Exhibit 10.1

 

 

 

CREDIT AGREEMENT

 

Dated as of July 25, 2013

 

among

 

Cache, Inc.,

as the Lead Borrower

 

For

 

The Borrowers Named Herein

 

The Guarantors Named Herein

 

WELLS FARGO BANK, NATIONAL ASSOCIATION
as Agent and L/C Issuer

 

and

 

The Lenders Party Hereto

 

 

 

 

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TABLE OF CONTENTS

 

Section

 

Page

 

 

 

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

 

1

 

 

 

1.01

Defined Terms

 

1

1.02

Other Interpretive Provisions

 

49

1.03

Accounting Terms

 

50

1.04

Times of Day

 

50

1.05

Letter of Credit Amounts

 

50

 

 

 

 

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

 

51

 

 

 

2.01

Committed Loans; Reserves

 

51

2.02

Borrowings, Conversions and Continuations of Committed Loans

 

52

2.03

Letters of Credit

 

54

2.04

Prepayments

 

62

2.05

Termination or Reduction of Commitments

 

63

2.06

Repayment of Loans

 

64

2.07

Interest

 

64

2.08

Fees

 

65

2.09

Computation of Interest and Fees

 

65

2.10

Evidence of Debt

 

65

2.11

Payments Generally; Agent’s Clawback

 

66

2.12

Sharing of Payments by Lenders

 

68

2.13

Settlement Amongst Lenders

 

68

 

 

 

ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER

 

69

 

 

 

 

3.01

Taxes

 

69

3.02

Illegality

 

71

3.03

Inability to Determine Rates

 

72

3.04

Increased Costs; Reserves on LIBO Rate Loans

 

72

3.05

Compensation for Losses

 

74

3.06

Mitigation Obligations; Replacement of Lenders

 

75

3.07

Survival

 

75

3.08

Designation of Lead Borrower as Borrowers’ Agent

 

75

 

 

 

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

76

 

 

 

 

4.01

Conditions of Initial Credit Extension

 

76

4.02

Conditions to all Credit Extensions

 

79

 

 

 

ARTICLE V REPRESENTATIONS AND WARRANTIES

 

80

 

 

 

 

5.01

Existence, Qualification and Power

 

80

 

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5.02

Authorization; No Contravention

 

80

5.03

Governmental Authorization; Other Consents

 

81

5.04

Binding Effect

 

81

5.05

Financial Statements; No Material Adverse Effect

 

81

5.06

Litigation

 

82

5.07

No Default

 

82

5.08

Ownership of Property; Liens

 

82

5.09

Environmental Compliance

 

83

5.10

Insurance

 

84

5.11

Taxes

 

84

5.12

ERISA Compliance

 

84

5.13

Subsidiaries; Equity Interests

 

85

5.14

Margin Regulations; Investment Company Act

 

85

5.15

Disclosure

 

86

5.16

Compliance with Laws

 

86

5.17

Intellectual Property; Licenses, Etc.

 

86

5.18

Labor Matters

 

87

5.19

Security Documents

 

87

5.20

Solvency

 

88

5.21

Deposit Accounts; Credit Card Arrangements

 

88

5.22

Brokers

 

89

5.23

Trade Relations

 

89

5.24

Material Contracts

 

89

 

 

 

ARTICLE VI AFFIRMATIVE COVENANTS

 

89

 

 

 

 

6.01

Financial Statements

 

89

6.02

Certificates; Other Information

 

91

6.03

Notices

 

92

6.04

Payment of Obligations

 

94

6.05

Preservation of Existence, Etc.

 

94

6.06

Maintenance of Properties

 

94

6.07

Maintenance of Insurance

 

94

6.08

Compliance with Laws

 

96

6.09

Books and Records; Accountants

 

96

6.10

Inspection Rights

 

96

6.11

Use of Proceeds

 

97

6.12

Additional Loan Parties

 

97

6.13

Cash Management

 

98

6.14

Information Regarding the Collateral

 

100

6.15

Physical Inventories

 

100

6.16

Environmental Laws

 

101

6.17

Further Assurances

 

101

 

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6.18

Compliance with Terms of Leaseholds

 

102

6.19

Material Contracts

 

102

 

 

 

ARTICLE VII NEGATIVE COVENANTS

 

102

 

 

 

 

7.01

Liens

 

103

7.02

Investments

 

103

7.03

Indebtedness; Disqualified Stock

 

103

7.04

Fundamental Changes

 

103

7.05

Dispositions

 

104

7.06

Restricted Payments

 

104

7.07

Prepayments of Indebtedness

 

105

7.08

Change in Nature of Business

 

105

7.09

Transactions with Affiliates

 

105

7.10

Burdensome Agreements

 

106

7.11

Use of Proceeds

 

107

7.12

Amendment of Material Documents

 

107

7.13

Fiscal Year

 

107

7.14

Deposit Accounts; Credit Card Processors

 

107

7.15

Uncapped Availability

 

107

 

 

 

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

 

108

 

 

 

 

8.01

Events of Default

 

108

8.02

Remedies Upon Event of Default

 

111

8.03

Application of Funds

 

112

 

 

 

ARTICLE IX THE AGENT

 

113

 

 

 

 

9.01

Appointment and Authority

 

113

9.02

Rights as a Lender

 

113

9.03

Exculpatory Provisions

 

114

9.04

Reliance by Agent

 

115

9.05

Delegation of Duties

 

115

9.06

Resignation of Agent

 

115

9.07

Non-Reliance on Agent and Other Lenders

 

116

9.08

Agent May File Proofs of Claim

 

117

9.09

Collateral and Guaranty Matters

 

118

9.10

Notice of Transfer

 

118

9.11

Reports and Financial Statements

 

118

9.12

Agency for Perfection

 

119

9.13

Indemnification of Agent

 

119

9.14

Relation among Lenders

 

120

9.15

Defaulting Lenders

 

120

 

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ARTICLE X MISCELLANEOUS

 

122

 

 

 

 

10.01

Amendments, Etc.

 

122

10.02

Notices; Effectiveness; Electronic Communications

 

124

10.03

No Waiver; Cumulative Remedies

 

126

10.04

Expenses; Indemnity; Damage Waiver

 

126

10.05

Payments Set Aside

 

128

10.06

Successors and Assigns

 

128

10.07

Treatment of Certain Information; Confidentiality

 

132

10.08

Right of Setoff

 

133

10.09

Interest Rate Limitation

 

134

10.10

Counterparts; Integration; Effectiveness

 

134

10.11

Survival

 

134

10.12

Severability

 

135

10.13

Replacement of Lenders

 

135

10.14

Governing Law; Jurisdiction; Etc.

 

136

10.15

Waiver of Jury Trial

 

137

10.16

No Advisory or Fiduciary Responsibility

 

137

10.17

USA PATRIOT Act Notice

 

138

10.18

Foreign Asset Control Regulations

 

138

10.19

Time of the Essence

 

139

10.20

Press Releases

 

139

10.21

Additional Waivers

 

139

10.22

No Strict Construction

 

141

10.23

Attachments

 

141

10.24

Keepwell

 

141

 

 

 

SIGNATURES

 

S-1

 

iv

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SCHEDULES

 

 

 

1.01

 

Borrowers

1.02

 

Guarantors

1.03

 

Permitted Reorganization

2.01

 

Commitments and Applicable Percentages

5.01

 

Loan Parties Organizational Information

5.06

 

Litigation

5.08(b)(1)

 

Owned Real Estate

5.08(b)(2)

 

Leased Real Estate

5.09

 

Environmental Compliance

5.10

 

Insurance

5.13

 

Subsidiaries; Other Equity Investments

5.17

 

Intellectual Property Matters

5.18

 

Collective Bargaining Agreements

5.21(a)

 

DDAs

5.21(b)

 

Credit Card Arrangements

5.24

 

Material Contracts

6.02

 

Financial and Collateral Reporting

7.01

 

Existing Liens

7.02

 

Existing Investments

7.03

 

Existing Indebtedness

7.10

 

Burdensome Agreements

10.02

 

Agent’s Office; Certain Addresses for Notices

 

EXHIBITS

 

 

 

 

 

 

Form of

 

 

 

 

 

A

 

Committed Loan Notice

 

B

 

Note

 

C

 

Compliance Certificate

 

D

 

Assignment and Assumption

 

E

 

Borrowing Base Certificate

 

F

 

Credit Card Notification

 

 

v

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CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of July 25, 2013, among

 

CACHE, INC., a Florida corporation (the “Lead Borrower”),

 

the Persons named on Schedule 1.01 hereto (collectively, the “Borrowers”),

 

the Persons named on Schedule 1.02 hereto (collectively, the “Guarantors”),

 

each lender from time to time party hereto (collectively, the “Lenders” and
individually, a “Lender”), and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and L/C Issuer.

 

The Borrowers have requested that the Lenders provide a revolving credit
facility, and the Lenders have indicated their willingness to lend and the L/C
Issuer has indicated its willingness to issue Letters of Credit, in each case on
the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms.  As used in this Agreement, the following terms shall
have the meanings set forth below:

 

“ACH” means automated clearing house transfers.

 

“Acceptable Document of Title” means, with respect to any Inventory, a tangible,
negotiable bill of lading or other Document (as defined in the UCC) that (a) is
issued by a common carrier which is not an Affiliate of the Approved Foreign
Vendor or any Loan Party which is in actual possession of such Inventory, (b) is
issued to the order of a Loan Party or, if so requested by the Agent after the
occurrence and during the continuance of an Event of Default, to the order of
the Agent, (c) is not subject to any Lien (other than in favor of the Agent),
and (d) is on terms otherwise reasonably acceptable to the Agent.

 

“Accommodation Payment” as defined in Section 10.21(d).

 

“Account” means “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
policy of insurance issued or to be issued, (d) for a secondary obligation
incurred or to be incurred, (e) for energy provided or to be provided, (f) for
the use or hire of a vessel under a charter or other contract, (g) arising out
of the use of a credit or charge card or information contained on or for use
with the card, or (h) as winnings in a lottery or other game of chance operated
or sponsored by a state,

 

1

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governmental unit of a state, or person licensed or authorized to operate the
game by a state or governmental unit of a state.  The term “Account” includes
health-care-insurance receivables.

 

“Acquisition” means, 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, division or line of
business 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 of any business unit,
division or line of business of another Person, or a Controlling interest in the
Equity Interests, of any other Person, or (d) any acquisition of any Store
locations of any Person, in each case for which the aggregate consideration
payable in connection with such transaction or group of transactions which are
part of a common plan, exceeds $500,000.

 

“Act” shall have the meaning provided in Section 10.17.

 

“Adjusted LIBO Rate” means:

 

(a)           for any Interest Period with respect to any LIBO Borrowing, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one
percent) equal to (i) the LIBO Rate for such Interest Period multiplied by
(ii) the Statutory Reserve Rate; and

 

(b)           for any interest rate calculation with respect to any Base Rate
Loan, an interest rate per annum (rounded upwards, if necessary, to the next
1/100 of one percent) equal to (i) the LIBO Rate for an Interest Period
commencing on the date of such calculation and ending on the date that is thirty
(30) days thereafter multiplied by (ii) the Statutory Reserve Rate.

 

The Adjusted LIBO Rate will be adjusted automatically as of the effective date
of any change in the Statutory Reserve Rate.

 

“Adjustment Date” means the first day of each Fiscal Quarter, commencing
September 29, 2013.

 

“Affiliate” means, with respect to any Person, (i) 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, (ii) any other Person
directly or indirectly holding 10% or more of any class of the Equity Interests
of that Person, and (iii) any other Person 10% or more of any class of whose
Equity Interests is held directly or indirectly by that Person.

 

“Agent” means Wells Fargo in its capacity as administrative agent and collateral
agent under any of the Loan Documents, or any successor thereto.

 

“Agent’s Office” means the Agent’s address and account as set forth on Schedule
10.02, or such other address or account as the Agent may from time to time
notify the Lead Borrower and the Lenders.

 

“Aggregate Commitments” means the Commitments of all the Lenders.  As of the
Closing Date, the Aggregate Commitments are $25,000,000.

 

2

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

 

“Agreement” means this Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

“Applicable Lenders” means the Required Lenders, all affected Lenders, or all
Lenders, as the context may require.

 

“Applicable Margin” means:

 

(a)           From and after the Closing Date until the first Adjustment Date,
the percentages set forth in Level I of the pricing grid below; and

 

(b)           From and after the first Adjustment Date and on each Adjustment
Date thereafter, the Applicable Margin shall be determined from the following
pricing grid based upon the Average Daily Availability as of the Fiscal Quarter
ended immediately preceding such Adjustment Date; provided, however, that if any
Borrowing Base Certificates is at any time restated or otherwise revised
(including as a result of an audit) or if the information set forth in any
Borrowing Base Certificate 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 Daily
Availability

 

LIBOR
Margin

 

Base Rate
Margin

 

Commercial
Letter of Credit
Fee

 

Standby
Letter of
Credit Fee

 

I

 

Equal to or greater than 50% of the Borrowing Base

 

1.50

%

0.50

%

1.50

%

1.50

%

II

 

Less than 50% of the Borrowing Base

 

1.75

%

0.75

%

1.50

%

1.50

%

 

“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time.  If the commitment of each
Lender to make Committed Loans and the obligation of the L/C Issuer to make L/C
Credit Extensions have been terminated pursuant to Section 8.02 or if the
Aggregate Commitments have expired, then the Applicable Percentage of each
Lender shall be determined based on the Applicable Percentage of such Lender
most recently in effect, giving effect to any subsequent assignments.  The
initial Applicable Percentage of each Lender is set forth opposite the name of
such

 

3

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

 

Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which
such Lender becomes a party hereto, as applicable.

 

“Appraisal Percentage” means 90%.

 

“Appraised Value” means the appraised orderly liquidation value of Eligible
Inventory, net of costs and expenses to be incurred in connection with any such
liquidation, which value is expressed as a percentage of the retail value as set
forth in the inventory stock ledger of the Lead Borrower, of Eligible Inventory,
which value shall be determined from time to time by the most recent appraisal
undertaken by an independent appraiser engaged by the Agent.

