, 2008, compared to a net income of $2.7 million in the three months ended October 31, 2007.

Comparison of the Thirty-Nine Weeks Ended November 1, 2008 with the Nine Months Ended October 31, 2007.

Net Sales

	Thirty-Nine Weeks Ended November 1, 2008		Percentage of Net Sales		Nine Months Ended October 31, 2007		Percentage of Net Sales
	($ in thousands)
Wholesale	$	157,439	62.6	%	$	179,327	79.6	%
Retail		93,863	37.4	%		45,904	20.4	%
Total net sales	$	251,302	100.0	%	$	225,231	100.0	%

Net sales increased 11.6% from $225.2 million in the nine months ended October 31, 2007 to $251.3 million in the thirty-nine weeks ended November 1, 2008. Excluding the sales from Perfumania’s retail division, which are included in the above sales information for the period from August 11, 2008 through November 1, 2008, net sales decreased by $19.4 million or 8.6%. Excluding Perfumania’s results, the decrease in sales was due to a decrease in wholesale sales of $21.9 million offset by an increase in retail sales of $2.5 million.

Included in wholesale sales are $15.4 million and $19.2 million of pre-merger affiliate sales to Perfumania in the thirty-nine weeks ended November 1, 2008 and the nine months ended October 31, 2007, respectively. The remaining decrease in wholesale sales of $6.5 million is the result of the continuing tightening of credit resources generally, which decreases wholesale customers’ ability to purchase. Also, the reduction in consumer spending and the weak global economy has caused wholesale customers to reduce their demand for fragrance for the 2008 holiday season.

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Perfumania’s retail sales for the thirty-nine weeks ended November 1, 2008 increased by 6.9% or $10.0 million to $155.1 million versus the comparative period in 2007. Perfumania’s comparable store sales decreased by 0.7% during the thirty-nine weeks ended November 1, 2008. The average number of stores operated was 320 in the thirty-nine week period ended 2008, versus 277 in the prior year’s comparable period which resulted in the majority of the increase in retail sales. The average retail price per unit sold during the thirty-nine weeks ended November 1, 2008 increased 9% from the prior year’s comparable period and the total number of units sold decreased by 2%. We attribute the increase in the average retail price per unit sold to changes in our product mix and promotions resulting in more sales of higher priced merchandise. The number of units sold was affected by softness in the United States economy, declining consumer confidence and the resulting weak mall traffic, all of which began to have a greater impact on Perfumania’s retail business beginning in September 2008.

We expect the softness in wholesale and retail sales to continue for the foreseeable future until consumer confidence and the United States economy improves.

Gross Profit

	Thirty-Nine Weeks Ended November 1, 2008		Nine Months Ended October 31, 2007
	(in thousands)
Wholesale	$	36,764	$	44,808
Retail		42,349		18,511
Total gross profit	$	79,113	$	63,319

Gross Profit Percentage

	Thirty-Nine Weeks Ended November 1, 2008		Nine Months Ended October 31, 2007
Wholesale	23.4	%	25.0	%
Retail	45.1	%	40.3	%
Total gross profit	31.5	%	28.1	%

Gross profit increased by $15.8 million from $63.3 million in the nine months ended October 31, 2007 (28.1% of total net sales) to $79.1 million in the thirty-nine weeks ended November 1, 2008 (31.5% of total net sales). Excluding the gross profit from Perfumania’s retail division which is included in the above gross profit information for the period from August 11, 2008 through November 1, 2008, gross profit decreased by $6.2 million. Excluding Perfumania’s results, the decrease in gross profit was due to a decrease in wholesale sales volume as discussed above offset by an increase in retail gross profit due to sales of a larger ratio of higher margin products.

Perfumania’s retail gross for the thirty-nine weeks ended November 1, 2008 increased by 7.6% to $72.2 million versus the comparative period in 2007. For these same periods, Perfumania’s retail gross margins were 46.5% and 46.2%, respectively.

Selling, general and administrative expenses increased by $26.0 million from $40.6 million in the nine months ended October 31, 2007 to $66.6 million in the thirty-nine weeks ended November 1, 2008. Excluding the selling, general administrative expenses of Perfumania’s retail division of $24.9 million, which are included for the period from August 11, 2008 through November 1, 2008, selling, general and administrative expenses increased by $1.1 million or 2.8%. This increase includes a reversal

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of a reserve on vendor advances of approximately $2.4 million in the nine months ending October 31, 2007. Gross selling, general and administrative expenses, excluding the $2.4 million reversal, decreased $1.3 million or 2.9%. Included in selling, general and administrative expenses are expenses in connection with the service agreements with Quality King, which were $2.4 million for the thirty-nine weeks ended November 1, 2008 compared with $2.2 million for the nine months ended October 31, 2007. See further discussion at Note 11 to these condensed consolidated financial statements.

Perfumania’s selling, general and administrative expenses for the thirty-nine weeks ended November 1, 2008 increased by 16.8% to $78.9 million compared to $67.5 million in the same period of 2007. The increase was largely attributable to the additional payroll, occupancy and store opening expenses needed to operate the 47 net new stores opened over the past year.

Depreciation and amortization was approximately $3.6 million in the thirty-nine weeks ended November 1, 2008 compared to $1.0 million for the nine months ended October 31, 2007. Approximately $1.7 million of the total increase is attributable to Perfumania’s retail division. Of the remaining $0.9 million increase, $0.5 million relates to amortization of deferred financing costs and the remainder relates to depreciation of asset purchases for the new building.

Interest expense was approximately $8.3 million for the thirty-nine weeks ended November 1, 2008 compared with approximately $9.4 million in the comparable period of 2007. Excluding the Perfumania’s interest expense, which is included in interest expense for the period from August 11, 2008 through November 1, 2008, interest expense decreased by $2.8 million or 30.1%. The decrease in interest expense relates to a decrease in the interest rates on total variable interest debt of approximately 2.50% during the thirty-nine weeks ended November 1, 2008 as compared to the same period in the prior year.

Income tax expense of $0.3 million was recorded as a result of the Company’s net income during the thirty-nine weeks ended November 1, 2008 compared with an income tax expense of $4.8 million during the comparable period of 2007. The Company’s effective tax rate for the thirty-nine week period ended November 1, 2008 and the nine months ended October 31, 2007 was 43.9% and 39.3%, respectively.

As a result of the foregoing, we realized a net income of approximately $0.3 million in the thirty-nine weeks ended November 1, 2008 compared to a net income of $7.5 million in the nine months ended October 31, 2007. Included in the net income of $0.3 million in the thirty-nine weeks ended November 1, 2008 is a net loss of approximately $4.1 million attributable to Perfumania for the period August 11, 2008 to November 1, 2008. Net income per share for the thirty-nine weeks ended November 1, 2008 was $0.05 compared to net income per share of $1.27 per share for the nine months ended October 31, 2007.

LIQUIDITY AND CAPITAL RESOURCES

Our principal funding requirements are for inventory purchases, financing extended terms on accounts payable, paying down accounts payable and debt, opening new stores and renovation of existing stores. Prior to the Merger, Model Reorg also financed extended terms on accounts receivable from E Com. For the first thirty-nine weeks of fiscal 2008, these capital requirements generally were satisfied through borrowings under the respective revolving credit facilities and notes payable to affiliate.

On August 11, 2008, in conjunction with the Merger with Model Reorg, the Company and certain of its subsidiaries entered into a new $250 million revolving credit facility with a syndicate of banks for which General Electric Capital Corporation serves as Agent, Collateral Agent and Lender, GE Capital Markets, Inc. serves as Joint Lead Arranger and Book Runner and Wachovia Capital Markets serves as Joint Lead Arranger (the “Senior Credit Facility”). The Senior Credit Facility is used for the Company’s general corporate purposes and those of its subsidiaries, including working capital. The Company and certain of its subsidiaries are co-borrowers under the Senior Credit Facility, and the Company’s other subsidiaries have guaranteed all of their obligations thereunder.

The Senior Credit Facility is scheduled to expire on August 11, 2011, when all amounts will be due and payable in full. The Senior Credit Facility does not require amortization of principal and may be paid before maturity in whole or in part at the Company’s option without penalty or premium; provided that, if the Company permanently reduces the revolving commitment in connection with a prepayment, on or before August 11, 2009, it must pay a prepayment fee equal to 1% of the amount of such reduction, or after such date and on or before August 11, 2010, it must pay a prepayment fee equal to 0.5% of the prepayment.

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The initial proceeds of the Senior Credit Facility were used to pay amounts incurred in connection with the Merger and to satisfy amounts outstanding under the Company’s and Model Reorg’s previous senior credit facilities.

Revolving loans under the Senior Credit Facility may be drawn, repaid and reborrowed up to the amount available under a borrowing base calculated with reference to a specified percentage of the borrowers’ eligible accounts and a specified percentage of the borrowers’ eligible inventory from time to time. The Senior Credit Facility also includes a sub-limit of $25 million for letters of credit and a sub-limit of $12.5 million for swing line loans (that is, same-day loans from the lead or agent bank).

Interest under the Senior Credit Facility is, at the Company’s election unless an Event of Default exists, at either (i) the higher of The Wall Street Journal corporate “base rate” or the federal funds rate plus 0.50% (the “Base Rate”) or (ii) the applicable London interbank offered rate (“LIBOR”), plus in each case, specified margins. These margins are determined based upon the Company’s excess availability (that is, at any time, an amount equal to (a) the lesser of the aggregate revolving commitments and the borrowing base at such time minus (b) the revolving exposure of all lenders) from time to time. Interest rate margins have initially been set at 2.50% per annum for LIBOR borrowings and 1.25% for Base Rate borrowings. Following the first fiscal quarter ending at least six months after the closing of the Senior Credit Facility, the interest rate margins will range from 2.25% to 2.75% for LIBOR borrowings and from 1.00% to 1.50% for Base Rate borrowings. The Company is also required to pay fees equal to 0.375% of the unused amount of the Senior Credit Facility and the outstanding amount of letters of credit under that facility.

All obligations of the Company under the Senior Credit Facility and under any interest rate protection or other hedging arrangements entered into in connection with the Senior Credit Facility are secured by a first priority perfected security interest in all existing and after-acquired personal property and owned real property owned by the Company and its subsidiaries, which are co-borrowers or guarantors, including, without limitation, 100% (or, in the case of excluded foreign subsidiaries, 66%) of the outstanding equity interests in their subsidiaries.

The Senior Credit Facility limits the Company’s and its subsidiaries’ ability to, among other things: incur additional indebtedness; incur liens or guarantee obligations; pay dividends and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except for certain existing arrangements under which the Company leases space and obtains certain business services from affiliated companies and other arrangements in the ordinary course of business.

The Senior Credit Facility provides that advances to suppliers by the Company and its subsidiaries may not exceed $8 million with respect to all suppliers or $5 million with respect to any one supplier (together with its affiliates). In addition, under the Senior Credit Facility, the Company and its subsidiaries must maintain certain financial ratios, as specified in the agreement. As of November 1, 2008, the Company was not in compliance with the Maximum Leverage Ratio under the terms of the Senior Credit Facility. Such noncompliance permits the lenders to accelerate the indebtedness and terminate the credit facility which would result in all amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. Management has requested a waiver of non-compliance from the lenders and while Management believes that it will receive such waiver, there can be no assurance that the waiver will be received or that there will not be a material cost for a waiver. Failure to receive the waiver could result in our having to refinance the Senior Credit Facility and obtain an alternative source of financing. Due to the current weakness in the credit markets, there is no assurance that such financing would be obtained, or if such refinancing is obtained, that the terms of a new facility would be on terms comparable to the current Senior Credit Facility. If the Company is unable to obtain alternative financing, its operations and financial condition would be materially adversely impacted and it would be forced to seek an alternative source of liquidity, such as by selling additional securities, to continue operations.

The Senior Credit Facility also includes other customary events of default that would permit the lenders to accelerate the indebtedness and terminate the credit facility.

At the closing of the Merger, six estate planning trusts established by Glenn, Stephen and Arlene Nussdorf (the “Nussdorf Trusts”) loaned an aggregate of approximately $55 million to Model Acquisition contemporaneously with the consummation of the

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Merger pursuant to unsecured subordinated promissory notes executed by Model Acquisition in favor of the Nussdorf Trusts. At the same time, Model Acquisition issued an unsecured subordinated promissory note in the principal amount of $35 million to Quality King Distributors, Inc. (“Quality King”). Glenn, Stephen and Arlene Nussdorf are principal stockholders of the Company, and Quality King is wholly owned by them.

All of the subordinated promissory notes issued to the Nussdorf Trusts and Quality King are subordinated to the Senior Credit Facility. The maturity date of the subordinated promissory notes payable to the Nussdorf Trusts is February 8, 2012 and the subordinated promissory note payable to Quality King debt will amortize quarterly beginning in January 2009 at the rate of $2.5 million per quarter, with the balance due June 30, 2012. The subordinated promissory notes payable to the Nussdorf Trusts bear interest at a rate equal to 2% over the rate in effect from time to time on the revolving loans under the Senior Credit Facility, and the subordinated promissory note payable to Quality King bears interest at a rate equal to 1% over the rate in effect from time to time on the revolving loans under the Senior Credit Facility. No interest payments will be required under any of the subordinated notes until January 2009.

Net cash used in operating activities during the thirty-nine weeks ended November 1, 2008 was approximately $80.9 million compared with approximately $59.7 million used in operating activities during the same period of the prior year. Accounts receivables increased due to the timing of shipments to our wholesale customers. The increase in inventory is due to planned purchases for store growth, selective opportunistic purchases of desirable merchandise and additional product availability, and lower wholesale and retail sales than were originally forecasted. Our purchases from related parties are generally payable in 90 days, however due to the seasonality of our business these terms are generally extended.

Net cash used in investing activities was approximately $7.7 million in the first thirty-nine weeks ended November 1, 2008 compared to $1.7 million in the nine months ended October 31, 2007. The current period’s investing activities primarily represented spending for renovation of existing stores and new stores that either opened during the thirty-nine weeks ended November 1, 2008 or that are scheduled for completion during fiscal year 2008 and capitalized Merger costs. During the thirty-nine weeks ended November 1, 2008, Perfumania opened 39 new stores and relocated two existing stores. At November 1, 2008, Perfumania operated 339 stores. We currently plan to open approximately 18 new stores and close one store during the remainder of fiscal year 2008.

Net cash provided by financing activities during the first thirty-nine weeks of fiscal 2008 was approximately $84.9 million, primarily from borrowings under our credit facility, compared with approximately $62.7 million for the same period in the prior year.

Based on past performance and current expectations, we believe that our cash balances and the available borrowing capacity under our revolving credit facility, our affiliated borrowings and our projected future operating results will generate sufficient liquidity to support the Company’s working capital needs, capital expenditures and debt service for the next twelve months. However, there can be no assurance that management’s plans and expectations will be successful.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our condensed consolidated financial statements have been prepared in accordance with US GAAP. Preparation of these statements requires management to make judgments and estimates. As such, some accounting policies have a significant impact on amounts reported in these financial statements. The judgments and estimates made can significantly affect results. Materially different amounts would be reported under different conditions or by using different assumptions. A summary of significant accounting policies can be found in Note 2 to the condensed consolidated financial statements.

We consider an accounting policy to be critical if it is both important to the portrayal of the Company’s financial condition and results, and requires significant judgment and estimates by management in its application. We have identified certain accounting policies that we consider critical to our business and our results of operations and have provided below additional information on those policies.

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Inventory Adjustments and Writeoffs

Inventories are stated at the lower of cost or market, with cost being determined on a weighted average cost basis. We review our inventory on a regular basis for excess and potentially slow moving inventory based on prior sales, forecasted demand, historical experience and through specific identification of obsolete or damaged merchandise and we record adjustments to reduce the carrying value of inventory to the lower of cost or market in accordance with our assessment. If actual sales are less than our forecasts, additional writeoffs could be necessary. Inventory shrinkage is estimated and accrued between physical inventory counts. Significant differences between future experience and that which was projected (for either the shrinkage or inventory reserves) could affect the recorded amounts of inventory and cost of sales.

Impairment of Long-Lived Assets

When events or changes in circumstances indicate that the carrying values of long-lived assets may be impaired, an evaluation of recoverability is performed by comparing the carrying value of the assets to projected future cash flows in addition to other quantitative and qualitative analyses. Inherent in this process is significant management judgment as to the projected cash flows. Upon indication that the carrying value of such assets may not be recoverable, the Company recognizes an impairment loss as a charge against current operations. Property and equipment assets are grouped at the lowest level for which there are identifiable cash flows when assessing impairment. Cash flows for retail assets are identified at the individual store level. Factors that could trigger an impairment review include a significant underperformance relative to expected historical or projected future operating results, or a significant negative industry or economic trend. Judgments are also made as to whether under-performing stores should be closed. Even if a decision has been made not to close an under-performing store, the assets at that store may be impaired. If actual results are materially different than these judgments or estimates, additional charges could be necessary. Significant deterioration in the performance of the Company’s stores compared to projections could result in significant additional asset impairments.

Impairment of Goodwill and Intangible Assets

Pursuant to the provisions of SFAS 142, the Company’s goodwill is tested for impairment annually (or more frequently if impairment indicators arise). The first step of this test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment. Owned tradenames that have been determined to have indefinite lives are not subject to amortization but are reviewed at least annually for potential impairment in accordance with SFAS 142, as mentioned above. The fair values are estimated and compared to their carrying values.

Trademarks, including tradenames and owned licenses having finite lives are amortized over their respective lives to their estimated residual values and are also reviewed for impairment in accordance with SFAS 144. The recoverability of the carrying values of all long-lived assets with finite lives is re-evaluated when changes in circumstances indicate the assets’ value may be impaired. Impairment testing is based on a review of forecasted operating cash flows and the profitability of the related brand.

Based on management’s most recent impairment review, there was no impairment identified in recorded goodwill and intangibles. However, during and subsequent to the thirteen week period ended November 1, 2008, the capital markets experienced substantial volatility and the Company’s stock price decreased significantly. It is not currently known if the market value of the Company will remain at the current depressed value. Accordingly, the Company will continually monitor both the expected future cash flows of its reporting units and long-term trends of its market capitalization for the purpose of assessing the carrying values of its goodwill and intangible assets, which could result in an impairment charge.

Valuation of Deferred Tax Assets

SFAS 109 requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe it is more likely than not that a portion of these assets will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets including our recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carry-forward periods available to us for tax reporting purposes and other relevant factors.

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The range of possible judgments relating to the valuation of our deferred tax assets is very wide. Significant judgment is required in making these assessments and it is very difficult to predict when, if ever, our assessment may conclude that the remaining portion of our deferred tax assets is realizable. Significant differences between future experience and that which was projected in calculating deferred tax assets could result in significant adjustments to our deferred tax assets and income tax expense.

FORWARD LOOKING STATEMENTS

Some of the statements in this quarterly report, including those that contain the words “anticipate,” “believe,” “plan,” “estimate,” “expect,” “should,” “intend,” and other similar expressions, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements of those of our industry to be materially different from any future results, performance or achievements expressed or implied by those forward-looking statements. Among the factors that could cause actual results, performance or achievement to differ materially from those described or implied in the forward-looking statements are our ability to integrate and achieve synergies between the Perfumania and Model Reorg businesses, our ability to service our obligations, our ability to comply with the covenants in our new senior credit facility, general economic conditions including a decrease in discretionary spending by consumers, competition, changes in or the lack of anticipated changes in the regulatory environment in various countries, the ability to raise additional capital to finance our expansion, the risks inherent in new product and service introductions and the entry into new geographic markets and other factors included in our filings with the SEC, including the Risk Factors included in our 2007 Annual Report on From 10-K and our most recent proxy statement filed with the SEC. Those Risk Factors contained in our 2007 Annual Report on Form 10-K and our most recent proxy statement are incorporated herein by this reference to them. Copies of our SEC filings are available from the SEC or may be obtained upon request from us. We do not undertake any obligation to update the information contained herein, which speaks only as of this date.

ITEM 4T. CONTROLS AND PROCEDURES

Changes in Internal Control over Financial Reporting

Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the fiscal quarter covered by this report, that our disclosure controls and procedures are effective. This evaluation excluded those disclosure controls and procedures that are subsumed by the internal control over financial reporting of the business operations of the former Model Reorg, with which we completed the Merger during this fiscal quarter. Before the Merger, Model Reorg was a privately held company that was not required to maintain controls and procedures with respect to SEC disclosures. While we are developing disclosure controls and procedures related to the former Model Reorg business, there has been insufficient time since the Merger to develop and test such procedures, so an evaluation would have been impractical.

Changes in Internal Control over Financial Reporting

Before the Merger, Model Reorg was a privately held company with internal control over financial reporting that was not designed or maintained to comply in all respects with SEC Rule 13a-15, which specifies the internal control over financial reporting that public companies which have filed or been required to file a Form 10-K are required to maintain. We are currently in the process of integrating Model Reorg’s business operations into our internal control over financial reporting. In many cases, this involves designing and documenting new internal controls and procedures appropriate to the combined company. In particular, during the fiscal quarter covered by this report, we have been improving controls over the period-end financial close process for the former Model Reorg business operations. That process had been significantly affected by changes in personnel, processes and systems during the post-Merger consolidation. We have also engaged a consulting firm to assist us with the assessment and documentation of our internal control over financial reporting.

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Since the Merger occurred during this fiscal quarter, there has not been time to properly document and test any new controls. Accordingly, we have excluded all the controls and procedures of the former Model Reorg business from our evaluation of changes in internal controls required by SEC Rule 13a-15(d) as of the end of the quarter. At this time, we anticipate that the fiscal 2008 management report under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) will include controls relating to the period-end financial close process but will exclude the other controls for the business operations of the former Model Reorg.

Other than as described above, there have been no changes in our internal control over financial reporting during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Model Reorg’s Historical Controls

The former Model Reorg’s business and results are very significant to our consolidated financial statements. At the end of the last fiscal quarter of the respective companies immediately preceding the Merger, total assets were approximately $319 million for Model Reorg, compared to approximately $190 million for E Com Ventures. Because the Merger was accounted for as a “reverse acquisition,” the Company’s financial statements now reflect Model Reorg’s results of operations for periods before August 11, 2008 and the results of the combined company beginning effective August 11, 2008. Further information from which the relative significance of the two companies’ businesses can be determined is included in the financial statements in Part I, Item 1 and Management’s Discussion and Analysis in Part I, Item 2 of this Form 10-Q.

Model Reorg had internal controls and procedures before the Merger, even if they were not required to be designed or maintained to comply with Rule 13a-15. Those controls and procedures focused on the principal risks for misstatement of Model Reorg’s financial statements. Its financial statements were audited, which necessarily also involves consideration of the internal controls, albeit not involving the full evaluation process used pursuant to Section 404.

Model Reorg management identified certain material weaknesses in its internal controls as of October 31, 2007, the end of its last full fiscal year. These related to determining the adequacy of certain estimates and reserves, calculating and monitoring certain deferred revenues, and monitoring state tax filing obligations. Model Reorg management adopted remedial measures with respect to each of the identified weaknesses, which it has since tested. These involve monitoring reserves, deferred revenues and state sales tax exposure on both a monthly and quarterly basis, and making adjustments to the financial statements as deemed necessary. Based on subsequent reviews, our management believes that those material weaknesses have been effectively remedied.

Notwithstanding the exclusion of Model Reorg’s controls from the evaluations of our disclosure controls and procedures and of changes in our internal control over financial reporting required by SEC Rule 13a-15, our management believes that the financial statements included in this report fairly present, in all material respects, our financial condition and results of operations for the periods presented in conformity with generally accepted accounting principles.

PART II. OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

As of November 1, 2008, the Company was not in compliance with the Maximum Leverage Ratio covenant under the terms of its Senior Credit Facility. Although the Company was not in arrears of any payments due under the facility, such noncompliance permits the lenders to accelerate the indebtedness and terminate the facility, which would result in all amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. Further information about this situation is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources of this Form 10-Q.

29

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At a special meeting of our shareholders held on August 8, 2008, our shareholders voted on three matters, each of which was adopted, as follows:

1. A proposal to approve the issuance of shares of common stock and warrants under the Agreement and Plan of Merger dated as of December 21, 2007 by and among E Com Ventures, Inc., Model Reorg, Inc., the shareholders of Model Reorg, and Model Reorg Acquisition L.L.C., as amended, and the issuance of our common stock upon exercise of such warrants;

Votes For	Votes Against	Votes Abstaining
2,149,089	728	0

2. A proposal to approve an amendment to E Com Ventures’ Articles of Incorporation to increase the number of shares of common stock we are authorized to issue from 6,250,000 shares to 20,000,000 shares;

Votes For	Votes Against	Votes Abstaining
2,145,737	4,080	0

3. A proposal to approve an amendment to E Com Ventures’ Articles of Incorporation to change our corporate name to Perfumania Holdings, Inc.

Votes For	Votes Against	Votes Abstaining
2,149,664	153	0

ITEM 6. EXHIBITS

The exhibits listed in the following Exhibit Index are filed herewith.

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of December 21, 2007, by and among the Company, Model Reorg, Inc., the shareholders of Model Reorg, Inc., and Model Reorg Acquisition LLC (“Merger Agreement”) (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed December 21, 2007).
2.2	First Amendment to Merger Agreement, dated as of July 8, 2008 (Incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed July 11, 2007).
3.1	Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s 1993 10-K filed April 28, 1994).
3.2	First Articles of Amendment to Amended and Restated Articles of Incorporation, dated August 8, 2008.
3.3	Second Articles of Amendment to Amended and Restated Articles of Incorporation, dated August 8, 2008.
3.4	Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (No. 33-46833)).
4.1	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Glenn Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.

30

4.2	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Glenn Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.3	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Stephen Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.
4.4	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Stephen Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.5	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Arlene Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.
4.6	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Arlene Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.7	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Quality King Distributors, Inc.
4.8	Form of Warrant issued to the former Model Reorg, Inc. shareholders on August 11, 2008.
10.1	Credit Agreement, dated as of August 11, 2008, among the Company, Quality King Fragrance, Inc., Scents Of Worth, Inc., Five Star Fragrance Company, Inc., Distribution Concepts, LLC, Northern Group, Inc., Perfumania, Inc., Magnifique Parfumes And Cosmetics, Inc., Ten Kesef II, Inc. and Perfumania Puerto Rico, Inc., as Borrowers, the other credit parties signatory thereto, as Credit Parties, the lenders signatory thereto from time to time, as Lenders, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, Wachovia Capital Markets LLC, as Joint Lead Arranger, and Wachovia Bank, National Association, as Syndication Agent.
10.2	Registration Rights Agreement dated August 11, 2008 by and among the Company and the former Model Reorg, Inc. shareholders.
10.3	Services Agreement, dated as of August 11, 2008, between Quality King Distributors, Inc. and the Company.
10.4	Amended and Restated Agreement, dated as of August 1, 2008, by and between Model Reorg Acquisition LLC, Quality King Distributors, Inc., and Michael W. Katz, together with related Promissory Note and Guaranty.
10.5	Employment Agreement dated October 5, 2007, as amended February 7, 2008, by and between Jacavi, LLC and Rene A. Garcia and Separation Agreement dated December 15, 2008, terminating the Employment Agreement.
10.6	Sub-Sublease, dated as of October 1, 2007, by and between Quality King Distributors, Inc. and Model Reorg, Inc.
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

31

PERFUMANIA HOLDINGS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PERFUMANIA HOLDINGS, INC.
		(Registrant)
Date: December 15, 2008	By:	/S/ Michael W. Katz
		Michael W. Katz
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/S/ Donna Dellomo
		Donna Dellomo
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

32

Exhibit Index

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of December 21, 2007, by and among the Company, Model Reorg, Inc., the shareholders of Model Reorg, Inc., and Model Reorg Acquisition LLC (“Merger Agreement”) (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed December 21, 2007).
2.2	First Amendment to Merger Agreement, dated as of July 8, 2008 (Incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed July 11, 2007).
3.1	Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s 1993 10-K filed April 28, 1994).
3.2	First Articles of Amendment to Amended and Restated Articles of Incorporation, dated August 8, 2008.
3.3	Second Articles of Amendment to Amended and Restated Articles of Incorporation, dated August 8, 2008.
3.4	Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (No. 33-46833)).
4.1	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Glenn Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.
4.2	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Glenn Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.3	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Stephen Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.
4.4	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Stephen Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.5	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Arlene Nussdorf 10 Year Grantor Retained Annuity Trust dated 11/1/98.
4.6	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Arlene Nussdorf 15 Year Grantor Retained Annuity Trust dated 11/2/98.
4.7	Subordinated Promissory Note, dated as of August 11, 2008, issued by Model Reorg Acquisition LLC for the benefit of Quality King Distributors, Inc.
4.8	Form of Warrant issued to the former Model Reorg, Inc. shareholders on August 11, 2008.
10.1	Credit Agreement, dated as of August 11, 2008, among the Company, Quality King Fragrance, Inc., Scents Of Worth, Inc., Five Star Fragrance Company, Inc., Distribution Concepts, LLC, Northern Group, Inc., Perfumania, Inc., Magnifique Parfumes And Cosmetics, Inc., Ten Kesef II, Inc. and Perfumania Puerto Rico, Inc., as Borrowers, the other credit parties signatory thereto, as Credit Parties, the lenders signatory thereto from time to time, as Lenders, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, Wachovia Capital Markets LLC, as Joint Lead Arranger, and Wachovia Bank, National Association, as Syndication Agent.

33

10.2	Registration Rights Agreement dated August 11, 2008 by and among the Company and the former Model Reorg, Inc. shareholders.
10.3	Services Agreement, dated as of August 11, 2008, between Quality King Distributors, Inc. and the Company.
10.4	Amended and Restated Agreement, dated as of August 1, 2008, by and between Model Reorg Acquisition LLC, Quality King Distributors, Inc., and Michael W. Katz, together with related Promissory Note and Guaranty.
10.5	Employment Agreement dated October 5, 2007, as amended February 7, 2008, by and between Jacavi, LLC and Rene A. Garcia and Separation Agreement dated December 15, 2008, terminating the Employment Agreement.
10.6	Sub-Sublease, dated as of October 1, 2007, by and between Quality King Distributors, Inc. and Model Reorg, Inc.
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-3.2

EXHIBIT 3.2

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

E COM VENTURES, INC.

a Florida corporation

Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, the Amended and Restated Articles of Incorporation of E Com Ventures, Inc. (the “Corporation”) are hereby amended as follows:

1. The first paragraph of Article III of the Amended and Restated Articles of Incorporation is hereby amended to provide the following:

The aggregate number of shares of all classes of capital stock that the Corporation shall have authority to issue is twenty-one million (21,000,000) shares, consisting of (i) twenty million (20,000,000) shares of common stock, par value $0.01 per share (the “Common Stock”), and (ii) one million (1,000,000) shares of preferred stock, par value $0.01 per share (the “Preferred Stock”).

Except as hereby amended, the Amended and Restated Articles of Incorporation of the Corporation shall remain the same.

2. The foregoing amendment to the Amended and Restated Articles of Incorporation of the Corporation was recommended by the Board of Directors of the Corporation and submitted to the shareholders of the Corporation for approval at the special meeting of the shareholders of the Corporation, held on August 8, 2008. The amendment to the Amended and Restated Articles of Incorporation of the Corporation was approved by the shareholders of the Corporation, with the number of votes cast for the amendment being sufficient for approval in accordance with the applicable provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed these Articles of Amendment to the Amended and Restated Articles of Incorporation as of this 8th day of August, 2008.

/s/    Michael W. Katz

Michael W. Katz

President

EX-3.3

EXHIBIT 3.3

ARTICLES OF AMENDMENT TO THE

AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

E COM VENTURES, INC.

a Florida corporation

Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, the Amended and Restated Articles of Incorporation of E Com Ventures, Inc. (the “Corporation”) are hereby amended as follows:

1. Article I of the Amended and Restated Articles of Incorporation of the Corporation is hereby deleted in its entirety and replaced with the following:

The name of the Corporation is “Perfumania Holdings, Inc.”

2. The foregoing amendment to the Amended and Restated Articles of Incorporation of the Corporation was recommended by the Board of Directors of the Corporation and submitted to the shareholders of the Corporation for approval at the special meeting of the shareholders of the Corporation, held on August 8, 2008. The amendment to the Amended and Restated Articles of Incorporation of the Corporation was approved by the shareholders of the Corporation, with the number of votes cast for the amendment being sufficient for approval in accordance with the applicable provisions of the Florida Business Corporation Act.

IN WITNESS WHEREOF, the undersigned duly authorized officer of the Corporation has executed these Articles of Amendment to the Amended and Restated Articles of Incorporation as of this 8th day of August, 2008.

/s/    Michael W. Katz

Michael W. Katz

President

EX-4.1

EXHIBIT 4.1

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$7,388,212.15 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98 (the “Holder”), in immediately available funds, the principal amount of Seven Million Three Hundred Eighty-Eight Thousand Two Hundred Twelve and 15/100 Dollars ($7,388,212.15), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations, and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.2

EXHIBIT 4.2

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$11,067,018.85 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98 (the “Holder”), in immediately available funds, the principal amount of Eleven Million Sixty-Seven Thousand Eighteen and 85/100 Dollars ($11,067,018.85), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in

arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations , and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising

any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.3

EXHIBIT 4.3

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$7,388,212.15 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98 (the “Holder”), in immediately available funds, the principal amount of Seven Million Three Hundred Eighty-Eight Thousand Two Hundred Twelve and 15/100 Dollars ($7,388,212.15), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in

arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations, and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of

any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.4

EXHIBIT 4.4

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$11,067,018.85 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98 (the “Holder”), in immediately available funds, the principal amount of Eleven Million Sixty-Seven Thousand Eighteen and 85/100 Dollars ($11,067,018.85), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this

Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations , and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of

any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.5

EXHIBIT 4.5

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$7,388,212.15 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98 (the “Holder”), in immediately available funds, the principal amount of Seven Million Three Hundred Eighty-Eight Thousand Two Hundred Twelve and 15/100 Dollars ($7,388,212.15), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in

arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations , and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising

any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.6

EXHIBIT 4.6

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG THE SUBORDINATED LENDERS PARTY THERETO, MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDERS (AS DEFINED THEREIN) ARE BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$11,067,018.85 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98 (the “Holder”), in immediately available funds, the principal amount of Eleven Million Sixty-Seven Thousand Eighteen and 85/100 Dollars ($11,067,018.85), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in full on February 11, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus two percent (2%) per annum in

arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations , and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising

any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Fax No.: (631) 866-4231; and (ii) if to the Holder: c/o Alfred R. Paliani, Esq., 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Fax No.: (631) 439-2262, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Pro Rata Treatment of Noteholders. This Note is one of a number of Subordinated Promissory Notes of the Company described on Exhibit A attached hereto (collectively, the “Trust Notes”). Each payment or prepayment of principal of this Note or any other Trust Note shall be made to the holders of the Trust Notes pro rata in accordance with the respective unpaid principal amounts of such holders’ respective Trust Notes. Each payment of interest on the Trust Notes shall be made to the holders of the Trust Notes pro rata in accordance with the amounts of interest due and payable to such holders under such holders’ respective Trust Notes. Each distribution of cash, property, securities or other value received by the holders of the Trust Notes in respect of the indebtedness outstanding under the Trust Notes, after payment of collection and other expenses as provided in the Trust Notes, shall be apportioned to such holders pro rata in accordance with the respective unpaid principal amounts of and interest on such holders’ respective Trust Notes. In the event the Holder shall receive any payment of principal or interest under this Note or any other cash, property, securities or other value with respect to this Note in excess of its pro rata share thereof as set forth above, the Holder shall hold such excess in trust for the benefit of the holders of the other Trust Notes.

(k) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EXHIBIT A

TRUST NOTES

Trust Name	Principal
Glenn Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Glenn Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Stephen Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Stephen Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Arlene Nussdorf 10 year Grantor Retained Annuity Trust dated 11/1/98	$	7,388,212.15
Arlene Nussdorf 15 year Grantor Retained Annuity Trust dated 11/2/98	$	11,067,018.85
Total Principal	$	55,365,693.00

EX-4.7

EXHIBIT 4.7

THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF AUGUST 11, 2008 (THE “INTERCREDITOR AND SUBORDINATION AGREEMENT”) AMONG QUALITY KING DISTRIBUTORS, INC., MODEL REORG ACQUISITION, LLC AND GENERAL ELECTRIC CAPITAL CORPORATION, AS AGENT AND COLLATERAL AGENT FOR CERTAIN LENDERS. BY ITS ACCEPTANCE OF THIS SUBORDINATED PROMISSORY NOTE, THE HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF SUCH INTERCREDITOR AND SUBORDINATION AGREEMENT TO THE SAME EXTENT THAT THE SUBORDINATED LENDER (AS DEFINED THEREIN) IS BOUND.

MODEL REORG ACQUISITION, LLC

SUBORDINATED PROMISSORY NOTE

$35,000,000.00 August 11, 2008

FOR VALUE RECEIVED, MODEL REORG ACQUISITION, LLC, a Delaware limited liability company and successor by merger to Model Reorg, Inc., a New York corporation (the “Company”), hereby unconditionally promises to pay to the order of QUALITY KING DISTRIBUTORS, INC., a New York corporation (the “Holder”), in immediately available funds, the principal amount of Thirty-Five Million and 00/100 Dollars ($35,000,000.00), and to pay interest on the unpaid principal amount hereof at the rate set forth in Section 3. All amounts owed hereunder shall be paid in lawful money of the United States of America.

This Note is subject to the following terms and conditions:

1. Payment of Principal. The principal amount hereof shall be payable in fourteen (14) installments, consisting of (a) thirteen (13) consecutive quarterly installments of $2,500,000 each on the last day of each January, April, July and October, commencing on January 31, 2009 and continuing through January 31, 2012 and (b) a final installment of the remaining unpaid principal balance hereof on June 30, 2012 (the “Maturity Date”).

2. Prepayment. The outstanding principal balance of this Note may be prepaid by the Company at any time and from time to time, without premium or penalty of any kind or nature whatsoever. Prepayments shall be applied to accrued and unpaid interest due hereunder and then to the installments due hereunder in order of maturity.

3. Payments of Interest. The Company shall pay or cause to be paid to Holder interest on the unpaid principal amount hereof from time to time outstanding at a rate per annum equal to the then current Senior Debt Rate plus one percent (1%) per annum in arrears on the last day of each January, April, July and October commencing on January 31, 2009 and on the Maturity Date until this Note shall be paid in full. Each change in any interest rate provided for in this Note based upon the Senior Debt Rate shall take effect at the time of such change in the Senior Debt Rate. Interest shall be calculated on the basis a 360 day year based on the actual number of days elapsed.

As used herein:

“Senior Debt Rate” shall mean, as of any date, the interest rate applicable to the Revolving Credit Advances, as defined in and determined in accordance with that certain Credit Agreement dated as August 11, 2008 among the Company, certain affiliates of the Company, the Lenders signatory thereto, General Electric Capital Corporation, as Agent, Collateral Agent and Lender, GE Capital Markets, Inc., as Joint Lead Arranger and Book Runner, and Wachovia Capital Markets, as Joint Lead Arranger (as amended, the “Senior Credit Agreement”); provided that, if all of the Commitments (as defined in the Senior Credit Agreement) shall have been terminated in accordance with the terms of the Senior Credit Agreement, the “Senior Debt Rate”, as of any date, shall be a rate per annum equal to (i) the rate published as of such date (or, if The Wall Street Journal shall not be published on such date, the date on which its was last published) by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases publishing a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent) plus (ii) one percent (1%).

4. Payments. Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time). “Business Day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York are authorized or required by law to be closed.

5. Default. The occurrence of any one or more of the following events shall constitute an event of default (each an “Event of Default”) hereunder:

(i) if the Company becomes insolvent or makes an assignment for the benefit of creditors;

(ii) if there shall be filed by or against the Company any petition for any relief under the bankruptcy laws of the United States now or hereafter in effect or any proceeding shall be commenced with respect to the Company under any insolvency, readjustment of debt, reorganization, dissolution, liquidation or similar law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity), provided that in the case of any involuntary filing or the commencement of any involuntary proceeding against the Company such proceeding or petition shall have continued undismissed and unvacated for ninety (90) days; or

(iii) if any petition or application to any court or tribunal, at law or in equity, shall be filed by or against the Company for the appointment of any receiver for the Company or any material part of the property of the Company; provided that in the case of any involuntary filing against the Company, such proceeding or appointment shall have continued undismissed and unvacated for ninety (90) days; or

(iv) if the Company shall fail for any reason to make any payment of principal and/or interest hereunder within ten (10) Business Days after such payment is due; or

(v) if the Company shall fail for any reason to make any payment of principal and interest under the Senior Credit Agreement or any senior credit facility to which this Note shall be subordinated, within thirty (30) days after such payment is due.

6. Remedies Upon Default; Default Interest.

(i) If any Event of Default shall occur for any reason, then and in any such event, in addition to all rights and remedies of the Holder under applicable law or otherwise, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively and concurrently, the Holder may, at its option, declare any or all amounts owing under this Note to be due and payable, whereupon the then unpaid balance hereof, together with all accrued and unpaid interest thereon, shall forthwith become due and payable.

(ii) Upon the occurrence of an Event of Default, or upon the maturity hereof (by demand, acceleration or otherwise), the principal and any accrued but unpaid interest owing on said principal sum (the “Obligations”) shall bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the “Default Rate,” being the lower of (A) the highest rate allowed by applicable law, or (B) a simple interest rate per annum equal to 3% above the rate pursuant to Section 3 hereof in effect on the date of maturity (acceleration or otherwise). All default interest charges (X) shall be in addition to, and not in lieu of, any other remedy available to Holder; (Y) shall be added to the Obligations , and (Z) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Holder by reason of the occurrence of any Event of Default.

7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen, or destroyed but only upon receipt of evidence (which may consist of a signed affidavit of the Holder) of such loss, theft, or destruction of such Note, and of the ownership thereof, and indemnity all reasonably satisfactory to the Company.

8. Other Matters

(a) Modification; Waiver. This Note may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Company and the Holder. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or hereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or further exercise hereof or the exercise of any other right, power or privilege hereunder. Any waiver must be in writing. The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity.

(b) Notices. Any notice required or permitted to be given hereunder (“Notices”) shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by fax, as follows: (i) if to the Company: 35 Sawgrass Drive, Suite 2, Bellport, NY 11713, Attention: Michael W. Katz, Telecopier No.: (631) 866-4231; and (ii) if to the Holder: 35 Sawgrass Drive, Suite 1, Bellport, NY 11713, Attn: Michael Anderson, fax no. 631-439-2019, in either case with a copy to Edwards Angell Palmer & Dodge LLP, 750 Lexington Avenue, New York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as the Company or the Holder hereto may designate by Notice to the other.

(c) Severability. If any provision of this Note is invalid, illegal, or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

(d) Headings. The headings in this Note are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Note.

(e) Governing Law. This Note shall be governed by and construed in all respects under the laws of the State of New York, without reference to its conflict of laws, rules or principles that would defer to the laws of another jurisdiction.

(f) Venue and Jurisdiction. Any action brought by the Company or the Holder against the other concerning the transactions contemplated by this Note shall be brought only in the civil or state courts of New York in the State of New York, County of Suffolk or in the U.S. District Court for the Eastern District of New York. The Company and the Holder by its acceptance hereof agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

(g) Expenses. The Company shall reimburse Holder for all reasonable costs and expenses, including without limitation, reasonable attorneys’ fees and expenses, incurred in connection with enforcing any provisions of this Note and/or collecting any amounts due under this Note.

(h) Waiver of Demand, Etc. The Company hereby waives presentment for payment, protest and demand, and notice of protest, demand and/or dishonor and nonpayment of this Note, notice of any Event of Default except as otherwise specifically provided herein, and all other notices or demands otherwise required by law that the Company may lawfully waive. The Company expressly agrees that this Note, or any payment hereunder, may be extended from time to time, without in any way affecting the liability of the Company. No unilateral consent or waiver by the Holder with respect to any action or failure to act which, without consent, would constitute a breach of any provision of this Note shall be valid and binding unless in writing and signed by the Holder.

(i) Waiver of Jury Trial. The Company and the Holder by its acceptance hereof hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or relating to this Note.

(j) Saving Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest on the principal balance due hereunder, at a rate in excess of such maximum rate, the interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder notwithstanding the other provisions hereof.

IN WITNESS WHEREOF, the Company has caused this Note to be executed on its behalf by the undersigned officer thereunto duly authorized.

MODEL REORG ACQUISITION, LLC
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

EX-4.8

EXHIBIT 4.8

THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES

ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD EXCEPT

PURSUANT TO A REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION

OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION

FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. THE TRANSFER OF THE

WARRANT IS FURTHER RESTRICTED AS DESCRIBED HEREIN.

E COM VENTURES, INC.

Common Stock Purchase Warrant

No. A-[•] [•] Shares

Date of Issuance: [•], 2008

This Common Stock Purchase Warrant (this “Warrant”) certifies that, for value received, [•] (the “Holder”), is entitled, upon the terms and subject to the limitations and exceptions set forth herein, at any time and from time to time during the period beginning at 12:01 a.m. New York time on the third (3^rd) anniversary of the Date of Issuance (the “Initial Exercise Date”) and ending at 5:00 p.m. New York time on the tenth (10^th) anniversary of the Date of Issuance (the “Termination Date”), to subscribe for and purchase from E Com Ventures, Inc., a Florida corporation (the “Company”), up to an aggregate of [•] ([•]) shares (subject to adjustment from time to time pursuant to the terms hereof) (the “Warrant Shares”) of the Company’s Common Stock, $0.01 par value (the “Common Stock”). The purchase price of one Warrant Share (the “Exercise Price”) under this Warrant shall be $23.94 (subject to adjustment from time to time pursuant to the terms hereof). This Warrant is one of a series of warrants issued as of the date hereof (the “Warrants”) pursuant to the Agreement and Plan of Merger dated as of December 21, 2007, by and among the Company, Model Reorg, Inc., the stockholders of Model Reorg, Inc. and Model Reorg Acquisition LLC (the “Merger Agreement”).

1. Exercise of Warrant.

(a) The purchase rights represented by this Warrant may be exercised by delivery of the Notice of Exercise Form annexed hereto duly executed, at the office of the Company specified in Section 13(j) hereto and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Promptly after the Date of Exercise, subject to (i) compliance with securities laws applicable to the issuance and sale of the Warrant Shares and (ii) the Company’s receipt of this Warrant, the Company’s transfer agent shall transmit certificates for Warrant Shares purchased hereunder to the Holder at the address specified in the Notice of Exercise Form. This Warrant shall be deemed to have been exercised and the Holder shall be deemed to have become the holder of record of such shares for all purposes as of the Date of Exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Warrant Shares shall not then have been actually delivered. A “Date of Exercise” means the date on which the Holder shall have delivered to the Company the Notice of Exercise Form appropriately completed and duly signed and payment of the Exercise Price for the number of Warrant Shares so indicated by the Holder to be purchased.

