Exhibit 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
September 5, 2008
among
JO-ANN STORES, INC.
as Lead Borrower for:
JO-ANN STORES, INC.
FCA OF OHIO, INC.
HOUSE OF FABRICS, INC.
JOANN.COM, INC.
JO-ANN STORES SUPPLY CHAIN MANAGEMENT, INC.
THE LENDERS PARTY HERETO,
BANK OF AMERICA, N.A.
as Issuing Bank
BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent
WELLS FARGO RETAIL FINANCE, LLC
NATIONAL CITY BUSINESS CREDIT, INC.
U.S. BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents
and
BANC OF AMERICA SECURITIES LLC
as Sole Lead Arranger and Book Manager

 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

              Page  
 
       
ARTICLE 1 Definitions
    2  
 
       
SECTION 1.01 Defined Terms
    2  
SECTION 1.02 Terms Generally
    29  
SECTION 1.03 Accounting Terms; GAAP
    30  
SECTION 1.04 Rounding
    30  
SECTION 1.05 Letter of Credit Amounts
    30  
 
       
ARTICLE 2 Amount and Terms of Credit
    31  
 
       
SECTION 2.01 Commitment of the Lenders
    31  
SECTION 2.02 Reserves; Changes to Reserves
    31  
SECTION 2.03 Making of Loans
    32  
SECTION 2.04 Overadvances
    33  
SECTION 2.05 Swingline Loans
    34  
SECTION 2.06 Letters of Credit
    34  
SECTION 2.07 Settlements Amongst Revolving Lenders
    38  
SECTION 2.08 Notes; Repayment of Loans
    39  
SECTION 2.09 Interest on Loans
    40  
SECTION 2.10 Default Interest
    40  
SECTION 2.11 Certain Fees
    41  
SECTION 2.12 Unused Commitment Fee
    41  
SECTION 2.13 Letter of Credit Fees
    41  
SECTION 2.14 Nature of Fees
    42  
SECTION 2.15 Termination or Reduction of Commitments
    42  
SECTION 2.16 Alternate Rate of Interest
    42  
SECTION 2.17 Conversion and Continuation of Loans
    43  
SECTION 2.18 Mandatory Prepayment; Commitment Termination; Cash Collateral
    44  
SECTION 2.19 Optional Prepayment of Loans; Reimbursement of Lenders
    45  
SECTION 2.20 Maintenance of Loan Account; Statements of Account
    47  
SECTION 2.21 Cash Receipts
    47  
SECTION 2.22 Application of Payments
    49  
SECTION 2.23 Increased Costs
    50  
SECTION 2.24 Change in Legality
    51  
SECTION 2.25 Payments; Sharing of Setoff
    52  
SECTION 2.26 Taxes
    53  
SECTION 2.27 Security Interests in Collateral
    54  
SECTION 2.28 Mitigation Obligations; Replacement of Lenders
    54  
SECTION 2.29 Increase in Revolving Commitments
    55  

 

(i)

--------------------------------------------------------------------------------

 

              Page  
 
       
ARTICLE 3 Representations and Warranties
    57  
 
       
SECTION 3.01 Organization; Powers
    57  
SECTION 3.02 Authorization; Enforceability
    57  
SECTION 3.03 Governmental Approvals; No Conflicts
    57  
SECTION 3.04 Financial Condition
    57  
SECTION 3.05 Properties
    58  
SECTION 3.06 Litigation and Environmental Matters
    58  
SECTION 3.07 Compliance with Laws and Agreements
    59  
SECTION 3.08 Investment Company Status
    59  
SECTION 3.09 Taxes
    59  
SECTION 3.10 ERISA
    59  
SECTION 3.11 Disclosure
    59  
SECTION 3.12 Subsidiaries
    60  
SECTION 3.13 Insurance
    60  
SECTION 3.14 Labor Matters
    60  
SECTION 3.15 Security Documents
    60  
SECTION 3.16 Federal Reserve Regulations
    60  
SECTION 3.17 Solvency
    60  
 
       
ARTICLE 4 Conditions
    61  
 
       
SECTION 4.01 Effective Date
    61  
SECTION 4.02 Conditions Precedent to Each Loan and Each Letter of Credit
    63  
 
       
ARTICLE 5 Affirmative Covenants
    64  
 
       
SECTION 5.01 Financial Statements and Other Information
    64  
SECTION 5.02 Notices of Material Events
    66  
SECTION 5.03 Information Regarding Collateral
    66  
SECTION 5.04 Existence; Conduct of Business
    67  
SECTION 5.05 Payment of Obligations
    67  
SECTION 5.06 Maintenance of Properties
    67  
SECTION 5.07 Insurance
    67  
SECTION 5.08 Casualty and Condemnation
    68  
SECTION 5.09 Books and Records; Inspection and Audit Rights; Appraisals
    68  
SECTION 5.10 Compliance with Laws
    69  
SECTION 5.11 Use of Proceeds and Letters of Credit
    69  
SECTION 5.12 Additional Subsidiaries
    70  
SECTION 5.13 Further Assurances
    70  
SECTION 5.14 Subordinated Debt Indenture
    71  
 
       
ARTICLE 6 Negative Covenants
    71  
 
       
SECTION 6.01 Indebtedness and Other Obligations
    71  
SECTION 6.02 Liens
    73  
SECTION 6.03 Fundamental Changes
    73  
SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions
    74  

 

(ii)

--------------------------------------------------------------------------------

 

              Page  
 
       
SECTION 6.05 Asset Sales
    75  
SECTION 6.06 Restricted Payments; Certain Payments of Indebtedness
    75  
SECTION 6.07 Transactions with Affiliates
    76  
SECTION 6.08 Restrictive Agreements
    76  
SECTION 6.09 Amendment of Material Documents
    77  
SECTION 6.10 Additional Subsidiaries
    77  
SECTION 6.11 Consolidated Fixed Charge Coverage Ratio
    77  
 
       
ARTICLE 7 Events of Default
    77  
 
       
SECTION 7.01 Events of Default
    77  
SECTION 7.02 When Continuing
    80  
SECTION 7.03 Remedies on Default
    80  
SECTION 7.04 Application of Proceeds
    81  
 
       
ARTICLE 8 The Agents
    82  
 
       
SECTION 8.01 Administration by Administrative Agent
    82  
SECTION 8.02 The Collateral Agent
    82  
SECTION 8.03 Sharing of Excess Payments
    83  
SECTION 8.04 Agreement of Required Lenders
    83  
SECTION 8.05 Liability of Agents
    84  
SECTION 8.06 Reimbursement and Indemnification
    84  
SECTION 8.07 Rights of Agents
    85  
SECTION 8.08 Independent Lenders and Issuing Bank
    85  
SECTION 8.09 Notice of Transfer
    85  
SECTION 8.10 Successor Agent
    85  
SECTION 8.11 Reports and Financial Statements
    86  
SECTION 8.12 Documentation Agent, Co-Agents, Syndication Agent and Arranger
    87  
SECTION 8.13 Collateral and Guaranty Matters
    87  
SECTION 8.14 Defaulting Lender
    88  
 
       
ARTICLE 9 Miscellaneous
    89  
 
       
SECTION 9.01 Notices
    89  
SECTION 9.02 Waivers; Amendments
    89  
SECTION 9.03 Expenses; Indemnity; Damage Waiver
    91  
SECTION 9.04 Designation of Lead Borrower as Borrowers’ Agent
    93  
SECTION 9.05 Successors and Assigns
    94  
SECTION 9.06 Survival
    97  
SECTION 9.07 Counterparts; Integration; Effectiveness
    97  
SECTION 9.08 Severability
    97  
SECTION 9.09 Right of Setoff
    97  
SECTION 9.10 Governing Law; Jurisdiction; Consent to Service of Process
    98  
SECTION 9.11 WAIVER OF JURY TRIAL
    99  
SECTION 9.12 Headings
    99  
SECTION 9.13 Interest Rate Limitation
    99  
SECTION 9.14 Intentionally Omitted
    99  
SECTION 9.15 Additional Waivers
    99  
SECTION 9.16 Designated Senior Indebtedness
    101  
SECTION 9.17 Existing Credit Agreement Amended and Restated
    101  
SECTION 9.18 Treatment of Certain Information; Confidentiality
    102  

 

(iii)

--------------------------------------------------------------------------------

 

EXHIBITS

     
A
  Assignment and Acceptance
B-1
  Revolving Notes
B-2
  Swingline Note
C
  Opinion of Counsel to Loan Parties
D
  Borrowing Base Certificate

 

(iv)

--------------------------------------------------------------------------------

 

SCHEDULES

     
1.1
  Lenders and Commitments
1.2
  Fiscal Periods
2.06
  Existing Letters of Credit
2.21(a)
  DDAs
2.21(b)
  Credit Card Arrangements
2.21(c)
  Blocked Accounts
2.21(f)
  Disbursement Accounts
3.05(c)(i)
  Title to Properties; Real Estate Owned
3.05(c)(ii)
  Leased Properties
3.06
  Disclosed Matters
3.12
  Subsidiaries
3.13
  Insurance
5.01(m)
  Financial Reporting Requirements
6.01
  Indebtedness
6.02
  Liens
6.04
  Investments

 

(v)

--------------------------------------------------------------------------------

 

AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 5, 2008 among
JO-ANN STORES, INC., an Ohio corporation, having a principal place of business
at 5555 Darrow Road, Hudson, Ohio 44236, as Lead Borrower for the Borrowers,
being
said JO-ANN STORES, INC., and
FCA of Ohio, Inc., an Ohio corporation, having a principal place of business at
5555 Darrow Road, Hudson, Ohio 44236, and
House of Fabrics, Inc., a Delaware corporation, having a principal place of
business at 5555 Darrow Road, Hudson, Ohio 44236, and
joann.com, Inc., a Delaware corporation, having a principal place of business at
5555 Darrow Road, Hudson, Ohio 44236, and
Jo-Ann Stores Supply Chain Management, Inc., an Ohio corporation, having a
principal place of business at 5555 Darrow Road, Hudson, Ohio 44236;
the LENDERS party hereto; and
BANK OF AMERICA, N.A., as Issuing Bank, a national banking association having a
place of business at 100 Federal Street, Boston, Massachusetts 02110; and
BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent for the
Lenders, a national banking association having a place of business at 100
Federal Street, Boston, Massachusetts 02110; and
WELLS FARGO RETAIL FINANCE, LLC, U.S. BANK NATIONAL ASSOCIATION, AND NATIONAL
CITY BUSINESS CREDIT, INC., as co-Documentation Agents;
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

 

1

--------------------------------------------------------------------------------

 

W I T N E S S E T H:
WHEREAS, certain of the Borrowers have entered into a Credit Agreement dated as
of April 24, 2001 among such Borrowers, the “Lenders” as defined therein, Bank
of America, N.A., as successor in interest to Fleet Retail Group, LLC (f/k/a
Fleet Retail Finance Inc.) as “Administrative Agent” and “Collateral Agent”,
Bank of America, N.A. (f/k/a Fleet National Bank) as “Issuing Bank”, Wachovia
Capital Finance Corporation (New England) (f/k/a Congress Financial Corporation)
as “Documentation Agent”, and GMAC Commercial Finance LLC (f/k/a GMAC Commercial
Credit LLC), National City Business Credit, Inc. (f/k/a National City Commercial
Finance, Inc.) and The CIT Group/Business Credit, Inc., as “Co-Agents” (as
amended and in effect, the “Existing Credit Agreement”); and
WHEREAS, the Borrowers and the Lenders hereunder desire to add additional
Persons as parties to the Existing Credit Agreement as provided herein and to
modify certain of the terms of the Existing Credit Agreement as set forth
herein; and
WHEREAS, the Borrowers and the Lenders hereunder desire to amend and restate the
Existing Credit Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth in this Agreement, and for good and valuable consideration, the receipt of
which is hereby acknowledged, the Lenders, the Agents, and the Borrowers hereby
agree that the Existing Credit Agreement shall be amended and restated in its
entirety to read as follows:
ARTICLE 1
Definitions
SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:
“ACH” shall mean automated clearing house transfers.
“Account” shall mean “accounts” as defined in the UCC, and also means a right to
payment of a monetary obligation, whether or not earned by performance, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use
of a credit or charge card or information contained on or for use with the card.
“Acquisition” shall mean, with respect to any Person (a) an investment in, or a
purchase of a Controlling interest in, the equity interests of any other Person,
(b) a purchase or other acquisition of all or substantially all of the assets or
properties of, another Person or of any business unit of another Person, (c) any
merger or consolidation of such Person with any other Person or other
transaction or series of transactions resulting in the acquisition of all or
substantially all of the assets, or a Controlling interest in the equity
interests, of any Person, or (d) any acquisition of any store locations of any
Person, in each case in any transaction or group of transactions which are part
of a common plan.

 

2

--------------------------------------------------------------------------------

 

“Additional Commitment Lender” shall have the meaning set forth in SECTION 2.29
hereof.
“Adjusted LIBO Rate” means, with respect to any LIBO Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by
(b) the Statutory Reserve Rate.
“Adjustment Date” means the first day of each fiscal month of the Borrowers,
commencing March 1, 2009.
“Administrative Agent” means Bank of America, in its capacity as administrative
agent for the Lenders hereunder.
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
“Agents” shall mean collectively, the Administrative Agent and the Collateral
Agent.
“Alternate Base Rate” shall mean, for any day, the higher of (a) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1% (0.50%) per annum and
(b) the rate of interest in effect for such day as publicly announced from time
to time by Bank of America as its “prime rate.” The “prime rate” is a rate set
by Bank of America based upon various factors including Bank of America’s costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above, or
below such announced rate. Any change in such rate announced by Bank of America
shall take effect at the opening of business on the day specified in the public
announcement of such change. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations thereof in accordance with the terms hereof, the Alternate
Base Rate shall be determined without regard to clause (a) of the first sentence
of this definition, until the circumstances giving rise to such inability no
longer exist.

 

3

--------------------------------------------------------------------------------

 

“Applicable Commitment Fee Percentage” means the applicable percentage set forth
in the grid below:

          Average daily balance in any quarter of the Unused Commitment  
Applicable Commitment Fee Percentage  
 
       
Less than or equal to 33% of the Total Commitments
    0.50 %
 
       
Greater than 33% but less than 66% of the Total Commitments
    0.375 %
 
       
Equal to or greater than 66% of the Total Commitments
    0.25 %

“Applicable Margin” means:
(a) From and after the Effective Date until the first Adjustment Date, the
percentages set forth in Level 2 of the pricing grid below; and
(b) From and after the first Adjustment Date, the Applicable Margin shall be
determined from the following pricing grid based upon the average Excess
Availability as of the fiscal month of the Borrowers that ended immediately
preceding such Adjustment Date; provided that upon the occurrence of an Event of
Default, the Applicable Margin shall be immediately increased to the percentages
set forth in Level 3 (even if the Excess Availability requirements for another
Level have been met) and interest shall be determined in the manner set forth in
SECTION 2.10; provided further if any Borrowing Base Certificates are at any
time restated or otherwise revised or if the information set forth in any
Borrowing Base Certificates otherwise proves to be false or incorrect such that
the Applicable Margin would have been higher than was otherwise in effect during
any period, without constituting a waiver of any Default or Event of Default
arising as a result thereof, interest due under this Agreement shall be
immediately recalculated at such higher rate for any applicable periods and
shall be due and payable on demand.

                      Level   Average Excess Availability   Base Rate Loans    
LIBO Loans  
1
  Greater than or equal to $175,000,000     0.75 %     1.75 %
 
                   
2
 
Greater than or equal to $125,000,000 but less than $175,000,000
    1.00 %     2.00 %
 
                   
3
  Less than $125,000,000     1.25 %     2.25 %

 

4

--------------------------------------------------------------------------------

 

“ Appraisal Percentage” means the following percentages for the periods
indicated:

          Period   Appraisal Percentage  
January 1 through September 14 of each year and November 16 through December 31
of each year
    85 %
September 15 through November 15 of each year
    90 %

“Appraised Value” means the net appraised liquidation value of the Borrowers’
Inventory as set forth in the Borrowers’ stock ledger (expressed as a percentage
of the Cost of such Inventory) as determined from time to time by the
Administrative Agent in accordance with its standard procedures and with the
assistance of an independent appraiser satisfactory to the Administrative Agent.
“Arranger” means Banc of America Securities LLC.
“Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by SECTION 9.05), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.
“Availability Reserves” means such reserves as the Administrative Agent from
time to time determines in the Administrative Agent’s discretion as being
appropriate (a) to reflect the impediments to the Agents’ ability to realize
upon the Collateral, (b) to reflect claims and liabilities that the
Administrative Agent determines will need to be satisfied in connection with the
realization upon the Collateral, (c) to reflect criteria, events, conditions,
contingencies or risks which adversely affect any component of the Borrowing
Base, or the assets, business, financial performance or financial condition of
any Loan Party, or (d) to reflect that a Default or an Event of Default then
exists. Without limiting the generality of the foregoing, Availability Reserves
may include (but are not limited to) reserves based on (i) Rent; (ii) Gift
Certificates and Merchandise Credit Liability; (iii) Frequent Shopper Programs;
(iv) Layaways and Customer Deposits; (v) customs, duties, and other costs to
release Inventory which is being imported into the United States;
(vi) outstanding taxes and other governmental charges, including, ad valorem,
real estate, personal property, and other taxes which might have priority over
the interests of the Collateral Agent in the Collateral and either which have
not been paid when due (unless such taxes are the subject of a bona fide dispute
and are supported by funded reserves) or which the Administrative Agent, in its
discretion, believes may impede the Agents’ ability to realize upon the
Collateral; (vii) salaries, wages and benefits due to employees of any Borrower
which might, in the determination of the Administrative Agent, have priority
over the interests of the Collateral Agent in the Collateral,
(viii) warehousemen’s or bailee’s charges and other Permitted Encumbrances which
may, in the determination of the Administrative Agent, have priority over the
interests of the Collateral Agent in the Collateral, (ix) Cash Management
Reserves, and (x) Bank Products Reserves.

 

5

--------------------------------------------------------------------------------

 

“Banker’s Acceptance” shall mean a time draft on a Commercial Letter of Credit
which has been accepted by the Issuing Bank.
“Bank of America” means Bank of America, N.A. and its successors.
“Bank Products” means any services of facilities provided to any Loan Party by
the Administrative Agent or any Lender or any of their respective Affiliates,
including, without limitation, on account of (a) Hedging Agreements,
(b) purchase cards, and (c) leasing, but excluding Cash Management Services.
“Bank Product Reserves” means such reserves as the Administrative Agent from
time to time determine in its reasonable discretion as being appropriate to
reflect the liabilities and obligations of the Loan Parties with respect to Bank
Products then provided or outstanding.
“Base Rate Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of
Article II.
“Blocked Account Agreements” has the meaning set forth in SECTION 2.21(c).
“Blocked Account Banks” shall mean the banks with whom deposit accounts are
maintained in which any funds of any of the Loan Parties from one or more DDAs
are concentrated and with whom a Blocked Account Agreement has been, or is
required to be, executed in accordance with the terms hereof.
“Blocked Accounts” shall have the meaning set forth in SECTION 2.21(c).
“BOA Concentration Account” shall have the meaning set forth in SECTION 2.21(c).
“BOA Disbursement Accounts” has the meaning provided therefor in SECTION
2.21(f).
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

 

6

--------------------------------------------------------------------------------

 

“Borrowers” means collectively, Jo-Ann Stores, Inc., an Ohio corporation, FCA of
Ohio, Inc., an Ohio corporation, House of Fabrics, Inc., a Delaware corporation,
joann.com, Inc., a Delaware corporation, and Jo-Ann Stores Supply Chain
Management, Inc., an Ohio corporation.
“Borrowing” shall mean (a) the incurrence of Loans of a single Type, on a single
date and having, in the case of LIBO Loans, a single Interest Period, or (b) a
Swingline Loan.
“Borrowing Base” means, at any time of calculation, an amount equal to
(a) the Receivables Advance Rate of the face amount of Eligible Credit Card
Receivables, plus
(b) (i) the Appraisal Percentage of the Appraised Value of Eligible Inventory
multiplied by (ii) (A) the Cost of Eligible Inventory minus (B) Inventory
Reserves; minus
(c) the then amount of all Availability Reserves.
“Borrowing Base Certificate” has the meaning assigned to such term in SECTION
5.01(e).
“Borrowing Request” means a request by the Lead Borrower on behalf of the
Borrowers for a Borrowing in accordance with SECTION 2.03.
“Breakage Costs” shall have the meaning set forth in SECTION 2.19(b).
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed, provided that, when used in connection with a LIBO Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
“Capital Expenditures” means, for any period, (a) the additions to property,
plant and equipment and other capital expenditures of the Borrowers that are (or
would be) set forth in a consolidated statement of cash flows of the Borrowers
for such period prepared in accordance with GAAP and (b) Capital Lease
Obligations incurred by the Borrowers during such period; provided that,
“Capital Expenditures” shall not include any expenditures which are
contractually required to be, and are, reimbursed to a Borrower in cash by its
landlords as tenant allowances during such period of calculation.
“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

 

7

--------------------------------------------------------------------------------

 

“Cash Collateral Account” shall mean an interest-bearing account established by
the Borrowers with the Collateral Agent at Bank of America, N.A. under the sole
and exclusive dominion and control of the Collateral Agent designated as the
“Jo-Ann Stores Cash Collateral Account”.
“Cash Control Event” means that (a) an Event of Default has occurred and is
continuing or (b) Excess Availability is less than $40,000,000.00. The
occurrence of a Cash Control Event shall be deemed continuing notwithstanding
that Excess Availability may thereafter exceed the amount set forth in the
preceding sentence unless and until Excess Availability exceeds such amounts for
sixty (60) consecutive days, in which case a Cash Control Event shall no longer
be deemed to be continuing; provided that a Cash Control Event shall be deemed
continuing (even if Excess Availability exceeds the required amounts for three
consecutive months) if a Cash Control Event has occurred and been discontinued
on three (3) occasions in any twelve month period.
“Cash Management Reserves” means such reserves as the Administrative Agent, from
time to time, determines in its reasonable discretion as being appropriate to
reflect the reasonably anticipated liabilities and obligations of the Loan
Parties with respect to Cash Management Services then provided or outstanding.
“Cash Management Services” means any one or more of the following types or
services or facilities provided to any Loan Party by the Administrative Agent,
any Lender or any of their respective Affiliates: (a) ACH transactions, (b) cash
management services, including, without limitation, controlled disbursement
services, treasury, depository, overdraft, and electronic funds transfer
services, (c) foreign exchange facilities, and (d) credit or debit cards.
“Cash Receipts” has the meaning provided therefor in SECTION 2.21(c).
“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.
“Change in Control” means, at any time, (a) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Lead Borrower
by Persons who were neither (i) nominated by the board of directors of the Lead
Borrower nor (ii) appointed by directors so nominated; or (b) the acquisition of
thirty-five percent (35%) or more of the capital stock of the Lead Borrower by
any Person or group of Persons other than the Family Group, or (c) the failure
of the Lead Borrower to own, directly or indirectly, 100% of the capital stock
of all of the other Borrowers (unless the Administrative Agent shall have
consented to any disposition of any or all of such stock, which consent shall
not be unreasonably withheld).
“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of SECTION 2.23(b), by any lending office of such Lender or by such
Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

 

8

--------------------------------------------------------------------------------

 

“Charges” has the meaning provided therefor in Section 9.13.
“Closing Date” means April 24, 2001.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means any and all “Collateral” as defined in any applicable
Security Document.
“Collateral Access Agreement” means an agreement reasonably satisfactory in form
and substance to the Agents executed by (a) a bailee or other Person in
possession of Collateral, and (b) each landlord of Real Estate leased by any
Loan Party, pursuant to which such Person (i) acknowledges the Collateral
Agent’s Lien on the Collateral, (ii) releases such Person’s Liens in the
Collateral held by such Person or located on such Real Estate, (iii) as to any
landlord, provides the Collateral Agent with access to the Collateral located in
or on such Real Estate and a reasonable time to sell and dispose of the
Collateral from such Real Estate, and (iv) makes such other agreements with the
Collateral Agent as the Agents may reasonably require.
“Collateral Agent” means Bank of America, in its capacity as collateral agent
under the Security Documents.
“Commercial Letter of Credit” means any Letter of Credit issued for the purpose
of providing the primary payment mechanism in connection with the purchase of
any materials, goods or services by the Borrowers in the ordinary course of
business of the Borrowers.
“Commitment Fee” has the meaning provided therefor in SECTION 2.12.
“Consolidated EBITDA” means, at any date of determination, an amount equal to
Consolidated Net Income of the Loan Parties on a consolidated basis for the most
recently completed Measurement Period, plus the following to the extent deducted
in calculating such Consolidated Net Income: (i) Consolidated Interest Charges,
(ii) the provision for U.S. Federal, state, local and foreign income Taxes,
(iii) depreciation and amortization expense, and (iv) stock- based compensation
not payable in cash (in each case of or by Loan Parties on a consolidated basis
for such Measurement Period).
“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination,
the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital
Expenditures made during such period minus (iii) the aggregate amount of U.S.
Federal, state, local and foreign income taxes paid in cash during such period
to (b) the sum of (i) Debt Service Charges plus (ii) the aggregate amount of all
Restricted Payments, in each case, of or by the Loan Parties on a consolidated
basis for the most recently completed Measurement Period in accordance with
GAAP.