 

“Approved Foreign Vendor” means a Foreign Vendor which (a) is located in any
country acceptable to the Agent in its Permitted Discretion, (b) has received
timely payment (subject to any payment terms allowed by such Foreign Vendor) or
performance of all obligations owed to it by the Loan Parties, (c) has not
asserted and has no right to assert any reclamation, repossession, diversion,
stoppage in transit, Lien or title retention rights in respect of such
Inventory, and (d), if so requested by the Agent, has entered into and is in
full compliance with the terms of a Foreign Vendor Agreement.

 

“Approved Fund” means any Person (other than a natural person) that is (or will
be) engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business
and that is administered or managed by (a) a Lender, (b) an Affiliate of a
Lender, (c) an entity or an Affiliate of an entity that administers or manages a
Lender or (d) the same investment advisor or an advisor under common control
with such Lender, Affiliate or advisor, as applicable.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 10.06(b)), and accepted by the Agent, in substantially the
form of Exhibit D or any other form approved by the Agent.

 

“Audited Financial Statements” means the audited consolidated balance sheet of
the Lead Borrower and its Subsidiaries for the Fiscal Year ended December 29,
2012, and the related consolidated statement of operations, stockholders’ equity
and cash flows for such Fiscal Year of the Lead Borrower and its Subsidiaries,
including the notes thereto.

 

“Availability” means, as of any date of determination thereof by the Agent, the
result, if a positive number, of:

 

(a)

 

The Loan Cap

 

 

 

 

 

Minus

 

 

 

(b)

 

The Total Outstandings.

 

4

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

 

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.05, and (c) the date of termination
of the commitment of each Lender to make Committed Loans and of the obligation
of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Availability Reserves” means, without duplication of any other Reserves or
items to the extent such items are otherwise addressed or excluded through
eligibility criteria, such reserves as the Agent from time to time determines in
its Permitted Discretion as being appropriate (a) to reflect the impediments to
the Agent’s ability to realize upon the Collateral, (b) to reflect claims and
liabilities that the 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, in the Agent’s Permitted Discretion, (but are
not limited to) reserves based on: (i) rent, provided, that rent Reserves for
locations leased by any Loan Party (A) shall not be taken for any such leased
locations covered by a Collateral Access Agreement and (B) for all other such
locations, shall be limited to three months’ rent for such leased location;
(ii) customs duties, and other costs to release Inventory which is being
imported into the United States; (iii) outstanding Taxes and other governmental
charges, including, without limitation, ad valorem, real estate, personal
property, sales, claims of the PBGC and other Taxes which may have priority over
the Liens of the Agent in the Collateral; (iv) salaries, wages and benefits due
to employees of any Borrower, (v) customer credit liabilities consisting of the
aggregate remaining 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 or gift card to pay all or a portion of the purchase price
for any Inventory, (b) outstanding merchandise credits of the Borrowers, and
(c) liabilities in connection with frequent shopping programs of the Borrowers,
which Availability Reserves with respect to such customer credit liabilities
will on the Closing Date be in an amount equal to 50% of such customer credit
liabilities, and thereafter will be adjusted in the Agent’s Permitted Discretion
based on changes in the Loan Parties’ business practices regarding such customer
credit liabilities, (vi) deposits made by customers with respect to the purchase
of goods or the performance of services and layaway obligations of the
Borrowers, (vii) reserves for reasonably anticipated changes in the Appraised
Value of Eligible Inventory between appraisals, (viii) warehousemen’s or
bailee’s charges and other Permitted Encumbrances which may have priority over
the Liens of the Agent in the Collateral, provided, that Reserves for
consignee’s, warehousemen’s and bailee’s charges (A) shall not be taken for
locations covered by a Collateral Access Agreement and (B) for all other such
locations, shall be limited to three months’ charges for any such other
location; (ix) amounts due to vendors on account of consigned goods, (x) Cash
Management Reserves, (xi) Bank Products Reserves and; (xii) royalties payable in
respect of licensed merchandise.

 

“Average Daily Availability” means, for any Fiscal Quarter, an amount equal to
the sum of Availability for each day of such Fiscal Quarter divided by the
actual number of days in such Fiscal Quarter, as determined by the Agent, which
determination shall be conclusive absent manifest error.

 

5

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

 

“Bank Products” means any services or facilities provided to any Loan Party by
the Agent or any of its Affiliates (but excluding Cash Management Services)
including, without limitation, on account of (a) Swap Contracts, (b) merchant
services constituting a line of credit, (c) leasing, (d) Factored Receivables,
and (e) supply chain finance services including, without limitation, trade
payable services and supplier accounts receivable purchases.

 

“Bank Product Reserves” means such reserves as the Agent from time to time
determines in its Permitted 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”  means, for any day, a fluctuating rate per annum equal to the
highest of (a) the Federal Funds Rate, as in effect from time to time, plus
one-half of one percent (0.50%), (b) the Adjusted LIBO Rate plus one percent
(1.00%), or (c) the rate of interest in effect for such day as publicly
announced from time to time by Wells Fargo as its “prime rate.”  The “prime
rate” is a rate set by Wells Fargo based upon various factors including Wells
Fargo’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 Wells
Fargo shall take effect at the opening of business on the day specified in the
public announcement of such change.

 

“Base Rate Loan” means a Committed Loan that bears interest based on the Base
Rate.

 

“Blocked Account” means a deposit account in which any funds of any of the Loan
Parties from one or more DDAs (other than Excluded Accounts) are concentrated. 
For the avoidance of doubt, no DDA with a balance of less than $7,500 shall be a
Blocked Account hereunder.

 

“Blocked Account Agreement” means, with respect to any Blocked Account
established by a Loan Party, an agreement, in form and substance reasonably
satisfactory to the Agent, establishing control, pursuant to Section 9-104 of
the UCC or other applicable section of the UCC, of such Blocked Account by the
Agent and whereby the applicable Blocked Account Bank agrees, promptly after its
receipt of notice of the occurrence and during the continuance of a Cash
Dominion Event, to comply only with the instructions originated by the Agent
without the further consent of any Loan Party.

 

“Blocked Account Bank” means each bank with whom a Blocked Account is maintained
and with whom a Blocked Account Agreement has been, or is required to be,
executed in accordance with the terms hereof.

 

“Borrowers” has the meaning specified in the introductory paragraph hereto.

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

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

 

plus

 

6

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

 

(b)           the retail value of Eligible Inventory consisting of Eligible
Stock Ledger Inventory, net of Inventory Reserves, multiplied by the product of
the Appraisal Percentage multiplied by the Appraised Value of Eligible Stock
Ledger Inventory;

 

plus

 

(c)           the retail value of Eligible Inventory consisting of Eligible
Finished Goods In-Transit Inventory, net of Inventory Reserves, multiplied by
the product of the Appraisal Percentage multiplied by the Appraised Value of
Eligible Finished Goods In-Transit Inventory;

 

plus

 

(d)           the retail value of Eligible Inventory consisting of Eligible
Warehouse Inventory, net of Inventory Reserves, multiplied by the product of the
Appraisal Percentage multiplied by the Appraised Value of Eligible Warehouse
Inventory;

 

plus

 

(e)           the lesser of (x) the retail value of Eligible In-Transit
Inventory, net of Inventory Reserves, multiplied by the product of Appraisal
Percentage multiplied by the Appraised Value of Eligible In-Transit Inventory,
and (y) $3,000,000;

 

minus

 

(f)            the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” means a certificate substantially in the form of
Exhibit E hereto (with such changes therein as may be required by the Agent to
reflect the components of and reserves against the Borrowing Base as provided
for hereunder from time to time), executed and certified as accurate and
complete by a Responsible Officer of the Lead Borrower, which shall include
appropriate exhibits, schedules, supporting documentation, and additional
reports as reasonably requested by the Agent.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Agent’s Office is located and, if such day
relates to any LIBO Rate Loan, means any such day on which dealings in Dollar
deposits are conducted by and between banks in the London interbank market.

 

“Capital Lease Obligations” means, with respect to any Person for any period,
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 liabilities on a balance sheet of such Person under GAAP and
the amount of which obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Cash Collateral Account” means a non-interest bearing account established by
one or more of the Loan Parties with Wells Fargo, and in the name of, the Agent
(or as the Agent shall otherwise direct) and

 

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under the sole and exclusive dominion and control of the Agent, in which
deposits are required to be made in accordance with Section 2.03(k) or 8.02(c).

 

“Cash Collateralize” has the meaning specified in Section 2.03(k).  Derivatives
of such term have corresponding meanings.

 

“Cash Dominion Event” means either (i) the occurrence and continuance of any
Event of Default, or (ii) the failure of the Borrowers to maintain Availability
of at least (x) fifteen percent (15%) of the Loan Cap for three (3) consecutive
Business Days or (y) twelve percent (12%) of the Loan Cap at any time.  For
purposes of this Agreement, the occurrence of a Cash Dominion Event shall be
deemed continuing until the earlier of (i) the date of the waiver by the Agent
of such Event of Default, (ii) if the Cash Dominion Event arises as a result of
the Borrowers’ failure to achieve Availability as required hereunder, until such
date as Availability has exceeded fifteen percent (15%) of the Loan Cap for
forty-five (45) consecutive days, or (iii) the date on which the Agent states
that the applicable Cash Dominion Event shall no longer be deemed to be
continuing for purposes of this Agreement; provided that a Cash Dominion Event
shall be deemed continuing (even if an Event of Default is no longer continuing
and/or Availability exceeds the required amount for forty-five (45) consecutive
days) at all times after a Cash Dominion Event has occurred and been
discontinued on two (2) occasions in any twelve month period or on four
(4) occasions in the aggregate after the Closing Date. The termination of a Cash
Dominion Event as provided herein shall in no way limit, waive or delay the
occurrence of a subsequent Cash Dominion Event in the event that the conditions
set forth in this definition again arise.

 

“Cash Equivalents” means any of the types of Permitted Investments permitted
pursuant to clauses (a) through (f) of the definition thereof.

 

“Cash Management Reserves” means such reserves as the Agent, from time to time,
determines in its Permitted 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 cash management services or facilities
provided to any Loan Party by the Agent or any of its Affiliates, including,
without limitation: (a) ACH transactions, (b) controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services,
(c) credit or debit cards, (d) credit card processing services, and (e) purchase
cards.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.

 

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

 

“CFC” means (i) a Person that is a controlled foreign corporation under
Section 957 of the Code or (ii) a Person that is treated as disregarded as
separate from its owner which is deemed town all interests in a “CFC” as
described in clause (i).

 

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“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority; provided
that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed to be a “Change in
Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means an event or series of events by which:

 

(a)           any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, of 35% or more of the Equity Interests
of the Lead Borrower entitled to vote for members of the board of directors or
equivalent governing body of the Lead Borrower on a fully-diluted basis (and
taking into account all such Equity Interests that such “person” or “group” has
the right to acquire pursuant to any option right); or

 

(b)           during any period of 12 consecutive months, a majority of the
members of the board of directors or other equivalent governing body of the Lead
Borrower cease to be composed of individuals (i) who were members of that board
or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and
(ii) above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body; or

 

(c)           any “change in control” or similar event as defined in any
Material Contract, or any document governing Material Indebtedness of any Loan
Party; or

 

(g)           the Lead Borrower fails at any time to own, directly or
indirectly, 100% of the Equity Interests of each other Loan Party free and clear
of all Liens (other than the Liens in favor of the Agent and other Permitted
Encumbrances), except where such failure is as a result of a transaction
permitted by the Loan Documents.

 

9

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“Closing Date” means the first date all the conditions precedent in Section 4.01
are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated
thereunder, as amended and in effect.

 

“Collateral” means any and all “Collateral” as defined in any applicable
Security Document and all other property that is or is intended under the terms
of the Security Documents to be subject to Liens in favor of the Agent other
than an asset of a CFC.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form
and substance to the Agent executed by (a) a bailee or other Person in
possession of Collateral, and (b) any landlord of Real Estate leased by any Loan
Party, pursuant to which such Person (i) acknowledges the Agent’s Lien on the
Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral
held by such Person or located on such Real Estate, (iii) provides the Agent
with access to the Collateral held by such bailee or other Person or located in
or on such Real Estate, (iv) as to any landlord, provides the Agent with a
reasonable time to sell and dispose of the Collateral from such Real Estate, and
(v) makes such other agreements with the Agent as the Agent may reasonably
require.

 

“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 a Loan Party in the ordinary course of
business of such Loan Party.

 

“Commercial Letter of Credit Agreement” means the Commercial Letter of Credit
Agreement relating to the issuance of a Commercial Letter of Credit in the form
from time to time in use by the L/C Issuer.

 

“Commitment” means, as to each Lender, its obligation to (a) make Committed
Loans to the Borrowers pursuant to Section 2.01 and (b) purchase participations
in L/C Obligations, in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01
or in the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.

 

“Committed Borrowing” means a borrowing consisting of simultaneous Committed
Loans of the same Type and, in the case of LIBO Rate Loans, having the same
Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a
conversion of Committed Loans from one Type to the other, or (c) a continuation
of LIBO Rate Loans, pursuant to Section 2.02, which, if in writing, shall be
substantially in the form of Exhibit A.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

 

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“Compliance Certificate” means a certificate substantially in the form of
Exhibit C.

 

“Concentration Account” has the meaning provided in Section 6.13(c).

 

“Consolidated” means, when used to modify a financial term, test, statement, or
report of a Person, the application or preparation of such term, test, statement
or report (as applicable) based upon the consolidation, in accordance with GAAP,
of the financial condition or operating results of such Person and its
Subsidiaries.

 

“Contractual Obligation” means, as to any Person, any provision of any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.

 

“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. 
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Cost” means the lower of cost or market value of Inventory, based upon the
Borrowers’ accounting practices, known to the Agent, which practices are in
effect on the Closing Date as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’
stock ledger.  “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.

 

“Credit Card Advance Rate” means 90%.

 

“Credit Card Issuer” shall mean any person (other than a Borrower or other Loan
Party) who issues or whose members issue credit cards, including, without
limitation, MasterCard or VISA bank credit or debit cards or other bank credit
or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc.
or Visa International and American Express, Discover, Diners Club, Carte Blanche
and other non-bank credit or debit cards, including, without limitation, credit
or debit cards issued by or through American Express Travel Related Services
Company, Inc.,  and Novus Services, Inc. and other issuers approved by the
Agent.

 

“Credit Card Processor” shall mean any servicing or processing agent or any
factor or financial intermediary who facilitates, services, processes or manages
the credit authorization, billing transfer and/or payment procedures with
respect to any Borrower’s sales transactions involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any Credit
Card Issuer.