(b) If this Warrant shall have been exercised in part, the Company shall, promptly following receipt of this Warrant, deliver to the Holder at the address specified by the Holder in the Notice of Exercise Form a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

2. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fraction of a share that the Holder would otherwise be entitled to purchase upon such exercise, such fraction shall be rounded up (for fractions of one-half or greater) or down (for fractions of less than one-half) to the nearest whole share.

3. Charges, Taxes and Expenses, Certificates for Warrant Shares shall be issued without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company.

4. Restriction on Transfer of Warrant and Warrant Shares. The Holder may not sell, transfer, assign, or otherwise dispose of this Warrant or any part hereof except (a) by will or by the laws of descent and distribution or (b) during the Holder’s lifetime, to any member of the Holder’s family or to any trust or other entity established for estate planning purposes, the majority of the beneficial interests in which are held by members of the Holder’s family. Other than pursuant to clause (a) or (b), the Holder (including any such subsequent Holder) may not sell, transfer, assign, or otherwise dispose of this Warrant or any part hereof to any other person without the prior, express written consent of the Company. The transfer of the Warrant Shares shall be restricted to the extent required by applicable securities laws, and the certificate or Certificates evidencing the Warrant Shares shall bear the following legend:

“THE ISSUANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.”

5. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company before the exercise hereof,

6. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate representing Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

7. Acceleration of Initial Exercise Date. At any time before the third (3^rd) anniversary of the Date of Issuance, the Initial Exercise Date shall be accelerated and shall be deemed to occur immediately before the consummation of any (a) merger, share exchange or consolidation of the Company with or into any other person or entity, (b) sale of all or substantially all of the Company’s assets in one or a series of related transactions, or (c) tender offer or exchange offer pursuant to which holders of not less than ninety percent (90%) of the then outstanding shares of Common Stock tender or exchange their shares for other securities, cash or property, other than any such transaction as a result of which holders of a majority of the voting securities of the Company outstanding immediately before such transaction would continue to have beneficial ownership, directly or indirectly, of a majority of the combined voting power of the Company or the surviving entity (including any person that, as a result of such transaction, owns all or substantially all of the Company’s assets either directly or through one or more subsidiaries) outstanding immediately after such transaction.

8. Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common- Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock or a compulsory share exchange, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company that he or she would have owned or have been entitled to receive had such Warrant been exercised in advance thereof Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company that are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately before such adjustment by the number of Warrant Shares purchasable hereunder immediately before such adjustment, and dividing such product by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event, subject to the effect of any exercise hereof between such record date and such effective date.

9. Fundamental Transactions. If, at any time while this Warrant is outstanding, (a) the Company effects any merger, share exchange or consolidation of the Company with or into any other person or entity, (b) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (c) any tender offer or exchange offer (whether by the Company or another person or entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (d) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for securities of any other issuer, cash or property

(in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately before such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration; provided that this Warrant shall have been cancelled or amended to the extent such cancellation or amendment is necessary so that such new warrant does not unjustly or disproportionately enrich the holder of the new warrant relative to a holder of the number of Shares for which this Warrant is exercisable immediately before such event. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 9 and ensuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

10. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant.

11. Notice of Corporate Action, If at any time: (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any consolidation, share exchange or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another person or entity, or (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall give the Holder (i) at least ten (10) days’ prior written notice of the

date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, share exchange, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, share exchange, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least ten (10) days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, share exchange, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up.

12. Covenants. The Company covenants that:

(a) during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise hereof;

(b) its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise hereof;

(c) it will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market (as defined in Section 13(k)) upon which the Common Stock may be listed at such time;

(d) it will not close its stockholder books or records in any manner that prevents the timely exercise of this Warrant pursuant to the terms hereof;

(e) all Warrant Shares that may be issued upon exercise hereof will, upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof;

(f) except as and to the extent waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment (and without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately before such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and

(iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant); and

(g) before taking any action that would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

13. Miscellaneous.

(a) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein (including without limitation the Termination Date) is not a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day. As used in this Warrant, a “Business Day” is any day that is not a Saturday, a Sunday or a legal holiday in the States of New York or Florida.

(b) Governing Law’, Dispute Resolution. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The dispute resolution provisions of the Merger Agreement shall apply to all disputes arising hereunder as if set forth in full herein, EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(c) Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.

(d) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(e) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(f) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(g) Amendment, This Warrant may be modified or amended or any provision hereof waived with the written consent of the Company and the holders of Warrants issued under the Merger Agreement representing two-thirds of the Warrant Shares issuable under Warrants then outstanding as of the date such consent is sought; provided, however, that (i) no such amendment shall adversely affect any holder of any such Warrant differently than it affects all other such holders unless such holder consents thereto and (ii) no amendment may increase the Exercise Price, decrease the number of shares or class of shares obtainable upon exercise of this Warrant or decrease the time period in which this Warrant can be exercised without the written consent of the Holder.

(h) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(i) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

(j) Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Notice of Exercise Form) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail or facsimile at the electronic mail address or facsimile number specified in this section before 5:00 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via electronic mail or facsimile at the electronic mail address or facsimile number specified in this section on a day that is not a Business Day or later than 5:00 p.m. (New York City time) on any Business Day, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be:

(x)	if to the Company, to:
	E Com Ventures, Inc.
	Attn: [•]
	251 International Parkway Sunrise, Florida 33325 Facsimile: [•]
	Email: [•]
(y)	if to the Holder, to the address, facsimile number, or email address, respectively, set forth in [•].

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: [•], 2008

E COM VENTURES, INC.
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

NOTICE OF EXERCISE

To: E Com Ventures, Inc.

The undersigned hereby elects to purchase                      Warrant Shares of E Com Ventures, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price of such Warrant Shares in full, in lawful money of the United States, together with all applicable transfer taxes, if any.

Please issue a certificate or certificates representing said

Warrant Shares in the name of the undersigned.

The Warrant Shares shall be delivered to the following:

SIGNATURE OF HOLDER

Dated as of:                                     

HOLDER

By:

Print Name:

ASSIGNMENT FORM

{Assignment of the foregoing Warrant is restricted as described therein,}

(To assign the foregoing Warrant, execute this form and supply required information.

Do not use this form to exercise the Warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to:

Name of Assignee:

Assignee’s Address:

Date:                     

Holder’s Signature:

Holder’s Address:

Signature Guaranteed:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a participant in the Medallion guaranty program. Officers of corporations and those acting in a fiduciary or other representative capacity must file proper evidence of authority to assign the foregoing Warrant.

EX-10.1

EXHIBIT 10.1

CREDIT AGREEMENT

Dated as of August 11, 2008

among

PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.), QUALITY KING FRAGRANCE, INC., SCENTS OF WORTH, INC., FIVE STAR FRAGRANCE COMPANY, INC., DISTRIBUTION CONCEPTS, LLC, NORTHERN GROUP, INC., PERFUMANIA, INC., MAGNIFIQUE PARFUMES AND COSMETICS, INC., TEN KESEF II, INC. AND PERFUMANIA PUERTO RICO, INC.

as Borrowers,

THE OTHER CREDIT PARTIES SIGNATORY HERETO,

as Credit Parties,

THE LENDERS SIGNATORY HERETO FROM TIME TO TIME,

as Lenders,

GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent, Collateral Agent and Lender,

GE CAPITAL MARKETS, INC.

as Joint Lead Arranger and Book Runner

WACHOVIA CAPITAL MARKETS LLC

as Joint Lead Arranger,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Syndication Agent,

TABLE OF CONTENTS

			Page
1.	AMOUNT AND TERMS OF CREDIT		2
	1.1	Credit Facilities.	2
	1.2	Letters of Credit.	6
	1.3	Prepayments.	6
	1.4	Use of Proceeds.	8
	1.5	Interest and Applicable Margins.	8
	1.6	Eligible Accounts.	11
	1.7	Eligible Inventory.	13
	1.8	Cash Management Systems.	15
	1.9	Fees.	15
	1.10	Receipt of Payments.	16
	1.11	Application and Allocation of Payments.	16
	1.12	Loan Account and Accounting.	17
	1.13	Indemnity.	17
	1.14	Access.	18
	1.15	Taxes.	19
	1.16	Capital Adequacy; Increased Costs; Illegality.	19
	1.17	Single Loan.	21
2.	CONDITIONS PRECEDENT		21
	2.1	Conditions to the Initial Loans.	21
	2.2	Further Conditions to Each Loan.	23
3.	REPRESENTATIONS AND WARRANTIES		23
	3.1	Corporate Existence; Compliance with Law.	23
	3.2	Executive Offices, Collateral Locations, FEIN.	24
	3.3	Corporate Power, Authorization, Enforceable Obligations.	24
	3.4	Financial Statements and Projections.	24
	3.5	Material Adverse Effect.	25
	3.6	Ownership of Property; Liens.	26
	3.7	Labor Matters.	26
	3.8	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.	27
	3.9	Government Regulation.	27
	3.10	Margin Regulations.	27
	3.11	Taxes.	27
	3.12	ERISA.	28
	3.13	No Litigation.	29
	3.14	Brokers.	29
	3.15	Intellectual Property.	29

	3.16	Full Disclosure.	29
	3.17	Environmental Matters.	30
	3.18	Insurance.	30
	3.19	Deposit and Disbursement Accounts.	30
	3.20	Government Contracts.	31
	3.21	Customer and Trade Relations.	31
	3.22	Bonding; Licenses.	31
	3.23	Solvency.	31
	3.24	Subordinated Debt.	31
4.	FINANCIAL STATEMENTS AND INFORMATION		31
	4.1	Reports and Notices.	31
	4.2	Communication with Accountants.	32
5.	AFFIRMATIVE COVENANTS		32
	5.1	Maintenance of Existence and Conduct of Business.	32
	5.2	Payment of Charges.	32
	5.3	Books and Records.	33
	5.4	Insurance; Damage to or Destruction of Collateral.	33
	5.5	Compliance with Laws.	34
	5.6	Supplemental Disclosure.	34
	5.7	Intellectual Property.	34
	5.8	Environmental Matters.	34
	5.9	Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases.	35
	5.10	Further Assurances.	36
6.	NEGATIVE COVENANTS		36
	6.1	Mergers, Subsidiaries, Etc.	36
	6.2	Investments; Loans and Advances.	36
	6.3	Indebtedness.	37
	6.4	Employee Loans and Affiliate Transactions.	37
	6.5	Capital Structure and Business.	38
	6.6	Guaranteed Indebtedness.	38
	6.7	Liens.	38
	6.8	Sale of Stock and Assets.	39
	6.9	ERISA.	39
	6.10	Financial Covenants.	39
	6.11	Hazardous Materials.	39
	6.12	Sale-Leasebacks.	39
	6.13	Restricted Payments.	39
	6.14	Change of Corporate Name, State of Incorporation or Location; Change of Fiscal Year.	40
	6.15	No Impairment of Intercompany Transfers.	40

	6.16	Real Estate Purchases.	40
	6.17	Changes Relating to Subordinated Debt.	40
7.	TERM		41
	7.1	Termination.	41
	7.2	Survival of Obligations Upon Termination of Financing Arrangements.	41
8.	EVENTS OF DEFAULT; RIGHTS AND REMEDIES		41
	8.1	Events of Default.	41
	8.2	Remedies.	43
	8.3	Waivers by Credit Parties.	44
9.	ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT		44
	9.1	Assignment and Participations.	44
	9.2	Appointment of Agent.	46
	9.3	Agent’s Reliance, Etc.	47
	9.4	GE Capital and Affiliates.	48
	9.5	Lender Credit Decision.	48
	9.6	Indemnification.	48
	9.7	Successor Agent.	49
	9.8	Setoff and Sharing of Payments.	49
	9.9	Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.	50
10.	SUCCESSORS AND ASSIGNS		52
	10.1	Successors and Assigns.	52
11.	MISCELLANEOUS		53
	11.1	Complete Agreement; Modification of Agreement.	53
	11.2	Amendments and Waivers.	53
	11.3	Fees and Expenses.	55
	11.4	No Waiver.	56
	11.5	Remedies.	56
	11.6	Severability.	56
	11.7	Conflict of Terms.	56
	11.8	Confidentiality.	56
	11.9	GOVERNING LAW.	57
	11.10	Notices.	58
	11.11	Section Titles.	58
	11.12	Counterparts.	58
	11.13	WAIVER OF JURY TRIAL.	58
	11.14	Press Releases and Related Matters.	58

	11.15	Reinstatement.	59
	11.16	Advice of Counsel.	59
	11.17	No Strict Construction.	59
	11.18	USA PATRIOT Act Notice.	59
12.	CROSS-GUARANTY		59
	12.1	Cross-Guaranty.	59
	12.2	Waivers by Borrowers.	60
	12.3	Benefit of Guaranty.	60
	12.4	Waiver of Subrogation, Etc.	60
	12.5	Election of Remedies.	61
	12.6	Limitation.	61
	12.7	Contribution with Respect to Guaranty Obligations.	62
	12.8	Liability Cumulative.	62

INDEX OF APPENDICES

Annex A (Recitals)	-	Definitions
Annex B (Section 1.2)	-	Letters of Credit
Annex C (Section 1.8)	-	Cash Management System
Annex D (Section 2.1(a))	-	Closing Checklist
Annex E (Section 4.1(a))	-	Financial Statements and Projections — Reporting
Annex F (Section 4.1(b))	-	Collateral Reports
Annex G (Section 6.10)	-	Financial Covenants
Annex H (Section 9.9(a))	-	Lenders’ Wire Transfer Information
Annex I (Section 11.10)	-	Notice Addresses
Annex J (from Annex A - Commitments definition)		Commitments as of Closing Date
Exhibit 1.1(a)(i)	-	Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii)	-	Form of Revolving Note
Exhibit 1.1(b)(ii)	-	Form of Swing Line Note
Exhibit 1.5(e)	-	Form of Notice of Conversion/Continuation
Exhibit 4.1(b)	-	Form of Borrowing Base Certificate
Exhibit 9.1(a)	-	Form of Assignment Agreement
Exhibit B-1	-	Application for Standby Letter of Credit
Exhibit B-2	-	Application for Documentary Letter of Credit
Schedule 1.1	-	Agent’s Representatives
Disclosure Schedule 1.4	-	Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.1	-	Type of Entity; State of Organization
Disclosure Schedule 3.2	-	Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(A)	-	Financial Statements
Disclosure Schedule 3.4(B)	-	Pro Forma
Disclosure Schedule 3.4(C)	-	Projections
Disclosure Schedule 3.6	-	Real Estate and Leases
Disclosure Schedule 3.7	-	Labor Matters
Disclosure Schedule 3.8	-	Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11	-	Tax Matters
Disclosure Schedule 3.12	-	ERISA Plans
Disclosure Schedule 3.13	-	Litigation
Disclosure Schedule 3.14	-	Disclosure Schedule 3.14 - Brokers
Disclosure Schedule 3.15	-	Intellectual Property
Disclosure Schedule 3.17	-	Hazardous Materials
Disclosure Schedule 3.18	-	Insurance
Disclosure Schedule 3.19	-	Deposit and Disbursement Accounts
Disclosure Schedule 3.20	-	Government Contracts
Disclosure Schedule 3.21	-	Customer and Trade Relations
Disclosure Schedule 3.22	-	Bonds; Patent, Trademark Licenses

Disclosure Schedule 5.1	-	Trade Names
Disclosure Schedule 6.3	-	Indebtedness
Disclosure Schedule 6.4 (a)	-	Transactions with Affiliates
Disclosure Schedule 6.7	-	Existing Liens
Disclosure Schedule 6.12	-	Sale-Leasebacks
Disclosure Schedule B	-	Existing Letters of Credit

This CREDIT AGREEMENT (this “Agreement”), dated as of August 11, 2008, among PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.), a Florida corporation (“Perfumania Holdings”), QUALITY KING FRAGRANCE, INC., a Delaware corporation (“QKF”), SCENTS OF WORTH, INC., a Florida corporation (“Scents of Worth”), FIVE STAR FRAGRANCE COMPANY, INC., a New York corporation (“Five Star Fragrance”), DISTRIBUTION CONCEPTS, LLC, a Florida limited liability company (“Distribution Concepts”), NORTHERN GROUP, INC., a New York corporation (“Northern Group”), PERFUMANIA, INC., a Florida corporation (“Perfumania”), MAGNIFIQUE PARFUMES AND COSMETICS, INC., a Florida corporation (“Magnifique Parfumes”), TEN KESEF II, INC., a Florida corporation (“Ten Kesef”) and PERFUMANIA PUERTO RICO, INC., a Puerto Rico corporation (“Perfumania PR”) (Perfumania Holdings, QKF, Scents of Worth, Five Star Fragrance, Distribution Concepts, Northern Group, Perfumania, Magnifique Parfumes, Ten Kesef and Perfumania PR are sometimes collectively referred to herein as the “Borrowers” and individually as a “Borrower”); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”), for itself, as Lender, and as Agent and Collateral Agent for Lenders, and the other Lenders signatory hereto from time to time.

RECITALS

WHEREAS, Borrowers have requested that Lenders extend a revolving credit facility to Borrowers of up to Two Hundred Fifty Million Dollars ($250,000,000) in the aggregate for the purpose of refinancing certain indebtedness of Borrowers and to provide (a) working capital financing for Borrowers, (b) funds for other general corporate purposes of Borrowers, (c) funds to pay expenses in connection with the Acquisition Agreement and (d) funds for other purposes permitted hereunder; and for these purposes, Lenders are willing to make certain loans and other extensions of credit to Borrowers of up to such amount upon the terms and conditions set forth herein; and

WHEREAS, Borrowers have agreed to secure all of their obligations under the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon all of their existing and after-acquired personal and real property; and

WHEREAS, Flowing Velvet, Inc., a New York corporation, Aladdin Fragrances, Inc., a New York corporation, Niche Marketing Group, Inc., a New York corporation, Model Reorg Acquisition LLC, a Delaware limited liability company, Jacavi, LLC, a Delaware limited liability company, Northern Amenities, Ltd., a New York corporation and Northern Brands, Inc., a New York corporation, are willing to guarantee all of the obligations of Borrowers to Agent and Lenders under the Loan Documents and to grant to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon all of their existing and after-acquired personal and real property to secure such guaranty; and

WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in Annex A shall govern. All Annexes,

1

Disclosure Schedules, Exhibits and other attachments (collectively, “Appendices”) hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows:

1. AMOUNT AND TERMS OF CREDIT

1.1 Credit Facilities.

(a) Revolving Credit Facility.

(i) Subject to the terms and conditions hereof, each Revolving Lender agrees to make available to Borrowers from time to time until the Commitment Termination Date its Pro Rata Share of advances (each, a “Revolving Credit Advance”). The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment. The obligations of each Revolving Lender hereunder shall be several and not joint. Until the Commitment Termination Date, Borrowers may borrow, repay and reborrow under this Section 1.1(a)(i); provided that the amount of any Revolving Credit Advance to be made at any time shall not exceed Borrowing Availability at such time. Borrowing Availability may be reduced by Reserves imposed by Agent in its reasonable credit judgment. Moreover, the sum of the Revolving Loan and Swing Line Loan outstanding to Borrowers shall not exceed at any time the Borrowing Base. Each Revolving Credit Advance shall be made on notice by Borrower Representative on behalf of the applicable Borrower to one of the representatives of Agent identified in Schedule 1.1 at the address specified therein. Any such notice must be given no later than (1) 11:00 a.m. (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a “Notice of Revolving Credit Advance”) must be given in writing (by telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall include the information required in such Exhibit and such other information as may be required by Agent. If any Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower Representative must comply with Section 1.5(e).

(ii) Except as provided in Section 1.12, each Borrower shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender. Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each a “Revolving Note” and, collectively, the “Revolving Notes”). Each Revolving Note shall represent the obligation of the applicable Borrower to pay the amount of the applicable Revolving Lender’s Revolving Loan Commitment or, if less, such Revolving Lender’s Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to such Borrower together with

2

interest thereon as prescribed in Section 1.5. The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date.

(iii) Subject to the terms and conditions hereof, each Lender agrees to make available to Borrowers from time to time during the Seasonal Advance Period its Pro Rata Share of additional Revolving Credit Advances (each, a “Seasonal Advance”). The Pro Rata Share of the aggregate Seasonal Advances of any Lender shall not at any time exceed its separate Seasonal Advance Commitment. The obligations of each Lender hereunder shall be several and not joint. During the Seasonal Advance Period, Borrowers may borrow, repay and reborrow under this Section 1.1(a)(iii); provided that the aggregate outstanding amount of Seasonal Advances at any time shall not exceed Seasonal Borrowing Availability at such time. Seasonal Borrowing Availability may be reduced by Reserves imposed by Agent in its reasonable credit judgment. Each Seasonal Advance shall be made on notice by Borrower Representative pursuant to the procedures provided herein for a Revolving Credit Advance.

(iv) Anything in this Agreement to the contrary notwithstanding, at the request of Borrower Representative, Agent, in its discretion, may (but shall have absolutely no obligation to), make Revolving Credit Advances to Borrowers on behalf of Revolving Lenders in amounts that cause the outstanding balance of the aggregate Revolving Loan to exceed the Borrowing Base (less the Swing Line Loan) (any such excess Revolving Credit Advances are herein referred to collectively as “Overadvances”); provided that (A) no such event or occurrence shall cause or constitute a waiver of Agent’s, Swing Line Lender’s or Revolving Lenders’ right to refuse to make any further Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any Letter of Credit Obligations, as the case may be, at any time that an Overadvance exists, (B) no Overadvance shall result in a Default or Event of Default based on Borrowers’ failure to comply with Section 1.3(b)(i) for so long as Agent permits such Overadvance to be outstanding, but solely with respect to the amount of any such Overadvance expressly permitted by this Section 1.1(a)(iv) and (C) Seasonal Advances made in accordance with the provisions of Section 1.1(a)(iii) which are outstanding during the Seasonal Advance Period shall not constitute Overadvances during the Seasonal Advance Period. In addition, Overadvances may be made even if the conditions to lending set forth in Section 2 have not been met. All Overadvances shall constitute Index Rate Loans, shall bear interest at the Default Rate and shall be payable on the earlier of demand or the Commitment Termination Date. Except as otherwise provided in Section 1.11(b), the authority of Agent to make Overadvances is limited to an aggregate amount not to exceed $5,000,000 at any time, other than Overadvances which are made to preserve or protect the Collateral or preserve or protect the interests of the Lenders, is, in any event, limited in duration to a maximum of 90 days out of any period of 180 consecutive days, shall not, in any event, cause the sum of the aggregate Revolving Loan plus the aggregate Swing Line Loan to exceed the Maximum Amount, and may, in any event, be revoked prospectively by a written notice to Agent signed by Revolving Lenders holding more than 50% of the Revolving Loan Commitments.

(b) Swing Line Facility.

(i) Agent shall notify the Swing Line Lender upon Agent’s receipt of any Notice of Revolving Credit Advance. Subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, make available from time to time until the

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Commitment Termination Date advances (each, a “Swing Line Advance”) in accordance with any such notice. The provisions of this Section 1.1(b) shall not relieve Revolving Lenders of their obligations to make Revolving Credit Advances under Section 1.1(a); provided that if the Swing Line Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line Advance shall be in lieu of any Revolving Credit Advance that otherwise may be made by Revolving Credit Lenders pursuant to such notice. The aggregate amount of Swing Line Advances outstanding shall not exceed at any time the lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and (except for Overadvances permitted under Section 1.1(a)(iv)) the Borrowing Base, in each case, less the outstanding balance of the Revolving Loan at such time (“Swing Line Availability”). Until the Commitment Termination Date, Borrowers may from time to time borrow, repay and reborrow under this Section 1.1(b). Each Swing Line Advance shall be made pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower Representative on behalf of the applicable Borrower in accordance with Section 1.1(a). Any such notice must be given no later than 11:00 a.m. (New York time) on the Business Day of the proposed Swing Line Advance. Unless the Swing Line Lender has received at least one Business Day prior written notice from Requisite Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender shall, notwithstanding the failure of any condition precedent set forth in Sections 2.2, be entitled to fund that Swing Line Advance, and to have each Revolving Lender make Revolving Credit Advances in accordance with Section 1.1(b)(iii) or purchase participating interests in accordance with Section 1.1(b)(iv). Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan. Borrowers shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent.

(ii) Each Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Each note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(b)(ii) (each a “Swing Line Note” and, collectively, the “Swing Line Notes”). Each Swing Line Note shall represent the obligation of each Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to such Borrower together with interest thereon as prescribed in Section 1.5. The entire unpaid balance of the Swing Line Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

(iii) The Swing Line Lender, at any time and from time to time no less frequently than once weekly shall on behalf of any Borrower (and each Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to each Borrower (which shall be an Index Rate Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the principal amount of the applicable Borrower’s Swing Line Loan (the “Refunded Swing Line Loan”) outstanding on the date such notice is given. Unless any of the events described in Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of Section 1.1(b)(iv) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender prior

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to 3:00 p.m. (New York time) in immediately available funds on the Business Day next succeeding the date that notice is given. The proceeds of those Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of the applicable Borrower.

(iv) If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section 1.1(b)(iii), one of the events described in Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section 1.1(b)(v) below, each Revolving Lender shall, on the date such Revolving Credit Advance was to have been made for the benefit of the applicable Borrower, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan to such Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request, each Revolving Lender shall promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation interest.

(v) Each Revolving Lender’s obligation to make Revolving Credit Advances in accordance with Section 1.1(b)(iii) and to purchase participation interests in accordance with Section 1.1(b)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Swing Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of any Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Sections 1.1(b)(iii) or 1.1(b)(iv), as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Index Rate thereafter.

(c) Reliance on Notices; Appointment of Borrower Representative. Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering any notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary. Each Borrower hereby designates Perfumania Holdings as its representative and agent on its behalf for the purposes of issuing Notices of Revolving Credit Advances and Notices of Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be

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deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.

1.2 Letters of Credit. Subject to and in accordance with the terms and conditions contained herein and in Annex B, Borrower Representative, on behalf of the applicable Borrower, shall have the right to request, and Revolving Lenders agree to incur, or purchase participations in, Letter of Credit Obligations in respect of each Borrower.

1.3 Prepayments.

(a) Voluntary Prepayments; Reductions in Revolving Loan Commitments. Borrowers may at any time on at least five (5) days prior written notice by Borrower Representative to Agent permanently prepay and reduce (but not terminate) the Revolving Loan Commitment; provided that (i) any such prepayments and reductions shall be in a minimum amount of $15,000,000 and integral multiples of $5,000,000 in excess of such amount, (ii) the Revolving Loan Commitment shall not be reduced to an amount less than $125,000,000, and (iii) after giving effect to such reductions, Borrowers shall comply with Section 1.3(b)(i). In addition, Borrowers may at any time on at least ten (10) days prior written notice by Borrower Representative to Agent terminate the Revolving Loan Commitment; provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full and all Letter of Credit Obligations shall be cash collateralized or otherwise satisfied in accordance with Annex B hereto. Any voluntary prepayment and any reduction or termination of the Revolving Loan Commitment must be accompanied by payment of the Fee required by Section 1.9(c), if any, plus the payment of any LIBOR funding breakage costs in accordance with Section 1.13(b). Upon any such reduction or termination of the Revolving Loan Commitment, each Borrower’s right to request Revolving Credit Advances, or request that Letter of Credit Obligations be incurred on its behalf, or request Swing Line Advances, shall be simultaneously and permanently reduced or terminated, as the case may be; provided that a permanent reduction of the Revolving Loan Commitment shall not require a corresponding pro rata reduction in the L/C Sublimit. Each notice of partial prepayment shall designate the Loans or other Obligations to which such prepayment is to be applied.

(b) Mandatory Prepayments.

(i) If at any time the aggregate outstanding balances of the Revolving Loan and the Swing Line Loan exceed the lesser of (A) the Maximum Amount and (B) the Borrowing Base, Borrowers shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding Revolving Credit Advances, Borrowers shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Annex B to the extent required to eliminate such excess.

(ii) Immediately upon receipt by any Credit Party of any cash proceeds of any asset disposition, Borrowers shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers in connection therewith (in each case,

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paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens on such asset (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(c). The following shall not be subject to mandatory prepayment under this clause (ii): (1) proceeds of sales of Inventory in the ordinary course of business; (2) asset disposition proceeds of less than $250,000 in the aggregate in any Fiscal Year; and (3) asset disposition proceeds that are reinvested in Equipment, Fixtures or Real Estate within one hundred and eighty (180) days following receipt thereof; provided that Borrower notifies Agent of its intent to reinvest at the time such proceeds are received and when such reinvestment occurs, so long as no Default or Event of Default has occurred and is continuing at the time of any such disposition.

(iii) If any Credit Party issues Stock or the Stock of any Credit Party (other than Perfumania Holdings) is sold, no later than the Business Day following the date of receipt of the proceeds thereof, Borrowers shall prepay the Loans (and cash collateralize Letter of Credit Obligations) in an amount equal to 50% of all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(c). Proceeds of Stock issuances to employees of any Credit Party shall not be subject to prepayment under this clause (iii).

(iv) If any Credit Party incurs Indebtedness, no later than the Business Day following the date of receipt of the proceeds thereof, Borrowers shall prepay the Loans (and cash collateralize Letter of Credit Obligations) in an amount equal to all such proceeds, net of reasonable costs paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(c). Proceeds of Indebtedness permitted under Section 6.3(a) shall not be subject to prepayment under this clause (iv).

(c) Application of Certain Mandatory Prepayments. Any prepayments made by any Borrower pursuant to (x) Sections 1.3(b) (ii), (iii) or (iv) above shall be applied as follows: first, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second, to interest then due and payable on the Swing Line Loan outstanding; third, to the principal balance of the Swing Line Loan outstanding until the same has been repaid in full; fourth, to interest then due and payable on Revolving Credit Advances; fifth, to the principal balance of Revolving Credit Advances outstanding, applied first, to Index Rate Loans and second, to LIBOR Loans, until, in each case, the same has been paid in full; and last, if a Default or Event of Default has occurred and is continuing at the time of such prepayment, to any Letter of Credit Obligations to provide cash collateral therefore in the manner set forth in Annex B. Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayments.

(d) Application of Prepayments from Insurance and Condemnation Proceeds. Prepayments from insurance or condemnation proceeds in accordance with Section 5.4(c), shall be applied as follows: insurance proceeds from casualties or losses to Collateral shall be applied, first, to the Swing Line Loans and, second, to the Revolving Credit Advances of the Borrower that incurred such casualties or losses. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. If insurance or condemnation proceeds received by a particular

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Borrower exceed the outstanding principal balances of the Loans to that Borrower, the allocation and application of those proceeds shall be determined by Agent, subject to the approval of Requisite Lenders.

(e) No Implied Consent. Nothing in this Section 1.3 shall be construed to constitute Agent’s or any Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.

1.4 Use of Proceeds. Borrowers shall utilize the proceeds of the Loans solely for the Refinancing (and to pay any related transaction expenses), to repay certain other Indebtedness of Borrowers and their Subsidiaries (including any intercompany Indebtedness owed to QKD (other than the QKD Subordinated Debt), to facilitate the Acquisition (and to pay any related transaction expenses), and for the financing of Borrowers’ ordinary working capital and general corporate needs. Disclosure Schedule (1.4) contains a description of Borrowers’ sources and uses of funds as of the Closing Date, including Loans and Letter of Credit Obligations to be made or incurred on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses.

1.5 Interest and Applicable Margins.

(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum; and (ii) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum.

The Applicable Margins shall be adjusted prospectively on the first day of each Fiscal Quarter based on the average daily Borrowing Availability for the immediately preceding Fiscal Quarter in accordance with the following grids:

Average daily Borrowing Availability for previous Fiscal Quarter:	Level of Applicable Margins:
> $50,000,000	Level I
< $50,000,000, but > $30,000,000	Level II
< $30,000,000, but > $20,000,000	Level III
< $20,000,000	Level IV

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	Applicable Margins
	Level I	Level II	Level III	Level IV
Applicable Revolver Index Margin	1.000%	1.250%	1.375%	1.500%
Applicable Revolver LIBOR Margin	2.250%	2.500%	2.625%	2.750%
Applicable L/C Margin	2.250%	2.500%	2.625%	2.750%
Applicable Unused Line Fee Margin	0.375%	0.375%	0.375%	0.375%

From the Closing Date until the first day of the month beginning after delivery of the first Borrowing Base Certificate after the first Fiscal Quarter ending at least six (6) months after the Closing Date, the Applicable Margins shall be those set forth for Level II above.

(b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(c) All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a 360-day year (other than interest calculated at the Index Rate, which shall be on the basis of a 365/366-day year) in each case for the actual number of days occurring in the period for which such interest and Fees are payable. The Index Rate is a floating rate determined for each day. Each determination by Agent of an interest rate and Fees hereunder shall be presumptive evidence of the correctness of such rates and Fees.

(d)(i) So long as an Event of Default has occurred and is continuing under Section 8.1(a), (h) or (i) or so long as any other Event of Default has occurred and is continuing and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower Representative, the interest rates applicable to the Loans and the Letter of Credit Fees shall be increased by two percentage points (2%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder (the “Default Rate”), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations.

(ii) Interest and Letter of Credit Fees at the Default Rate shall accrue, in the case of an Event of Default under Section 8.1(a), (h) or (i), from the initial date of such Event of Default, and, in the case of any other Event of Default, from the date of the election by Agent or Requisite Lenders to apply the Default Rate, until, in each case, that Event of Default is cured or waived and shall be payable upon demand.

(iii) In the event that the Default Rate has been instituted as a result of Borrowers’ failure to comply with any of the Financial Covenants as of the end of any Fiscal Quarter, Borrowers shall be entitled to have the contractual interest rate otherwise applicable hereunder (and not the Default Rate) reinstated thirty (30) days after Agent’s receipt of written notice from Borrower Representative requesting the reinstatement of the contractual interest rate, accompanied by the Financial Statements and Compliance Certificate for the Fiscal Quarter immediately following the Fiscal Quarter in which such Event of Default occurred, so long as (i)

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neither the Financial Statements nor Compliance Certificate for such Fiscal Quarter reflect a violation of any Financial Covenant as of the last day of such Fiscal Quarter, (ii) no other Event of Default shall have occurred and be continuing as of the end of such thirty (30) day period, and (iii) no acceleration of the Obligations shall have occurred as of the end of such thirty (30) day period. Nothing contained in the preceding sentence shall at any time create or be deemed to constitute a waiver of or commit Lenders to waive (A) any Financial Covenant violation regardless of the applicability or non-applicability of the Default Rate or (B) the applicability of the Default Rate at any time following acceleration of the Obligations.

(e) Subject to the conditions precedent set forth in Section 2.2, Borrower Representative shall have the option to (i) request that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the first day after the last day of the LIBOR Period of the Loan to be continued. Any Loan or group of Loans having the same proposed LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of such amount. Any such election must be made by 11:00 a.m. (New York time) on the third Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such election. If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time) on the third Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default has occurred and is continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) in the form of Exhibit 1.5(e).

(f) Notwithstanding anything to the contrary set forth in this Section 1.5, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate.

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1.6 Eligible Accounts. All of the Accounts owned by each Borrower and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be “Eligible Accounts” for purposes of this Agreement, except any Account to which any of the exclusionary criteria set forth below applies. Agent shall have the right to establish, modify or eliminate Reserves against Eligible Accounts from time to time in its reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below and to establish new criteria, and to adjust advance rates with respect to Eligible Accounts, in its reasonable credit judgment, subject to the approval of Supermajority Lenders in the case of adjustments or new criteria which have the effect of making more credit available, and subject to the approval of Lenders holding more than 95% of the Commitments of all Lenders in the case of adjustments in advance rates which have the effect of making more credit available. Eligible Accounts shall not include any Account of any Borrower:

(a) that does not arise from the sale of goods or the performance of services by such Borrower in the ordinary course of its business;

(b)(i) upon which such Borrower’s right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) as to which such Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process or (iii) if the Account represents a progress billing consisting of an invoice for goods sold or used or services rendered pursuant to a contract under which the Account Debtor’s obligation to pay that invoice is subject to such Borrower’s completion of further performance under such contract or is subject to the equitable lien of a surety bond issuer;

(c) to the extent that any defense, counterclaim, setoff or dispute is asserted as to such Account;

(d) that is not a true and correct statement of bona fide indebtedness incurred in the amount of the Account for merchandise sold to or services rendered and accepted by the applicable Account Debtor;

(e) with respect to which an invoice, reasonably acceptable to Agent in form and substance, has not been sent to the applicable Account Debtor;

(f) that (i) is not owned by such Borrower or (ii) is subject to any Lien of any other Person, other than Liens in favor of Agent, on behalf of itself and Lenders;

(g) that arises from a sale to any Credit Party or any director, officer, other employee or Affiliate of any Credit Party, or to any entity that has any common officer or director with any Credit Party;

(h) that is the obligation of an Account Debtor that is the United States government or a political subdivision thereof, or any state, county or municipality or department, agency or instrumentality thereof unless Agent, in its sole discretion, has agreed to

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the contrary in writing and such Borrower, if necessary or desirable, has complied with respect to such obligation with the Federal Assignment of Claims Act of 1940, or any applicable state, county or municipal law restricting assignment thereof;

(i) that is the obligation of an Account Debtor located in a foreign country other than Canada unless payment thereof is assured by a letter of credit assigned and delivered to Agent, reasonably satisfactory to Agent as to form, amount and issuer;

(j) to the extent such Borrower or any Subsidiary thereof is liable for goods sold or services rendered by the applicable Account Debtor to such Borrower or any Subsidiary thereof but only to the extent of the potential offset;

(k) that arises with respect to goods that are delivered on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor is or may be conditional;

(l) to the extent that such Account is solely for freight charges or claims;

(m) to the extent that such Account constitutes a “charge-back”;

(n) that is in default; provided, that, without limiting the generality of the foregoing, an Account shall be deemed in default upon the occurrence of any of the following:

(i) the Account is not paid within the earlier of: sixty (60) days following its due date or ninety (90) days following its original invoice date or, if the Account is a Dated Account, the Account is not paid within the earlier of thirty (30) days following its due date or two hundred ten (210) days following its original invoice date; provided, however, that, the aggregate of all Dated Accounts included in the Aggregate Borrowing Base shall not in any event exceed $5,000,000;

(ii) the Account Debtor obligated upon such Account suspends business, makes a general assignment for the benefit of creditors or fails to pay its debts generally as they come due; or

(iii) a petition is filed by or against any Account Debtor obligated upon such Account under any bankruptcy law or any other federal, state or foreign (including any provincial) receivership, insolvency relief or other law or laws for the relief of debtors;

(o) that is the obligation of an Account Debtor if fifty percent (50%) or more of the Dollar amount of all Accounts owing by that Account Debtor are ineligible under the other criteria set forth in this Section 1.6;

(p) as to which Agent’s Lien thereon, on behalf of itself and Lenders, is not a first priority perfected Lien;

(q) as to which any of the representations or warranties in the Loan Documents are untrue;

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(r) to the extent such Account is evidenced by a judgment, Instrument or Chattel Paper;

(s) to the extent such Account exceeds any credit limit established by Agent, in its reasonable credit judgment, following prior notice of such limit by Agent to Borrower Representative;

(t) to the extent that such Account, together with all other Accounts owing by such Account Debtor and its Affiliates (other than Walmart and its Affiliates and certain investment-grade Account Debtors (as determined by Agent in its reasonable credit judgment)) as of any date of determination exceed twenty percent (20%) of all Eligible Accounts in the Borrowing Base, or, in the case of Walmart and its Affiliates, twenty five percent (25%) of all Eligible Accounts in the Borrowing Base; or

(u) that is payable in any currency other than Dollars.

1.7 Eligible Inventory. All of the Inventory owned by the Borrowers and reflected in the most recent Borrowing Base Certificate delivered by each Borrower to Agent shall be “Eligible Inventory” for purposes of this Agreement, except any Inventory to which any of the exclusionary criteria set forth below applies. Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below and to establish new criteria and to adjust advance rates with respect to Eligible Inventory, in its reasonable credit judgment, subject to the approval of Supermajority Lenders in the case of adjustments or new criteria which have the effect of making more credit available, and subject to the approval of Lenders having more than 95% of the Commitments of all Lenders in the case of adjustments in advance rates which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of any Borrower that:

(a) is not owned by such Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory), except the Liens in favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in favor of landlords and bailees to the extent permitted in Section 5.9 hereof (subject to Reserves established by Agent in accordance with Section 5.9 hereof);

(b) other than consigned goods that meet the requirements of Section 1.7(c) below, (i) is not located on premises owned, leased or rented by such Borrower and set forth in Disclosure Schedule (3.2), or (ii) is stored at a leased location, unless Agent has given its prior consent thereto and unless either (x) a reasonably satisfactory landlord waiver has been delivered to Agent, or (y) Reserves reasonably satisfactory to Agent have been established with respect thereto or (iii) is stored with a bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee letter has been received by Agent and Reserves reasonably satisfactory to Agent have been established with respect thereto, or (iv) is located at an owned location subject to a mortgage in favor of a lender other than Agent unless a reasonably satisfactory mortgagee waiver has been delivered to Agent, or (v) is located at any site if the aggregate book value of Inventory at any such location is less than $100,000;

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(c)(i) is placed on consignment, unless each of the following requirements is met with respect to each location where Inventory has been consigned: (A) Agent has been notified thereof in advance and has given its prior consent thereto, which consent will not be unreasonably withheld in Agent’s reasonable credit judgment, (B) such Inventory of such Borrower is clearly segregated from all Inventory of such customer in a manner satisfactory to Agent in its reasonable credit judgment, (C) all Code filings deemed necessary or desirable by Agent have been made, including, without limitation, all Code filings in respect of consigned inventory naming customer as debtor and such Borrower as secured party and all assignments of such Code filings by such Borrower to Agent, on behalf of itself and Lenders, as assignee of the secured party, (D) a satisfactory collateral agreement with respect to, among other things, access, acknowledgment of Agent’s first and only priority Lien, Code consignment filings and said customer’s agreement to notify Agent in advance if it changes its jurisdiction of organization, has been delivered to Agent by such customer and (E) in any event, the maximum aggregate amount of all such consigned Inventory included in the Borrowing Base does not exceed $25,000,000; or (ii) is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent’s Liens have been perfected at origin and destination and except for Eligible L/C Inventory;

(d) is covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent and Lenders;

(e) is obsolete, slow moving, unsalable, shopworn, seconds, damaged, is past its expiration date, has been returned by the buyer and is unfit for sale or is otherwise unfit for sale;

(f) consists of display items or packing or shipping materials, manufacturing supplies, work-in-process Inventory (for the avoidance of doubt, excluding finished Inventory with SKUs, but which has yet to be placed in final, outside packaging) or replacement parts;

(g) is not of a type held for sale in the ordinary course of such Borrower’s business;

(h) is Inventory located at retail stores in Puerto Rico in excess of $7,000,000 in the aggregate at any time;

(i) is not subject to a first priority lien in favor of Agent on behalf of itself and Lenders, subject to Permitted Encumbrances as set forth in clause (e) of the definition thereof (subject to reserves satisfactory to Agent);

(j) breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents;

(k) consists of any costs associated with “freight-in” charges;

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(l) consists of Hazardous Materials or goods that can be transported or sold only with licenses that are not readily available;

(m) is not covered by casualty insurance reasonably acceptable to Agent; or

(n) is subject to any patent or trademark license requiring the payment of royalties or fees in an aggregate amount for all such Inventory in excess of $15,000,000; provided, that, Agent may, in its reasonable credit judgment, establish such related Reserves as it determines.

1.8 Cash Management Systems. On or prior to the Closing Date, Borrowers will establish and will maintain until the Termination Date, the cash management systems described in Annex C (the “Cash Management Systems”).

1.9 Fees.

(a) Borrowers shall pay to GE Capital, individually, the Fees specified in the GE Capital Fee Letter.

(b) As additional compensation for the Revolving Lenders, Borrowers shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the Commitment Termination Date, a Fee for Borrowers’ non-use of available funds in an amount equal to the Applicable Unused Line Fee Margin per annum (calculated on the basis of a 360 day year for actual days elapsed) multiplied by the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan and the Swing Line Loan outstanding during the period for which such Fee is due.

(c) If Borrowers pay after acceleration or prepay the Revolving Loan and reduce or terminate the Revolving Loan Commitment, whether voluntarily or involuntarily and whether before or after acceleration of the Obligations, or if any of the Commitments are otherwise terminated, Borrowers shall pay to Agent, for the benefit of Lenders as liquidated damages and compensation for the costs of being prepared to make funds available hereunder an amount equal to the Applicable Percentage (as defined below) multiplied by, in the event of a reduction in the Revolving Loan Commitment, the amount of the reduction of the Revolving Loan Commitment and, in the event of a payment after acceleration or a termination of the Revolving Loan Commitment, the Maximum Amount. As used herein, the term “Applicable Percentage” shall mean (y) one percent (1%), in the case of a prepayment on or prior to the first anniversary of the Closing Date, and (z) one-half of one percent (0.50%), in the case of a prepayment after the first anniversary of the Closing Date but on or prior to the second anniversary thereof. The Credit Parties agree that the Applicable Percentages are a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early termination of the Commitments. Notwithstanding the foregoing, no prepayment fee shall be payable by Borrowers upon a mandatory prepayment made pursuant to Sections 1.3(b) or 1.16(c); provided that Borrowers do not permanently reduce or terminate the Revolving Loan Commitment upon any such prepayment.

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(d) Borrowers shall pay to Agent, for the ratable benefit of Revolving Lenders, the Letter of Credit Fee as provided in Annex B.

1.10 Receipt of Payments. Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (New York time) on the day when due in immediately available funds in Dollars to the Collection Account. Payments received after 2:00 p.m. New York time on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day.

1.11 Application and Allocation of Payments.

(a) So long as no Event of Default has occurred and is continuing, (i) payments consisting of proceeds of Accounts received in the ordinary course of business shall be applied, first, to the Swing Line Loan, second, the Revolving Loan (other than the Seasonal Advances), and third, the Seasonal Advances; (ii) voluntary prepayments shall be applied in accordance with the provisions of Section 1.3(a); and (iii) mandatory prepayments shall be applied as set forth in Sections 1.3(c) and 1.3(d). All payments and prepayments applied to a particular Loan shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share. As to any other payment, and as to all payments made when an Event of Default has occurred and is continuing or following the Commitment Termination Date, each Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records. Such payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent’s expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in proportion to the interest accrued as to each Loan; (5) to principal payments on the other Loans and any Obligations under any Secured Rate Contract and to provide cash collateral for Letter of Credit Obligations in the manner described in Annex B, ratably to the aggregate, combined principal balance of the other Loans, Obligations under any Secured Rate Contract and outstanding Letter of Credit Obligations; and (6) to all other Obligations, including expenses of Lenders to the extent reimbursable under Section 11.3. After all Obligations have been paid in full, Agent shall apply payments to repay any Indebtedness outstanding under Permitted Hedge Agreements to the extent that such Indebtedness is secured by the Collateral as permitted hereunder.