 

9

--------------------------------------------------------------------------------

 

“Consolidated Interest Charges” means, for any Measurement Period, the sum of
(a) all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (including capitalized interest) or
in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, (b) all interest paid or
payable with respect to discontinued operations and (c) the portion of rent
expense with respect to such period under Capital Lease Obligations that is
treated as interest in accordance with GAAP, in each case of or by the Loan
Parties on a consolidated basis for the most recently completed Measurement
Period in accordance with GAAP.
“Consolidated Net Income” shall mean, with respect to the Loan Parties for any
Measurement Period, the net income (or loss) of the Loan Parties on a
consolidated basis for such Measurement Period taken as a single accounting
period determined in accordance with GAAP, plus the amount of any goodwill of
the Loan Parties charged off during such period (to the extent any such goodwill
is included as an expense in the determination of Consolidated Net Income);
provided, however, that there shall be excluded (i) the income (or loss) of a
Person in which any Loan Party has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Loan Party
during such period, (ii) the income (or loss) of a Person accrued prior to the
date it becomes a Subsidiary of a Loan Party or any of such Loan Party’s
Subsidiaries or is merged into or consolidated with a Loan Party or any of its
Subsidiaries or that Person’s assets are acquired by such Loan Party or any of
its Subsidiaries, and (iii) the income of any direct or indirect Subsidiary of a
Loan Party to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter documents or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary.
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms “Controlling” and “Controlled” have meanings correlative thereto.
“Cost” means the average cost of purchases, as reported on the Borrowers’ stock
ledger, based upon the Borrowers’ accounting practices which are in effect on
the date of this Agreement. “Cost” does not include inventory capitalization
costs or other non-purchase price charges (such as freight) used in the
Borrowers’ calculation of cost of goods sold; provided that the Administrative
Agent acknowledges that freight is included in the cost of the Borrowers’
imported Inventory in accordance with the Borrowers’ accounting practices which
are in effect on the date of this Agreement.
“Covenant Compliance Event” means that Excess Availability at any time is less
than ten percent (10%) of the then Borrowing Base. For purposes hereof, the
occurrence of a Covenant Compliance Event shall be deemed continuing
notwithstanding that Excess Availability may thereafter exceed the amount set
forth in the preceding sentence unless and until Excess Availability equals or
exceeds such amounts for sixty (60) consecutive days, in which case a Covenant
Compliance Event shall no longer be deemed to be continuing.

 

10

--------------------------------------------------------------------------------

 

“Credit Card Notifications” has the meaning provided therefor in SECTION
2.21(c).
“Credit Extensions” as of any day, shall be equal to the sum of (a) the
principal balance of all Loans then outstanding, and (b) the then amount of the
Letter of Credit Outstandings.
“DDAs” means any checking or other demand deposit account maintained by any
Borrower.
“DDA Notification” has the meaning provided therefor in SECTION 2.21(c).
“Debt Service Charges” means for any Measurement Period, the sum of
(a) Consolidated Interest Charges paid or required to be paid for such
Measurement Period, plus (b) principal payments made or required to be made on
account of Indebtedness (excluding the Obligations but including, without
limitation, Capital Lease Obligations) for such Measurement Period, in each case
determined on a consolidated basis in accordance with GAAP.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
“Default” means any event or condition that constitutes an Event of Default or
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.
“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Revolving Loans, participations in Letters of Credit or participations in
Swingline Loans required to be funded by it hereunder within one Business Day of
the date required to be funded by it hereunder, (b) has otherwise failed to pay
over to the Administrative Agent or any other Lender any other amount required
to be paid by it hereunder within one Business Day of the date when due, unless
the subject of a good faith dispute, or (c) has been deemed insolvent or become
the subject of a bankruptcy or insolvency proceeding.
“Dollars” or “$” refers to lawful money of the United States of America.
“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

 

11

--------------------------------------------------------------------------------

 

“Eligible Credit Card Receivables means Accounts due to a Borrower on a
non-recourse basis from Visa, Mastercard, American Express Co., Discover and
other major credit card processors reasonably acceptable to the Administrative
Agent as arise in the ordinary course of business, which have been earned by
performance and are deemed by the Administrative Agent in its reasonable
discretion to be eligible for inclusion in the calculation of the Borrowing
Base. Without limiting the foregoing, unless otherwise approved in writing by
the Administrative Agent, none of the following shall be deemed to be Eligible
Credit Card Receivables:
(a) Accounts that have been outstanding for more than five (5) Business Days
from the date of sale;
(b) Accounts with respect to which a Borrower does not have good, valid and
marketable title thereto, free and clear of any Encumbrance (other than
Encumbrances granted to the Collateral Agent, for its benefit and the ratable
benefit of the Secured Parties, pursuant to the Security Documents);
(c) Accounts that are not subject to a first priority security interest in favor
of the Collateral Agent, for the benefit of itself and the Secured Parties (it
being the intent that chargebacks in the ordinary course by the credit card
processors shall not be deemed violative of this clause);
(d) Accounts which are disputed, are with recourse, or with respect to which a
claim, counterclaim, offset or chargeback has been asserted (to the extent of
such claim, counterclaim, offset or chargeback);
(e) Accounts which the Administrative Agent determines in its reasonable
discretion to be uncertain of collection.
“Eligible In-Transit Inventory” shall mean, as of the date of determination
thereof, without duplication of other Eligible Inventory, Inventory (a) not yet
delivered to the Borrowers, (b) for which payment has been made by the
Borrowers, (c) which has been consigned to a Borrower (along with delivery to a
Borrower of the documents of title with respect thereto), (d) as to which a
customs broker agency agreement, satisfactory to the Administrative Agent, is in
effect, and (e) which otherwise would constitute Eligible Inventory.
“Eligible Inventory” shall mean, as of the date of determination thereof,
(a) Eligible In- Transit Inventory, (b) Eligible L/C Inventory but only if and
to the extent that the Administrative Agent in its reasonable discretion
determines to include such as Eligible Inventory, and (c) items of Inventory of
the Borrowers that are finished goods, merchantable and readily saleable to the
public in the ordinary course deemed by the Administrative Agent in its
reasonable discretion to be eligible for inclusion in the calculation of the
Borrowing Base. Without limiting the foregoing, unless otherwise approved in
writing by the Administrative Agent, none of the following shall be deemed to be
Eligible Inventory:
(a) Inventory that is not owned solely by the Borrowers, or is leased or on
consignment or the Borrowers do not have good and valid title thereto;
(b) Inventory (including any portion thereof in transit from vendors, other than
Eligible In-Transit Inventory) that is not located at a warehouse facility used
by a Borrower in the ordinary course or at a property that is owned or leased by
the Borrowers;

 

12

--------------------------------------------------------------------------------

 

(c) Inventory that is comprised of goods which (i) are damaged, defective,
“seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor,
(iii) are obsolete or slow moving, or custom items, work-in-process, raw
materials, or that constitute spare parts, promotional, marketing, packaging and
shipping materials or supplies used or consumed in a Borrower’s business,
(iv) are not in compliance in all material respects with all standards imposed
by any Governmental Authority having regulatory authority over such Inventory,
its use or sale, or (v) are bill and hold goods;
(d) Inventory that is not located in the United States of America (excluding
territories and possessions thereof) other than Eligible In-Transit Inventory;
(e) Inventory that is not subject to a perfected first-priority security
interest in favor of the Collateral Agent for the benefit of the Secured
Parties;
(f) Inventory which consists of samples, labels, bags, packaging, and other
similar non-merchandise categories;
(g) Inventory as to which insurance in compliance with the provisions of SECTION
5.07 hereof is not in effect;
(h) Inventory which has been sold but not yet delivered or as to which any
Borrower has accepted a deposit; and
(i) Inventory acquired in a Permitted Acquisition permitted pursuant to
Section 6.04 hereof, unless and until the Collateral Agent has completed or
received (A) an appraisal of such Inventory from appraisers satisfactory to the
Collateral Agent, and has established Inventory Reserves (if applicable)
therefor, and otherwise agrees that such Inventory shall be deemed Eligible
Inventory, and (B) such other due diligence as the Agents may require, all of
the results of the foregoing to be reasonably satisfactory to the Agents.
“Eligible L/C Inventory” shall mean, as of the date of determination thereof,
without duplication of other Eligible Inventory, Inventory (a) which does not
constitute Eligible In-Transit Inventory and for which no documents of title
have then been issued, (b) the purchase of which is supported by a Commercial
Letter of Credit or Banker’s Acceptance having an expiry within sixty (60) days
of such date of determination, which Commercial Letter of Credit or Banker’s
Acceptance provides that it may be drawn only after the Inventory is completed
and after documents of title have been issued for such Inventory reflecting a
Borrower or the Collateral Agent as consignee of such Inventory, and (c) which
otherwise would constitute Eligible Inventory.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by or with any Governmental Authority, relating in
any way to the environment, preservation or reclamation of natural resources,
handling, treatment, storage, disposal, Release or threatened Release of any
Hazardous Material.

 

13

--------------------------------------------------------------------------------

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties or
indemnities), of any Borrower directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened release
of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Lead Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) 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 any
Plan; (d) the incurrence by the Lead Borrower or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by the Lead Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any
Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence
by the Lead Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by the Lead Borrower or any ERISA Affiliate of any
notice, or the receipt by any Multiemployer Plan from the Lead Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
“Event of Default” has the meaning assigned to such term in SECTION 7.01.
“Excess Availability” means, as of any date of determination, the excess, if
any, of (a) the lesser of the Borrowing Base or the aggregate Revolving
Commitments, over (b) the sum of (i) the outstanding Credit Extensions, and
(ii) all then held checks, accounts payable which are beyond credit terms then
accorded the Borrowers and overdrafts.

 

14

--------------------------------------------------------------------------------

 

“Excluded Taxes” means, with respect to the Agents, any Lender, the Issuing Bank
or any other recipient of any payment to be made by or on account of any
obligation of the Borrowers hereunder, (a) income or franchise taxes imposed on
(or measured by) its gross or net income by the United States of America, or by
the jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which any Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by a Borrower under SECTION
2.28(b), any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with SECTION 2.26(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrowers with respect to such withholding tax pursuant to SECTION 2.26(a).
“Existing Letters of Credit” means those Letters of Credit under the Existing
Credit Agreement set forth on Schedule 2.06 hereto.
“Facility Guarantee” means the Guaranty executed by the Facility Guarantors in
favor of the Agents, the Issuing Bank and the Lenders.
“Facility Guarantors” means all Subsidiaries of each Borrower now existing or
hereafter created other than Foreign Subsidiaries.
“Facility Guarantors Collateral Documents” means all security agreements,
mortgages, pledge agreements, deeds of trust, and other instruments, documents
or agreements executed and delivered by any Facility Guarantor to secure the
Facility Guarantee.
“Family Group” means (i) Betty Rosskamm, Alan Rosskamm, Jacqueline Rothstein and
their respective spouses, heirs, legatees, lineal descendants, executors,
administrators, and other representatives, and (ii) any trust, family
partnership or similar investment entity of which any of the foregoing Persons
are trustee(s), managing member(s), managing partner(s) or similar officer(s)
and/or that is for the benefit of any of the foregoing Persons as long as one or
more of such Persons has the exclusive or joint right to control the voting and
disposition of securities held by such trust, family partnership or similar
investment entity.
“Federal Funds Effective Rate” means, for any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of
America on such day on such transactions as reasonably determined by the
Administrative Agent.

 

15

--------------------------------------------------------------------------------

 

“Fee Letter” means the fee letter dated July 31, 2008 among the Borrowers, the
Arranger and the Administrative Agent, as such letter may from time to time be
amended.
“Financial Officer” means, with respect to any Borrower, the chief financial
officer, treasurer, controller or assistant controller of such Borrower.
“Fiscal Period” means the accounting periods of the Borrowers based upon the
Borrowers’ accounting practices which are in effect on the date of this
Agreement, such fiscal periods being reflected on Schedule 1.2 hereto.
“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the
District of Columbia.
“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the
District of Columbia.
“GAAP” means generally accepted accounting principles in the United States of
America.
“Gift Certificate and Merchandise Credit Liability” means, at any time, the
aggregate face value at such time of (a) outstanding gift certificates and gift
cards of the Borrowers entitling the holder thereof to use all or a portion of
the certificate to pay all or a portion of the purchase price for any Inventory,
and (b) outstanding merchandise credits of the Borrowers.
“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation, provided that the term “Guarantee” shall not include endorsements
for collection or deposit in the ordinary course of business.

 

16

--------------------------------------------------------------------------------

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law,
including any material listed as a hazardous substance under Section 101(14) of
CERCLA.
“Hedging Agreement” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement, or other
interest or currency exchange rate or commodity price hedging arrangement.
“Ideaforest Note” means the Promissory Note dated as of November 5, 2007 made by
Jo-Ann Stores, Inc. in favor of Renee LaBran, as the designated representative
of certain Persons named therein.
“Increase Effective Date” shall have the meaning set forth in SECTION 2.29
hereof.
“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others
(including, without limitation, under any Synthetic Leases), (h) all Capital
Lease Obligations of such Person, (i) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters
of guaranty (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances, (k) all Hedging Agreements, and (l) the
principal and interest portions of all rental obligations of such Person under
any Synthetic Lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an operating
lease in accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person’s ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

17

--------------------------------------------------------------------------------

 

“Indemnitee” has the meaning provided therefor in SECTION 9.03(b).
“Interest Payment Date” means (a) with respect to any Base Rate Loan (including
a Swingline Loan), the last day of each calendar month, and (b) with respect to
any LIBO Loan, the last day of each calendar quarter and the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part.
“Interest Period” means, with respect to any LIBO Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Lead Borrower may elect, provided that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period, and (c) any Interest Period which would otherwise
end after the Maturity Date shall end on the Maturity Date. For purposes hereof,
the date of a Borrowing initially shall be the date on which such Borrowing is
made and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
“Inventory” has the meaning assigned to such term in the Security Agreement.
“Inventory Reserves” means such reserves as may be established from time to time
by the Administrative Agent in the Administrative Agent’s reasonable discretion
with respect to the determination of the saleability, at retail, of the Eligible
Inventory or which reflect such other factors as affect the market value of the
Eligible Inventory. Without limiting the generality of the foregoing, Inventory
Reserves may include (but are not limited to) reserves based on (i)
obsolescence; (ii) seasonality; (iii) Shrink; (iv) imbalance; (v) change in
Inventory character; (vi) change in Inventory composition; (vii) change in
Inventory mix; (viii) markdowns (both permanent and point of sale); (ix) retail
markons and markups inconsistent with prior period practice and performance;
industry standards; current business plans; or advertising calendar and planned
advertising events.
“Issuing Bank” means Bank of America and any other Lender selected by the Lead
Borrower, in their respective capacities as the issuers of Letters of Credit
hereunder and any successors to Bank of America or such Lenders in such
capacity. The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of such Issuing Bank in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
“L/C Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.
“Lead Borrower” means Jo-Ann Stores, Inc., an Ohio corporation.

 

18

--------------------------------------------------------------------------------

 

“Lenders” shall mean the Persons identified on Schedule 1.1 hereto and each
assignee that becomes a party to this Agreement as set forth in SECTION 9.05(b).
“Letter of Credit” shall mean a letter of credit that is (i) issued pursuant to
this Agreement for the account of any Borrower, (ii) a Standby Letter of Credit
or Commercial Letter of Credit, (iii) issued in connection with the purchase of
Inventory by any Borrower and for other purposes for which a Borrower has
historically obtained letters of credit, or for any other purpose that is
reasonably acceptable to the Administrative Agent, and (iv) in form and
substance reasonably satisfactory to the Issuing Bank. “Letter of Credit” shall
also mean and include all Banker’s Acceptances and all Existing Letters of
Credit.
“Letter of Credit Fees” shall mean the fees payable in respect of Letters of
Credit pursuant to SECTION 2.13.
“Letter of Credit Outstandings” shall mean, at any time, the sum of (a) with
respect to Letters of Credit outstanding at such time, the aggregate maximum
amount that then is or at any time thereafter may become available for drawing
or payment thereunder plus (b) all amounts theretofore drawn or paid under
Letters of Credit for which the Issuing Bank has not then been reimbursed.
“LIBO Borrowing” shall mean a Borrowing comprised of LIBO Loans.
“LIBO Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Adjusted LIBO Rate in accordance with the provisions of
Article II.
“LIBO Rate” means for any Interest Period with respect to a LIBO Loan, the rate
per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Administrative Agent from time to
time) at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the
“LIBO Rate” for such Interest Period shall be the rate per annum determined by
the Administrative Agent to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the LIBO Loan being made, continued or converted by Bank
of America and with a term equivalent to such Interest Period would be offered
by Bank of America’s London Branch to major banks in the London interbank
eurodollar market at their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

19

--------------------------------------------------------------------------------

 

“Loan Documents” means this Agreement, the Notes, the Letters of Credit, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA
Notifications, the Credit Card Notifications, the Security Documents, the
Facility Guarantee, and any other instrument or agreement executed and delivered
in connection therewith.
“Loan Party” or “Loan Parties” means the Borrowers and the Facility Guarantors.
“Loans” shall mean all loans (including, without limitation, Revolving Loans and
Swingline Loans) at any time made to the Borrowers or for account of the
Borrowers pursuant to this Agreement.
“Margin Stock” has the meaning assigned to such term in Regulation U.
“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property, assets, prospects, or condition, financial or otherwise,
of the Lead Borrower and its Subsidiaries taken as a whole, or (b) the validity
or enforceability of this Agreement or any of the other Loan Documents or any of
the material rights or remedies of the Administrative Agent, the Collateral
Agent or the Lenders hereunder or thereunder.
“Material Agreements” means, with respect to any Person, each contract to which
such Person is a party evidencing any Material Indebtedness, and each agreement
to which such Person is a party, the termination of which would reasonably be
expected to have a Material Adverse Effect. Without limiting the foregoing, the
Subordinated Debt Indenture, the IdeaForest Note and the Lease Agreement dated
October 19, 2006 between Jo-Ann Stores Supply Chain Management, Inc. and
BPVisilia LLC relating to the Borrowers’ Visalia, California distribution center
shall all be deemed to be Material Agreements.
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit) or obligations in respect of one or more Hedging Agreements of any one
or more of the Borrowers in an aggregate principal amount exceeding
$10,000,000.00. For purposes of determining the amount of Material Indebtedness
at any time, the “principal amount” of the obligations in respect of any Hedging
Agreement at such time shall be the maximum aggregate amount that a Borrower
would be required to pay if such Hedging Agreement were terminated at that time.
“Maturity Date” means September 5, 2013.
“Maximum Rate” has the meaning provided therefor in SECTION 9.13.
“Measurement Period” means, at any date of determination, the most recently
completed four fiscal quarters of the Borrowers.

 

20

--------------------------------------------------------------------------------

 

“Minority Lenders” has the meaning provided therefor in SECTION 9.02(d).
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.
“Net Proceeds” means, with respect to any event, (a) the cash proceeds received
in respect of such event, including (i) any cash received in respect of any
non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, in each case net of (b) the sum
of (i) all reasonable fees and out-of-pocket expenses (including appraisals, and
brokerage, legal, title and recording tax expenses and commissions) paid by any
Borrower to third parties (other than Affiliates) in connection with such event,
and (ii) in the case of a sale or other disposition of an asset (including
pursuant to a casualty or condemnation), the amount of all payments required to
be made by any Borrower as a result of such event to repay (or to establish an
escrow for the repayment of) Indebtedness (other than Loans) which is secured by
such asset and constitutes a Permitted Encumbrance that is senior to the Lien of
the Collateral Agent.
“Noncompliance Notice” has the meaning provided therefor in SECTION 2.05(b).
“Notes” shall mean (i) the promissory notes of the Borrowers substantially in
the form of Exhibit B-1, each payable to the order of a Revolving Lender,
evidencing the Revolving Loans, and (ii) the promissory note of the Borrowers
substantially in the form of Exhibit B-2, payable to the Swingline Lender,
evidencing the Swingline Loans.
“Obligations” means (a) all advances to, and debts (including principal,
interest, fees, costs, and expenses), liabilities, obligations, covenants,
indemnities, and duties of, any Loan Party arising under any Loan Document or
otherwise solely with respect to any Loan or Letter of Credit (including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral therefor), whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Laws naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding, (b) the due and punctual performance of all
covenants, agreements, obligations and liabilities of the Loan Parties under or
pursuant to the Credit Agreement and the other Loan Documents, and (c) any Other
Liabilities.
“Other Liabilities” means any obligation on account of (a) any Cash Management
Services furnished to any of the Loan Parties or any of their Subsidiaries by
the Administrative Agent, any Lender or any of their respective Affiliates
and/or (b) any transaction with any Agent, any Lender or any of their respective
Affiliates, which arises out of any Bank Product entered into with any Loan
Party and any such Person, as each may be amended from time to time.

 

21

--------------------------------------------------------------------------------

 

“Other Taxes” means any and all current or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
“Overadvance” means, at any time of calculation, a circumstance in which the
Credit Extensions exceed the lesser of (a) the Revolving Commitments or (b) the
Borrowing Base.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.
“Payment Conditions” means, at the time of determination, that (a) no Default or
Event of Default then exists or would arise as a result of the making of the
subject payment, and (b) prior to, and, on a pro forma basis for twelve months
after giving effect to, the subject payment, Excess Availability shall be equal
to or greater than (i) with respect to any calculation of Payment Conditions in
connection with a Permitted Acquisition, $75,000,000, and (ii) with respect to
any other calculation of Payment Conditions, twenty percent (20%) of the lesser
of (x) the Total Commitments and (y) the then Borrowing Base.
“Perfection Certificate” means a certificate in the form of Annex 1 to the
Security Agreement or any other form approved by the Collateral Agent.
“Permitted Acquisition” means an Acquisition that meets one of the following
criteria: (i) the consideration for which is equal to or less than $10,000,000
and no Default or Event of Default then exists or would arise from the
consummation of such Acquisition; or (ii) for which all of the following
conditions are satisfied:
(a) Such Acquisition shall have been approved by the Board of Directors of the
Person (or similar governing body if such Person is not a corporation) which is
the subject of such Acquisition and such Person shall not have announced that it
will oppose such Acquisition or shall not have commenced any action which
alleges that such Acquisition shall violate applicable law;
(b) The Lead Borrower shall have furnished the Administrative Agent with fifteen
(15) days’ prior written notice of such intended Acquisition and shall have
furnished the Administrative Agent with a current draft of the acquisition
documents (and final copies thereof as and when executed), a summary of any due
diligence undertaken by the Loan Parties in connection with such Acquisition,
appropriate financial statements of the Person which is the subject of such
Acquisition, pro forma projected financial statements for the twelve (12) month
period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a consolidated basis with all Loan
Parties), and such other information as the Administrative Agent may reasonably
require;

 

22

--------------------------------------------------------------------------------

 

(c) The legal structure of the Acquisition shall be reasonably acceptable to the
Administrative Agent in its discretion;
(d) Any assets acquired shall be utilized in, and if the Acquisition involves a
merger, consolidation or stock acquisition, the Person which is the subject of
such Acquisition shall be engaged in, a business otherwise permitted to be
engaged in by a Borrower under this Agreement;
(e) If the Person which is the subject of such Acquisition will be maintained as
a Subsidiary of a Loan Party, such Subsidiary shall have been joined as a
“Borrower” hereunder, and the Collateral Agent shall have received a first
priority security interest in such Subsidiary’s equity interests, Inventory,
Accounts, and other property of the same nature as constitutes collateral under
the Security Documents; and
(f) The Loan Parties shall have satisfied the Payment Conditions.
“Permitted Encumbrances” means:
(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.05;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 60 days or are being
contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute an Event of
Default under SECTION 7.01(k); and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of the Borrowers or any Subsidiary.
provided that, except as provided in any one or more of clauses (a) through
(f) above, the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.

 

23

--------------------------------------------------------------------------------

 

“Permitted Investments” means each of the following:
(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s;
(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and demand deposit and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof
that has a combined capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above (without regard to the
limitation on maturity contained in such clause) and entered into with a
financial institution satisfying the criteria described in clause (c) above or
with any primary dealer.
provided that, notwithstanding the foregoing, no such investments shall be
permitted unless (i) either (A) no Loans are then outstanding, or (B) the
investment is a temporary investment pending expiration of an Interest Period
for a LIBO Loan, the proceeds of which investment will be applied to the
Obligations after the expiration of such Interest Period, and (b) such
investments are pledged to the Administrative Agent as additional collateral for
the Obligations pursuant to such agreements as may be reasonably required by the
Administrative Agent.
“Permitted Overadvance” means an Overadvance determined by the Administrative
Agent, in its reasonable discretion, (a) which is made to maintain, protect or
preserve the Collateral and/or the Lenders’ rights under the Loan Documents, or
(b) which is otherwise in the Lenders’ interests; provided that Permitted
Overadvances shall not (i) exceed five percent (5%) of the then Borrowing Base
in the aggregate outstanding at any time or (ii) remain outstanding for more
than forty-five (45) consecutive Business Days, unless in case of clause (ii),
the Required Lenders otherwise agree; and provided further that the foregoing
shall not (1) modify or abrogate any of the provisions of SECTION 2.06(f) hereof
regarding the Lender’s obligations with respect to L/C Disbursements, or
(2) result in any claim or liability against the Administrative Agent
(regardless of the amount of any Overadvance) for “inadvertent Overadvances”
(i.e. where an Overadvance results from changed circumstances beyond the control
of the Administrative Agent (such as a reduction in the collateral value)), and
further provided that in no event shall the Administrative Agent make an
Overadvance, if after giving effect thereto, the principal amount of the Credit
Extensions would exceed the Revolving Commitments.

 

24

--------------------------------------------------------------------------------

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Lead Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Prepayment Amount” means, (a) if Excess Availability is equal to or greater
than $60,000,000.00 after giving effect to the subject Prepayment Event, zero,
or (b) if Excess Availability is less than $60,000,000.00 after giving effect to
the subject Prepayment Event, such amount as shall result in Excess Availability
becoming equal to at least $60,000,000.00. The amounts payable under clause
(b) of this definition shall be payable whether or not a Cash Control Event then
exists.
“Prepayment Event” means any of the following events:
(a) any sale, transfer or other disposition (including pursuant to a sale and
leaseback transaction) of any property or asset of a Borrower, other than any
sale, transfer or other disposition permitted by Sections 6.05 (a)(i) or
(b) made prior to a Cash Control Event;
(b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any property or
asset of a Borrower, unless (i) the proceeds therefrom are required to be paid
to the holder of a Lien on such property or asset having priority over the Lien
of the Collateral Agent, or (ii) prior to the occurrence of a Cash Control
Event, the proceeds therefrom are utilized for purposes of replacing or
repairing the assets in respect of which such proceeds, awards or payments were
received within 12 months of the occurrence of the damage to or loss of the
assets being repaired or replaced;
(c) the issuance by a Borrower of any equity securities, other than (i) any such
issuance of equity securities to another Borrower, (ii) any such issuance of
equity securities in connection with any employee benefit plans; or
(d) the incurrence by a Borrower of any Indebtedness of the type described in
clause (a), (b) or (c) of the definition of the term “Indebtedness”, other than
Indebtedness permitted by SECTION 6.01(a).
“Real Estate” means all land, together with the buildings, structures, parking
areas, and other improvements thereon, now or hereafter owned by any Borrower,
including all easements, rights-of-way, and similar rights relating thereto and
all leases, tenancies, and occupancies thereof.