 

“Credit Card Notifications” has the meaning provided in Section 6.13(a)(i).

 

“Credit Card Receivables” means each “payment intangible” (as defined in the
UCC) together with all income, payments and proceeds thereof, owed by a Credit
Card Issuer or Credit Card Processor to a Loan Party resulting from charges by a
customer of a Loan Party on credit or debit cards issued by such Credit Card
Issuer in connection with the sale of goods by a Loan Party, or services
performed by a Loan Party, in each case in the ordinary course of its business.

 

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“Credit Extensions” mean each of the following: (a) a Committed Borrowing and
(b) an L/C Credit Extension.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and
each of its Affiliates which issues Letters of Credit or provides Bank Products
or Cash Management Services to the Loan Parties, (ii) the Agent, (iii) the L/C
Issuer, (iv) each beneficiary of each indemnification obligation undertaken by
any Loan Party under any Loan Document, (v) any other Person to whom Obligations
under this Agreement and other Loan Documents are owing, and (vi) the permitted
successors and assigns of each of the foregoing, and (b) collectively, all of
the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all reasonable and
documented out-of-pocket expenses incurred by the Agent and its Affiliates in
connection with this Agreement and the other Loan Documents, including without
limitation (i) the reasonable and documented fees, charges and disbursements of
(A) one primary counsel for the Agent and local counsel, if necessary,
(B) outside consultants for the Agent, (C) appraisers, (D) commercial finance
examinations, and (E) all such reasonable and documented out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of the
Obligations if any Event of Default is continuing, (ii) in connection with
(A) the preparation, negotiation, administration, management, execution and
delivery of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (B) the
enforcement or protection of their rights in connection with this Agreement or
the Loan Documents or efforts to preserve, protect, collect, or enforce the
Collateral, or (C) any workout, restructuring or negotiations in respect of any
Obligations if any Event of Default is continuing, and (iii) all reasonable and
customary fees and charges (as adjusted from time to time) of the Agent with
respect to the disbursement of funds (or the receipt of funds) to or for the
account of Borrowers (whether by wire transfer or otherwise), together with any
reasonable and documented out-of-pocket costs and expenses incurred in
connection therewith, and (b) with respect to the L/C Issuer, and its
Affiliates, all reasonable and documented out-of-pocket expenses incurred in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder; and (c) all reasonable and
documented out-of-pocket expenses incurred by the Credit Parties who are not the
Agent, the L/C Issuer or any Affiliate of any of them, after the occurrence and
during the continuance of an Event of Default, provided that such Credit Parties
shall be entitled to reimbursement for no more than one counsel representing all
such Credit Parties (absent a conflict of interest in which case the Credit
Parties may engage and be reimbursed for additional counsel).

 

“Customs Broker/Carrier Agreement” means an agreement in form and substance
reasonably satisfactory to the Agent among a Borrower, a customs broker, freight
forwarder, consolidator or carrier, and the Agent, in which the customs broker,
freight forwarder, consolidator or carrier acknowledges that it has control over
and holds the documents evidencing ownership of the subject Inventory for the
benefit of the Agent and agrees, upon notice from the Agent, to hold and dispose
of the subject Inventory solely as directed by the Agent.

 

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“DDA” means each checking, savings or other demand deposit account maintained by
any of the Loan Parties.  All funds in each DDA shall be conclusively presumed
to be Collateral and proceeds of Collateral and the Agent and the Lenders shall
have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“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, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

 

“Default Rate” means (a) when used with respect to Obligations other than Letter
of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the
Applicable Margin, if any, applicable to Base Rate Loans, plus (iii) 2% per
annum; provided, however, that with respect to a LIBO Rate Loan, the Default
Rate shall be an interest rate equal to the interest rate (including any
Applicable Margin) otherwise applicable to such LIBO Rate Loan plus 2% per
annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to
the Applicable Margin for Standby Letters of Credit or Commercial Letters of
Credit, as applicable, plus 2% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any amounts
required to be funded by it under this Agreement within one (1) Business Day of
the date that it is required to do so under this Agreement (including the
failure to make available to the Agent amounts required pursuant to a Settlement
or to make a required payment in connection with a Letter of Credit
Disbursement), (b) notified the Borrowers, the Agent, or any Lender in writing
that it does not intend to comply with all or any portion of its funding
obligations under this Agreement, (c) has made a public statement to the effect
that it does not intend to comply with its funding obligations under the
Agreement or under other agreements generally (as reasonably determined by the
Agent) under which it has committed to extend credit, (d) failed, within one
(1) Business Day after written request by the Agent, to confirm that it will
comply with the terms of the Agreement relating to its obligations to fund any
amounts required to be funded by it under the Agreement, (e) otherwise failed to
pay over to the Agent or any other Lender any other amount required to be paid
by it under the Agreement within one (1) Business Day of the date that it is
required to do so under the Agreement, or (f) (i) becomes or is insolvent or has
a parent company that has become or is insolvent or (ii) becomes the subject of
a bankruptcy or insolvency proceeding, or has had a receiver, conservator,
trustee, or custodian or appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any
such proceeding or appointment or has a parent company that has become the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee, or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in any
such proceeding or appointment.

 

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“Defaulting Lender Rate” means (a) for the first three (3) days from and after
the date the relevant payment is due, the Base Rate, and (b) thereafter, the
interest rate then applicable to Committed Loans that are Base Rate Loans
(inclusive of the Applicable Margin applicable thereto).

 

“Disposition” or “Dispose” means the sale, transfer, exclusive license, lease or
other disposition (including any sale and leaseback transaction and any sale,
transfer, license or other disposition of (whether in one transaction or in a
series of transactions) of any property (including, without limitation, any
Equity Interests other than Equity Interests of the Lead Borrower) by any
Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is ninety-one (91)
days after the date on which the Committed Loans mature.  The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of this
Agreement will be the maximum amount that the Lead Borrower and its Subsidiaries
may become obligated to pay upon maturity of, or pursuant to any mandatory
redemption provisions of, such Disqualified Stock or portion thereof, plus
accrued dividends.

 

“Dollars” and “$” mean lawful money of the United States.

 

“Drawing Document” means any Letter of Credit or other document presented for
purposes of drawing under any Letter of Credit.

 

“E-Commerce Distribution Center” means the distribution and fulfillment center
for on-line purchases of the Borrower’s Inventory operated by SpeedFC, Inc. (or
any of its successors or assigns) and located at 10300 Sanden Drive, Suite 10,
Dallas, Texas (or any successor location thereto).

 

“Eligible Assignee” means (a) a Lender or any of its Affiliates; (b) a bank,
insurance company, or company engaged in the business of making commercial
loans, which Person, together with its Affiliates, has a combined capital and
surplus in excess of $250,000,000; (c) an Approved Fund; (d) any Person to whom
a Lender assigns its rights and obligations under this Agreement as part of an
assignment and transfer of such Lender’s rights in and to a material portion of
such Lender’s portfolio of asset based credit facilities, and (e) any other
Person (other than a natural person) approved by (i) the Agent and the L/C
Issuer, and (ii) unless an Event of Default has occurred and is continuing, the
Lead Borrower (each such approval not to be unreasonably withheld or delayed);
provided that notwithstanding the foregoing, “Eligible Assignee” shall not
include a Loan Party or any of the Loan Parties’ Affiliates or Subsidiaries.

 

“Eligible Credit Card Receivables” means at the time of any determination
thereof, each Credit Card Receivable that satisfies the following criteria, as
determined by the Agent in its Permitted Discretion: such Credit Card Receivable
(i) has been earned by performance and represents the bona fide amounts

 

14

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due to a Borrower from a Credit Card Issuer or Credit Card Processor, and in
each case originated in the ordinary course of business of such Borrower, and
(ii) in each case is not ineligible for inclusion in the calculation of the
Borrowing Base pursuant to any of clauses (a) through (i) below.  Without
limiting the foregoing, to qualify as an Eligible Credit Card Receivable, such
Credit Card Receivable shall indicate no Person other than a Borrower as payee
or remittance party.  In determining the amount to be so included, the face
amount of a Credit Card Receivable shall be reduced by, without duplication, to
the extent not reflected in such face amount, (i) the amount of all accrued and
actual discounts, claims, credits or credits pending, promotional program
allowances, price adjustments, finance charges or other allowances (including
any amount that a Borrower may be obligated to rebate to a customer, a Credit
Card Issuer or Credit Card Processor pursuant to the terms of any written
agreement or understanding) and (ii) the aggregate amount of all cash received
in respect of such Credit Card Receivable but not yet applied by the Loan
Parties to reduce the amount of such Credit Card Receivable.  Except as
otherwise agreed to by the Agent in its Permitted Discretion, any Credit Card
Receivable included within any of the following categories shall not constitute
an Eligible Credit Card Receivable:

 

(a)           Credit Card Receivables which do not constitute a “payment
intangible” (as defined in the UCC);

 

(b)           Credit Card Receivables that have been outstanding for more than
five (5) Business Days from the date of sale;

 

(c)           Credit Card Receivables (i) that are not subject to a perfected
first-priority security interest in favor of the Agent, or (ii) with respect to
which a Borrower does not have good, valid and marketable title thereto, free
and clear of any Lien (other than Liens granted to the Agent pursuant to the
Security Documents and Permitted Encumbrances arising by operation of Law);

 

(d)           Credit Card Receivables 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)           Credit Card Receivables as to which the Credit Card Issuer or
Credit Card Processor has the right under certain circumstances to require a
Loan Party to repurchase the Credit Card Receivables from such Credit Card
Issuer or Credit Card Processor;

 

(f)            Credit Card Receivables due from a Credit Card Issuer or Credit
Card Processor which is the subject of any bankruptcy or insolvency proceedings;

 

(g)           Credit Card Receivables which are not a valid, legally enforceable
obligation of the applicable Credit Card Issuer or Credit Card Processor with
respect thereto;

 

(h)           Credit Card Receivables which do not conform to all
representations, warranties (subject to any qualifications made with respect to
such representations and warranties) or other provisions in the Loan Documents
relating to Credit Card Receivables; or

 

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(i)            Credit Card Receivables which the Agent determines in its
Permitted Discretion to be uncertain of collection or which do not meet such
other reasonable eligibility criteria for Credit Card Receivables as the Agent
may determine in its Permitted Discretion.

 

“Eligible Finished Goods In-Transit Inventory” means, without duplication of
other Eligible Inventory, Inventory of a Borrower (excluding, for the avoidance
of doubt, Eligible In-Transit Inventory) that is in transit between owned or
leased locations or locations which meet the criteria set forth in clause
(d)(ii) of the definition of Eligible Inventory, and which otherwise would
constitute Eligible Inventory.

 

“Eligible In-Transit Inventory” means, as of any date of determination thereof,
without duplication of other Eligible Inventory, In-Transit Inventory:

 

(a)           Which has been shipped from a foreign location for receipt by a
Borrower, but which has not yet been delivered to such Borrower, which
In-Transit Inventory has been in transit for forty-five (45) days or less from
the date of shipment of such Inventory;

 

(b)           For which the purchase order is in the name of a Borrower and
title and risk of loss has passed to such Borrower;

 

(c)           For which an Acceptable Document of Title has been issued, and in
each case as to which the Agent has control (as defined in the UCC) over the
documents of title which evidence ownership of the subject Inventory (such as,
if requested by the Agent, by the delivery of a Customs Broker/Carrier
Agreement);

 

(d)           Which is insured in compliance with the provisions of Section 6.07
hereof (including, without limitation, marine cargo insurance);

 

(e)           the Foreign Vendor with respect to such In-Transit Inventory is an
Approved Foreign Vendor;

 

(f)            For which payment of the purchase price has been made by the
Borrower or the purchase price is supported by a Commercial Letter of Credit;
and

 

(g)           Which otherwise would constitute Eligible Inventory;

 

provided that the Agent may, in its Permitted Discretion, exclude any particular
Inventory from the definition of “Eligible In-Transit Inventory” in the event
the Agent determines that such Inventory is subject to any Person’s right of
reclamation, repudiation, stoppage in transit or any event has occurred or is
reasonably anticipated by the Agent to arise which may otherwise adversely
impact in any material respect the ability of the Agent to realize upon such
Inventory.

 

“Eligible Inventory” means, as of the date of determination thereof, without
duplication, (i) Eligible Stock Ledger Inventory, (ii) Eligible Finished Goods
In-Transit Inventory, (iii) Eligible In-Transit Inventory, (iv) Eligible
Warehouse Inventory,  and (v) items of Inventory of a Borrower that are finished
goods, merchantable and readily saleable to the public in the ordinary course of
the Borrowers’ business, in

 

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each case that, except as otherwise agreed by the Agent in its Permitted
Discretion, (A) complies with each of the representations and warranties
(subject to any qualifications made with respect to such representations and
warranties) respecting Inventory made by the Loan Parties in the Loan Documents,
and (B) is not excluded as ineligible by virtue of one or more of the criteria
set forth below as determined by the Agent in its Permitted Discretion.  Except
as otherwise agreed by the Agent, in its Permitted Discretion, the following
items of Inventory shall not be included in Eligible Inventory:

 

(a)           Inventory that is not solely owned by a Borrower or a Borrower
does not have good and valid title thereto;

 

(b)           Inventory that is leased by or is on consignment to a Borrower or
which is consigned by a Borrower to a Person which is not a Loan Party;

 

(c)           Inventory (other than Eligible In-Transit Inventory) that is not
located in the United States of America (excluding territories or possessions of
the United States);

 

(d)           Inventory (other than Inventory covered by clause (e) below) that
is not located at a location that is owned or leased by a Borrower, except
(i) Inventory in transit between such owned or leased locations or locations
which meet the criteria set forth in clause (ii) below, or (ii) to the extent
that the Borrowers have furnished the Agent with (A) any UCC financing
statements or other documents that the Agent may determine in its Permitted
Discretion to be necessary to perfect its security interest in such Inventory at
such location, and (B) either (x) a Collateral Access Agreement executed by the
Person owning any such location has been delivered to the Agent or
(y) Availability Reserves have been established with respect thereto;

 

(e)           Inventory that is located in a distribution center or warehouse
leased by a Borrower unless either (x) the applicable lessor has delivered to
the Agent a Collateral Access Agreement or (y) Availability Reserves have been
established with respect thereto;

 

(f)            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 samples, spare parts, promotional, marketing,
labels, bags and other packaging and shipping materials or supplies used or
consumed in a Borrower’s business, (iv) are seasonal in nature and which have
been packed away for sale in the subsequent season, (v) 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 (vi) are
bill and hold goods;

 

(g)           Inventory that is not subject to a perfected first priority
(subject to Permitted Encumbrances having priority by operation of applicable
Law) security interest in favor of the Agent;

 

(h)           Inventory that is not insured in compliance with the provisions of
Section 5.10 hereof;

 

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(i)            Inventory that has been sold but not yet delivered or as to which
a Borrower has accepted a deposit;

 

(j)            Inventory that is subject to any licensing, patent, royalty,
trademark, trade name or copyright agreement with any third party from which any
Borrower or any of its Subsidiaries has received notice of a dispute in respect
of any such agreement;

 

(k)           Inventory acquired in a Permitted Acquisition or which is not of
the type usually sold in the ordinary course of the Borrowers’ business, unless
and until the Agent has completed or received (A) an appraisal of such Inventory
from appraisers satisfactory to the Agent and establishes an advance rate and
Inventory Reserves (if applicable) therefor, and otherwise agrees that such
Inventory shall be deemed Eligible Inventory, and (B) such other due diligence
as the Agent may require, all of the results of the foregoing to be reasonably
satisfactory to the Agent; or

 

(l)            Inventory deemed by the Agent in its Permitted Discretion to be
ineligible for inclusion in the calculation of the Borrowing Base.