(b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan Documents if and to the extent Borrowers fail to pay promptly any such amounts as and when due, even if the amount of such charges would exceed Borrowing Availability at such time; provided, that, such charges shall not, in any event, cause the sum of the aggregate Revolving Loan plus the aggregate Swing Line Loan to exceed the Maximum Amount. At Agent’s option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder.

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1.12 Loan Account and Accounting. Agent shall maintain a loan account (the “Loan Account”) on its books to record: all Advances, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent’s most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by each Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay the Obligations. Agent shall render to Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to each Borrower for the immediately preceding month. Unless Borrower Representative notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) days after the date thereof, each and every such accounting shall be presumptive evidence of all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrowers. Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it.

1.13 Indemnity.

(a) Each Credit Party that is a signatory hereto shall jointly and severally indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person’s respective officers, directors, employees, attorneys, agents and representatives (each, an “Indemnified Person”), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys’ fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, “Indemnified Liabilities”); provided, that no such Credit Party shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person’s gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

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(b) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or occurs as a result of acceleration, by operation of law or otherwise); (ii) any Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) any Borrower shall refuse to accept any borrowing of, or shall request a termination of, any borrowing of, conversion into or continuation of, LIBOR Loans after Borrower Representative has given notice requesting the same in accordance herewith; or (iv) any Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower Representative has given a notice thereof in accordance herewith, then Borrowers shall jointly and severally indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower Representative with its written calculation of all amounts payable pursuant to this Section 1.13(b), and such calculation shall be binding on the parties hereto unless Borrower Representative shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail.

1.14 Access. Each Credit Party that is a party hereto shall, during normal business hours, from time to time upon five (5) Business Days prior notice as frequently as Agent reasonably determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors, officers and employees of each Credit Party and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Credit Party’s books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party (it being understood that at least one field examination will be conducted per year). If an Event of Default has occurred and is continuing, each such Credit Party shall provide such access to Agent and to each Lender at all times and without advance notice. Furthermore, so long as any Event of Default has occurred and is continuing, Borrowers shall provide Agent and each Lender with access to their suppliers and customers. Each Credit Party shall make available to Agent and its counsel reasonably promptly originals or copies of all books and records that Agent may reasonably request. Each Credit Party shall deliver any document or instrument necessary for Agent, as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for such Credit Party, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Credit Party. Agent will give Lenders at least five (5) Business Days prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent’s representatives on regularly scheduled audits at no charge to Borrowers.

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1.15 Taxes.

(a) Any and all payments by each Borrower hereunder (including any payments made pursuant to Section 12) or under the Notes shall be made, in accordance with this Section 1.15, free and clear of and without deduction for any and all present or future Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (including any sum payable pursuant to Section 12) or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.15) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower Representative shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof.

(b) Each Credit Party that is a signatory hereto shall jointly and severally indemnify and, within ten (10) days of demand therefore, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1.15) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.

(c) Each Lender organized under the laws of a jurisdiction outside the United States (a “Foreign Lender”) as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to Borrower Representative and Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate or document prescribed by the IRS or the United States certifying as to such Foreign Lender’s entitlement to such exemption (a “Certificate of Exemption”). Any foreign Person that seeks to become a Lender under this Agreement shall provide a Certificate of Exemption to Borrower Representative and Agent prior to becoming a Lender hereunder. No foreign Person may become a Lender hereunder if such Person fails to deliver a Certificate of Exemption in advance of becoming a Lender.

1.16 Capital Adequacy; Increased Costs; Illegality.

(a) If any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder, then Borrowers shall from time to time upon demand by such Lender (with a copy of such

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demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower Representative and to Agent shall be presumptive evidence of the matters set forth therein.

(b) If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to 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 Borrower Representative and to Agent by such Lender, shall be presumptive evidence of the matters set forth therein. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender’s internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.16(b).

(c) Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender’s reasonable opinion, materially adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower Representative through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by such Borrower to such Lender, together with interest accrued thereon, unless Borrower Representative on behalf of such Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all LIBOR Loans into Index Rate Loans.

(d) Within thirty (30) days after receipt by Borrower Representative of written notice and demand from any Lender (an “Affected Lender”) for payment of additional amounts or increased costs as provided in Sections 1.15(a), 1.16(a), 1.16(b) or 1.16(c), Borrower Representative may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default has occurred and is continuing, Borrower Representative, with the consent of Agent, may obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”) for the Affected Lender, which Replacement Lender must be reasonably satisfactory to Agent. If Borrowers obtain a Replacement Lender within ninety (90) days following notice of their intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through

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the date of such sale and such assignment shall not require the payment of an assignment fee to Agent; provided, that Borrowers shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within 15 days following its receipt of Borrowers’ notice of intention to replace such Affected Lender. Furthermore, if Borrowers give a notice of intention to replace and do not so replace such Affected Lender within ninety (90) days thereafter, Borrowers’ rights under this Section 1.16(d) shall terminate with respect to such Affected Lender and Borrowers shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a), 1.16(b) and 1.16(c).

1.17 Single Loan. All Loans to each Borrower and all of the other Obligations of each Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of that Borrower secured, until the Termination Date, by all of the Collateral.

2. CONDITIONS PRECEDENT

2.1 Conditions to the Initial Loans. No Lender shall be obligated to make any Loan or incur any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner reasonably satisfactory to Agent, or waived in writing by Agent and Requisite Lenders, Supermajority Lenders or all Lenders, as applicable, as required hereunder:

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

(b) Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs. (i) Agent shall have received a fully executed original of pay-off letters reasonably satisfactory to Agent confirming that all of the Prior Lender Obligations will be repaid in full from the proceeds of the initial Revolving Credit Advance and all Liens upon any of the property of Borrowers or any of their Subsidiaries in favor of each applicable Prior Lender shall be terminated by such Prior Lender immediately upon such payment; and (ii) all letters of credit issued or guaranteed by each applicable Prior Lender shall have been cash collateralized, supported by a guaranty of Agent or supported by a Letter of Credit issued pursuant to Annex B, or shall constitute, and be deemed to constitute, Letters of Credit issued pursuant to Annex B of this Agreement, in any such case, as mutually agreed upon by Agent, Borrowers and each applicable Prior Lender.

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(c) Approvals. Agent shall have received (i) satisfactory evidence that the Credit Parties have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the Related Transactions or (ii) an officer’s certificate in form and substance reasonably satisfactory to Agent affirming that no such consents or approvals are required.

(d) Opening Availability. The Eligible Accounts and Eligible Inventory supporting the initial Revolving Credit Advance and the initial Letter of Credit Obligations incurred and the amount of the Reserves to be established on the Closing Date shall be sufficient in value, as determined by Agent, to provide Borrowers, collectively, with Borrowing Availability, after giving effect to the initial Revolving Credit Advance made to each Borrower, the incurrence of any initial Letter of Credit Obligations and the consummation of the Related Transactions (on a pro forma basis, with trade payables being paid currently, and expenses and liabilities being paid in the ordinary course of business and without acceleration of sales and without deterioration of working capital) of at least $20,000,000.

(e) Minimum Subordinated Debt. As of the Closing Date, Borrowers shall have received gross cash Proceeds from the Nussdorf Subordinated Debt in an amount equal to the Proceeds received by the Nussdorf Siblings from QKD as repayment of certain outstanding QKD Indebtedness; provided that, in no event shall such amount be less than $54,000,000.

(f) Payment of Fees. Borrowers shall have paid the Fees required to be paid on the Closing Date in the respective amounts specified in Section 1.9 (including the Fees specified in the GE Capital Fee Letter), and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date.

(g) Capital Structure: Other Indebtedness. The capital structure of each Credit Party and the terms and conditions of all Indebtedness, including without limitation, the Subordinated Debt of each Credit Party shall be acceptable to Agent in its sole discretion.

(h) Due Diligence. Agent shall have completed its pre-funding Collateral audit with results reasonably satisfactory to Agent.

(i) Acquisition. The Agent shall be reasonably satisfied that, as certified to the Agent, all conditions precedent to the consummation of the Acquisition will have been satisfied or duly waived with the consent of the Agent (not to be unreasonably withheld) and the Acquisition will have been consummated substantially in accordance with the Acquisition Agreement. The terms and conditions of and documentation for the Acquisition shall be reasonably satisfactory to Agent.

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2.2 Further Conditions to Each Loan.

Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Advance, make, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of the date thereof:

(a) any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect as of such date as determined by Agent or Requisite Lenders, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement and Agent or Requisite Lenders have determined not to make such Advance, convert or continue any Loan as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact that such warranty or representation is untrue or incorrect;

(b) any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance (or the incurrence of any Letter of Credit Obligation), and Agent or Requisite Lenders shall have determined not to make any Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a result of that Default or Event of Default; or

(c) after giving effect to any Advance (or the incurrence of any Letter of Credit Obligations), the outstanding principal amount of the aggregate Revolving Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, in each case, less the then outstanding principal amount of the Swing Line Loan.

The request and acceptance by any Borrower of the proceeds of any Advance, the incurrence of any Letter of Credit Obligations or the conversion or continuation of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section 12 and of the granting and continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

3. REPRESENTATIONS AND WARRANTIES

To induce Lenders to make the Loans and to incur Letter of Credit Obligations, the Credit Parties executing this Agreement, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Credit Parties, each and all of which shall survive the execution and delivery of this Agreement.

3.1 Corporate Existence; Compliance with Law. Each Credit Party (a) is a corporation, limited liability company, limited partnership or general partnership duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation or organization set forth in Disclosure Schedule (3.1); (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses or liabilities which could reasonably be expected to have a Material Adverse Effect; (c) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now conducted or proposed to be conducted; (d) subject to specific representations regarding Environmental Laws, has all licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (e) is in compliance with its charter and bylaws or partnership or operating

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agreement, as applicable; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.2 Executive Offices, Collateral Locations, FEIN. As of the Closing Date, each Credit Party’s name as it appears in official filings in its state of incorporation or organization, state of incorporation or organization, organization type and, in the case of a corporation, whether such corporation is a “C” corporation or “S” corporation, organization number, if any, issued by its state of incorporation or organization, and the current location of each Credit Party’s chief executive office and the warehouses and premises at which any Collateral is located are set forth in Disclosure Schedule (3.2), none of such locations has changed within the four (4) months preceding the Closing Date and each Credit Party has only one state of incorporation or organization. In addition, Disclosure Schedule (3.2) lists the federal employer identification number of each Credit Party.

3.3 Corporate Power, Authorization, Enforceable Obligations. The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person’s power; (b) have been duly authorized by all necessary corporate, limited liability company or limited partnership action; (c) do not contravene any provision of such Person’s charter, bylaws or partnership or operating agreement as applicable; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1(c), all of which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents shall be duly executed and delivered by each Credit Party that is a party thereto and each such Loan Document shall constitute a legal, valid and binding obligation of such Credit Party enforceable against it in accordance with its terms.

3.4 Financial Statements and Projections. Except for the Projections, all Financial Statements concerning the Credit Parties and their respective Subsidiaries that are referred to below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended.

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(a) Financial Statements. The following Financial Statements attached hereto as Disclosure Schedule (3.4(a)) have been delivered on the date hereof:

(i) The audited balance sheets at (x) February 2, 2008 and the related statements of income and cash flows of Perfumania Holdings, certified by Deloitte, LLP and (y) October 31, 2007 and the related statements of income and cash flows of the Acquired Business and their respective Subsidiaries for the Fiscal Year then ended, certified by BDO Seidman, LLP.

(ii) The internally prepared balance sheets for the months ended February 29, 2008, March 31, 2008 and April 30, 2008 and the related statements of income and cash flows of Perfumania Holdings and its Subsidiaries and the Acquired Business and its Subsidiaries for the Fiscal Quarter and Fiscal Month ended April 30, 2008.

(iii) The internally prepared monthly balance sheets and the related statements of income and cash flows of Perfumania Holdings and its Subsidiaries and the Acquired Business and its Subsidiaries for the Fiscal Months of May and June, 2008.

(b) Pro Forma. The Pro Forma delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(b)) was prepared by Borrowers giving pro forma effect to the Related Transactions, was based on the internally prepared combined and combining balance sheets of Borrowers, the Acquired Business, the other Credit Parties and their respective Subsidiaries dated June 30, 2008, and was prepared in accordance with GAAP, with only such adjustments thereto as would be required in accordance with GAAP.

(c) Projections. The Projections delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(c)) have been prepared by Borrowers in light of the past operations of their businesses, but including future payments of known contingent liabilities, and reflect projections for the three year period beginning on October, 2007 on a month-by-month basis for the first year and on a year-by-year basis thereafter. The Projections are based upon the same accounting principles as those used in the preparation of the financial statements described above and the estimates and assumptions stated therein, all of which Borrowers believe to be reasonable and fair in light of current conditions and current facts known to Borrowers and, as of the Closing Date, reflect Borrowers’ good faith and reasonable estimates of the future financial performance of Borrowers for the period set forth therein. The Projections are not a guaranty of future performance, and actual results may differ from the Projections.

3.5 Material Adverse Effect. Between November 3, 2007 and the Closing Date in the case of Perfumania Holdings and between October 31, 2007 and the Closing Date in the case of the Acquired Business: (a) no Credit Party has incurred any obligations, contingent or noncontingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term Commitments that are not reflected in the Pro Forma and that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon any Credit Party’s assets and no law or regulation applicable to any Credit Party has been adopted that has had or could reasonably be expected to have a Material Adverse Effect, and (c) no Credit Party is in default and to the best of Borrowers’ knowledge no third party is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Since November 3, 2007 in the case of Perfumania Holdings and since October 31, 2007 in the case of the Acquired Business, no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect.

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3.6 Ownership of Property; Liens. As of the Closing Date, the real estate (“Real Estate”) listed in Disclosure Schedule (3.6) constitutes all of the real property owned, leased, subleased, or used by any Credit Party. Each Credit Party owns good and marketable fee simple title to all of its owned Real Estate, and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Disclosure Schedule (3.6), and copies of all such leases or a summary of terms thereof reasonably satisfactory to Agent have been delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate with respect to which any Credit Party is a lessor, sublessor or assignor as of the Closing Date. Each Credit Party also has good and marketable title to, or valid leasehold interests in, all of its personal property and assets. As of the Closing Date, none of the properties and assets of any Credit Party are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to any Credit Party that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Each Credit Party has received all deeds, assignments, waivers, consents, nondisturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Credit Party’s right, title and interest in and to all such Real Estate and other properties and assets. Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. As of the Closing Date, no portion of any Credit Party’s Real Estate has suffered any material damage by fire or other casualty loss that has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied. As of the Closing Date, all material permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which it is currently occupied and used have been lawfully issued and are in full force and effect. Each Borrower has good title to all of its Inventory, has all licenses necessary to sell its Inventory and conducts all sales of its Inventory in compliance with all applicable laws and regulations and without violation or breach of any license, contract, agreement, arrangement or understanding to which such Borrower is a party or which is applicable to such Borrower or such Inventory.

3.7 Labor Matters. Except as set forth on Disclosure Schedule 3.7, as of the Closing Date (a) no strikes or other material labor disputes against any Credit Party are pending or, to any Credit Party’s knowledge, threatened; (b) hours worked by and payment made to employees of each Credit Party comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matters; (c) all payments due from any Credit Party for employee health and welfare insurance have been paid or accrued as a liability on the books of such Credit Party; (d) no Credit Party is a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement (and true and complete copies of any agreements described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no organizing activity involving any Credit Party pending or, to any Credit Party’s knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to any Credit Party’s knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Credit Party has made a pending demand for recognition; and (g) there are no material

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complaints or charges against any Credit Party pending or, to the knowledge of any Credit Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Credit Party of any individual.

3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. Except as set forth in Disclosure Schedule (3.8), as of the Closing Date, no Credit Party has any Subsidiaries, which are engaged in any joint venture or partnership with any other Person, or are Affiliates of any other Person. All of the issued and outstanding Stock of each Credit Party is owned by each of the Stockholders and in the amounts set forth in Disclosure Schedule (3.8). Except as set forth in Disclosure Schedule (3.8), there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Credit Party may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for the Obligations) is described in Section 6.3 (including Disclosure Schedule (6.3)).

3.9 Government Regulation. No Credit Party 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. No Credit Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loans by Lenders to Borrowers, the incurrence of the Letter of Credit Obligations on behalf of Borrowers, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.

3.10 Margin Regulations. No Credit Party is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as “Margin Stock”). No Credit Party owns any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any of the Loans or other extensions of credit under this Agreement to be considered a “purpose credit” within the meaning of Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board.

3.11 Taxes. All Federal and other material tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Credit Party have been filed with the appropriate Governmental Authority, and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof

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excluding Charges or other amounts being contested in accordance with Section 5.2(b). Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable years for which any Credit Party’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described in Disclosure Schedule (3.11), as of the Closing Date, no Credit Party has 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 assessment or collection of any Charges. None of the Credit Parties and their respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to each Credit Party’s knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would reasonably be expected to have a Material Adverse Effect.

3.12 ERISA.

(a) Disclosure Schedule (3.12) lists, as of the Closing Date, (i) all ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, and all Retiree Welfare Plans. Copies of all such listed Plans, together with a copy of the latest form IRS/DOL 5500-series, as applicable, for each such Plan, have been delivered to Agent. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the IRC and its terms, including the timely filing of all reports required under the IRC or ERISA. Neither any Credit Party nor ERISA Affiliate has failed to make any material contribution or pay any material amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No “prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of the IRC, has occurred with respect to any Plan, that would subject any Credit Party to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Credit Party, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any material liability as a result of a complete or partial withdrawal from a Multiemployer Plan; and (v) within the last five years no Title IV Plan of any Credit Party or ERISA Affiliate has been terminated, whether or not in a “standard termination” as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at any time within the last five years) with material Unfunded Pension Liabilities been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such time).

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3.13 No Litigation. No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Credit Party, threatened against any Credit Party, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, “Litigation”), (a) that challenges any Credit Party’s right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to any Credit Party and that , if so determined, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule (3.13), as of the Closing Date there is no Litigation pending or, to any Credit Party’s knowledge, threatened, that seeks damages in excess of $250,000 or injunctive relief against, or alleges criminal misconduct of, any Credit Party.

3.14 Brokers. Except as set forth on Disclosure Schedule 3.14, no broker or finder brought about the obtaining, making or closing of the Loans or the Related Transactions, and no Credit Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

3.15 Intellectual Property. As of the Closing Date, each Credit Party owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now conducted by it or presently proposed to be conducted by it, and each Patent, Trademark, Copyright and License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule (3.15). Each Credit Party conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect. Except as set forth in Disclosure Schedule (3.15), no Credit Party is aware of any material infringement claim by any other Person with respect to any Intellectual Property.

3.16 Full Disclosure. No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports from time to time prepared by any Credit Party and delivered hereunder or any written statement prepared by any Credit Party and furnished by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. Projections from time to time delivered hereunder are or will be based upon the estimates and assumptions stated therein, all of which Borrowers believed at the time of delivery to be reasonable and fair in light of current conditions and current facts known to Borrowers as of such delivery date, and reflect Borrowers’ good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. Such Projections are not a guaranty of future performance and actual results may differ from those set forth in such Projections. The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances.

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3.17 Environmental Matters.

(a) Except as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i) the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not adversely impact the value or marketability of such Real Estate and that would not result in Environmental Liabilities that could reasonably be expected to exceed $100,000; (ii) no Credit Party has caused or suffered to occur any material Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate; (iii) the Credit Parties are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in Environmental Liabilities which could reasonably be expected to exceed $100,000; (iv) the Credit Parties have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities that could reasonably be expected to exceed $100,000, and all such Environmental Permits are valid, uncontested and in good standing; (v) no Credit Party is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Credit Party which could reasonably be expected to exceed $100,000; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $100,000 or injunctive relief against, or that alleges criminal misconduct by, any Credit Party; (vii) no notice has been received by any Credit Party identifying it as a “potentially responsible party” or requesting information under CERCLA or analogous state statutes, and to the knowledge of the Credit Parties, there are no facts, circumstances or conditions that may result in any Credit Party being identified as a “potentially responsible party” under CERCLA or analogous state statutes; and (viii) the Credit Parties have provided to Agent copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Credit Party.

(b) Each Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any Credit Party’s affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any Credit Party’s conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits.

3.18 Insurance. Disclosure Schedule (3.18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Credit Party, as well as a summary of the terms of each such policy.

3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19) lists all banks and other financial institutions at which any Credit Party maintains deposit or other accounts as of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

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3.20 Government Contracts. Except as set forth in Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is a party to any contract or agreement with any Governmental Authority and no Credit Party’s Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar state or local law.

3.21 Customer and Trade Relations. Except as set forth in Disclosure Schedule (3.21), as of the Closing Date, there exists no actual or, to the knowledge of any Credit Party, threatened termination or cancellation of, or any material adverse modification or change in: the business relationship of any Credit Party with any customer or group of customers whose purchases during the preceding 12 months caused them to be ranked among the ten largest customers of such Credit Party; or the business relationship of any Credit Party with any supplier essential to its operations.

3.22 Bonding; Licenses. Except as set forth on Disclosure Schedule 3.22, as of the Closing Date, no Credit Party is a party to or bound by any surety bond agreement or bonding requirement with respect to products or services sold by it or any trademark or patent license agreement with respect to products sold by it.

3.23 Solvency. Both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or incurred on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or incurred, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower Representative; (c) the Refinancing, the Acquisition and the consummation of the other Related Transactions; and (d) the payment and accrual of all transaction costs in connection with the foregoing, each Credit Party is and will be Solvent.

3.24 Subordinated Debt. As of the Closing Date, Borrowers have delivered to Agent a complete and correct copy of the agreements governing the QKD Subordinated Debt and the Nussdorf Subordinated Debt (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). All Obligations, including the Letter of Credit Obligations, constitute Indebtedness entitled to the benefits of the subordination provisions contained in the agreements governing the QKD Subordinated Debt and the Nussdorf Subordinated Debt.

4. FINANCIAL STATEMENTS AND INFORMATION

4.1 Reports and Notices.

(a) Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the Financial Statements, notices, Projections and other information at the times, to the Persons and in the manner set forth in Annex E.

(b) Each Credit Party executing this Agreement hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the various Collateral Reports (including Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times, to the Persons and in the manner set forth in Annex F.

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4.2 Communication with Accountants. Each Credit Party executing this Agreement authorizes Agent to communicate directly with its independent certified public accountants, including Deloitte & Touche, LLP; provided, that, so long as no Default or Event of Default has occurred and is continuing, Agent shall not communicate with the Credit Parties’ independent certified public accountants without the prior consent of the Borrowers, such consent not to be unreasonably withheld or delayed. Each Credit Party authorizes and shall instruct those accountants and advisors to communicate to Agent information relating to any Credit Party with respect to the business, results of operations and financial condition of any Credit Party.

5. AFFIRMATIVE COVENANTS

Each Credit Party executing this Credit Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof and until the Termination Date:

5.1 Maintenance of Existence and Conduct of Business. Each Credit Party shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its material rights and franchises; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and transact business only in such corporate and trade names as are set forth in Disclosure Schedule (5.1).

5.2 Payment of Charges.

(a) Subject to Section 5.2(b), each Credit Party shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (i) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees, in each case, before any thereof shall become past due, except in the case of clauses (ii) and (iii) where the failure to pay or discharge such Charges would not result in aggregate liabilities in excess of $750,000.

(b) Each Credit Party may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 5.2(a); provided, that (i) adequate reserves with respect to such contest are maintained on the books of such Credit Party, in accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) such Credit Party shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent

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evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Credit Party or the conditions set forth in this Section 5.2(b) are no longer met.

5.3 Books and Records. Each Credit Party shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Disclosure Schedule (3.4(a)).

5.4 Insurance; Damage to or Destruction of Collateral.

(a) The Credit Parties shall, at their sole cost and expense, maintain the policies of insurance described on Disclosure Schedule (3.18) as in effect on the date hereof or otherwise in form and amounts and with insurers reasonably acceptable to Agent. Such policies of insurance (or the loss payable and additional insured endorsements delivered to Agent) shall contain provisions pursuant to which the insurer agrees to provide thirty (30) days prior written notice to Agent in the event of any non-renewal, cancellation or amendment of any such insurance policy. If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent deems advisable. Agent shall have no obligation to obtain insurance for any Credit Party or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Credit Party’s failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including reasonable attorneys’ fees, court costs and other charges related thereto, shall be payable on demand by Borrowers to Agent and shall be additional Obligations hereunder secured by the Collateral.

(b) Agent reserves the right at any time upon any change in any Credit Party’s risk profile (including any change in the product mix maintained by any Credit Party or any laws affecting the potential liability of such Credit Party) to require additional forms and limits of insurance to, in Agent’s opinion, adequately protect both Agent’s and Lenders’ interests in all or any portion of the Collateral and to ensure that each Credit Party is protected by insurance in amounts and with coverage customary for its industry. If reasonably requested by Agent, each Credit Party shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies.

(c) Each Credit Party shall deliver to Agent, in form and substance reasonably satisfactory to Agent, endorsements to (i) all “All Risk” and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Credit Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default has occurred and is continuing, as such Credit Party’s true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such “All Risk” policies of insurance, endorsing the name of such Credit Party on any check or other item of payment for the proceeds of such “All Risk” policies of insurance and for making all determinations and decisions with

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respect to such “All Risk” policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower Representative shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $250,000 or more, whether or not covered by insurance. After deducting from such proceeds (i) the expenses incurred by Agent in the collection or handling thereof, and (ii) amounts required to be paid to creditors (other than Lenders) having Permitted Encumbrances, Agent shall apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(d); provided that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by each Borrower, or permit or require the applicable Credit Party to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction.

5.5 Compliance with Laws. Each Credit Party shall comply with all federal, state, local and foreign laws and regulations applicable to it, including those relating to ERISA, labor laws, and Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.6 Supplemental Disclosure. From time to time as may be reasonably requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of an Event of Default) or at Credit Parties’ election, the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing, and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Closing Date.

5.7 Intellectual Property. Each Credit Party will conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect and shall comply in all material respects with the terms of its Licenses.

5.8 Environmental Matters. Each Credit Party shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance that could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real

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Estate in all material respects; (c) notify Agent promptly after such Credit Party becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate that is reasonably likely to result in Environmental Liabilities in excess of $100,000; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Credit Party in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $100,000, in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Credit Party or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then each Credit Party shall, upon Agent’s written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrowers’ expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder.

5.9 Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases. Each Credit Party shall use commercially reasonable efforts to obtain a landlord’s agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property, mortgagee of owned property or bailee with respect to any warehouse, processor or converter facility or other location where Collateral is stored or located (other than retail locations), which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to Agent. With respect to such locations (including retail locations) or warehouse space leased or owned as of the Closing Date and thereafter, if Agent has not received a landlord or mortgagee agreement or bailee letter as of the Closing Date (or, if later, as of the date such location is acquired or leased), any Borrower’s Eligible Inventory at that location shall, in Agent’s discretion, be subject to such Reserves as may be established by Agent in its reasonable credit judgment. After the Closing Date, except with respect to retail locations, no real property or warehouse space shall be leased by any Credit Party and no Inventory shall be shipped to a processor or converter under arrangements established after the Closing Date without the prior written consent of Agent (which consent, in Agent’s discretion, may be conditioned upon the exclusion from the Borrowing Base of Eligible Inventory at that location or the establishment of Reserves acceptable to Agent) or, unless and until a reasonably satisfactory landlord agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location. Notwithstanding the foregoing, Borrowers may temporarily store (for a period not to exceed two weeks) Inventory at locations as to

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which a landlord waiver or bailee letter has not been obtained; provided, that such Inventory shall be excluded from the Borrowing Base and the aggregate amount of such Inventory stored at all such locations shall not exceed $5,000,000 at any time. Each Credit Party shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location (including retail locations) or public warehouse where any Collateral is or may be located. To the extent otherwise permitted hereunder, if any Credit Party proposes to acquire a fee ownership interest in Real Estate after the Closing Date, it shall first provide to Agent a mortgage or deed of trust granting Agent a first priority Lien on such Real Estate, together with environmental audits, mortgage title insurance commitment, real property survey, local counsel opinion(s), and, if required by Agent, supplemental casualty insurance and flood insurance, and such other documents, instruments or agreements reasonably requested by Agent, in each case, in form and substance reasonably satisfactory to Agent.

5.10 Further Assurances. Each Credit Party executing this Agreement agrees that it shall and shall cause each other Credit Party to, at such Credit Party’s expense and upon the reasonable request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectively the provisions and purposes of this Agreement and each Loan Document.

6. NEGATIVE COVENANTS

Each Credit Party executing this Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof until the Termination Date:

6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or indirectly, by operation of law or otherwise, (a) form or acquire any Subsidiary, or (b) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person; provided, that, following prior written notice to Agent in the case of a purchase of Accounts and/or Inventory in excess of $1,000,000 or any purchase of related brand-name intangibles, Borrowers may make opportune purchases of Inventory, Accounts and related brand-name intangibles (but no assumptions of liabilities other than related liabilities approved by Agent in an amount not to exceed $3,000,000 in any single transaction) in the ordinary course of business consistent with past practices, provided, further, that Borrowers shall take all steps required or reasonably requested by Agent to perfect Agent’s Liens in such Inventory, Accounts and related brand-name intangibles.

6.2 Investments; Loans and Advances. Except as otherwise expressly permitted by this Section 6, no Credit Party shall make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that: (a) Borrowers may hold investments comprised of notes payable, or stock or other securities issued by Account Debtors to any Borrower pursuant to negotiated agreements with respect to settlement of such Account Debtor’s Accounts in the ordinary course of business consistent with past practices; (b) each Credit Party may maintain its existing investments in its Subsidiaries as of the Closing Date; (c) Borrowers may make Advances to Suppliers to

the extent not prohibited by paragraph (f) of Annex G to the Agreement; and (d) other investments not exceeding $250,000 in the aggregate at any time outstanding.

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6.3 Indebtedness.

(a) No Credit Party shall create, incur, assume or permit to exist any Indebtedness, except (without duplication) (i) Indebtedness secured by purchase money security interests and Capital Leases permitted in Section 6.7(c), (ii) the Loans and the other Obligations, (iii) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, (iv) existing Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or amendments or modifications thereto that do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and that are otherwise on terms and conditions no less favorable to any Credit Party, Agent or any Lender, as determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified, (v) Indebtedness consisting of intercompany loans and advances made between the Borrowers; provided, that: (A) on the Closing Date, each Borrower shall have executed and delivered, a demand note (the “Intercompany Note”) to evidence any such intercompany Indebtedness owing at any time by such Borrower to any other Borrower which Intercompany Note shall be in form and substance reasonably satisfactory to Agent and shall be pledged and delivered to Agent pursuant to the applicable Pledge Agreement or Security Agreement as additional collateral security for the Obligations; (B) each Borrower shall record all intercompany transactions on its books and records in a manner reasonably satisfactory to Agent; (C) the obligations of each Borrower under any such Intercompany Note shall be subordinated to the Obligations of such Borrower hereunder and under the other Loan Documents in a manner reasonably satisfactory to Agent; (D) at the time any such intercompany loan or advance is made by any Borrower to any other Borrower as permitted by this clause (v) and after giving effect thereto, each such Borrower shall be Solvent; and (E) no Default or Event of Default would occur and be continuing after giving effect to any such proposed intercompany loan; (vi) the QKD Subordinated Debt, (vii) the Nussdorf Subordinated Debt and (viii) Indebtedness under Secured Rate Contracts or (B) Permitted Hedge Agreements.

(b) No Credit Party shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness prior to its scheduled maturity, other than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof in accordance with Section 6.3(a)(iv); and (iv) as otherwise permitted in Section 6.13.

6.4 Employee Loans and Affiliate Transactions.

(a) Except as otherwise expressly permitted in this Section 6 with respect to Affiliates, no Credit Party shall enter into or be a party to any transaction with any other Credit Party or any Affiliate thereof except (i) in the ordinary course of and pursuant to the reasonable requirements of such Credit Party’s business and upon fair and reasonable terms that are no less favorable to such Credit

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Party than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of such Credit Party, (ii) the transactions between GSN, QKD and Borrowers by which GSN or QKD provides transportation services to Borrowers in exchange for a fee determined in the ordinary course of business consistent with past practices; (iii) the transactions between Consolidators and Borrowers by which Consolidators provides freight consolidating and forwarding services for Borrowers in exchange for a fee in the ordinary course of business consistent with past practices, (iv) the Bellport Sublease transaction and (v) the Services Agreement transaction. In addition, if any such transaction or series of related transactions, other than the transactions permitted by Section 6.2(d) or 6.3(a)(v), involves payments in excess of $100,000 in the aggregate, the terms of these transactions must be disclosed in advance to Agent. All such transactions existing as of the date hereof are described in Disclosure Schedule (6.4(a)).

(b) No Credit Party shall enter into any lending or borrowing transaction with any employees of any Credit Party, except loans to its respective employees in the ordinary course of business consistent with past practices to the extent permitted under Section 6.2(d).

6.5 Capital Structure and Business. If all or part of a Credit Party’s Stock is pledged to Agent, that Credit Party shall not issue additional Stock. No Credit Party shall amend its charter or bylaws in a manner that would adversely affect Agent or Lenders or such Credit Party’s duty or ability to repay the Obligations. No Credit Party shall engage in any business other than the businesses currently engaged in by it or businesses reasonably related thereto.

6.6 Guaranteed Indebtedness. No Credit Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of any other Credit Party if the primary obligation is expressly permitted by this Agreement.

6.7 Liens. No Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in existence on the date hereof and summarized on Disclosure Schedule (6.7) securing the Indebtedness described on Disclosure Schedule (6.3) and permitted refinancings, extensions and renewals thereof, including extensions or renewals of any such Liens; provided that the principal amount of the Indebtedness so secured is not increased and the Lien does not attach to any other property; (c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures acquired by any Credit Party in the ordinary course of business, involving the incurrence of an aggregate amount of purchase money Indebtedness and Capital Lease Obligations of not more than $5,000,000 outstanding at any one time for all such Liens (provided that such Liens attach only to the assets subject to such purchase money debt and such Indebtedness is incurred within twenty (20) days following such purchase and does not exceed 100% of the purchase price of the subject assets); and (d) Liens on the Collateral securing the Secured Rate Contracts or Permitted Hedge Agreements; provided, that (i) such Liens (other than those securing Secured Rate Contracts) shall rank junior to the Liens of Agent, for the benefit of Agent and Lenders, on the Collateral securing the Obligations and (ii) Agent shall have established a Reserve

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against Borrowing Availability equal to the amount of the Indebtedness under the Secured Rate Contracts and Permitted Hedge Agreements so secured by the Liens on the Collateral. In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action, that would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the Obligations, except operating leases, Capital Leases or Licenses which prohibit Liens upon the assets that are subject thereto.

6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer, convey, assign or otherwise dispose of any of its properties or other assets, including the Stock of any of its Subsidiaries (whether in a public or a private offering or otherwise) or any of its Accounts, other than (a) the sale of Inventory in the ordinary course of business, (b) the sale or other disposition by a Credit Party of Equipment, Fixtures or Real Estate that are obsolete or no longer used or useful in such Credit Party’s business and having a book value not exceeding $1,000,000 in the aggregate in any Fiscal Year; and (c) the sale or other disposition of other Equipment and Fixtures having a book value not exceeding $1,000,000 in the aggregate in any Fiscal Year.

6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur (i) an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (ii) an ERISA Event to the extent such ERISA Event would reasonably be expected to result in taxes, penalties and other liabilities in an aggregate amount in excess of $250,000 in the aggregate.

6.10 Financial Covenants. Borrowers shall not breach or fail to comply with any of the Financial Covenants.

6.11 Hazardous Materials. No Credit Party shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real Estate where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any of the Real Estate or any of the Collateral, other than such violations or Environmental Liabilities that could not reasonably be expected to have a Material Adverse Effect.

6.12 Sale-Leasebacks. Except as set forth in Disclosure Schedule (6.12), no Credit Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.

6.13 Restricted Payments. No Credit Party shall make any Restricted Payment, except (a) intercompany loans and advances between Borrowers to the extent permitted by Section 6.3, (b) dividends and distributions by Subsidiaries of any Borrower paid to such Borrower, (c) employee loans permitted under Section 6.4(b), (d) payments of principal and interest of Intercompany Notes issued in accordance with Section 6.3; (e) the payment of principal and interest of the QKD Subordinated Debt; provided, that (i) no Default or Event of Default has occurred and is continuing or would result after giving effect to any Restricted Payment permitted pursuant to this clause (e), (ii) the Fixed Charge Coverage Ratio of Borrowers both before and after giving effect to any Restricted Payment permitted pursuant to this clause (e) is not less than 1.10 to 1.00 and (iii) in no event shall any Restricted Payment permitted

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pursuant to this clause (e) be paid prior to January 31, 2009; (f) the payment of principal and interest of the Nussdorf Subordinated Debt; provided, that (i) no Default or Event of Default has occurred and is continuing or would result after giving effect to any Restricted Payment permitted pursuant to this clause (f), (ii) the Fixed Charge Coverage Ratio of Borrowers both before and after giving effect to any Restricted Payment permitted pursuant to this clause (f) is not less than 1.25 to 1.00 and (iii) in no event shall any Restricted Payment permitted pursuant to this clause (f) be paid prior to the last day of the Fiscal Quarter ended April 30, 2009; and (g) the payment of interest on the Existing Nussdorf Convertible Note; provided, that no Default or Event of Default has occurred and is continuing or would result after giving effect to any Restricted Payment permitted pursuant to this clause (g).

6.14 Change of Corporate Name, State of Incorporation or Location; Change of Fiscal Year. No Credit Party shall (a) change its name as it appears in official filings in the state of its incorporation or other organization (b) change its chief executive office, principal place of business, corporate offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral, (c) change the type of entity that it is, (d) change its organization identification number, if any, issued by its state of incorporation or other organization, or (e) change its state of incorporation or organization or incorporate or organize in any additional jurisdictions, in each case without at least thirty (30) days prior written notice to Agent and after Agent’s written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and provided that any such new location shall be in the continental United States. No Credit Party shall change its Fiscal Year.

6.15 No Impairment of Intercompany Transfers. No Credit Party shall directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions or the making or repayment of intercompany loans by a Subsidiary of any Borrower to any Borrower or between Borrowers.

6.16 Real Estate Purchases. No Credit Party shall purchase a fee simple ownership interest in Real Estate other than in the ordinary course of business consistent with past practices.

6.17 Changes Relating to Subordinated Debt.

No Credit Party shall change or amend the terms of any Subordinated Debt (or any indenture or agreement in connection therewith) if the effect of such amendment is to: (a) increase the interest rate on such Subordinated Debt; (b) change the dates upon which payments of principal or interest are due on such Subordinated Debt 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 Subordinated Debt; (d) change the redemption or prepayment provisions of such Subordinated Debt other than to extend the dates therefor or to reduce the premiums payable in connection therewith; (e) grant any security or collateral to secure payment of such

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Subordinated Debt; or (f) change or amend any other term if such change or amendment would materially increase the obligations of the Credit Party thereunder or confer additional material rights on the holder of such Subordinated Debt in a manner adverse to any Credit Party, Agent or any Lender.

7. TERM

7.1 Termination. The financing arrangements contemplated hereby shall be in effect until the Commitment Termination Date, and the Loans and all other Obligations shall be automatically due and payable in full on such date.

7.2 Survival of Obligations Upon Termination of Financing Arrangements. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Credit Parties or the rights of Agent and Lenders relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated, or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is required after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon the Credit Parties, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the provisions of Section 11, the payment obligations under Sections 1.15 and 1.16, and the indemnities contained in the Loan Documents shall survive the Termination Date.

8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES

8.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder:

(a) Any Borrower (i) fails to make any payment of principal of, or interest on, or Fees owing in respect of, the Loans or any of the other Obligations when due and payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within ten (10) days following Agent’s demand for such reimbursement or payment of expenses.

(b) Any Credit Party fails or neglects to perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4(a) or 6, or any of the provisions set forth in Annexes C or G, respectively.

(c) Any Borrower fails or neglects to perform, keep or observe any of the provisions of Section 4.1 or any provisions set forth in Annexes E or F, respectively, and the same shall remain unremedied for three (3) Business Days or more.

(d) Any Credit Party fails or neglects to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by any other clause of this Section 8.1) and the same shall remain unremedied for thirty (30) days or more.

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(e) A default or breach occurs under any other agreement, document or instrument to which any Credit Party is a party that is not cured within any applicable grace period therefor, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of any Credit Party in excess of $500,000 in the aggregate (including (x) undrawn committed or available amounts and (y) amounts owing to all creditors under any combined or syndicated credit arrangements), or (ii) causes, or permits any holder of such Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of $500,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash collateral in respect thereof to be demanded, in each case, regardless of whether such default is waived, or such right is exercised, by such holder or trustee.

(f) Any information contained in any Borrowing Base Certificate is untrue or incorrect in any respect, or any representation or warranty herein or in any Loan Document or in any written statement, report, financial statement or certificate (other than a Borrowing Base Certificate) made or delivered to Agent or any Lender by any Credit Party is untrue or incorrect in any material respect as of the date when made or deemed made.

(g) Assets of any Credit Party with a fair market value of $500,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Credit Party and such condition continues for thirty (30) days or more.

(h) A case or proceeding is commenced against any Credit Party seeking a decree or order in respect of such Credit Party (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party’s assets, or (iii) ordering the winding-up or liquidation of the affairs of such Credit Party, and such case or proceeding shall remain undismissed or unstayed for ninety (90) days or more or a decree or order granting the relief sought in such case or proceeding is granted by a court of competent jurisdiction.

(i) Any Credit Party (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party’s assets, (iii) makes an assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due.

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(j) A final judgment or judgments for the payment of money in excess of $500,000 in the aggregate at any time are outstanding against one or more of the Credit Parties (which judgments are not covered by insurance policies as to which liability has been accepted by the insurance carrier), and the same are not, within thirty (30) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay.

(k) Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Credit Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document ceases to be a valid and perfected first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby.

(l) Any Change of Control occurs.

(m) Any uninsured damage, loss, theft or destruction in excess of $500,000 with respect to all or any portion of any property or assets of any Credit Party occurs.

(n) Any claims are made or otherwise asserted under the environmental indemnity permitted under Section 6.6(c) of this Agreement in an amount in excess of $1,000,000, either individually or in the aggregate, and such claims remain unresolved or otherwise outstanding for more than 60 days.

8.2 Remedies.

(a) If any Event of Default has occurred and is continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice, suspend the Revolving Loan facility with respect to additional Advances and/or the incurrence of additional Letter of Credit Obligations, whereupon any additional Advances and additional Letter of Credit Obligations shall be made or incurred in Agent’s sole discretion (or in the sole discretion of the Requisite Lenders, if such suspension occurred at their direction) so long as such Default or Event of Default is continuing. If any Event of Default has occurred and is continuing, Agent may (and at the written request of Requisite Lenders shall), without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loans and the Letter of Credit Fees to the Default Rate.

(b) If any Event of Default has occurred and is continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice: (i) terminate the Revolving Loan facility with respect to further Advances or the incurrence of further Letter of Credit Obligations; (ii) reduce the Revolving Loan Commitment from time to time; (iii) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, and require that the Letter of Credit Obligations be cash collateralized in the manner set forth in Annex B, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and each other Credit Party; or (iv) exercise any rights and remedies provided to Agent under the

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Loan Documents or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of Default specified in Sections 8.1(h) or (i), the Commitments shall be immediately terminated and all of the Obligations, including the aggregate Revolving Loan, shall become immediately due and payable without declaration, notice or demand by any Person.

8.3 Waivers by Credit Parties. Except as otherwise provided for in this Agreement or by applicable law, each Credit Party waives (including for purposes of Section 12): (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent’s taking possession or control of, or to Agent’s replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws.

9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

9.1 Assignment and Participations.

(a) Subject to the terms of this Section 9.1, any Lender may make an assignment to a Qualified Assignee of, or sell participations in, at any time or times, the Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any portion thereof or interest therein, including any Lender’s rights, title, interests, remedies, powers or duties thereunder. Any assignment by a Lender shall: (i) require the consent of Agent (which consent shall not be unreasonably withheld or delayed with respect to a Qualified Assignee) and the execution of an assignment agreement (an “Assignment Agreement”) substantially in the form attached hereto as Exhibit 9.1(a) and otherwise in form and substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable Loans to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof; (iii) after giving effect to any such partial assignment, the assignee Lender shall have Commitments in an amount at least equal to $5,000,000 and the assigning Lender shall have retained Commitments in an amount at least equal to $5,000,000 or shall no longer be a Lender; (iv) include a payment to Agent of an assignment fee of $3,500; and (v) so long as no Event of Default has occurred and is continuing, require the consent of Borrower Representative, which shall not be unreasonably withheld or delayed; provided that no such consent shall be required for an assignment to a Qualified Assignee. In the case of an assignment by a Lender under this Section 9.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as all other Lenders hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion thereof from and after the date of such assignment. Each Borrower hereby acknowledges and agrees that any assignment shall give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a “Lender”. In all instances, each Lender’s liability to make Loans hereunder shall be several and not joint and shall be limited to such Lender’s Pro Rata Share of the applicable Commitment. In

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the event Agent or any Lender assigns or otherwise transfers all or any part of the Obligations, Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute new Notes in exchange for the Notes, if any, being assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may at any time pledge the Obligations held by it and such Lender’s rights under this Agreement and the other Loan Documents to a Federal Reserve Bank, and any Lender that is an investment fund may assign the Obligations held by it and such Lender’s rights under this Agreement and the other Loan Documents to another investment fund managed by the same investment advisor; provided, that no such pledge to a Federal Reserve Bank shall release such Lender from such Lender’s obligations hereunder or under any other Loan Document.

(b) Any participation by a Lender of all or any part of its Commitments shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a participation shall give rise to a direct obligation of Borrowers to the participant and the participant shall be considered to be a “Lender”. Except as set forth in the preceding sentence no Borrower or Credit Party shall have any obligation or duty to any participant. Neither Agent nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred.

(c) Except as expressly provided in this Section 9.1, no Lender shall, as between Borrowers and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender.

(d) Each Credit Party executing this Agreement shall assist any Lender permitted to sell assignments or participations under this Section 9.1 as reasonably required to enable the assigning or selling Lender to effect any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, if requested by Agent, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants. Each Credit Party executing this Agreement shall certify the correctness, completeness and accuracy of all descriptions of the Credit Parties and their respective affairs contained in any selling materials provided by them and all other information provided by them and included in such materials, except that any Projections delivered by Borrowers shall only be certified by Borrowers as having been prepared by Borrowers in compliance with the representations contained in Section 3.4(c).