 

25

--------------------------------------------------------------------------------

 

“Receivables Advance Rate” means eighty-five percent (85%).
“Register” has the meaning set forth in SECTION 9.05(c).
“Regulation U” means Regulation U of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.
“Related Fund” shall mean with respect to any Lender which is a fund that
invests in loans, any other fund that invests in loans that is managed by the
same investment advisor as the Lender or by an Affiliate of such Lender or
investment advisor.
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.
“Release” has the meaning set forth in Section 101(22) of CERCLA.
“Reports” has the meaning set forth in SECTION 8.11(b).
“Required Lenders” shall mean, at any time, Lenders having Revolving Commitments
at least equal to 51% of the Total Commitments, or if the Revolving Commitments
have been terminated, Lenders whose percentage of the outstanding Obligations
(after settlement and repayment of all Swingline Loans by the Lenders) aggregate
not less than 51% of all such Obligations; provided that the Commitment of, and
the portion of the outstanding Credit Extensions held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of
Required Lenders.
“Reserves” means all (if any) Inventory Reserves, and Availability Reserves.
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of capital
stock of any Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of capital stock of a member of any Borrower or
any Subsidiary or any option, warrant or other right to acquire any such shares
of capital stock of any Borrower or any Subsidiary.
“Revolving Commitment” means, with respect to each Lender, the commitment of
such Lender set forth as its Revolving Commitment opposite its name on
Schedule 1.1 hereto or as may subsequently be set forth in the Register from
time to time, as the same may be reduced from time to time pursuant to SECTION
2.15 or increased pursuant to SECTION 2.29.

 

26

--------------------------------------------------------------------------------

 

“Revolving Commitment Percentage” means with respect to each Revolving Lender,
that percentage of the Revolving Commitments of all Revolving Lenders hereunder
in the amount set forth opposite its name on Schedule 1.1 hereto or as may
subsequently be set forth in the Register from time to time, as the same may be
reduced from time to time pursuant to SECTION 2.15 or increased pursuant to
SECTION 2.29.
“Revolving Lender” means each Lender having a Revolving Commitment as set forth
on Schedule 1.1 hereto or in the Assignment and Acceptance by which it becomes a
Lender.
“Revolving Loans” means all Loans at any time made by a Revolving Lender
pursuant to Section 2.01.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
“Secured Parties” has the meaning assigned to such term in the Security
Agreement.
“Security Agreement” means the Amended and Restated Security Agreement dated as
of the Effective Date among the Borrowers and the Collateral Agent for the
benefit of the Secured Parties, as amended and in effect from time to time.
“Security Documents” means the Security Agreement, the Facility Guarantors
Collateral Documents, and each other security agreement or other instrument or
document executed and delivered pursuant to Section 5.12 to secure any of the
Obligations.
“Settlement Date” has the meaning provided in SECTION 2.07(b) hereof.
“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise
unaccounted for.
“Solvent” means, with respect to any Person on a particular date, that on such
date (a) at fair valuations, all of the properties and assets of such Person are
greater than the sum of the debts, including contingent liabilities, of such
Person, (b) the present fair saleable value of the properties and assets of such
Person is not less than the amount that would be required to pay the probable
liability of such Person on its debts as they become absolute and matured,
(c) such Person is able to realize upon its properties and assets and pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such Person does not intend
to, and does not believe that it will, incur debts beyond such Person’s ability
to pay as such debts mature, and (e) such Person is not engaged in a business or
a transaction, and is not about to engage in a business or transaction, for
which such Person’s properties and assets would constitute unreasonably small
capital after giving due consideration to the prevailing practices in the
industry in which such Person is engaged.

 

27

--------------------------------------------------------------------------------

 

“Standby Letter of Credit” means any Letter of Credit other than a Commercial
Letter of Credit.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. LIBO
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
“Subordinated Debt Indenture” shall mean the Indenture dated February 26, 2004
among the Lead Borrower, certain of its Subsidiaries, as Guarantors and National
City Bank, as Trustee with respect to the Lead Borrower’s issuance of 7.50%
Senior Subordinated Notes in the aggregate face amount of $100,000,000 due in
2012, as such Indenture may be refinanced in accordance with the provisions of
SECTION 5.14 hereof.
“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
“Swingline Lender” means Bank of America, in its capacity as lender of Swingline
Loans hereunder.
“Swingline Loan” shall mean a Loan made by the Swingline Lender to the Borrowers
pursuant to SECTION 2.05 hereof.
“Synthetic Lease” means any lease or other agreement for the use or possession
of property creating obligations which do not appear as Indebtedness on the
balance sheet of the lessee thereunder but which, upon the insolvency or
bankruptcy of such Person, may be characterized as Indebtedness of such lessee
without regard to the accounting treatment.
“Taxes” means any and all current or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

28

--------------------------------------------------------------------------------

 

“Termination Date” shall mean the earliest to occur of (i) the Maturity Date, or
(ii) the date on which the maturity of the Loans are accelerated and the
Revolving Commitments are terminated, or (iii) the date of the occurrence of any
Event of Default pursuant to SECTION 7.01(h) or SECTION 7.01(i) hereof.
“Total Commitment” shall mean, at any time, the sum of the Revolving Commitments
at such time.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
“Unused Commitment” shall mean, on any day, (a) the then Total Commitments minus
(b) the sum of (i) the principal amount of Loans then outstanding (but excluding
the principal amount of Swingline Loans then outstanding) and (ii) the then
Letter of Credit Outstandings.
“Unrestricted Subsidiary” means a Subsidiary of a Loan Party designated by the
Lead Borrower’s board of directors as such, provided that no Subsidiary may be
designated as an Unrestricted Subsidiary unless (a) none of its assets are
included in the calculation of Borrowing Base immediately prior to such
Subsidiary’s being designated as an Unrestricted Subsidiary, (b) the value of
its total assets do not exceed $1,000,000.00 in the aggregate, (c) such
Subsidiary may be designated as an Unrestricted Subsidiary under the
Subordinated Debt Indenture, and (d) no Default or Event of Default exists at
the time of such designation.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. In the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including;” the words “to” and “until” each mean “to but
excluding;” and the word “through” means “to and including.”

 

29

--------------------------------------------------------------------------------

 

SECTION 1.03 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect on the Effective Date, provided that, if the
Borrowers notify the Administrative Agent that the Borrowers request an
amendment to any provision hereof to reflect the effect of any change occurring
after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Borrowers that the
Required Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
GAAP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such provision shall have been amended in accordance
herewith.
SECTION 1.04 Rounding.
Any financial ratios required to be maintained by the Borrowers pursuant to this
Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by
which such ratio is expressed herein and rounding the result up or down to the
nearest number (with a rounding-up if there is no nearest number).
SECTION 1.05 Letter of Credit Amounts.
Unless otherwise specified, all references herein to the amount of a Letter of
Credit at any time shall be deemed to be the stated amount of such Letter of
Credit in effect at such time; provided, however, that with respect to any
Letter of Credit that, by its terms of any issuer documents related thereto,
provides for one or more automatic increases in the stated amount thereof, the
amount of such Letter of Credit shall be deemed to be the maximum stated amount
of such Letter of Credit after giving effect to all such increases, whether or
not such maximum stated amount is in effect at such time.

 

30

--------------------------------------------------------------------------------

 

ARTICLE 2
Amount and Terms of Credit
SECTION 2.01 Commitment of the Lenders.
(a) Each Revolving Lender severally and not jointly with any other Lender,
agrees, upon the terms and subject to the conditions herein set forth, to extend
credit to the Borrowers on a revolving basis, in the form of Revolving Loans and
Letters of Credit and in an amount not to exceed the lesser of such Lender’s
Revolving Commitment or such Lender’s Revolving Commitment Percentage of the
Borrowing Base, subject to the following limitations:
(i) The aggregate outstanding amount of the Credit Extensions and Swingline
Loans shall not at any time exceed the lower of (i) $300,000,000 or, in each
case, any lesser amount to which the Revolving Commitments have then been
reduced by the Borrowers pursuant to SECTION 2.15 or any greater amount to which
the Revolving Commitments have then been increased pursuant to SECTION 2.29, and
(ii) the then amount of the Borrowing Base.
(ii) No Lender shall be obligated to issue any Letter of Credit, and Letters of
Credit shall be available from the Issuing Bank, subject to the ratable
participation of all Revolving Lenders, as set forth in SECTION 2.06. The
Borrowers will not at any time permit the aggregate Letter of Credit
Outstandings to exceed $200,000,000.
(iii) Subject to all of the other provisions of this Agreement, Revolving Loans
that are repaid may be reborrowed prior to the Termination Date. No new Credit
Extension, however, shall be made to the Borrowers after the Termination Date.
(b) Each Borrowing of Revolving Loans (other than Swingline Loans) shall be made
by the Revolving Lenders pro rata in accordance with their respective Revolving
Commitments. The failure of any Lender to make any Loan shall neither relieve
any other Lender of its obligation to fund its Loan in accordance with the
provisions of this Agreement nor increase the obligation of any such other
Lender.
SECTION 2.02 Reserves; Changes to Reserves.
(a) The initial Inventory and Availability Reserves as of the date of this
Agreement are the following:
(i) Rent (an Availability Reserve): An amount equal to two months base rents for
a leased premises located in the states of Washington, Virginia, Pennsylvania
and any other state which grants a landlord a priority lien for unpaid rent.
(ii) Import Load (an Inventory Reserve): An amount equal to 100% of the amounts
reflected in the Borrowers’ perpetual inventory for Inventory imported into the
United States of America in excess of the actual cost of such Inventory.
(iii) Gift Certificate and Merchandise Credit Liability (an Availability
Reserve): An amount equal to fifty percent (50%) of the Borrowers’ Gift
Certificate and Merchandise Credit Liability outstanding from time to time.

 

31

--------------------------------------------------------------------------------

 

(iv) Packaway Inventory (an Inventory Reserve): An amount equal to all packaway
Inventory of the Borrowers in excess of $20,000,000.00 at Cost.
(v) Customer Deposits (an Availability Reserve): An amount equal to 100% of the
Borrowers’ customer deposit liability, whether for layaways, special orders or
otherwise.
(vi) Shrink (an Inventory Reserve): In an amount not to exceed the sum of the
Loan Parties’ average Shrink rate for the prior six (6) months plus .50%.
(b) The Administrative Agent may hereafter establish additional Reserves or
change any of the foregoing Reserves, in the exercise of the reasonable judgment
of the Administrative Agent; provided that the Administrative Agent agrees that
it shall not establish Bank Product Reserves or Cash Management Reserves until
such time as (i) an Event of Default has occurred and is continuing or
(ii) Excess Availability is less than $100,000,000.
SECTION 2.03 Making of Loans.
(a) Except as set forth in SECTION 2.16 and SECTION 2.24, Loans (other than
Swingline Loans) by the Lenders shall be either Base Rate Loans or LIBO Loans as
the Lead Borrower on behalf of the Borrowers may request subject to and in
accordance with this SECTION 2.03, provided that all Swingline Loans shall be
only Base Rate Loans. All Loans made pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, be Loans of the same Type. Each
Lender may fulfill its Revolving Commitment with respect to any Loan by causing
any lending office of such Lender to make such Loan; but any such use of a
lending office shall not affect the obligation of the Borrowers to repay such
Loan in accordance with the terms of the applicable Note. Each Lender shall,
subject to its overall policy considerations, use reasonable efforts (but shall
not be obligated) to select a lending office which will not result in the
payment of increased costs by the Borrowers pursuant to SECTION 2.23. Subject to
the other provisions of this SECTION 2.03 and the provisions of SECTION 2.24,
Borrowings of Loans of more than one Type may be incurred at the same time, but
no more than five (5) Borrowings of LIBO Loans may be outstanding at any time.
(b) The Lead Borrower shall give the Administrative Agent three Business Days’
prior telephonic notice (thereafter confirmed in writing) of each Borrowing of
LIBO Loans and one Business Day’s prior notice of each Borrowing of Base Rate
Loans. Any such notice, to be effective, must be received by the Administrative
Agent not later than 11:00 a.m., Boston time, on the third Business Day in the
case of LIBO Loans prior to, and on the first Business Day in the case of Base
Rate Loans prior to, the date on which such Borrowing is to be made. Such notice
shall be irrevocable and shall specify the amount of the proposed Borrowing
(which shall be in an integral multiple of $1,000,000, but not less than
$5,000,000 in the case of LIBO Loans) and the date thereof (which shall be a
Business Day) and shall contain disbursement instructions. Such notice shall
specify whether the Borrowing then being requested is to be a Borrowing of Base
Rate Loans or LIBO Loans and, if LIBO Loans, the Interest Period with respect
thereto. If no election of Interest Period is specified in any such notice for a
Borrowing of LIBO Loans, such notice shall be deemed a request for an Interest
Period of one month. If no election is made as to the Type of Loan, such notice
shall be

 

32

--------------------------------------------------------------------------------

 

deemed a request for Borrowing of Base Rate Loans. The Administrative Agent
shall promptly notify each Lender of its proportionate share of such Borrowing,
the date of such Borrowing, the Type of Borrowing being requested and the
Interest Period or Interest Periods applicable thereto, as appropriate. On the
borrowing date specified in such notice, each Lender shall make its share of the
Borrowing available at the office of the Administrative Agent at 100 Federal
Street, Boston, Massachusetts 02110, no later than 1:00 p.m., Boston time, in
immediately available funds. Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender’s share
of such Borrowing, the Administrative Agent may assume that such Lender has made
such share available on such date in accordance with this Section and may, in
reliance upon such assumption, make available to the Borrowers a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrowers
to but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to Base Rate Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing. Upon receipt of the funds made available by the
Lenders to fund any Borrowing hereunder, the Administrative Agent shall disburse
such funds in the manner specified in the notice of borrowing delivered by the
Lead Borrower and shall use reasonable efforts to make the funds so received
from the Lenders available to the Borrowers no later than 4:00 p.m., Boston
time.
SECTION 2.04 Overadvances. The Agents and the Lenders have no obligation to make
any Loan or to provide any Letter of Credit if an Overadvance would result. The
Administrative Agent may, in its discretion, make Permitted Overadvances without
the consent of the Lenders and each Lender shall be bound thereby. Any Permitted
Overadvances may constitute Swingline Loans. The making of any Permitted
Overadvance is for the benefit of the Borrowers; such Permitted Overadvances
constitute Revolving Loans and Obligations. The making of any such Permitted
Overadvances on any one occasion shall not obligate the Administrative Agent or
any Lender to make or permit any Permitted Overadvances on any other occasion or
to permit such Permitted Overadvances to remain outstanding.

 

33

--------------------------------------------------------------------------------

 

SECTION 2.05 Swingline Loans.
(a) The Swingline Lender is authorized by the Lenders, but is not obligated, to
make Swingline Loans up to $25,000,000 plus the Permitted Overadvance in the
aggregate outstanding at any time, consisting only of Base Rate Loans, upon a
notice of Borrowing received by the Administrative Agent and the Swingline
Lender (which notice, at the Swingline Lender’s discretion, may be submitted
prior to 1:00 p.m., Boston time, on the Business Day on which such Swingline
Loan is requested). Swingline Loans shall be subject to periodic settlement with
the Revolving Lenders under SECTION 2.07 below.
(b) Swingline Loans may be made only in the following circumstances: (A) for
administrative convenience, the Swingline Lender may, but is not obligated to,
make Swingline Loans in reliance upon the Borrowers’ actual or deemed
representations under SECTION 4.02, that the applicable conditions for borrowing
are satisfied or (B) for Permitted Overadvances, or (C) if the conditions for
borrowing under SECTION 4.02 cannot be fulfilled, the Borrowers shall give
immediate notice thereof to the Administrative Agent and the Swingline Lender (a
“Noncompliance Notice”), and the Administrative Agent shall promptly provide
each Lender with a copy of the Noncompliance Notice. If the conditions for
borrowing under SECTION 4.02 cannot be fulfilled, the Required Lenders may
direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease
making Swingline Loans (other than Permitted Overadvances) until such conditions
can be satisfied or are waived in accordance with SECTION 9.02 hereof. Unless
the Required Lenders so direct the Swingline Lender, the Swingline Lender may,
but is not obligated to, continue to make Swingline Loans beginning one Business
Day after the Non-Compliance Notice is furnished to the Lenders. Notwithstanding
the foregoing, no Swingline Loans shall be made pursuant to this subsection (b)
(other than Permitted Overadvances) if the aggregate outstanding amount of the
Credit Extensions and Swingline Loans would exceed the lower of (i) $300,000,000
or any lesser amount to which the Revolving Commitments have then been reduced
by the Borrowers pursuant to SECTION 2.15 or any greater amount to which the
Revolving Commitments have then been increased pursuant to SECTION 2.29, and
(ii) the then amount of the Borrowing Base.
SECTION 2.06 Letters of Credit.
(a) Upon the terms and subject to the conditions herein set forth, the Lead
Borrower on behalf of the Borrowers may request the Issuing Bank, at any time
and from time to time after the date hereof and prior to the Termination Date,
to issue, and subject to the terms and conditions contained herein, the Issuing
Bank shall issue, for the account of the Borrowers one or more Letters of
Credit; provided that no Letter of Credit shall be issued if after giving effect
to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed
$200,000,000, or (ii) the aggregate Credit Extensions (including Swingline
Loans) would exceed the limitation set forth in SECTION 2.01(a)(i); and
provided, further, that no Letter of Credit shall be issued if the Issuing Bank
shall have received notice from the Administrative Agent or the Required Lenders
that the conditions to such issuance have not been met. The Lead Borrower and
the Issuing Bank shall furnish the Administrative Agent with written notice of
the issuance of any Letter of Credit on the same Business Day as such Letter of
Credit is issued. All Existing Letters of Credit shall be deemed to have been
issued pursuant hereto, and from and after the Effective Date shall be subject
to and governed by the terms and conditions hereof.
(b) Each Standby Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance
of such Letter of Credit (or, in the case of any renewal or extension thereof,
one year after such renewal or extension) and (ii) the date that is five
Business Days prior to the Maturity Date, provided that each Standby Letter of
Credit may, upon the request of the Lead Borrower, include a provision whereby
such Letter of Credit shall be renewed automatically for additional consecutive
periods of 12 months or less (but not beyond the date that is five Business Days
prior to the Maturity Date) unless the Issuing Bank notifies the beneficiary
thereof at least 30 days prior to the then-applicable expiration date that such
Letter of Credit will not be renewed.

 

34

--------------------------------------------------------------------------------

 

(c) Each Commercial Letter of Credit and Banker’s Acceptance shall expire at or
prior to the close of business on the earlier of (i) the date 210 days after the
date of the issuance of such Commercial Letter of Credit and (ii) the date that
is five Business Days prior to the Maturity Date.
(d) Drafts drawn under each Letter of Credit shall be reimbursed by the
Borrowers in dollars on the same Business Day of any such drawing by paying to
the Administrative Agent an amount equal to such drawing not later than
12:00 noon, Boston time, on (i) the date that the Borrowers shall have received
notice of such payment, if such notice is received prior to 10:00 a.m., Boston
time, on such date, or (ii) the Business Day immediately following the day that
the Borrowers receive such notice, if such notice is received after 10:00 a.m.,
Boston time on the day of receipt, provided that the Lead Borrower may, subject
to the conditions to borrowing set forth herein, request in accordance with
SECTION 2.03 that such payment be financed with a Revolving Loan consisting of a
Base Rate Loan or Swingline Loan in an equivalent amount and, to the extent so
financed, the Borrowers’ obligation to make such payment shall be discharged and
replaced by the resulting Base Rate Loan or Swingline Loan. The Issuing Bank
shall, promptly following its receipt thereof, examine all documents purporting
to represent a demand for payment under a Letter of Credit. The Issuing Bank
shall promptly notify the Administrative Agent and the Borrowers by telephone
(confirmed by telecopy) of such demand for payment and whether the Issuing Bank
has made or will make payment thereunder, provided that any failure to give or
delay in giving such notice shall not relieve the Borrowers of their obligation
to reimburse the Issuing Bank and the Lenders with respect to any such payment.
(e) If the Issuing Bank shall make any L/C Disbursement, then, unless the
Borrowers shall reimburse the Issuing Bank in full on the date such payment is
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such payment is made to but excluding the date that the
Borrowers reimburse the Issuing Bank therefor, at the rate per annum then
applicable to Base Rate Loans, provided that, if the Borrowers fail to reimburse
such Issuing Bank when due pursuant to paragraph (d) of this Section, then
SECTION 2.10 shall apply. Interest accrued pursuant to this paragraph shall be
for the account of the Issuing Bank, except that interest accrued on and after
the date of payment by any Revolving Lender pursuant to paragraph (g) of this
Section to reimburse the Issuing Bank shall be for the account of such Revolving
Lender to the extent of such payment.

 

35

--------------------------------------------------------------------------------

 

(f) Immediately upon the issuance of any Letter of Credit by the Issuing Bank
(or the amendment of a Letter of Credit increasing the amount thereof), and
without any further action on the part of the Issuing Bank, the Issuing Bank
shall be deemed to have sold to each Revolving Lender, and each such Revolving
Lender shall be deemed unconditionally and irrevocably to have purchased from
the Issuing Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such Lender’s Revolving Commitment Percentage,
in such Letter of Credit, each drawing thereunder and the obligations of the
Borrowers under this Agreement and the other Loan Documents with respect
thereto. Upon any change in the Revolving Commitments pursuant to SECTION 9.05,
it is hereby agreed that with respect to all Letter of Credit Outstandings,
there shall be an automatic adjustment to the participations hereby created to
reflect the new Revolving Commitment Percentages of the assigning and assignee
Revolving Lenders. Any action taken or omitted by the Issuing Bank under or in
connection with a Letter of Credit, if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Issuing Bank any
resulting liability to any Lender.
(g) In the event that the Issuing Bank makes any L/C Disbursement and the
Borrowers shall not have reimbursed such amount in full to the Issuing Bank
pursuant to this SECTION 2.06, the Issuing Bank shall promptly notify the
Administrative Agent, which shall promptly notify each Revolving Lender of such
failure, and each Revolving Lender shall promptly and unconditionally pay to the
Administrative Agent for the account of the Issuing Bank the amount of such
Revolving Lender’s Revolving Commitment Percentage of such unreimbursed payment
in dollars and in same day funds. If the Issuing Bank so notifies the
Administrative Agent, and the Administrative Agent so notifies the Revolving
Lenders prior to 11:00 a.m., Boston time, on any Business Day, each such
Revolving Lender shall make available to the Issuing Bank such Revolving
Lender’s Revolving Commitment Percentage of the amount of such payment on such
Business Day in same day funds; if any such notice is made after 11:00 a.m.,
Boston time, on any Business Day, each such Revolving Lender shall make
available to the Issuing Bank such Revolving Lender’s Revolving Commitment
Percentage of the amount of such payment on the immediately succeeding Business
Day in same day funds. If and to the extent such Revolving Lender shall not have
so made its Revolving Commitment Percentage of the amount of such payment
available to the Issuing Bank, such Revolving Lender agrees to pay to the
Issuing Bank, forthwith on demand such amount, together with interest thereon,
for each day from such date until the date such amount is paid to the
Administrative Agent for the account of the Issuing Bank at the Federal Funds
Effective Rate. Each Revolving Lender agrees to fund its Revolving Commitment
Percentage of such unreimbursed payment notwithstanding a failure to satisfy any
applicable lending conditions or the provisions of SECTION 2.01 or SECTION 2.06,
or the occurrence of the Termination Date. The failure of any Revolving Lender
to make available to the Issuing Bank its Revolving Commitment Percentage of any
payment under any Letter of Credit shall neither relieve any Revolving Lender of
its obligation hereunder to make available to the Issuing Bank its Revolving
Commitment Percentage of any payment under any Letter of Credit on the date
required, as specified above, nor increase the obligation of such other
Revolving Lender. Whenever any Revolving Lender has made payments to the Issuing
Bank in respect of any reimbursement obligation for any Letter of Credit, such
Revolving Lender shall be entitled to share ratably, based on its Revolving
Commitment Percentage, in all payments and collections thereafter received on
account of such reimbursement obligation.