 

“Eligible Stock Ledger Inventory” means, without duplication of other Eligible
Inventory, Inventory of a Borrower located at a Store, at the E-Commerce
Distribution Center or consisting of replenishment Inventory that, in each case,
is included in the inventory stock ledger of the Lead Borrower and which
otherwise would constitute Eligible Inventory.

 

“Eligible Warehouse Inventory” means, without duplication of other Eligible
Inventory, Inventory of a Borrower located at any warehouse or distribution
center of such Borrower (other than the E-Commerce Distribution Center) which
has not yet been allocated to a Store, and which otherwise would constitute
Eligible Inventory.

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim,
action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent
or otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Borrower, any other Loan
Party or any of their respective Subsidiaries resulting from or based upon
(a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal or presence 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.

 

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“Equipment” has the meaning set forth in the UCC.

 

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with any Loan Party within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 and 4971 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate
from a Multiemployer Plan or notification to the Lead Borrower or any ERISA
Affiliate that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a plan amendment as a
termination of a Pension Plan or a Multiemployer Plan under Sections 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Lead
Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of
Default shall be deemed to be continuing unless and until that Event of Default
has been duly waived as provided in Section 10.03 hereof.

 

“Excluded Account” means any DDAs which are petty cash, payroll, trust, escrow
or tax withholding accounts, and any DDAs that are pledged to Bank of America,
N.A. to secure the letters of credit described on Schedule 7.03 hereto (but only
for so long as such DDAs are pledged to Bank of America, N.A. to secure such
letters of credit).

 

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the Guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any Guarantee thereof) is or becomes illegal under

 

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the Commodity Exchange Act or any rule, regulation or order of the Commodity
Futures Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the Guarantee of such Guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more
than one swap, such exclusion shall apply only to the portion of such Swap
Obligation that is attributable to swaps for which such Guarantee or security
interest is or becomes illegal.

 

“Excluded Taxes” means, with respect to the Agent, any Lender, the L/C Issuer or
any other recipient of any payment to be made by or on account of any obligation
of the Loan Parties hereunder, (a) taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) 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 or any similar tax imposed by
any other jurisdiction in which such party is organized or has its principal
office, (c) in the case of a Lender, any withholding tax that is imposed on
amounts payable to such Lender at the time such Lender becomes a party hereto
(or designates a new Lending Office) except to the extent that such 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 Loan Parties with
respect to such withholding tax pursuant to Section 3.01(a), (d) or is
attributable to such Lender’s failure or inability to comply with
Section 3.01(e), (e) any U.S. federal, state or local backup withholding tax,
and (f) any U.S. federal withholding tax imposed under FATCA.

 

“Executive Officer” means the chief executive officer, president, chief
financial officer, controller, vice president of finance or treasurer of a Loan
Party.

 

“Executive Order” has the meaning set forth in Section 10.18.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance), and condemnation awards (and payments in lieu thereof).

 

“Facility Guaranty” means the Guaranty made by the Guarantors in favor of the
Agent and the other Credit Parties, in form reasonably satisfactory to the
Agent, as the same now exists or may hereafter be amended, modified,
supplemented, renewed, restated or replaced.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to the implementation of Section 1471(b) of the Code.

 

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“Factored Receivables” means any Accounts originally owed or owing by a Loan
Party to another Person which have been purchased by or factored with Wells
Fargo or any of its Affiliates pursuant to a factoring arrangement or otherwise
with the Person that sold the goods or rendered the services to the Loan Party
which gave rise to such Account.

 

“Federal Funds 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 Wells Fargo
on such day on such transactions as determined by the Agent.

 

“Fee Letter” means the letter agreement, dated July 25, 2013, among the Lead
Borrower and the Agent.

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall
generally end on the last Saturday of each calendar month in accordance with the
fiscal accounting calendar of the Loan Parties.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on the last Saturday of each March, June, September and
December of such Fiscal Year in accordance with the fiscal accounting calendar
of the Loan Parties.

 

“Fiscal Year” means any period of twelve (12) consecutive Fiscal Months ending
on the Saturday closest to December 31 of any calendar year.

 

“Foreign Asset Control Regulations” has the meaning set forth in Section 10.18.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Lead Borrower is resident for tax
purposes.  For purposes of this definition, the United States, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

“Foreign Vendor” means a Person that sells In-Transit Inventory to a Borrower.

 

“Foreign Vendor Agreement” means an agreement between a Foreign Vendor and the
Agent in form and substance reasonably satisfactory to the Agent and pursuant to
which, among other things, the parties shall agree upon their relative rights
with respect to In-Transit Inventory of a Borrower purchased from such Foreign
Vendor.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

 

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such

 

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other principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

“Governmental Authority” means the government of the United States or any other
nation, or of 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 (including any
supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien).  The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.

 

“Guarantor” has the meaning specified in the introductory paragraph hereto and
shall also refer to each other Subsidiary of the Lead Borrower that shall be
required to execute and deliver a Facility Guaranty pursuant to Section 6.12.

 

“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.

 

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

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(b)           the maximum amount (after giving effect to any prior drawings or
reductions that may have been reimbursed) of all direct or contingent
obligations of such Person arising under letters of credit (including standby
and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments;

 

(c)           net obligations of such Person under any Swap Contract;

 

(d)           all obligations of such Person to pay the deferred purchase price
of property or services (other than (i) trade accounts and accrued expenses
payable in the ordinary course of business which are not past due for more than
60 days after their applicable due date or more than 120 days after the date on
which such trade account payable was created or which are otherwise being
disputed in accordance with the provisions of Section 6.04 hereof and
(ii) accruals for payroll and other liabilities accrued in the ordinary course
of business);

 

(e)           indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse;

 

(f)            All Indebtedness of such Person (i) in respect of any Capital
Lease Obligations of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP, and (b) in respect of any Synthetic Lease Obligations, the
capitalized amount of the remaining lease or similar payments under the relevant
lease or other applicable agreement or instrument that would appear on a balance
sheet of such Person prepared as of such date in accordance with GAAP if such
lease, agreement or instrument were accounted for as a capital lease;

 

(g)           all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any Disqualified Stock, or
any warrant, right or option to acquire such Disqualified Stock, valued, in the
case of a redeemable preferred interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends; and

 

(h)           all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person and except to the extent such Person’s
liability for such Indebtedness is otherwise limited under Law or otherwise. 
The amount of any net obligation under any Swap Contract on any date shall be
deemed to be the Swap Termination Value thereof as of such date.  For purposes
of this definition, (i) the amount of any Indebtedness represented by a guaranty
or other similar instrument shall be the lesser of the principal amount of the
obligations guaranteed and still outstanding and the maximum amount for which
the guaranteeing Person may be liable pursuant to the

 

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terms of the instrument embodying such Indebtedness, and (ii) the amount of any
Indebtedness described in clause (e) above shall be the lower of the amount of
the obligation and the fair market value of the assets of such Person securing
such obligation.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future:  trade secrets, know-how
and other proprietary information; trademarks, trademark applications, internet
domain names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and combinations
of the foregoing) indicia and other source and/or business identifiers, and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights and copyright
applications; (including copyrights for computer programs) and all tangible and
intangible property embodying the copyrights, unpatented inventions (whether or
not patentable); patents and patent applications; industrial design applications
and registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, customer lists, records, writings,
computer tapes or disks, flow diagrams, specification sheets, computer software,
source codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; all other
intellectual property; and all common law and other rights throughout the world
in and to all of the foregoing.

 

“Interest Payment Date” means, (a) as to any LIBO Rate Loan, the last day of
each Interest Period applicable to such LIBO Rate Loan and the Maturity Date;
provided, however, that if any Interest Period for a LIBO Rate Loan exceeds
three months, the respective dates that fall every three months after the
beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan, the first day after the end of each month and the
Maturity Date.

 

“Interest Period” means, as to each LIBO Rate Loan, the period commencing on the
date such LIBO Rate Loan is disbursed or converted to or continued as a LIBO
Rate Loan and ending on the date one, two, three or six months thereafter, as
selected by the Lead Borrower in its Committed Loan Notice; provided that:

 

(i)            any Interest Period that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;

 

(ii)           any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period;

 

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(iii)          no Interest Period shall extend beyond the Maturity Date; and

 

(iv)          notwithstanding the provisions of clause (iii), no Interest Period
shall have a duration of less than one (1) month, and if any Interest Period
applicable to a LIBO Borrowing would be for a shorter period, such Interest
Period shall not be available hereunder.

 

For purposes hereof, the date of a Committed Borrowing initially shall be the
date on which such Committed Borrowing is made and thereafter shall be the
effective date of the most recent conversion or continuation of such Committed
Borrowing.

 

“Internal Control Event” means a material weakness in, or fraud that involves
management or other employees who have a significant role in, the Lead
Borrower’s and/or its Subsidiaries’ internal controls over financial reporting,
in each case as described in the Securities Laws.

 

“In-Transit Inventory” means Inventory of a Borrower which is in the possession
of a common carrier and is in transit from a Foreign Vendor of a Borrower from a
location outside of the continental United States to a location of a Borrower
that is within the continental United States.

 

“Inventory” has the meaning given that term in the UCC, and shall also include,
without limitation, all: (a) goods which (i) are leased by a Person as lessor,
(ii) are held by a Person for sale or lease or to be furnished under a contract
of service, (iii) are furnished by a Person under a contract of service, or
(iv) consist of raw materials, work in process, or materials used or consumed in
a business; (b) goods of said description in transit; (c) goods of said
description which are returned, repossessed or rejected; and (d) packaging,
advertising, and shipping materials related to any of the foregoing.

 

“Inventory Reserves” means, without duplication of any other Reserves or items
that are otherwise addressed or excluded through eligibility criteria, such
reserves as may be established from time to time by the Agent in its Permitted
Discretion with respect to the determination of the salability, at retail, of
the Eligible Inventory, which reflect such other factors as negatively affect
the market value of the Eligible Inventory. Without limiting the generality of
the foregoing, Inventory Reserves may, in the Agent’s Permitted Discretion,
include (but are not limited to) reserves based on:

 

(a)           Obsolescence;

 

(b)           Seasonality;

 

(c)           Shrink;

 

(d)           Imbalance;

 

(e)           Change in Inventory character;

 

(f)            Change in Inventory composition;

 

(g)           Change in Inventory mix;

 

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(h)           Markdowns (both permanent and point of sale);

 

(i)            Retail markons and markups inconsistent with prior period
practice and performance, industry standards, current business plans or
advertising calendar and planned advertising events; and

 

(j)            Out-of-date and/or expired Inventory.

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) any
Acquisition, or (d) the purchase, acquisition or investment of or in any stocks,
bonds, mutual funds, notes, debentures or other securities, or any deposit
account, certificate of deposit or other investment of any kind.  For purposes
of covenant compliance, the amount of any Investment shall be the amount
actually invested, without adjustment for subsequent increases or decreases in
the value of such Investment net of any repayments thereof.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the International Standby
Practices 1998 (International Chamber of Commerce Publication No. 590) and any
subsequent revision thereof adopted by the International Chamber of Commerce on
the date such Letter of Credit is issued.

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit
Application, the Standby Letter of Credit Agreement or Commercial Letter of
Credit Agreement, as applicable, and any other document, agreement and
instrument entered into by the L/C Issuer and the applicable Loan Party or in
favor of the L/C Issuer and relating to any such Letter of Credit.

 

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent
may have priority over the Lien of the Agent in any of the Collateral.

 

“Laws” means each international, foreign, Federal, state and local statute,
treaty, rule, guideline, regulation, ordinance, code and administrative or
judicial precedent or authority, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and each applicable administrative
order, directed duty, request, license, authorization and permit of, and
agreement with, any Governmental Authority, in each case whether or not having
the force of law.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the amount
thereof, or the renewal thereof.

 

“L/C Issuer” means Wells Fargo in its capacity as issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit hereunder (which
successor may only be a Lender selected by the Agent in its discretion).  The
L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to
be issued

 

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by Affiliates of the L/C Issuer and/or for such Affiliate to act as an advising,
transferring, confirming and/or nominated bank in connection with the issuance
or administration of any such Letter of Credit, in which case the term “L/C
Issuer” shall include any such Affiliate with respect to Letters of Credit
issued by such Affiliate.

 

“L/C Obligations” means, as at any date of determination, the aggregate undrawn
amount available to be drawn under all outstanding Letters of Credit.  For
purposes of computing the amounts available to be drawn under any Letter of
Credit, the amount of such Letter of Credit shall be determined in accordance
with Section 1.05.  For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of any Rule under the ISP
or any article of the UCP, such Letter of Credit shall be deemed to be
“outstanding” in the amount so remaining available to be drawn.

 

“Lead Borrower” has the meaning assigned to such term in the preamble of this
Agreement.

 

“Lease” means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which a Loan Party is entitled to the use or occupancy
of any space in a structure, land, improvements or premises for any period of
time.

 

“Lender” has the meaning specified in the introductory paragraph hereto.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender
as such Lender may from time to time notify the Lead Borrower and the Agent.