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(e) Any Lender may furnish any information concerning Credit Parties in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants); provided that such Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.8.

(f) So long as no Event of Default has occurred and is continuing, no Lender shall assign or sell participations in any portion of its Loans or Commitments to a potential Lender or participant, if, as of the date of the proposed assignment or sale, the assignee Lender or participant would be subject to capital adequacy or similar requirements under Section 1.16(a), increased costs under Section 1.16(b), an inability to fund LIBOR Loans under Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).

(g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”), may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing by the Granting Lender to Agent and Borrowers, the option to provide to Borrowers all or any part of any Loans that such Granting Lender would otherwise be obligated to make to Borrowers pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan; and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender. No SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). Any SPC may (i) with notice to, but without the prior written consent of, Borrowers and Agent, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by Borrowers and Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 9.1(g) may not be amended without the prior written consent of each Granting Lender, all or any of whose Loans are being funded by an SPC at the time of such amendment. For the avoidance of doubt, the Granting Lender shall for all purposes, including without limitation, the approval of any amendment or waiver of any provision of any Loan Document or the obligation to pay any amount otherwise payable by the Granting Lender under the Loan Documents, continue to be the Lender of record hereunder.

9.2 Appointment of Agent. GE Capital is hereby appointed to act on behalf of all Lenders as Agent and Collateral Agent under this Agreement and the other Loan Documents. The provisions of this Section 9.2 are solely for the benefit of Agent, Collateral Agent and Lenders and no Credit Party nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, each of Agent and Collateral Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Credit Party or any other Person. Neither Agent nor Collateral Agent shall have duties or responsibilities except for those expressly set forth in this Agreement and the other Loan Documents. The duties of Agent and Collateral Agent shall be mechanical and administrative in nature and Agent and Collateral Agent shall not have, or be deemed to

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have, by reason of this Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender. Except as expressly set forth in this Agreement and the other Loan Documents, neither Agent nor Collateral Agent shall have any duty to disclose, and shall not be liable for failure to disclose, any information relating to any Credit Party or any of their respective Subsidiaries or any Account Debtor that is communicated to or obtained by GE Capital or any of its Affiliates in any capacity. Neither Agent, Collateral Agent nor any of their Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in connection herewith or therewith, except for damages caused by its or their own gross negligence or willful misconduct.

If Agent or Collateral Agent shall request instructions from Requisite Lenders, Supermajority Lenders or all affected Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, then Agent or Collateral Agent, as the case may be, shall be entitled to refrain from such act or taking such action unless and until Agent or Collateral Agent shall have received instructions from Requisite Lenders, Supermajority Lenders or all affected Lenders, as the case may be as required hereunder, and neither Agent nor Collateral Agent shall incur liability to any Person by reason of so refraining. Agent and Collateral Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent or Collateral Agent, be contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of Agent or Collateral Agent, expose Agent or Collateral Agent to Environmental Liabilities or (c) if Agent or Collateral Agent shall not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent or Collateral Agent as a result of Agent or Collateral Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of Requisite Lenders, Supermajority Lenders or all affected Lenders, as applicable as required hereunder.

9.3 Agent’s Reliance, Etc. Neither Agent, Collateral Agent nor any of their Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Agent or Collateral Agent (as applicable): (a) may treat the payee of any Note as the holder thereof until Agent receives written notice of the assignment or transfer thereof signed by such payee and in form reasonably satisfactory to Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Credit Party or to inspect the Collateral (including the books and records) of any Credit Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or

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value of this Agreement or 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 the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties.

9.4 GE Capital and Affiliates. With respect to its Commitments hereunder, GE Capital shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include GE Capital in its individual capacity. GE Capital and its Affiliates may lend money to, invest in, and generally engage in any kind of business with, any Credit Party, any of their Affiliates and any Person who may do business with or own securities of any Credit Party or any such Affiliate, all as if GE Capital were not Agent and without any duty to account therefor to Lenders. GE Capital and its Affiliates may accept fees and other consideration from any Credit Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders. Each Lender acknowledges the potential conflict of interest between GE Capital as a Lender holding disproportionate interests in the Loans and GE Capital as Agent.

9.5 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the Financial Statements referred to in Section 3.4(a) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of the Credit Parties and its own decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent 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 this Agreement. Each Lender acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of interest.

9.6 Indemnification. Lenders agree to indemnify Agent and Collateral Agent (to the extent not reimbursed by Credit Parties and without limiting the obligations of Credit Parties hereunder), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against Agent or Collateral Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by Agent or Collateral Agent in connection therewith; provided, 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 Agent’s gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse Agent and Collateral Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by Agent or Collateral 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 rights or responsibilities under, this Agreement and each other Loan Document, to the extent that Agent or Collateral Agent is not reimbursed for such expenses by Credit Parties.

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9.7 Successor Agent. Agent may resign at any time by giving not less than thirty (30) days prior written notice thereof to Lenders and Borrower Representative. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within thirty (30) days after the resigning Agent’s giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial institution is organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $300,000,000. If no successor Agent has been appointed pursuant to the foregoing, within thirty (30) days after the date such notice of resignation was given by the resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder shall be subject to the approval of Borrower Representative, such approval not to be unreasonably withheld or delayed; provided that such approval shall not be required if a Default or an Event of Default has occurred and is continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent’s resignation, the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, except that any indemnity rights or other rights in favor of such resigning Agent shall continue. After any resigning Agent’s resignation hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was acting as Agent under this Agreement and the other Loan Documents.

9.8 Setoff and Sharing of Payments. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default and subject to Section 9.9(f), each Lender is hereby authorized at any time or from time to time, without prior notice to any Credit Party or to any Person other than Agent, any such notice being hereby expressly waived, to offset and to appropriate and to apply any and all balances held by it at any of its offices for the account of any Borrower or Guarantor (regardless of whether such balances are then due to such Borrower or Guarantor) and any other properties or assets at any time held or owing by that Lender or that holder to or for the credit or for the account of any Borrower or Guarantor against and on account of any of the Obligations that are not paid when due; provided that the Lender exercising such offset rights shall give notice thereof to the affected Credit Party promptly after exercising such rights. Any Lender exercising a right of setoff or otherwise receiving any payment on account of the Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender’s or holder’s Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so offset or otherwise received with each other Lender or holder in accordance with their respective Pro Rata Shares (other than offset rights exercised by any

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Lender with respect to Sections 1.13, 1.15 or 1.16). Each Lender’s obligation under this Section 9.8 shall be in addition to and not in limitation of its obligations to purchase a participation in an amount equal to its Pro Rata Share of the Swing Line Loans under Section 1.1. Each Credit Party that is a Borrower or Guarantor agrees, to the fullest extent permitted by law, that (a) any Lender may exercise its right to offset with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell participations in such amounts so offset to other Lenders and holders and (b) any Lender so purchasing a participation in the Loans made or other Obligations held by other Lenders or holders may exercise all rights of offset, bankers’ lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or holder were a direct holder of the Loans and the other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or any portion of the offset amount or payment otherwise received is thereafter recovered from the Lender that has exercised the right of offset, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest.

9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.

(a) Advances; Payments.

(i) Revolving Lenders shall refund or participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(b). If the Swing Line Lender declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m. (New York time) on the date such Notice of Revolving Advance is received, by telecopy, telephone or other similar form of transmission. Each Revolving Lender shall make the amount of such Lender’s Pro Rata Share of such Revolving Credit Advance available to Agent in same day funds by wire transfer to Agent’s account as set forth in Annex H not later than 3:00 p.m. (New York time) on the requested funding date, in the case of an Index Rate Loan, and not later than 12:30 p.m. (New York time) on the requested funding date, in the case of a LIBOR Loan. After receipt of such wire transfers (or, in the Agent’s sole discretion, before receipt of such wire transfers), subject to the terms hereof, Agent shall make the requested Revolving Credit Advance to the Borrower designated by Borrower Representative in the Notice of Revolving Credit Advance. All payments by each Revolving Lender shall be made without setoff, counterclaim or deduction of any kind.

(ii) Not less than once during each calendar week or more frequently at Agent’s election (each, a “Settlement Date”), Agent shall advise each Lender by telephone, or telecopy of the amount of such Lender’s Pro Rata Share of principal, interest and Fees paid for the benefit of Lenders with respect to each applicable Loan. Provided that each Lender has funded all payments or Advances required to be made by it and has purchased all participations required to be purchased by it under this Agreement and the other Loan Documents as of such Settlement Date, Agent shall pay to each Lender such Lender’s Pro Rata Share of principal, interest and Fees paid by Borrowers since the previous Settlement Date for the benefit of such Lender on the Loans held by it. To the extent that any Lender (a “Non-Funding Lender”) has failed to fund all such payments and Advances or failed to fund the purchase of all such participations, Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender’s Pro Rata Share of all

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payments received from Borrowers. Such payments shall be made by wire transfer to such Lender’s account (as specified by such Lender in Annex H or the applicable Assignment Agreement) not later than 2:00 p.m. (New York time) on the next Business Day following each Settlement Date.

(b) Availability of Lender’s Pro Rata Share. Agent may assume that each Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance available to Agent on each funding date. If such Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without setoff, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent’s demand, Agent shall promptly notify Borrower Representative and Borrowers shall immediately repay such amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Borrowers may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. To the extent that Agent advances funds to any Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such Advance is made, Agent shall be entitled to retain for its account all interest accrued on such Advance until reimbursed by the applicable Revolving Lender.

(c) Return of Payments.

(i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind.

(ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind.

(d) Non-Funding Lenders. The failure of any Non-Funding Lender to make any Revolving Credit Advance or any payment required by it hereunder or to purchase any participation in any Swing Line Loan to be made or purchased by it on the date specified therefor shall not relieve any other Lender (each such other Revolving Lender, an “Other Lender”) of its obligations to make such Advance or purchase such participation on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make an Advance, purchase a participation or make any other payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be included in the calculation of “Requisite

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Lenders” or “Supermajority Lenders” hereunder) for any voting or consent rights under or with respect to any Loan Document. At Borrower Representative’s request, Agent or a Person reasonably acceptable to Agent shall have the right with Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to Agent or such Person, all of the Commitments of that Non-Funding Lender for an amount equal to the principal balance of all Loans held by such Non-Funding Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.

(e) Dissemination of Information. Agent shall use reasonable efforts to provide Lenders with any notice of Default or Event of Default received by Agent from, or delivered by Agent to, any Credit Party, with notice of any Event of Default of which Agent has actually become aware and with notice of any action taken by Agent following any Event of Default; provided, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s gross negligence or willful misconduct. Lenders acknowledge that Borrowers are required to provide Financial Statements and Collateral Reports to Lenders in accordance with Annexes E and F hereto and agree that Agent shall have no duty to provide the same to Lenders.

(f) Actions in Concert. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Notes (including exercising any rights of setoff) without first obtaining the prior written consent of Agent and Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Notes shall be taken in concert and at the direction or with the consent of Agent or Requisite Lenders.

10. SUCCESSORS AND ASSIGNS

10.1 Successors and Assigns. This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of each Credit Party, Agent, Lenders and their respective successors and assigns (including, in the case of any Credit Party, a debtor-in-possession on behalf of such Credit Party), except as otherwise provided herein or therein. No Credit Party may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Agent and Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by any Credit Party without the prior express written consent of Agent and Lenders shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Credit Party, Agent and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents.

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11. MISCELLANEOUS

11.1 Complete Agreement; Modification of Agreement. The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2. Any letter of interest, commitment letter, fee letter or confidentiality agreement, if any, between any Credit Party and Agent or any Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. Notwithstanding the foregoing, the GE Capital Fee Letter shall survive the execution and delivery of this Agreement and shall continue to be binding obligations of the parties.

11.2 Amendments and Waivers.

(a) Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, or any consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent and Borrowers, and by Requisite Lenders, Supermajority Lenders or all affected Lenders, as applicable. Except as set forth in Section 9.2 or in clauses (b) and (c) below, all such amendments, modifications, terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders.

(b) No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that increases the percentage advance rates set forth in the definition of the Borrowing Base shall be effective unless the same shall be in writing and signed by Agent, Lenders holding more than 95% of the Commitments of all Lenders and Borrowers. No amendment, modification, termination or waiver or consent with respect to any provision of this Agreement that makes less restrictive the nondiscretionary criteria for exclusion from Eligible Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7, shall be effective unless the same shall be in writing and signed by Agent, Supermajority Lenders and Borrowers.

(c) No amendment, modification, termination or waiver shall, unless in writing and signed by Agent and each Lender directly affected thereby: (i) increase the principal amount of any Lender’s Commitment (which action shall be deemed to directly affect all Lenders); (ii) reduce the principal of, rate of interest on or Fees payable with respect to any Loan or Letter of Credit Obligations of any affected Lender; (iii) extend any scheduled payment date (other than payment dates of mandatory prepayments under Section 1.3(b)(ii)-(iv)) or final maturity date of the principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; (v) release any Borrower or release any Guaranty or, except as otherwise permitted herein or in the other Loan Documents, release, or permit any Credit Party to sell or otherwise dispose of, any Collateral with a total value exceeding $15,000,000 in the aggregate during the term of this Agreement (which action shall be deemed to directly affect all Lenders); (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that shall be required for Lenders or any of them to take any action hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the terms “Requisite Lenders” or “Supermajority Lenders” insofar as such definitions affect the

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substance of this Section 11.2. Furthermore, no amendment, modification, termination or waiver affecting the rights or duties of Agent or L/C Issuer under this Agreement or any other Loan Document shall be effective unless in writing and signed by Agent or L/C Issuer, as the case may be, in addition to Lenders required hereinabove to take such action. No amendment, modification or waiver of this Agreement or any Loan Document altering the ratable treatment of Obligations arising under Secured Rate Contracts resulting in such Obligations being junior in right of payment to principal on the Loans or resulting in Obligations owing to any Secured Swap Provider becoming unsecured (other than release of Liens in accordance with the terms hereof), in each case in a manner adverse to any Secured Swap Provider, shall be effective without the written consent of GE Capital. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of that Note. No notice to or demand on any Credit Party in any case shall entitle such Credit Party or any other Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 shall be binding upon each holder of the Notes at the time outstanding and each future holder of the Notes.

(d) If, in connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”):

(i) requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this clause (i) or in clause (ii), below being referred to as a “Non-Consenting Lender”);

(ii) requiring the consent of Supermajority Lenders, the consent of Requisite Lenders is obtained, but the consent of Supermajority Lenders is not obtained;

then, so long as Agent is not a Non-Consenting Lender, at Borrower Representative’s request, Agent or a Person reasonably acceptable to Agent shall have the right with Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent’s request, sell and assign to Agent or such Person, all of the Commitments of such Non-Consenting Lenders for an amount equal to the principal balance of all Loans held by the Non-Consenting Lenders and all accrued interest and Fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.

(e) Upon payment in full in cash and performance of all of the Obligations (other than indemnification Obligations), termination of the Commitments and a release of all claims against Agent and Lenders, and so long as no suits, actions, proceedings or claims are pending or threatened against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers termination statements, mortgage releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations.

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11.3 Fees and Expenses. Borrowers shall reimburse (i) Agent for all fees, costs and expenses (including the reasonable fees and expenses of all of its counsel, advisors, consultants and auditors) and (ii) Agent (and, with respect to clauses (b) and (c) below, all Lenders) for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers), incurred in connection with the negotiation, preparation and filing and/or recordation of the Loan Documents and incurred in connection with:

(a) any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents or Related Transactions Documents or advice in connection with the syndication and administration of the Loans made pursuant hereto or its rights hereunder or thereunder;

(b) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, any Credit Party or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against any or all of the Credit Parties or any other Person that may be obligated to Agent by virtue of the Loan Documents; including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided, further, that no Person shall be entitled to reimbursement under this clause (b) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person’s gross negligence or willful misconduct; provided, further, that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders;

(c) any attempt to enforce any remedies of Agent against any or all of the Credit Parties or any other Person that may be obligated to Agent or any Lender by virtue of any of the Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided, that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders;

(d) any workout or restructuring of the Loans during the pendency of one or more Events of Default; and

(e) efforts to (i) monitor the Loans or any of the other Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their respective affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral;

including, as to each of clauses (a) through (e) above, all reasonable attorneys’ and other professional and service providers’ fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel and others in connection with or relating to

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any of the events or actions described in this Section 11.3, all of which shall be payable, on demand, by Borrowers to Agent. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services.

11.4 No Waiver. Agent’s or any Lender’s failure, at any time or times, to require strict performance by the Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Agent or such Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 11.2, none of the undertakings, agreements, warranties, covenants and representations of any Credit Party contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by any Credit Party shall be deemed to have been suspended or waived by Agent or any Lender, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and the applicable required Lenders, and directed to Borrowers specifying such suspension or waiver.

11.5 Remedies. Agent’s and Lenders’ rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Agent or any Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required.

11.6 Severability. Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document.

11.7 Conflict of Terms. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control.

11.8 Confidentiality. Agent and each Lender agree to use commercially reasonable efforts (equivalent to the efforts Agent or such Lender applies to maintaining the confidentiality of its own confidential information) to maintain as confidential all confidential information provided to them by the Credit Parties and designated as confidential during the term of the Agreement and for a period of two (2) years following the Termination Date, except that Agent and any Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.8 (and any such bona fide assignee or participant or potential

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assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any Litigation to which Agent or such Lender is a party; or (f) that ceases to be confidential through no fault of Agent or any Lender.

11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

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11.10 Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11.10); (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex I or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower Representative or Agent) designated in Annex I to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.

11.11 Section Titles. The Section titles and Table of Contents 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.

11.12 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement.

11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

11.14 Press Releases and Related Matters. Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of GE Capital or its affiliates or referring to this

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Agreement, the other Loan Documents or the Related Transactions Documents without at least two (2) Business Days prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with GE Capital before issuing such press release or other public disclosure. Each Credit Party consents to the publication by Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using Borrowers’ name, product photographs, logo or trademark; provided, however, that all references to the Credit Parties shall be limited to “Perfumania Holdings, Inc. (f/k/a E Com Ventures, Inc.) and its Affiliates,” and shall not mention the other Credit Parties by name. Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

11.15 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

11.16 Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of Sections 11.9 and 11.13, with its counsel.

11.17 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

11.18 USA PATRIOT Act Notice. Each Lender that is subject to the Patriot Act (as hereinafter defined) and Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender or Agent, as applicable, to identify such Borrower in accordance with the Patriot Act.

12. CROSS-GUARANTY

12.1 Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to Agent and Lenders and their respective successors and assigns, the full and prompt payment

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(whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to Agent and Lenders by each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 12 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 12 shall be absolute and unconditional, irrespective of, and unaffected by,

(a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any Borrower is or may become a party;

(b) the absence of any action to enforce this Agreement (including this Section 12) or any other Loan Document or the waiver or consent by Agent and Lenders with respect to any of the provisions thereof;

(c) the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Agent and Lenders in respect thereof (including the release of any such security);

(d) the insolvency of any Credit Party; or

(e) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.

Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.

12.2 Waivers by Borrowers. Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Agent or Lenders to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. It is agreed among each Borrower, Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this Section 12 and such waivers, Agent and Lenders would decline to enter into this Agreement.

12.3 Benefit of Guaranty. Each Borrower agrees that the provisions of this Section 12 are for the benefit of Agent and Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and Agent or Lenders, the obligations of such other Borrower under the Loan Documents.

12.4 Waiver of Subrogation, Etc. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in Section 12.7, each Borrower hereby expressly and irrevocably waives any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor. Each Borrower acknowledges and agrees that this waiver is intended to benefit Agent and

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Lenders and shall not limit or otherwise affect such Borrower’s liability hereunder or the enforceability of this Section 12, and that Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 12.4.

12.5 Election of Remedies. If Agent or any Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents giving Agent or such Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 12. If, in the exercise of any of its rights and remedies, Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Borrower hereby consents to such action by Agent or such Lender and waives any claim based upon such action, even if such action by Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by Agent or such Lender. Any election of remedies that results in the denial or impairment of the right of Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations. In the event Agent or any Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Agent or such Lender but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Agent, Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 12, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be entitled but for such bidding at any such sale.

12.6 Limitation. Notwithstanding any provision herein contained to the contrary, each Borrower’s liability under this Section 12 (which liability is in any event in addition to amounts for which such Borrower is primarily liable under Section 1) shall be limited to an amount not to exceed as of any date of determination the greater of:

(a) the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and

(b) the amount that could be claimed by Agent and Lenders from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower’s right of contribution and indemnification from each other Borrower under Section 12.7.

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12.7 Contribution with Respect to Guaranty Obligations.

(a) To the extent that any Borrower shall make a payment under this Section 12 of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

(b) As of any date of determination, the “Allocable Amount” of any Borrower shall be equal to the maximum amount of the claim that could then be recovered from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

(c) This Section 12.7 is intended only to define the relative rights of Borrowers and nothing set forth in this Section 12.7 is intended to or shall impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 12.1. Nothing contained in this Section 12.7 shall limit the liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and accrued interest, Fees and expenses with respect thereto for which such Borrower shall be primarily liable.

(d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Borrower to which such contribution and indemnification is owing.

(e) The rights of the indemnifying Borrowers against other Credit Parties under this Section 12.7 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of the Commitments.

12.8 Liability Cumulative. The liability of Borrowers under this Section 12 is in addition to and shall be cumulative with all liabilities of each Borrower to Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

[Signature Pages Follow]

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

BORROWERS:
PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.)
PERFUMANIA, INC.
MAGNIFIQUE PARFUMES AND COSMETICS, INC.
TEN KESEF II, INC.
PERFUMANIA PUERTO RICO, INC.
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and Chief Executive Officer
QUALITY KING FRAGRANCE, INC.
SCENTS OF WORTH, INC.
FIVE STAR FRAGRANCE COMPANY, INC.
NORTHERN GROUP, INC.
By:	/s/    Donna Dellomo
Name:	Donna Dellomo
Title:	Chief Financial Officer and Secretary
DISTRIBUTION CONCEPTS, LLC
By:	/s/    Rene Garcia
Name:	Rene Garcia
Title:	President

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GENERAL ELECTRIC CAPITAL CORPORATION, as Agent, Collateral Agent and Lender
By:	/s/    Meenoo Sameer
	Duly Authorized Signatory

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The following Persons are signatories to this Agreement in their capacity as Credit Parties and not as Borrowers.

PERFUMANIA.COM, INC.
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and Chief Executive Officer
FLOWING VELVET, INC.
ALADDIN FRAGRANCES, INC.
NICHE MARKETING GROUP, INC.
NORTHERN AMENITIES, LTD.
NORTHERN BRANDS, INC.
By:	/s/    Donna Dellomo
Name:	Donna Dellomo
Title:	Treasurer and Secretary
MODEL REORG ACQUISITION LLC
By:	/s/    Donna Dellomo
Name:	Donna Dellomo
Title:	Treasurer and Secretary
JACAVI, LLC
By:	/s/    Rene Garcia
Name:	Rene Garcia
Title:	President

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WACHOVIA BANK NATIONAL ASSOCIATION
By:	/s/    Ernest May
Name:	Ernest May
Title:	Director

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BANK OF AMERICA, N.A.
By:	/s/    Patrick Gilligan
Name:	Patrick Gilligan
Title:	Vice President

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TD BANK, N.A.
By:	/s/    Robert Munns
Name:	Robert Munns
Title:	Vice President

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UNION BANK OF CALIFORNIA
By:	/s/    Brent Housteau
Name:	Brent Housteau
Title:	Vice President

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RBS BUSINESS CAPITAL, a division of RBS Asset Finance, Inc.
By:	/s/    Jennifer L. Mannila
Name:	Jennifer L. Mannila
Title:	Vice President

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BANK LEUMI USA
By:	/s/    John Grieco
Name:	John Grieco
Title:	First Vice President
By:	/s/    Nancy Pulla
Name:	Nancy Pulla
Title:	Assistant Treasurer

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ANNEX A (Recitals)

to

CREDIT AGREEMENT

DEFINITIONS

Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings, and all references to Sections, Exhibits, Schedules or Annexes in the following definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the Agreement:

“Account Debtor” means any Person who is or may become obligated to any Credit Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a payment intangible).

“Accounting Changes” has the meaning ascribed thereto in Annex G.

“Accounts” means all “accounts,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, or Instruments), (including any such obligations that may be characterized as an account or contract right under the Code), (b) all of each Credit Party’s rights in, to and under all purchase orders or receipts for goods or services, (c) all of each Credit Party’s rights to any goods represented by any of the foregoing (including unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all rights to payment due to any Credit Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Credit Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Credit Party), (e) all health care insurance receivables and (f) all collateral security of any kind, given by any Account Debtor or any other Person with respect to any of the foregoing.

“Acquired Business” means, collectively, Model Reorg, QKF, Scents of Worth, Flowing Velvet, Aladdin Fragrances, Niche Marketing, Northern Amenities, Northern Brands, and Five Star Fragrance, and their respective subsidiaries engaged in the fragrance business.

“Acquisition” means the merger of Model Reorg with and into Model Reorg Acquisition LLC pursuant to the Acquisition Agreement.

“Acquisition Agreement” means the Agreement and Plan of Merger, dated as of December 21, 2007, by and among Perfumania Holdings, Model Reorg, the Stockholders of Model Reorg and Model Reorg Acquisition LLC, as amended by the First Amendment to Merger Agreement dated as of July 8, 2008.

“Advance” means any Revolving Credit Advance or Swing Line Advance, as the context may require.

“Advances to Suppliers” means the amounts, which shall be net of any reserves (such reserves not to exceed $5,000,000 in the aggregate for all Borrowers at any time), outstanding at any one time, as determined in accordance with GAAP, (i) advanced by any Borrower to any supplier as prepayments for Inventory, without deduction or setoff for any sums owed by any Borrower to such supplier, and (ii) advanced by any Borrower to any other Borrower or to any Guarantor for use by the recipient to purchase Inventory.

“Affiliate” means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person’s officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of any Borrower. For the purposes of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term “Affiliate” shall specifically exclude Agent and each Lender.

“Agent” means GE Capital in its capacity as Agent for Lenders or its successor appointed pursuant to Section 9.7.

“Agreement” means the Credit Agreement by and among Borrowers, the other Credit Parties party thereto, GE Capital, as Agent and Lender and the other Lenders from time to time party thereto, as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Aladdin Fragrances” has the meaning ascribed to it in the preamble to the Agreement.

“Appendices” has the meaning ascribed to it in the recitals to the Agreement.

“Applicable L/C Margin” means the per annum fee, from time to time in effect, payable with respect to outstanding Letter of Credit Obligations as determined by reference to Section 1.5(a).

“Applicable Margins” means collectively the Applicable L/C Margin, the Applicable Unused Line Fee Margin, the Applicable Revolver Index Margin and the Applicable Revolver LIBOR Margin.

“Applicable Revolver Index Margin” means the per annum interest rate margin from time to time in effect and payable in addition to the Index Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

“Applicable Revolver LIBOR Margin” means the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a).

“Applicable Unused Line Fee Margin” means the per annum fee, from time to time in effect, payable in respect of Borrowers’ non-use of committed funds pursuant to Section 1.9(b), which fee is determined by reference to Section 1.5(a).

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11 U.S.C. §§101 et seq.

“Bellport Sublease” means that certain sub-sublease between Model Reorg and QKD, as sub-sublandlord, dated October 1, 2007, as amended by that certain First Amendment to Sub-Sublease, dated October 1, 2007.

“Board of Directors” shall mean, with respect to any person, (i) in the case of any corporation, the board of directors of such person, (ii) in the case of any limited liability company, the board of managers of such person, (iii) in the case of any partnership, the Board of Directors of the general partner of such person and (iv) in any other case, the functional equivalent of the foregoing.

“Blocked Accounts” has the meaning ascribed to it in Annex C.

“Borrower Representative” means Perfumania Holdings in its capacity as Borrower Representative pursuant to the provisions of Section 1.1(c).

“Borrowers” and “Borrower” have the respective meanings ascribed thereto in the preamble to the Agreement.

“Borrowing Availability” means as of any date of determination as to all Borrowers, the lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, less the sum of the aggregate Revolving Loan and Swing Line Loan then outstanding.

“Borrowing Base” means, as of any date of determination by Agent, from time to time, an amount equal to the sum at such time of:

(a) 85% of the book value of Eligible Accounts; and

(b) up to 85% of the appraised net orderly liquidation value percentage (from the most recently completed and delivered appraisal of Borrowers’ Inventory pursuant to this Agreement; provided, that, during the period beginning December 16 and ending December 31 of each year, the net orderly liquidation value percentage for the immediately following month of January shall be used in this calculation) of Eligible Inventory, valued at the lower of cost (determined on a first-in, first-out basis) or market; in each case,

less any Reserves established by Agent in its reasonable credit judgment at such time including, without limitation, in the case of Eligible L/C Inventory, Reserves for duties, customs brokers, freight, taxes, insurance and other Charges and expenses pertaining to such Inventory.

“Borrowing Base Certificate” means a certificate to be executed and delivered from time to time by Borrowers in the form attached to the Agreement as Exhibit 4.1(b).

“Business Day” means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day.

“Capital Expenditures” means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP; provided, that, expenditures made from the proceeds of casualty insurance or condemnation in connection with the repair or replacement of the asset covered by such casualty insurance or condemnation, shall be excluded from the calculation of Capital Expenditures.

“Capital Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person.

“Capital Lease Obligation” means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease.

“Cash Collateral Account” has the meaning ascribed to it Annex B.

“Cash Equivalents” has the meaning ascribed to it in Annex B.

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

A “Change in Control” shall be deemed to have occurred if:

(a) at any time a change of control occurs, resulting in a default thereunder (other than a default which has been waived) or the requirement of any Borrower to pay money or offer to pay money, under any Indebtedness of any Borrower or any of their Subsidiaries in an aggregate outstanding principal amount exceeding $5,000,000;

(b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that for purposes of this clause such person or group shall be deemed to have “beneficial ownership” of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly,

of Voting Stock of Borrower Representative representing more than 50% of the voting power of the total outstanding Voting Stock of Borrower Representative;

(c) individuals who, on the Closing Date, constituted the Board of Directors of Borrower Representative (together with any new directors whose election to such Board of Directors or whose nomination for election was approved by a vote of a majority of the members of the Board of Directors of Borrower Representative, which members comprising such majority are then still in office and were either directors on the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Borrower Representative; or

(d) Borrower Representative at any time ceases to own, directly or indirectly, 100% of the Equity Interests of each other Borrower.

For purposes of this definition, a person shall not be deemed to have beneficial ownership of Equity Interests subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement.

“Charges” means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Credit Party, (d) any Credit Party’s ownership or use of any properties or other assets, or (e) any other aspect of any Credit Party’s business.

“Chattel Paper” means any “chattel paper,” as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Credit Party.

“Closing Date” means August 11, 2008.

“Closing Checklist” means the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as Annex D.

“Code” means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

“Collateral” means the property covered by the Security Agreement, the Mortgages (if any) and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations.

“Collateral Agent” means GE Capital in its capacity as Collateral Agent for Lenders.

“Collateral Documents” means the Security Agreement, the Pledge Agreements, the Guaranties, the Mortgages (if any), the Patent Security Agreement, the Trademark Security Agreement, the Copyright Security Agreement and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations.

“Collateral Reports” means the reports with respect to the Collateral referred to in Annex F.

“Collection Account” means that certain account of Agent, account number 50279513 in the name of Agent at DeutscheBank Trust Company Americas in New York, New York ABA No. 021 001 033, or such other account as may be specified in writing by Agent as the “Collection Account.”

“Commitment Termination Date” means the earliest of (a) August 11, 2011, (b) the date of termination of Lenders’ obligations to make Advances and to incur Letter of Credit Obligations or permit existing Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers of the Loans and the cancellation and return (or stand-by guarantee) of all Letters of Credit or the cash collateralization of all Letter of Credit Obligations pursuant to Annex B, and the permanent reduction of all Commitments to zero dollars ($0).

“Commitments” means (a) as to any Lender, such Lender’s Revolving Loan Commitment (including without duplication the Swing Line Lender’s Swing Line Commitment as a subset of its Revolving Loan Commitment) as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments (including without duplication the Swing Line Lender’s Swing Line Commitment as a subset of its Revolving Loan Commitment), which aggregate commitment shall be Two Hundred Fifty Million Dollars ($250,000,000) on the Closing Date, as to each of clauses (a) and (b), as such commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement.

“Compliance Certificate” has the meaning ascribed to it in Annex E.

“Concentration Accounts” has the meaning ascribed to it in Annex C.

“Consolidators” means Quality Consolidators, Inc., a Puerto Rico corporation.

“Contracts” means all “contracts,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, and in any event including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Credit Party may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.

“Control Letter” means a letter agreement between Agent and (i) the issuer of uncertificated securities with respect to uncertificated securities in the name of any Credit Party, (ii) a securities intermediary with respect to securities, whether certificated or uncertificated, securities entitlements and other financial assets held in a securities account in the name of any Credit Party, (iii) a futures commission merchant or clearing house, as applicable, with respect to commodity accounts and commodity contracts held by any Credit Party, whereby, among other things, the issuer, securities intermediary or futures commission merchant limits any security interest in the applicable financial assets in a manner reasonably satisfactory to Agent, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such financial assets, and agrees to follow the instructions or entitlement orders of Agent without further consent by the affected Credit Party.

“Copyright License” means any and all rights now owned or hereafter acquired by any Credit Party under any written agreement granting any right to use any Copyright or Copyright registration.

“Copyright Security Agreements” means the Copyright Security Agreements made in favor of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

“Copyrights” means all of the following now owned or hereafter adopted or acquired by any Credit Party: (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof.

“Credit Parties” means each Borrower, each Guarantor and each of their respective Subsidiaries.

“Dated Account” means an Account of a Borrower due more than sixty (60) days from its due date and more than ninety (90) days from its invoice date pursuant to a specific dating program disclosed to Agent and created in the ordinary course of such Borrower’s business.

“Default” means any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default.

“Default Rate” has the meaning ascribed to it in Section 1.5(d).

“Deposit Accounts” means all “deposit accounts” as such term is defined in the Code, now or hereafter held in the name of any Credit Party.

“Disbursement Accounts” has the meaning ascribed to it in Annex C.

“Disclosure Schedules” means the Schedules prepared by Borrowers and denominated as Disclosure Schedules (1.4) through (6.16) and Disclosure Schedule B in the Index to the Agreement.

“Documents” means all “documents,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located.

“Dollars” or “$” means lawful currency of the United States of America.

“EBITDA” means, with respect to any Person for any fiscal period, without duplication, an amount equal to (a) combined net income on a FIFO basis of such Person for such period determined in accordance with GAAP, minus (b) the sum of (i) income tax credits, (ii) interest income, (iii) rental income, (iv) freight income, (v) gain from extraordinary items for such period, (vi) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), and (vii) any other non-cash gains that have been added in determining combined net income, in each case to the extent included in the calculation of combined net income of such Person for such period in accordance with GAAP, but without duplication, plus (c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) depreciation and amortization for such period, (v) amortized debt discount for such period, (vi) transaction fees incurred in connection with the Acquisition that were actually expensed in an amount not to exceed $2,000,000, (vii) unamortized historical financing fees that are written off in an amount not to exceed $300,000, and (viii) the amount of any deduction to combined net income as the result of any grant to any members of the management of such Person of any Stock, in each case to the extent included in the calculation of combined net income of such Person for such period in accordance with GAAP, but without duplication. For purposes of this definition, the following items shall be excluded in determining combined net income of a Person: (1) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (3) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (4) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period in a maximum amount per Fiscal Year not to exceed $1,500,000; (5) any write-up of any asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any

Indebtedness, of such Person; and (8) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets.

“Eligible Accounts” has the meaning ascribed to it in Section 1.6.

“Eligible Inventory” has the meaning ascribed to it in Section 1.7.

“Eligible L/C Inventory” means all raw materials and finished goods Inventory owned by Borrowers and covered by documentary Letters of Credit, which Inventory is in transit to one of the Borrowers’ facilities and which Inventory (a) is owned by one of the Borrowers, (b) is fully insured, (c) is subject to a first priority security interest in and lien upon such goods in favor of Agent (except for any possessor lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to such Borrowers), (d) is evidenced or deliverable pursuant to Documents that have been delivered to Agent or an agent acting on its behalf or designating Agent as Consignee, and (e) is otherwise deemed to be “Eligible Inventory” hereunder.

“Environmental Laws” means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes.

“Environmental Liabilities” means, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property.

“Environmental Permits” means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.

“Equipment” means all “equipment,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located and, in any event, including all such Credit Party’s machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto.

“Equity Interest” shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of property of, such partnership, whether outstanding on the date hereof or issued after the Closing Date, but excluding debt securities convertible or exchangeable into such equity.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder.

“ERISA Affiliate” means, with respect to any Credit Party, any trade or business (whether or not incorporated) that, together with such Credit Party, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.

“ERISA Event” means, with respect to any Credit Party or any ERISA Affiliate, (a) with respect to a Title IV Plan, any event described in Section 4043(c) of ERISA for which notice to the PBGC has not been waived; (b) the withdrawal of any Credit Party or 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 any Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan in a distress termination described in Section 4041(c) of ERISA or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) with respect to a Title IV Plan, the

existence of an “accumulated funding deficiency” (as defined in Section 412 of the IRC or Section 302 of ERISA) whether or not waived, or the failure to make by its due date a required installment under Section 412(m) of the Code or the failure to make any required contribution to a Multiemployer Plan; (g) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to a Title IV Plan; (h) the making of any amendment to any Title IV Plan which could result in the imposition of a lien or the posting of a bond or other security; (i) with respect to a Title IV Plan an event described in Section 4062(e) of ERISA; (j) any other event or condition that would 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 for the imposition of liability under Section 4069 or 4212(c) of ERISA; (k) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; (l) the loss of a Qualified Plan’s qualification or tax exempt status; or (m) the termination of a Plan described in Section 4064 of ERISA.

“Existing Nussdorf Convertible Note” means that Subordinated Convertible Note dated as of December 9, 2004 (as amended by that certain Amendment to Subordinated Convertible Note dated as of April 28, 2006), issued by Perfumania Holdings to Stephen Nussdorf and Glenn Nussdorf, in the original principal amount of $5,000,000.

“Event of Default” has the meaning ascribed to it in Section 8.1.

“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et seq.

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

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

“Fees” means any and all fees payable to Agent or any Lender pursuant to the Agreement or any of the other Loan Documents.

“Financial Covenants” means the financial covenants set forth in Annex G.

“Financial Statements” means the combined and combining income statements, statements of cash flows and balance sheets of Borrowers, the other Credit Parties and their respective Subsidiaries delivered in accordance with Section 3.4 and Annex E.

“Fiscal Month” means any of the monthly accounting periods of Borrowers.

“Fiscal Quarter” means any of the quarterly accounting periods of Borrowers, ending on or about month-end of January, April, July and October of each year.

“Fiscal Year” means any of the annual accounting periods of Borrowers ending on or about month-end of January of each year.

“Five Star Fragrance” has the meaning ascribed to it in the preamble to the Agreement.

“Fixed Charges” means, with respect to any Person for any fiscal period, (a) the aggregate of all Interest Expense paid during such period, plus (b) scheduled payments of principal with respect to Indebtedness during such period, (c) income taxes paid or payable in cash with respect to such fiscal period, plus (d) Restricted Payments made pursuant to and in compliance with Sections 6.13(e) and 6.13(f).

“Fixed Charge Coverage Ratio” means, with respect to any Person for any fiscal period, the ratio of (a) EBITDA minus cash Capital Expenditures during such period other than Capital Expenditures funded by purchase money Indebtedness or Capital Leases permitted by Section 6.7 of the Agreement, to (b) Fixed Charges, calculated on a FIFO basis.

“Fixtures” means all “fixtures” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party.

“Flowing Velvet” has the meaning ascribed to it in the preamble to the Agreement.

“Funded Debt” means, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons.

“GAAP” means generally accepted accounting principles in the United States of America consistently applied, as such term is further defined in Annex G to the Agreement.

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

“GE Capital Credit Facility” means that certain Credit Agreement, dated as of December 20, 2002 (as amended or otherwise modified), by and among Quality King Distributors, Inc., QK Healthcare, Inc., Olla Beauty Supply, Inc., Quality King Fragrance, Inc., Model Imperial, Inc. and G.P.C. Sales, Inc. (solely with respect to its Five Star Fragrance Company division), the Credit Parties party thereto and GE Capital, in its capacity as agent thereunder.

“GE Capital Fee Letter” means that certain letter, dated as of May 16, 2008, between GE Capital and Borrower Representative with respect to certain Fees to be paid from time to time by Borrowers to GE Capital.

“General Intangibles” means all “general intangibles,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including all right, title and interest that such Credit Party may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Credit Party or any computer bureau or service company from time to time acting for such Credit Party.

“Goods” means all “goods” as defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, including embedded software to the extent included in “goods” as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guaranteed Indebtedness” means as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary obligation”) of any other Person (the “primary obligor”) in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed to be an

amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof.

“Guaranties” means, collectively, each guaranty executed by any Guarantor in favor of Agent and Lenders in respect of the Obligations.

“Guarantors” means each of the Persons listed in the third Recital of the Agreement and each other Person, if any, that executes a guaranty or other similar agreement in favor of Agent, for itself and the ratable benefit of Lenders, in connection with the transactions contemplated by the Agreement and the other Loan Documents.

“Hazardous Material” means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or other similar term or phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.

“Indebtedness” means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property, payment for which is deferred 6 months or more, but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than 6 months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers’ acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness 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), (e) all Capital Lease Obligations and the present value (discounted at the Index Rate as in effect on the Closing Date) of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness 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 or other assets (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations.

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

“Indemnified Person” has the meaning ascribed to in Section 1.13.

“Index Rate” means, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate.

“Index Rate Loan” means a Loan or portion thereof bearing interest by reference to the Index Rate.

“Instruments” means all “instruments,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.

“Intellectual Property” means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks.

“Intercompany Notes” has the meaning ascribed to it in Section 6.3.

“Interest Expense” means, with respect to any Person for any fiscal period, interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including, interest expense with respect to any Funded Debt of such Person and interest expense for the relevant period that has been capitalized on the balance sheet of such Person.

“Interest Payment Date” means (a) as to any Index Rate Loan, the first Business Day of each month to occur while such Loan is outstanding, and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period; provided, that in the case of any LIBOR Period greater than three months in duration, interest shall be payable at three-month intervals and on the last day of such LIBOR Period; and provided further that, in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid in full and (y) the Commitment Termination Date shall be deemed to be an “Interest Payment Date” with respect to any interest that has then accrued under the Agreement.

“Inventory” means all “inventory,” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of any Credit Party for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Credit Party’s business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software.

“Inventory Turnover Ratio” means, as of any date of determination, (i) the cost of goods sold, calculated on a FIFO basis, of Borrowers on a combined basis for the 12-month period then ended on such date of determination divided by (ii) the average of the FIFO book value of the Inventory of Borrowers on a combined basis on the last day of each of the four Fiscal Quarters ending with the Fiscal Quarter ending on such date of determination.

“Investment Property” means all “investment property” as such term is defined in the Code now owned or hereafter acquired by any Credit Party, wherever located, including (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Credit Party, including the rights of any Credit Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts of any Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all commodity accounts held by any Credit Party.

“IRC” means the Internal Revenue Code of 1986 and all regulations promulgated thereunder.

“IRS” means the Internal Revenue Service.

“Jacavi” has the meaning ascribed to it in the preamble to the Agreement.

“L/C Issuer” has the meaning ascribed to it in Annex B.

“L/C Sublimit” has the meaning ascribed to it in Annex B.

“Lenders” means (a) GE Capital, the other Lenders named on the signature pages of the Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations, such term shall include any assignee of such Lender and (b) solely for the purpose of obtaining the benefit of the Liens granted to the Agent for the benefit of the Lenders under the Collateral Documents, a Person to whom any Obligations in respect of a Secured Rate Contract are owed. For the avoidance of doubt, any Person to whom any Obligations in respect of a Secured Rate Contract are owed and which does not hold any Loans or Commitments shall not be entitled to any other rights as a “Lender” under this Agreement or any other Loan Document.

“Letter of Credit Fee” has the meaning ascribed to it in Annex B.

“Letter of Credit Obligations” means all outstanding obligations incurred by Agent and Lenders at the request of Borrower Representative, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of a participation as set forth in Annex B with respect to any Letter of Credit. The amount of such Letter of Credit Obligations shall equal the maximum amount that may be payable at such time or at any time thereafter by Agent or Lenders thereupon or pursuant thereto.

“Letters of Credit” means documentary or standby letters of credit issued for the account of any Borrower by any L/C Issuer, and bankers’ acceptances issued by any Borrower, for which Agent and Lenders have incurred Letter of Credit Obligations.

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including rights to payment or performance under a letter of credit, whether or not such Credit Party, as beneficiary, has demanded or is entitled to demand payment or performance.

“Leverage Ratio” means, with respect to Borrowers, on a consolidated basis, the ratio of (a) Senior Debt as of any date of determination, to (b) EBITDA for the twelve months ending on that date of determination.

“LIBOR Business Day” means a Business Day on which banks in the City of London are generally open for interbank or foreign exchange transactions.

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference to the LIBOR Rate.

“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower Representative pursuant to the Agreement and ending one, two, three or six months thereafter, as selected by Borrower Representative’s irrevocable notice to Agent as set forth in Section 1.5(e); provided, that the foregoing provision relating to LIBOR Periods is subject to the following:

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

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

(c) any LIBOR Period that begins on the last LIBOR 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 LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;

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

(e) Borrower Representative shall select LIBOR Periods so that there shall be no more than 15 separate LIBOR Loans in existence at any one time, but may not request more than 9 separate LIBOR Loans on any day.

“LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent equal to:

(a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period that appears on Reuters Screen LIBOR01 as of 11:00 a.m. (London time), on the second full LIBOR Business Day next preceding the first day of such LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by

(b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board) that are required to be maintained by a member bank of the Federal Reserve System.

If such interest rates shall cease to be available from Telerate News Service (or its successor satisfactory to Agent), the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower Representative.

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Credit Party.

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).

“Litigation” has the meaning ascribed to it in Section 3.13.

“Loan Account” has the meaning ascribed to it in Section 1.12.

“Loan Documents” means the Agreement, the Notes, the Collateral Documents, the Master Standby Agreement, the Master Documentary Agreement, and all other agreements, instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter whether heretofore, now or hereafter executed

by or on behalf of any Credit Party, or any employee of any Credit Party, and delivered to Agent or any Lender in connection with the Agreement or the transactions contemplated thereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loans” means the Revolving Loan and the Swing Line Loan.

“Lock Boxes” has the meaning ascribed to it in Annex C.

“Margin Stock” has the meaning ascribed to it in Section 3.10.