 

36

--------------------------------------------------------------------------------

 

(h) Whenever the Borrowers desire that the Issuing Bank issue a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit), the
Lead Borrower shall give to the Issuing Bank and the Administrative Agent at
least two Business Days’ prior written (including telegraphic, telex, facsimile
or cable communication) notice (or such shorter period as may be agreed upon in
writing by the Issuing Bank and the Lead Borrower) specifying the date on which
the proposed Letter of Credit is to be issued, amended, renewed or extended
(which shall be a Business Day), the stated amount of the Letter of Credit so
requested, the expiration date of such Letter of Credit, the name and address of
the beneficiary thereof, and the provisions thereof. If requested by the Issuing
Bank, the Borrowers shall also submit a letter of credit application on the
Issuing Bank’s standard form in connection with any request for the issuance,
amendment, renewal or extension of a Letter of Credit.
(i) The obligations of the Borrowers to reimburse the Issuing Bank for any L/C
Disbursement shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation (it being understood that any such payment by the
Borrowers shall be without prejudice to, and shall not constitute a waiver of,
any rights the Borrowers might have or might acquire as a result of the payment
by the Issuing Bank of any draft or the reimbursement by the Borrowers thereof):
(i) any lack of validity or enforceability of any Letter of Credit; (ii) the
existence of any claim, setoff, defense or other right which the Borrowers may
have at any time against a beneficiary of any Letter of Credit or against any of
the Lenders, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction; (iii) any draft, demand,
certificate or 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 the Issuing
Bank of any Letter of Credit against presentation of a demand, draft or
certificate or other document which does not comply with the terms of such
Letter of Credit; (v) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrowers’ obligations hereunder; or (vi) the fact that any
Event of Default shall have occurred and be continuing. None of the
Administrative Agent, the Lenders, the Issuing Bank or any of their Affiliates
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank,
provided that the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrowers to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by the
Borrowers to the extent permitted by applicable law) suffered by the Borrowers
that are caused by the Issuing Bank’s failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or willful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented that appear on their face to be in
compliance with the terms of a Letter of Credit, the Issuing Bank may, in its
sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

37

--------------------------------------------------------------------------------

 

(j) If any Event of Default shall occur and be continuing, on the Business Day
that the Borrowers receive notice from the Administrative Agent or the Required
Lenders demanding the deposit of cash collateral pursuant to this paragraph, the
Borrowers shall deposit in the Cash Collateral Account an amount in cash equal
to 105% of the Letter of Credit Outstandings as of such date plus any accrued
and unpaid interest thereon. Each such deposit shall be held by the Collateral
Agent as collateral for the payment and performance of the Obligations of the
Borrowers under this Agreement. The Collateral Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
Cash Collateral Account. Other than any interest earned on the investment of
such deposits, which investments shall be made at the option and sole discretion
of the Collateral Agent at the request of the Borrowers and at the Borrowers’
risk and expense, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such Cash
Collateral Account shall be applied by the Collateral Agent to reimburse the
Issuing Bank for payments on account of drawings under Letters of Credit for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrowers for
the Letter of Credit Outstandings at such time or, if the Loans have matured or
the maturity of the Loans has been accelerated, be applied to satisfy other
Obligations of the Borrowers under this Agreement.
SECTION 2.07 Settlements Amongst Revolving Lenders.
(a) The Swingline Lender may (and shall not less frequently than weekly as
provided in SECTION 2.07(b) below), at any time, on behalf of the Borrowers
(which hereby authorize the Swingline Lender to act in their behalf in that
regard) request the Administrative Agent to cause the Revolving Lenders to make
a Revolving Loan (which shall be a Base Rate Loan) in an amount equal to such
Lender’s Revolving Commitment Percentage of the outstanding amount of Swingline
Loans made in accordance with SECTION 2.05, which request may be made regardless
of whether the conditions set forth in Article IV have been satisfied. Upon such
request, each Revolving Lender shall make available to the Administrative Agent
the proceeds of such Revolving Loan for the account of the Swingline Lender. If
the Swingline Lender requires a Revolving Loan to be made by the Revolving
Lenders and the request therefor is received prior to 12:00 Noon, Boston time,
on a Business Day, such transfers shall be made in immediately available funds
no later than 3:00 p.m., Boston time, that day; and, if the request therefor is
received after 12:00 Noon, Boston time, then no later than 3:00 p.m., Boston
time, on the next Business Day. The obligation of each Revolving Lender to
transfer such funds is irrevocable, unconditional and without recourse to or
warranty by the Administrative Agent or the Swingline Lender. If and to the
extent any Revolving Lender shall not have so made its transfer to the
Administrative Agent, such Revolving Lender agrees to pay to the Administrative
Agent, forthwith on demand such amount, together with interest thereon, for each
day from such date until the date such amount is paid to the Administrative
Agent at the Federal Funds Effective Rate.

 

38

--------------------------------------------------------------------------------

 

(b) The amount of each Lender’s Revolving Commitment Percentage of outstanding
Revolving Loans (including Swingline Loans) shall be computed weekly (or more
frequently in the Administrative Agent’s discretion) and shall be adjusted
upward or downward based on all Revolving Loans (including Swingline Loans) and
repayments of Revolving Loans (including Swingline Loans) received by the
Administrative Agent as of 3:00 p.m., Boston time, on the first Business Day
following the end of the period specified by the Administrative Agent (such
date, the “Settlement Date”).
(c) The Administrative Agent shall deliver to each of the Revolving Lenders
promptly after the Settlement Date a summary statement of the amount of
outstanding Revolving Loans (including Swingline Loans) for the period and the
amount of repayments received for the period. As reflected on the summary
statement: (x) the Administrative Agent shall transfer to each Revolving Lender
its applicable Revolving Commitment Percentage of repayments, and (y) each
Revolving Lender shall transfer to the Administrative Agent (as provided below),
or the Administrative Agent shall transfer to each Revolving Lender, such
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Revolving Loans made by each Revolving Lender with
respect to Revolving Loans (including Swingline Loans) shall be equal to such
Revolving Lender’s applicable Revolving Commitment Percentage of Revolving Loans
(including Swingline Loans) outstanding as of such Settlement Date. If the
summary statement requires transfers to be made to the Administrative Agent by
the Revolving Lenders and is received prior to 12:00 Noon, Boston time, on a
Business Day, such transfers shall be made in immediately available funds no
later than 3:00 p.m., Boston time, that day; and, if received after 12:00 Noon,
Boston time, then no later than 3:00 p.m., Boston time, on the next Business
Day. The obligation of each Revolving Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the
Administrative Agent. If and to the extent any Revolving Lender shall not have
so made its transfer to the Administrative Agent, such Revolving Lender agrees
to pay to the Administrative Agent, forthwith on demand such amount, together
with interest thereon, for each day from such date until the date such amount is
paid to the Administrative Agent at the Federal Funds Effective Rate.
SECTION 2.08 Notes; Repayment of Loans.
(a) The Loans made by each Lender (and to the Swingline Lender, with respect to
Swingline Loans) shall, if requested by such Lender, be evidenced by a Note duly
executed on behalf of the Borrowers, dated the Effective Date, in substantially
the form attached hereto as Exhibit B-1 or B-2, as applicable, payable to the
order of each such Lender (or the Swingline Lender, as applicable) in an
aggregate principal amount equal to such Lender’s Revolving Commitment (or, in
the case of the Note evidencing the Swingline Loans, $25,000,000).

 

39

--------------------------------------------------------------------------------

 

(b) The outstanding principal balance of all Obligations shall be payable on the
Termination Date (subject to earlier repayment as provided below). Each Note
shall bear interest from the date thereof on the outstanding principal balance
thereof as set forth in this Article II. Each Lender is hereby authorized by the
Borrowers to endorse on a schedule attached to each Note delivered to such
Lender (or on a continuation of such schedule attached to such Note and made a
part thereof), or otherwise to record in such Lender’s internal records, an
appropriate notation evidencing the date and amount of each Loan from such
Lender, each payment and prepayment of principal of any such Loan, each payment
of interest on any such Loan and the other information provided for on such
schedule; provided, however, that the failure of any Lender to make such a
notation or any error therein shall not affect the obligation of the Borrowers
to repay the Loans made by such Lender in accordance with the terms of this
Agreement and the applicable Notes. Upon receipt of an affidavit of a Lender as
to the loss, theft, destruction or mutilation of such Lender’s Note in form and
substance reasonably acceptable to the Lead Borrower and upon cancellation of
such Note, the Borrowers will issue, in lieu thereof, a replacement Note in
favor of such Lender, in the same principal amount thereof and otherwise of like
tenor.
SECTION 2.09 Interest on Loans.
(a) Subject to SECTION 2.10, each Base Rate Loan shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 365 or
366 days, as applicable) at a rate per annum that shall be equal to the then
Alternate Base Rate, plus the Applicable Margin for Base Rate Loans.
(b) Subject to SECTION 2.10, each LIBO Loan shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 360 days) at a rate
per annum equal, during each Interest Period applicable thereto, to the Adjusted
LIBO Rate for such Interest Period, plus the Applicable Margin for LIBO Loans.
(c) Accrued interest on all Loans shall be payable in arrears on each Interest
Payment Date applicable thereto, at maturity (whether by acceleration or
otherwise), after such maturity on demand and (with respect to LIBO Loans) upon
any repayment or prepayment thereof (on the amount prepaid).
SECTION 2.10 Default Interest.
Effective upon the occurrence of any Event of Default and at all times
thereafter while such Event of Default is continuing, at the option of the
Administrative Agent or upon the direction of the Required Lenders, interest
shall accrue on all outstanding Loans (including Swingline Loans) (after as well
as before judgment, as and to the extent permitted by law) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of
360 days) equal to the rate (including the Applicable Margin for Loans) in
effect from time to time plus 2.00% per annum, and such interest shall be
payable on demand.

 

40

--------------------------------------------------------------------------------

 

SECTION 2.11 Certain Fees.
The Borrowers shall pay to the Administrative Agent, for the account of the
Administrative Agent, the fees set forth in the Fee Letter as and when payment
of such fees is due as therein set forth.
SECTION 2.12 Unused Commitment Fee.
The Borrowers shall pay to the Administrative Agent for the account of the
Revolving Lenders, a commitment fee (the “Commitment Fee”) equal to the
Applicable Commitment Fee Percentage (on the basis of actual days elapsed in a
year of 360 days) of the average daily balance of the Unused Commitment for each
day commencing on and including the Effective Date and ending on but excluding
the Termination Date. The Commitment Fee so accrued in any calendar quarter
shall be payable on the first Business Day of the immediately succeeding
calendar quarter, except that all Commitment Fees so accrued as of the
Termination Date shall be payable on the Termination Date. The Administrative
Agent shall pay the Commitment Fee to the Revolving Lenders based upon their
Revolving Commitment Percentage.
SECTION 2.13 Letter of Credit Fees.
(a) The Borrowers shall pay the Administrative Agent, for the account of the
Revolving Lenders, on the last day of each calendar quarter, in arrears, a fee
(each, a “Letter of Credit Fee”) equal to the following per annum percentages of
the average face amount of the following categories of Letters of Credit
outstanding during the subject quarter:
(i) Standby Letters of Credit: The Applicable Margin for LIBO Loans.
(ii) Commercial Letters of Credit (including Banker’s Acceptances): The
Applicable Margin for LIBO Loans minus .50%.
(iii) After the occurrence and during the continuance of an Event of Default, at
the option of the Administrative Agent or upon the direction of the Required
Lenders, the Letter of Credit Fee shall be increased by an amount equal to two
percent (2%) per annum.
(b) The Borrowers shall pay to the Administrative Agent, for the account of the
Issuing Bank, and in addition to all Letter of Credit Fees otherwise provided
for hereunder, such fronting fees and other fees and charges in connection with
the issuance, negotiation, settlement, amendment and processing of each Letter
of Credit issued by the Issuing Bank as are customarily imposed by the Issuing
Bank from time to time in connection with letter of credit transactions.
(c) The Borrowers shall also pay to the Administrative Agent, for the account of
the Issuing Bank, and in addition to all Letter of Credit Fees otherwise
provided for hereunder, such commissions, drawing fees, and other fees and
charges in connection with the issuance, negotiation, settlement, amendment and
processing of each Banker’s Acceptance issued by the Issuing Bank as are
customarily imposed by the Issuing Bank from time to time in connection with
Banker’s Acceptance transactions.

 

41

--------------------------------------------------------------------------------

 

SECTION 2.14 Nature of Fees.
All fees shall be paid on the dates due, in immediately available funds, to the
Administrative Agent, for the respective accounts of the Administrative Agent,
the Issuing Bank, and the Lenders, as provided herein. Once paid, all fees shall
be fully earned and shall not be refundable under any circumstances.
SECTION 2.15 Termination or Reduction of Commitments.
Upon at least two Business Days’ prior written notice to the Administrative
Agent, the Borrowers may at any time in whole permanently terminate, or from
time to time in part permanently reduce, the Revolving Commitments. Each such
reduction shall be in the principal amount of $5,000,000 or any integral
multiple thereof. Each such reduction or termination shall (i) be applied
ratably to the Revolving Commitments of each Lender and (ii) be irrevocable when
given. At the effective time of each such reduction or termination, the
Borrowers shall pay to the Administrative Agent for application as provided
herein (i) all Commitment Fees accrued on the amount of the Revolving
Commitments so terminated or reduced through the date thereof, and (ii) any
amount by which the Credit Extensions outstanding on such date exceed the amount
to which the Revolving Commitments are to be reduced effective on such date, in
each case pro rata based on the amount prepaid.
SECTION 2.16 Alternate Rate of Interest.
If prior to the commencement of any Interest Period for a LIBO Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrowers and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Borrowing
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a LIBO Borrowing shall be ineffective and (ii) if any Borrowing
Request requests a LIBO Borrowing, such Borrowing shall be made as a Borrowing
of Base Rate Loans.

 

42

--------------------------------------------------------------------------------

 

SECTION 2.17 Conversion and Continuation of Loans.
The Lead Borrower on behalf of the Borrowers shall have the right at any time,
on three Business Days’ prior irrevocable notice to the Administrative Agent
(which notice, to be effective, must be received by the Administrative Agent not
later than 11:00 a.m., Boston time, on the third Business Day preceding the date
of any conversion), (x) to convert any outstanding Borrowings of Loans (but in
no event Swingline Loans) of one Type (or a portion thereof) to a Borrowing of
Loans of the other Type or (y) to continue an outstanding Borrowing of LIBO
Loans for an additional Interest Period, subject to the following:
(a) no Borrowing of Loans may be converted into, or continued as, LIBO Loans at
any time when an Event of Default has occurred and is continuing (nothing
contained herein being deemed to obligate the Borrowers to incur Breakage Costs
upon the occurrence of an Event of Default unless the Obligations are
accelerated);
(b) if less than a full Borrowing of Loans is converted, such conversion shall
be made pro rata among the Lenders, as applicable, in accordance with the
respective principal amounts of the Loans comprising such Borrowing held by such
Lenders immediately prior to such refinancing;
(c) the aggregate principal amount of Loans being converted into or continued as
LIBO Loans shall be in an integral of $1,000,000 and at least $5,000,000;
(d) each Lender shall effect each conversion by applying the proceeds of its new
LIBO Loan or Base Rate Loan, as the case may be, to its Loan being so converted;
(e) the Interest Period with respect to a Borrowing of LIBO Loans effected by a
conversion or in respect to the Borrowing of LIBO Loans being continued as LIBO
Loans shall commence on the date of conversion or the expiration of the current
Interest Period applicable to such continuing Borrowing, as the case may be;
(f) a Borrowing of LIBO Loans may be converted only on the last day of an
Interest Period applicable thereto;
(g) each request for a conversion or continuation of a Borrowing of LIBO Loans
which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month; and
(h) no more than five (5) Borrowings of LIBO Loans may be outstanding at any
time.

 

43

--------------------------------------------------------------------------------

 

If the Lead Borrower does not give notice to convert any Borrowing of LIBO
Loans, or does not give notice to continue, or does not have the right to
continue, any Borrowing as LIBO Loans, in each case as provided above, such
Borrowing shall automatically be converted to a Borrowing of Base Rate Loans at
the expiration of the then-current Interest Period. The Administrative Agent
shall, after it receives notice from the Lead Borrower, promptly give each
Lender notice of any conversion, in whole or part, of any Loan made by such
Lender.
SECTION 2.18 Mandatory Prepayment; Commitment Termination; Cash Collateral.
The outstanding Obligations shall be subject to mandatory prepayment as follows:
(a) If at any time the amount of the Credit Extensions exceeds the lower of
(i) the then amount of the Revolving Commitments and (ii) the then amount of the
Borrowing Base, the Borrowers will immediately upon notice from the
Administrative Agent (A) prepay the Loans in an amount necessary to eliminate
such excess, with payments first being applied to Revolving Loans, and (B) if,
after giving effect to the prepayment in full of all outstanding Loans such
excess has not been eliminated, deposit cash into the Cash Collateral Account in
an amount equal to 105% of the Letters of Credit Outstanding.
(b) The Revolving Loans shall be repaid daily in accordance with the provisions
of SECTION 2.21(h) hereof.
(c) In the event and on each occasion that any Net Proceeds are received by or
on behalf of a Borrower in respect of any Prepayment Event, the Borrowers shall,
immediately after such Net Proceeds are received, prepay the Loans in an
aggregate principal amount equal to (i) if a Cash Control Event then exists,
such Net Proceeds, or (ii) if no Cash Control Event then exists, the Prepayment
Amount. The Net Proceeds prepaid from any Prepayment Event shall be paid FIRST,
in reduction of the Swingline Loans, SECOND, in reduction of the other Loans,
with payments first being applied, if no Event of Default then exists, to
Revolving Loans, THIRD, if an Event of Default then exists, to the Cash
Collateral Account as collateral for the Letter of Credit Outstandings up to
105% thereof, FOURTH, to all other Obligations. If all Obligations are paid, any
excess Net Proceeds shall be deposited in a separate cash collateral account,
and as long as no Event of Default then exists, shall be released to the
Borrowers upon the request of the Lead Borrower and utilized by the Borrowers
prior to any further Revolving Loans being made.
(d) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid
before outstanding LIBO Loans are prepaid. Each partial prepayment of LIBO Loans
shall be in an integral multiple of $1,000,000. No prepayment of LIBO Loans
shall be permitted pursuant to this SECTION 2.18 other than on the last day of
an Interest Period applicable thereto, unless the Borrowers simultaneously
reimburse the Lenders for all “Breakage Costs” (as defined below) associated
therewith. In order to avoid such Breakage Costs, as long as no Event of Default
has occurred and is continuing, at the request of the Lead Borrower, the
Administrative Agent shall hold all amounts required to be applied to LIBO Loans
in the Cash Collateral Account and will apply such funds to the applicable LIBO
Loans at the end of the then pending Interest Period therefor (provided that the
foregoing shall in no way limit or restrict the Agents’ rights upon the
subsequent occurrence of an Event of Default). No partial prepayment of a
Borrowing of LIBO Loans shall result in the aggregate principal amount of the
LIBO Loans remaining outstanding pursuant to such Borrowing being less than
$5,000,000.

 

44

--------------------------------------------------------------------------------

 

(e) All amounts required to be applied to all Loans hereunder (other than
Swingline Loans) shall be applied ratably in accordance with each Lender’s
Revolving Commitment Percentage.
(f) Upon the Termination Date, the credit facility provided hereunder shall be
terminated in full and the Borrowers shall pay, in full and in cash, all
outstanding Loans and all other outstanding Obligations.
SECTION 2.19 Optional Prepayment of Loans; Reimbursement of Lenders.
(a) The Borrowers shall have the right at any time and from time to time to
prepay outstanding Loans in whole or in part, (x) with respect to LIBO Loans,
upon at least two Business Days’ prior written, telex or facsimile notice to the
Administrative Agent prior to 11:00 a.m., Boston time, and (y) with respect to
Base Rate Loans, on the same Business Day if written, telex or facsimile notice
is received by the Administrative Agent prior to 1:00 p.m., Boston time, subject
to the following limitations:
(i) Subject to SECTION 2.18, all prepayments shall be paid to the Administrative
Agent for application, first, to the prepayment of outstanding Swingline Loans,
second, to the prepayment of other outstanding Loans ratably in accordance with
each Lender’s Revolving Commitment Percentage, and third, to the funding of a
cash collateral deposit in the Cash Collateral Account in an amount equal to
105% of all Letter of Credit Outstandings.
(ii) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid
before outstanding LIBO Loans are prepaid. Each partial prepayment of LIBO Loans
shall be in an integral multiple of $1,000,000. No prepayment of LIBO Loans
shall be permitted pursuant to this SECTION 2.19 other than on the last day of
an Interest Period applicable thereto, unless the Borrowers simultaneously
reimburse the Lenders for all “Breakage Costs” (as defined below) associated
therewith. No partial prepayment of a Borrowing of LIBO Loans shall result in
the aggregate principal amount of the LIBO Loans remaining outstanding pursuant
to such Borrowing being less than $5,000,000.
(iii) Each notice of prepayment shall specify the prepayment date, the principal
amount and Type of the Loans to be prepaid and, in the case of LIBO Loans, the
Borrowing or Borrowings pursuant to which such Loans were made. Each notice of
prepayment shall be irrevocable and shall commit the Borrowers to prepay such
Loan by the amount and on the date stated therein. The Administrative Agent
shall, promptly after receiving notice from the Borrowers hereunder, notify each
Lender of the principal amount and Type of the Loans held by such Lender which
are to be prepaid, the prepayment date and the manner of application of the
prepayment.

 

45

--------------------------------------------------------------------------------

 

(b) The Borrowers shall reimburse each Lender on demand for any loss incurred or
to be incurred by it in the reemployment of the funds released (i) resulting
from any prepayment (for any reason whatsoever, including, without limitation,
conversion to Base Rate Loans or acceleration by virtue of, and after, the
occurrence of an Event of Default) of any LIBO Loan required or permitted under
this Agreement, if such Loan is prepaid other than on the last day of the
Interest Period for such Loan or (ii) in the event that after the Lead Borrower
delivers a notice of borrowing under SECTION 2.03 in respect of LIBO Loans, such
Loans are not made on the first day of the Interest Period specified in such
notice of borrowing for any reason other than a breach by such Lender of its
obligations hereunder or the delivery of any notice pursuant to SECTION 2.16.
Such loss shall be the amount as reasonably determined by such Lender as the
excess, if any, of (A) the amount of interest which would have accrued to such
Lender on the amount so paid or not borrowed at a rate of interest equal to the
Adjusted LIBO Rate for such Loan, for the period from the date of such payment
or failure to borrow to the last day (x) in the case of a payment or refinancing
with Base Rate Loans other than on the last day of the Interest Period for such
Loan, of the then current Interest Period for such Loan or (y) in the case of
such failure to borrow, of the Interest Period for such Loan which would have
commenced on the date of such failure to borrow, over (B) the amount of interest
which would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the London interbank
market (collectively, “Breakage Costs”). Any Lender demanding reimbursement for
such loss shall deliver to the Borrowers from time to time one or more
certificates setting forth the amount of such loss as determined by such Lender
and setting forth in reasonable detail the manner in which such amount was
determined.
(c) In the event the Borrowers fail to prepay any Loan on the date specified in
any prepayment notice delivered pursuant to SECTION 2.19(a), the Borrowers on
demand by any Lender shall pay to the Administrative Agent for the account of
such Lender any amounts required to compensate such Lender for any loss incurred
by such Lender as a result of such failure to prepay, including, without
limitation, any loss, cost or expenses incurred by reason of the acquisition of
deposits or other funds by such Lender to fulfill deposit obligations incurred
in anticipation of such prepayment. Any Lender demanding such payment shall
deliver to the Borrowers from time to time one or more certificates setting
forth the amount of such loss as determined by such Lender and setting forth in
reasonable detail the manner in which such amount was determined.
(d) Whenever any partial prepayment of Loans are to be applied to LIBO Loans,
such LIBO Loans shall be prepaid in the chronological order of their Interest
Payment Dates.

 

46

--------------------------------------------------------------------------------

 

SECTION 2.20 Maintenance of Loan Account; Statements of Account.
(a) The Administrative Agent shall maintain an account on its books in the name
of the Borrowers (the “Loan Account”) which will reflect (i) all Swingline Loans
and all Loans and advances made by the Lenders to the Borrowers or for the
Borrowers’ account, including the Loans, (ii) all L/C Disbursements, fees and
interest that have become payable as herein set forth, and (iii) any and all
other Obligations that have become payable.
(b) The Loan Account will be credited with all amounts received by the
Administrative Agent from the Borrowers or from others for the Borrowers’
account, including all amounts received in the BOA Concentration Account from
the Blocked Account Banks, and the amounts so credited shall be applied as set
forth in SECTION 2.22(a) and (b). After the end of each month, the
Administrative Agent shall send to the Borrowers a statement accounting for the
charges, loans, advances and other transactions occurring among and between the
Administrative Agent, the Lenders and the Borrowers during that month. The
monthly statements shall, absent manifest error, be an account stated, which is
final, conclusive and binding on the Borrowers.
SECTION 2.21 Cash Receipts.
(a) Annexed hereto as Schedule 2.21(a) is a list of all present DDAs, which
Schedule includes, with respect to each depository (i) the name and address of
that depository; (ii) the account number(s) maintained with such depository; and
(iii) to the extent known, a contact person at such depository.
(b) Annexed hereto as Schedule 2.21(b) is a list describing all arrangements to
which any Borrower is a party with respect to the payment to any Borrower of the
proceeds of all credit card charges for sales by any Borrower.
(c) To the extent not already provided to the Administrative Agent, on or prior
to the Effective Date, the Borrowers shall (i) deliver to the Administrative
Agent notifications executed on behalf of the Borrowers to each depository
institution with which any DDA is maintained in form satisfactory to the
Administrative Agent, of the Administrative Agent’s interest in such DDA (each,
a “DDA Notification”), and (ii) deliver to the Administrative Agent
notifications executed on behalf of the Borrowers to each of the Borrower’s
credit card clearinghouses and processors of notice in form satisfactory to the
Administrative Agent, (each, a “Credit Card Notification”), and (iii) enter into
control agreements with the banks maintaining the deposit accounts identified on
Schedule 2.21(c) (collectively, the “Blocked Accounts”), which agreements (the
“Blocked Account Agreements”) shall be in form and substance satisfactory to the
Administrative Agent. The DDA Notifications, Credit Card Notifications and
Blocked Account Agreements shall require, after the occurrence of a Cash Control
Event, the sweep on each Business Day of all available cash receipts from the
sale of Inventory and other assets, all collections of Accounts, and all other
cash payments received by the Borrowers from any Person or from any source or on
account of any sale or other

 

47

--------------------------------------------------------------------------------

 

transaction or event (all such cash receipts and collections, “Cash Receipts”),
to a concentration account maintained by the Collateral Agent at Bank of America
(the “BOA Concentration Account”). In that regard, after the occurrence of a
Cash Control Event, the Borrowers shall cause the ACH or wire transfer to a
Blocked Account or to the BOA Concentration Account, no less frequently than
daily (and whether or not there is then an outstanding balance in the Loan
Account) of (A) the then contents of each DDA, each such transfer to be net of
any minimum balance, not to exceed $5,000.00, as may be required to be
maintained in the subject DDA by the bank at which such DDA is maintained; and
(B) the proceeds of all credit card charges not otherwise provided for pursuant
hereto. Further, whether or not any Obligations are then outstanding, after the
occurrence of a Cash Control Event, the Borrowers shall cause the ACH or wire
transfer to the BOA Concentration Account, no less frequently than daily, of the
then entire ledger balance of each Blocked Account, net of such minimum balance,
not to exceed $5,000.00, as may be required to be maintained in the subject
Blocked Account by the bank at which such Blocked Account is maintained. In the
event that, notwithstanding the provisions of this SECTION 2.21, after the
occurrence of a Cash Control Event, the Borrowers receive or otherwise have
dominion and control of any such proceeds or collections, such proceeds and
collections shall be held in trust by the Borrowers for the Administrative Agent
and shall not be commingled with any of the Borrowers’ other funds or deposited
in any account of any Borrower other than as instructed by the Administrative
Agent.
(d) The Borrowers shall accurately report to the Administrative Agent all
amounts deposited in the Blocked Accounts to ensure the proper transfer of funds
as set forth above. If at any time other than the times set forth above any cash
or cash equivalents owned by the Borrowers are deposited to any account, or held
or invested in any manner, otherwise than in a Blocked Account that is subject
to a Blocked Account Agreement, the Administrative Agent shall require the
Borrowers to close such account and have all funds therein transferred to an
account maintained by the Administrative Agent at Bank of America and all future
deposits made to a Blocked Account which is subject to a Blocked Account
Agreement.
(e) The Borrowers may close DDAs or Blocked Accounts and/or open new DDAs or
Blocked Accounts, subject to the execution and delivery to the Administrative
Agent of appropriate DDA Notifications or Blocked Account Agreements (unless
expressly waived by the Administrative Agent) consistent with the provisions of
this SECTION 2.21 and otherwise satisfactory to the Administrative Agent. Unless
consented to in writing by the Administrative Agent, the Borrowers may not
maintain any bank accounts or enter into any agreements with credit card
processors other than the ones expressly contemplated herein.
(f) The Borrowers may also maintain with the Administrative Agent at Bank of
America one or more disbursement accounts (the “BOA Disbursement Accounts”) to
be used by the Borrowers for disbursements and payments (including payroll) in
the ordinary course of business or as otherwise permitted hereunder. The only
Disbursement Accounts as of the Effective Date are those described in
Schedule 2.21(f).