 

“Letter of Credit” means each Standby Letter of Credit and each Commercial
Letter of Credit issued hereunder.

 

“Letter of Credit Application” means an application for the issuance or
amendment of a Letter of Credit in the form from time to time in use by the L/C
Issuer.

 

“Letter of Credit Disbursement” means a payment made by the L/C Issuer pursuant
to a Letter of Credit.

 

“Letter of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(l).

 

“Letter of Credit Indemnified Costs” has the meaning specified in
Section 2.03(f).

 

“Letter of Credit Related Person” has the meaning specified in Section 2.03(f).

 

“Letter of Credit Sublimit” means an amount equal to $5,000,000.  The Letter of
Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. 
A permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less than
the Letter of

 

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Credit Sublimit, then the Letter of Credit Sublimit shall be reduced to an
amount equal to (or, at Lead Borrower’s option, less than) the Aggregate
Commitments.

 

“LIBO Borrowing” means a Committed Borrowing comprised of LIBO Rate Loans.

 

“LIBO Rate” means for any Interest Period with respect to a LIBO Rate Loan, the
rate per annum equal to the London Interbank Offered Rate as appearing on
LIBOR01 page as published by Reuters (or other commercially available source
providing quotations of LIBOR as designated by the 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 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 Rate Loan being made, continued or converted by Wells Fargo and with a term
equivalent to such Interest Period would be offered to Wells Fargo by major
banks in the London interbank eurodollar market in which Wells Fargo
participates at their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.

 

“LIBO Rate Loan” means a Committed Loan that bears interest at a rate based on
the Adjusted LIBO Rate.

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment
for security, deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or preferential arrangement in the nature of a
security interest of any kind or nature whatsoever (including any conditional
sale, Capital Lease Obligation, Synthetic Lease Obligation, or other title
retention agreement, any easement, right of way or other encumbrance on title to
real property, and any financing lease having substantially the same economic
effect as any of the foregoing) and (b) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities.

 

“Loan Account” has the meaning assigned to such term in Section 2.10(a).

 

“Loan Cap” means, at any time of determination, the lesser of (a) the Aggregate
Commitments or (b) the Borrowing Base.

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the
Credit Card Notifications, the Security Documents, the Facility Guaranty, and
any other instrument or agreement now or hereafter executed and delivered in
connection herewith, each as amended and in effect from time to time.

 

“Loan Parties” means, collectively, the Borrowers and each Guarantor.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or financial condition of the Loan Parties and their Subsidiaries
taken as a whole; (b) a material impairment of the ability of the Loan Parties,
taken as a whole, to perform their obligations under any Loan Documents; or
(c) a material

 

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impairment of the rights and remedies of the Agent or any Lender under any Loan
Document or a material adverse effect upon the legality, validity, binding
effect or enforceability against the Loan Parties, taken as a whole, of the Loan
Documents.  In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event in and of itself does
not have such effect, a Material Adverse Effect shall be deemed to have occurred
if the cumulative effect of such event and all other then existing events would
result in a Material Adverse Effect.

 

“Material Contract” means, with respect to any Person, each contract to which
such Person is a party as to which the breach, nonperformance, or cancellation
by any party thereto would have a Material Adverse Effect.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the
Loan Parties in an aggregate principal amount exceeding $2,500,000.   For
purposes of determining the amount of Material Indebtedness at any time, (a) the
amount of the obligations in respect of any Swap Contract at such time shall be
calculated at the Swap Termination Value thereof, (b) undrawn committed or
available amounts shall be included, and (c) all amounts owing to all creditors
under any combined or syndicated credit arrangement shall be included.

 

“Maturity Date” means July 25, 2018.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Lead Borrower or any ERISA Affiliate
makes or is obligated to make contributions or has made or been obligated to
make contributions.

 

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or
any of its Subsidiaries, or any Extraordinary Receipt received or paid to the
account of any Loan Party or any of its Subsidiaries, the excess, if any, of
(i) the sum of cash and cash equivalents received by any Loan Party in
connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the sum of
(A) the principal amount of, premium or penalty, if any, interest and other
amounts on any Indebtedness that is secured by the applicable asset by a Lien
permitted hereunder which is senior to the Agent’s Lien on such asset and that
is required to be repaid (or to establish an escrow for the future repayment
thereof) in connection with such transaction (other than Indebtedness under the
Loan Documents) plus (B) the reasonable and customary out-of-pocket fees and
expenses incurred by such Loan Party or such Subsidiary in connection with such
transaction (including, without limitation, investment banking fees, appraisals,
and brokerage, advisor, accounting, legal, title and recording and transfer tax
expenses, fees and commissions) paid by any Loan Party to third parties (other
than Affiliates)) plus (C) amounts provided as a funded reserve against (x) any
liabilities under any indemnification obligations or purchase price adjustment
associated with such Disposition or (y) any taxes paid or reasonably estimated
to be payable in connection therewith; and

 

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(b)           with respect to the sale or issuance of any Equity Interest by any
Loan Party or any of its Subsidiaries, or the incurrence or issuance of any
Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the
sum of the cash and cash equivalents received in connection with such
transaction over (ii) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses and fees, incurred by such Loan
Party or such Subsidiary in connection therewith (including, without limitation,
investment banking fees, appraisals, and brokerage, advisor, accounting and
legal expenses, fees and commissions).

 

“Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

 

“Note” means a promissory note made by the Borrowers in favor of a Lender
requesting a such promissory note as evidence of the Committed Loans made by
such Lender, substantially in the form of Exhibit B.

 

“NPL” means the National Priorities List under CERCLA.

 

“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 with
respect to any Committed 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, fees, costs, expenses and indemnities
that accrue after the commencement by or against any Loan Party or any
Subsidiary thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest,
fees, costs, expenses and indemnities are allowed claims in such proceeding, and
(b) any Other Liabilities; provided that the Obligations shall not include any
Excluded Swap Obligations.

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and (d) in each case, all shareholder or other
equity holder agreements, voting trusts and similar arrangements to which such
Person is a party or which is applicable to its Equity Interests and all other
arrangements relating to the Control or management of such Person.

 

“Other Liabilities” means (a) any obligation on account of (i) any Cash
Management Services furnished to any of the Loan Parties or any of their
Subsidiaries and/or (ii) any transaction with the Agent or any of its
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.

 

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“Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

 

“Outstanding Amount” means (i) with respect to Committed Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of Committed Loans occurring on such
date; and (ii) with respect to any L/C Obligations on any date, the amount of
such L/C Obligations on such date after giving effect to any L/C Credit
Extension occurring on such date and any other changes in the aggregate amount
of the L/C Obligations as of such date.

 

“Overadvance” means a Credit Extension to the extent that, immediately after its
having been made, Availability is less than zero.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Lead Borrower
or any ERISA Affiliate or to which the Lead Borrower or any ERISA Affiliate
contributes or has an obligation to contribute.

 

“Permitted Acquisition” means an Acquisition in which all of the following
conditions are satisfied:

 

(a)           No Default or Event of Default then exists or would arise from the
consummation of such Acquisition;

 

(b)           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;

 

(c)           The Lead Borrower shall have furnished the Agent with fifteen (15)
days’ prior written notice (or such shorter period as the Agent may agree) of
such intended Acquisition and shall have furnished the Agent with (i) a current
draft of the primary acquisition documents (and final copies thereof as and when
executed) and (ii) to the extent requested by the Agent, (w) a summary of any
due diligence undertaken by the Loan Parties in connection with such
Acquisition, (x) appropriate financial statements of the Person which is the
subject of such Acquisition, (y) pro forma projected financial statements for
the twelve (12) month period following such Acquisition after giving effect to
such Acquisition (including balance sheets, cash

 

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flows and income statements by month for the acquired Person, individually, and
on a Consolidated basis with all Loan Parties), and (z) such other information
as the Agent may reasonably require, all of which shall be in a form reasonably
satisfactory to the Agent;

 

(d)           If the proceeds of any Committed Loan are used to fund such
Acquisition, the legal structure of the Acquisition shall be reasonably
acceptable to the Agent in its Permitted Discretion;

 

(e)           After giving effect to the Acquisition, if the Acquisition is an
Acquisition of the Equity Interests, a Loan Party shall acquire and own,
directly or indirectly, a majority of the Equity Interests in the Person being
acquired and shall Control a majority of any voting interests or shall otherwise
Control the governance of the Person being acquired;

 

(f)            Any assets acquired shall be utilized in, and if the Acquisition
involves a merger, consolidation or Acquisition of Equity Interests, 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;

 

(g)           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 or as a Guarantor, as the Agent shall
determine, and the Agent shall have received (or shall receive within a time
period reasonably acceptable to the Agent following the consummation of such
Permitted Acquisition) a first priority (subject to Permitted Encumbrances
having priority by operation of applicable Law) security and/or mortgage
interest in such Subsidiary’s Equity Interests, Inventory, Accounts and other
property of the same nature as constitutes collateral under the Security
Documents; and

 

(h)           After giving pro forma effect to such Acquisition, and on a
projected basis as of the end of each Fiscal Month during any subsequent
projected twelve (12) Fiscal Months, Availability will be equal to or greater
than 30% of the Loan Cap, and the Loan Parties shall deliver to the Agent
evidence of satisfaction of the condition contained in this clause (i) on a
basis (including, without limitation, giving due consideration to results for
prior periods) reasonably satisfactory to the Agent.

 

“Permitted Discretion” means a determination made by the Agent in the exercise
of its reasonable credit judgment, exercised in good faith in accordance with
customary business practices for comparable asset-based lending transactions in
the retail industry.

 

“Permitted Disposition” means any of the following:

 

(a)           Dispositions of inventory in the ordinary course of business;

 

(b)           bulk sales of other Dispositions of the Inventory of a Loan Party
not in the ordinary course of business in connection with Store closings, at
arm’s length, provided, that

 

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such Store closures and related sales or other Inventory Dispositions shall not
exceed (i) in any Fiscal Year of the Lead Borrower and its Subsidiaries, eight
percent (8.0%) of the number of the Loan Parties’ Stores as of the beginning of
such Fiscal Year (net of new Store openings and Store relocations (A) occurring
substantially contemporaneously with the related Store closure date or
(B) wherein a binding lease has been entered into on or prior to the related
Store closure date) and (ii) in the aggregate from and after the Closing Date,
fifteen percent (15.0%) of the number of the Loan Parties’ Stores in existence
as of the Closing Date (net of new Store openings and Store relocations
(A) occurring substantially contemporaneously with the related Store closure
date or (B) wherein a binding lease has been entered into on or prior to the
related Store closure date), provided, that all sales of Inventory in connection
with Store closings in a transaction or series of related transactions which in
the aggregate involve Inventory having a retail value greater than $1,500,000
shall be in accordance with liquidation agreements and with professional
liquidators reasonably acceptable to the Agent; provided, further that (A) all
Net Proceeds received in connection therewith are applied to the Obligations if
then required in accordance with Section 2.04 hereof and (B) no such liquidation
agreement or professional liquidator shall be required to the extent such sales
or other Dispositions of Inventory are limited to a single store;

 

(c)           non-exclusive licenses of Intellectual Property of a Loan Party or
any of its Subsidiaries in the ordinary course of business;

 

(d)           licenses for the conduct of licensed departments within the Loan
Parties’ Stores in the ordinary course of business; provided that, if requested
by the Agent, the Agent shall have entered into an intercreditor agreement with
the Person operating such licensed department on terms and conditions reasonably
satisfactory to the Agent;

 

(e)           Dispositions of Equipment in the ordinary course of business that
is worn, damaged, obsolete or, in the judgment of a Loan Party, no longer useful
or necessary in its business or that of any Subsidiary;

 

(f)            sales, transfers and Dispositions among the Loan Parties or by
any Subsidiary to a Loan Party;

 

(g)           sales, transfers and Dispositions by any Subsidiary which is not a
Loan Party to another Subsidiary that is not a Loan Party;

 

(h)           (i) the making of Permitted Investments, (ii) the granting of or
suffering to permit of Permitted Encumbrances, (iii) transactions permitted
under Section 7.04, (iv) the making of Restricted Payments permitted under
Section 7.06, (v) the payment of Indebtedness to the extent not prohibited by
Section 7.07, and (vi) any casualty event or condemnation;

 

(i)            the sale or abandonment of Intellectual Property of a Loan Party
or any of its Subsidiaries in the ordinary course of business that is not
material and is no longer used or useful in the business of any Loan Party;

 

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(j)            Dispositions by or of or the dissolution of Adrienne Victoria,
LLC, a Delaware limited liability company (including the Equity Interests
thereof);

 

(k)           leases, subleases, licenses or sublicenses (including the
provision of software under an open source license) entered into by a Loan Party
or any Subsidiary or terminated by a Loan Party or any Subsidiary, in each case,
in the ordinary course of business of such Person and which do not materially
interfere with the business of the Loan Parties, taken as a whole;

 

(l)            so long as no Event of Default is continuing, Dispositions of
Cash Equivalents;

 

(m)          so long as no Change of Control would result therefrom, the
issuance and sale by the Lead Borrower of Equity Interests of the Lead Borrower
(including any purchase option, call or similar right of a third party with
respect to the Equity Interests of the Lead Borrower) after the date hereof;

 

(n)           the termination of Leases in the ordinary course of business; and

 

(o)           other Dispositions of property (other than assets included in the
Borrowing Base) of the Loan Parties or their Subsidiaries in an aggregate amount
not to exceed $750,000 in any Fiscal Year.