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

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

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, prospects or financial condition of the Borrowers considered as a whole, (b) the Borrowers’ ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement, (c) the Collateral or Agent’s Liens, on behalf of itself and Lenders, on the Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s rights and remedies under the Agreement and the other Loan Documents.

“Maximum Amount” means, as of any date of determination, an amount equal to the Revolving Loan Commitment of all Lenders as of that date.

“Model Reorg” means Model Reorg, Inc., a New York corporation.

“Mortgaged Properties” has the meaning assigned to it in Annex D.

“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Credit Party to Agent on behalf of itself and Lenders with respect to the Mortgaged Properties, all in form and substance reasonably satisfactory to Agent.

“Multiemployer Plan” means a “multiemployer plan” as defined in Sections 3(37) or 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them.

“Niche Marketing” has the meaning ascribed to it in the preamble to the Agreement.

“Non-Funding Lender” has the meaning ascribed to it in Section 9.9(a)(ii).

“Northern Amenities” has the meaning ascribed to it in the preamble to the Agreement.

“Northern Brands” has the meaning ascribed to it in the preamble to the Agreement.

“Notes” means, collectively, the Revolving Notes and the Swing Line Note.

“Notice of Conversion/Continuation” has the meaning ascribed to it in Section 1.5(e).

“Notice of Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a).

“Nussdorf Siblings” means, collectively, Glenn Nussdorf, Stephen Nussdorf and Arlene Nussdorf, either in his or her own right or (individually or collectively) in his or her capacity as trustee of one or more trusts created for the benefit of his or her respective lineal descendants.

“Nussdorf Subordinated Debt” means unsecured Subordinated Debt owing to the Nussdorf Siblings in an aggregate principal amount not to exceed $56,000,000 and otherwise on terms satisfactory to Agent.

“Obligations” means all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Agent, any Lender or any Secured Swap Provider, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement, letter of credit agreement or other instrument, arising under the Agreement, any of the other Loan Documents or any Secured Rate Contract. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against any Credit Party in bankruptcy, whether or not allowed in such case or proceeding), Fees, hedging obligations under swaps, caps and collar arrangements provided by any Lender in accordance with the terms of the Agreement, expenses, attorneys’ fees and any other sum chargeable to any Credit Party under the Agreement, any of the other Loan Documents or any Secured Rate Contract.

“Overadvance” has the meaning ascribed to it in Section 1.1(a)(iv).

“Patent License” means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right with respect to any invention on which a Patent is in existence.

“Patent Security Agreements” means the Patent Security Agreements made in favor of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

“Patents” means all of the following in which any Credit Party now holds or hereafter acquires any interest: (a) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof.

“Patriot Act” has the meaning ascribed to it in Section 11.18.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means a Plan described in Section 3(2) of ERISA.

“Perfumania Holdings” has the meaning ascribed to it in the preamble to the Agreement.

“Permitted Encumbrances” means the following encumbrances: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 5.2(b); (b) pledges or deposits of money securing statutory obligations under workmen’s compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (d) inchoate and unperfected workers’, mechanics’ or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing liabilities in an outstanding aggregate amount not in excess of $250,000 at any time, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (g) any attachment or judgment lien not constituting an Event of Default under Section 8.1(j); (h) zoning restrictions, easements, licenses, or other restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Estate; (i) presently existing or hereafter created Liens in favor of Agent, on behalf of Lenders; and (j) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the Agreement.

“Permitted Hedge Agreements” means, collectively, (A) the interest rate swap agreements in existence on the Closing Date, if any, and (B) other interest rate cap, swap or collar agreements, or other non-speculative agreements or arrangements designed to provide protection against fluctuations in interest rates in form and substance satisfactory to Agent.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).

“Plan” means, at any time, an “employee benefit plan”, as defined in Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to or has maintained, contributed to or had an obligation to contribute to at any time within the past 7 years on behalf of participants who are or were employed by any Credit Party or ERISA Affiliate.

“Pledge Agreements” means, collectively, the pledge agreements entered into on or after the Closing Date by any Credit Party (as required by the Agreement or any other Loan Document).

“Prior Lender” means (i) collectively, GMAC Commercial Finance LLC and Wachovia Bank N.A. in their capacity as lenders in connection with the Prior Lender Obligations described in clause (i) of such definition, and (ii) GE Capital in its capacity as agent under the GE Capital Credit Facility.

“Prior Lender Obligations” means (i) all obligations of the Credit Parties under that certain Amended and Restated Revolving Credit and Security Agreement with Prior Lender, dated December 11, 2006 (as amended or otherwise modified) and (ii) the obligations of Model Reorg under the GE Capital Credit Facility.

“Proceeds” means “proceeds,” as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Credit Party against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Credit Party against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral.

“Pro Forma” means the unaudited combined and combining balance sheet of Borrowers, the other Credit Parties and their respective Subsidiaries as of June 30, 2008 after giving pro forma effect to the Related Transactions.

“Projections” means Borrowers’ forecasted combined and, commencing with the Projections for the Fiscal Year ending January, 2009, combining: (a) balance sheets; (b) profit and loss statements; and (c) cash flow statements, all prepared on a basis consistent with the historical Financial Statements of the Borrowers, together with appropriate supporting details and a statement of underlying assumptions.

“Pro Rata Share” means with respect to all matters relating to any Lender, (a) with respect to the Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments of all Lenders, and (b) with respect to all Loans, the percentage obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments of all Lenders, and (c) with respect to all Loans on and after the Commitment Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders.

“QKD” means Quality King Distributors, Inc., a New York corporation.

“QKD Subordinated Debt” means unsecured Subordinated Debt owing to QKD in an aggregate principal amount not to exceed $35,000,000 and otherwise on terms satisfactory to Agent.

“QKF” has the meaning ascribed to it in the preamble to the Agreement.

“Qualified Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC.

“Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with respect to any Lender that is an investment fund that invests in commercial loans, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person proposed to become a Lender after the Closing Date and determined by Agent to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such Person proposed to become a Lender after the Closing Date and that holds Subordinated Debt or Stock issued by any Credit Party shall be a Qualified Assignee.

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

“Real Estate” has the meaning ascribed to it in Section 3.6.

“Refinancing” means the repayment in full by Borrowers of the Prior Lender Obligations on the Closing Date.

“Refunded Swing Line Loan” has the meaning ascribed to it in Section 1.1(b)(iii).

“Related Transactions” means the initial borrowing under the Revolving Loan on the Closing Date, the Refinancing, the Acquisition, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents.

“Related Transactions Documents” means the Loan Documents and all other agreements or instruments executed in connection with the Related Transactions.

“Release” means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property.

“Requisite Lenders” means Lenders having (a) more than 51% of the Commitments of all Lenders, or (b) if the Commitments have been terminated, more than 51% of the aggregate outstanding amount of all Loans.

“Reserves” means (a) reserves established by Agent from time to time against Eligible Inventory pursuant to Section 5.9, in its reasonable credit judgment, and (b) such other reserves against Eligible Accounts, Eligible Inventory or Borrowing Availability of any Borrower that Agent may, in its reasonable credit judgment, establish from time to time. Without limiting the generality of the foregoing, Reserves established to ensure the payment of accrued Interest Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent’s credit judgment.

“Restricted Payment” means, with respect to any Credit Party (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of such Credit Party’s Stock or any other payment or distribution made in respect thereof, either directly or indirectly; (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of such Credit Party now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of such Credit Party’s Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; (f) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Credit Party other than payment of compensation in the ordinary course of business to Stockholders who are employees of such Person; and (g) any payment of management fees (or other fees of a similar nature) by such Credit Party to any Stockholder of such Credit Party or its Affiliates.

“Retiree Welfare Plan” means, at any time, a welfare plan (within the meaning of Section 3(1) of ERISA) that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant’s termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC or other similar state law and at the sole expense of the participant or the beneficiary of the participant.

“Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a)(i), and, unless otherwise expressly set forth herein, shall include Seasonal Advances.

“Revolving Lenders” means, as of any date of determination, Lenders having a Revolving Loan Commitment.

“Revolving Loan” means, at any time, the sum of (i) the aggregate amount of Revolving Credit Advances outstanding to Borrower plus (ii) the aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless the context otherwise requires, references to the outstanding principal balance of the Revolving Loan shall include the outstanding balance of Letter of Credit Obligations.

“Revolving Loan Commitment” means (a) as to any Lender, the aggregate Commitment of such Lender to make Revolving Credit Advances or incur Letter of Credit Obligations as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Credit Advances or incur Letter of Credit Obligations, which aggregate commitment shall be Two Hundred Fifty Million Dollars ($250,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement.

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).

“Scents of Worth” has the meaning ascribed to it in the preamble to the Agreement.

“Seasonal Advance” has the meaning ascribed to it in Section 1.1(a)(iii).

“Seasonal Advance Commitment” means, as to any Lender, the commitment of such Lender to make Seasonal Advances as set forth on Annex J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of such Lender.

“Seasonal Advance Period” means the period beginning August 15, 2008 and ending October 31, 2008.

“Seasonal Borrowing Availability” means as of any date of determination as to all Borrowers, the lesser of (i) the Seasonal Maximum Amount and (ii) the Seasonal Borrowing Base.

“Seasonal Borrowing Base” means, as of any date of determination by Agent, from time to time, an amount equal to the excess at such time of: (i) 85% of the net orderly liquidation value percentage (from the most recently completed and delivered appraisal of Borrowers’ Inventory pursuant to this Agreement) for the months of November and December, 2008 of Eligible Inventory, valued at the lower of cost (determined on a first-in, first-out basis) or market, over (ii) 85% of the net orderly liquidation value percentage for the months other than November and December, 2008 of Eligible Inventory, valued at the lower of cost (determined on a first-in, first-out basis) or market, less any Reserves established by Agent at such time including, without limitation, in the case of Eligible L/C Inventory, Reserves for duties, customs brokers, freight, taxes, insurance and other Charges and expenses pertaining to such Inventory.

“Seasonal Maximum Amount” means, as of any date of determination, an amount equal to $15,000,000.

“Secured Rate Contract” means any Rate Contract between Borrower and the counterparty thereto which has been provided or arranged by any Lender or an Affiliate of any Lender.

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

“Security Agreement” means the Security Agreement of even date herewith entered into by and among Agent, on behalf of itself and Lenders, and each Credit Party that is a signatory thereto.

“Senior Debt” means, with respect to any Person, the Obligations.

“Services Agreement” means that certain Services Agreement dated on or prior to the date hereof between QKD and Perfumania Holdings.

“Software” means all “software” as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program.

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

“Stock” means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934).

“Stockholder” means, with respect to any Person, each holder of Stock of such Person.

“Subordinated Debt” means the Indebtedness of Borrowers evidenced by the agreements governing the QKD Subordinated Debt and the Nussdorf Subordinated Debt and any other Indebtedness of any Credit Party subordinated to the Obligations in a manner and form satisfactory to Agent and Lenders in their sole discretion, as to right and time of payment and as to any other rights and remedies thereunder, including, without limitation, Indebtedness under the Existing Nussdorf Convertible Note.

“Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower.

“Supermajority Lenders” means Lenders having (a) 70% or more of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been terminated, 70% or more of the aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan being attributed to the Lender making such Loan) and Letter of Credit Obligations.

“Supporting Obligations” means all “supporting obligations” as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(b)(i).

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(b)(i).

“Swing Line Commitment” means, as to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of the Swing Line Lender.

“Swing Line Lender” means GE Capital.

“Swing Line Loan” means, as the context may require, at any time, the aggregate amount of Swing Line Advances outstanding to any Borrower or to all Borrowers.

“Swing Line Note” has the meaning ascribed to it in Section 1.1(b)(ii).

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Agent or a Lender by the jurisdictions under the laws of which Agent and Lenders are organized or conduct business or any political subdivision thereof.

“Termination Date” means the date on which (a) the Loans have been indefeasibly repaid in full, (b) all other Obligations under the Agreement and the other Loan Documents have been completely discharged (c) all Letter of Credit Obligations have been cash collateralized, canceled or backed by standby letters of credit in accordance with Annex B, and (d) none of Borrowers shall have any further right to borrow any monies under the Agreement.

“Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the IRC, and that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.

“Trademark Security Agreements” means the Trademark Security Agreements made in favor of Agent, on behalf of Lenders, by each applicable Credit Party.

“Trademark License” means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right to use any Trademark.

“Trademarks” means all of the following now owned or hereafter existing or adopted or acquired by any Credit Party: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing.

“Unfunded Pension Liability” means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such

Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of five (5) years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Credit Party or any ERISA Affiliate as a result of such transaction.

“Voting Stock” shall mean, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such person.

Rules of construction with respect to accounting terms used in the Agreement or the other Loan Documents shall be as set forth in Annex G. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, and not to any particular section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule.

Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; the word “or” is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of any Credit Party, such words are intended to signify that such Credit Party has actual knowledge or awareness of a particular fact or circumstance or that such Credit Party, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance.

ANNEX B (Section 1.2)

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CREDIT AGREEMENT

LETTERS OF CREDIT

(a) Issuance. Subject to the terms and conditions of the Agreement, Agent and Revolving Lenders agree to incur, from time to time prior to the Commitment Termination Date, upon the request of Borrower Representative on behalf of the applicable Borrower and for such Borrower’s account, Letter of Credit Obligations by causing Letters of Credit to be issued by GE Capital or a Subsidiary thereof or a bank or other legally authorized Person selected by or acceptable to Agent in its sole discretion (each, an “L/C Issuer”) for such Borrower’s account and guaranteed by Agent; provided, that if the L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be guaranteed by Agent but rather each Revolving Lender shall, subject to the terms and conditions hereinafter set forth, purchase (or be deemed to have purchased) risk participations in all such Letters of Credit issued with the written consent of Agent, as more fully described in paragraph (b)(ii) below. The aggregate amount of all such Letter of Credit Obligations shall not at any time exceed the least of (i) Twenty Five Million Dollars ($25,000,000) (the “L/C Sublimit”) and (ii) the Maximum Amount less the aggregate outstanding principal balance of the Revolving Credit Advances and the Swing Line Loan, and (iii) the Borrowing Base less the aggregate outstanding principal balance of the Revolving Credit Advances and the Swing Line Loan. No such Letter of Credit shall have an expiry date that is more than one year following the date of issuance thereof or that is later than seven (7) days prior to the Commitment Termination Date, unless otherwise determined by the Agent, in its sole discretion (including with respect to customary evergreen provisions). The letters of credit listed on Disclosure Schedule B that are outstanding on the Closing Date shall remain outstanding and, from and after the Closing Date, shall constitute Letters of Credit issued hereunder and shall be subject to all of the terms and provisions of the Agreement and the other Loan Documents applicable to Letters of Credit and Letter of Credit Obligations.

(b)(i) Advances Automatic; Participations. In the event that Agent or any Revolving Lender shall make any payment on or pursuant to any Letter of Credit Obligation, such payment shall then be deemed automatically to constitute a Revolving Credit Advance to the applicable Borrower under Section 1.1(a) of the Agreement regardless of whether a Default or Event of Default has occurred and is continuing and notwithstanding any Borrower’s failure to satisfy the conditions precedent set forth in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata Share thereof in accordance with the Agreement. The failure of any Revolving Lender to make available to Agent for Agent’s own account its Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or in respect of a Letter of Credit shall not relieve any other Revolving Lender of its obligation hereunder to make available to Agent its Pro Rata Share thereof, but no Revolving Lender shall be responsible for the failure of any other Revolving Lender to make available such other Revolving Lender’s Pro Rata Share of any such payment.

(ii) If it shall be illegal or unlawful for any Borrower to incur Revolving Credit Advances as contemplated by paragraph (b)(i) above because of an Event of Default described in Sections 8.1(h) or (i) or otherwise, or if it shall be illegal or unlawful for any Revolving Lender to be deemed to have assumed a ratable share of the reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is a Revolving Lender, then (A) immediately and without further action whatsoever, each Revolving Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation equal to such Revolving Lender’s Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations in respect of all Letters of Credit then outstanding and (B) thereafter, immediately upon issuance of any Letter of Credit, each Revolving Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation in such Revolving Lender’s Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations with respect to such Letter of Credit on the date of such issuance. Each Revolving Lender shall fund its participation in all payments or disbursements made under the Letters of Credit in the same manner as provided in the Agreement with respect to Revolving Credit Advances.

(c) Cash Collateral.

(i) If Borrowers are required to provide cash collateral for any Letter of Credit Obligations pursuant to the Agreement, including Section 8.2 of the Agreement, prior to the Commitment Termination Date, each Borrower will pay to Agent for the ratable benefit of itself and Revolving Lenders cash or cash equivalents acceptable to Agent (“Cash Equivalents”) in an amount equal to 105% of the maximum amount then available to be drawn under each applicable Letter of Credit outstanding for the benefit of such Borrower. Such funds or Cash Equivalents shall be held by Agent in a cash collateral account (the “Cash Collateral Account”) maintained at a bank or financial institution acceptable to Agent. The Cash Collateral Account shall be in the name of the applicable Borrower and shall be pledged to, and subject to the control of, Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent, on behalf of itself and Lenders, a security interest in all such funds and Cash Equivalents held in the Cash Collateral Account from time to time and all proceeds thereof, as security for the payment of all amounts due in respect of the Letter of Credit Obligations and other Obligations, whether or not then due. The Agreement, including this Annex B, shall constitute a security agreement under applicable law.

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

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

(iv) No Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds or Cash Equivalents held in the Cash Collateral Account, except that upon the termination of all Letter of Credit Obligations and the payment of all amounts payable by Borrowers to Agent and Lenders in respect thereof, any funds remaining in the Cash Collateral Account shall be applied to other Obligations then due and owing and upon payment in full of such Obligations, any remaining amount shall be paid to Borrowers or as otherwise required by law. Interest earned on deposits in the Cash Collateral Account shall be held as additional collateral.

(d) Fees and Expenses. Borrowers agree to pay to Agent for the benefit of Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each month during which any Letter of Credit Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to the Applicable L/C Margin from time to time in effect multiplied by the maximum amount available from time to time to be drawn under the applicable Letter of Credit. Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the first day of each month and on the Commitment Termination Date. In addition, Borrowers shall pay to any L/C Issuer, on demand, such fees (including all per annum fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued.

(e) Request for Incurrence of Letter of Credit Obligations. Borrower Representative shall give Agent at least two (2) Business Days prior written notice requesting the incurrence of any Letter of Credit Obligation. The notice shall be accompanied by the form of the Letter of Credit (which shall be acceptable to the L/C Issuer) and a completed Application for Standby Letter of Credit or Application for Documentary Letter of Credit (as applicable) in the form of Exhibit B-1, or B-2 attached hereto. Notwithstanding anything contained herein to the contrary, Letter of Credit applications by Borrower Representative and approvals by Agent and the L/C Issuer may be made and transmitted pursuant to electronic codes and security measures mutually agreed upon and established by and among Borrower Representative, Agent and the L/C Issuer.

(f) Obligation Absolute. The obligation of Borrowers to reimburse Agent and Revolving Lenders for payments made with respect to any Letter of Credit Obligation shall be absolute, unconditional and irrevocable, without necessity of presentment, demand, protest or other formalities, and the obligations of each Revolving Lender to make payments to Agent with respect to Letters of

Credit shall be unconditional and irrevocable. Such obligations of Borrowers and Revolving Lenders shall be paid strictly in accordance with the terms hereof under all circumstances including the following:

(i) any lack of validity or enforceability of any Letter of Credit or the Agreement or the other Loan Documents or any other agreement;

(ii) the existence of any claim, setoff, defense or other right that any Borrower or any of their respective Affiliates or any Lender may at any time have against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such transferee may be acting), Agent, any Lender, or any other Person, whether in connection with the Agreement, the Letter of Credit, the transactions contemplated herein or therein or any unrelated transaction (including any underlying transaction between any Borrower or any of their respective Affiliates and the beneficiary for which the Letter of Credit was procured);

(iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) payment by Agent (except as otherwise expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty thereof against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit or such guaranty;

(v) any other circumstance or event whatsoever, that is similar to any of the foregoing; or

(vi) the fact that a Default or an Event of Default has occurred and is continuing.

(g) Indemnification; Nature of Lenders’ Duties.

(i) In addition to amounts payable as elsewhere provided in the Agreement, Borrowers hereby agree to pay and to protect, indemnify, and save harmless Agent and each Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees and allocated costs of internal counsel) that Agent or any Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any Lender seeking indemnification or of any L/C Issuer to honor a demand for payment under any Letter of Credit or guaranty thereof as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority, in each case other than to the extent solely as a result of the gross negligence or willful misconduct of Agent or such Lender (as finally determined by a court of competent jurisdiction).

(ii) As between Agent and any Lender and Borrowers, Borrowers assume all risks of the acts and omissions of, or misuse of any Letter of Credit by beneficiaries, of any Letter of Credit. In furtherance and not in limitation of the foregoing, to the fullest extent permitted by law, neither Agent nor any Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document issued by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) failure of the beneficiary of any Letter of Credit to comply fully with conditions required in order to demand payment under such Letter of Credit; provided, that in the case of any payment by Agent under any Letter of Credit or guaranty thereof, Agent shall be liable to the extent such payment was made solely as a result of its gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in determining that the demand for payment under such Letter of Credit or guaranty thereof complies on its face with any applicable requirements for a demand for payment under such Letter of Credit or guaranty thereof; (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they may be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a payment under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G) the credit of the proceeds of any drawing under any Letter of Credit or guaranty thereof; and (H) any consequences arising from causes beyond the control of Agent or any Lender. None of the above shall affect, impair, or prevent the vesting of any of Agent’s or any Lender’s rights or powers hereunder or under the Agreement.

(iii) Nothing contained herein shall be deemed to limit or to expand any waivers, covenants or indemnities made by Borrowers in favor of any L/C Issuer in any letter of credit application, reimbursement agreement or similar document, instrument or agreement between or among Borrowers and such L/C Issuer, a Master Documentary Agreement and a Master Standby Agreement entered into with Agent.

ANNEX C (Section 1.8)

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CREDIT AGREEMENT

CASH MANAGEMENT SYSTEM

Each Credit Party shall, and shall cause its Subsidiaries to, establish and maintain the Cash Management Systems described below:

(a) On or before the Closing Date and until the Termination Date, each Borrower shall (i) establish lock boxes (“Lock Boxes”) or at Agent’s discretion, blocked accounts (“Blocked Accounts”) at one or more of the banks set forth in Disclosure Schedule (3.19), and shall request in writing and otherwise take such reasonable steps to ensure that all Account Debtors forward payment directly to such Lock Boxes, and (ii) deposit and cause its Subsidiaries to deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral (whether or not otherwise delivered to a Lock Box) into one or more Blocked Accounts in such Borrower’s name or any such Subsidiary’s name and at a bank identified in Disclosure Schedule (3.19) (each, a “Relationship Bank”). On or before the Closing Date, each Borrower shall have established a concentration account in its name (each a “Concentration Account” and collectively, the “Concentration Accounts”) at the bank or banks that shall be designated as the Concentration Account bank for each such Borrower in Disclosure Schedule (3.19) (each a “Concentration Account Bank” and collectively, the “Concentration Account Banks”), which banks shall be reasonably satisfactory to Agent.

(b) Each Borrower may maintain, in its name, an account (each a “Disbursement Account” and collectively, the “Disbursement Accounts”) at a bank reasonably acceptable to Agent into which Agent shall, from time to time, deposit proceeds of Revolving Credit Advances and Swing Line Advances made to such Borrower pursuant to Section 1.1 for use by such Borrower solely in accordance with the provisions of Section 1.4.

(c) On or before the Closing Date, each Concentration Account Bank, each bank where a Disbursement Account is maintained and all other Relationship Banks, shall have entered into tri-party blocked account agreements with Agent, for the benefit of itself and Lenders, and the applicable Borrower and Subsidiaries thereof, as applicable, in form and substance reasonably acceptable to Agent, which shall become operative on or prior to the Closing Date. Each such blocked account agreement shall provide, among other things, that (i) all items of payment deposited in such account and proceeds thereof deposited in the applicable Concentration Account are held by such bank as agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the bank executing such agreement has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and for returned checks or other items of payment, and (iii) from and after the Closing Date (A) with respect to banks at which a Blocked Account is maintained, such bank agrees to forward immediately all amounts in each Blocked Account to such Borrower’s Concentration Account Bank and

to commence the process of daily sweeps from such Blocked Account into the applicable Concentration Account and (B) with respect to each Concentration Account Bank, such bank agrees to immediately forward all amounts received in the applicable Concentration Account to the Collection Account through daily sweeps from such Concentration Account into the Collection Account. No Borrower shall, or shall cause or permit any Subsidiary thereof to, accumulate or maintain cash in Disbursement Accounts or payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements.

(d) So long as no Default or Event of Default has occurred and is continuing, Borrowers may amend Disclosure Schedule (3.19) to add or replace a Relationship Bank, Lock Box or Blocked Account or to replace any Concentration Account or any Disbursement Account; provided, that (i) Agent shall have consented in writing in advance to the opening of such account or Lock Box with the relevant bank and (ii) prior to the time of the opening of such account or Lock Box, the applicable Borrower or its Subsidiaries, as applicable, and such bank shall have executed and delivered to Agent a tri-party blocked account agreement, in form and substance reasonably satisfactory to Agent. Borrowers shall close any of their accounts (and establish replacement accounts in accordance with the foregoing sentence) promptly and in any event within thirty (30) days following notice from Agent that the creditworthiness of any bank holding an account is no longer acceptable in Agent’s reasonable judgment, or as promptly as practicable and in any event within sixty (60) days following notice from Agent that the operating performance, funds transfer or availability procedures or performance with respect to accounts or Lock Boxes of the bank holding such accounts or Agent’s liability under any tri-party blocked account agreement with such bank is no longer acceptable in Agent’s reasonable judgment.

(e) The Lock Boxes, Blocked Accounts, Disbursement Accounts and the Concentration Accounts shall be cash collateral accounts, with all cash, checks and other similar items of payment in such accounts securing payment of the Loans and all other Obligations, and in which each Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the Security Agreement.

(f) All amounts deposited in the Collection Account shall be deemed received by Agent in accordance with Section 1.10 and shall be applied (and allocated) by Agent in accordance with Section 1.11. In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account.

(g) Each Borrower shall and shall cause its Affiliates, officers, employees, agents, directors or other Persons acting for or in concert with such Borrower (each a “Related Person”) to (i) hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash and other items of payment received by such Borrower or any such Related Person, and (ii) within one (1) Business Day after receipt by such Borrower or any such Related Person of any checks, cash or other items of payment, deposit the same into a Blocked Account of such Borrower. Each Borrower on behalf of itself and each Related Person thereof acknowledges and agrees that all cash, checks or other items of payment constituting proceeds of Collateral are part of the Collateral. All proceeds of the sale or other disposition of any Collateral, shall be deposited directly into the applicable Blocked Accounts.

ANNEX D (Section 2.1(a))

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CREDIT AGREEMENT

CLOSING CHECKLIST

In addition to, and not in limitation of, the conditions described in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be received by Agent in form and substance satisfactory to Agent on or prior to the Closing Date (each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in Annex A to the Agreement):

A. Appendices. All Appendices to the Agreement, in form and substance satisfactory to Agent.

B. Revolving Notes and Swing Line Note. Duly executed originals of the Revolving Notes and Swing Line Note for each applicable Lender, dated the Closing Date.

C. Security Agreement. Duly executed originals of the Security Agreement, dated the Closing Date, and all instruments, documents and agreements executed pursuant thereto, including a power of attorney from each Credit Party.

D. Insurance. Satisfactory evidence that the insurance policies required by Section 5.4 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements, as reasonably requested by Agent, in favor of Agent, on behalf of Lenders.

E. Security Interests and Code Filings.

(a) Evidence satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a valid and perfected first priority security interest in the Collateral, including (i) such documents duly executed by each Credit Party (including financing statements under the Code and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as Agent may request in order to perfect its security interests in the Collateral and (ii) copies of Code search reports listing all effective financing statements that name any Credit Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral, except for those relating to the Prior Lender Obligations (all of which shall be terminated on the Closing Date) and Permitted Encumbrances.

(b) Evidence reasonably satisfactory to Agent, including copies, of all UCC-1 and other financing statements filed in favor of any Credit Party with respect to each location, if any, at which Inventory may be consigned.

(c) Control Letters from (i) all issuers of uncertificated securities and financial assets held by each Borrower, (ii) all securities intermediaries with respect to all securities accounts and securities entitlements of each Borrower, and (iii) all futures commission agents and clearing houses with respect to all commodities contracts and commodities accounts held by any Borrower.

F. Payoff Letters; Termination Statements. Copies of duly executed payoff letters, in form and substance reasonably satisfactory to Agent, by and between all parties to the Prior Lender loan documents evidencing repayment in full of all Prior Lender Obligations, together with (a) UCC-3 or other appropriate termination statements, in form and substance satisfactory to Agent, manually signed by each applicable Prior Lender releasing all liens of such Prior Lender upon any of the personal property of each Credit Party or written authorization by each applicable Prior Lender in favor of Agent authorizing Agent to file any and all such UCC-3 or other appropriate termination statements on behalf of such Prior Lender, and (b) termination of all blocked account agreements, bank agency agreements or other similar agreements or arrangements or arrangements in favor of each applicable Prior Lender or relating to the Prior Lender Obligations.

G. Intellectual Property Security Agreements. Duly executed originals of Trademark Security Agreements, Copyright Security Agreements and Patent Security Agreements, each dated the Closing Date and signed by each Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable, all in form and substance reasonably satisfactory to Agent, together with all instruments, documents and agreements executed pursuant thereto.

H. Guaranties. Duly executed originals of the Guaranties executed by and each Guarantor, dated the Closing Date, and all documents, instruments and agreements executed pursuant thereto.

I. Initial Borrowing Base Certificate. Duly executed originals of an initial Borrowing Base Certificate from each Borrower, dated the Closing Date, reflecting information concerning Eligible Accounts and Eligible Inventory of such Borrower as of a date not more than seven (7) days prior to the Closing Date.

J. Initial Notice of Revolving Credit Advance. Duly executed originals of a Notice of Revolving Credit Advance, dated the Closing Date, with respect to the initial Revolving Credit Advance to be requested by Borrower Representative on the Closing Date.

K. Letter of Direction. Duly executed originals of a letter of direction from Borrower Representative addressed to Agent, on behalf of itself and Lenders, with respect to the disbursement on the Closing Date of the proceeds of the initial Revolving Credit Advance.

L. Cash Management System; Blocked Account Agreements. Evidence satisfactory to Agent that, as of the Closing Date, Cash Management Systems complying with Annex C to the Agreement have been established and are currently being maintained in the manner set forth in such Annex C, together with copies of duly executed tri-party blocked account and lock box agreements, reasonably satisfactory to Agent, with the banks as required by Annex C.

M. Charter and Good Standing. For each Credit Party, such Person’s (a) charter and all amendments thereto, (b) good standing certificates (including verification of tax status) in its state of incorporation and (c) good standing certificates (including

verification of tax status) and certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the Closing Date and certified by the applicable Secretary of State or other authorized Governmental Authority.

N. Bylaws and Resolutions. For each Credit Party, (a) such Person’s bylaws, together with all amendments thereto and (b) resolutions of such Person’s Board of Directors, approving and authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and the transactions to be consummated in connection therewith, each certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as being in full force and effect without any modification or amendment.

O. Incumbency Certificates. For each Credit Party, signature and incumbency certificates of the officers of each such Person executing any of the Loan Documents, certified as of the Closing Date by such Person’s corporate secretary or an assistant secretary as being true, accurate, correct and complete.

P. Opinions of Counsel. Duly executed originals of opinions of counsel for the Credit Parties, together with any local counsel opinions reasonably requested by Agent, each in form and substance reasonably satisfactory to Agent and its counsel, dated the Closing Date, and addressed to Agent and Lenders.

Q. Pledge Agreements. Duly executed originals of each of the Pledge Agreements accompanied by (as applicable) (a) share certificates representing all of the outstanding Stock being pledged pursuant to such Pledge Agreement and stock powers for such share certificates executed in blank and (b) the original Intercompany Notes and other instruments evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly endorsed in blank.

R. Accountants’ Letters. A letter from the Credit Parties to their independent auditors authorizing the independent certified public accountants of the Credit Parties to communicate with Agent and Lenders in accordance with Section 4.2.

S. Fee Letter. Duly executed originals of the GE Capital Fee Letter.

T. Officer’s Certificate. Agent shall have received duly executed originals of a certificate of the Chief Executive Officer and Chief Financial Officer of each Borrower, dated the Closing Date, stating that, since November 3, 2007 in the case of Perfumania Holdings and since October 31, 2007 in the case of the Acquired Business (a) no event or condition has occurred or is existing which could reasonably be expected to have a Material Adverse Effect; (b) there has been no material adverse change in the industry in which any Borrower operates; (c) no Litigation has been commenced which, if successful, would have a Material Adverse Effect or could challenge any of the transactions contemplated by the Agreement and the other Loan Documents; (d) other than Restricted Payments set forth on a schedule attached thereto, there have been no Restricted Payments made by any Credit Party; and (e) there has been no material increase in liabilities, liquidated or contingent, of any Borrower or the Borrowers taken as a whole, unless offset

by a corresponding increase in current assets, and no material decrease in assets of any Borrower or the Borrowers taken as a whole, unless offset by a corresponding decrease in current liabilities.

U. Waivers. Agent, on behalf of Lenders, shall have received landlord waivers and consents, bailee letters and mortgagee agreements in form and substance reasonably satisfactory to Agent, in each case as required pursuant to Section 5.9.

V. Mortgages. Mortgages covering all of the Real Estate (if any) (the “Mortgaged Properties”), together with: (a) title insurance policies, current as-built surveys, zoning letters and certificates of occupancy, in each case reasonably satisfactory in form and substance to Agent, in its sole discretion; (b) evidence that counterparts of the Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of Agent, to create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or in favor of such other trustee as may be required or desired under local law); and (c) an opinion of counsel in each state in which any Mortgaged Property is located in form and substance and from counsel reasonably satisfactory to Agent.

W. Subordination and Intercreditor Agreements. Agent and Lenders shall have received any and all subordination and/or intercreditor agreements, all in form and substance reasonably satisfactory to Agent, in its sole discretion, as Agent shall have deemed necessary or appropriate with respect to any Indebtedness of any Credit Party, including, without limitation, subordination agreements with the holders of Subordinated Debt.

X. Inventory Appraisal. Agent shall have received an appraisal as to Borrowers’ Inventory, which shall be in form and substance reasonably satisfactory to Agent.

Y. Audited Financials; Financial Condition. Agent shall have received the Financial Statements, Projections and other materials set forth in Section 3.4, certified by Borrower Representative’s Chief Financial Officer, in each case in form and substance reasonably satisfactory to Agent, and Agent shall be satisfied, in its sole discretion, with all of the foregoing. Agent shall have further received a certificate of the Chief Executive Officer and/or the Chief Financial Officer of each Borrower, based on such Pro Forma and Projections, to the effect that (a) such Borrower will be Solvent upon the consummation of the transactions contemplated herein; (b) the Pro Forma fairly presents the financial condition of such Borrower as of the date thereof after giving effect to the transactions contemplated by the Loan Documents; (c) the Projections are based upon estimates and assumptions stated therein, all of which such Borrower believes to be reasonable and fair in light of current conditions and current facts known to such Borrower and, as of the Closing Date, reflect such Borrower’s good faith and reasonable estimates of its future financial performance and of the other information projected therein for the period set forth therein; and (d) containing such other statements with respect to the solvency of such Borrower and matters related thereto as Agent shall request.

Z. Master Standby Agreement. A Master Agreement for Standby Letters of Credit among Borrowers and GE Capital.

AA. Master Documentary Agreement. A Master Agreement for Documentary Letters of Credit among Borrowers and GE Capital.

BB. Other Documents. Such other certificates, documents and agreements respecting any Credit Party as Agent may reasonably request.

ANNEX E (Section 4.1(a))

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CREDIT AGREEMENT

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

Borrowers shall deliver or cause to be delivered to Agent or to Agent and Lenders, as indicated, the following:

(a) Monthly Financials. To Agent and Lenders, within thirty (30) days after the end of each Fiscal Month or, in the case of the financial information for the Fiscal Months of January, 2009, within ninety (90) days after the end of such Fiscal Month, February, 2009, within seventy five (75) days after the end of such Fiscal Month, March, 2009, within sixty (60) days after the end of such Fiscal Month, January of each other Fiscal Year, within ninety (90) days after the end of such Fiscal Month, February, October and November of each other Fiscal Year, within sixty (60) days after the end of such Fiscal Month and March of each other Fiscal Year, within forty five (45) days after the end of such Fiscal Month, financial information regarding Borrowers, the other Credit Parties and their respective Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, consisting of combined and combining (i) unaudited balance sheets as of the close of such Fiscal Month and the related statements of income and cash flows for that portion of the Fiscal Year ending as of the close of such Fiscal Month, setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments); and (ii) a summary of the outstanding balance of all Intercompany Notes as of the last day of that Fiscal Month. Such financial information shall be accompanied by (A) a statement in reasonable detail (each, a “Compliance Certificate”) showing the calculations used in determining compliance with each of the Financial Covenants that is tested on a monthly basis and (B) the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position and results of operations of Borrowers, the other Credit Parties and their respective Subsidiaries, on a combined and combining basis, in each case as at the end of such Fiscal Month and for that portion of the Fiscal Year then ended and (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. Borrowers shall also deliver to Agent within thirty (30) days after the end of each of January, February and March of each other Fiscal Year, draft statements of income, including a calculation of EBITDA levels on a combined and combining basis.

(b) Quarterly Financials. To Agent and Lenders, within fifty (50) days after the end of each of the first three Fiscal Quarters, combined and combining financial information regarding Borrowers, the other Credit Parties and their respective Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, including unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding period in the prior year and the

figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments). Such financial information shall be accompanied by (A) a Compliance Certificate showing the calculations used in determining compliance with each of the Financial Covenants that is tested on a quarterly basis and (B) the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position, results of operations and statements of cash flows of Borrowers, the other Credit Parties and their respective Subsidiaries, on both a combined and combining basis, as at the end of such Fiscal Quarter and for that portion of the Fiscal Year then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrowers shall deliver to Agent and Lenders, within fifty (50) days after the end of each Fiscal Quarter, a management discussion and analysis that includes a comparison to budget for that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to the corresponding period in the prior year.

(c) Operating Plan. To Agent and Lenders, as soon as available, but not later than the end of each Fiscal Year, an annual operating plan for Borrowers, on a combined and, commencing with the Projections for the Fiscal Year ending on or about month-end, January, 2010, combining basis consistent with the historical Financial Statements of Borrowers, approved by the Board of Directors of each of the Borrowers, for the following Fiscal Year, which (i) includes a statement of all of the material assumptions on which such plan is based, (ii) includes monthly balance sheets, income statements and statements of cash flows for the following year and (iii) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities.

(d) Annual Audited Financials. To Agent and Lenders, within ninety (90) days after the end of each Fiscal Year, audited Financial Statements for Borrowers, the other Credit Parties and their respective Subsidiaries on a combined and combining basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP and as to the combined Financial Statements certified without qualification, by an independent certified public accounting firm of national standing or otherwise acceptable to Agent. Such Financial Statements shall be accompanied by (i) a Compliance Certificate showing the calculations used in determining compliance with each of the Financial Covenants, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred with respect to the Financial Covenants (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special

investigation was made with respect to the existence of Defaults or Events of Default, (iii) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (iv) the certification of the Chief Executive Officer or Chief Financial Officer of Borrowers that all such Financial Statements present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Borrowers, the other Credit Parties and their respective Subsidiaries on a combined and combining basis, as at the end of such Fiscal Year and for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default.

(e) Management Letters. To Agent and Lenders, within five (5) Business Days after receipt thereof by any Credit Party, copies of all management letters, exception reports or similar letters or reports received by such Credit Party from its independent certified public accountants.

(f) Default Notices. To Agent and Lenders, as soon as practicable, and in any event within five (5) Business Days after an executive officer of any Borrower has actual knowledge of the existence of any Default, Event of Default or other event that has had a Material Adverse Effect, telephonic or telecopied notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day.

(g) SEC Filings and Press Releases. To Agent and Lenders, promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Credit Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person.

(h) Subordinated Debt and Equity Notices. To Agent, as soon as practicable, copies of all material written notices given or received by any Credit Party with respect to any Subordinated Debt or Stock of such Person, and, within two (2) Business Days after any Credit Party obtains knowledge of any matured or unmatured event of default with respect to any Subordinated Debt, notice of such event of default.

(i) Supplemental Schedules. To Agent, supplemental disclosures, if any, required by Section 5.6.

(j) Litigation. To Agent in writing, promptly upon learning thereof, notice of any Litigation commenced or threatened in writing against any Credit Party that (i) seeks damages in excess of $250,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities or (vi) involves any product recall.

(k) Insurance Notices. To Agent, disclosure of losses or casualties required by Section 5.4.

(l) Lease Default Notices. To Agent, (i) within two(2) Business Days after receipt thereof, copies of any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, (ii) monthly within three (3) Business Days after payment thereof, evidence of payment of lease or rental payments as to each leased or rented location for which a landlord or bailee waiver has not been obtained and (iii) such other notices or documents as Agent may reasonably request.

(m) Lease Amendments. To Agent, within two (2) Business Days after receipt thereof, copies of all material amendments to any real estate leases.

(n) Hedging Agreements. To Agent within two (2) Business Days after entering into such agreement or amendment, copies of all interest rate, commodity or currency hedging agreements or amendments thereto.

(o) Other Documents. To Agent and Lenders, such other financial and other information respecting any Credit Party’s business or financial condition as Agent or any Lender shall from time to time reasonably request.

ANNEX F (Section 4.1(b))

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CREDIT AGREEMENT

COLLATERAL REPORTS

Borrowers shall deliver or cause to be delivered the following:

(a) To Agent, upon its request, and in any event no less frequently than 12:00 p.m. (New York time) on the third Business Day after the end of each week (together with a copy of all or any part of the following reports requested by any Lender in writing after the Closing Date), each of the following reports, each of which shall be prepared by the applicable Borrower as of the last day of the immediately preceding week or the date two (2) days prior to the date of any such request:

(i) a Borrowing Base Certificate with respect to each Borrower, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(ii) with respect to each Borrower, a summary of Inventory by location and type with a supporting perpetual Inventory report, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion; and

(iii) with respect to each Borrower, a weekly trial balance showing Accounts outstanding aged from due date as follows: current, 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion.

(b) To Agent, on a weekly basis or at such more frequent intervals as Agent may request from time to time (together with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date), collateral reports with respect to each Borrower, including all additions, including sales reports, and reductions, including collections, credit adjustments and other reductions (cash and non-cash), with respect to Accounts of such Borrower, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion each of which shall be prepared by the applicable Borrower as of the last day of the immediately preceding week or the date two (2) days prior to the date of any such request;

(c) To Agent, within fifteen (15) days after the end of each Fiscal Month:

(i) an aging of accounts payable, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(ii) with respect to each Borrower, a monthly trial balance showing Accounts outstanding aged from due date as follows: current, 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion.

(d) To Agent, at the same time as the financial reporting under Annex E is required to be delivered for each Fiscal Month:

(i) a reconciliation of the Accounts trial balance of each Borrower to such Borrower’s most recent Borrowing Base Certificate, general ledger and monthly Financial Statements delivered pursuant to Annex E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(ii) a reconciliation of the perpetual inventory by location of each Borrower to such Borrower’s most recent Borrowing Base Certificate, general ledger and monthly Financial Statements delivered pursuant to Annex E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(iii) an aging of accounts payable and a reconciliation of that accounts payable aging to each Borrower’s general ledger and monthly Financial Statements delivered pursuant to Annex E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(e) To Agent, within sixty (60) days after the end of each Fiscal Month: a reconciliation of the outstanding Loans as set forth in the monthly Loan Account statement provided by Agent to each Borrower’s general ledger and monthly Financial Statements delivered pursuant to Annex E, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(f) To Agent, within twenty-five (25) days after the end of each Fiscal Month, a schedule, in form and substance satisfactory to Agent, detailing the then outstanding Advances to Suppliers, in each case accompanied by such supporting detail and documentation as shall be requested by Agent in its reasonable discretion;

(g) To Agent, at the time of delivery of each of the annual Financial Statements delivered pursuant to Annex E, (i) a listing of government contracts, if any, of each Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a list of any applications for the registration of any Patent, Trademark or Copyright filed by any Credit Party with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in the prior Fiscal Quarter;

(h) Each Borrower, at its own expense, shall deliver to Agent the results of each annual physical verification that such Borrower or any of its Subsidiaries makes, or causes any other Person to make on their behalf, of all or any portion of their Inventory (and, if a Default or an Event of Default has occurred and is continuing, each Borrower shall, upon the request of Agent, conduct, and deliver the results of, such physical verifications as Agent may require);

(i) Borrowers, at their own expense, shall deliver to Agent an appraisal of their Inventory no less frequently than twice a year or at such more frequent intervals as Agent may request at any time, such appraisals to be conducted by an appraiser engaged by Agent, and such appraisal to be in form and substance reasonably satisfactory to Agent; and

(j) Such other reports, statements and reconciliations with respect to the Borrowing Base, Collateral or Obligations of any or all Credit Parties as Agent shall from time to time request in its reasonable discretion.

ANNEX G (Section 6.10)

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CREDIT AGREEMENT

FINANCIAL COVENANTS

Borrowers shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated in accordance with GAAP consistently applied:

(a) Minimum Fixed Charge Coverage Ratio. For each and every Fiscal Quarter, beginning with the Fiscal Quarter ending October 31, 2008, Credit Parties on a consolidated basis shall have, at the end of each Fiscal Quarter, a Fixed Charge Coverage Ratio for the 12-month period then ended of not less than 1.10 to 1.00.

(b) Inventory Turnover Ratio. For each and every Fiscal Quarter, beginning with the Fiscal Quarter ending October 31, 2008, Credit Parties, on a consolidated basis shall have, at the end of each Fiscal Quarter, an Inventory Turnover Ratio for the 12-month period then ended of not less than 1.00 to 1.00.

(c) Advances to Suppliers. For each and every Fiscal Quarter, beginning with the Fiscal Quarter ending October 31, 2008, Credit Parties (other than the Inactive Companies) on a combined basis shall not have at any time aggregate outstanding Advances to Suppliers in excess of $8,000,000 with respect to all suppliers or in excess of $5,000,000 with respect to any one supplier (together with its Affiliates).

