Assignment of Lessor's Interest In Leases

ASSIGNMENT OF LESSOR'S INTEREST IN LEASES


THIS ASSIGNMENT made as of this 29th day of April, 1998 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Assignment") is between PIERCING PAGODA, INC. ("Assignor"), a Delaware corporation having its chief executive office at 3910 Adler Place, Lehigh Valley, Pennsylvania 18002, and CORESTATES BANK, N.A., a national bank with offices at 600 Penn Street, Reading, Pennsylvania 19603, as administrative agent for the Lenders (hereinafter defined) under that certain Syndicated Loan Agreement dated March 27, 1997 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Syndicated Loan Agreement") by and among Assignor, the lending institutions from time to time parties thereto (each a "Lender" and collectively, the "Lenders"), and Assignee, as administrative agent for itself and the other Lenders and as a Lender (in such capacity, the "Assignee").


W I T N E S S E T H T H A T:


Pursuant to the terms and subject to the conditions set forth in the Syndicated Loan Agreement and that certain Reimbursement Agreement dated as of the date hereof (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Reimbursement Agreement") by and among Assignor, the Lenders and Assignee, as the administrative agent for itself and the other Lenders. Assignee, on behalf of each Lender (according to such Lender's Pro Rata Share [as defined in the Syndicated Loan Agreement]) has issued for the account of Assignor its irrevocable letter of credit (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Letter of Credit") in an amount equal to Two Million Six Hundred Nineteen Thousand Nine Hundred Fifty-Four and 25/100 ($2,619,954.25) Dollars to provide credit enhancement for Assignor's Taxable Variable Rate Demand/Fixed Rate Bonds, Series of 1998, in the aggregate amount of Two Million Five Hundred Sixty-Five Thousand ($2,565,000.00) Dollars (as amended, modified, extended, supplemented, restated and/or replaced from time to time collectively, the "Bonds").


The reimbursement obligation of Assignor to the Lenders is evidenced by the Letter of Credit and those certain Revolving Loan Notes executed and delivered by Assignor to the Lenders pursuant to, and as described in, the Syndicated Loan Agreement. To induce the Lenders, through Assignee as administrative agent and as issuer of the Letter of Credit, to issue the Letter of Credit, Assignor is executing and delivering an Open-End Mortgage and Security Agreement (as amended, modified, extended, supplemented restated and/or replaced, the "Mortgage") to secure the existing and future debts, liabilities and obligations of Assignor to the Lenders under the Reimbursement Agreement. As a future condition to the issuance of the Letter of Credit, and as additional collateral security for the liabilities and obligations secured by the Mortgage, Assignee has required the execution and delivery of this Assignment.


NOW, THEREFORE, for value received and intending to be legally bound, Assignor agrees as follows: 1) As security for the payment of all sums and performance of all obligations secured by the Mortgage and as security for the payment and performance of all of Assignor's obligations under the Reimbursement Agreement, Assignor hereby assigns to Assignee all of its right, title and interest as lessor in, to and under all leases now or hereafter affecting the Property, together with all extensions and modifications of any such leases and all guarantees of lessee's obligations thereunder now or hereafter in force (said leases, extensions, modifications and guarantees being hereinafter collectively called the "Lease"). This Assignment includes, without limitation, the right to receive all rents and other amounts payable under the Lease. Upon the payment in full of all amounts secured hereby, as evidenced by the recording or filing of an instrument or instruments of satisfaction or full release of the Mortgage, this Assignment shall terminate and be of no further force or effect.


2) Assignor represents, warrants and covenants that:


(a) The Lease shall be subordinate in estate, lien, operation and effect to the Note and the Mortgage.


(b) Assignor has not made and will not make any other assignment of the Lease.


(c) There are no leases or agreements to lease all or any part of the Property now in effect.


(d) Assignor will not enter into any leases for all or any part of the Property without the prior written approval thereof by Assignee. All leases of all or any part of the Property shall include subordination and attornment provisions satisfactory to Assignee, and shall be on the form of standard lease approved by Assignee in writing with no modifications except such modifications as Assignee may approve in writing prior to the execution and delivery of the respective lease. No lease of all or any part of the Property shall be materially amended except any such amendments ...