 

“Permitted Encumbrances” means:

 

(a)           Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 6.04;

 

(b)           carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by applicable Law, arising in the ordinary course
of business and securing obligations that are not overdue by more than sixty
(60) days or are being contested in compliance with Section 6.04;

 

(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, other than any Lien imposed by ERISA;

 

(d)           deposits to secure the performance of bids, trade contracts and
leases (other than Indebtedness for borrowed money), statutory obligations,
customs, surety and appeal bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;

 

(e)           Liens in respect of judgments that would not constitute an Event
of Default hereunder;

 

(f)            easements, covenants, conditions, restrictions, building code
laws, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising

 

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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
materially interfere with the ordinary conduct of business of the Loan Parties,
taken as a whole, and such other minor title defects or survey matters that are
disclosed by current surveys that, in each case, do not materially interfere
with the current use of the real property;

 

(g)           Liens existing on the Closing Date and listed on Schedule 7.01 and
any Permitted Refinancings thereof;

 

(h)           Liens on fixed or capital assets acquired by any Loan Party which
are permitted under clause (c) of the definition of Permitted Indebtedness so
long as (i) such Liens and the Indebtedness secured thereby are incurred prior
to or within one hundred and eighty (180) days after such acquisition, (ii) the
Indebtedness secured thereby does not exceed the cost of acquisition of such
fixed or capital assets and (iii) such Liens shall not extend to any other
property or assets of the Loan Parties (other than Replacement Assets);

 

(i)            Liens in favor of the Agent;

 

(j)            Liens of landlords and lessors in respect of rent not past due
more than 15 days unless being contested in good faith pursuant to the
provisions of Section 6.04 hereof;

 

(k)           possessory Liens in favor of brokers and dealers arising in
connection with the acquisition or disposition of Investments owned as of the
Closing Date and Permitted Investments, provided that such liens (a) attach only
to such Investments and (b) secure only obligations incurred in the ordinary
course and arising in connection with the acquisition or disposition of such
Investments and not any obligation in connection with margin financing;

 

(l)            banker’s liens, liens in favor of securities intermediaries,
rights of setoff or similar rights and remedies as to deposit accounts or
securities accounts or other funds maintained with depository institutions or
securities intermediaries arising solely by virtue of any statutory or common
law;

 

(m)          Liens arising from precautionary UCC filings regarding “true”
operating leases or, to the extent permitted under the Loan Documents, the
consignment of goods to a Loan Party;

 

(n)           voluntary Liens on property (other than property of the type
included in the Borrowing Base) in existence at the time such property is
acquired pursuant to a Permitted Acquisition or other Permitted Investment on
such property of a Subsidiary of a Loan Party in existence at the time such
Subsidiary is acquired pursuant to a Permitted Acquisition or other Permitted
Investment; provided, that such Liens are not incurred in connection with or in
anticipation of such Permitted Acquisition or other Permitted Investment and do
not attach to any other assets of any Loan Party or any Subsidiary (other than
Replacement Assets);

 

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(o)           Liens in favor of customs and revenues authorities imposed by
applicable Law arising in the ordinary course of business in connection with the
importation of goods solely to the extent the following conditions are
satisfied: (A) such Liens secure obligations that are being contested in good
faith by appropriate proceedings, (B) the applicable Loan Party or Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (C) such contest effectively suspends collection of the contested
obligation and enforcement of any Lien securing such obligation;

 

(p)           Liens or rights of setoff against credit balances of any Loan
Party with Credit Card Issuers or Credit Card Processors or amounts owing by
such Credit Card Issuers or Credit Card Processors to such Loan Party in the
ordinary course of business;

 

(q)           Liens solely on any Cash deposits or Cash Equivalents of any Loan
Party (i) in connection with any letter of intent or purchase agreement in
respect of any Permitted Acquisition or (ii) in the ordinary course of business
of the Loan Parties to secure the performance of the Loan Parties’ obligations
under the terms of a lease;

 

(r)            Liens constituting interest or title of a lessor, sublessor,
licensor or sublicensor or secured by a lessor’s sublessor’s, licensor’s or
sublicensor’s interest under a lease entered into by the Loan Parties in the
ordinary course of business;

 

(s)            Liens on consigned Inventory held for sale by the Loan Parties on
behalf of a third party in the ordinary course of business in an amount not to
exceed $750,000 at any time outstanding;

 

(t)            Liens on insurance policies owned by any Loan Party and the
proceeds thereof securing the financing of the premiums with respect thereto;

 

(u)           Liens on the Equity Interests of Lead Borrower in favor of third
parties consisting of any purchase options, calls or similar rights of third
parties; and

 

(v)           other Liens securing obligations (other than for borrowed money)
in an aggregate principal amount not exceeding $750,000 at any one time
outstanding.

 

“Permitted Indebtedness” means each of the following:

 

(a)           Indebtedness outstanding on the Closing Date and listed on
Schedule 7.03 and any Permitted Refinancing thereof;

 

(b)           Indebtedness of any Loan Party to any other Loan Party;

 

(c)           purchase money Indebtedness of any Loan Party to finance the
acquisition of any personal property consisting solely of 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 Permitted

 

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Refinancings thereof, provided, however, that the aggregate principal amount of
Indebtedness permitted by this clause (c) shall not exceed $3,500,000 at any
time outstanding and further provided that, if requested by the Agent, the Loan
Parties shall use commercially reasonable efforts to cause the holders of such
Indebtedness to enter into a Collateral Access Agreement on terms reasonably
satisfactory to the Agent;

 

(d)           obligations (contingent or otherwise) of any Loan Party or any
Subsidiary thereof existing or arising under any Swap Contract, provided that
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates, and not for purposes
of speculation or taking a “market view”;

 

(e)           contingent liabilities under export or import indemnities, customs
and revenue bonds, performance, bid, appeal and surety bonds and performance and
completion guarantees or similar obligations or obligations incurred in respect
of letters of credit, bank guarantees or similar instruments related thereto, in
each case, incurred in the ordinary course of business, including in respect of
workers compensation claims, health, disability or other employee benefits or
property, casualty or liability insurance or self-insurance or other
Indebtedness with respect to reimbursement-type obligations regarding worker
compensation claims;

 

(f)            Indebtedness constituting customary indemnification, adjustment
of purchase price or similar obligations or deferred purchase price (including
earn-outs or similar obligations), in each case, with respect to any Permitted
Acquisition or Permitted Disposition, provided that any such Indebtedness in an
original principal amount in excess of $250,000 individually or $500,000 in the
aggregate with respect to a deferred purchase price (including earn-outs or
similar obligations but excluding customary indemnification obligations) has a
maturity which extends beyond the Maturity Date and is otherwise on terms
reasonably acceptable to the Agent, and is subordinated to the Obligations on
terms reasonably acceptable to the Agent;

 

(g)           Indebtedness of any Person that becomes a Subsidiary of a Loan
Party in a Permitted Acquisition, which Indebtedness is existing at the time
such Person becomes a Subsidiary of a Loan Party (other than Indebtedness
incurred solely in contemplation of such Person’s becoming a Subsidiary of a
Loan Party);

 

(h)           the Obligations;

 

(i)            unsecured Indebtedness in the aggregate principal amount of up to
$250,000 at any time outstanding (but excluding the issuance, redemption or
repurchase of Disqualified Stock), provided that, as to any such Indebtedness
(i) such Indebtedness shall be on commercially reasonable terms and conditions
with market rate pricing and shall have a maturity date that is at least
ninety-one (91) days after the Maturity Date and (ii) as of the date

 

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of the incurrence of any such Indebtedness and after giving effect thereto, no
Event of Default shall exist or have occurred and be continuing;

 

(j)            unsecured guarantees made by any Loan Party in the ordinary
course of business of the obligations of suppliers, customers, franchisees and
licensees of the Loan Parties;

 

(k)           guarantees by any Loan Party of Indebtedness of any other Loan
Party with respect to Indebtedness otherwise permitted to be incurred pursuant
to Section 7.03;

 

(l)            Indebtedness consisting of (i) the financing of insurance
premiums or (ii) take or pay obligations contained in supply arrangements, in
each case, in the ordinary course of business;

 

(m)          Indebtedness representing deferred compensation to employees of the
Loan Parties incurred in the ordinary course of business;

 

(n)           cash management obligations and other Indebtedness in respect of
netting services, automatic clearinghouse arrangements, overdraft protections,
employee credit card programs and other cash management and similar arrangements
in the ordinary course of business;

 

(o)           to the extent constituting Indebtedness, Investments permitted
under Section 7.02;

 

(p)           Unsecured Subordinated Indebtedness not otherwise specifically
described herein in an aggregate principal amount not to exceed $1,000,000 at
any time outstanding, provided that (i) the terms of such Indebtedness are
reasonably acceptable to the Agent, (ii) the maturity date of such Indebtedness
shall be at least 91 days after the Maturity Date and (iii) the amount of any
fees and expenses associated with such Indebtedness shall be reasonably
acceptable to the Agent; and

 

(q)           other unsecured Indebtedness in an aggregate amount not to exceed
$750,000 at any time outstanding.

 

“Permitted Investments” means each of the following:

 

(a)           readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition thereof; provided that the full faith and credit of the
United States of America is pledged in support thereof;

 

(b)           marketable direct obligations issued by any state of the United
States or any political subdivision of any such state or any public
instrumentality thereof, in each case

 

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maturing within one year after such date and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody’s;

 

(c)           commercial paper issued by any Person organized under the laws of
any state of the United States of America and rated at least “Prime-1” (or the
then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent
grade) by S&P at the time of acquisition of such commercial paper, in each case
with maturities of not more than 270 days from the date of acquisition thereof;

 

(d)           time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) at the time of acquisition (A) is a
Lender or (B) is organized under the laws of the United States of America, any
state thereof or the District of Columbia or is the principal banking subsidiary
of a bank holding company organized under the laws of the United States of
America, any state thereof or the District of Columbia, and is a member of the
Federal Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c) of this definition and (iii) has combined
capital and surplus of at least $1,000,000,000, in each case with maturities of
not more than one year from the date of acquisition thereof;

 

(e)           fully collateralized repurchase agreements with a term of not more
than thirty (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
(d) above or with any primary dealer and having a market value at the time that
such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such counterparty entity with whom such repurchase
agreement has been entered into;

 

(f)            Investments, classified in accordance with GAAP as current assets
of the Loan Parties, in any money market fund, mutual fund, or other investment
companies that are registered under the Investment Company Act of 1940, as
amended, which are administered by financial institutions that have the highest
rating obtainable from either Moody’s or S&P, and substantially all of the
assets of which consist of one or more of the types of securities described in
clauses (a) through (e) above;

 

(g)           Investments existing on the Closing Date and any modifications,
replacements, renewals, reinvestments or extensions thereof, and set forth on
Schedule 7.02, but not any increase in the amount thereof;

 

(h)           (i)            Investments by any Loan Party and its Subsidiaries
in their respective Subsidiaries outstanding on the Closing Date, and
(ii) additional Investments by any Loan Party and its Subsidiaries in Loan
Parties;

 

(i)            Investments consisting of extensions of credit in the nature of
accounts receivable or notes receivable arising from the grant of trade credit
in the ordinary course of

 

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business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss;

 

(j)            Guarantees constituting Permitted Indebtedness;

 

(k)           as long as no Event of Default exists or would arise from the
making of such Investment, Investments by any Loan Party in Swap Contracts
entered into in the ordinary course of business and for bona fide business (and
not speculative purposes) to protect against fluctuations in interest rates in
respect of the Obligations;

 

(l)            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;

 

(m)          as long as no Event of Default exists or would arise from the
making of such Investment, advances, loans or extensions of credit to officers,
directors and employees of the Loan Parties and Subsidiaries in the ordinary
course of business in an amount not to exceed $100,000 to any individual at any
time or in an aggregate amount not to exceed $250,000 at any time outstanding,
for travel, entertainment, relocation and analogous ordinary business purposes;

 

(n)           Investments constituting Permitted Acquisitions or deposits in
connection with Permitted Acquisitions;

 

(o)           Capital contributions, loans or advances made by any Loan Party to
another Loan Party;

 

(p)           guarantees by any Loan Party of leases (other than Capitalized
Leases) or of other obligations that do not constitute Indebtedness;

 

(q)           promissory notes and other noncash consideration permitted to be
received in connection with Permitted Dispositions, Restricted Payments
permitted to be made in accordance with Section 7.06 and Permitted Acquisitions;

 

(r)            Investments in the ordinary course of business consisting of
endorsements for collection or deposit and customary trade arrangements with
customers;

 

(s)            advances of payroll payments to employees in the ordinary course
of business;

 

(t)            Investments held by a Loan Party acquired after the Closing Date
pursuant to a Permitted Acquisition or of a Person merged into such Loan Party
or merged or consolidated with such Loan Party (other than the Lead Borrower) in
accordance with Section 7.04 after the Closing Date to the extent that such
Investments were not made in contemplation of or in connection with such
Permitted Acquisition, merger or consolidation and were in existence on the date
of such Permitted Acquisition, merger or consolidation;

 

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(u)           so long as no Change of Control would result
therefrom, Investments to the extent that payment for such Investments is made
solely with Equity Interests (other than Disqualified Stock) of the Lead
Borrower;

 

(v)           deposits, rebates, prepayments and other credits to suppliers made
in the ordinary course of business;

 

(w)          deposits for leases, utilities and letters of credit in the
ordinary course of business; and

 

(x)           as long as no Event of Default exists or would arise from the
making of such Investment, other Investments in an aggregate amount not to
exceed $750,000 at any time outstanding;

 

provided, however, that notwithstanding the foregoing, after the occurrence and
during the continuance of a Cash Dominion Event, no such Investments specified
in clauses (a) through (g) and clause (v) shall be permitted unless (i) either
(A) no Committed Loans, or, if then required to be Cash Collateralized, Letters
of Credit are then outstanding, or (B) the Investment is a temporary Investment
pending expiration of an Interest Period for a LIBO Rate Loan, the proceeds of
which Investment will be applied to the Obligations after the expiration of such
Interest Period,  and (ii) such Investments shall be pledged to the Agent as
additional collateral for the Obligations pursuant to such agreements as may be
reasonably required by the Agent.

 

“Permitted Overadvance” means an Overadvance made by the Agent, in its
discretion, which is made for one or more of the following reasons:

 

(a)           to maintain, protect or preserve the Collateral and/or the Credit
Parties’ rights under the Loan Documents or which is otherwise for the benefit
of the Credit Parties;

 

(b)           to enhance the likelihood of, or to maximize the amount of,
repayment of any Obligation; or

 

(c)           to pay any other amount chargeable to any Loan Party hereunder;

 

provided however, that in no event shall the Agent make a Permitted Overadvance,
if after giving effect thereto, the principal amount of the Credit Extensions
would exceed the Aggregate Commitments (as in effect prior to any termination of
the Commitments pursuant to Section 2.05  or Section 8.02 hereof).