(d) Maximum Leverage Ratio. For each and every Fiscal Quarter, beginning with the Fiscal Quarter ending October 31, 2008, Credit Parties on a consolidated basis shall have, at the end of each Fiscal Quarter, a Leverage Ratio for the 12-month period then ended not in excess of the amount set forth below for such 12-month period:

Fiscal Quarter Ending	Maximum Leverage Ratio
October 31, 2008	6.00 to 1.00
January 31, 2009	6.00 to 1.00
April 30, 2009	6.00 to 1.00
July 31, 2009	6.00 to 1.00
October 31, 2009	5.75 to 1.00
January 31, 2010	5.75 to 1.00
April 30, 2010	5.75 to 1.00
July 31, 2010	5.75 to 1.00
October 31, 2010 and each Fiscal Quarter thereafter	5.50 to 1.00

Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing. If any “Accounting Changes” (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrowers, Agent and Lenders agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrowers’ and their Subsidiaries’ financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of Requisite Lenders to any required amendments of such provisions shall be sufficient to bind all Lenders. “Accounting Changes” means (i) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (ii) changes in accounting principles concurred in by any Borrower’s certified public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (iv) the reversal of any reserves established as a result of purchase accounting adjustments. All such adjustments resulting from expenditures made subsequent to the Closing Date (including capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period. If Agent, Borrowers and Requisite Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments within thirty (30) days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. For purposes of Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified measurement period, regardless of when the Financial Statements reflecting such breach are delivered to Agent.

ANNEX H (Section 9.9(a))

to

CREDIT AGREEMENT

WIRE TRANSFER INFORMATION

[Deleted]

ANNEX I (Section 11.10)

to

CREDIT AGREEMENT

NOTICE ADDRESSES

(A) If to Agent or GE Capital, at

General Electric Capital Corporation

401 Merritt 7

Norwalk, CT 06856

Attention: Perfumania Holdings Account Manager

Telecopier No.: (203) 956-4237

with copies to:

Winston & Strawn

200 Park Avenue

New York, NY 10166

Attention: William D. Brewer, Esq.

Telecopier No.: (212) 294-4700

and

General Electric Capital Corporation

401 Merritt 7

Norwalk, CT 06856

Attention: Corporate Counsel - Commercial Finance

Telecopier No.: (203) 956-4001

(B) If to any Borrower, to Borrower Representative, at

Perfumania Holdings, Inc.

35 Sawgrass Drive, Suite 2

Bellport, NY 11713

Attention: Michael W. Katz

Telecopier No.: (631) 866-4231

with copies to:

Edwards, Angell, Palmer & Dodge LLP

111 Huntington Avenue

Boston, MA 02199

Attention: Susan E. Siebert, Esq.

Telecopier No.: (617) 227-4420

(C) Wachovia Bank National Association

One South Broad Street

Philadelphia, Pennsylvania 19107

Attention: Robert H. Waters, Jr., Director

Telecopier No.: (267) 321-6901

Telephone No.: (267) 321-6791

(D) Bank of America, N.A.

200 Glastonbury Boulevard

Glastonbury, Connecticut 06033

Attention: Edgar Ezerins, SVP SR Client Manager

Telecopier No.: (860) 368-6029

Telephone No.: (860) 368-6024

(E) TD Bank, N.A.

1000 MacArthur Boulevard

Mahwah, New Jersey 07430

Attention: Robert Munns, Vice President

Telecopier No.: (201) 236-9257

Telephone No.: (201) 236-2685

(F) Union Bank California

400 California Street, 8^th Floor

San Francisco, California 94104

Attention: Greg Stewart, Vice President

Telecopier No.: (415) 765-2170

Telephone No.: (415) 765-2031

(G) RBS Business Capital, a division of RBS Asset Finance, Inc.

53 State Street, 9^th Floor

Boston, Massachusetts 02109

Attention: Jennifer L. Mannila, Vice President

Telecopier No.: (617) 227-7995

Telephone No.: (617) 994-7358

(H) Bank Leumi USA

562 Fifth Avenue

New York, New York 10036

Attention: John Grieco, First Vice President

Telecopier No.: (212) 626-1309

Telephone No.: (212) 626-1386

ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

Revolving Loan Commitment	Lender(s)
$67,500,000 (including a Swing Line Commitment of $12,500,000)	General Electric Capital Corporation
$67,500,000	Wachovia Bank National Association
$30,000,000	Bank of America, N.A.
$25,000,000	TD Bank, N.A.
$25,000,000	Union Bank of California
$20,000,000	RBS Business Capital, a division of RBS Asset Finance, Inc.
$15,000,000	Bank Leumi USA

EXHIBIT 1.1(a)(ii)

to

CREDIT AGREEMENT

FORM OF REVOLVING NOTE

New York, New York

$        ,        ,                                  , 2008

FOR VALUE RECEIVED, the undersigned,                                         , a                                  corporation (“Borrower”), HEREBY PROMISES TO PAY to the order of                                          (“Lender”), at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as Agent for Lenders (“Agent”), at its address at 401 Merritt 7, Norwalk, Connecticut 06856, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of                                          DOLLARS AND                      CENTS ($        ,        ,        ) or, if less, the aggregate unpaid amount of all Revolving Credit Advances made to the undersigned under the “Credit Agreement” (as hereinafter defined). All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in Annex A thereto.

This Revolving Note is one of the Revolving Notes issued pursuant to that certain Credit Agreement dated as of August     , 2008 by and among Borrower, the other Persons named therein as Credit Parties, Agent, Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents referred to therein. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. The date and amount of each Revolving Credit Advance made by Lenders to Borrower, the rates of interest applicable thereto and each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Credit Agreement or this Note in respect of the Revolving Credit Advances made by Lender to Borrower.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference. Interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.

If any payment on this Revolving Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Revolving Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Revolving Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower.

Except as provided in the Credit Agreement, this Revolving Note may not be assigned by Lender to any Person.

THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

By:

Title:

EXHIBIT 1.1(b)(ii)

to

CREDIT AGREEMENT

FORM OF SWING LINE NOTE

New York, New York

$        ,        ,                                  , 2008

FOR VALUE RECEIVED, the undersigned,                                         , a                                  corporation (“Borrower”), HEREBY PROMISES TO PAY to the order of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (“Swing Line Lender”) at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as Agent (in such capacity, the “Agent”) at the Agent’s address at 401 Merritt 7, Norwalk, Connecticut 06856, or at such other place as Agent may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the amount of                                          DOLLARS AND NO CENTS ($        ,        ,        ) or, if less, the aggregate unpaid amount of all Swing Line Advances made to the undersigned under the “Credit Agreement” (as hereinafter defined). All capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in Annex A thereto.

This Swing Line Note is issued pursuant to that certain Credit Agreement dated as of August     , 2008 by and among Borrower, the other Persons named therein as Credit Parties, Agent, Swing Line Lender and the other Persons signatory thereto from time to time as Lenders (including all annexes, exhibits and schedules thereto and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”), and is entitled to the benefit and security of the Credit Agreement, the Security Agreement and all of the other Loan Documents. Reference is hereby made to the Credit Agreement for a statement of all of the terms and conditions under which the Loans evidenced hereby are made and are to be repaid. The date and amount of each Swing Line Advance made by Swing Line Lender to Borrower, the rate of interest applicable thereto and each payment made on account of the principal thereof, shall be recorded by Agent on its books; provided that the failure of Agent to make any such recordation shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Credit Agreement or this Swing Line Note in respect of the Swing Line Advances made by Swing Line Lender to Borrower.

The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Credit Agreement, the terms of which are hereby incorporated herein by reference. Interest thereon shall be paid until such principal amount is paid in full at such interest rates and at such times, and pursuant to such calculations, as are specified in the Credit Agreement.

If any payment on this Swing Line Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

Upon and after the occurrence of any Event of Default, this Swing Line Note may, as provided in the Credit Agreement, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.

Time is of the essence of this Swing Line Note. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower.

THIS SWING LINE NOTE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

By:

Title:

EXHIBIT 1.5(e)

to

CREDIT AGREEMENT

FORM OF NOTICE OF CONVERSION/CONTINUATION

Reference is made to that certain Credit Agreement dated as of August     , 2008 by and among the undersigned (“Borrower Representative”), the other Persons named therein as Borrowers, the other Persons named therein as Credit Parties, General Electric Capital Corporation (“Agent”) and the Lenders from time to time signatory thereto (including all annexes, exhibits or schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”). Capitalized terms used herein without definition are so used as defined in the Credit Agreement.

Borrower Representative hereby gives irrevocable notice, pursuant to Section 1.5(e) of the Credit Agreement, of its request to:

(a) on [     date     ] convert $[            ] of the aggregate outstanding principal amount of the Revolving Loan, bearing interest at the [            ] Rate, into a(n) [            ] Loan [and, in the case of a LIBOR Loan, having a LIBOR Period of [            ] month(s)];

[(b) on [     date     ] continue $[            ] of the aggregate outstanding principal amount of the Revolving Loan, bearing interest at the LIBOR Rate, as a LIBOR Loan having a LIBOR Period of [            ] month(s)].

Borrower Representative certifies that the conversion and/or continuation of the Loans requested above is for the separate account(s) of the following Borrowers[s] in the following [respective] amount[s]: [Name: $            ] and [Name: $            ].

Borrower Representative hereby represents and warrants that all of the conditions contained in Section 2.2 of the Credit Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the conversion/continuation requested hereby, before and after giving effect thereto; and (ii) reaffirms the cross-guaranty provisions set forth in Section 12 of the Credit Agreement and the guaranty and continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

[Signature Page Follows]

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

[Name of Borrower Representative]

By:

Title

EXHIBIT 9.1(a)

to

CREDIT AGREEMENT

FORM OF ASSIGNMENT AGREEMENT

This Assignment Agreement (this “Agreement”) is made as of                          ,          by and between                                          (“Assignor Lender”) and                                          (“Assignee Lender”) and acknowledged and consented to by GENERAL ELECTRIC CAPITAL CORPORATION, as agent (“Agent”). All capitalized terms used in this Agreement and not otherwise defined herein will have the respective meanings set forth in the Credit Agreement as hereinafter defined.

RECITALS:

WHEREAS, Perfumania Holdings, Inc. (f/k/a E Com Ventures, Inc.), Quality King Fragrance, Inc., Scents of Worth, Inc., Five Star Fragrance Company, Inc., Distribution Concepts, LLC, Northern Group, Inc., Perfumania, Inc., Magnifique Parfumes and Cosmetics, Inc., Ten Kesef II, Inc. and Perfumania Puerto Rico, Inc., each as Borrower (each a “Borrower” and collectively, “Borrowers”), the other Credit Parties named therein, Agent, Assignor Lender and the other Persons signatory thereto as Lenders have entered into that certain Credit Agreement dated as of August,     , 2008 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) pursuant to which Assignor Lender has agreed to make certain Loans to, and incur certain Letter of Credit Obligations for, Borrowers;

WHEREAS, Assignor Lender desires to assign to Assignee Lender [all/a portion] of its interest in the Loans (as described below), the Letter of Credit Obligations and the Collateral and to delegate to Assignee Lender [all/a portion] of its Commitments and other duties with respect to such Loans, Letter of Credit Obligations and Collateral;

WHEREAS, Assignee Lender desires to become a Lender under the Credit Agreement and to accept such assignment and delegation from Assignor Lender; and

WHEREAS, Assignee Lender desires to appoint Agent to serve as agent for Assignee Lender under the Credit Agreement.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Assignor Lender and Assignee Lender agree as follows:

13. ASSIGNMENT, DELEGATION, AND ACCEPTANCE

13.1 Assignment. Assignor Lender hereby transfers and assigns to Assignee Lender, without recourse and without representations or warranties of any kind (except as set forth in Section 3.2 of this Agreement), [all/such percentage] of Assignor Lender’s right, title, and interest in the Revolving Loan, Letter of Credit Obligations, the Loan Documents and Collateral as will result in Assignee Lender having as of the Effective Date (as hereinafter defined) a Pro Rata Share thereof, as follows:

Assignee Lender’s Loans	Principal Amount	Pro Rata Share
Revolving Loan	$		%

13.2 Delegation. Assignor Lender hereby irrevocably assigns and delegates to Assignee Lender [all/a portion] of its Commitments and its other duties and obligations as a Lender under the Loan Documents equivalent to[100%/    %] of Assignor Lender’s Commitment (such percentage representing a commitment of $         ).

13.3 Acceptance by Assignee Lender. By its execution of this Agreement, Assignee Lender irrevocably purchases, assumes and accepts such assignment and delegation and agrees to be a Lender with respect to the delegated interest under the Credit Agreement and other Loan Documents and to be bound by the terms and conditions thereof. By its execution of this Agreement, Assignor Lender agrees, to the extent provided herein, to relinquish its rights and be released from its obligations and duties under the Credit Agreement.

13.4 Effective Date. Such assignment and delegation by Assignor Lender and acceptance by Assignee Lender will be effective and Assignee Lender will become a Lender under the Credit Agreement and other Loan Documents as of [the date of this Agreement] (“Effective Date”) and upon (i) receipt of (x) Agent’s and (y) if applicable, Borrower Representative’s consent to such assignment and delegation and (ii) payment of the Assigned Amount and the Assignment Fee (as each term is defined below). Interest and Fees accrued prior to the Effective Date are for the account of Assignor Lender, and Interest and Fees accrued from and after the Effective Date are for the account of Assignee Lender.

14. INITIAL PAYMENT AND DELIVERY OF NOTES

14.1 Payment of the Assigned Amount. Assignee Lender will pay to Assignor Lender, in immediately available funds, not later than 12:00 noon (New York time) on the Effective Date, an amount equal to its Pro Rata Share of the then outstanding principal amount of the Loans as set forth above in Section 1.1, together with accrued interest, fees and other amounts, all as set forth on Schedule 2.1 (the “Assigned Amount”).

14.2 Payment of Assignment Fee. [Assignor Lender and/or Assignee Lender] shall pay to Agent, for its own account in immediately available funds, not later than 12:00 noon (New York time) on the Effective Date, the assignment fee in the amount of $3,500 (the “Assignment Fee”) as required pursuant to Section 9.1(a) of the Credit Agreement.

14.3 Execution and Delivery of Notes. Upon payment of the Assigned Amount and the Assignment Fee, Assignor Lender will deliver to Agent the Notes previously delivered to Assignor Lender for redelivery to Borrower Representative and Agent will obtain from Borrower Representative for delivery to [Assignor Lender and] Assignee Lender, new executed Notes evidencing Assignee Lender’s [and Assignor Lender’s respective] Pro Rata Share[s] in the applicable Loans after giving effect to the assignment described in Section 1. Each new Note will be issued in the aggregate maximum principal amount of the applicable Commitment of [the Lender to whom such Note is issued] [the Assignee Lender].

15. REPRESENTATIONS, WARRANTIES AND COVENANTS

15.1 Assignee Lender’s Representations, Warranties and Covenants. Assignee Lender hereby represents, warrants, and covenants the following to Assignor Lender and Agent:

(a) This Agreement is a legal, valid, and binding agreement of Assignee Lender, enforceable according to its terms;

(b) The execution and performance by Assignee Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice to, or consent or approval by any Governmental Authority;

(c) Assignee Lender is familiar with transactions of the kind and scope reflected in the Loan Documents and in this Agreement;

(d) Assignee Lender has made its own independent investigation and appraisal of the financial condition and affairs of each Credit Party, has conducted its own evaluation of the Loans and Letter of Credit Obligations, the Credit Agreement and the other Loan Documents and each Credit Party’s creditworthiness, has made its decision to become a Lender to Borrowers under the Credit Agreement independently and without reliance upon Assignor Lender or Agent, and will continue to do so;

(e) Assignee Lender is entering into this Agreement in the ordinary course of its business, and is acquiring its interest in the Loans and Letter of Credit Obligations for investment purposes and not with a view to or for sale in connection with any subsequent distribution;

(f) No future assignment or participation granted by Assignee Lender pursuant to Section 9.1 of the Credit Agreement will require Assignor Lender, Agent or any Borrower to file any registration statement with the Securities and Exchange Commission or to apply to qualify under the blue sky laws of any state;

(g) Assignee Lender has no loans to, written or oral agreements with, or equity or other ownership interest in any Credit Party;

(h) Assignee Lender will not enter into any written or oral agreement with, or acquire any equity or other ownership interest in, any Credit Party without the prior written consent of Agent;

(i) Assignee Lender is a Qualified Assignee;

(j) As of the Effective Date, Assignee Lender (i) is entitled to receive payments of principal and interest in respect of the Obligations without deduction for or on account of any taxes imposed by the United States of America or any political subdivision thereof , (ii) is not subject to capital adequacy or similar requirements under Section 1.16(a) of the Credit Agreement, (iii) does not require the payment of any increased costs under Section 1.16(b) of the Credit Agreement, and (iv) is not unable to fund LIBOR Loans under Section 1.16(c) of the Credit Agreement, and Assignee Lender will indemnify Agent from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, or expenses that result from Assignee Lender’s failure to fulfill its obligations under the terms of Section 1.15(c) of the Credit Agreement or from any other inaccuracy in the foregoing; and

(k) This Assignment by Assignor Lender to Assignee Lender complies with the terms of the Credit Agreement (including Section 9.1 thereof) and the other Loan Documents.

15.2 Assignor Lender’s Representations, Warranties and Covenants. Assignor Lender hereby represents, warrants and covenants the following to Assignee Lender and Agent:

(a) Assignor Lender is the legal and beneficial owner of the Assigned Amount;

(b) This Agreement is a legal, valid and binding agreement of Assignor Lender, enforceable according to its terms;

(c) The execution and performance by Assignor Lender of its duties and obligations under this Agreement and the Loan Documents will not require any registration with, notice to or consent or approval by any Governmental Authority;

(d) Assignor Lender has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill the obligations hereunder and to consummate the transactions contemplated hereby;

(e) Assignor Lender is the legal and beneficial owner of the interests being assigned hereby, free and clear of any adverse claim, Lien, encumbrance, security interest, restriction on transfer, purchase option, call or similar right of any Person; and

(f) This Assignment by Assignor Lender to Assignee Lender complies with the terms of the Credit Agreement (including Section 9.1 thereof) and the other Loan Documents; and

16. LIMITATIONS OF LIABILITY

Neither Assignor Lender (except as provided in Section 3.2 of this Agreement) nor Agent makes any representations or warranties of any kind, nor assumes any responsibility or liability whatsoever, with regard to (a) the Credit Agreement or any other

Loan Document or any other document or instrument furnished pursuant thereto or the Loans, Letter of Credit Obligations or other Obligations, (b) the creation, validity, genuineness, enforceability, sufficiency, value or collectibility of any of them, (c) the amount, value or existence of the Collateral, (d) the perfection or priority of any Lien upon the Collateral, or (e) the financial condition of any Credit Party or other obligor or the performance or observance by any Credit Party of its obligations under the Credit Agreement or any other Loan Document. Neither Assignor Lender nor Agent has or will have any duty, either initially or on a continuing basis, to make any investigation, evaluation, appraisal of, or any responsibility or liability with respect to the accuracy or completeness of, any information provided to Assignee Lender which has been provided to Assignor Lender or Agent by any Borrower or any other Credit Party. Nothing in this Agreement or in the Credit Agreement or any other Loan Document shall impose upon the Assignor Lender or Agent any fiduciary relationship in respect of the Assignee Lender.

17. FAILURE TO ENFORCE

No failure or delay on the part of Agent or Assignor Lender in the exercise of any power, right or privilege hereunder or under any Loan Document will impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein. No single or partial exercise of any such power, right or privilege will preclude further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative with, and not exclusive of, any rights or remedies otherwise available.

18. NOTICES

Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given will be in writing and addressed to the respective party as set forth below its signature hereunder, or to such other address as the party may designate in writing to the other.

19. AMENDMENTS AND WAIVERS

No amendment, modification, termination, or waiver of any provision of this Agreement will be effective without the written concurrence of Assignor Lender, Agent and Assignee Lender.

20. SEVERABILITY

Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. In the event any provision of this Agreement is or is held to be invalid, illegal or unenforceable under applicable law, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement. In addition, in the event any provision of or obligation under this Agreement is or is held to be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations in any other jurisdictions will not in any way be affected or impaired thereby.

21. SECTION TITLES

Section and Subsection titles in this Agreement are included for convenience of reference only, do not constitute a part of this Agreement for any other purpose, and have no substantive effect.

22. SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

23. APPLICABLE LAW

THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

24. COUNTERPARTS

This Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, will be deemed an original and all of which shall together constitute one and the same instrument. Delivery of an executed counterpart by telecopier shall be effective as delivery of a manually executed counterpart.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

ASSIGNEE LENDER:	ASSIGNOR LENDER:
By:	By:
Title:	Title:
Notice Address:	Notice Address:

ACKNOWLEDGED AND CONSENTED TO:

GENERAL ELECTRIC CAPITAL

CORPORATION, as Agent

By:

Title:

[PERFUMANIA HOLDINGS, INC.,
as Borrower Representative
By:
Title:	]1

¹ If Borrower Representative’s consent is required under Section 9.1 of the Credit Agreement.

SCHEDULE 2.1

ASSIGNED AMOUNT

	Principal Amount
Revolving Loan	$
Other + or - 2	$
Total	$
AMOUNT RETAINED BY ASSIGNOR LENDER
	Principal Amount
Revolving Loan	$
Total	$

All determined as of the Effective Date.

² Please describe in detail any other + or - amount.

EX-10.2

EXHIBIT 10.2

PERFUMANIA HOLDINGS, INC.

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of the 11 day of August, 2008, by and among Perfumania Holdings, Inc. (f/k/a E Com Ventures, Inc.), a Florida corporation (the “Company”), and each of the shareholders of Model Reorg, Inc., a New York corporation (“Model Reorg”), listed on Schedule A hereto.

RECITALS

WHEREAS, the Company, Model Reorg Acquisition LLC, a Delaware limited liability company, Model Reorg and the Shareholders have entered into an Agreement and Plan of Merger dated as of December 21, 2007, as amended July 8, 2008 (the “Merger Agreement”), pursuant to which the Shareholders will receive, in exchange for their shares of Model Reorg common stock, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), and Common Stock Purchase Warrants to acquire Common Stock (the “Warrants”); and

WHEREAS, it is a condition of the Merger Agreement that the parties hereto enter into this Agreement providing for the Company to register the shares of Common Stock issuable to the Shareholders under the Merger Agreement (excluding any Common Stock issued or issuable upon exercise of any of the Warrants) as set forth herein;

NOW THEREFORE, the parties hereby agree as follows:

1. DEFINITIONS. For purposes of this Agreement:

1.1 “Common Stock” means shares of the Company’s common stock, par value $0.01 per share.

1.2 “Company” means Perfumania Holdings, Inc. (VIA E Com Ventures, Inc.), any successor thereto by operation of law, and any other company whose shares are issued upon conversion of, or whose shares are exchanged for, substantially all of the outstanding shares of Common Stock pursuant to a merger, consolidation or other recapitalization transaction.

1.3 “Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company filed pursuant hereto, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law based upon, or arising out of, any of such party’s obligations arising hereunder.

1.4 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

1.5 “Excluded Registration” means (i) a registration of the sale of securities to directors, employees or consultants of the Company or a subsidiary pursuant to a bona fide compensatory arrangement; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; (iv) a registration solely of debt or nonconvertible preferred stock; or (v) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

1.6 “GAAP” means generally accepted accounting principles in the United States.

1.7 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

1.8 “Majority in Interest” means Shareholders holding a majority of the Registrable Securities as to which Shareholders have requested inclusion in a registration under Section 2.1.

1.9 “Participating Holder” means a holder of Company securities that is described in clause (a)^. of Section 2.8 and that, in compliance with Section 2.8, has acquired rights to have such securities registered under the Securities Act by having them included in a registration statement filed by the Company.

1.10 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

1.11 “Registrable Securities” means those shares of Common Stock issued pursuant to the Merger Agreement (other than (i) any that have been transferred by a Shareholder in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 3.1, (ii) any for which registration rights have terminated pursuant to Section 2.9, and (iii) any Common Stock issued or issuable upon exercise of any of the Warrants) and all shares of Common Stock or other securities issued upon conversion or exchange or otherwise in respect thereof, including without limitation pursuant to any stock dividend, stock split, merger, consolidation or other recapitalization transaction.

1.12 “Restated Certificate” means the Amended and Restated Certificate of Incorporation of the Company.

1.13 “SEC” means the Securities and Exchange Commission.

1.14 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as in effect from time to time.

1.15 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act, as in effect from time to time.

1.16 “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.

1.17 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and the fees and expenses of counsel to the selling Shareholders.

1.18 “Shareholder” means a shareholder of Model Reorg listed on Schedule A and his, her or its respective successors and other assigns complying with Section 3.1.

2. REGISTRATION RIGHTS. The Company covenants and agrees as follows:

2.1 Company Registration. Promptly after the Company determines to register (including, for this purpose, a registration by the Company for holders of Common Stock other than the Shareholders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall give each Shareholder written notice of such proposed registration. Upon the request of any Shareholder given within twenty (20) days after such notice, the Company shall, subject to the provisions of Section 2.2, cause to be registered all of the Registrable Securities that each such Shareholder has requested to be included in such registration,

2.2 Underwriting Requirements.

(a) If the Shareholders intend to distribute the Registrable Securities covered by their registration request by means of an underwriting, they shall so advise the Company and will select (by a Majority in Interest) such underwriter(s) as shall be reasonably acceptable to the Company. In such event, the right of any Shareholder to include such Shareholder’s Registrable Securities in such registration shall be conditioned upon such Shareholder’s participation in such underwriting and the inclusion of such Shareholder’s Registrable Securities in the underwriting to the extent provided herein. All Shareholders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.3(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.

(b) Notwithstanding any other provision of this Section 2.2, if the underwriter(s) referred to in clause (a) advise(s) such Shareholders in writing that marketing factors require a limitation on the number of shares to be underwritten, the maximum number of Registrable Securities and securities to be registered on behalf of all Participating Holders that may be included in the underwriting shall be allocated among such Shareholders and Participating Holders in proportion (as nearly as practicable) to the number of Registrable Securities for which each Shareholder and Participating Holder requested registration; provided, however, that the number of Registrable Securities held by the Shareholders to be included in such underwriting shall not be reduced unless all other securities (other than securities to be sold by the Company and Participating Holders) are first entirely excluded from the underwriting.

(c) For purposes of any apportionment under Section 2.2(b), a Shareholder and any of such Shareholder’s transferees shall be deemed to be a single “Shareholder,” and any pro rata reduction with respect to such “Shareholder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “Shareholder,” as defined in this sentence.

2.3 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and, upon the request of a Majority in Interest, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Shareholders refrain, at the written request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration and (ii) in the case of any registration of Registrable Securities that are intended to be offered on a continuous or delayed basis, such 120-day period shall be extended for up to an additional sixty (60) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

(b) subject to clause (i), prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to keep such registration statement effective for the period specified in clause (a) and to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c) furnish to the selling Shareholders such numbers of copies of the prospectus, including a preliminary prospectus, included in the registration statement, and such other documents, as the Shareholders may reasonably request in order to facilitate their disposition of their Registrable Securities;

(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Shareholders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f) promptly make available (subject to reasonable confidentiality requirements) for inspection by the selling Shareholders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Shareholders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or reasonably advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(g) notify each selling Shareholder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed;

(h) after such registration statement becomes effective, notify each selling Shareholder of any request by the SEC that the Company amend or supplement such registration statement or prospectus; and

(i) immediately notify each seller of Registrable Securities and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and, at the request of a Majority in Interest, the Company shall promptly prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; provided that the Company may po’stpone for up to ninety (90) days the delivery of any such supplement or amendment if the Company’s Board of Directors determines in good faith that disclosure of the new information to be contained therein would reasonably be expected to have a material adverse effect on (i) any proposal or plan by the Company or any of its affiliates to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization or similar transaction or (ii) any pending or threatened litigation to which the Company is, or is threatened to be made, a party; and

(^j) in the case of an underwritten offering, use its best efforts to furnish, at the request of any Shareholder whose Registrable Securities are included in the registration statement, on the date on which such Registrable Securities are sold to the underwriter, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters and such Shareholder and (ii) a “comfort” letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any.

2.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Shareholder that such Shareholder shall furnish to the Company such information regarding such Shareholder, the Registrable Securities held by such Shareholder, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Shareholder’s Registrable Securities.

2.5 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to this Section 2, including all registration, filing, and qualification fees, printers’ and accounting fees, and fees and disbursements of counsel for the Company, shall be borne and paid by the Company, whether or not any such registration or qualification becomes effective. All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Shareholders pro rata on the basis of the number of Registrable Securities registered on their behalf.

2.6 Withdrawal of Registration. The Company shall have the right to terminate or withdraw any registration initiated by it before the effective date thereof, whether or not any Shareholder has elected to include Registrable Securities in such registration, without liability of the Company to any holder of Registrable Securities except for payment of registration expenses as provided in Section 2.5. Any Shareholder may withdraw any Registrable Securities from any registration before the effective date of such registration without liability to the Company or any other holder of Common Stock except for payment of such Shareholder’s portion of any Selling Expenses incurred with respect to the period before such withdrawal.

2.7 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Shareholder, and the partners, members, officers, directors, and shareholders of each such Shareholder, legal counsel for each such Shareholder, any underwriter (as defined in the Securities Act) for each such Shareholder, and each Person, if any, who controls such Shareholder, underwriter or other Person within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Shareholder, underwriter, controlling Person, or other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Shareholder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

(b) To the extent permitted by law, each selling Shareholder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel for the Company, any underwriter (as defined in the Securities Act), any other Shareholder selling securities in such registration statement, and any controlling Person of any such underwriter, other Shareholder or other Person, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Shareholder expressly for use in connection with such registration; and each such selling Shareholder will pay to the Company and each other aforementioned Person any legal fees and other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Shareholder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Shareholder by way of indemnity or contribution under Sections 2.7(b) and 2.7(d) exceed the proceeds from the offering received by such Shareholder (net of any Selling Expenses paid by such Shareholder).

(c) Promptly after receipt by an indemnified party under this Section 2.7 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.7, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel reasonably mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action will not relieve such indemnifying party of any liability to the indemnified party under this Section 2.7, except to the extent, and only to the extent, that such failure actually and materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.7.

(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (1) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact

that this Section 2.7 provides for indemnification in such case or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.7, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall the aggregate amounts payable by any Shareholder by way of indemnity or contribution under Sections 2.7(b) and 2.7(d) exceed the proceeds from the offering received by such Shareholder (net of any Selling Expenses) paid by such Shareholder).

(e) Notwithstanding the foregoing, to the extent that any provision on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering is in conflict with any of the foregoing provisions, the provision in the underwriting agreement shall control.

(f) The obligations of the Company and Shareholders under this Section 2.7 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

2.8 Limitations on Subsequent Registration Rights. The Company shall not, without the prior written consent of the holders of a majority of the Registrable Securities then outstanding, enter into any agreement that would (x) allow any holder or prospective holder of any securities of the Company to include such securities in any registration under the Securities Act or (y) require the Company to comply with any demand or request by or on behalf of such holder or prospective holder for registration of any securities held by or on behalf of such holder or prospective holder unless (a) such holder or prospective holder is (i) an institutional investor or financial institution that, with the approval of the Board of Directors of the Company, has provided bona fide debt or equity financing to the Company and/or (ii) a holder of Company securities issued with the approval of the Board of Directors of the Company as consideration for the acquisition of a business or assets, and such agreement is entered into as a condition of such financing or acquisition and (b) the terms of such agreement allow the Company to comply with Section 2.1 hereof and require such holder or prospective holder to (i) comply with the underwriting requirements in Section 2.2(a) hereof together with the Shareholders and (ii) include such securities in any such registration only pro rata with the Registrable Securities in compliance with Section 2.2(b) hereof. The Company represents and warrants that no such rights exist as of the date of this Agreement, except as pursuant to this Agreement.

2.9 Termination of Registration Rights. The right of any Shareholder to request inclusion of Registrable Securities in any registration pursuant to Section 2.1 shall terminate on the date that such Shareholder is able to sell, during any three-month period without limitation under Rule 144 of the amount of securities to be sold, all of the remaining Registrable Securities held by or then issuable to such Shareholder.

3. MISCELLANEOUS.

3.1 Successors and Assigns. The rights of a Shareholder under this Agreement may be assigned (but only subject to assumption of all related obligations) by a Shareholder to a transferee of Registrable Securities; provided that the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred and such transferee agrees in a written instrument delivered to the Company to assume and be bound by the terms and conditions of this Agreement as a Shareholder hereunder. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective heirs, executors, administrators, legal representatives, successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

3.2 Governing Law. This Agreement (including any claim or controversy arising out of or relating to this Agreement) shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles that would result in the application of any law other than the law of the State of New York.

3.3 Counterparts. This Agreement may be executed and delivered in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

3.4 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day, (ii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iii) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or in the case of the Company, to the principal office of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 3.4.

3.5 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the Shareholders holding a majority of the Registrable Securities then held by all Shareholders; provided

that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Shareholder without the written consent of such Shareholder, unless such amendment, termination, or waiver applies to all Shareholders in the same fashion. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 3.5 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

3.6 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

3.7 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

3.8 Dispute Resolution. The dispute resolution provisions of the Merger Agreement shall apply to all disputes arising hereunder as if set forth in full herein.

3.9 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.9.

3.10 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

PERFUMANIA HOLDINGS, INC.

By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO
SHAREHOLDERS:
	/s/    Glenn Nussdorf
	Glenn Nussdorf
	/s/    Michael W. Katz
	Michael W. Katz, as attorney-in-fact for Stephen Nussdorf
	/s/    Arlene Nussdorf
	Arlene Nussdorf
	/s/    Rene Garcia
	Rene Garcia
	THE JACQUELINE MARIE GARCIA 2006 FAMILY TRUST u/t/a dated October 30, 2006
	By:	/s/    Rene Garcia
		RENE A. GARCIA, Trustee
	By:	/s/    Rafael Villoldo
		RAFAEL VILLOLDO, Trustee

THE CAROLINA MARIE GARCIA 2006 FAMILY TRUST u/t/a dated October 30, 2006
By:	/s/    Rene Garcia
	RENE A. GARCIA, Trustee
By:	/s/    Rafael Villoldo
	RAFAEL VILLOLDO, Trustee
IRREVOCABLE TRUST FOR VICTOR GARCIA u/t/a dated October 30, 2006
By:	/s/    Rene Garcia
	RENE A. GARCIA, Trustee
By:	/s/    Rafael Villoldo
	RAFAEL VILLOLDO, Trustee

SCHEDULE A

SHAREHOLDERS

Glenn Nussdorf

Stephen Nussdorf

Arlene Nussdorf

Rene Garcia

The Jacqueline Marie Garcia 2006 Family Trust u/t/a dated October 30, 2006

The Carolina Marie Garcia 2006 Family Trust u/t/a dated October 30, 2006

Irrevocable Trust for Victor Garcia u/t/a dated October 30, 2006

EX-10.3

EXHIBIT 10.3

SERVICES AGREEMENT

This SERVICES AGREEMENT (as same may be supplemented, modified, amended, restated or extended from time to time, the “Agreement”), dated as of August 11, 2008 (the “Effective Date”), between QUALITY KING DISTRIBUTORS, INC. (“QK”), a corporation organized under the laws of the State of New York, and E COM VENTURES, INC. (“E Com”), a corporation organized under the laws of the State of Florida (each a “Party” and together, the “Parties”).

W I T N E S S E T H:

WHEREAS, E Com desires for itself and on behalf of certain of E Com’s wholly-owned subsidiaries (E Com and such subsidiaries being collectively referred to herein as the “E Com Companies”) to obtain from QK the services set forth below, and QK is willing to provide such services to E Com, each on the terms and conditions of this Agreement; and

WHEREAS, QK desires to obtain from E Com certain economic benefits as set forth below, and E Com is willing to share with QK such economic benefits, each on the terms and conditions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, QK and E Com agree as follows:

ARTICLE 1. QK SERVICES

1.01 QK shall provide to the E Com Companies the services set forth on Appendix A hereto, as may be amended from time to time, including, without limitation, to provide for additional future services (the “QK Services”). The term for each QK Service (each, a “Service Term”) shall be determined pursuant to Article 3 below. The QK Services shall include such reasonably necessary personnel, material, management expertise, and procurement services to furnish and deliver to the E Com Companies the QK Services. Any functions, responsibilities, activities or tasks that are not specifically described in this Agreement or Appendix A, but are reasonably required for the proper performance and delivery of the QK Services, and are a necessary part of such QK Services, shall be deemed to be implied by and included within the scope of the QK Services to the same extent and in the same manner as if specifically described in this Agreement.

1.02 QK shall work jointly with the E Com Companies to create a plan for the provision or delivery of the QK Services. During the Term (as defined hereinafter), E Com shall (i) comply with any reasonable requests or instructions provided by QK that are necessary for QK to adequately provide the QK Services to E Com and (ii) comply with all reasonable standards, policies and procedures applicable to the QK Services.

ARTICLE 2. SHARED SERVICE

E Com shall, to the extent permitted by UPS, share with QK the economic benefit of the bulk rate contract (which contract provides certain discounts and other benefits for the shipping of merchandise and related items) E Com has with UPS to ship QK’s merchandise and related items (the “Shared Service”). QK agrees that upon receipt of an invoice from UPS or E Com for the Shared Service, it will remit to UPS the amount payable by QK to UPS or E Com, as the case may be, in a timely manner. QK acknowledges and agrees that it does not have any claim against any E Com Company for UPS’s provision or non-provision of the Shared Service to QK.

ARTICLE 3. ARTICLE 3. TERM AND TERMINATION

3.01 The Service Term for each of the QK Services and the Shared Service shall commence on the Effective Date and shall continue with respect to each such service until such time as either Party notifies the other Party, in writing, that such QK Service or Shared Service, as the case may be, is no longer being provided or is no longer being purchased. Such notice shall provide that the Service Term for such QK Service or Shared Service, as the case may be, shall terminate no earlier than thirty (30) days after such written notice (or such earlier date as may be required to comply with any applicable regulatory or third party contractual requirements). The termination of a QK Service or the Shared Service, as the case may be, in no way affects the Service Terms of the remaining QK Services or Shared Service, as applicable, and the Service Terms for the remaining QK Services or Shared Service, as applicable, shall continue until terminated in accordance with this Section 3.01.

3.02 The term of this Agreement (the “Term”) shall commence on the Effective Date and shall terminate on the earlier of (i) the date on which the last of the QK Services and the Shared Service is being provided or being purchased and (ii) thirty (30) days after written notice from one Party to the other Party terminating this Agreement, each in accordance with Section 3.01 above. The provisions of Articles 4, 6, 7, 8.02, 9, and 10 shall survive termination of this Agreement.

ARTICLE 4. FEES

4.01 In consideration of QK providing the QK Services to E Com, E Com shall pay to QK the amounts provided for under Appendix A hereto, unless otherwise agreed upon in writing by the Parties. All payments for the QK Services are payable within thirty (30) days from date of invoice. The Parties shall also reimburse each other for reasonable out-of-pocket costs and expenses incurred in connection with performing the QK Services or making available the Shared Service, as the case may be; provided that proper documentation is provided to the reimbursing Party for such costs and expenses. E Com may withhold payments for (i) amounts in dispute, but only until such disputes are resolved, and (ii) amounts for which appropriate documentation is lacking, but only until such documentation is supplied to E Com. The payments contemplated by this Article 4 and Article 2 above shall fully compensate the respective Party for the QK Services and the Shared Service, as the case may be, and no further payments shall be due to either Party for the same.

4.02 QK shall prepare and maintain complete and accurate books of account and records (including originals or copies of documents that support entries in the books of account) covering all QK Services and the fees and reimbursements charged by QK to E Com under this Agreement. E Com’s representatives may, from time to time during regular business hours on reasonable advance notice, during the term of this Agreement and for one year thereafter, audit QK’s books of account and records and examine and copy all documents and materials relating to the QK Services, including invoices, credits and shipping documents and other information related to the QK Services. Any such audit commenced within such one-year period may continue through completion in the ordinary course. QK’s books of account, records and documents, including computer records, shall be maintained for at least three years after the fiscal year in which the related QK Services are billed and, if an audit is pending, through the completion of any audit commenced in accordance with the preceding two sentences (and resolution of any dispute with regard to any payments hereunder). If any audit of QK’s books and records discloses that E Com’s payments were higher than the amount that should have been paid, all payments required to be made to eliminate the discrepancy, plus interest thereon at the interest rate payable by E Com from time to time under its senior revolving credit facility from the date of overpayment until the date of repayment, shall be made promptly by QK.

ARTICLE 5. FORCE MAJEURE

5.01 Neither Party shall be held liable for any delay or failure in performance of any part of this Agreement (other than payment obligations hereunder) from any cause beyond its reasonable control, including, without limitation, acts of God, acts of civil or military authority, embargoes, epidemics, war, terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear accidents, floods, strikes, and power blackouts. Upon the occurrence of a condition described in this Article 5, the Party whose performance is prevented shall give written notice to the other Party as soon as practicable but in any event within five (5) days of such occurrence, and the Parties shall promptly confer, in good faith, to agree upon equitable, reasonable action to minimize the impact on both Parties of such conditions.

ARTICLE 6. CONFIDENTIALITY

6.01 Each Party acknowledges that in the course of performing its obligations hereunder, each Party and its agents, representatives and employees may have access to non-public information, including trade secrets and information pertaining to the other Party, its business, customers, correspondents, finances, activities, software, systems, strategies or plans, that are proprietary or confidential in nature (all the foregoing, collectively, “Confidential Information”). The receiving Party shall cause its agents, representatives and employees, and its contractors and subcontractors and their respective agents, to keep all Confidential Information confidential and none of them shall use or disclose any Confidential Information other than in the performance of their obligations under this Agreement. Moreover, the receiving Party shall reveal Confidential Information only to its agents, representatives and employees who need to know such Confidential Information in connection with this Agreement. All electronic or hard copies of the Confidential Information are the property of the disclosing Party and shall be promptly returned to the disclosing Party by the receiving Party upon the earlier of request by the disclosing Party or termination of this Agreement. This provision shall survive the termination of this Agreement.

ARTICLE 7. LIMITATION OF LIABILITY; INDEMNIFICATION

7.01 Neither QK nor E Com or the E Com Companies shall be liable for, nor will the measure of damages include, any indirect, incidental, special, or consequential damages or amounts for loss of income, profits, or savings arising out of or relating to its performance under this Agreement. In no event shall the amount of QK’s liability exceed the total amount paid by all of the E Com Companies to QK pursuant to this Agreement. In no event shall the amount of the E Com Companies’ liability with respect to any QK Service exceed the amount determined pursuant to Appendix A for that service.

7.02 Each Party shall indemnify, defend, and hold harmless the other Party, its successors, assigns, parents, subsidiaries and affiliates, and all their respective directors, officers, employees, and representatives, from and against any and all claims, losses, actions, damages, expenses and all other liabilities, including reasonable attorney’s fees (collectively, “Losses”), (i) arising from the indemnifying Party’s breach of this Agreement or as a result of the indemnified Party being sued by a third party with respect to a QK Service or the Shared Service, as the case may be, provided to the indemnified Party by the indemnifying Party (except to the extent such Losses result from the indemnified Party’s gross negligence or willful misconduct), whether direct or indirect and (ii) for any injury to persons and damage to property caused by the indemnifying Party or its employees, contractors or subcontractors in connection with this Agreement.

ARTICLE 8. EMPLOYEES; EQUIPMENT AND FACILITIES

8.01 QK shall have full responsibility to supervise and manage the employees of QK who perform the QK Services. Such employees shall at all times remain subject to the direction and control of QK, and E Com shall have no liability for the welfare, salaries, fringe benefits, legally required employer contributions and tax obligations of QK’s employees by virtue of the relationships established under this Agreement.

8.02 No equipment or facility of QK used in performing the QK Services for or subject to use by E Com shall be deemed to be transferred, assigned, conveyed or leased by such performance or use, and QK shall continue to have such title, rights to or interests in such equipment or facility that it enjoyed prior to entering into this Agreement QK shall continue to maintain, in a manner consistent with past practice, security, maintenance and legally required insurance coverage on such equipment or facility.

8.03 QK shall be responsible for ensuring that all QK Services under this Agreement comply with all applicable laws and regulations.

ARTICLE 9. DISPUTES

9.01 Should there be any dispute with respect to any provision of this Agreement, the disputing Party shall promptly notify the other Party in writing of the nature and basis of the dispute, and each Party shall negotiate in good faith to resolve the dispute. In the event that the Parties are unable to resolve the dispute, such dispute shall be submitted and settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association (the “AAA”). There shall be three neutral arbitrators, with

each Party selecting one arbitrator and the two Party-nominated arbitrators selecting the third neutral arbitrator. If a Party fails to nominate an arbitrator within 30 days following the commencement of the arbitration proceeding, then the arbitrator nominated by the other Party shall be the sole arbitrator. The proceedings shall be conducted in New York, New York. Judgment upon the award may be entered in any court having jurisdiction. The arbitrators may award legal fees and other costs to the prevailing Party in the arbitration.

ARTICLE 10. MISCELLANEOUS PROVISIONS

10.01 Assignment. Neither Party may assign this Agreement in whole or in part without the written consent of the other Party (which consent shall not be unreasonably withheld or delayed), except this Agreement may be assigned to an affiliate of such Party. This Agreement shall be binding on the Parties and their respective successors and permitted assigns.

10.02 Notices. Except as otherwise specified in this Agreement, all notices, requests, approvals, consents and other communications required or permitted under this Agreement shall be in writing and shall be deemed given (i) the third day after being sent by registered or certified mail, postage pre-paid, (ii) the next business day after being sent by a nationally recognized overnight delivery service for next day delivery, (iii) the day received when delivered by hand or (iv) the next business day after being sent by facsimile transmission, in each case to the applicable address set forth below.

If to Quality King Distributors, Inc.:
	35 Sawgrass Drive, Suite 1 Bellport, New York 11713 Attention: Alfred R. Paliani, Esq. Fax Number: (631) 439-2262
If to E Com Ventures, Inc.:
	35 Sawgrass Drive, Suite 2 Bellport, New York 11713 Attention: Michael Katz Fax Number: (631) 866-4231

Either Party may change its address or facsimile number for notification purposes by giving the other Party notice of the new address or facsimile and the date upon which it will become effective in accordance with the provisions of this Section 10.02.

10.03 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one single agreement between the Parties. Counterparts of the signature pages of this Agreement that are manually signed and delivered by electronic or facsimile transmission shall be deemed to constitute signed original counterparts hereof and shall bind the Parties signing and delivering in such manner.

10.04 Relationship. The Parties intend to create an independent contractor relationship and nothing contained in this Agreement shall be construed to make either QK or any of the E Com Companies partners, joint venturers, principals, agents, or employees of the other. Without limiting the foregoing, the terms of this Agreement are not intended to cause QK or any of the E Com Companies to

become joint employers for any purpose. Each of the Parties agrees that the provisions of this Agreement as a whole are not intended to, and do not, constitute control of the other Party or its subsidiaries or provide it with the ability to control such other Party or its subsidiaries, and each Party hereto expressly disclaims any right or power under this Agreement to exercise any power whatsoever over the management or policies of the other Party or its subsidiaries. Nothing in this Agreement shall oblige either Party hereto to act in breach of the requirements of any law applicable to it.