 

48

--------------------------------------------------------------------------------

 

(g) The BOA Concentration Account is, and shall remain, under the sole dominion
and control of the Collateral Agent. Each Borrower acknowledges and agrees that
(i) such Borrower has no right of withdrawal from the BOA Concentration Account,
(ii) the funds on deposit in the BOA Concentration Account shall continue to be
collateral security for all of the Obligations and (iii) the funds on deposit in
the BOA Concentration Account shall be applied as provided in SECTION 2.22(a) or
SECTION 7.04, as applicable.
(h) So long as no Cash Control Event has occurred, daily, the Borrowers may
direct, and shall have sole control over, the manner of disposition of its funds
in the DDA Accounts and Blocked Accounts. Effective upon notice to the Lead
Borrower from the Collateral Agent in the event of a Cash Control Event (which
notice may be given by telephone if promptly confirmed in writing), the BOA
Concentration Account will, without any further action on the part of any
Borrower or the Collateral Agent convert into a closed account under the
exclusive dominion and control of the Collateral Agent in which funds are held
subject to the rights of the Collateral Agent hereunder. In such event, all
amounts in the BOA Concentration Account from time to time may be applied to the
Obligations in such order and manner as provided in SECTION 2.22 or SECTION 7.04
hereof, as applicable, and the Administrative Agent may, in its discretion, but
shall not be obligated to, transfer any amounts in the BOA Concentration Account
to the BOA Disbursement Accounts.
SECTION 2.22 Application of Payments.
(a) Subject to the provisions of SECTION 2.21, as long as the Obligations have
not been accelerated pursuant to SECTION 7.03 hereof, all amounts received in
the BOA Concentration Account from any source, including the Blocked Account
Banks, shall be applied, on the day immediately following receipt, in the
following order: first, to pay interest due and payable on Credit Extensions and
to pay fees and expense reimbursements and indemnification then due and payable
to the Administrative Agent, the Arranger, the Issuing Bank, the Collateral
Agent, and the Lenders; second to repay outstanding Swingline Loans; third, to
repay other outstanding Revolving Loans that are Base Rate Loans and all
outstanding reimbursement obligations under Letters of Credit; fourth, to repay
outstanding Revolving Loans that are LIBO Loans and all Breakage Costs due in
respect of such repayment pursuant to SECTION 2.19(b) or, at the Borrowers’
option (if no Event of Default has occurred and is then continuing), to fund a
cash collateral deposit to the Cash Collateral Account sufficient to pay, and
with direction to pay, all such outstanding LIBO Loans on the last day of the
then-pending Interest Period therefor; fifth if any Event of Default has
occurred and is continuing, to fund a cash collateral deposit in the Cash
Collateral Account in an amount equal to 105% of all Letter of Credit
Outstandings; sixth, to pay all other Obligations that are then outstanding and
then due and payable. If all Obligations are paid, any excess amounts shall be
deposited in a separate cash collateral account, and as long as no Event of
Default then exists, shall be released to the Borrowers upon the request of the
Lead Borrower and utilized by the Borrowers prior to any further Revolving Loans
being made. Any other amounts received by the Administrative Agent, the Issuing
Bank, the Collateral Agent, or any Lender as contemplated by SECTION 2.21 shall
also be applied in the order set forth above in this SECTION 2.22.

 

49

--------------------------------------------------------------------------------

 

(b) All credits against the Obligations shall be conditioned upon final payment
to the Administrative Agent of the items giving rise to such credits and shall
be subject to one (1) Business Day’s clearance and collection. If any item
deposited to the BOA Concentration Account and credited to the Loan Account is
dishonored or returned unpaid for any reason, whether or not such return is
rightful or timely, the Administrative Agent shall have the right to reverse
such credit and charge the amount of such item to the Loan Account and the
Borrowers shall indemnify the Administrative Agent, the Collateral Agent, the
Issuing Bank and the Lenders against all claims and losses resulting from such
dishonor or return.
SECTION 2.23 Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender or any holding company of any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or LIBO Loans made by such Lender or
any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBO Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to such Lender or the Issuing
Bank of participating in, issuing or maintaining any Letter of Credit or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s or the Issuing Bank’s capital or on the capital of
such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or the Issuing Bank’s policies and the policies
of such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

 

50

--------------------------------------------------------------------------------

 

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section and setting forth in reasonable detail the manner in which such amount
or amounts were determined shall be delivered to the Borrowers and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation.
SECTION 2.24 Change in Legality.
(a) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, if (x) any Change in Law shall make it unlawful for a Lender to make
or maintain a LIBO Loan or to give effect to its obligations as contemplated
hereby with respect to a LIBO Loan or (y) at any time any Lender determines that
the making or continuance of any of its LIBO Loans has become impracticable as a
result of a contingency occurring after the date hereof which adversely affects
the London interbank market or the position of such Lender in the London
interbank market, then, by written notice to the Borrowers, such Lender may
(i) declare that LIBO Loans will not thereafter be made by such Lender
hereunder, whereupon any request by the Borrowers for a LIBO Borrowing shall, as
to such Lender only, be deemed a request for an Base Rate Loan unless such
declaration shall be subsequently withdrawn; and (ii) require that all
outstanding LIBO Loans made by it be converted to Base Rate Loans, in which
event all such LIBO Loans shall be automatically converted to Base Rate Loans as
of the effective date of such notice as provided in paragraph (b) below. In the
event any Lender shall exercise its rights under clause (i) or (ii) of this
paragraph (a), all payments and prepayments of principal which would otherwise
have been applied to repay the LIBO Loans that would have been made by such
Lender or the converted LIBO Loans of such Lender shall instead be applied to
repay the Base Rate Loans made by such Lender in lieu of, or resulting from the
conversion of, such LIBO Loans.
(b) For purposes of this SECTION 2.24, a notice to the Borrowers by any Lender
pursuant to paragraph (a) above shall be effective, if lawful, and if any LIBO
Loans shall then be outstanding, on the last day of the then-current Interest
Period; and otherwise such notice shall be effective on the date of receipt by
the Borrowers.

 

51

--------------------------------------------------------------------------------

 

SECTION 2.25 Payments; Sharing of Setoff.
(a) The Borrowers shall make each payment required to be made by it hereunder or
under any other Loan Document (whether of principal, interest, fees or
reimbursement of drawings under Letters of Credit, or of amounts payable under
SECTION 2.19(b), SECTION 2.23 or SECTION 2.26, or otherwise) prior to
12:00 noon, Boston time, on the date when due, in immediately available funds,
without setoff or counterclaim. Any amounts received after such time on any date
may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices at 100 Federal Street, Boston, Massachusetts, except payments to be
made directly to the Issuing Bank or Swingline Lender as expressly provided
herein and except that payments pursuant to SECTION 2.19(b), SECTION 2.23,
SECTION 2.26 and SECTION 9.03 shall be made directly to the Persons entitled
thereto and payments pursuant to other Loan Documents shall be made to the
Persons specified therein. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment under any Loan
Document shall be due on a day that is not a Business Day, except with respect
to LIBO Borrowings, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed
drawings under Letters of Credit, interest and fees then due hereunder, such
funds shall be applied as set forth in SECTION 2.22(a) or SECTION 7.04 hereof,
as applicable.
(c) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrowers will not make such payment, the Administrative Agent may assume that
the Borrowers have made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the Issuing
Bank, as the case may be, the amount due. In such event, if the Borrowers have
not in fact made such payment, then each of the Lenders or the Issuing Bank, as
the case may be, severally agrees to repay to the Administrative Agent forthwith
on demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(d) If any Lender shall fail to make any payment required to be made by it
pursuant to this Agreement, then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied
obligations are fully paid.

 

52

--------------------------------------------------------------------------------

 

SECTION 2.26 Taxes.
(a) Any and all payments by or on account of any obligation of the Borrowers
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes, provided that if the
Borrowers shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrowers shall make
such deductions and (iii) the Borrowers shall pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrowers shall indemnify the Administrative Agent, each Lender and the
Issuing Bank, within 10 Business Days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, such Lender or the Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrowers hereunder or
under any other Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto (except to the extent that any such penalties or interest result
through the fault of the Administrative Agent, such Lender or the Issuing Bank,
as applicable), whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to the
Borrowers by a Lender or the Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or the Issuing Bank setting forth in
reasonable detail the manner in which such amount was determined, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrowers to a Governmental Authority, the Borrowers shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

 

53

--------------------------------------------------------------------------------

 

(e) Any Foreign Lender that is entitled to an exemption from or reduction in
withholding tax shall deliver to the Borrowers and the Administrative Agent two
copies Internal Revenue Service Form W-8BEN claiming eligibility for benefits of
an income tax treaty to which the United States is a party, duly completed
copies of Internal Revenue Service Form W-8ECI, in the case of a Foreign Lender
claiming the benefits of the exemption for portfolio interest under section
881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is
not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a
“10 percent shareholder” of the Borrowers within the meaning of section
881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in
section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal
Revenue Service Form W-8BEN, or any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in United States Federal
withholding tax duly completed together with such supplementary documentation as
may be prescribed by applicable law to permit the Lead Borrower to determine the
withholding or deduction required to be made. Such forms shall be delivered by
each Foreign Lender on or before the date it becomes a party to this Agreement
(or, in the case of a transferee that is a participation holder, on or before
the date such participation holder becomes a transferee hereunder) and on or
before the date, if any, such Foreign Lender changes its applicable lending
office by designating a different lending office (a “New Lending Office”). In
addition, each Foreign Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Foreign
Lender. Notwithstanding any other provision of this SECTION 2.26(e), a Foreign
Lender shall not be required to deliver any form pursuant to this SECTION
2.26(e) that such Foreign Lender is not legally able to deliver.
(f) The Borrowers shall not be required to indemnify any Foreign Lender or to
pay any additional amounts to any Foreign Lender in respect of U.S. Federal
withholding tax pursuant to paragraph (a) or (c) above to the extent that the
obligation to pay such additional amounts would not have arisen but for a
failure by such Foreign Lender to comply with the provisions of paragraph
(e) above. Should a Lender become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrowers shall, at such Lender’s
expense, take such steps as such Lender shall reasonably request to assist such
Lender to recover such Taxes.
SECTION 2.27 Security Interests in Collateral.
To secure their Obligations under this Agreement and the other Loan Documents,
the Borrowers have granted to the Collateral Agent, for its benefit and the
ratable benefit of the other Secured Parties, a first-priority security interest
in all of the Collateral pursuant hereto and to the Security Documents.
SECTION 2.28 Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under SECTION 2.23, or if the Borrowers
are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to SECTION 2.26, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to SECTION 2.23 or SECTION 2.26, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment; provided, however, that the
Borrowers shall not be liable for such costs and expenses of a Lender requesting
compensation if (i) such Lender becomes a party to this Agreement on a date
after the Effective Date and (ii) the relevant Change in Law occurs on a date
prior to the date such Lender becomes a party hereto.

 

54

--------------------------------------------------------------------------------

 

(b) If any Lender requests compensation under SECTION 2.23, or if the Borrowers
are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to SECTION 2.26, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrowers
may, at their sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
SECTION 9.05), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (i) the Borrowers
shall have received the prior written consent of the Administrative Agent, the
Issuing Bank and Swingline Lender, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in unreimbursed drawings
under Letters of Credit and Swingline Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under SECTION 2.23 or
payments required to be made pursuant to SECTION 2.26, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrowers to require such assignment and delegation cease to apply.
SECTION 2.29 Increase in Revolving Commitments.
(a) Request for Increase. Provided no Default then exists or would arise
therefrom, upon notice to the Administrative Agent (which shall promptly notify
the Lenders), the Lead Borrower may from time to time, request an increase in
the Revolving Commitments by an amount (for all such requests) not exceeding
$100,000,000; provided that (i) any such request for an increase shall be in a
minimum amount of $25,000,000, and (ii) the Lead Borrower may make a maximum of
four such requests. At the time of sending such notice, the Lead Borrower (in
consultation with the Administrative Agent) shall specify the time period within
which each Lender is requested to respond (which shall in no event be less than
ten Business Days from the date of delivery of such notice to the Lenders).
(b) Lender Elections to Increase. Each Lender shall notify the Administrative
Agent within such time period whether or not it agrees to increase its Revolving
Commitment and, if so, whether by an amount equal to, greater than, or less than
its Revolving Commitment Percentage of such requested increase. Any Lender not
responding within such time period shall be deemed to have declined to increase
its Revolving Commitment.
(c) Notification by Administrative Agent; Additional Lenders. The Administrative
Agent shall notify the Lead Borrower and each Lender of the Lenders’ responses
to each request made hereunder. To achieve the full amount of a requested
increase and subject to the approval of the Administrative Agent, the Issuing
Bank and the Swingline Lender (which approvals shall not be unreasonably
withheld), to the extent that the existing Lenders decline to increase their
Revolving Commitments, or decline to increase their Revolving Commitments to the
amount requested by the Lead Borrower, the Administrative Agent, in consultation
with the Lead Borrower, will use its reasonable efforts to arrange for other
assignees to become a Lender hereunder (any such Lender or assignee, an
“Additional Commitment Lender”) and to issue commitments in an amount equal to
the amount of the increase in the Revolving Commitments requested by the Lead
Borrower and not accepted by the existing Lenders (and the Lead Borrower may
also invite additional assignees to become Lenders), provided, however, that
without the consent of the Administrative Agent, at no time shall the Revolving
Commitment of any Additional Commitment Lender be less than $10,000,000.

 

55

--------------------------------------------------------------------------------

 

(d) Effective Date and Allocations. If the Revolving Commitments are increased
in accordance with this Section, the Administrative Agent and the Lead Borrower
shall determine the effective date (the “Increase Effective Date”) and the final
allocation of such increase. The Administrative Agent shall promptly notify the
Lead Borrower and the Lenders of the final allocation of such increase and the
Increase Effective Date and on the Increase Effective Date (i) the Total
Commitments under, and for all purposes of, this Agreement shall be increased by
the aggregate amount of such Commitment Increases, and (ii) Schedule 1.1 shall
be deemed modified, without further action, to reflect the revised Revolving
Commitments and Revolving Commitment Percentages of the Lenders.
(e) Conditions to Effectiveness of Increase. As a condition precedent to such
increase, (i) the Lead Borrower shall deliver to the Administrative Agent a
certificate of each Loan Party dated as of the Increase Effective Date (in
sufficient copies for each Lender) signed by the chief executive officer,
president or a Financial Officer of such Loan Party (A) certifying and attaching
the resolutions adopted by such Loan Party approving or consenting to such
increase, and (B) in the case of the Borrowers, certifying that, before and
after giving effect to such increase, (1) the representations and warranties
contained in Article 3 and the other Loan Documents are true and correct on and
as of the Increase Effective Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they are true and correct as of such earlier date, and except that for
purposes of this SECTION 2.29, the representations and warranties contained in
SECTION 3.04 shall be deemed to refer to the most recent statements furnished
pursuant to clauses (a) and (c), respectively, of SECTION 5.01, (ii) the
Borrowers, the Administrative Agent, and any Additional Commitment Lender shall
have executed and delivered a joinder to the Loan Documents in such form as the
Administrative Agent shall reasonably require; (iii) the Borrowers shall have
paid such fees and other compensation to the Additional Commitment Lenders as
the Lead Borrower and such Additional Commitment Lenders shall agree; (iv) the
Borrowers shall have paid such arrangement fees to the Administrative Agent as
the Lead Borrower and the Administrative Agent may agree; (v) the Borrowers
shall deliver to the Administrative Agent and the Lenders an opinion or
opinions, in form and substance reasonably satisfactory to the Administrative
Agent, from counsel to the Borrowers reasonably satisfactory to the
Administrative Agent and dated such date (which opinion shall be substantially
the same in form and substance as the opinion delivered pursuant to SECTION
4.01(b) hereof; (vi) the Borrowers and the Additional Commitment Lender shall
have delivered such other instruments, documents and agreements as the
Administrative Agent may reasonably have requested; and (vii) no Default exists.
The Borrowers shall prepay any Loans outstanding on the Increase Effective Date
(and pay any additional amounts required pursuant to SECTION 2.26) to the extent
necessary to keep the outstanding Loans ratable with any revised Revolving
Credit Percentages arising from any nonratable increase in the Revolving
Commitments under this Section.
(f) Conflicting Provisions. This Section shall supersede any provisions in
SECTION 2.25 or SECTION 8.03 to the contrary.

 

56

--------------------------------------------------------------------------------

 

ARTICLE 3
Representations and Warranties
Each Loan Party represents and warrants to the Agents and the Lenders that:
SECTION 3.01 Organization; Powers. Each Loan Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
SECTION 3.02 Authorization; Enforceability. The transactions contemplated hereby
and by the other Loan Documents to be entered into by each Loan Party are within
such Loan Party’s corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by each Loan Party that is a party hereto and
constitutes, and each other Loan Document to which any Loan Party is a party,
when executed and delivered by such Loan Party will constitute, a legal, valid
and binding obligation of such Loan Party (as the case may be), enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
SECTION 3.03 Governmental Approvals; No Conflicts. The transactions to be
entered into contemplated by the Loan Documents (a) do not require any consent
or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for such as have been obtained or made and are in
full force and effect and except filings and recordings necessary to perfect
Liens created under the Loan Documents, (b) will not violate any applicable law
or regulation or the charter, by-laws or other organizational documents of any
Loan Party or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon any Loan Party or its assets, or give rise to a right thereunder to require
any payment to be made by any Loan Party, and (d) will not result in the
creation or imposition of any Lien on any asset of any Loan Party, except Liens
created under the Loan Documents.
SECTION 3.04 Financial Condition. The Lead Borrower has heretofore furnished to
the Lenders the consolidated balance sheet, and statements of income,
stockholders’ equity, and cash flows for the Lead Borrower and its Subsidiaries
as of and for the fiscal year ending February 2, 2008 and as of and for the
fiscal quarter ending May 3, 2008, certified by the chief executive officer,
president or a Financial Officer of the Borrowers. Such financial statements
present fairly, in all material respects, the financial position, results of
operations and cash flows of the Lead Borrower and its Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year end audit
adjustments and the absence of footnotes. Since the date of such financial
statements, there have been no changes in the assets, liabilities, financial
condition, business or prospects of the Borrowers other than changes in the
ordinary course of business, the effect of which has not been materially
adverse.

 

57

--------------------------------------------------------------------------------

 

SECTION 3.05 Properties.
(a) Except as disclosed in Schedules 3.05(c)(i) and 3.05(c)(ii), each Loan Party
has good title to, or valid leasehold interests in, all its real and personal
property material to its business, except for defects which could not reasonably
be expected to have a Material Adverse Effect.
(b) Each Loan Party owns, or is licensed to use, all trademarks, trade names,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Loan Parties does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05(c)(i) sets forth the address (including county) of all Real
Estate that is owned by the Loan Parties as of the Closing Date, together with a
list of the holders of any mortgage or other Lien thereon. Schedule 3.05(c)(ii)
sets forth the address (including county) of all Real Estate that is leased by
the Loan Parties as of the Closing Date.
SECTION 3.06 Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of any Borrower,
threatened against or affecting any Loan Party (i)  as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than those set forth on
Schedule 3.06) or (ii) that involve any of the Loan Documents.
(b) Except for the matters set forth on Schedule 3.06 and except with respect to
any other matters that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, no Loan Party (i) has failed
to comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become subject to any Environmental Liability, (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any basis for
any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the status of
the matters set forth on Schedule 3.06 that, individually or in the aggregate,
has resulted in, or could reasonably be expected to result in, a Material
Adverse Effect.

 

58

--------------------------------------------------------------------------------

 

SECTION 3.07 Compliance with Laws and Agreements. Each Loan Party is in
compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, Material Agreements and
other instruments binding upon it or its property, and except where the failure
to do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08 Investment Company Status. No Loan Party is an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of
1940.
SECTION 3.09 Taxes. Each Loan Party has timely filed or caused to be filed all
tax returns and reports required to have been filed and has paid or caused to be
paid all taxes required to have been paid by it, except (a) taxes that are being
contested in good faith by appropriate proceedings, for which such Loan Party
has set aside on its books adequate reserves, and as to which no Lien has
arisen, or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $500,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $1,000,000 the fair market value of
the assets of all such underfunded Plans.
SECTION 3.11 Disclosure. The Borrowers have disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which any Loan
Party is subject, and all other matters known to any of them, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of any of the reports, financial statements, certificates
or other information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

59

--------------------------------------------------------------------------------

 

SECTION 3.12 Subsidiaries. Schedule 3.12 sets forth the name of, and the
ownership interest of each Loan Party in each Subsidiary as of the Closing Date.
The Loan Parties are not party to any joint venture, general or limited
partnership, or limited liability company, agreements or any other business
ventures or entities.
SECTION 3.13 Insurance. Schedule 3.13 sets forth a description of all insurance
maintained by or on behalf of the Borrowers and their Subsidiaries as of the
Effective Date. As of the Effective Date, all premiums in respect of such
insurance that are due and payable have been paid.
SECTION 3.14 Labor Matters. As of the Effective Date, there are no strikes,
lockouts or slowdowns against any Loan Party pending or, to the knowledge of the
Borrowers, threatened. The hours worked by and payments made to employees of the
Loan Parties have not been in violation of the Fair Labor Standards Act or any
other applicable federal, state, local or foreign law dealing with such matters
to the extent that any such violation could reasonably be expected to have a
Material Adverse Effect. All payments due from any Loan Party, or for which any
claim may be made against any Loan Party, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of such member. The consummation of the transactions
contemplated by the Loan Documents will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Loan Party is bound.
SECTION 3.15 Security Documents. The Security Documents create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral, as applicable, and the
Security Documents constitute the creation of a fully perfected first priority
Lien on, and security interest, as applicable, in, all right, title and interest
of the Loan Parties thereunder in such Collateral, in each case prior and
superior in right to any other Person.
SECTION 3.16 Federal Reserve Regulations.
(a) No Loan Party is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of buying or carrying Margin
Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to buy or carry Margin Stock or to extend credit to others for
the purpose of buying or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose or (ii) for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation U or X.
(c) Less than 25% of the assets of the Borrowers on a consolidated basis consist
of Margin Stock.
SECTION 3.17 Solvency. Each of the Loan Parties is Solvent. No transfer of
property is being made by any Loan Party and no obligation is being incurred by
any Loan Party in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Loan Party.

 

60

--------------------------------------------------------------------------------

 

ARTICLE 4
Conditions
SECTION 4.01 Effective Date. The obligation of the Lenders to make each Loan and
of the Issuing Bank to issue each Letter of Credit, including any Loan to be
made or Letter of Credit to be issued on the Effective Date, is subject to the
following conditions precedent:
(a) The Agents (or their counsel) shall have received from each party hereto
either (i) a counterpart of this Agreement and all other Loan Documents signed
on behalf of such party or (ii) written evidence satisfactory to the Agents
(which may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement and all
other Loan Documents.
(b) The Agents shall have received a favorable written opinion (addressed to
each Agent and the Lenders and dated the Effective Date) of counsel for the Loan
Parties regarding the legal existence and good standing of the Loan Parties, the
due authorization of the Loan Parties to enter into the Loan Documents, the due
execution by the Loan Parties of the Loan Documents, and stating that the
consummation of the transactions contemplated hereby shall not conflict with, or
result in a default or event of default under, any Material Agreement
(including, without limitation, the Subordinated Debt Indenture) or
organizational documents of any Loan Party, and otherwise substantially in the
form of Exhibit C hereto. The Borrowers hereby request such counsel to deliver
such opinion.
(c) The Agents shall have received such documents and certificates as the Agents
or their counsel may reasonably request relating to the organization, existence
and good standing of each Loan Party, the authorization of the transactions
contemplated by the Loan Documents and any other legal matters relating to the
Borrowers, the Facility Guarantors, the Loan Documents or the transactions
contemplated thereby, all in form and substance satisfactory to the Agents and
their counsel.
(d) After giving effect to the consummation of the transactions contemplated
hereby, no Event of Default shall exist.
(e) The Agents shall have received a certificate, reasonably satisfactory in
form and substance to the Agents, with respect to the solvency of the Lead
Borrower and its Subsidiaries on a consolidated basis as of the Effective Date.
(f) The consummation of the transactions contemplated hereby shall not
(a) violate any applicable law, statute, rule or regulation or (b) conflict
with, or result in a default or event of default under, any Material Agreement
of any Loan Party.