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting a
Permitted Refinancing); provided, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
Refinanced (plus unpaid accrued interest and premiums thereon and underwriting
discounts, defeasance costs, fees, commissions and expenses), (b) the weighted
average life to maturity

 

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of such Permitted Refinancing is greater than or equal to the weighted average
life to maturity of the Indebtedness being Refinanced (c) such Permitted
Refinancing shall not require any scheduled principal payments due prior to the
Maturity Date in excess of, or prior to, the scheduled principal payments due
prior to such Maturity Date for the Indebtedness being Refinanced, (d) if the
Indebtedness being Refinanced is subordinated in right of payment to the
Obligations under this Agreement, such Permitted Refinancing shall be
subordinated in right of payment to such Obligations on terms at least as
favorable (taken as a whole in all material respects) to the Credit Parties as
those contained in the documentation governing the Indebtedness being
Refinanced, (e) no Permitted Refinancing shall have direct or indirect obligors
who were not also obligors of the Indebtedness being Refinanced, or greater
guarantees or security, than the Indebtedness being Refinanced, (f) such
Permitted Refinancing shall be otherwise on terms (excluding for these purposes
pricing terms, which shall be governed by clause (g)), taken as a whole, not
materially less favorable to the Credit Parties than those contained in the
documentation governing the Indebtedness being Refinanced, including, without
limitation, with respect to financial and other covenants and events of default,
(g) the interest rate applicable to any such Permitted Refinancing shall not
exceed the greater of (i) the then applicable market interest rate and (ii) the
interest rate on the Indebtedness being refinanced, and (h) at the time thereof,
no Default or Event of Default shall have occurred and be continuing.

 

“Permitted Reorganization” means the reorganization of the Lead Borrower
contemplated by the Form of Agreement and Plan of Merger attached as Schedule
1.03 hereto.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, limited partnership,
Governmental Authority or other entity.

 

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by any Loan Party or, with respect to any
such plan that is subject to Section 412 of the Code or Title IV of ERISA, any
ERISA Affiliate, other than a Multiemployer Plan.

 

“Prepayment Event” means:

 

(a)           any Disposition (including pursuant to a sale and leaseback
transaction) of any property or asset of a Loan Party (other than, prior to the
occurrence of a Cash Dominion Event, a Permitted Disposition);

 

(b)           any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of (and payments in
lieu thereof), any property or asset of a Loan Party, 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 Agent or (ii) prior to the occurrence
of a Cash Dominion Event, the proceeds therefrom either (x) do not exceed
$500,000 or (y) are deposited into a segregated account and utilized for
purposes of replacing or repairing the assets in respect of which such proceeds,
awards or payments were received within 180 days of the occurrence of the damage
to or loss of the assets being repaired or replaced;

 

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(c)           the issuance by a Loan Party of any Equity Interests, other than
any such issuance of Equity Interests (i) to a Loan Party, (ii) as consideration
for a Permitted Acquisition or (iii) as a compensatory issuance to any employee,
director, or consultant (including under any option plan);

 

(d)           the incurrence by a Loan Party of any Indebtedness for borrowed
money other than Permitted Indebtedness; or

 

(e)           the receipt by any Loan Party of any Extraordinary Receipts;
provided that, so long as no Cash Dominion Event is continuing, only the receipt
of Extraordinary Receipts in an amount greater than $500,000 shall constitute a
Prepayment Event hereunder.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan
Party that has total assets exceeding $10,000,000 at the time the relevant
Guarantee or grant of the relevant security interest becomes effective with
respect to such Swap Obligation or such other person as constitutes an “eligible
contract participant” under the Commodity Exchange Act or any regulations
promulgated thereunder and can cause another person to qualify as an “eligible
contract participant” at such time by entering into a keepwell under
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Real Estate” means all Leases and all land, together with the buildings,
structures, parking areas, and other improvements thereon, now or hereafter
owned by any Loan Party, including all easements, rights-of-way, and similar
rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified by the Securities
Laws and shall be independent of the Lead Borrower and its Subsidiaries as
prescribed by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

 

“Replacement Assets” means, with respect to any properties or assets subject to
an existing Lien, any replacements, substitutions, attachments and accessions of
or to such properties or assets subject to such Lien under the terms of the
documentation creating such Lien at the time such properties or assets are
acquired (or, with respect to the acquisition of a Person that owns such assets,
the time such Person becomes a Subsidiary) and proceeds and products of the
properties or assets subject to such Lien.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

“Reports” has the meaning provided in Section 9.11(b).

 

“Request for Credit Extension” means (a) with respect to a Committed Borrowing,
conversion or continuation of Committed Loans, a Committed Loan Notice, and
(b) with respect to an L/C Credit

 

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Extension, a Letter of Credit Application and, if required by the L/C Issuer, a
Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as
applicable.

 

“Required Lenders” means, as of any date of determination, Lenders holding more
than 50% of the Aggregate Commitments or, if the commitment of each Lender to
make Committed Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02, Lenders holding in the
aggregate more than 50% of the Total Outstandings (with the aggregate amount of
each Lender’s risk participation and funded participation in L/C Obligations
being deemed “held” by such Lender for purposes of this definition); provided
that the Commitment of, and the portion of the Total Outstandings held or deemed
held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

 

“Reserves” means all Inventory Reserves and Availability Reserves.

 

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Loan Party or any of
the other individuals designated in writing to the Agent by an existing
Responsible Officer of a Loan Party as an authorized signatory of any
certificate or other document to be delivered hereunder.  Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to such Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.  Without limiting the foregoing, “Restricted Payments”
with respect to any Person shall also include all payments made by such Person
with any proceeds of a dissolution or liquidation of such Person.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

 

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the PCAOB.

 

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“Security Agreement” means the Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent, as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or replaced.

 

“Security Documents” means the Security Agreement, the Blocked Account
Agreements, the Credit Card Notifications, and each other security agreement or
other instrument or document executed and delivered to the Agent pursuant to
this Agreement or any other Loan Document granting a Lien to secure any of the
Obligations.

 

“Settlement Date” has the meaning provided in Section 2.13(a).

 

“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Lead Borrower and its Subsidiaries as of that date
determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise
unaccounted for.

 

“Solvent” and “Solvency” means, with respect to any Person as of any date of
determination, that (a) at fair valuations, the sum of such Person’s debts
(including contingent liabilities) is less than all of such Person’s assets,
(b) such Person is not engaged or about to engage in a business or transaction
for which the remaining assets of such Person are unreasonably small in relation
to the business or transaction or for which the property remaining with such
Person is an unreasonably small capital after giving due consideration to the
prevailing practices in the industry in which such Person is engaged, and
(c) such Person has not incurred and does not intend to incur, or reasonably
believe that it will incur, debts beyond its ability to pay such debts as they
become due (whether at maturity or otherwise), and (d) such Person is “solvent”
or not “insolvent”, as applicable within the meaning given those terms and
similar terms under applicable laws relating to fraudulent transfers and
conveyances.  For purposes of this definition, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability
(irrespective of whether such contingent liabilities meet the criteria for
accrual under Statement of Financial Accounting Standard No. 5).

 

“Standard Letter of Credit Practice” means, for the L/C Issuer, any domestic or
foreign Law or letter of credit practices applicable in the city in which the
L/C Issuer issued the applicable Letter of Credit or, for its branch or
correspondent, such Laws and practices applicable in the city in which it has
advised, confirmed or negotiated such Letter of Credit, as the case may be, in
each case, (a) which letter of credit practices are of banks that regularly
issue letters of credit in the particular city, and (b) which laws or letter of
credit practices are required or permitted under ISP or UCP, as chosen in the
applicable Letter of Credit.

 

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial
Letter of Credit and that (a) is used in lieu or in support of performance
guaranties or performance, surety or similar bonds (excluding appeal bonds)
arising in the ordinary course of business, (b) is used in lieu or in support of
stay or appeal bonds, (c) supports the payment of insurance premiums for
reasonably necessary

 

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casualty insurance carried by any of the Loan Parties, or (d) supports payment
or performance for identified purchases or exchanges of products or services in
the ordinary course of business.

 

“Standby Letter of Credit Agreement” means the Standby Letter of Credit
Agreement relating to the issuance of a Standby Letter of Credit in the form
from time to time in use by the L/C Issuer.

 

“Stated Amount” means at any time the maximum amount for which a Letter of
Credit may be honored.

 

“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 FRB to which the 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
Rate 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.

 

“Store” means any retail store (which may include any real property, fixtures,
equipment, inventory and other property related thereto) operated, or to be
operated, by any Loan Party.

 

“Subordinated Indebtedness” means Indebtedness which is expressly subordinated
in right of payment to the prior payment in full of the Obligations and which is
in form and on terms approved in writing by the Agent.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
Equity Interests having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned, or the management of
which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.  Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of a Loan Party.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the

 

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International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, 
(ii) the date on which the maturity of the Obligations is accelerated (or deemed
accelerated) and the Commitments are irrevocably terminated (or deemed
terminated) in accordance with Article VIII, or (iii) the termination of the
Commitments in accordance with the provisions of Section 2.05(a) hereof.

 

“Total Outstandings” means the aggregate Outstanding Amount of all Committed
Loans and all L/C Obligations.

 

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

 

“Type” means, with respect to a Committed Loan, its character as a Base Rate
Loan or a LIBO Rate Loan.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy

 

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hereunder is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New York, “Uniform Commercial Code” means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection or availability of such remedy, as the case may be.

 

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and
Practice for Documentary Credits 2007 Revision, International Chamber of
Commerce Publication No. 600 and any subsequent revision thereof adopted by the
International Chamber of Commerce on the date such Letter of Credit is issued.

 

“UFCA” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

“Uncapped Availability” means, as of any date of determination thereof by the
Agent, the result, if a positive number, of:

 

(a)           The Borrowing Base

 

Minus

 

(b)           The Total Outstandings.

 

“Unintentional Overadvance” means an Overadvance which, to the Agent’s
knowledge, did not constitute an Overadvance when made but which has become an
Overadvance resulting from changed circumstances beyond the control of the
Credit Parties, including, without limitation, a reduction in the Appraised
Value of property or assets included in the Borrowing Base, increase in Reserves
or misrepresentation by the Loan Parties.

 

“United States” and “U.S.” mean the United States of America.

 

“Unmatured Surviving Obligations” means Obligations under this Agreement and the
other Loan Documents that by their terms survive the termination of this
Agreement or the other Loan Documents but are not, as of the date of
determination, due and payable and for which no outstanding claim has been made.

 

“Weekly Borrowing Base Delivery Event” means either (i) the occurrence and
continuance of any Event of Default, or (ii) the failure of the Borrowers to
maintain Availability at least equal to fifteen percent (15%) of the Loan Cap. 
For purposes of this Agreement, the occurrence of a Weekly Borrowing Base
Delivery Event shall be deemed continuing until the earlier of (i) the date of
the waiver by the Agent of such Event of Default, (ii) if the Weekly Borrowing
Base Delivery Event arises as a result of the Borrowers’ failure to achieve
Availability as required hereunder, until such date as Availability has exceeded
fifteen percent (15%) of the Loan Cap for forty-five (45) consecutive calendar
days, or (iii) the date on which the Agent states that the applicable Weekly
Borrowing Base Delivery Event shall no longer be deemed to be continuing for
purposes of this Agreement.  The termination of a Weekly

 

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Borrowing Base Delivery Event as provided herein shall in no way limit, waive or
delay the occurrence of a subsequent Weekly Borrowing Base Delivery Event in the
event that the conditions set forth in this definition again arise.

 

“Wells Fargo” means Wells Fargo Bank, National Association and its successors.

 

1.02        Other Interpretive Provisions.  With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other
Loan Document:

 

(a)           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, (i) any definition of or reference to any agreement,
instrument or other document (including any Organization Document) 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
or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (iii) the words
“herein,” “hereof” and “hereunder,” and words of similar import when used in any
Loan Document, shall be construed to refer to such Loan Document in its entirety
and not to any particular provision thereof, (iv) all references in a Loan
Document to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, the Loan
Document in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending
replacing or interpreting such law and any reference to any law or regulation
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) 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.

 

(b)           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.”

 

(c)           Section headings herein and in the other Loan Documents are
included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.

 

(d)           Any reference herein or in any other Loan Document to the
satisfaction, repayment, or payment in full of the Obligations shall mean the
repayment in Dollars in full in cash or immediately available funds (or, in the
case of contingent reimbursement obligations

 

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with respect to Letters of Credit and Bank Products (other than Swap Contracts)
and any other contingent Obligation, including indemnification obligations,
providing Cash Collateralization) of all of the Obligations (including the
payment of any termination amount then applicable (or which would or could
become applicable as a result of the repayment of the other Obligations) under
Swap Contracts) other than (i) Unmatured Surviving Obligations, (ii) any
Obligations relating to Bank Products (other than Swap Contracts) that, at such
time, are allowed by the applicable Bank Product provider to remain outstanding
without being required to be repaid or Cash Collateralized, and (iii) any
Obligations relating to Swap Contracts that, at such time, are allowed by the
applicable provider of such Swap Contracts to remain outstanding without being
required to be repaid.

 

1.03        Accounting Terms

 

(a)           Generally.  All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data
(including financial ratios and other financial calculations) required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP
applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the Audited Financial Statements,
except as otherwise specifically prescribed herein and without including the
effect of any changes to lease accounting that requires the assets and
liabilities under operating leases to be recognized in any statement of
financial position.

 

(b)           Changes in GAAP.  If at any time any change in GAAP would affect
the computation of any requirement set forth in any Loan Document, and either
the Lead Borrower or the Required Lenders shall so request, the Agent, the
Lenders and the Lead Borrower shall negotiate in good faith to amend such ratio
or requirement to preserve the original intent thereof in light of such change
in GAAP (subject to the approval of the Required Lenders); provided that, until
so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Lead Borrower
shall provide to the Agent and the Lenders financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.

 

1.04        Times of Day.  Unless otherwise specified, all references herein to
times of day shall be references to Eastern time (daylight or standard, as
applicable).

 

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

 

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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.

 

ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01                        Committed Loans; Reserves.  (a) Subject to the terms
and conditions set forth herein, each Lender severally agrees to make loans
(each such loan, a “Committed Loan”) to the Borrowers from time to time, on any
Business Day during the Availability Period, in an aggregate amount not to
exceed at any time outstanding the lesser of (x) the amount of such Lender’s
Commitment, or (y) such Lender’s Applicable Percentage of the Borrowing Base;
subject in each case to the following limitations:

 

(i)                                     after giving effect to any Committed
Borrowing, the Total Outstandings shall not exceed the Loan Cap,

 

(ii)                                  after giving effect to any Committed
Borrowing, the aggregate Outstanding Amount of the Committed Loans of any
Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of
all L/C Obligations shall not exceed such Lender’s Commitment, and

 

(iii)                               The Outstanding Amount of all L/C
Obligations shall not at any time exceed the Letter of Credit Sublimit.