10.05 Severability. If any provision of this Agreement (other than a term or provision relating to any payment obligation) shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

10.06 Waiver. No delay or omission by either Party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by any Party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers or discharges must be in writing and signed by the Party waiving its rights.

10.07 Entire Agreement. This Agreement and Appendix A attached hereto, which is hereby incorporated by reference into this Agreement, represent the entire agreement between the Parties with respect to its subject matter, and supersedes in its entirety all other or prior agreements, whether oral or written, with respect thereto.

10.08 Amendments. No amendment to or change of any provision of this Agreement shall be valid unless in writing and signed by an authorized representative of each Party.

10.09 Headings. The section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.

10.10 Governing Law. This Agreement and the rights and obligations of the Parties shall be construed in accordance with and be governed by the laws of the State of New York, without giving effect to the principles thereof relating to the conflicts of law, and any actions or claims with respect thereto shall be commenced exclusively in the state courts of the State of New York or in the United States District Court for the Eastern District of New York, and each of the Partners irrevocably submits to the exclusive jurisdiction of each such court in any proceeding and waives any objection it may now or hereafter have to venue or to convenience of forum. EACH OF THE PARTIES WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

IN WITNESS WHEREOF, QK and E Com have each caused this Agreement to be signed and delivered by its duly authorized representative.

QUALITY KING DISTRIBUTORS, INC.:
By:	/s/    Mike Anderson
Name:	Mike Anderson
Title:	Treasurer and Assistant Secretary
E COM VENTURES INC.:
By:	/s/    Michael W. Katz
Name:	Michael W. Katz
Title:	President and CEO

Appendix A

QK Services

QK Services	Description of QK Services	Fees
Legal Services	Use of QK’s in-house counsel, Alfred R. Paliani, and its paralegal(s).	Fees shall be billed at the hourly rate of in-house counsel, which is currently $275 and includes the services of in-house paralegal(s), which the Parties shall adjust from time to time to give effect to the cost to QK of such services
Payroll and Human Resources Services	Use of QK’s benefits and related human resource services for employees of the E Com Companies for which applicable services are provided.	Fees shall be charged on the following basis: (i) pass-through of actual, per-employee costs for the benefits received by the respective employees plus (ii) E Com’s proportionate share (based on the relative number of employees of QK and its affiliates and of the E Com Companies for which applicable services are provided) of (a) the cost to QK for plan-wide third party costs and (b) allocated overhead, plus (iii) with respect to both (i) and (ii), an administrative fee of two percent (2%) of such amounts; provided, however, that such administrative fee shall not apply to amounts advanced to or on behalf of employees such as wages, withholding taxes, amounts payable to insurers and benefit plan administrators, and the like (except to reimburse outside services providers, insurers and administrators for service charges and fees).

EX-10.4

EXHIBIT 10.4

AMENDED AND RESTATED AGREEMENT

This Agreement (the “Agreement”) is made effective as of the 1st day of August, 2008 (“Effective Date”), by and between Model Reorg Acquisition LLC, a Delaware limited liability company (“LLC”), a wholly-owned subsidiary of Perfumania Holdings, Inc. and successor by merger to Model Reorg, Inc. (“Model”), a New York corporation, having its principal place of business at 35 Sawgrass Drive, Bellport, New York 11713, and Michael W. Katz (“Katz”), having his residence at 4 Gnarled Hollow Circle, Huntington, N.Y. 11743.

WHEREAS, Model and Katz entered into an agreement, dated as of the 31^st day of January, 2003 (the “2003 Agreement”), amending, restating and superceding that certain Shareholder’s Agreement, dated as of September 16, 1997, between Model and Katz, which provided for the issuance of certain stock in Model to Katz and which set forth other terms and conditions governing Katz’ ownership of the stock, the purchase of the stock by Model from Katz and various other rights and obligations of the parties relating thereto, including without limitation non-compete, non-solicitation and confidentiality covenants by Katz; and

WHEREAS, LLC and Katz intend hereby to amend and restate the 2003 Agreement to read in its entirety as set forth herein so that, upon execution of this Agreement, the terms of the 2003 Agreement will no longer be of any force or effect and neither party shall have any further obligation thereunder; and

WHEREAS, Model has agreed to pay Katz the sum of $1,920,000, as an additional payment for his stock in Model which will be payable over a three year term with interest and evidenced by a promissory note; and

WHEREAS, Katz has agreed to enter into non-compete, non-solicitation and confidentiality covenants, as set forth herein; and

WHEREAS, Model merged with and into LLC (the “Merger”), which Merger was consummated on August 11, 2008. The group of companies that includes Perfumania Holdings, Inc., LLC and its subsidiaries, Perfumania, Inc., Perfumania.com, Inc. and any other subsidiaries of Perfumania Holdings, Inc. is hereinafter collectively referred to as the “Perfumania Group”.

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

1 Termination of the 2003 Agreement.

(a) The parties acknowledge and agree that the 2003 Agreement is hereby amended and restated to read in its entirety as set forth herein and the terms of the 2003 Agreement shall have no further force and effect. Neither LLC nor Katz shall have any further obligation whatsoever thereunder.

(b) Katz confirms and acknowledges that, upon execution of this Agreement, he will own no stock in Model and will have no further right under the terms of the 2003 Agreement to any stock in Model (including without limitation any consideration payable in the Merger to stockholders of Model) and, except as required in this Agreement and under the promissory note executed pursuant to paragraph 2 below, shall have no further entitlement to any payment or other consideration for his stock in Model.

2 Payment of Consideration to Katz.

LLC and the Perfumania Group shall pay Katz the sum of $1,920,000.00 evidenced by a promissory note (the “Note”) executed by LLC, dated effective as of August 1, 2008, in the form which is attached hereto as Exhibit A, bearing interest at the annual rate of 4% payable in monthly installments over a three-year period in accordance with the terms and conditions of the Note.

3 Death or Disability of Katz.

Notwithstanding the provisions of Section 2 above, upon the death or determination of disability of Katz, any unpaid balance of the Note and accrued interest thereon payable to Katz shall be accelerated and become immediately due and payable to Katz, his representative or Katz’ estate.

For purposes of this Agreement, Katz shall be deemed disabled in the following circumstances:

(a) In the event that (i) there is a determination by a physician designated jointly by LLC and Katz that Katz suffers from illness or other physical or mental impairment that would prevent Katz from substantially performing duties Katz customarily performed for LLC but that said disability is not permanent as set forth in (b) below, or a determination cannot be made as to whether or not the disability is permanent, and (ii) such disability continues for a period of one hundred and twenty (120) consecutive days during any twelve month period or for one hundred and eighty (180) days, whether or not consecutive, during any 12-month period; or

(b) In the event there is a determination by a physician designated jointly by LLC and Katz, that Katz suffers from a permanent disability, which will preclude him from resuming duties he customarily performed for LLC at any time during the last six months of employment.

The physician designated by LLC and Katz to make a determination as to disability shall include in the determination being issued a statement as to (i) whether or not the disability is permanent as defined in 3(b) above; and (ii) if a determination cannot be made as to whether or not the disability is permanent or if a determination is made that at the time the disability is not permanent, the determination shall specify when the disabled Katz should be reevaluated. The parties agree that in the event a determination is made that the disabled Katz must be reevaluated at certain intervals, then the disabled Katz shall submit to such reevaluations.

In the event that LLC and Katz cannot agree on a physician to designate to make the determination as to Katz’ disability, then and in that event, the existence of such disability shall be resolved by the opinion of two (2) licensed physicians, one selected by LLC and one selected by Katz. If the two physicians cannot agree as to whether or not Katz is disabled as defined herein, the two physicians so selected shall designate a third physician and a majority of the three physicians so selected shall determine whether or not Katz is so disabled.

Anything in this paragraph to the contrary notwithstanding, Katz shall be conclusively deemed to be (i) permanently disabled within the meaning of paragraph 3(b) during any period in which he receives disability insurance proceeds, provided that such proceeds are paid pursuant to a policy or benefit payable in the event of a permanent, not short term, disability; or (ii) disabled under 3(a)(i) above during any period in which he receives disability insurance proceeds.

4 Confidentiality, Non-Compete and Non-Solicitation Covenants.

(a) It is agreed that Katz’ services to the Perfumania Group are of an extraordinary and intellectual character, which gives them a peculiar value, and that his position with the Perfumania Group places or will place him in a position of confidence and trust with the customers, vendors and employees of the Perfumania Group. In addition, Katz acknowledges that, as a result of his position with the Perfumania Group, he will be able to develop relationships with customers and vendors of one or more members of the Perfumania Group that are vital to the future success and viability of the Fragrance Business, as defined below, and Katz acknowledges that maintaining such relationships and clients is an essential element to preserving the goodwill and reputation of each member of the Perfumania Group as it relates to the Fragrance Business. Accordingly, Katz agrees that for the period commencing on the date hereof and ending on the date that is one (1) year following the effective date of termination of his employment with any and all members of the Perfumania Group (the “Covenant Period”), he will not, directly or indirectly, individually, or through a corporate or other business entity, without the prior written consent of the Perfumania Holdings, Inc. Board of Directors:

(i) solicit Competitive Business (as defined below) from any customer or vendor of any member of the Perfumania Group with respect to Fragrance Business during the Covenant Period;

(ii) attempt in any manner to persuade any customer or vendor of any member of the Perfumania Group with respect to Fragrance Business during the Covenant Period to cease to do Competitive Business or to reduce the amount of Competitive Business which any customer or vendor has customarily done or contemplates doing with any member of the Perfumania Group whether or not the relationship between any member of the Perfumania Group and such customer or vendor was originally established in whole or in part through his efforts;

(iii) except on behalf of any member of the Perfumania Group, employ or attempt to employ any person who is then, or at any time during the preceding year was, in the employ of any member of the Perfumania Group; or

(iv) except on behalf of any member of the Perfumania Group, directly or indirectly, individually or as a partner, principal, stockholder, equity owner, employee, agent, officer or consultant of any company, corporation, partnership or other entity, engage in a Competitive Business in the Fragrance Business during the Covenant Period.

For purposes hereof, “Fragrance Business” means the wholesale purchase and wholesale and retail sale or consignment of perfumes, colognes and fragrances. For purposes hereof, “Competitive Business” means any business engaged in any way in the Fragrance Business.

Notwithstanding the provisions of Section 4 above, the foregoing covenants shall not be deemed to prohibit Katz from acquiring as an investment not more than five percent (5%) of the capital stock of a company in the Fragrance Business, whose stock is traded on a national securities exchange.

(b) The terms and conditions of sub-subparagraphs (i) through (v) of this subparagraph (b) shall apply during Katz’ employment with, and for a period of three years following the termination of Katz’ employment with, any and all members of the Perfumania Group.

(i) For purposes of this Agreement, “Confidential Information” means all information, data and knowledge disclosed to or made available to Katz by any member of the Perfumania Group concerning the organization, business, technology or finances of any member of the Perfumania Group or of any third party company in the Fragrance Business that any member of the Perfumania Group is under an obligation to keep confidential, including, but not limited to, trade secrets or confidential information such as customer lists or compilations, alternate source vendor information, pricing and cost information, and financial information.

(ii) Katz shall not publish or otherwise disclose the Confidential Information or any part thereof to any other person, firm or corporation; provided, however, that the obligation not to publish or disclose the Confidential Information shall not apply to any of the following: (A) information that Katz receives from a third party without restriction or without breach of this Agreement; (B) information that is approved for release by the written authorization of the Board of Directors of the member of the Perfumania Group to which such information pertains or from which such information was obtained; (C) information that is or becomes publicly known, except when that information becomes publicly known as a result of an action of Katz; or (E) the disclosure of information which is required or protected by law or court order.

(iii) Katz shall safeguard the Confidential Information from disclosure or dissemination using a comparable level of diligence that Katz uses in safeguarding his own confidential information and that the members of the Perfumania Group generally use to safeguard their confidential information.

(iv) In the event that Katz is requested or required (by oral questions, interrogatories, requests for information or documents subpoena, civil investigative demand or similar process) to disclose any Confidential Information, Katz will, if practicable to do so, provide the applicable member of the Perfumania Group with prompt notice of such request(s) so that such member may seek an appropriate protective order and/or waive compliance with the provisions of this Agreement.

(v) All Confidential Information shall remain the sole and exclusive property of the applicable member of the Perfumania Group at all times. No license in Confidential Information is granted to Katz either directly or indirectly by this Agreement, nor are any rights of ownership in Confidential Information granted by this Agreement.

(c) Katz acknowledges and agrees that the covenants and obligations he has with respect to noncompetition, nonsolicitation and confidentiality of LLC and the members of the Perfumania Group contained in this paragraph relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause LLC and members of the Perfumania Group irreparable injury for which adequate remedies are not available at law. Therefore, Katz agrees that LLC or any

member of the Perfumania Group shall be entitled to an injunction, restraining order or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain Katz from committing any violation of the covenants and obligations contained in this paragraph. These injunctive remedies are cumulative and are in addition to any other rights and remedies that LLC or any member of the Perfumania Group may have at law or in equity.

(d) Notwithstanding the foregoing sentence, in the event of a breach of paragraph 4 of this Agreement alleged by LLC, any payments due to be made to Katz under paragraph 2 of this Agreement shall continue to be made for a period ending on the earlier to occur of (i) the date that is three (3) months following the commencement of an action for injunctive relief or an arbitration proceeding relating to such breach, or (ii) the determination by the court or arbitration panel, as applicable, that such breach occurred. Thereafter, LLC may discontinue any further payments to Katz unless and until the court or arbitration panel, as applicable, makes a final determination that Katz did not violate paragraph 4. In any suit for damages resulting from such breach, Katz shall be entitled to a setoff against any damages recovery made by LLC (the “LLC Damages”) in the amount of any unpaid balance of the promissory note issued pursuant to paragraph 2 above (the “Katz Setoff’), it being understood that if the LLC Damages exceed the Katz Setoff, then LLC’s recovery shall be limited to the amount of the Katz Setoff and any excess, if any, of the LLC Damages over the Katz Setoff shall be waived by LLC. If the Katz Setoff exceeds the LLC Damages, then Katz shall recover against LLC for such excess. The limitation on damages recovery by LLC that is specified in this subparagraph shall not in any way impair LLC’s right to obtain injunctive relief for a violation of paragraph 4 of this Agreement. In the event of an Event of Default, as defined in the Note, and the expiration of thirty (30) days following written notice from Katz of such Event of Default, Katz’s covenants under paragraph 4 hereof and all obligations of Katz under said paragraph 4 will terminate and be null and void unless such Event of Default is cured within said thirty day period.

5 Quality King Guarantee.

(a) Quality King Distributors, Inc. (“Quality King”) hereby unconditionally, irrevocably and absolutely guarantees to Katz and his successors and assigns, the due and prompt performance and payment, as applicable, by LLC of all of LLC’s obligations under or pursuant to this Agreement. (b) Simultaneously with the execution and delivery of the Note to Katz, Quality King shall deliver to Katz a guaranty substantially in the form attached hereto as Exhibit B signed by an officer of Quality King guaranteeing the due and prompt performance and payment by LLC of all of its obligations under the Note.

6 Entire Agreement: No Waiver.

This Agreement contains the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, either oral or written, with respect to the subject matter hereof, and there are no representations, warranties, promises, covenants or understandings other than those expressly set forth herein. No waiver of a breach of any provision hereof or a default under any provision hereof shall be deemed a waiver of such provision or of any subsequent breach or default of any kind or nature. No provision of this Agreement may be amended or waived except in writing signed by the party to be charged.

7 Severability.

In the event that any provision of this Agreement shall be declared invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the other provision s of this Agreement.

8 Successors and Assigns.

The terms and provisions of this Agreement shall inure to the benefit and be binding upon (1) LLC and its successors and assigns and all the members of the Perfumania Group, and (2) Katz and his respective heirs, legal representatives, successors and assigns.

9 Governing Law.

This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed solely within such State by residents thereof, without regard to New York’s internal law governing conflicts of laws.

10 Notices.

All notices and other communications given hereunder shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by recognized overnight courier such as Federal Express or UPS, addressed to the party for whom or for which intended, in the case of LLC, to its then principal office, or at such other address of which LLC shall have given notice to Katz in the manner herein provided, and in the case of Katz, at his residence address as the same is first set forth above or at such other address of which Katz shall have given notice to LLC in the manner herein provided, with a copy of all such notices and communications to be given concurrently to Alfred R. Paliani, Esq., General Counsel, Quality King Distributors, Inc., 35 Sawgrass Drive, Bellport, New York 11713. Notwithstanding the death of Katz, any notice intended for his executors or administrators shall be addressed to such party unless and until such executors or administrators shall have furnished evidence of their qualification as such and shall have given notice of the address to which notices intended for such executors or administrators shall be sent.

11 Maintenance of Copies.

The parties hereto agree to cause a copy of this Agreement to be kept on file at the offices of LLC.

12 Arbitration.

Any controversy or claim arising out of or relating to this Agreement shall be submitted to arbitration before a single arbitrator and such arbitration shall comply with and be governed by the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), as are applicable to contracts made and performed entirely within the State of New York. Said arbitration shall take place in the office of AAA located Suffolk County, New York or such other place as mutually agreed upon by the parties in writing. An award by the arbitrator shall be binding upon both parties. Each party shall bear his or its costs of arbitration, including without limitation, attorneys’ fees and a one half share of the arbitrator’s fees. Judgment on the award rendered by the arbitrator may be entered by the Supreme Court for the State of New York, County of Suffolk.

13 Counterparts.

This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument. In addition, signed signature pages transmitted by facsimile or scanned into an image file and transmitted via email shall be deemed due execution of the Agreement.

IN WITNESS WHEREOF, Katz has hereunto set his hand and LLC has caused this Agreement to be executed and its corporate seal affixed by its officers thereunto duly authorized on the date first above written.

	MODEL REORG ACQUISITION LLC
/s/    Michael W. Katz	By:	/s/    Donna Dellomo
	Name:	Donna Dellomo
	Title:	Secretary and Treasurer
	QUALITY KING DISTRIBUTORS, INC.
	As to Paragraph 5 Only
	By:	/s/    Glenn Nussdorf
	Name:	Glenn Nussdorf
	Title:	President

EXHIBIT A

PROMISSORY NOTE

$1,920,000.00 Bellport, New York Dated: As of August 1, 2008

FOR VALUE RECEIVED, the undersigned MODEL REORG ACQUISITION LLC, a Delaware limited liability company (the “Maker”), and its successors and assigns, having an office at 35 Sawgrass Drive, Bellport, New York 11713, promises to pay to the order of MICHAEL W. KATZ (the “Holder”), having his residence at 4 Gnarled Hollow Circle, Huntington, N.Y. 11743, the principal sum of one million nine hundred twenty thousand dollars and no cents ($1,920,000.00) as hereinafter provided, together with interest (computed on the basis of a 360-day year of twelve 30-day months) at a rate equal to four percent (4%) per annum on the sum of the unpaid principal amount hereof from the date hereof until the principal amount hereof and accrued interest thereon is paid in full, whether upon maturity or by acceleration or otherwise. The agreement (the “Agreement”), dated as of August 1, 2008, between Holder and Maker, respecting, among other things, the payment to Holder of the remaining purchase price for Holder’s stock of Model Reorg, Inc., the Maker’s predecessor, among other obligations of the parties thereto, is hereby incorporated by reference in its entirety and made a part hereof, excluding paragraph 12 thereof relating to arbitration of disputes.

The principal amount of this Note, which is equal to one million nine hundred twenty thousand dollars and no cents ($1,920,000.00), and all interest accruing thereon for the period commencing on the date hereof through and including the date that the principal balance hereof is paid in full, shall be payable in thirty-six (36) equal installments of principal in the amount of $53,333.33 each, payable monthly commencing on September 1, 2008, with each subsequent installment payable on the first day of each month thereafter, and the final installment payable on August 1, 2011, each such installment to be paid together with all interest accrued on the unpaid principal balance hereof as of the date of each such installment.

The Maker hereby waives all applicable exemption rights as well as valuation and appraisement, presentment and demand for payment, protest and notice of protest, notice of dishonor, protest and demand, demand and dishonor, and non-payment of this Note, and expressly agrees that its liability under this Note shall not be affected by any renewal or extension in the time of payment of the principal and/or interest due and payable hereunder, regardless of the number of such renewals and extensions. No failure or delay by the Holder in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any rights, power or privilege.

If this Note (a) is not paid when due or (b) is collected through a bankruptcy, receivership or other court proceeding, whether before or after this Note is due, or (c) is placed in the hands of attorneys for collection, the undersigned agrees to pay, in addition to the then outstanding balance of the principal sum, any accrued and unpaid interest thereon and all other fees, sums, charges and amounts due and payable under this Note, all costs of collecting or attempting to collect the same (including, but not limited to, reasonable attorneys’ fees and disbursements) incurred by the Holder hereof.

This Note may not be altered, amended, canceled, changed, discharged, modified, terminated or waived orally, but only by an agreement in writing dated and executed by the party against which enforcement of such alteration, amendment, change, cancellation, discharge, modification, termination or waiver is sought.

Any notice, request, demand, consent, approval or other communication which the Holder hereof or the undersigned is obligated or may elect to give hereunder (“Notice”) shall be given by registered or certified mail, return receipt requested, postage prepaid, or by recognized overnight courier such as Federal Express or UPS, addressed to the party to receive such Notice at such party’s address first above set forth. Either party may, by Notice given as aforesaid, change its address for all subsequent Notices. Notices shall be deemed given as of the second business day following the date when mailed as aforesaid.

This Note may be prepaid in whole or in part at any time without premium or penalty.

Upon the happening of any of the following events, each of which constitutes a default (“Event of Default”), all sums due will thereupon or at any time thereafter, at Holder’s option, without notice or demand, become immediately due and payable:

(1) failure of any Obligor (which term means and includes Maker and any endorser, surety, guarantor or other party liable for payment of this Note) to pay an installment of principal and interest on or before the expiration of ten (10) days following written notice from Holder to Maker of its failure to make timely payment of such installment hereunder; (2) the filing of any petition under the Bankruptcy Code or any similar federal or state statute by or against any Obligor or the insolvency of any Obligor; or (3) the making of a general assignment by any Obligor for the benefit of creditors, appointment of or taking possession by a receiver, trustee or custodian or similar official for any Obligor or for any assets of any such Obligor or institution by or against any Obligor of any kind of insolvency proceedings or any proceeding for dissolution or liquidation of any Obligor which is not dismissed within 90 days of the filing thereof; or (4) failure of Obligor (which term means and includes the Maker and any endorser, surety, guarantor or other party liable for payment of this Note) to pay unpaid principal balance of this Note and any accrued interest thereon upon acceleration in accordance with paragraph 3 of the Agreement.

Holder will have all of the rights and remedies of a creditor under all applicable law. Without limiting the generality of the foregoing, upon the occurrence of an Event of Default, Holder may, at his option, and without notice or demand declare the entire unpaid principal and accrued interest accelerated and due and payable at once.

The provisions of this Note shall be binding upon and inure to the benefit of the undersigned Maker and the Holder hereof and their respective heirs, legal representatives, successors and assigns,. For the purposes of this Note, the phrase “Holder” shall also mean and include all subsequent holders of this Note.

In case any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been included.

This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to New York’s internal law governing conflicts of laws.

MODEL REORG ACQUISITION LLC
By:	/s/    Donna Dellomo
Name:	Donna Dellomo
Title:	Secretary and Treasurer

EXHIBIT B

GUARANTY

In consideration of, and to induce Michael W. Katz (“Katz”) to execute, that certain agreement (the “Agreement”) by and between Katz and Model Reorg Acquisition LLC (the “LLC”), a Delaware limited liability company, dated as of August 1, 2008, and to induce Katz to accept a promissory note (the “Note”), dated as of August 1, 2008, from the LLC for the sum of $1,920,000 plus interest as described in the Note, as part of the payment for Katz’s stock in the Model Reorg, Inc., the LLC’s predecessor, the undersigned, Quality King Distributors, Inc., a New York corporation (“Guarantor”), intending to be legally bound, hereby unconditionally, irrevocably and absolutely guarantees, to Katz and his successors and assigns, the due and prompt payment and performance by the LLC of all of the LLC’s obligations and liabilities (the “Obligations”) under or pursuant to the Note, as defined more particularly below.

The word “Obligations” is used herein in its most comprehensive sense and includes, without limitation, any indemnity obligations, agreements, payment obligations, covenants, warranties or representations of the LLC under or pursuant to the Note, whether existing now or arising after the date of this Guaranty.

The liability of Guarantor hereunder is primary and shall be enforceable against Guarantor without first resorting to the LLC or exhausting remedies against the LLC and regardless of the solvency or insolvency of the LLC at any time. Any forbearances, acceptance of payments on account, extensions of time for payment of charges in the form of indebtedness, acceptance or release of security, invalidity or enforceability of the Obligations and any change in the status of the LLC shall not release Guarantor from any liability under this Guaranty. Guarantor understands and acknowledges that by virtue of this Guaranty, Guarantor has specifically assumed any and all risks of a bankruptcy or reorganization proceeding with respect to the LLC. Guarantor agrees that in the event a settlement is made with the LLC for less than the amount due Katz, Guarantor shall not be released from liability for the balance still due Katz even though the LLC shall have been released from said Obligations.

This is an absolute, continuing and unconditional Guaranty, and Guarantor’s obligations hereunder shall not be affected by (i) the validity, regularity or enforceability of the Note; or (ii) any other circumstance whatsoever (with or without notice to or knowledge of the LLC) which constitutes, or might be construed to constitute, an equitable or legal discharge of the LLC from the Obligations, in bankruptcy or in any other instance. This Guaranty shall remain in full force and effect from this date until all the Obligations have been paid or otherwise satisfied or performed in full.

Guarantor hereby waives notice of acceptance of this Guaranty, notice of presentment and protest of the Note, diligence, notice of any default by the LLC, and all other notices to which Guarantor might be entitled or which may be required by law. Guarantor waives the benefit of any statutes of limitations affecting Guarantor’s liability hereunder or the enforcement this Guaranty. The Guarantor hereby absolutely subordinates to the Obligations, both in right of payment and in the time of payment, any present or future debts or obligations of the LLC to Guarantor, except to the extent that Guarantor’s senior secured bank lenders have a prior perfected security interest in such present or future debts or obligations of the LLC to Guarantor.

Guarantor agrees to pay Katz all costs, reasonable attorneys’ fees and reasonable expenses paid or incurred by Katz in enforcing any of his rights under this Guaranty, as well as interest, on any unpaid Obligations of the Corporation to Katz under the Note at the rate set forth in the Note.

Guarantor hereby represents and warrants (i) that it is duly organized and validly existing in good standing under the laws of the jurisdiction under which it is organized, and is duly qualified to do business and is in good standing in every other jurisdiction as to which the nature of the business conducted by it makes such qualification necessary; (ii) that it has power and authority to enter into and perform this Guaranty; (iii) that the execution, delivery and performance of this Guaranty by it have been duly authorized by proper action and are not in contravention of law or of the terms of its articles of incorporation or bylaws, or equivalent charter documents, or any agreement, instrument, indenture or other undertaking to which it is a party or by which it is bound; (iv) that all registrations and approvals of any governmental agency, department or commission necessary for the execution, delivery and performance of this Guaranty and for the validity and enforceability thereof, have been obtained and are in full force and effect; (v) that this Guaranty is the legal, valid and binding obligation of the Guarantor, enforceable against Guarantor in accordance with its terms; and (vi) that no legal proceedings are pending, or to the best of Guarantor’s knowledge threatened, before any court or governmental agency which would reasonably be expected to adversely affect in a material manner its financial condition, operations or any licenses or its ability to perform under this Guaranty. All representations and warranties made by Guarantor herein shall survive the execution hereof.

Guarantor is an affiliate of the LLC and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Obligations.

This Guaranty shall be construed, interpreted and applied in accordance with the internal laws of the State of New York, exclusive of its choice of law provisions and regardless of the laws that might otherwise govern under applicable principles of conflict of laws.

GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY, OR THE RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE EASTERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY FINAL JUDGMENT THEREOF.

In case any provision of this Guaranty shall be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Guaranty and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Guarantor agrees that this Guaranty shall be binding on its successors and permitted assigns; provided, however, that this Guaranty may not be assigned by Guarantor without the prior express written consent of Katz, which consent shall not be unreasonably withheld or delayed. Any assignment made in contravention of this paragraph shall be null and void.

None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Katz.

This Guaranty may be executed in one or more counterparts, including facsimiles thereof, all of which shall be considered one and the same Guaranty.

IN WITNESS WHEREOF, this Guaranty is signed as of the 1st day of August, 2008.

GUARANTOR:
QUALITY KING DISTRIBUTORS, INC.
By:	/s/    Glenn Nussdorf
Name:	Glenn Nussdorf
Title:	President

Acknowledged and agreed:

/s/    Michael W. Katz

Michael W. Katz

EX-10.5

EXHIBIT 10.5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made as of February 7, 2008 by and between JACAVI, LLC, a Delaware limited liability company (the “Company”), and RENE A. GARCIA (the “Executive”).

The parties hereto are entering into this Agreement in order to set forth the terms and conditions under which the Executive shall be employed by the Company.

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, and in consideration of the mutual covenants contained herein, agree as follows:

1. Employment. The Executive is and shall continue to be employed by the Company on the terms and conditions set forth herein.

2. Term of Employment. The term (“Term”) of the Executive’s employment by the Company commenced on October 5, 2007 and ends on December 31, 2010. Notwithstanding the foregoing, either party hereto may earlier terminate this Agreement, but only as provided herein.

3. Position. During the Executive’s employment with Company, the Executive shall serve as the president and chief executive officer of the Company and of Distribution Concepts, LLC, a Florida limited liability company (the “Operating Subsidiary”). The Executive shall perform those duties generally required of persons in the position of president and chief executive officer, including but not limited to managing the day-to-day affairs of the Company and its subsidiaries, including the Operating Subsidiary, as well as such other duties, not inconsistent with this Agreement or the positions of president and chief executive officer, as the Company’s Board of Managers (the “Board”) may from time to time direct. The Executive shall report and be responsible to the Board.

4. Scope of Services. During the Term, the Executive agrees to perform in good faith and to the best of his ability and shall devote such time, attention and skill as is reasonably necessary to the business affairs of the Company and all of its subsidiaries (and any of its Affiliates in accordance with the terms of this Agreement), and the performance of the Executive’s duties hereunder. The Executive may, to the extent not otherwise prohibited by this Agreement, devote such amount of time to other activities as does not interfere or compete with the performance of the Executive’s duties under this Agreement or with the provisions of Article 9 of hereunder.

5. Salary, Compensation and Benefits.

5.1 Base Salary. The Company agrees to pay to the Executive for all services to be rendered by the Executive hereunder an initial salary (“Base Salary”) at an annual rate of $300,000. The Base Salary shall be payable in equal monthly installments at the same time and in the same manner as the Company pays its employees generally.

5.2 Incentives, Savings and Retirement Plans. The Executive shall be entitled to participate in all incentive, savings, and retirement plans, policies and programs made available by Model Reorg, Inc. to its executive-level employees generally (“Plans”).

5.3 Fringe Benefits. During the Term, the Executive shall be entitled to the benefits of such group medical, dental, travel and accident, short and long-term disability and term life insurance, if any, as Model Reorg, Inc. shall make generally available from time to time to its executive-level employees.

5.4 Reimbursement of Business Expenses. The Company shall reimburse the Executive (or, in the Company’s sole discretion, shall pay directly), upon presentation of vouchers and other supporting documentation as the Company may reasonably require, for reasonable out-of-pocket expenses incurred by the Executive relating to the business or affairs of the Company or the performance of the Executive’s duties hereunder, including, without limitation, reasonable expenses with respect to entertainment, travel and similar items, provided that the incurring of such expenses shall have been approved in accordance with the Company’s regular reimbursement procedures and practices in effect from time to time.

5.5 Withholding. The Company may withhold from the Executive’s compensation all applicable amounts required by law.

6. Termination of Employment.

6.1 If the Executive’s employment with the Company terminates for any reason (including death or Disability (as hereinafter defined)), the Company shall pay to the Executive any Base Salary, business expense reimbursements, compensation and benefits under any Plans and any and all benefits and other similar amounts, accrued but unpaid as of the date of termination. In the event of termination due to Disability, the Company shall continue to pay the Executive his Base Salary and those benefits to which the Executive was entitled at the time of such termination for a period of one (1) year from such termination.

6.2 In addition to the amounts set forth in paragraph 6.1 above, upon termination of the Executive’s employment with the Company without Cause or upon the Executive’s resignation for Good Reason, contingent upon the Executive’s execution and delivery of a general release reasonably satisfactory to the Company releasing the Company, its officers, agents, stockholders, members and Affiliates from any liability for any matter other than for payments under this Section 6 and contractual obligations under other written agreements, the Executive shall be entitled to receive severance from the Company in an amount equal to 12 months of the Base Salary then in effect (“Severance”), such Severance to be paid over a like number of months consistent with the Company’s normal payroll schedule, and the Executive shall have no further obligation under Section 9 of this Agreement.

6.3 Notwithstanding anything contained in this Agreement or the Related Agreement, upon the Executive’s material breach of any provision of Section 9 hereof, which such breach is reasonably capable of cure within thirty (30) days but shall not have been cured within thirty (30) days of written notice thereof by any manager of the Company to the Executive, or in the event of the termination of the Related Agreement due to the Executive’s breach thereunder, the Company’s obligation to pay Severance and the Term hereof shall immediately terminate.

6.4 Notwithstanding any conflicting or inconsistent provisions of any related stock option plan, agreement or other document, in the event of termination by Executive for Good Reason or following a Change of Control, Executive shall not have a duty to seek other employment or otherwise mitigate the amount of compensation payable to him under the terms of this Section 6, and the amounts payable pursuant to this Section 6 shall be payable to Executive notwithstanding the subsequent engagement of the Executive by a third party that does not breach the terms and conditions of Section 9 hereof.

7. Related Agreement. The Related Agreement is that certain Limited Liability Company Agreement of Jacavi LLC dated as of October 31, 2006 (as may be amended from time to time, the “Related Agreement”) to which the Executive is a party, which Related Agreement memorializes, among other things, (a) the indirect ownership interest in the Company of the Executive and his family members, and (b) certain rights, authority and obligations of the Executive with respect to the operations of the Company in the ordinary course of its business.

8. Executive’s Representations and Warranties. The Executive represents and warrants that the Executive is not a party to any other employment, non-competition, or other agreement or restriction which could interfere with the Executive’s employment with the Company or the Executive’s or the Company’s rights and obligations hereunder and that the Executive’s acceptance of employment with the Company and the performance of the Executive’s duties hereunder will not breach the provisions of any contract, agreement, or understanding to which the Executive is party or any duty owed by the Executive to any other person.

9. Non-Competition and Non-Solicitation.

9.1 The Executive shall not, directly or indirectly, for the Executive or on behalf of or in conjunction with any other person, persons, company, partnership, limited liability entity, corporation or business of whatever nature (other than for or on behalf of Model Reorg, Inc. and/or its Affiliates or Jacavi Beauty Sales LLC) during the period of the Executive’s employment by or with the Company, and for the 12 months immediately following the termination of the Executive’s employment under this Agreement, for any reason whatsoever (with or without Cause or Good Reason), except as provided in Subsection 6.2 above.

(i) engage, as an officer, director, stockholder, member, owner, partner, joint venturer, or in a managerial, consulting or advisory capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any business which offers any services or products in direct competition with the Operating Subsidiary within the United States of America (“USA”);

(ii) contact any person who is, at that time, within the USA, an employee of the Company or the Operating Subsidiary in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company or the Operating Subsidiary;

(iii) contact any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a client of the Company or the Operating Subsidiary within the USA for the purpose of soliciting or selling products or services in direct competition with the Company or the Operating Subsidiary within the USA;

(iv) contact any prospective acquisition candidate, on the Executive’s own behalf or on behalf of any competitor, which candidate for which, to the Executive’s knowledge the Company or the Operating Subsidiary made an acquisition analysis, for the purpose of acquiring such entity; or

(v) induce or attempt to induce any person known by the Executive to be a customer, supplier, licensee or business relation of the Company or the Operating Subsidiary to cease doing business with the Company or the Operating Subsidiary or in any way interfere with the relationship between the Company and any person known by the Executive to be a customer, supplier, licensee, or business relation of the Company or the Operating Subsidiary.

Notwithstanding the above, the foregoing covenants shall not be deemed to prohibit the Executive from acquiring as an investment not more than five (5%) percent of the capital stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter.

9.2 Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing non-competition and non-solicitation covenants, and because of the immediate and irreparable damage that could be caused to the Company for which the Company would have no other adequate remedy, the Executive agrees that the foregoing non-competition and non-solicitation covenants may be enforced by the Company in the event of breach by the Executive, by injunctions and restraining orders.

9.3 The non-competition and non-solicitation covenants in Section 9.1 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and this Agreement shall thereby be reformed.

9.4 The Executive acknowledges that the non-competition and non-solicitation covenants in Section 9.1: (i) are agreed to by the Executive as an inducement for and in consideration of the Company’s entering into this Agreement; and (ii) contain limitations as to time, geographic area and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Company.

9.5 The Executive agrees that all of the non-competition and non-solicitation covenants in Section 9.1 shall be construed as an agreement independent of any other provision in this Agreement, that the Company shall be the beneficiary of and have the right to enforce such covenants, and that the existence of any claim or cause of action of the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. It is specifically agreed that the period of one (1) year following termination of the Executive’s employment stated at the beginning of this Section 9, during which the agreements and covenants of the Executive made in this Section 9 shall be effective, shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of this Section 9.

10. Definitions. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meaning hereby assigned to them as follows:

10.1 “Affiliate” shall mean any “person” (as such term is utilized in Section 13d and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement), who or which directly or indirectly controls, is controlled by or is under common control with, another person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through ownership of voting securities, by contract or otherwise.

10.2 “Cause” shall mean the Executive’s: (i) dishonesty of a material nature (including, but not limited to, theft or embezzlement of Company funds or assets); (ii) conviction of, or guilty plea or no contest plea, to any felony, or the entry of a consent decree with any governmental body regarding any such felony; (iii) noncompliance in any material respect with any laws or regulations, foreign or domestic, materially affecting the operation of the Company’s business; (iv) violation of any express direction or any rule, regulation or policy established by the Board that is consistent with the terms of this Agreement; (v) material breach of this Agreement or of the Executive’s fiduciary duties to the Company; or (vi) abuse of alcohol or drugs which interferes with the Executive’s performance of his duties; provided that in the case of (iii), (iv) or (v), which noncompliance, violation or breach, if reasonably capable of cure within thirty (30) days shall not have been cured within thirty (30) days of written notice thereof by any manager of the Company to the Executive.

10.3 “Change of Control” shall be deemed to occur if and when one or more of Stephen, Glenn and Arlene Nussdorf no longer own at least 51% of Model Reorg, Inc. A Change of Control shall not be deemed to occur in connection with any business combination between the Company and any entity at least 50% owned and controlled by Model Reorg, Inc. or the E Corn transaction contemplated under the Related Agreement.

10.4 “Disability” means either (i) the Executive is deemed disabled for purposes of any group or individual disability policy paid for by the Company and at the time in effect, or (ii) in the good faith judgment of the Board, the Executive is substantially unable to perform the Executive’s duties under this Agreement for more than (180) days, whether or not consecutive, in any twelve (12) month period, by reason of a physical or mental illness or injury.

10.5 Termination by the Executive for “Good Reason” shall mean a resignation that occurs within thirty (30) days following the occurrence of any one or more of the following:

A. the reassignment of the Executive by Company, without the Executive’s express written consent, to a position with the Company other than that of president and chief executive officer of the Company and its Operating Subsidiary or a material adverse change in the nature or scope of the Executive’s authorities, powers, functions, duties or responsibilities in those positions inconsistent with the provisions of this Agreement or the Related Agreement;

B. the Company’s breach or failure to perform its material obligations under this Agreement in any respect, including, without limitation, the failure by Company to pay compensation in accordance with this Agreement (provided that if such breach is capable of being cured within 30 days, such breach or failure shall continue for 30 days after Executive given the Company notice thereof) and such breach or failure has a material and adverse effect on the Executive;

C. Company’s requiring the Executive, without the Executive’s express written consent, to change his place of permanent residency to or to spend more than 5% of the time in which he performs his duties for Company in a place more than 50 miles outside of Miami-Dade County, Florida;

D. the occurrence of a Change of Control; or

E. the Executive has terminated the Related Agreement on the basis of a Model Termination Event as described in subsection (a) of the definition thereof in the Related Agreement.

11. Waivers and Amendments. The respective rights and obligations of the Company and the Executive under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) or amended only with the written consent of a duly authorized representative of the Company and the Executive.

12. Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the Company’s successors and assigns.

13. Entire Agreement. This Agreement and the Related Agreement constitute the full and entire understanding and agreement of the parties with regard to the subjects hereof and supersede in their entirety all other or prior agreements, whether oral or written, with respect thereto.

14. Notices. All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in this Section), reputable commercial overnight delivery service (including Federal Express and U.S. Postal Service overnight delivery service) or, deposited with the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as set forth below:

If to the Company, addressed to:

Model Reorg, Inc.

2060 Ninth Avenue

Ronkonkoma, New York 11779

Attention: Michael Katz

Fax: (631) 439-2333

with a copy to:

Edwards Angell Palmer & Dodge LLP

750 Lexington Avenue

New York, New York 10022

Attention: Patricia L. Kantor, Esq.

Fax: (212) 308-4844

If to the Executive, to the address set forth on the signature page of this Agreement,

with a copy to:

Berger Singerman, PA

200 S. Biscayne Blvd, Suite 1000

Miami, Florida 33131

Attention: Daniel Lampert, Esq.

Fax: (305) 714-4340

or at the current address listed in the Company’s records.

Notices shall be deemed given upon the earlier to occur of (i) receipt by the party to whom such notice is directed; (ii) if sent by facsimile machine, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. Eastern Time and, if sent after 5:00 p.m. Eastern Time, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent; (iii) on the first business day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the commercial courier if sent by commercial overnight delivery service; or (iv) the fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice duly given in accordance therewith, may specify a different address for the giving of any notice hereunder.

15. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of State of Florida (without giving effect to any conflicts or choice of laws provisions thereof that would cause the application of the domestic substantive laws of any other jurisdiction).

16. Consent to Jurisdiction

(a) EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE JURISDICTION OF ALL STATE AND FEDERAL COURTS LOCATED IN DADE COUNTY, FLORIDA, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATION, ANY PROCEEDING RELATING TO ANCILLARY MEASURES IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM RELIEF, OR ANY PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OR AWARD. EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN THE COURTS DESCRIBED ABOVE AND COVENANTS THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH IN THIS SECTION OR AS PROVIDED IN THE NONDISCLOSURE AND DEVELOPMENTS AGREEMENT, OR TO CHALLENGE OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.

(b) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH SECTION 14 OF THIS AGREEMENT.

17. Equitable Remedies. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically such terms and provisions of this Agreement, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity.

18, Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

19. Severability; Titles and Subtitles; Gender; Singular and Plural; Counterparts; Facsimile.

(a) In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

(b) The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

(c) The use of any gender in this Agreement shall be deemed to include the other genders, and the use of the singular in this Agreement shall be deemed to include the plural (and vice versa), wherever appropriate.

(d) This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute one instrument.

(e) Counterparts of this Agreement (or applicable signature pages hereof) that are manually signed and delivered by facsimile transmission shall be deemed to constitute signed original counterparts hereof and shall bind the parties signing and delivering in such manner.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above specified.

COMPANY:		EXECUTIVE:
JACAVI, LLC
By:	/s/    Rene Garcia	/s/    Rene Garcia
Name:	Rene Garcia	Address: 1608 NW 84th Ave.
Title:	President	Miami, FL 33126

SEPARATION AGREEMENT

This Separation Agreement (the “Agreement”) is entered into among Rene A. Garcia, an individual residing at 1608 NW 84^th Avenue, Miami, FL 33126 (“Garcia”), and Jacavi, LLC, a Delaware limited liability company (the “Employer” or the “Company”).

WHEREAS, Garcia and the Company are parties to that certain Amended and Restated Employment Agreement dated as of January 2008 (the “Employment Agreement”); and

WHEREAS, the undersigned desire to enter into this Agreement in order to (i) terminate the Employment Agreement and (ii) resolve any claims, controversies, disputes or outstanding issues that may exist between them.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein, including the agreement to release Garcia from his obligations under the restrictive covenants contained in Section 9 of the Employment Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Termination. Effective December 15, 2008, the Employment Agreement is hereby terminated in all respects and is of no further force or effect (such time to be hereinafter referred to as the “Termination Date”) Garcia waives any notice provisions, termination provisions, early termination penalties and severance obligations in the Employment Agreement. In addition, Garcia hereby resigns any and all positions Garcia held with the Company, whether as officer, director or otherwise.

2. Release. In consideration of the benefits promised by the Company under the terms of this Agreement and as a condition of the Company entering into this Agreement, and except for the “Preserved Matters”, as defined in paragraph 4, below, Garcia, on behalf of himself, his agents, representatives, attorneys, heirs, executors, administrators, successors and assigns (collectively the “Executive”), hereby agrees to forever release and forever discharge the Company and any of its parent companies (including, without limitation, Model Reorg Acquisition, LLC (“Model Reorg”) and Perfumania Holdings, Inc. (“Perfumania Holdings”)), subsidiary companies, companies under common control with any of the foregoing or affiliated or related business entities or any of their respective successors or assigns, or any of the foregoing entities’ current or former shareholders, directors, officers, managers, agents, employees or attorneys (collectively the “Released Parties”), whether as legal entities or individuals acting as agents for any of the Released Parties or in their individual capacities, of and from all manner of actions, proceedings, causes of action, suits, debts, sums of money, accounts, contracts, controversies, agreements, promises, damages, judgments, claims, liabilities, terms, sanctions and demands, of whatsoever character, nature or kind, actual or potential, known or unknown, suspected or unsuspected, whether arising in law or in equity out of any federal, state or city constitution, statute, ordinance, by-law or regulation (including, but not limited to, any and all claims for discrimination under the Age Discrimination in Employment Act, The Older Worker Benefits Protection Act, Title VII of the Civil Rights Act of 1964, Sections 1981 through 1988 of Title 42 of the United States Code, the Americans with

Disabilities Act of 1990, the Family and Medical Leave Act of 1993 and all claims for breach of contract and wrongful discharge and any and all claims relating to Executive’s employment at the Company and the termination thereof, all claims under any statute, state or federal, and all claims for attorneys’ fees, costs, disbursements or the like), which Executive ever had, now has, or may have for, or by reason of, any matter, cause, event or thing whatsoever, from the beginning of the world to the date of this Agreement.