 

61

--------------------------------------------------------------------------------

 

(g) All necessary consents and approvals to the transactions contemplated hereby
shall have been obtained and shall be satisfactory to the Agents.
(h) The Agents shall be reasonably satisfied that any financial statements
delivered to them fairly present the business and financial condition of the
Borrowers and their Subsidiaries, and that there has been no material adverse
change in the assets, business, financial condition, income or prospects of the
Borrowers and their Subsidiaries since the date of the most recent financial
information delivered to the Agents.
(i) There shall not be any action, suit, investigation or proceeding pending or,
to the knowledge of the Loan Parties threatened in any court or before any
arbitrator or Governmental Authority that could reasonably be expected to have a
Material Adverse Effect.
(j) There shall not have occurred any default of any Material Agreement of any
Loan Party, including, without limitation, under the Subordinated Debt
Indenture.
(k) The Collateral Agent shall have received results of updated searches or
other evidence reasonably satisfactory to the Collateral Agent (in each case
dated as of a date reasonably satisfactory to the Collateral Agent) indicating
the absence of liens on the assets of the Loan Parties, except for Liens granted
to the Collateral Agent, for the benefit of the Secured Parties, and liens for
which termination statements and releases reasonably satisfactory to the
Collateral Agent are being tendered concurrently herewith.
(l) The Collateral Agent shall have received all documents and instruments,
including Uniform Commercial Code financing statements and Blocked Account
Agreements, required by law or reasonably requested by the Collateral Agent to
be filed, registered or recorded to create or perfect the first priority Liens
intended to be created under the Loan Documents and all such documents and
instruments shall have been so filed, registered or recorded to the satisfaction
of the Collateral Agent.
(m) All fees due at or immediately after the Effective Date and all costs and
expenses incurred by the Agents in connection with the establishment of the
credit facility contemplated hereby (including the fees and expenses of counsel
to the Agents) shall have been paid in full.
(n) No material changes in governmental regulations or policies affecting the
Loan Parties, the Agents, the Arranger or any Lender involved in this
transaction shall have occurred prior to the Effective Date.
(o) There shall not have occurred any disruption or material adverse change in
the financial or capital markets in general that would, in the reasonable
opinion of the Agents, have a material adverse effect on the market for loan
syndications or adversely affecting the syndication of the Loans, and the
Arranger shall have achieved syndication of the Loans.

 

62

--------------------------------------------------------------------------------

 

(p) There shall be no events of default on the Effective Date on any long term
debt held by any of the Borrowers or Facility Guarantors.
(q) There shall have been delivered to the Administrative Agent such additional
instruments and documents as the Agents or counsel to the Agents reasonably may
require or request.
The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02 Conditions Precedent to Each Loan and Each Letter of Credit.
In addition to those conditions described in Section 4.01, the obligation of the
Revolving Lenders to make each Revolving Loan and of the Issuing Bank to issue
each Letter of Credit, is subject to the following conditions precedent:
(a) Notice. The Administrative Agent shall have received a notice with respect
to such Borrowing or issuance, as the case may be, as required by Article II.
(b) Representations and Warranties. All representations and warranties contained
in this Agreement and the other Loan Documents or otherwise made in writing in
connection herewith or therewith shall be true and correct in all material
respects on and as of the date of each Borrowing or the issuance of each Letter
of Credit hereunder with the same effect as if made on and as of such date,
other than representations and warranties that relate solely to an earlier date.
(c) No Default. On the date of each Borrowing hereunder and the issuance of each
Letter of Credit, the Loan Parties shall be in compliance with all of the terms
and provisions set forth herein and in the other Loan Documents to be observed
or performed and no Default or Event of Default shall have occurred and be
continuing.
(d) Borrowing Base Certificate. The Administrative Agent shall have received the
timely delivery of the most recently required Borrowing Base Certificate, with
each such Borrowing Base Certificate including schedules as required by the
Administrative Agent.
The request by the Borrowers for, and the acceptance by the Borrowers of, each
extension of credit hereunder shall be deemed to be a representation and
warranty by the Borrowers that the conditions specified in this SECTION 4.02
have been satisfied at that time and that after giving effect to such extension
of credit the Borrowers shall continue to be in compliance with the Borrowing
Base. The conditions set forth in this SECTION 4.02 are for the sole benefit of
the Administrative Agent and each Revolving Lender and may be waived by the
Administrative Agent in whole or in part without prejudice to the Administrative
Agent or any Revolving Lender.

 

63

--------------------------------------------------------------------------------

 

ARTICLE 5
Affirmative Covenants
Until the Revolving Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all L/C Disbursements shall have been reimbursed, each Loan Party covenants and
agrees with the Agents and the Lenders that:
SECTION 5.01 Financial Statements and Other Information. The Borrowers will
furnish to the Agents:
(a) within 95 days after the end of each fiscal year of the Lead Borrower, its
consolidated and consolidating balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all audited (in the case of such consolidated statements)
and reported on by independent public accountants of recognized national
standing (without a “going concern” or like qualification or exception and
without a qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the Lead
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 50 days after the end of each fiscal quarter of the Lead Borrower,
its consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows, and a summary of all Capital Expenditures,
as of the end of and for such fiscal quarter and the elapsed portion of the
fiscal year, all certified by one of its Financial Officers as presenting in all
material respects the financial condition and results of operations of the Lead
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year end audit adjustments and
the absence of footnotes;
(c) within 30 days after the end of each fiscal month of the Lead Borrower, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows, and a summary of all Capital Expenditures, as of the end
of and for such fiscal month and the elapsed portion of the fiscal year, all
certified by one of its Financial Officers as presenting in all material
respects the financial condition and results of operations of the Lead Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year end audit adjustments and the
absence of footnotes;
(d) concurrently with any delivery of financial statements under clause (a),
(b), or (c) above, a certificate of a Financial Officer of the Lead Borrower
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, and (ii) setting forth reasonably detailed
calculations (A) with respect to the performance covenants included in the
definition of “Applicable Margin”, and (B) demonstrating compliance with SECTION
6.11 (whether or not the provisions of SECTION 6.11 are then applicable), and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the Lead Borrower’s audited financial statements
referred to in Section 3.04 and, if any such change has occurred, specifying the
effect of such change on the financial statements accompanying such certificate;

 

64

--------------------------------------------------------------------------------

 

(e) within thirty (30) days after the commencement of each fiscal year of the
Lead Borrower, a detailed consolidated budget by month for such fiscal year
(including a projected consolidated balance sheet and related statements of
projected operations and cash flow as of the end of and for such fiscal year)
and, promptly when available, any significant revisions of such budget;
(f) within five (5) Business Days after the end of each Fiscal Period, a
certificate in the form of Exhibit E (a “Borrowing Base Certificate”) showing
the Borrowing Base as of the close of business on the last day of the
immediately preceding Fiscal Period, each such Certificate to be certified as
complete and correct on behalf of the Borrowers by a Financial Officer of the
Lead Borrower, provided, however, if a Cash Control Event exists, such Borrowing
Base Certificate (showing the Borrowing Base as of the close of business on the
last day of the immediately preceding week) shall be furnished weekly on
Wednesday of each week for such period as such Cash Control Event is deemed to
exist;
(g) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by any Loan Party
with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, as the case may be;
(h) promptly upon receipt thereof, copies of all reports submitted to any Loan
Party by independent certified public accountants in connection with each
annual, interim or special audit of the books of the Loan Parties or any of
their Subsidiaries made by such accountants, including any management letter
commenting on the Loan Parties’ internal controls submitted by such accountants
to management in connection with their annual audit;
(i) the financial and collateral reports described on Schedule 5.01(i) hereto,
at the times set forth in such Schedule;
(j) a detailed summary of the Net Proceeds received from any Prepayment Event
within one (1) Business Day after receipt of such proceeds;
(k) notice of any intended sale or other disposition of assets of any Loan Party
permitted hereunder or incurrence of any Indebtedness permitted hereunder at
least thirty (30) Business Days prior to the date of consummation such sale or
disposition or incurrence of such Indebtedness; and
(l) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of any Loan Party, or
compliance with the terms of any Loan Document, as the Agents or any Lender may
reasonably request.

 

65

--------------------------------------------------------------------------------

 

SECTION 5.02 Notices of Material Events. The Borrowers will furnish to the
Administrative Agent, the Issuing Bank, the Collateral Agent, and each Lender
prompt written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting any Loan Party or
any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect; and
(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.
(e) any change in any Borrower’s executive officers.
(f) any failure by any Loan Party to pay rent at any of such Loan Party’s
locations, which failure continues for more than ten (10) days following the day
on which such rent first came due.
(g) the discharge by any Borrower of their present independent accountants or
any withdrawal or resignation by such independent accountants.
(h) any material change in the business, operations, or financial affairs of any
Loan Party.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Lead Borrower setting
forth the details of the event or development requiring such notice and, if
applicable, any action taken or proposed to be taken with respect thereto.
SECTION 5.03 Information Regarding Collateral.
(a) The Lead Borrower will furnish to the Agents prompt written notice of any
change (i) in any Loan Party’s corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party’s chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility), (iii) in any Loan Party’s identity or corporate structure or
jurisdiction of formation or (iv) in any Loan Party’s Federal Taxpayer
Identification Number. The Lead Borrower also agrees promptly to notify the
Agents if any material portion of the Collateral is damaged or destroyed.

 

66

--------------------------------------------------------------------------------

 

(b) Each year, at the time of delivery of annual financial statements with
respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the
Lead Borrower shall deliver to the Agents a certificate of a Financial Officer
of the Lead Borrower setting forth the information required pursuant to
Section II of the Perfection Certificate or confirming that there has been no
change in such information since the date of the Perfection Certificate
delivered on the Closing Date or the date of the most recent certificate
delivered pursuant to this Section.
SECTION 5.04 Existence; Conduct of Business. Each Loan Party will, and will
cause each of the Subsidiaries to, do or cause to be done all things necessary
to comply with its respective charter, certificate of incorporation, articles of
organization, and/or other organizational documents, as applicable; and by-laws
and/or other instruments which deal with corporate governance, and to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges, franchises, patents, copyrights, trademarks and
trade names material to the conduct of its business, provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under SECTION 6.03.
SECTION 5.05 Payment of Obligations. Each Loan Party will, and will cause each
of the Subsidiaries to, pay its Indebtedness and other obligations, including
tax liabilities, before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) such Loan Party or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP,
(c) such contest effectively suspends collection of the contested obligation and
enforcement of any Lien securing such obligation and (d) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect. Nothing contained herein shall be deemed to limit the
rights of the Administrative Agent under SECTION 2.02(b) hereof.
SECTION 5.06 Maintenance of Properties. Each Loan Party will, and will cause
each of the Subsidiaries to, keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted and with the exception of storing closings and asset dispositions
permitted hereunder.
SECTION 5.07 Insurance.
(a) Each Loan Party shall (i) maintain insurance with financially sound and
reputable insurers reasonably acceptable to the Administrative Agent (or, to the
extent consistent with prudent business practice, a program of self-insurance
approved by the Administrative Agent) on such of its property and in at least
such amounts and against at least such risks as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
occurring upon, in or about or in connection with the use of any properties
owned, occupied or controlled by it (including the insurance required pursuant
to the Security Documents); (ii) maintain such other insurance as may be
required by law; and (iii) furnish to the Administrative Agent, upon written
request, full information as to the insurance carried.

 

67

--------------------------------------------------------------------------------

 

(b) Fire and extended coverage policies maintained with respect to any
Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders’ loss payable clause (regarding personal property), in form and
substance satisfactory to the Collateral Agent, which endorsements or amendments
shall provide that the insurer shall pay all proceeds otherwise payable to the
Loan Parties under the policies directly to the Collateral Agent, (ii) a
provision to the effect that none of the Loan Parties, the Administrative Agent,
the Collateral Agent, or any other party shall be a coinsurer and (iii) such
other provisions as the Collateral Agent may reasonably require from time to
time to protect the interests of the Lenders. Commercial general liability
policies shall be endorsed to name the Collateral Agent as an additional
insured. Business interruption policies shall name the Collateral Agent as a
loss payee and shall be endorsed or amended to include (i) a provision that,
from and after the Effective Date, the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies directly to the Administrative
Agent or the Collateral Agent, (ii) a provision to the effect that none of the
Loan Parties, the Administrative Agent, the Collateral Agent or any other party
shall be a co-insurer and (iii) such other provisions as the Collateral Agent
may reasonably require from time to time to protect the interests of the
Lenders. Each such policy referred to in this paragraph also shall provide that
it shall not be canceled, modified or not renewed (i) by reason of nonpayment of
premium except upon not less than 30 days’ prior written notice thereof by the
insurer to the Collateral Agent (giving the Collateral Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason except upon
not less than 60 days’ prior written notice thereof by the insurer to the
Collateral Agent. The Borrowers shall deliver to the Collateral Agent, prior to
the cancellation, modification or nonrenewal of any such policy of insurance, a
copy of a renewal or replacement policy (or other evidence of renewal of a
policy previously delivered to the Collateral Agent) together with evidence
satisfactory to the Collateral Agent of payment of the premium therefor.
SECTION 5.08 Casualty and Condemnation. Each Borrower will furnish to the Agents
and the Lenders prompt written notice of any casualty or other insured damage to
any material portion of any Collateral or the commencement of any action or
proceeding for the taking of any material portion of the Collateral or any part
thereof or interest therein under power of eminent domain or by condemnation or
similar proceeding.
SECTION 5.09 Books and Records; Inspection and Audit Rights; Appraisals.
(a) Each Loan Party will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. Each Loan Party will, and will cause each of the Subsidiaries to,
permit any representatives designated by any Agent, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.

 

68

--------------------------------------------------------------------------------

 

(b) Each Loan Party will, and will cause each of the Subsidiaries to, from time
to time upon the request of the Collateral Agent or the Required Lenders through
the Administrative Agent, permit any Agent or professionals (including
investment bankers, consultants, accountants, lawyers and appraisers) retained
by the Agents to conduct appraisals, commercial finance examinations and other
evaluations, including, without limitation, of (i) the Borrowers’ practices in
the computation of the Borrowing Base and (ii) the assets included in the
Borrowing Base and related financial information such as, but not limited to,
sales, gross margins, payables, accruals and reserves, and pay the reasonable
fees and expenses of the Agents or such professionals with respect to such
evaluations and appraisals; provided that, so long as Excess Availability is
equal to or greater than $100,000,000 for any twelve consecutive month period,
the Borrowers shall be responsible only for the costs and expenses of two
(2) such appraisals and two (2) commercial finance examinations in such twelve
consecutive month period following the Effective Date, and if Excess
Availability at any time is less than $100,000,000 during any such twelve
consecutive month period, then the Borrowers shall be responsible only for the
costs and expenses of three (3) such appraisals and three (3) commercial finance
examinations in such twelve consecutive month period; and provided further that,
in the event that no Loans have been outstanding for a period of twelve
consecutive months and Excess Availability is equal to or greater than
$200,000,000, the Borrowers shall be responsible only for the costs and expenses
of one (1) such appraisal and one (1) commercial finance examination in such
twelve consecutive month period. Notwithstanding the foregoing limitations on
the Borrowers’ obligation to pay the expenses for appraisals and commercial
finance examinations prior to the occurrence of an Event of Default, the
Administrative Agent may (i) undertake such additional appraisals and commercial
finance examinations prior to the occurrence of an Event of Default as it deems
appropriate, at the expense of the Lenders, and (ii) if an Event of Default
shall have occurred and be continuing, undertake such additional appraisals and
commercial finance examinations at the Borrowers’ expense as it deems
appropriate.
SECTION 5.10 Compliance with Laws. Each Loan Party will, and will cause each of
the Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.11 Use of Proceeds and Letters of Credit. The proceeds of Loans made
hereunder and Letters of Credit issued hereunder will be used only (a) to
finance the acquisition of working capital assets of the Borrowers, including
the purchase of inventory and equipment, in each case in the ordinary course of
business, (b) to finance Capital Expenditures of the Borrowers, and (c) for
general corporate purposes, including stock and bond repurchases to the extent
permitted herein. No part of the proceeds of any Loan will be used, whether
directly or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations U and X.

 

69

--------------------------------------------------------------------------------

 

SECTION 5.12 Additional Subsidiaries. If any additional Subsidiary is formed or
acquired after the Effective Date, the Lead Borrower will notify the Agents and
the Lenders thereof and (a) if such Subsidiary is not a Foreign Subsidiary or an
Unrestricted Subsidiary, the Borrowers will cause such Subsidiary to become a
Loan Party hereunder and each applicable Security Document in the manner
provided therein within three Business Days after such Subsidiary is formed or
acquired and promptly take such actions to create and perfect Liens on such
Subsidiary’s assets to secure the Obligations as any Agent or the Required
Lenders shall reasonably request and (b) if any shares of capital stock or
Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the
Borrowers will cause such shares and promissory notes evidencing such
Indebtedness to be pledged within three Business Days after such Subsidiary is
formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary,
shares of stock of such Subsidiary to be pledged may be limited to 65% of the
outstanding shares of voting stock of such Subsidiary).
SECTION 5.13 Further Assurances.
(a) Each Loan Party will execute any and all further documents, financing
statements, agreements and instruments, and take all such further actions
(including the filing and recording of financing statements and other
documents), that may be required under any applicable law, or which any Agent or
the Required Lenders may reasonably request, to effectuate the transactions
contemplated by the Loan Documents or to grant, preserve, protect or perfect the
Liens created or intended to be created by the Security Documents or the
validity or priority of any such Lien, all at the expense of the Loan Parties.
The Loan Parties also agree to provide to the Agents, from time to time upon
request, evidence reasonably satisfactory to the Agents as to the perfection and
priority of the Liens created or intended to be created by the Security
Documents.
(b) If any material assets are acquired by any Loan Party after the Effective
Date (other than assets constituting Collateral under the Security Agreement
that become subject to the Lien of the Security Agreement upon acquisition
thereof), the Lead Borrower will notify the Agents and the Lenders thereof, and
the Loan Parties will cause such assets to be subjected to a Lien securing the
Obligations and will take such actions as shall be necessary or reasonably
requested by any Agent or the Required Lenders to grant and perfect such Liens,
including actions described in paragraph (a) of this Section, all at the expense
of the Loan Parties.
(c) Upon the request of the Administrative Agent, the Borrowers shall cause each
of its customs brokers to deliver an agreement to the Administrative Agent
covering such matters and in such form as the Administrative Agent may
reasonably require.

 

70

--------------------------------------------------------------------------------

 

SECTION 5.14 Subordinated Debt Indenture.
On or prior to the date that is sixty (60) days prior to the Maturity (as
defined in the Subordinated Debt Indenture) of the Indebtedness under the
Subordinated Note Indenture, the Borrowers shall have defeased, repaid or
refinanced such Indebtedness, or shall have obtained a commitment from a third
party to refinance such Indebtedness prior to the Maturity thereof, or shall
have notified the Administrative Agent that the Borrowers shall repay such
Indebtedness from proceeds of the Loans and/or available cash; provided that,
after giving effect to any such refinancing (i) the principal amount of the
Indebtedness outstanding at such time is not increased (except by the amount of
any accrued interest, reasonable closing costs, expenses, fees, and premium paid
in connection with such extension, renewal or replacement), (ii) the result of
such refinancing of or replacement shall not be an earlier maturity date or
decreased weighted average life, (iii) the holders of such refinancing
Indebtedness are not afforded covenants, defaults, rights or remedies, taken as
a whole, which are materially more burdensome to the obligor or obligors than
those contained in the Indebtedness being extended, renewed or replaced,
(iv) the obligor or obligors under any such refinancing Indebtedness are the
same as the obligor(s) under the Indebtedness being extended, renewed or
replaced, (v) the refinancing Indebtedness is unsecured, (vi) the subordination,
to the extent applicable, and other material provisions of the refinancing
Indebtedness are no less favorable to the Lenders than those terms of the
Indebtedness being refinanced, and (vii) the refinancing Indebtedness is not
exchangeable or convertible into any other Indebtedness which does not comply
with clauses (i) through (v) above; and provided further that, upon such
notification by the Borrowers to the Administrative Agent that the Borrowers
shall repay such Indebtedness from proceeds of the Loans, the Administrative
Agent shall establish a Reserve under the Borrowing Base in the amount to be
repaid until the date such payment is made.
ARTICLE 6
Negative Covenants
Until the Revolving Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all L/C Disbursements
shall have been reimbursed, each Loan Party covenants and agrees with the Agents
and the Lenders that:
SECTION 6.01 Indebtedness and Other Obligations.
(a) The Loan Parties will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) Indebtedness set forth in Schedule 6.01;

 

71

--------------------------------------------------------------------------------

 

(iii) Indebtedness of any Loan Party to any other Loan Party;
(iv) Guarantees by any Loan Party of Indebtedness of any other Loan Party or
Subsidiary provided that Guarantees by any Borrower of Indebtedness of any
Subsidiary that is not a Borrower shall be subject to Section 6.04;
(v) Indebtedness of any Loan Party to finance the acquisition of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness assumed
in connection with the acquisition of any such assets or secured by a Lien on
any such assets prior to the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof or result in an earlier maturity date or decreased
weighted average life thereof, provided that the aggregate principal amount of
Indebtedness permitted by this clause (v) shall not exceed $10,000,000.00 at any
time outstanding;
(vi) Intentionally Omitted;
(vii) Indebtedness incurred to finance any Real Estate owned by any Loan Party
or incurred in connection with sale-leaseback transactions permitted hereunder,
provided that the terms of such Indebtedness are reasonably acceptable to the
Administrative Agent;
(viii) Indebtedness under Hedging Agreements with (A) Bank of America or an
Affiliate of Bank of America or (B) any other Lender or an Affiliate of such
other Lender to the extent approved in writing by the Administrative Agent in
its sole discretion, not to be unreasonably withheld;
(ix) Indebtedness under the Subordinated Debt Indenture, provided that the
Indebtedness permitted hereunder shall not exceed $100,000,000;
(x) Indebtedness on account of the IdeaForest Note; and
(xi) other unsecured Indebtedness; provided that the Indebtedness permitted
hereunder, when aggregated with the Indebtedness outstanding pursuant to
Section 6.01(a)(ix) hereof, shall not exceed $200,000,000, and provided further
that the terms of such Indebtedness are reasonably acceptable to the
Administrative Agent.
(b) None of the Loan Parties will, nor will they permit any Subsidiary to, issue
any preferred stock (except for preferred stock (i) all dividends in respect of
which are to be paid (and all other payments in respect of which are to be made)
in additional shares of such preferred stock, in lieu of cash, until all
Obligations have been repaid in full and all Revolving Commitments terminated,
(ii) that is not subject to redemption other than redemption at the option of
the Loan Party issuing such preferred stock and (iii) all payments in respect of
which are expressly subordinated to the Obligations) or be or become liable in
respect of any obligation (contingent or otherwise) to purchase, redeem, retire,
acquire or make any other payment in respect of (i) any shares of capital stock
of any Loan Party or (ii) any option, warrant or other right to acquire any such
shares of capital stock.

 

72

--------------------------------------------------------------------------------

 

SECTION 6.02 Liens.  The Loan Parties will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of any Loan Party set forth in
Schedule 6.02, provided that (i) such Lien shall not apply to any other property
or asset of any Loan Party and (ii) such Lien shall secure only those
obligations that it secures as of the Effective Date, and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;
(d) Liens on fixed or capital assets acquired by any Loan Party, provided that
(i) such Liens secure Indebtedness permitted by clause (v) of Section 6.01(a),
(ii) such Liens and the Indebtedness secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the
cost of acquiring such fixed or capital assets and (iv) such Liens shall not
apply to any other property or assets of the Loan Parties; and
(e) Liens to secure Indebtedness permitted by clause (vii) of Section 6.01(a)
provided that such Liens shall not apply to any property or assets of the Loan
Parties other than the Real Estate so refinanced or which is the subject of a
sale-leaseback transaction, provided further that the Collateral Agent may in
its reasonable discretion, require that the purchaser under any such
sale-leaseback transaction deliver a Collateral Access Agreement on terms and
conditions reasonably satisfactory to the Agents.
SECTION 6.03 Fundamental Changes.
(a) The Loan Parties will not merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, (i) any
Subsidiary may merge into a Borrower in a transaction in which a Borrower is the
surviving corporation, and (ii)  any Subsidiary that is not a Borrower may merge
into any Subsidiary that is not a Borrower, provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
(b) The Loan Parties will not engage to any material extent in any business
other than businesses of the type conducted by the Loan Parties on the date of
execution of this Agreement and businesses reasonably related thereto.

 

73

--------------------------------------------------------------------------------

 

SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions. The Loan
Parties will not purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments existing on the Effective Date, and set forth on Schedule 6.04,
to the extent such investments would not be permitted under any other clause of
this Section;
(c) loans or advances made by any Loan Party to any other Loan Party, provided
that any such loans and advances made by a Borrower shall be evidenced by a
promissory note pledged pursuant to the Security Agreement;
(d) Guarantees constituting Indebtedness permitted by Section 6.01, provided
that such Guarantees by the Borrowers shall not exceed $5,000,000.00 in the
aggregate at any time outstanding;
(e) investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;
(f) loans or advances to employees for the purpose of travel, entertainment or
relocation in the ordinary course of business in an amount not to exceed
$500,000.00 to any employee or $2,000,000.00 in the aggregate at any time
outstanding;
(g) in addition to Guarantees permitted pursuant to Section 6.04(d) hereof,
Guarantees of Indebtedness permitted under Section 6.01(a)(x) hereof;
(h) investments constituting Permitted Acquisitions; and
(i) Other investments (excluding Acquisitions), provided that (i) no Default or
Event of Default exists at the time of, or after giving effect to, the proposed
Investment, and (ii) average Excess Availability (A) for the thirty days prior
to the making of any such investment and (B) on a pro forma basis for the ninety
days immediately following the making of any such investment, shall be equal to
or greater than $50,000,000.