Executive’s decision to enter into this Agreement is based solely on the mutual considerations described above and Executive affirms that it is his free act and deed. Before signing this Agreement, Executive has had the opportunity to carefully consider the terms and ramifications of the Agreement and the opportunity to consult with advisors, legal or otherwise, which the Company has encouraged Executive to do. Executive acknowledges that the benefits provided for by this Agreement are in addition to any payment, benefit or other thing of value to which Executive might otherwise be entitled under any policy, plan or procedure of the Company or pursuant to any prior agreement or contract with the Company.

3. Unknown Claims Released. Executive understands that he is releasing claims that he may not know about. This is Executive’s knowing and voluntary intent, even though he recognizes that someday he might learn that some or all of the facts he currently believes to be true are untrue and even though he might then regret having signed this Agreement. Nevertheless, Executive assumes that risk and agree that this Agreement shall remain effective in all respects in any such case. Executive expressly waives all rights he might have under any law that is intended to protect him from waiving unknown claims, and he understands the significance of doing so.

4. Claims Not Released. Executive understands that he is not releasing, and the parties agree that Executive’s releases do not affect or impair any of the “Preserved Matters”, which term shall mean and consist of: (a) any claim that relates to the right to enforce this Agreement, (b) any claim as a shareholder of Perfumania Holdings or arising under the agreements to which Executive is a party relating to the merger of Model Reorg into Perfumania Holdings (other than the Employment Agreement), (c) Executive’s rights to indemnity and advancement of expenses for defense costs under the organizational documents of the Company, Model Reorg or Perfumania Holdings (including the benefits under any Directors’ & Officers insurance coverages in effect) or (d) any rights or claims that arise after the signing of this Agreement.

5. COBRA. Executive will retain coverage and benefits under the Company’s medical plans through midnight on December 31, 2008. Effective January 1, 2009, Executive will have the right to COBRA medical insurance continuation coverage as to any Company-provided medical plan in which he participates in accordance with the provisions of COBRA.

6. Revocation of Agreement. Executive acknowledges that Executive has had the opportunity to consider this Agreement for a period of up to twenty-one (21) days and understands that Executive may revoke this Agreement at any time during the period of seven (7) days following the day Executive executes this Agreement. Any revocation within this period must be submitted, in writing, to Model Reorg Acquisition, LLC, 35 Sawgrass Drive,

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Suite 2, Bellport, New York 11713, Attn: Michael W. Katz, and state, “I hereby revoke my acceptance of our Agreement terminating my employment effective December 15, 2008.” This Agreement shall not become effective or enforceable until the revocation period has expired. If the last day of the revocation period is a Saturday, Sunday, or legal holiday, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday. Executive agrees that any modifications, material or otherwise, made to this Agreement do not restart or affect in any manner the original twenty-one (21) day consideration period.

7. No Participation in Claims. Executive understands that if this Agreement were not signed, he would have the right to voluntarily assist other individuals or entities in bringing claims against the Released Parties. Executive hereby waives that right and will not provide any such assistance, other than assistance in an investigation or proceeding conducted by a federal or state agency. To the extent that the law prohibits Executive from waiving his right to bring and/or participate in the investigation of a claim, he nevertheless waives his right to seek or accept any monetary damages or relief in any proceeding.

8. Prohibited Statements. As part of this Agreement, Executive agrees to refrain from taking action or making statements, written or oral, which disparage or defame the goodwill or reputation of the Released Parties.

9. Confidentiality. The parties hereto represent that they have not and agree that, except as required by law, they shall not publicize or disclose the terms, contents, conditions or existence of this Agreement, whether in writing or orally, to any person, except to an accountant, tax preparer, financial or legal consultant or spouse, if requested by such person or entity, and then only if reasonably necessary in the performance of such person’s or entity’s professional services or within the marital relationship. The parties hereto further agree not to solicit or initiate any demand by others not a party to this Agreement for any disclosure of the terms and conditions of this Agreement.

Executive also agrees to continue to maintain the confidentiality of, and not to divulge, furnish, publish or use to the detriment of the Company, the Company’s Confidential Information. “Confidential Information” means any and all information, whether or not reduced to written or recorded form, that is related to the Company or any of its parent companies (including, without limitation, Model Reorg Acquisition, LLC and Perfumania Holdings, Inc.), subsidiary companies and companies under common control with any of the foregoing, that is not generally known or accessible to members of the public and/or competitors of the Company nor intended for general dissemination, whether furnished by the Company or compiled by Executive, including, without limitation, information relating to the Company’s past, present, or future research, development, business methodologies or business affairs such as trade secrets, inventions (whether or not patentable), product development, software, software and technology architecture, networks, facilities, billing records, policies, financial and operational information, contracts, officer, director and member information (including professional and personal information regarding such member), suppliers, client lists, client data and information, client pricing, client bidding information, marketing or sales prospects, projected projects, Company “know how,” and all copies, reproductions, notes, analyses, compilations, studies, interpretations, summaries and other documents. “Confidential Information” does not include

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information that has become publicly known and made generally available through no wrongful act of Executive or others or that Executive obtained or developed prior to his employment by the Company.

10. Return of Company Property. Executive acknowledges that he has returned all Company property and Company Confidential Information in his possession.

11. Nonadmission of Liability. Executive recognizes and agrees that this Agreement is not intended to imply any wrongdoing on the Company’s part with respect to his employment or its termination, or any other reason, and shall not constitute evidence of the same.

12. Assignment of Claims. Executive hereby represents and warrants that Executive has not assigned or transferred, or purported to assign or transfer, to any person or entity, any claim against the Released Parties or any portion thereof or interest therein. Executive also waives the right to all remedies in any such action that may be brought on Executive’s behalf.

13. No Further Rights. Notwithstanding the terms and conditions of the Employment Agreement, the parties hereto agree, with the sole exceptions that (a) Executive shall remain liable for actions and omissions, and obligations arising, under the Employment Agreement prior to the Termination Date, and (b) Executive’s rights to medical benefits under paragraph 5, above, which shall remain in full force and effect, that there shall be no continuing rights or obligations of either party under the Employment Agreement, including, without limitation, any obligation of the Company to provide Executive with any severance, compensation or other benefits upon termination of employment, and any non-compete or non-solicitation covenant of the Executive.

14. Representations and Warranties. Each party hereto represents and warrants to the other party that he/it has all requisite power and authority to execute and perform this Agreement, and that this Agreement constitutes his/its legal, valid and binding obligation, enforceable against his/it in accordance with its terms. Each party hereto also represents that he/it has consulted, or has been provided the opportunity to consult, with legal counsel prior to signing this Agreement.

15. Further Assurance. Subject to the terms and conditions of this Agreement, each party hereto will use its commercially reasonable efforts to take, or cause to be taken, all such actions and to do or cause to be done, all things necessary or proper to effectuate the termination of the Employment Agreement.

16. Entire Agreement. This Agreement sets forth the entire agreement between the parties hereto, and fully supersedes any prior agreements or understandings between the parties hereto as set forth herein. No modifications, alterations or changes to this Agreement shall be binding unless in writing and signed by each of the parties hereto.

17. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

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18. Governing Law. This Agreement shall be governed, construed and enforced in accordance with the laws of the State of Florida (without regard to its choice of law principles). Any action, suit or other proceeding initiated by any party hereto under or in connection with this Agreement must be brought in any federal or state court in the State of Florida and both parties hereto consent to the jurisdiction and venue of any federal or state court in the State of Florida and agree to waive any claim that Florida is not a convenient forum for such dispute.

19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. A signature sent by telecopy or facsimile transmission shall be as valid and binding upon a party hereto as an original signature of such party.

[Remainder of Page Intentionally Left Blank]

[Signature Page to Follow]

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement as of the date first written below.

JACAVI, LLC
By:	/s/ Michael W. Katz
	Name: Michael W. Katz
	Title: President
Date: 12/15/08

RENE A. GARCIA

/s/ Rene A. Garcia

Date: 12/15/08

EX-10.6

EXHIBIT 10.6

SUB-SUBLEASE

Model Reorg, Inc.

This Sub-Sublease (“Lease”) is made as of the 1^st day of October, 2007 by and between QUALITY KING DISTRIBUTORS, INC. (“Landlord”), a New York corporation, and MODEL REORG, INC. (“Sub-subtenant”), a New York corporation.

WITNESSETH:

1. DEMISED PREMISES

Landlord hereby leases to Sub-subtenant and Sub-subtenant hereby takes and hires from Landlord, subject to the terms, provisions and covenants herein and in the Restated Sublease (as defined in Section 15.01 hereof), that portion of the premises located at 35 Sawgrass Drive, Bellport, New York 11713 (“Premises”) described in Exhibit A annexed hereto (the “Leased Premises”) for the Term (as defined below).

2. TERM

The term of this Lease (“Term”) shall be for a period of 20 years, commencing on October 1, 2007 (the “Commencement Date”) and, unless earlier terminated pursuant to the terms of the Lease, shall expire at 11:59 p.m. on September 30, 2027 (the “Lease Termination Date”).

3. USE

Sub-subtenant shall use the Leased Premises for warehouse and offices, and for no other purpose.

4. RENT

4.01 Rent: During the Term, Sub-subtenant shall pay equal monthly installments of rent (the “Basic Rent”) to Landlord for the Leased Premises, in advance, on or before the first day of each calendar month, without any offsets or deductions and without prior demand therefore, in accordance with Schedule A annexed hereto.

The Basic Rent for any partial month during the Term shall be pro-rated based upon the actual number of days in such month.

Basic Rent shall be payable to the attention of Landlord at Quality King Distributors, Inc., 35 Sawgrass Drive, Bellport, New York 11713, Attention: Michael Anderson, or at such other place as Landlord may hereafter designate in writing.

4.02 Payment of Rent: If Sub-subtenant fails to make any payment of Basic Rent or any other sums due and payable under this Lease within ten (10) days after the date such payment is due and payable, Sub-subtenant shall pay to Landlord a late charge on the amount of such delinquent payment at the rate of 10% per annum (the “Default Interest Rate”) for such late payment.

Nothing contained herein shall be construed as permitting Landlord to charge or receive interest in excess of the maximum legal rate then allowed by law. Such interest at the Default Interest Rate shall constitute additional rent hereunder and shall be due and payable with the next installment of Basic Rent.

5. CONDITION OF PREMISES

5.01 “As Is” Condition: Possession of the Leased Premises shall be delivered to and accepted by Sub-subtenant in “as is” condition. Upon the Lease Termination Date or any earlier termination pursuant to the terms hereof, Sub-subtenant shall deliver the Leased Premises to Landlord free of all of Sub-subtenant’s furniture and personal property. Sub-subtenant shall take good care of the Leased Premises and the fixtures and appurtenances therein, and shall make all repairs thereto. Sub-subtenant shall not look to Landlord for, nor shall Landlord be responsible for, any repairs to the Leased Premises unless caused by the gross negligence of Landlord.

5.02 Improvements: All alterations, installations and improvements made in or to the Leased Premises by either Sub-subtenant or Landlord shall, at the discretion of Landlord, become the property of Landlord and shall remain upon and be surrendered with the Leased Premises upon expiration of the Term.

6. BROKER

Each of the parties hereto represents and warrants to the other that it has not dealt with any broker in connection with this lease transaction.

7. ASSIGNMENT OR FURTHER SUBLETTING

7.01 Assignment or Further Subletting Generally: During the Term, and provided Sub-subtenant is not in default under this Lease, Landlord shall not unreasonably withhold its consent to an Sub-subtenant assignment of this Lease or sublease of the Leased Premises to a assignee or subtenant whose use will not violate Article 3 hereof and provided that Sub-subtenant, first furnishes Landlord with the name, identity and business of the proposed subtenant or assignee and such other information and documentation (including personal and business financial statements, tax returns, etc.) that Landlord requests in order to evaluate the credit-worthiness and character of the proposed assignee or subtenant.

7.02 Right of Assignment to E Com Ventures, Inc.: During the Term, Sub-subtenant shall have the right to assign this Lease to E Com Ventures, Inc. or an affiliate thereof.

8. ALTERATIONS

Sub-subtenant shall make no changes in or to the Leased Premises without obtaining Landlord’s prior written consent. Subject to the prior written consent of Landlord, and to the provisions of this Article 8, Sub-subtenant may make alterations, installations, additions

or improvements which do not affect the structure of the Premises or the Leased Premises or their utility services

or plumbing and electrical lines, and provided same are in and affect only the interior of the Leased Premises, using contractors or mechanics first approved in writing by Landlord. All fixtures, all electrical items and all paneling, partitions, railings and like installations installed in the Leased Premises at any time, either by Sub-subtenant or by Landlord on Sub-subtenant’s behalf, shall become the property of Landlord and shall remain upon and be surrendered with the Leased Premises unless Landlord, by notice to Sub-subtenant no later than thirty (30) days prior to the Lease Termination Date or before sixty (60) days after the expiration of this Lease, elects to have them removed by Sub-subtenant, in which event the same shall be removed from the Leased Premises by Sub-subtenant forthwith. Nothing in this Article 8 shall be construed to prevent Sub-subtenant’s removal of trade fixtures, but upon removal of any such trade fixtures from the Leased Premises or upon removal of other installations as may be required by Landlord, Sub-subtenant shall immediately and at its expense repair and restore the Leased Premises to the condition existing prior to installation, and shall repair any damage to the Leased Premises due to such removal. All property permitted or required to be removed by Sub-subtenant at the end of the Term remaining in the Leased Premises after Sub-subtenant’s removal shall be deemed abandoned and may be removed from the Leased Premises by Landlord at Sub-subtenant’s expense, which right of Landlord shall survive the expiration of this Lease. Sub-subtenant shall, before making any alterations, additions, installations or improvements, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall promptly deliver duplicates of all such permits, approvals and certificates to Landlord; and Sub-subtenant agrees to carry such workers’ compensation, general liability, personal and property damage insurance as Landlord may reasonably require. Sub-subtenant agrees to obtain and deliver to Landlord written and unconditional waivers of lien upon the real property of which the Leased Premises form a part, for all work, labor and services to be performed and materials to be furnished in connection with such work, signed by all contractors, subcontractors, materialmen and laborers who become involved in such work. The work shall be done in a good and workmanlike manner and in compliance with all applicable law, ordinances, codes, governmental rules, regulations and requirements, and in accordance with the standards, if any, of the Board of Fire Underwriters the jurisdiction of which includes the Leased Premises.

9. REPAIRS

Landlord shall make the necessary structural repairs to the roof and walls of the Building of which the Leased Premises form a part unless such repairs are necessitated by the acts of Sub-subtenant or Sub-subtenant’s agents, servants, employees or invitees. Except as provided in the immediately preceding sentence and for what may otherwise be specifically provided for in this Lease, Sub-subtenant shall be responsible for all maintenance and repairs of and to the Leased Premises, including but not limited to the following responsibilities: Sub-subtenant shall take good care of the Leased Premises and the fixtures, appurtenances and systems in or affecting the Leased Premises (including but not limited to plumbing, doors, painting, windows, electrical, heating and sprinkler and air-conditioning, if any), and shall make all repairs thereto or replace as and when needed to preserve them in good working order and condition, and shall maintain the Leased Premises in a clean, neat and orderly condition. Sub-subtenant shall not permit or suffer the

Leased Premises to fall to such low temperature as would cause freezing of the water lines or sprinkler servicing the Leased Premises; and, in default hereof, Sub-subtenant shall promptly effect and pay for all repairs the need for which shall arise from such freezing, and shall hold Landlord harmless form any loss, damage or liability caused by or arising out of such freezing. Notwithstanding anything above to the contrary, all damage or injury to the Leased Premises or to its fixtures, equipment and appurtenances, whether requiring structural or non-structural repairs, caused by or resulting from carelessness, omission, neglect or improper conduct of Sub-subtenant, its servants, employees, invitees or licensees, shall be repaired promptly by Sub-subtenant at its sole cost and expense, to the reasonable satisfaction of Landlord and in accordance with Section 8 hereinabove. Sub-subtenant shall also repair all damage to the Leased Premises caused by the moving of Sub-subtenant’s fixtures, furniture or equipment. All of the aforesaid repairs shall be of quality or class at least equal to the original work or construction. If Sub-subtenant fails after ten (10) days’ notice to proceed with due diligence to make repairs required to be made by Sub-subtenant, the same may be made by Landlord, at Landlord’s option (in which event Landlord shall not be liable for any injury to persons, damage to property or loss of business arising out of the making of such repairs) at the expense of Sub-subtenant, and the expenses thereof incurred by Landlord (together with interest at the Default Lease Interest Rate) shall be collectible as additional rent within ten (10) days of demand therefore. There shall be no allowance to Sub-subtenant for a diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from the making or failing to make by Landlord, Sub-subtenant or others, of any repairs, alterations, additions or improvements in or to the Leased Premises or the fixtures, appurtenances or equipment thereof.

10. DEFAULTS AND REMEDIES

Section 10.01 Sub-subtenant’s Defaults: If Sub-subtenant defaults in the timely payment of Basic Rent or any additional rent or sum herein reserved, as required in this Lease, or if Sub-subtenant defaults in compliance with any of the other covenants or conditions of this Lease and fails to cure such default, other than the payment of Basic Rent or any additional rent or sum herein reserved, within ten (10) days after the receipt of notice specifying the default, Landlord may (a) cancel and terminate this Lease upon written notice to Sub-subtenant (whereupon the Term shall terminate and expire, and Sub-subtenant shall then quit and surrender the Leased Premises to Landlord, but Sub-subtenant shall remain liable as hereinafter provided); and/or (b) at any time thereafter reenter and resume possession of the Leased Premises as if this Lease had not been made, Sub-subtenant hereby waiving the service of any notice of intention to reenter or to institute legal proceedings to that end.

Section 10.02 Reentry by Landlord: If this Lease shall be terminated or if Landlord shall be entitled to reenter the Leased Premises and dispossess or remove Sub-subtenant under the provisions of Section 10.01, Landlord or Landlord’s agents or servants may immediately or at any time thereafter reenter the Leased Premises and remove Sub-subtenant, its agents, employees, servants, licensees and any subtenants and other persons, firms or corporations, and all or any of its or their property therefrom, either by summary dispossess proceedings or by any suitable action or proceeding at law or by peaceable reentry or otherwise, without being liable to indictment, prosecution or damages therefore, and may repossess and enjoy the Leased Premises, including all additions, alterations and improvements thereto.

Section 10.03 Effect of Termination: In case of a termination of this Lease pursuant to this Article 10, the Basic Rent, additional rent and all other charges required to be paid by Sub-subtenant hereunder shall thereupon become immediately due and shall be paid by Sub-subtenant up to the time of such termination, and Sub-subtenant shall also pay to Landlord all expenses which Landlord may then or thereafter incur as a result of or arising out of such Termination, including but not limited to court costs, attorneys’ fees, brokerage commissions and costs of terminating the tenancy of Sub-subtenant, reentering, dispossessing or otherwise removing Sub-subtenant, and restoring the Leased Premises to good order and condition, and from time to time altering and otherwise preparing the same for reletting. Upon such Termination, Landlord may, at any time and from time to time, relet the Leased Premises, in whole or in part, either in its own name or as Sub-subtenant’s agent, for a term or terms which, at Landlord’s option, may be for the remainder of the then current Term, or for any longer or shorter period.

Section 10.04 Damages: In addition to the payments required by Section 10.03 hereinabove, Sub-subtenant shall be obligated to, and shall, pay to Landlord upon demand and at Landlord’s option:

(a) Liquidated damages in an amount which, at the time of a termination of this Lease under this Article 10 is equal to the excess, if any, of the then present amount of the installments of Basic Rent reserved hereunder, for the period which would otherwise have constituted the unexpired portion of the then current Term, over the then present rental value of the Leased Premises for such unexpired portion of the then current Term; or

(b) Damages (payable in monthly installments), in advance, on the first day of each calendar month following such termination, and continuing until the date originally fixed herein for the expiration of the then current Term in amounts equal to the excess, if any, of the sums of the aggregate expenses paid by Landlord during the month immediately preceding such calendar month for all such items as, by the terms of this Lease, are required to be paid by Sub-subtenant, plus an amount equal to the installment of Basic Rent which would have been payable by Sub-subtenant hereunder in respect to such calendar month, had this Lease not been terminated, over the sum of rents, if any, collected by or accruing to Landlord in respect to such calendar month pursuant to a reletting or to any holding over by any subtenants of Sub-subtenant.

Section 10.05 No Obligation to Relet: Landlord shall in no event be obligated to, or liable for failure to, relet the Leased Premises, or in the event that the Leased Premises are relet, for failure to collect rent due under such reletting; and in no event shall Tenant be entitled to receive any excess of the rents received from such reletting over the sums payable by Sub-subtenant to Landlord hereunder, but such excess shall be credited to the unpaid rentals due hereunder, and to the expenses of reletting and preparing for reletting as provided herein.

Section 10.06 Successive Suits: Suit or suits for the recovery of damages hereunder, or for any installments of rent, may be brought by Landlord from time to time at its election, and nothing herein contained shall be deemed to require Landlord to postpone suit until the date when the Term would have expired if it had not been terminated under the provisions of this Lease, or under any provision of law, or had Landlord not reentered into or upon the Leased Premises.

Section 10.07 Acceleration: Anything to the contrary hereinbefore notwithstanding, Landlord shall have the option to accelerate all future rentals due and hold Sub-subtenant responsible, in advance, for the aggregate “damages” (ad described in this Article 10) to be suffered by Landlord during the remainder of the then current Term or renewal term, if any, as well as damages covering any renewal term, the option for which shall have been exercised by Sub-subtenant.

Section 10.08 Waiver of Redemption: Sub-subtenant hereby waives all rights of redemption to which Sub-subtenant or any person claiming under Sub-subtenant might be entitled, after an abandonment of the Premises, or after a surrender and acceptance of the Leased Premises and the Sub-subtenant’s leasehold estate, or after a dispossession of Sub-subtenant from the Leased Premises, or after a termination of this Lease, or after a judgment against Sub-subtenant in an action in ejectment, or after the issuance of a final order or warrant of dispossess in a summary proceeding, or in any other proceeding or action authorized by any rule of law or statute now or hereafter in force or effect.

11. INSURANCE/CASUALTY/CONDEMNATION

Section 11.01 Sub-subtenant’s Insurance: Throughout the Term, Sub-subtenant shall, at its sole cost and expense:

(a) Obtain and maintain in force Worker’s Compensation Insurance as required by law;

(b) Obtain and maintain Public Liability Insurance (issued by an insurance company licensed to do business in New York and reasonably acceptable to Landlord and any mortgagee(s) of the Leased Premises) covering the Leased Premises in an amount per occurrence of Ten Million ($10,000,000) Dollars combined single limit for bodily injury and property damage, and Ten Million ($10,000,000) Dollars for Personal Liability, which insurance shall name Landlord and the holder(s) of any mortgage(s) affecting the Leased Premises as additional assureds thereunder; and

(c) Obtain and maintain Fire and Extended Coverage on Sub-subtenant’s personal property on the Leased Premises and on any leasehold improvements which may be placed on or affixed to the Leased Premises by Sub-subtenant.

Section 11.02 Policies: Sub-subtenant shall, at all times during the Tenn, maintain in full force and effect and on deposit at Landlord’s office a certificate of insurance or a duplicate original of the insurance policy for the coverages set forth herein, together with evidence of payment of premium. Any such policy shall provide that it shall not be cancelable without at least ten (10) days’ prior written notice to Landlord. If Sub-subtenant shall default in maintaining such insurance, Landlord may, at its option and without waiving any of Landlord’s rights hereunder or releasing Sub-subtenant from any obligation hereunder, procure such insurance, and Sub-subtenant shall, on demand, reimburse Landlord, as additional rent, for the cost thereof with interest at the Default Interest Rate.

Section 11.03 Building Insurance: Sub-subtenant shall not keep anything in the Leased Premises except as permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization or other authority then having jurisdiction, and then only in such manner and such quantity so as not to increase the premium for the Landlord’s insurance, nor shall Sub-subtenant use the Leased Premises in a manner which will increase the rate for such insurance on the building or any other property located therein over that in effect at the commencement of Sub-subtenant’s occupancy. Sub-subtenant shall pay, as additional rent, all costs, expenses, fines, penalties or damages which may be imposed upon Landlord by reason of Sub-subtenant’s failure to comply with the provisions of this Section 11.03.

Section 11.04 Right of Termination: If Landlord shall be unable to procure fire and extended coverage insurance because of Sub-subtenant’s use of the Leased Premises, Landlord shall have the right to terminate this Lease upon written notice to Sub-subtenant specifying the reason for such termination, and the Basic Rent shall be adjusted between the parties hereto as of the date of termination specified in such notice.

Section 11.05 Waiver of Subrogation: Landlord hereby releases Sub-subtenant from liability for damage or destruction to the land and Building of which the Leased Premises form a part, and Sub-subtenant hereby releases Landlord for liability for damage or destruction to any of its personal property or leasehold improvements, provided, however, that such release shall be in force and effect only in respect of damage or destruction covered by standard policies of fire insurance with extended coverage (as maintained by Sub-subtenant or Landlord pursuant to this Lease), and such waiver shall be in effect solely to the extent of proceeds under any such policy.

12. ELECTRICITY AND OTHER SERVICES AND UTILITIES

During the Term, Sub-subtenant shall put and keep in its name, and agrees to timely and completely pay all charges, fees and expenses as charged by the providers thereof for, electric current, telephone, gas, cable, water and sewer and all other services and utilities servicing the Leased Premises.

13. DAMAGE TO LEASED PREMISES

Section 13.01 Notice: If the Leased Premises or any part thereof shall be damaged by fire or other casualty, Sub-subtenant shall give immediate notice thereof to Landlord, and this Lease shall continue in full force and effect except as hereinafter set forth.

Section 13.02 Partial Damage: Subject to Section 13.03 below, if the Leased Premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by Landlord with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Landlord’s control.

Section 13.03 Substantial Damage: If the Leased Premises are substantially damaged or rendered unusable or (whether or not the Leased Premises are damaged in whole or in part) shall be so damaged as, in Landlord’s reasonable judgment, practically to require demolition or rebuilding thereof, then, in any of such events, Landlord may elect to terminate this Lease by written notice to Sub-subtenant given within one hundred eighty (180) days after such fire or casualty, specifying a date for the expiration of this Lease, which date shall not be more than sixty (60) days after the giving of such notice, and upon the date specified in such notice the Term shall expire as fully and completely as if such date were the date set forth above for the expiration of this Lease, and Sub-subtenant shall forthwith quit, surrender and vacate the Premises, without prejudice, however, to Landlord’s rights and remedies against Sub-subtenant under provisions of this Lease in effect prior to such termination, and any Basic Rent, additional rent and other sums under this Lease owing shall be paid up to such date. Unless Landlord shall serve a termination notice as provided for herein, Landlord shall make the repairs and restorations with all reasonable expedition subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Landlord’s control, and this Lease shall continue in full force and effect. It is understood that there shall be no abatement of rent for any period of time during which the Leased Premises shall be in a damaged condition, whether or not the Leased Premises shall be partially or wholly unusable.

Section 13.04 Sub-subtenant’s Property: Sub-subtenant acknowledges that Landlord will not carry insurance on Sub-subtenant’s furniture and/or furnishings or any fixtures or equipment, improvements or appurtenances removable by Sub-subtenant and agrees that Landlord will not be obligated to repair any damage thereto or replace same.

Section 13.05 Mortgages: It is understood and agreed that the provisions of this Article 13 are subject to the rights of mortgagees, if any, of the land and building of which the Leased Premises form a part, and to the rights of mortgagees, if any, of Landlord’s interest in the Lease.

14. EMINENT DOMAIN

Section 14.01 Total Taking: In the event that any public authority or agency holding the power of eminent domain under applicable law shall at any time during the Term condemn, or acquire title in lieu of condemnation to, all or substantially all of the Leased Premises, this Lease shall terminate and expire as of the date upon which title shall vest in such authority, and Sub-subtenant shall pay rent only to the time of such vesting of title.

Section 14.02 Partial Taking: If there shall be only a partial taking or condemnation as aforesaid totaling one-quarter (1/4) or less of the Leased Premises and which shall not substantially prevent Sub-subtenant’s use of the Leased Premises for purposes of its business, this Lease shall thereafter continue as to the untaken part and Sub-subtenant shall be entitled to a reduction in the Basic Rent in such proportion as Landlord shall reasonably deem fair and equitable.

Section 14.03 Restoration by Landlord: If there shall be a partial taking and this Lease shall continue as to the remaining part of the Leased Premises, Landlord, at is own expense and as promptly as practicable, shall restore such remaining part as nearly as may be practicable to its former condition, but only upon receipt of, and to the extent of, the condemnation aware made on account of such partial taking.

Section 14.04 Award to Landlord: Landlord reserves the exclusive right to negotiate with the condemning authority with respect to any proposed condemnation award, and all damages and compensation paid for the taking under the power of eminent domain, whether for the whole or a part of the Leased Premises and whether by agreement or award, shall belong to and be the property of Landlord. Sub-subtenant hereby releases and disclaims any interest or right whatsoever in the award or compensation offered or paid by the condemning authority to the Landlord. There is expressly excluded from any right of compensation to the Sub-subtenant, and Sub-subtenant expressly waives, any claim against the condemning authority for diminution in the value of the leasehold.

Section 14.05 Notice to Sub-subtenant: Landlord shall give prompt notice to Sub-subtenant of any eminent domain proceedings with respect to the Leased Premises.

15. SUBORDINATION

Section 15.01 Subordination to Mortgages: This Lease is hereby made and shall be subject and subordinate to that certain Amended and Restated Sublease dated the date hereof between 35 Sawgrass, LLC, as Landlord, and Quality King Distributors, Inc., as Sub-subtenant (the “Restated Sublease”) and the Prime Lease (as defined in the Restated Sublease) and to all mortgages which may now or hereafter affect the Leased Premises, the Premises and/or the land and building of which the Leased Premises form a part, and to all renewals, modifications, consolidations, replacements or extensions thereof. Sub-subtenant shall, in the event any proceedings are brought for the foreclosure of any such mortgage, attorn to the holder of such mortgage or a purchaser upon any such foreclosure, as Landlord under this Lease.

Section 15.02 Sub-subtenant’s Certificate: Notwithstanding the automatic applicability as to all current and future mortgages of the subordination of this Lease, Sub-subtenant shall, upon request of Landlord or the holder of a current or future mortgage, execute any instrument which may be deemed necessary or desirable by Landlord to confirm such subordination or as otherwise required for mortgage financing or transfer of this Lease, including, but not limited to, certified financial statements and estoppel certificates executed and acknowledged to any mortgagee or transferee, or any proposed mortgage lender or transferee, including but not limited to certifications that this Lease is in full force and effect or, if not, in what respect it is not; that this Lease has not been modified, or the extent to which it has been modified; and that there are no existing defaults hereunder to the best of Sub-subtenant’s knowledge, or specifying the default, if any. If Sub-subtenant fails to respond after due notice within seven (7) days, it shall automatically constitute affirmation of the items contained in the estoppel statement.

16. NON-LIABILITY OF LANDLORD

Landlord shall not be responsible or liable to Sub-subtenant for any loss, damage or injury to person or property that may be occasioned by the acts or omissions of Landlord or of persons occupying any property or space adjacent to or adjoining the Leased

Premises, or any part thereof, including, not in limitation of the foregoing, loss, damage or injury resulting to Sub-subtenant or to any other person or to any property of Sub-subtenant or of any other person, from water, gas, steam, fire or the bursting, stoppage or leakage of sewer or other pipes.

17. COMPLIANCE WITH LAWS, ETC.

Section 17.01 Sub-subtenant’s Acts: Sub-subtenant shall not do or permit anything to be done in the Leased Premises which shall constitute a public nuisance or which will conflict with the regulations of the Fire Department or with any insurance policy upon said improvements or any part thereof. Landlord represents that to the best of its knowledge and information, there are no present violations against the Real Property or the Building thereon.

Section 17.02 Operation of Leased Premises: Sub-subtenant shall, at its own expense, obtain all necessary environmental and operating permits and comply with all present and future requirements of law and with all present and future ordinances or orders, rules and regulations of any state, municipal or other public authority affecting the Leased Premises and with all requirements of the Fire Insurance Exchange or similar body, and of any liability insurance company insuring Landlord against liability for accidents in or connected with the Leased Premises including, but not limited to laws, ordinances, orders, rules and regulations which apply to the interior or exterior of the Leased Premises, the structural or nonstructural parts thereof, and to make all improvements and repairs required by such laws, ordinances, orders, rules and regulations, ordinary or extraordinary, foreseen or unforeseen.

Section 17.03 Environmental Laws: Sub-subtenant acknowledges the existence of all local, state and federal laws, rules and regulations dealing with or pertaining to environmental regulation, contamination or clean-up (collectively, “Environmental Laws”) including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. §9601 et seq. and 40 CFR §302.1 et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq.), The Federal Water Pollution Control Act (33 U.S.C. §1251 et seq. and 40 CFR §116.1 et seq.), and the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), and the regulations promulgated pursuant to said laws, all as amended, relating to or affecting the Leased Premises, and Sub-subtenant shall comply with all Environmental Laws, whether or not arising due to a condition or circumstances not caused by or within the control of Sub-subtenant. During the Term, Sub-subtenant shall not permit, and shall be liable for the presence, release or threat of release of any hazardous, toxic or harmful substances, wastes, materials, pollutants or contaminants (including, without limitation, asbestos, polychlorinated biphenyls, petroleum products, flammable explosives, radioactive materials, or raw materials which include hazardous constituents) or any other substances or materials which are regulated by the Environmental Laws (collectively, “Hazardous Substances”), on, in, under or affecting all or any portion of the Leased Premises or any surrounding areas.

Sub-subtenant agrees not to generate, store, manufacture, refine, transport, treat, dispose of, or otherwise permit to be present on or about the Leased Premises, any Hazardous Substances. It is understood and agreed that the provisions contained in this Article shall

be applicable notwithstanding the fact that any substance shall not be deemed to be a Hazardous Substance at the time of its use by Sub-subtenant but shall thereafter be deemed to be a Hazardous Substance. Notwithstanding the foregoing, Landlord agrees that the storage and distribution of fragrances, perfumes, hair and beauty care products and cosmetics such as shampoos, conditioners, hairsprays, hair mousses, hair shines, hair color preparations and nail polishes and related items contained in the manufacturers’ consumer packaging shall be deemed permitted on the Leased Premises, in compliance with law.

If Sub-subtenant fails to comply with the Environmental Laws or any other governmental law as of the termination or sooner expiration of this Lease and as a consequence thereof Landlord is unable to rent the Leased Premises, then Landlord shall treat Sub-subtenant as one who has not removed at the end of its Term, and thereupon be entitled to all remedies against Sub-subtenant provided by law in that situation, payable in advance on the first day of each month, until such time as Sub-subtenant provides Landlord with a negative declaration or confirmation that any required clean-up plan has been successfully completed.

Sub-subtenant agrees to defend, indemnify and hold harmless Landlord, its agents and employees, and each and every mortgagee of the Premises or the Leased Premises from and against any and all liabilities, damages, claims, losses, judgments, causes of action, costs and expenses (including the reasonable fees and expenses of counsel) which may be incurred by Landlord or any such mortgagee or threatened against Landlord or such mortgagee, relating to or arising out of any breach by Sub-subtenant of the undertakings set forth in this Article 17, said indemnity to survive the Lease expiration or sooner termination.

Section 17.04 Environmental Consultant: Landlord, at its option, may hire an environmental consultant to inspect the Leased Premises and Sub-subtenant’s operations, at Sub-subtenant’s sole cost and expense, from time to time. Sub-subtenant agrees to pay promptly upon demand, as Additional Rent, the cost of such environmental consultant. Additionally, Sub-subtenant shall promptly comply with all reasonable requirements and recommendations suggested by such environmental consultant(s), at Sub-subtenant’s sole cost and expense.

Section 17.05 No Liability: Landlord shall have no liability whatsoever, to Sub-subtenant or any third party, for any violation of the Environmental Laws or the environmental event occurring during the Term and Sub-subtenant will be responsible for curing or complying therewith, as the case may be, at Sub-subtenant’s sole cost and expense.

Section 17.06 Americans with Disabilities Act: Sub-subtenant shall at all times strictly comply with, to the extent applicable to the Leased Premises, with the requirements of the Americans with Disabilities Act of 1990 and all federal, state and local laws, ordinances and regulations relating to access to and use of premises by disabled persons.

18. INDEMNIFICATION OF LANDLORD

Landlord shall not be liable or responsible for, and Sub-subtenant agrees to indemnify, defend and save Landlord harmless from and against all liability and all losses, claims, damages, suits, actions, demands, costs and expenses, including reasonable attorneys’ fees

and costs, arising out of an/or relating to the operation, maintenance, management and control of the Leased Premises and/or in connection with (a) any injury or damage whatsoever caused to or by any person, including Sub-subtenant, its employees, servants, guests, customers, invitees, contractors or agents, or to property, including Sub-subtenant’s property, arising out of any occurrence on or in the Leased Premises; (b) any breach of this Lease by Sub-subtenant; (c) any act or omission of Sub-subtenant or of any person on the Leased Premises, occurring in, on or about the Premises; or (d) any contest or proceeding brought by Sub-subtenant as may be provided for herein. The provisions hereof are not intended to abrogate the provisions of Section 11.05 hereinabove (“Waiver of Subrogation”). The provisions of this section shall survive the expiration or earlier termination of this Lease.

19. QUIET ENJOYMENT: If and so long as Sub-subtenant shall observe and perform all the terms, covenants and obligations required by it to be observed and performed hereunder, Landlord warrants peaceful and quiet occupation and enjoyment of the Leased Premises by Sub-subtenant.

20. MISCELLANEOUS

Section 20.01 Merger: All prior understandings and agreements between the parties, with respect to the matters set forth herein, are merged within this Lease which alone fully sets forth the understandings of the parties with respect to the matters set forth herein.

Section 20.02 Changes in Writing: This Lease may not be changed or telininated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought.

Section 20.03 Notice: Any notice, demand or other communication required or permitted to be given or made by either party under this Lease shall be in writing and shall be deemed properly given three (3) days after sent by registered or certified mail, return receipt requested, or one day after sent by overnight mail, addressed to the parties at the addresses set forth below. Either party may, by notice aforesaid, designate a different address for communications intended for it.

To Landlord:	Quality King Distributors, Inc.
	35 Sawgrass Drive
	Bellport, New York 11713
	Attention: Michael Anderson
with a copy to:	Edwards Angell Palmer & Dodge LLP
	750 Lexington Avenue
	New York, New York 10022
	Attention: Patricia Kantor, Esq.

To Sub-subtenant:	Model Reorg, Inc.
	35 Sawgrass Drive
	Bellport, New York 11713 Attention: Michael Katz
with a copy to:	Edwards Angell Palmer & Dodge LLP 750 Lexington Avenue New York, New York 10022 Attention: Patricia Kantor, Esq.

Section 20.04 Binding Effect: This Lease will be binding on, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns.

Section 20.05 Recordation: Landlord and Sub-subtenant hereby agree to enter into a Memorandum of Lease in recordable form, setting forth the terms and provisions of this Lease, except the rental provisions.

Section 20.06 Effectiveness: This Lease shall not be effective until executed and delivered by Landlord and Sub-subtenant.

21. SIGNS

Section 21.01 Erection of Signs: Sub-subtenant shall have the right, with the prior written consent of Landlord, to erect, at the main entrance to the Leased Premises, signs for advertising purposes in connection with its business at the Leased Premises. All signs shall comply with applicable governmental rules and regulations, and Sub-subtenant shall remove such signs at the expiration of the Term or sooner termination of this Lease, as the case may be, and restore the sign area to its original condition. Landlord shall include Sub-subtenant’s name in any building directory.

Section 21.02 Repair of Damages: Sub-subtenant shall be responsible for any damage caused to the Leased Premises or the Building by the erection or maintenance on the Premises of said signs, and any damage so caused shall be repaired forthwith at Sub-subtenant’s sole cost and expense. In the event any sign erected by Sub-subtenant is removed during the Term or at the expiration or earlier termination thereof, Sub-subtenant shall, at its sole cost and expense, repair any damage whatsoever caused by the removal.

22. SECURITY DEPOSIT

Section 22.01 Security Deposit: Sub-subtenant has this day deposited with Landlord the sum of                                          AND /00 ($         ) DOLLARS as security for the payment of the rent due hereunder and the full and faithful performance by Sub-subtenant of the covenants and conditions on the part of Sub-subtenant to be performed. Said sum shall be returned to Sub-subtenant, without interest, after the expiration of the Term, provided that Sub-subtenant has fully and faithfully performed all such covenants and conditions and is not in arrears in rent. Landlord may, if it so elects, have recourse to such security to make good any default by Sub-subtenant, in which event Sub-subtenant shall, on demand, promptly restore said security to its original amount. If Landlord shall

assign or transfer said security for the benefit of Sub-subtenant to any subsequent owner or holder of Landlord’s interest in this Lease, such assignee or transferee shall become liable for the repayment thereof as herein provided, and the assignor or transferor shall be deemed to be released by Sub-subtenant from all liability to return such security. This provision shall be applicable to every assignment or transfer of Landlord’s interest in this Lease, and shall in no way be deemed to permit Landlord to retain the security after termination of Landlord’s ownership of such interest. Sub-subtenant shall not mortgage, encumber or assign said security without the prior written consent of Landlord. The security shall at all times equal to one and one-half month’s Basic Rent, and as Basic Rent increases from time to time, Sub-subtenant shall immediately deposit with Landlord such amounts as shall be necessary for the deposit to equal one and one-half (1-1/2) months’ Basic Rent.

23. FINANCIAL STATEMENTS:

Within fifty (50) days after the end of each fiscal quarter, except the fourth fiscal quarter, Sub-subtenant shall deliver to Landlord, or upon Landlord’s request, to CW Capital LLC (“Lender”) or its successors or assigns, unaudited financial statements of its financial affairs and condition, including a balance sheet and a statement of profit and loss in such detail as Lender may reasonably request, and setting forth the financial condition and the income and expenses for Sub-subtenant for the immediately preceding fiscal quarter, except the fourth fiscal quarter, which financial statements will be prepared by Landlord or Sub-subtenant. All information required to be provided herein shall be accompanied by a certificate executed by the chief financial officer, the managing member or the general partner of Sub-subtenant, as applicable, stating that each such statement or item of information presents fairly the financial condition of the Sub-subtenant being reported upon. In addition, Sub-subtenant shall deliver audited annual financial statements, certified by a public accountant, to the Lender within one hundred twenty (120) days following the end of each fiscal year. A “Big Three” accounting firm or other independent certified public accountant reasonably acceptable to Lender shall audit such audited annual financial statement. Lender hereby approves BDO Seidman, LLP as an acceptable accounting firm. Each such annual financial statement shall be prepared in accordance with generally accepted accounting principles consistently applied. At any time and from time to time Sub-subtenant shall deliver to Lender or its agents such other financial data as Lender or its agents shall reasonably request with respect to the ownership, maintenance, use and operation of the Leased Premises. Consolidated financial statements that include Sub-subtenant shall satisfy the requirements of this Section.

IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year first above written.

LANDLORD:
QUALITY KING DISTRIBUTORS, INC.
By:	/s/    Michael J. Anderson
Name:	Michael J. Anderson
Title:	Chief Financial Officer and Vice President
SUB-SUBTENANT:
MODEL REORG, INC.
By:	/s/    Michael Katz
Name:	Michael Katz
Title:	Executive Vice President

SCHEDULE A

Basic Rent: $8.10 per rentable square foot ($2,298,780.00 annual); with annual increases of 3.0%.

Square footage: Approximately 283,800 square feet.

FIRST AMENDMENT TO SUB-SUBLEASE

This First Amendment to Sub-Sublease (“Amendment”) is made of the 1^st day of October, 2007 by and between QUALITY KING DISTRIBUTORS, INC. (“Landlord”), a New York corporation, and MODEL REORG, INC. (“Sub-subtenant”), a New York corporation.

Landlord and Sub-subtenant agree as follows:

1. Paragraph 4.01 is amended to add the following new paragraph:

This is a triple net lease and Landlord shall have no financial obligations with respect to the Premises or Leased Premises except as expressly set forth herein. Sub-subtenant shall be responsible for payment of its Proportionate Share (as defined below) of all costs and expenses attributable to the Premises (in addition to the full amount of all costs and expenses attributable to the Leased Premises), including, without limitation, real estate taxes, all operating expenses, insurance, maintenance, extermination, water and sewer charges, utilities, janitorial services, accounting and bookkeeping, landscaping, snow removal, charges attributable to common areas of the Premises and all other sums arising out of, directly or indirectly, the operation, repair and maintenance of the Premises. To the extent that any cost or expense is attributable to work or services solely benefiting or requested by fewer than all the sub-subtenants occupying the Premises, such cost or expense shall be paid only by the sub-subtenant or sub-subtenants benefiting or requesting same.

Sub-subtenant’s Proportionate Share equals the Warehouse Proportionate Share which is 47.58% plus the Office Proportionate Share which is 66.73%.

2. The Sub-sublease is hereby amended to add the following new paragraph 24:

24. ACCESS TO LEASED PREMISES

Landlord and its agents or representatives shall have a right of access to the Leased Premises at all times and for any purpose, including, without limitation, to inspect, repair or show same to any person. Sub-subtenant shall cooperate with the provisions of this section and acknowledges and agrees that its failure to provide such access shall be a material default under this lease.

IN WITNESS HEREOF, the parties have executed this Amendment as of the day and year first above written.

LANDLORD:
QUALITY KING DISTRIBUTORS, INC.
By:	/s/    Michael Anderson
Name:	Michael Anderson
Title:	Chief Financial Officer and Vice President
SUB-SUBTENANT: MODEL REORG, INC.
By:	/s/    Michael Katz
Name:	Michael Katz
Title:	Executive Vice President

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael W. Katz, certify that:

(1) I have reviewed this report on Form 10-Q of Perfumania Holdings, 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; and

(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 we 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 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: December 15, 2008

By:	/s/    Michael W. Katz
	Michael W. Katz
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Donna Dellomo, certify that:

(1) I have reviewed this report on Form 10-Q of Perfumania Holdings, 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; and

(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 we 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 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: December 15, 2008

By:	/s/    Donna Dellomo
	Donna Dellomo
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS 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 of Perfumania Holdings, Inc. (the “Company”) on Form 10-Q for the period ending November 1, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, Michael W. Katz, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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.

By:	/s/    Michael W. Katz
	Michael W. Katz
	President and Chief Executive Officer
	December 15, 2008

EX-32.2

EXHIBIT 32.2

CERTIFICATIONS 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 of Perfumania Holdings, Inc. (the “Company”) on Form 10-Q for the period ending November 1, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, Donna Dellomo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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.

By:	/s/    Donna Dellomo
	Donna Dellomo
	Chief Financial Officer
	December 15, 2008