 

74

--------------------------------------------------------------------------------

 

SECTION 6.05 Asset Sales. The Loan Parties will not, and will not permit any of
the Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset,
including any capital stock, nor will the Loan Parties permit any of the
Subsidiaries to issue any additional shares of its capital stock or other
ownership interest in such Subsidiary, except:
(a) (i) sales of Inventory in the ordinary course of business, or (ii) used or
surplus equipment, or (iii) Permitted Investments, in each case in the ordinary
course of business;
(b) sales, transfers and dispositions among the Loan Parties and their
Subsidiaries, provided that any such sales, transfers or dispositions involving
a Subsidiary that is not a Loan Party shall be made in compliance with
Section 6.08;
(c) sale-leaseback transactions involving any Borrower’s Real Estate;
(d) the sale of the Borrowers’ Real Estate;
(e) Provided that no Overadvance shall result after giving effect thereto, bulk
sales or dispositions of the Borrowers’ Inventory not in the ordinary course of
business in an amount not to exceed, in the aggregate from and after the
Effective Date, ten percent (10%) of the Cost of the Borrowers’ Eligible
Inventory as of the Effective Date;
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other disposition permitted under clause
(b)) shall be made at arm’s length and for fair value and solely for cash
consideration (other than (x) sales, transfers and other dispositions permitted
under clause (b)); and further provided that the authority granted under clauses
(a) through (e) hereof may be terminated in whole or in part by the Agents upon
the occurrence and during the continuance of any Event of Default.
SECTION 6.06 Restricted Payments; Certain Payments of Indebtedness.
(a) The Loan Parties will not, and will not permit any Subsidiary to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
except as long as no Default or Event of Default exists or would arise therefrom
(i) the Loan Parties may declare and pay dividends with respect to their capital
stock payable solely in additional shares of their common stock, (ii) the wholly
owned Subsidiaries of the Lead Borrower may declare and pay dividends ratably
with respect to their capital stock, and (iii) only if the Payment Conditions
are then satisfied, the Lead Borrower may (A) pay cash dividends on its capital
stock in an amount not to exceed $20,000,000.00 in any fiscal year, and/or
(B) repurchase its capital stock.

 

75

--------------------------------------------------------------------------------

 

(b) The Loan Parties will not, and will not permit any Subsidiary to, make or
agree to pay or make, directly or indirectly, any payment or other distribution
(whether in cash, securities or other property) of or in respect of principal of
or interest on any Indebtedness, or any payment or other distribution (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any Indebtedness, except:
(i) payment of regularly scheduled interest and principal payments as and when
due in respect of any permitted Indebtedness;
(ii) refinancings of Indebtedness described in clause (i), above, to the extent
permitted by Section 6.01;
(iii) prepayments of the IdeaForest Note as long as (A) no Default or Event of
Default then exists or would arise therefrom, (B) prior to making such
prepayment, Excess Availability is at least $20,000,000, and (C) after giving
effect to such prepayment, Excess Availability is at least $20,000,000;
(iv) repayment, refinancing or redemption of the Indebtedness due under the
Subordinated Debt Indenture as required by Section 5.14 hereof; and
(v) other repayments, refinancing or redemptions of (A) the Indebtedness due
under the Subordinated Debt Indenture, or (B) other Indebtedness pursuant to
Section 6.01(a)(xi) hereof, in each case if the Payment Conditions are then
satisfied.
SECTION 6.07 Transactions with Affiliates. The Loan Parties will not, and will
not permit any Subsidiary to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) transactions in the ordinary course of business that are at prices
and on terms and conditions not less favorable to the Loan Parties or such
Subsidiary than could be obtained on an arm’s-length basis from unrelated third
parties, and (b) transactions between or among the Loan Parties not involving
any other Affiliate.
SECTION 6.08 Restrictive Agreements. The Loan Parties will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Loan Parties or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Loan Parties or any other Subsidiary or to guarantee Indebtedness of the
Loan Parties or any other Subsidiary, provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document,
(ii) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (iii) clause (a) of the foregoing shall
not apply to customary provisions in leases restricting the assignment or
subleasing thereof; and (iv) the foregoing shall not apply to restrictions set
forth in the Subordinated Debt Indenture as in effect on February 26, 2004.

 

76

--------------------------------------------------------------------------------

 

SECTION 6.09 Amendment of Material Documents. The Loan Parties will not, and
will not permit any Subsidiary to, amend, modify or waive any of its rights
under (a) its certificate of incorporation, by-laws or other organizational
documents to the extent that such amendment, modification or waiver would be
materially adverse to the interests of the Lenders, (b) any leases or subleases
relating to real estate, including, without limitation, the Real Estate to the
extent that such amendment, modification or waiver would be adverse to the
interests of the Lenders, (c) any Material Agreement to the extent that such
amendment, modification or waiver would be adverse to the interests of the
Lenders, or (d) any other instruments, documents or agreements, in each case to
the extent that such amendment, modification or waiver would be adverse to the
interests of the Lenders.
SECTION 6.10 Additional Subsidiaries. The Loan Parties will not, and will not
permit any Subsidiary to, create any additional Subsidiary unless the
requirements of Section 5.12 are satisfied contemporaneously therewith.
SECTION 6.11 Consolidated Fixed Charge Coverage Ratio.
If a Covenant Compliance Event shall occur, the Loan Parties shall not permit
the Consolidated Fixed Charge Coverage Ratio, calculated on a trailing twelve
month basis as of the last day of each month, commencing with the month
immediately preceding the Covenant Compliance Event and continuing until a
Covenant Compliance Event shall no longer be continuing, to be less than
1.1:1.0.
ARTICLE 7
Events of Default
SECTION 7.01 Events of Default.
If any of the following events (“Events of Default”) shall occur:
(a) the Loan Parties shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;
(b) the Loan Parties shall fail to pay any interest on any Loan or any fee or
any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, when and as
the same shall become due and payable;
(c) any representation or warranty made or deemed made by or on behalf of any
Loan Party in or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when made
or deemed made;

 

77

--------------------------------------------------------------------------------

 

(d) the Loan Parties shall fail to observe or perform any covenant, condition or
agreement contained in Sections 2.21, 5.01(f), 5.07, 5.09, or 5.11, or in
Article VI;
(e) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in any Loan Document (other than those specified in
clause (a), (b), (c), or (d) of this Article), and such failure shall continue
unremedied for a period of 15 Business Days after notice thereof from the
Administrative Agent to the Lead Borrower (which notice will be given at the
request of any Lender);
(f) any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness when
and as the same shall become due and payable (after giving effect to the
expiration of any grace or cure period set forth therein);
(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any such Material Indebtedness or any trustee or agent on its or their behalf
to cause any such Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of any Loan Party or its debts, or of a substantial part of its assets,
under any federal or state bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan Party or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall be entered;
(i) any Loan Party shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any federal
or state bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan Party or
for a substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) any Loan Party shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

 

78

--------------------------------------------------------------------------------

 

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $15,000,000.00 shall be rendered against any Loan Party or any
combination thereof and the same shall not have been vacated, discharged, stayed
or bonded and shall continue unsatisfied and in effect for a period of
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, is not in effect, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
material assets of any Loan Party to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the Loan Parties in an
aggregate amount exceeding $2,000,000.00;
(m) (i) any challenge by or on behalf of any Loan Party to the validity of any
Loan Document or the applicability or enforceability of any Loan Document
strictly in accordance with the subject Loan Document’s terms or which seeks to
void, avoid, limit, or otherwise adversely affect any security interest created
by or in any Loan Document or any payment made pursuant thereto.
(ii) any challenge by or on behalf of any other Person to the validity of any
Loan Document or the applicability or enforceability of any Loan Document
strictly in accordance with the subject Loan Document’s terms or which seeks to
void, avoid, limit, or otherwise adversely affect any security interest created
by or in any Loan Document or any payment made pursuant thereto, in each case,
as to which an order or judgment has been entered adverse to the Agents and the
Lenders.
(iii) any Lien purported to be created under any Security Document shall cease
to be, or shall be asserted by any Loan Party not to be, a valid and perfected
Lien on any Collateral, with the priority required by the applicable Security
Document, except as a result of the sale or other disposition of the applicable
Collateral in a transaction permitted under the Loan Documents;
(n) a Change in Control shall occur;
(o) the occurrence of any uninsured loss to any material portion of the
Collateral which would reasonably be expected to result in a Material Adverse
Effect;
(p) the indictment of, or institution of any legal process or proceeding
against, any Loan Party, under any federal, state, municipal, and other civil or
criminal statute, rule, regulation, order, or other requirement having the force
of law where the relief, penalties, or remedies sought or available include the
forfeiture of any material property of any Loan Party and/or the imposition of
any stay or other order, the effect of which could reasonably be to restrain in
any material way the conduct by the Loan Parties, taken as a whole, of their
business in the ordinary course;

 

79

--------------------------------------------------------------------------------

 

(q) the determination by any Borrower, whether by vote of such Borrower’s board
of directors or otherwise to: suspend the operation of such Borrower’s business
in the ordinary course, liquidate more than twenty-five (25%) percent of such
Borrower’s assets or store locations, or employ an agent or other third party to
conduct any so-called store closing, store liquidation or
“Going-Out-Of-Business” sales; or
then, and in every such event (other than an event with respect to any Loan
Party described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Lead
Borrower, take either or both of the following actions, at the same or different
times:  (i) terminate the Revolving Commitments, and thereupon the Revolving
Commitments shall terminate immediately, and (ii) declare the Obligations then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Loan Parties; and in case of any event
with respect to any Loan Party described in clause (h) or (i) of this Article,
the Revolving Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Loan Parties.
SECTION 7.02 When Continuing.
For all purposes under this Agreement, each Default and Event of Default that
has occurred shall be deemed to be continuing at all times thereafter unless it
either (a) is cured or corrected to the reasonable written satisfaction of the
Lenders in accordance with Section 9.02, or (b) is waived in writing by the
Lenders in accordance with Section 9.02.
SECTION 7.03 Remedies on Default.
In case any one or more of the Events of Default shall have occurred and be
continuing, and whether or not the maturity of the Loans shall have been
accelerated pursuant hereto, the Administrative Agent may proceed to protect and
enforce its rights and remedies under this Agreement, the Notes or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right of the Agents or the Lenders. No remedy
herein is intended to be exclusive of any other remedy and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.

 

80

--------------------------------------------------------------------------------

 

SECTION 7.04 Application of Proceeds.
After the occurrence of an Event of Default and acceleration of the Obligations,
all proceeds realized from any Loan Party or on account of any Collateral or,
without limiting the foregoing, on account of any Prepayment Event shall be
applied as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by the
Agents in connection with any collection or sale of the Collateral or otherwise
in connection with this Agreement, the Security Agreement or any of the
Obligations, including all court costs and the reasonable fees and expenses of
its agents and legal counsel, the repayment of all advances made by the Agents
under the Security Agreement, or under any other Loan Document, on behalf of any
Loan Party and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder, or under any other Loan
Document;
SECOND, to the payment of all fees due to the Agents and the Lenders under the
Loan Documents;
THIRD, to the extent that Swingline Loans have not been refinanced by a
Revolving Loan, payment to the Swingline Lender of that portion of the
Obligations constituting accrued and unpaid interest on the Swingline Loans;
FOURTH, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans;
FIFTH, to the extent that Swingline Loans have not been refinanced by a
Revolving Loan, payment to the Swingline Lender of that portion of the
Obligations constituting unpaid principal of the Swingline Loans;
SIXTH, to payment of that portion of the Obligations constituting unpaid
principal of the Loans;
SEVENTH, to the Cash Collateral Account as collateral for Letter of Credit
Outstandings up to 105% thereof;
EIGHTH, to payment of that portion of the Obligations arising from Cash
Management Services to the extent secured under the Security Documents;
NINTH, to payment of all other Obligations arising from Bank Products to the
extent secured under the Security Documents; and
TENTH, to the Loan Parties, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.

 

81

--------------------------------------------------------------------------------

 

All amounts required to be applied to Loans hereunder (other than Swingline
Loans) shall be applied ratably in accordance with each Lender’s Revolving
Commitment Percentage. The Administrative Agent shall have absolute discretion
as to the time of application of any such proceeds, moneys or balances in
accordance with this Agreement and the Security Agreement. Upon any sale or
other disposition of the Collateral by the Collateral Agent (including pursuant
to a power of sale granted by statute or under a judicial proceeding) undertaken
in accordance with the provisions of the Uniform Commercial Code, the receipt of
the Collateral Agent or of the officer making the sale or other disposition
shall be a sufficient discharge to the purchaser or purchasers of the Collateral
so sold or otherwise disposed of and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
ARTICLE 8
The Agents
SECTION 8.01 Administration by Administrative Agent.
The general administration of the Loan Documents shall be by the Administrative
Agent. The Lenders, the Collateral Agent and the Issuing Bank each hereby
irrevocably authorizes the Administrative Agent (i) to enter into the Loan
Documents to which it is a party and (ii) at its discretion, to take or refrain
from taking such actions as agent on its behalf and to exercise or refrain from
exercising such powers under the Loan Documents and the Notes as are delegated
by the terms hereof or thereof, as appropriate, together with all powers
reasonably incidental thereto. The Administrative Agent shall have no duties or
responsibilities except as set forth in this Agreement and the remaining Loan
Documents.
SECTION 8.02 The Collateral Agent.
Each Lender, the Administrative Agent and the Issuing Bank hereby irrevocably
(i) designate Bank of America as Collateral Agent under this Agreement and the
other Loan Documents, (ii) authorize the Collateral Agent to enter into the
Collateral Documents and the other Loan Documents to which it is a party and to
perform its duties and obligations thereunder and (iii) agree and consent to all
of the provisions of the Security Documents. All Collateral shall be held or
administered by the Collateral Agent (or its duly-appointed agent) for its
benefit and for the ratable benefit of the other Secured Parties. Any proceeds
received by the Collateral Agent from the foreclosure, sale, lease or other
disposition of any of the Collateral and any other proceeds received pursuant to
the terms of the Security Documents or the other Loan Documents shall be paid
over to the Administrative Agent for application as provided in Sections 2.18,
2.22, or 7.04, as applicable.

 

82

--------------------------------------------------------------------------------

 

SECTION 8.03 Sharing of Excess Payments.
Each of the Lenders, the Agents and the Issuing Bank agrees that if it shall,
through the exercise of a right of banker’s lien, setoff or counterclaim against
the Loan Parties, including, but not limited to, a secured claim under
Section 506 of the Bankruptcy Code or other security or interest arising from,
or in lieu of, such secured claim and received by such Lender, any Agent or the
Issuing Bank under any applicable bankruptcy, insolvency or other similar law,
or otherwise, obtain payment in respect of the Obligations owed it (an “excess
payment”) as a result of which such Lender, such Agent or the Issuing Bank has
received payment of any Loans or other Obligations outstanding to it in excess
of the amount that it would have received if all payments at any time applied to
the Loans and other Obligations had been applied in the order of priority set
forth in Section 2.22, then such Lender, Agent or the Issuing Bank shall
promptly purchase at par (and shall be deemed to have thereupon purchased) from
the other Lenders, such Agent and the Issuing Bank, as applicable, a
participation in the Loans and Obligations outstanding to such other Persons, in
an amount determined by the Administrative Agent in good faith as the amount
necessary to ensure that the economic benefit of such excess payment is
reallocated in such manner as to cause such excess payment and all other
payments at any time applied to the Loans and other Obligations to be
effectively applied in the order of priority set forth in Section 2.22 pro rata
in proportion to its Revolving Commitment; provided, that if any such excess
payment is thereafter recovered or otherwise set aside such purchase of
participations shall be correspondingly rescinded (without interest). The Loan
Parties expressly consent to the foregoing arrangements and agrees that any
Lender, any Agent or the Issuing Bank holding (or deemed to be holding) a
participation in any Loan or other Obligation may exercise any and all rights of
banker’s lien, setoff or counterclaim with respect to any and all moneys owing
by such Loan Party to such Lender, such Agent or the Issuing Bank as fully as if
such Lender, Agent or the Issuing Bank held a Note and was the original obligee
thereon, in the amount of such participation.
SECTION 8.04 Agreement of Required Lenders.
(a) Upon any occasion requiring or permitting an approval, consent, waiver,
election or other action on the part of only the Required Lenders, action shall
be taken by the Agents for and on behalf or for the benefit of all Lenders upon
the direction of the Required Lenders, and any such action shall be binding on
all Lenders. No amendment, modification, consent, or waiver shall be effective
except in accordance with the provisions of Section 9.02.
(b) Upon the occurrence of an Event of Default, the Agents shall (subject to the
provisions of Section 9.02) take such action with respect thereto as may be
reasonably directed by the Required Lenders; provided that unless and until the
Agents shall have received such directions, the Agents may (but shall not be
obligated to) take such action as it shall deem advisable in the best interests
of the Lenders. In no event shall the Agents be required to comply with any such
directions to the extent that the Agents believe that the Agents’ compliance
with such directions would be unlawful.

 

83

--------------------------------------------------------------------------------

 

SECTION 8.05 Liability of Agents.
(a) Each of the Agents, when acting on behalf of the Lenders and the Issuing
Bank, may execute any of its respective duties under this Agreement by or
through any of its respective officers, agents and employees, and none of the
Agents nor their respective directors, officers, agents or employees shall be
liable to the Lenders or the Issuing Bank or any of them for any action taken or
omitted to be taken in good faith, or be responsible to the Lenders or the
Issuing Bank or to any of them for the consequences of any oversight or error of
judgment, or for any loss, except to the extent of any liability imposed by law
by reason of such Agent’s own gross negligence or willful misconduct. The Agents
and their respective directors, officers, agents and employees shall in no event
be liable to the Lenders or the Issuing Bank or to any of them for any action
taken or omitted to be taken by them pursuant to instructions received by them
from the Required Lenders, or all Lenders, as applicable, or in reliance upon
the advice of counsel selected by it. Without limiting the foregoing, none of
the Agents, nor any of their respective directors, officers, employees, or
agents shall be responsible to any Lender or the Issuing Bank for the due
execution, validity, genuineness, effectiveness, sufficiency, or enforceability
of, or for any statement, warranty or representation in, this Agreement, any
Loan Document or any related agreement, document or order, or shall be required
to ascertain or to make any inquiry concerning the performance or observance by
any Loan Party of any of the terms, conditions, covenants, or agreements of this
Agreement or any of the Loan Documents.
(b) None of the Agents nor any of their respective directors, officers,
employees, or agents shall have any responsibility to the Loan Parties on
account of the failure or delay in performance or breach by any Lender (other
than by the Agent in its capacity as a Lender) or the Issuing Bank of any of
their respective obligations under this Agreement or the Notes or any of the
Loan Documents or in connection herewith or therewith.
(c) The Administrative Agent and the Collateral Agent, in such capacities
hereunder, shall be entitled to rely on any communication, instrument, or
document reasonably believed by such person to be genuine or correct and to have
been signed or sent by a person or persons believed by such person to be the
proper Person or Persons, and, such Person shall be entitled to rely on advice
of legal counsel, independent public accountants, and other professional
advisers and experts selected by such Person.
SECTION 8.06 Reimbursement and Indemnification.
Each Lender agrees (i) to reimburse (x) each Agent for such Lender’s Revolving
Commitment Percentage of any expenses and fees incurred by such Agent for the
benefit of the Lenders or the Issuing Bank under this Agreement, the Notes and
any of the Loan Documents, including, without limitation, counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders or the Issuing Bank, and any other expense incurred in connection with
the operations or enforcement thereof not reimbursed by the Loan Parties and
(y) each Agent for such Lender’s Revolving Commitment Percentage of any expenses
of such Agent incurred for the benefit of the Lenders or the Issuing Bank that
the Loan Parties have agreed to reimburse pursuant to Section 9.03 and has
failed to so reimburse and (ii) to indemnify and hold harmless the Agents and
any of their directors, officers, employees, or agents, on demand, in the amount
of such Lender’s Revolving Commitment Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against it or any of them in any way
relating to or arising out of this Agreement, the Notes or any of the Loan
Documents or any action taken or omitted by it or any of them under this
Agreement, the Notes or any of the Loan Documents to the extent not reimbursed
by the Loan Parties (except such as shall result from their respective gross
negligence or willful misconduct).

 

84

--------------------------------------------------------------------------------

 

SECTION 8.07 Rights of Agents.
It is understood and agreed that Bank of America shall have the same rights and
powers hereunder (including the right to give such instructions) as the other
Lenders and may exercise such rights and powers, as well as its rights and
powers under other agreements and instruments to which it is or may be party,
and engage in other transactions with the Borrowers, as though it were not the
Administrative Agent or the Collateral Agent, respectively, of the Lenders under
this Agreement.
SECTION 8.08 Independent Lenders and Issuing Bank.
The Lenders and the Issuing Bank each acknowledge that they have decided to
enter into this Agreement and to make the Loans or issue the Letters of Credit
hereunder based on their own analysis of the transactions contemplated hereby
and of the creditworthiness of the Loan Parties and agrees that the Agents shall
bear no responsibility therefor.
SECTION 8.09 Notice of Transfer.
The Agents may deem and treat a Lender party to this Agreement as the owner of
such Lender’s portion of the Loans for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 9.05(b).
SECTION 8.10 Successor Agent.
Any Agent may resign at any time by giving five (5) Business Days’ written
notice thereof to the Lenders, the Issuing Bank, the other Agents and the Lead
Borrower. Upon any such resignation of any Agent, the Required Lenders shall
have the right to appoint a successor Agent, which so long as there is no
Default, or Event of Default, shall be reasonably satisfactory to the Lead
Borrower (whose consent shall not be unreasonably withheld or delayed). If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment, within 30 days after the retiring Agent’s giving
of notice of resignation, the retiring Agent may, on behalf of the Lenders, the
other Agents and the Issuing Bank, appoint a successor Agent which shall be
(i) a commercial bank (or affiliate thereof) organized under the laws of the
United States of America or of any State thereof and having a combined capital
and surplus of a least $100,000,000, (ii) or a Lender capable of complying with
all of the duties of such Agent (and the Issuing Bank), hereunder (in the
opinion of the retiring Agent and as certified to the Lenders in writing by such
successor Agent) which, in the case of (i) and (ii) above, so long as there is
no Default, or Event of Default, shall be reasonably satisfactory to the Lead
Borrower (whose consent shall not be unreasonably withheld or delayed). Upon the
acceptance of any appointment as Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring Agent’s resignation hereunder as such Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was such Agent under this Agreement.

 

85

--------------------------------------------------------------------------------

 

SECTION 8.11 Reports and Financial Statements.
By signing this Agreement, each Lender:
(a) agrees to furnish the Administrative Agent after such Lender’s receipt from
the Administrative Agent of notice of the occurrence of a Cash Control Event
(and thereafter during the continuance of such Cash Control Event at such
frequency as the Administrative Agent may reasonably request) with a summary of
all Other Liabilities due or to become due to such Lender. In connection with
any distributions to be made hereunder, the Administrative Agent shall be
entitled to assume that no amounts are due to any Lender on account of Other
Liabilities unless the Administrative Agent has received written notice thereof
from such Lender;
(b) is deemed to have requested that the Administrative Agent furnish such
Lender, promptly after they become available, copies of all financial statements
required to be delivered by the Loan Parties hereunder and all commercial
finance examinations and appraisals of the Collateral received by the Agents
(collectively, the “Reports”);
(c) expressly agrees and acknowledges that the Administrative Agent makes no
representation or warranty as to the accuracy of the Reports, and shall not be
liable for any information contained in any Report;
(d) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that the Agents or any other party performing any audit
or examination will inspect only specific information regarding the Loan Parties
and will rely significantly upon the Loan Parties’ books and records, as well as
on representations of the Loan Parties’ personnel;
(e) agrees to keep all Reports confidential in accordance with Section 9.18
below; and
(f) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold the Agents and any such other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any Credit Extensions that the indemnifying Lender has made or
may make to the Borrowers, or the indemnifying Lender’s participation in, or the
indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay and protect,
and indemnify, defend, and hold the Agents and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including attorney costs) incurred by the
Agents and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender (other than as permitted by Section 9.18 below).

 

86

--------------------------------------------------------------------------------

 

SECTION 8.12 Documentation Agent, Co-Agents, Syndication Agent and Arranger.
Notwithstanding the provisions of this Agreement or any of the other Loan
Documents, the Documentation Agent, the Co-Agents, the Syndication Agent and,
except as provided in the commitment letter for this transaction, the Arranger
shall have no powers, rights, duties, responsibilities or liabilities with
respect to this Agreement and the other Loan Documents.
SECTION 8.13 Collateral and Guaranty Matters.
The Lenders irrevocably authorize the Agents, at their option and in their
discretion:
(a) to release any Lien on any property granted to or held by the Collateral
Agent under any Loan Document (i) upon termination of the Total Commitments and
payment in full of all Obligations (other than contingent indemnification
obligations for which no claim has been asserted) and the expiration or
termination of all Letters of Credit, (ii) that is sold or to be sold as part of
or in connection with any sale permitted hereunder or under any other Loan
Document, or (iii) if approved, authorized or ratified in writing by the
applicable Lenders in accordance with SECTION 9.02;
(b) to subordinate any Lien on any property granted to or held by the Collateral
Agent under any Loan Document to the holder of any Lien on such property that is
permitted by SECTION 6.02(d); and
(c) to release any Facility Guarantor from its obligations under the Facility
Guarantee if such Person ceases to be a Subsidiary as a result of a transaction
permitted hereunder.
Upon request by any Agent at any time, the Lenders will confirm in writing such
Agent’s authority to release or subordinate its interest in particular types or
items of property, or to release any Facility Guarantor from its obligations
under the Facility Guarantee pursuant to this SECTION 8.13. In each case as
specified in this SECTION 8.13, the Agents will, at the Loan Parties’ expense,
execute and deliver to the applicable Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such item of Collateral
from the assignment and security interest granted under the Security Documents
or to subordinate its interest in such item, or to release such Facility
Guarantor from its obligations under the Facility Guarantee, in each case in
accordance with the terms of the Loan Documents and this SECTION 8.13.

 

87

--------------------------------------------------------------------------------

 

SECTION 8.14 Defaulting Lender.
(a) If for any reason any Lender shall fail or refuse to abide by its
obligations under this Agreement, including without limitation its obligation to
make available to Administrative Agent its Revolving Commitment Percentage of
any Loans, expenses or setoff or purchase its Revolving Commitment Percentage of
a participation interest in the Swingline Loans or Letters of Credit and such
failure is not cured within two (2) days of receipt from the Administrative
Agent of written notice thereof, then, in addition to the rights and remedies
that may be available to the Agents, the other Lenders, the Loan Parties or any
other party at law or in equity, and not at limitation thereof, (i) such
Defaulting Lender’s right to participate in the administration of, or
decision-making rights related to, the Obligations, this Agreement or the other
Loan Documents shall be suspended during the pendency of such failure or
refusal, and (ii) a Defaulting Lender shall be deemed to have assigned any and
all payments due to it from the Loan Parties, whether on account of outstanding
Loans, interest, fees or otherwise, to the remaining non-Defaulting Lenders for
application to, and reduction of, their proportionate shares of all outstanding
Obligations until, as a result of application of such assigned payments the
Lenders’ respective Revolving Commitment Percentages of all outstanding
Obligations shall have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency. The Defaulting Lender’s decision-making and participation rights
and rights to payments as set forth in clauses (i) and (ii) hereinabove shall be
restored only upon the payment by the Defaulting Lender of its Revolving
Commitment Percentage of any Obligations, any participation obligation, or
expenses as to which it is delinquent, together with interest thereon from the
date when originally due until the date upon which any such amounts are actually
paid.
(b) The non-Defaulting Lenders shall also have the right, but not the
obligation, in their respective, sole and absolute discretion, to cause the
termination and assignment, without any further action by the Defaulting Lender
for no cash consideration (pro rata, based on the respective Revolving
Commitments of those Lenders electing to exercise such right), of the Defaulting
Lender’s Revolving Commitment to fund future Loans. Upon any such purchase of
the Revolving Commitment Percentage of any Defaulting Lender, the Defaulting
Lender’s share in future Credit Extensions and its rights under the Loan
Documents with respect thereto shall terminate on the date of purchase, and the
Defaulting Lender shall promptly execute all documents reasonably requested to
surrender and transfer such interest, including, if so requested, an Assignment
and Acceptance.
(c) Each Defaulting Lender shall indemnify the Administrative Agent and each
non-Defaulting Lender from and against any and all loss, damage or expenses,
including but not limited to reasonable attorneys’ fees and funds advanced by
the Administrative Agent or by any non-Defaulting Lender, on account of a
Defaulting Lender’s failure to timely fund its Revolving Credit Percentage of a
Loan or to otherwise perform its obligations under the Loan Documents.

 

88

--------------------------------------------------------------------------------

 

ARTICLE 9
Miscellaneous
SECTION 9.01 Notices. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
(a) if to any Loan Party, to it at 5555 Darrow Road, Hudson, Ohio 44236,
Attention of Treasurer, with a copy to General Counsel (Telecopy No. (330)
463-6675);
(b) if to the Administrative Agent or the Collateral Agent, or the Swingline
Lender to Bank of America, N.A., 100 Federal Street, Boston, Massachusetts
02110, Attention of Richard D. Hill (Telecopy No. (617) 434-4131), with a copy
to Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108,
Attention: David S. Berman, Esquire (Telecopy No. (617) 880-3456);
(c) if to any other Lender, to it at its address (or telecopy number) set forth
on the signature pages hereto or on any Assignment and Acceptance for such
Lender.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02 Waivers; Amendments.
(a) No failure or delay by the Agents, the Issuing Bank or any Lender in
exercising any right or power hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Agents, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Agents, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.

 

89

--------------------------------------------------------------------------------

 

(b) Neither this Agreement nor any other Loan Document nor any provision hereof
or thereof may be waived, amended or modified except, in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by the
Borrowers and the Required Lenders or, in the case of any other Loan Document,
pursuant to an agreement or agreements in writing entered into by the Agents and
the Loan Parties that are parties thereto, in each case with the consent of the
Required Lenders, provided that no such agreement shall (i) increase the
Revolving Commitment of any Lender without the written consent of such Lender,
(ii) reduce the principal amount of any Loan or L/C Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, without the
written consent of each Lender affected thereby, (iii) postpone the scheduled
date of payment of the principal amount of any Loan or L/C Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of the
Revolving Commitments or the Maturity Date, without the written consent of each
Lender affected thereby, (iv) change Sections 2.18, 2.21, 2.22 or 7.04 without
the written consent of each Lender, (v) change any of the provisions of this
Section 9.02 or the definition of the term “Required Lenders” or any other
provision of any Loan Document specifying the number or percentage of Lenders
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, (vi) release any Loan Party from its obligations under any Loan
Document, or limit its liability in respect of such Loan Document, without the
written consent of each Lender, (vii) except (A) for Real Estate which is
financed in accordance with the provisions of Section 6.01, (B) for sales
described in Section 6.05, and (C) as permitted in the Security Documents,
release any material portion of the Collateral from the Liens of the Security
Documents without the written consent of each Lender, (viii) change the
definition of the term “Borrowing Base” or any component definition thereof if
as a result thereof the amounts available to be borrowed by the Borrowers would
be increased, without the written consent of each Lender, provided that the
foregoing shall not limit the discretion of the Administrative Agent to change,
establish or eliminate any Reserves, (ix) increase the Permitted Overadvance,
without the written consent of each Lender, (x) except for Real Estate which is
financed in accordance with the provisions of Section 6.01, subordinate the
Obligations hereunder, or the Liens granted hereunder or under the other Loan
Documents, to any other Indebtedness or Lien, as the case may be, without the
prior written consent of each Lender, and provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Agents or the Issuing Bank without the prior written consent of the Agents or
the Issuing Bank, as the case may be.
(c) Notwithstanding anything to the contrary contained herein, no modification,
amendment or waiver which increases the maximum amount of the Swingline Loans to
an amount in excess of $25,000,000.00 (or such greater amount to which such
limit has been previously increased in accordance with the provisions of this
Section 9.02(c)) shall be made without the written consent of each Lender.

 

90

--------------------------------------------------------------------------------

 

(d) Notwithstanding anything to the contrary contained in this Section 9.02, in
the event that the Borrowers request that this Agreement or any other Loan
Document be modified, amended or waived in a manner which would require the
consent of the Lenders pursuant to Sections 9.02(b) or 9.02(c) and such
amendment is approved by the Required Lenders, but not by the requisite
percentage of the Lenders, the Borrowers, and the Required Lenders shall be
permitted to amend this Agreement without the consent of the Lender or Lenders
which did not agree to the modification or amendment requested by the Borrowers
(such Lender or Lenders, collectively the “Minority Lenders”) to provide for
(w) the termination of the Revolving Commitment of each of the Minority Lenders,
(x) the addition to this Agreement of one or more other financial institutions,
or an increase in the Revolving Commitment of one or more of the Required
Lenders, so that the aggregate Revolving Commitments after giving effect to such
amendment shall be in the same amount as the aggregate Revolving Commitments
immediately before giving effect to such amendment, (y) if any Loans are
outstanding at the time of such amendment, the making of such additional Loans
by such new or increasing Lender or Lenders, as the case may be, as may be
necessary to repay in full the outstanding Loans (including principal, interest,
and fees) of the Minority Lenders immediately before giving effect to such
amendment and (z) such other modifications to this Agreement or the Loan
Documents as may be appropriate and incidental to the foregoing.
(e) No notice to or demand on any Loan Party shall entitle any Loan Party to any
other or further notice or demand in the same, similar or other circumstances.
Each holder of a Note shall be bound by any amendment, modification, waiver or
consent authorized as provided herein, whether or not a Note shall have been
marked to indicate such amendment, modification, waiver or consent and any
consent by a Lender, or any holder of a Note, shall bind any Person subsequently
acquiring a Note, whether or not a Note is so marked. No amendment to this
Agreement shall be effective against the Borrowers unless signed by the
Borrowers.
SECTION 9.03 Expenses; Indemnity; Damage Waiver.
(a) The Loan Parties shall jointly and severally pay (i) all reasonable
out-of-pocket expenses incurred by the Agents and their Affiliates, including
the reasonable fees, charges and disbursements of counsel for the Agents,
outside consultants for the Agents, appraisers, for commercial finance
examinations and environmental site assessments, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of the Loan Documents or any amendments, modifications or waivers
of the provisions thereof (whether or not the transactions contemplated hereby
or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all reasonable out-of-pocket expenses incurred by the Agents, the Issuing
Bank or any Lender, including the reasonable fees, charges and disbursements of
any counsel and any outside consultants for the Agents, the Issuing Bank or any
Lender, for appraisers, commercial finance examinations, and environmental site
assessments, in connection with the enforcement or protection of its rights in
connection with the Loan Documents or efforts to preserve, protect, collect, or
enforce the Collateral or in connection with any proceeding under any Debtor
Relief Laws, including its rights under this Section, or in connection with the
Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit; provided that the
Lenders who are not the Agents or the Issuing Bank shall be entitled to
reimbursement for no more than one counsel representing all such Lenders (absent
a conflict of interest in which case the Lenders may engage and be reimbursed
for additional counsel).

 

91

--------------------------------------------------------------------------------

 

(b) The Loan Parties shall, jointly and severally, indemnify the Agents, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable and documented fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any other agreement or instrument
contemplated hereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the transactions
contemplated by the Loan Documents or any other transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by any Loan Party or any of the
Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of the Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or wilful
misconduct of such Indemnitee or any Affiliate of such Indemnitee (or of any
officer, director, employee, advisor or agent of such Indemnitee or any such
Indemnitee’s Affiliates).
(c) To the extent that any Loan Party fails to pay any amount required to be
paid by it to the Agents or the Issuing Bank under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Agents or the Issuing Bank,
as the case may be, such Lender’s pro rata share (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agents or the Issuing Bank. For purposes hereof, a
Lender’s “pro rata share” shall be determined based upon its share of the Total
Commitments at the time.
(d) To the extent permitted by applicable law, no Loan Party shall assert, and
each hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
transactions contemplated by the Loan Documents, any Loan or Letter of Credit or
the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after written
demand therefor.

 

92

--------------------------------------------------------------------------------

 

SECTION 9.04 Designation of Lead Borrower as Borrowers’ Agent.
(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower
as that Borrower’s agent to obtain Loans and Letters of Credit hereunder, the
proceeds of which shall be available to each Borrower for those uses as those
set forth herein. As the disclosed principal for its agent, each Borrower shall
be obligated to the Agents and each Lender on account of Loans so made and
Letters of Credit so issued hereunder as if made directly by the Lenders to that
Borrower, notwithstanding the manner by which such Loans and Letters of Credit
are recorded on the books and records of the Lead Borrower and of any Borrower.
(b) Each Borrower recognizes that credit available to it hereunder is in excess
of and on better terms than it otherwise could obtain on and for its own account
and that one of the reasons therefor is its joining in the credit facility
contemplated herein with all other Borrowers. Consequently, each Borrower hereby
assumes and agrees to discharge all Obligations of all other Borrowers as if the
Borrower so assuming were each other Borrower.
(c) The Lead Borrower shall act as a conduit for each Borrower (including
itself, as a “Borrower”) on whose behalf the Lead Borrower has requested a Loan.
(i) The Lead Borrower shall cause the transfer of the proceeds of each Loan to
the (those) Borrower(s) on whose behalf such Loan was obtained. Neither the
Agents nor any Lender shall have any obligation to see to the application of
such proceeds.
(ii) If, for any reason, and at any time during the term of this Agreement,
(A) any Borrower, including the Lead Borrower, as agent for the Borrowers, shall
be unable to, or prohibited from carrying out the terms and conditions of this
Agreement (as determined by the Administrative Agent in the Administrative
Agent’s sole and absolute discretion); or
(B) the Administrative Agent deems it inexpedient (in the Administrative Agent’s
sole and absolute discretion) to continue making Loans and cause Letters of
Credit to be issued to or for the account of any particular Borrower, or to
channel such Loans and Letters of Credit through the Lead Borrower,
then the Lenders may make Loans directly to, and cause the issuance of Letters
of Credit directly for the account of such of the Borrowers as the
Administrative Agent determines to be expedient, which Loans may be made without
regard to the procedures otherwise included herein.

 

93

--------------------------------------------------------------------------------

 

(d) In the event that the Administrative Agent determines to forgo the
procedures included herein pursuant to which Loans and Letters of Credit are to
be channeled through the Lead Borrower, then the Administrative Agent may
designate one or more of the Borrowers to fulfill the financial and other
reporting requirements otherwise imposed herein upon the Lead Borrower.
(e) Each of the Borrowers shall remain liable to the Agents and the Lenders for
the payment and performance of all Obligations (which payment and performance
shall continue to be secured by all Collateral granted by each of the Borrowers)
notwithstanding any determination by the Administrative Agent to cease making
Loans or causing Letters of Credit to be issued to or for the benefit of any
Borrower.
(f) The authority of the Lead Borrower to request Loans on behalf of, and to
bind, the Borrowers, shall continue unless and until the Administrative Agent
acts as provided in subparagraph (c), above, or the Administrative Agent
actually receives
(i) written notice of: (i) the termination of such authority, and (ii) the
subsequent appointment of a successor Lead Borrower, which notice is signed by
the respective Presidents of each Borrower (other than the President of the Lead
Borrower being replaced) then eligible for borrowing under this Agreement; and
(ii) written notice from such successive Lead Borrower (i) accepting such
appointment; (ii) acknowledging that such removal and appointment has been
effected by the respective Presidents of such Borrowers eligible for borrowing
under this Agreement; and (iii) acknowledging that from and after the date of
such appointment, the newly appointed Lead Borrower shall be bound by the terms
hereof, and that as used herein, the term “Lead Borrower” shall mean and include
the newly appointed Lead Borrower.
SECTION 9.05 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that no Loan Party may assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any such attempted assignment or transfer without such consent
shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank
and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

 

94

--------------------------------------------------------------------------------

 

(b) Any Lender may assign to one or more assignees (other than to any Loan Party
or any of its Affiliates) all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Revolving Commitment and the
Loans at the time owing to it), provided that (i) except in the case of an
assignment to a Lender or an Affiliate of a Lender or to a Related Fund, each of
the Lead Borrower (but only if no Default then exists), the Agents and the
Issuing Bank must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld or delayed), (ii) except in the case
of an assignment to a Lender or an Affiliate of a Lender or to a Related Fund,
or an assignment of the entire remaining amount of the assigning Lender’s
Revolving Commitment or Loans, the amount of the Revolving Commitment or Loans
of the assigning Lender subject to each such assignment (determined as of the
date the Assignment and Acceptance with respect to such assignment is delivered
to the Administrative Agent) shall not be less than $10,000,000 unless the
Administrative Agent otherwise consents, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, provided that no such fee shall be
payable in the case of an assignment to a Lender or an Affiliate of a Lender or
to a Related Fund. Subject to acceptance and recording thereof pursuant to
paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Section 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent of the Loan
Parties, shall maintain at one of its offices in Boston, Massachusetts a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Revolving
Commitment of, and principal amount of the Loans and L/C Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The
entries in the Register shall be conclusive and the Loan Parties, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Lead Borrower,
the Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance executed by
an assigning Lender and an assignee, the processing and recordation fee referred
to in paragraph (b) of this Section and any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall accept
such Assignment and Acceptance and record the information contained therein in
the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.

 

95

--------------------------------------------------------------------------------

 

(e) Any Lender may, without the consent of the Loan Parties, the Agents, and the
Issuing Bank, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under
this Agreement (including all or a portion of its Revolving Commitment and the
Loans owing to it), provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Loan Parties, the Agents, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation in the
Revolving Commitments, the Loans and the Letters of Credit Outstandings shall
provide that such Lender shall retain the sole right to enforce the Loan
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents, provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Loan Parties agree that each Participant shall be entitled to the
benefits of Sections 2.23, 2.25 and 2.26 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.09 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.25(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater payment under
Section 2.23 or 2.26 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Lead Borrower’s
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.26 unless (i) the Lead
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with
Section 2.26(f) as though it were a Lender and (ii) such Participant is eligible
for exemption from the withholding tax referred to therein, following compliance
with Section 2.26(f).
(g) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including (i) any pledge or assignment to secure obligations to a
Federal Reserve Bank, and (ii) in the case of a Lender which is a fund, any
pledge or assignment of all or any portion of such Lender’s rights under this
Agreement to any holders of obligations owed, or securities issued, by such
Lender as security for such obligations or securities, or to any trustee for, or
any other representative of, such holders and this Section shall not apply to
any such pledge or assignment of a security interest, provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

 

96

--------------------------------------------------------------------------------

 

SECTION 9.06 Survival. All covenants, agreements, representations and warranties
made by the Loan Parties in the Loan Documents and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Agents, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement and the other Loan
Documents is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Revolving Commitments have not expired or terminated. The
provisions of Sections 2.23, 2.26 and 9.03 and Article VIII shall survive and
remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Revolving Commitments or the
termination of this Agreement or any provision hereof.
SECTION 9.07 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agents, Borrowers and the Lenders and when the
Administrative Agent shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.08 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.09 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, after obtaining the prior written consent of the
Administrative Agent or the Required Lenders, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Loan Parties against any of and all the obligations of the Loan Parties now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Lender may have.

 

97

--------------------------------------------------------------------------------

 

SECTION 9.10 Governing Law; Jurisdiction; Consent to Service of Process.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK (EXCEPT FOR THE CONFLICT OF LAWS RULES THEREOF, BUT
INCLUDING GENERAL OBLIGATIONS LAW SECTIONS 5-1401 AND 5-1402).
(b) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE
SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH PARTY
HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL
COURT. EACH PARTY HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
(c) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO
IN PARAGRAPH (B) OF THIS SECTION. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.
(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

 

98

--------------------------------------------------------------------------------

 

SECTION 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(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 HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 9.12 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.13 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts that are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.14 Intentionally Omitted.
SECTION 9.15 Additional Waivers.
(a) The Obligations are the joint and several obligations of each Loan Party. To
the fullest extent permitted by applicable law, the obligations of each Loan
Party hereunder shall not be affected by (i) the failure of any Agent or any
other Secured Party to assert any claim or demand or to enforce or exercise any
right or remedy against any other Loan Party under the provisions of this
Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of, this Agreement, any other Loan Document, or any other agreement, including
with respect to any other Borrower of the Obligations under this Agreement, or
(iii) the failure to perfect any security interest in, or the release of, any of
the security held by or on behalf of the Collateral Agent or any other Secured
Party.

 

99

--------------------------------------------------------------------------------

 

(b) The obligations of each Loan Party hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations), including any claim of
waiver, release, surrender, alteration or compromise of any of the Obligations,
and shall not be subject to any defense or set-off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Loan Party hereunder shall
not be discharged or impaired or otherwise affected by the failure of any Agent
or any other Secured Party to assert any claim or demand or to enforce any
remedy under this Agreement, any other Loan Document or any other agreement, by
any waiver or modification of any provision of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the Obligations, or
by any other act or omission that may or might in any manner or to any extent
vary the risk of any Loan Party or that would otherwise operate as a discharge
of any Loan Party as a matter of law or equity (other than the indefeasible
payment in full in cash of all the Obligations).
(c) To the fullest extent permitted by applicable law, each Loan Party waives
any defense based on or arising out of any defense of any other Loan Party or
the unenforceability of the Obligations or any part thereof from any cause, or
the cessation from any cause of the liability of any other Loan Party, other
than the indefeasible payment in full in cash of all the Obligations. The
Collateral Agent and the other Secured Parties may, at their election, foreclose
on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with any other Loan Party, or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of any Loan Party hereunder except to the extent that
all the Obligations have been indefeasibly paid in full in cash. Pursuant to
applicable law, each Loan Party waives any defense arising out of any such
election even though such election operates, pursuant to applicable law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such Loan Party against any other Loan Party, as the case may be,
or any security.

 

100

--------------------------------------------------------------------------------

 

(d) Each Borrower is obligated to repay the Obligations as joint and several
obligors under this Agreement. Upon payment by any Loan Party of any
Obligations, all rights of such Loan Party against any other Loan Party arising
as a result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Administrative Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement and the other Loan Documents.
Subject to the foregoing, to the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Obligations
constituting Revolving Loans made to another Borrower hereunder or other
Obligations incurred directly and primarily by any other Borrower (an
“Accommodation Payment”), then the Borrower making such Accommodation Payment
shall be entitled to contribution and indemnification from, and be reimbursed
by, each of the other Borrowers in an amount, for each of such other Borrowers,
equal to a fraction of such Accommodation Payment, the numerator of which
fraction is such other Borrower’s Allocable Amount and the denominator of which
is the sum of the Allocable Amounts of all of the Borrowers. As of any date of
determination, the “Allocable Amount” of each Borrower shall be equal to the
maximum amount of liability for Accommodation Payments which could be asserted
against such Borrower hereunder without (a) rendering such Borrower “insolvent”
within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent
Conveyance Act (“UFCA”), (b) leaving such Borrower with unreasonably small
capital or assets, within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.
SECTION 9.16 Designated Senior Indebtedness. The Obligations shall constitute
Designated Senior Indebtedness for all purposes under the Subordinated Debt
Indenture.
SECTION 9.17 Existing Credit Agreement Amended and Restated.
This Agreement shall amend and restate the Existing Credit Agreement in its
entirety. On the Effective Date, the rights and obligations of the parties under
the Existing Credit Agreement shall be subsumed within and be governed by this
Agreement; provided, however, that each of the “Loans” (as such term is defined
in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement on the Effective Date shall, for purposes of this Agreement, be
included as Loans hereunder and each of the “Letters of Credit” (as defined in
the Existing Credit Agreement) outstanding under the Existing Credit Agreement
on the Effective Date shall be Letters of Credit hereunder.

 

101

--------------------------------------------------------------------------------

 

SECTION 9.18 Treatment of Certain Information; Confidentiality.
(a) Each of the Agents, the Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective
partners, directors, officers, employees, agents, funding sources, attorneys,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
any Loan Party and its obligations, (g) with the consent of the Lead Borrower or
(h) to the extent such Information (x) becomes publicly available other than as
a result of a breach of this Section or (y) becomes available to any such Person
or any of their respective Affiliates on a non-confidential basis from a source
other than the Loan Parties.
(b) For purposes of this Section, “Information” means all information received
from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or
any Subsidiary thereof or their respective businesses, other than any such
information that is available to any Agent, the Issuing Bank or any Lender on a
non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary
thereof, provided that, in the case of information received from any Loan Party
or any Subsidiary after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
(c) Each of the Agents, the Issuing Bank and the Lenders acknowledges that
(a) the Information may include material non-public information concerning the
Loan Parties or a Subsidiary, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and
(c) it will handle such material non-public information in accordance with
applicable law, including federal and state securities laws.
[Signature pages to follow]

 

102

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as a sealed instrument as of
the day and year first above written.

            JO-ANN STORES, INC.,
as Lead Borrower and as a Borrower
      By:   /s/ James Kerr         James Kerr, Executive Vice President       
and Chief Financial Officer        FCA OF OHIO, INC., as a Borrower
      By:   /s/ James Kerr         James Kerr, Vice President              HOUSE
OF FABRICS, INC., as a Borrower
      By:   /s/ James Kerr         James Kerr, Vice President             
JOANN.COM, INC., as a Borrower
      By:   /s/ James Kerr         James Kerr, Vice President             
JO-ANN STORES SUPPLY CHAIN
MANAGEMENT, INC., as a Borrower
      By:   /s/ James Kerr         James Kerr, Vice President   

Signature Page to Amended and Restated Credit Agreement

 

 

--------------------------------------------------------------------------------

 

                  BANK OF AMERICA, N.A.,
as Administrative Agent, as Collateral Agent,
as Swingline Lender, and as Lender    
 
           
 
  By:
  /s/ Richard D. Hill, Jr.
 
Name: Richard D. Hill, Jr.    
 
      Title: Managing Director    
 
                Address:
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attn: Richard D. Hill
Telephone: (617) 434-4080
Telecopy: (617) 434-4131

BANK OF AMERICA, N.A.,
as Issuing Bank    
 
           
 
  By:
  /s/ Richard D. Hill, Jr.
 
Name: Richard D. Hill, Jr.    
 
    Title: Managing Director    
 
                Address:
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attn: Richard D. Hill
Telephone: (617) 434-4080
Telecopy: (617) 434-4131
   

Signature Page to Amended and Restated Credit Agreement

 

 

--------------------------------------------------------------------------------

 

                  WELLS FARGO RETAIL FINANCE, LLC, as
Co-Documentation Agent and as a Lender    
 
           
 
  By:
  /s/ Matthew N. Williams
 
Name: Matthew N. Williams    
 
      Title: VP    
 
                NATIONAL CITY BUSINESS CREDIT, INC., as
Co-Documentation Agent and as a Lender    
 
           
 
  By:
  /s/ Kathryn C. Ellero
 
Name: Kathryn C. Ellero    
 
      Title: Vice President    
 
                U.S. BANK NATIONAL ASSOCIATION, as
Co-Documentation Agent and as a Lender    
 
           
 
  By:
  /s/ Matthew Kasper
 
Name: Matthew Kasper    
 
      Title: Assistant Vice-President    
 
                GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender    
 
           
 
  By:
  /s/ Rebecca A. Ford
 
Name: Rebecca A. Ford    
 
      Title: Duly Authorized Signatory    

Signature Page to Amended and Restated Credit Agreement

 

 

--------------------------------------------------------------------------------

 

                  WACHOVIA CAPITAL FINANCE
CORPORATION (NEW ENGLAND), as a Lender    
 
           
 
  By:   /s/ John Husson    
 
           
 
      Name: John Husson    
 
    Title: Managing Director    
 
                KEYBANK NATIONAL ASSOCIATION, as a Lender    
 
           
 
  By:   /s/ Nadine M. Eames    
 
           
 
      Name: Nadine M. Eames    
 
      Title: Vice President    
 
                RZB FINANCE LLC, as a Lender    
 
           
 
  By:   /s/ Christoph Hoedl    
 
           
 
      Name: Christoph Hoedl    
 
      Title: Group Vice President    
 
           
 
  By:   /s/ Shirley Ritch    
 
           
 
      Name: Shirley Ritch    
 
    Title: Assistant Vice President    

Signature Page to Amended and Restated Credit Agreement

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 1.1
LENDERS AND REVOLVING COMMITMENTS

                              Revolving       Revolving     Commitment   Lender
  Commitment     Percentage  
Bank of America, N.A.
  $ 70,000,000.00       23.333 %
Wells Fargo Retail Finance, LLC
  $ 50,000,000.00       16.667 %
National City Business Credit, Inc.
  $ 40,000,000.00       13.333 %
U.S. Bank National Association
  $ 40,000,000.00       13.333 %
General Electric Capital Corporation
  $ 30,000,000.00       10.000 %
Wachovia Capital Finance Corporation (New England)
  $ 30,000,000.00       10.000 %
KeyBank National Association
  $ 20,000,000.00       6.667 %
RZB Finance LLC
  $ 20,000,000.00       6.667 %
 
           
TOTAL
  $ 300,000,000.00       100.000 %
 
           

Schedule 1.1 to Amended and Restated Credit Agreement