 

Within the limits of each Lender’s Commitment, and subject to the other terms
and conditions hereof, the Borrower may borrow under this Section 2.01, prepay
under Section 2.04, and reborrow under this Section 2.01.  Committed Loans may
be Base Rate Loans or LIBO Rate Loans, as further provided herein.

 

(b)                                 The Inventory Reserves and Availability
Reserves as of the Closing Date are set forth in the Borrowing Base Certificate
delivered pursuant to Section 4.01(c) hereof.

 

(c)                                  The Agent shall have the right, at any time
and from time to time after the Closing Date in its Permitted Discretion to
establish, modify or eliminate Reserves upon three (3) Business Days’ prior
notice to the Lead Borrower (during which period the Agent shall be available to
discuss any such proposed Reserve with the Borrowers; provided that no such
prior notice shall be required (1) at any time that an Event of Default is
continuing, (2) for changes to any Reserves resulting solely by virtue of
mathematical calculations of the amount of the Reserve in accordance with the
methodology of calculation previously utilized, or (3) for changes to Reserves
or establishment of additional Reserves if a Material Adverse Effect has
occurred or it would be reasonably likely that a Material Adverse Effect to the
Lenders would occur were such Reserve not changed or established prior to the
expiration of such three (3) Business Day period.  The amount of any
Availability Reserve established by the Agent shall have a reasonable
relationship to the event, condition or other matter that is the basis for such
Availability Reserve as determined by the Agent in its Permitted Discretion.  In

 

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the event that the Agent determines in its Permitted Discretion that (a) the
events, conditions or circumstances underlying the maintenance of any Reserve
shall cease to exist or (b) the liability that is the basis for any Reserve has
been reduced, then such Reserve shall be rescinded or reduced in an amount as
determined in the Agent’s Permitted Discretion.

 

2.02                        Borrowings, Conversions and Continuations of
Committed Loans.

 

(a)                                 Committed Loans shall be either Base Rate
Loans or LIBO Rate Loans as the Lead Borrower may request subject to and in
accordance with this Section 2.02.  Subject to the other provisions of this
Section 2.02, Committed Borrowings of more than one Type may be incurred at the
same time.

 

(b)                                 Each Committed Borrowing, each conversion of
Committed Loans from one Type to the other, and each continuation of LIBO Rate
Loans shall be made upon the Lead Borrower’s irrevocable notice to the Agent,
which may be given by telephone.  Each such notice must be received by the Agent
not later than 12:00 p.m. (i) three Business Days prior to the requested date of
any Committed Borrowing of, conversion to or continuation of LIBO Rate Loans or
of any conversion of LIBO Rate Loans to Base Rate Loans, and (ii) on the
requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by
the Lead Borrower pursuant to this Section 2.02(b) must be confirmed promptly by
delivery to the Agent of a written Committed Loan Notice or, at the discretion
of the Agent, an updated Borrowing Base Certificate as calculated after giving
effect to such Borrowing, appropriately completed and signed by a Responsible
Officer of the Lead Borrower (it being understood, for the avoidance of doubt,
that any updates to the Inventory and Credit Card Receivables amounts set forth
in the Borrowing Base Certificate shall be made only in accordance with
Section 6.02(b) hereof).  Each Committed Borrowing of, conversion to or
continuation of LIBO Rate Loans shall be in a principal amount of $1,000,000 or
a whole multiple of $500,000 in excess thereof.  Each Committed Loan Notice
(whether telephonic or written) shall specify (i) whether the Lead Borrower is
requesting a Committed Borrowing, a conversion of Committed Loans from one Type
to the other, or a continuation of LIBO Rate Loans, (ii) the requested date of
the Committed Borrowing, conversion or continuation, as the case may be (which
shall be a Business Day), (iii) the principal amount of Committed Loans to be
borrowed, converted or continued, (iv) the Type of Committed Loans to be
borrowed or to which existing Committed Loans are to be converted, and (v) if
applicable, the duration of the Interest Period with respect thereto.  If the
Lead Borrower fails to specify a Type of Committed Loan in a Committed Loan
Notice or if the Lead Borrower fails to give a timely notice requesting a
conversion or continuation, then the applicable Committed Loans shall be made
as, or converted to, Base Rate Loans.  Any such automatic conversion to Base
Rate Loans shall be effective as of the last day of the Interest Period then in
effect with respect to the applicable LIBO Rate Loans.  If the Lead Borrower
requests a Committed Borrowing of, conversion to, or continuation of LIBO Rate
Loans in any such Committed Loan Notice, but fails to specify an Interest
Period, it will be deemed to have specified an Interest Period of one month.

 

(c)                                  Following receipt of a Committed Loan
Notice, the Agent shall promptly notify each Lender of the amount of its
Applicable Percentage of the applicable Committed Loans, and if no timely notice
of a conversion or continuation is provided by the Lead Borrower, the Agent
shall notify

 

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each Lender of the details of any automatic conversion to Base Rate Loans
described in Section 2.02(b).  In the case of a Committed Borrowing, each Lender
shall make the amount of its Committed Loan available to the Agent in
immediately available funds at the Agent’s Office not later than 1:00 p.m. on
the Business Day specified in the applicable Committed Loan Notice.  Upon
satisfaction of the applicable conditions set forth in Section 4.02 (and, if
such Committed Borrowing is the initial Credit Extension, Section 4.01), the
Agent shall use reasonable efforts to make all funds so received available to
the Borrowers in like funds by no later than 4:00 p.m. on the day of receipt by
the Agent either by (i) crediting the account of the Lead Borrower on the books
of Wells Fargo with the amount of such funds or (ii) wire transfer of such
funds, in each case in accordance with instructions provided to (and reasonably
acceptable to) the Agent by the Lead Borrower.

 

(d)                                 The Agent, without the request of the Lead
Borrower, may advance any interest, fee, service charge (including direct wire
fees), Credit Party Expenses, or other payment to which any Credit Party is
entitled from the Loan Parties pursuant hereto or any other Loan Document and
may charge the same to the Loan Account notwithstanding that an Overadvance may
result thereby.  The Agent shall advise the Lead Borrower of any such advance or
charge promptly after the making thereof.  Such action on the part of the Agent
shall not constitute a waiver of the Agent’s rights and the Borrowers’
obligations under Section 2.04(c).  Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.02(d) shall bear
interest at the interest rate then and thereafter applicable to Base Rate Loans.

 

(e)                                  Except as otherwise provided herein, a LIBO
Rate Loan may be continued or converted only on the last day of an Interest
Period for such LIBO Rate Loan.  During the existence of a Default or an Event
of Default, no Committed Loans may be requested as, converted to or continued as
LIBO Rate Loans without the consent of the Required Lenders.

 

(f)                                   The Agent shall promptly notify the Lead
Borrower and the Lenders of the interest rate applicable to any Interest Period
for LIBO Rate Loans upon determination of such interest rate.  At any time that
Base Rate Loans are outstanding, the Agent shall notify the Lead Borrower and
the Lenders of any change in Wells Fargo’s prime rate used in determining the
Base Rate promptly following the public announcement of such change.

 

(g)                                  After giving effect to all Committed
Borrowings, all conversions of Committed Loans from one Type to the other, and
all continuations of Committed Loans as the same Type, there shall not be more
than six (6) Interest Periods in effect with respect to LIBO Rate Loans.

 

(h)                                 The Agent, the Lenders and the L/C Issuer
shall have no obligation to make any Committed Loan or to provide any Letter of
Credit if an Overadvance would result.  The Agent may, in its discretion, make
Permitted Overadvances without the consent of the Borrowers, the Lenders and the
L/C Issuer and the Borrowers and each Lender and L/C Issuer shall be bound
thereby.  A Permitted Overadvance is for the account of the Borrowers and shall
constitute a Base Rate Loan and an Obligation and shall be repaid by the
Borrowers in accordance with the provisions of Section 2.04(c).  The making of
any such Permitted Overadvance on any one occasion shall not obligate the Agent
or any Lender to

 

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make or permit any Permitted Overadvance on any other occasion or to permit such
Permitted Overadvances to remain outstanding. The making by the Agent of a
Permitted Overadvance shall not modify or abrogate any of the provisions of
Section 2.03 regarding the Lenders’ obligations to purchase participations with
respect to Letter of Credits.  The Agent shall have no liability for, and no
Loan Party or Credit Party shall have the right to, or shall, bring any claim of
any kind whatsoever against the Agent with respect to Unintentional Overadvances
regardless of the amount of any such Overadvance(s).

 

2.03                        Letters of Credit.

 

(a)                                 Subject to the terms and conditions of this
Agreement, upon the request of the Lead Borrower made in accordance herewith,
and prior to the Maturity Date, the L/C Issuer agrees to issue a requested
Letter of Credit for the account of the Loan Parties.  By submitting a request
to the L/C Issuer for the issuance of a Letter of Credit, the Borrowers shall be
deemed to have requested that the L/C Issuer issue the requested Letter of
Credit.  Each request for the issuance of a Letter of Credit, or the amendment,
renewal, or extension of any outstanding Letter of Credit, shall be irrevocable
and shall be made in writing pursuant to a Letter of Credit Application by a
Responsible Officer and delivered to the L/C Issuer and the Agent via
telefacsimile or other electronic method of transmission reasonably acceptable
to the L/C Issuer not later than 12:00 p.m. at least two Business Days (or such
other date and time as the Agent and the L/C Issuer may agree in a particular
instance in their sole discretion) prior to the requested date of issuance,
amendment, renewal, or extension.  Each such request shall be in form and
substance reasonably satisfactory to the L/C Issuer and (i) shall specify
(A) the amount of such Letter of Credit, (B) the date of issuance, amendment,
renewal, or extension of such Letter of Credit, (C) the proposed expiration date
of such Letter of Credit, (D) the name and address of the beneficiary of the
Letter of Credit, and (E) such other information (including, the conditions to
drawing, and, in the case of an amendment, renewal, or extension, identification
of the Letter of Credit to be so amended, renewed, or extended) as shall be
necessary to prepare, amend, renew, or extend such Letter of Credit, and
(ii) shall be accompanied by such Issuer Documents as the Agent or the L/C
Issuer may request or require, to the extent that such requests or requirements
are consistent with the Issuer Documents that the L/C Issuer generally requests
for Letters of Credit in similar circumstances.  The Agent’s records of the
content of any such request will be conclusive.

 

(b)                                 The L/C Issuer shall have no obligation to
issue a Letter of Credit if, after giving effect to the requested issuance,
(i) the Total Outstandings would exceed Loan Cap, (ii) the aggregate Outstanding
Amount of the Committed Loans of any Lender, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all L/C Obligations would exceed such
Lender’s Commitment, or (iii) the Outstanding Amount of the L/C Obligations
would exceed the Letter of Credit Sublimit;

 

(c)                                  In the event there is a Defaulting Lender
as of the date of any request for the issuance of a Letter of Credit, the L/C
Issuer shall not be required to issue or arrange for such Letter of Credit to
the extent (i) the Defaulting Lender’s participation with respect to such Letter
of Credit may not be reallocated pursuant to Section 9.15(b), or (ii) the L/C
Issuer has not otherwise entered into arrangements reasonably satisfactory to it
and the Borrowers to eliminate the L/C Issuer’s risk with respect to the
participation in such Letter of Credit of the Defaulting Lender, which
arrangements may

 

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include the Borrowers cash collateralizing such Defaulting Lender’s
participation with respect to such Letter of Credit in accordance with
Section 9.15(b).  Additionally, the L/C Issuer shall have no obligation to issue
a Letter of Credit if (A) any order, judgment, or decree of any Governmental
Authority or arbitrator shall, by its terms, purport to enjoin or restrain the
L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C
Issuer or any request or directive (whether or not having the force of Law) from
any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit
or request that the L/C Issuer refrain from the issuance of letters of credit
generally or such Letter of Credit in particular, or (B) the issuance of such
Letter of Credit would violate one or more policies of the L/C Issuer applicable
to letters of credit generally, or (C) if the expiry date of such requested
Letter of Credit would occur after the Letter of Credit Expiration Date, unless
either such Letter of Credit is Cash Collateralized on or prior to the date of
issuance of such Letter of Credit (or such later date as to which the Agent may
agree) or all the Lenders have approved such expiry date.

 

(d)                                 Each Letter of Credit shall be in form and
substance reasonably acceptable to the L/C Issuer, including the requirement
that the amounts payable thereunder must be payable in Dollars.  If the L/C
Issuer makes a payment under a Letter of Credit, the Borrowers shall pay to
Agent an amount equal to the applicable Letter of Credit Disbursement on the
Business Day such Letter of Credit Disbursement is made and, in the absence of
such payment, the amount of the Letter of Credit Disbursement immediately and
automatically shall be deemed to be a Committed Loan hereunder (notwithstanding
any failure to satisfy any condition precedent set forth in Section 4.02 hereof)
and, initially, shall bear interest at the rate then applicable to Committed
Loans that are Base Rate Loans. If a Letter of Credit Disbursement is deemed to
be a Committed Loan hereunder, the Borrowers’ obligation to pay the amount of
such Letter of Credit Disbursement to the L/C Issuer shall be automatically
converted into an obligation to pay the resulting Committed Loan.  Promptly
following receipt by the Agent of any payment from the Borrowers pursuant to
this paragraph, the Agent shall distribute such payment to the L/C Issuer or, to
the extent that the Lenders have made payments pursuant to Section 2.03(e) to
reimburse the L/C Issuer, then to such Lenders and the L/C Issuer as their
interests may appear.

 

(e)                                  Promptly following receipt of a notice of a
Letter of Credit Disbursement pursuant to Section 2.03(d), each Lender agrees to
fund its Applicable Percentage of any Committed Loan deemed made pursuant to
Section 2.03(d) on the same terms and conditions as if the Borrowers had
requested the amount thereof as a Committed Loan and the Agent shall promptly
pay to the L/C Issuer the amounts so received by it from the Lenders.  By the
issuance of a Letter of Credit (or an amendment, renewal, or extension of a
Letter of Credit) and without any further action on the part of the L/C Issuer
or the Lenders, the L/C Issuer shall be deemed to have granted to each Lender,
and each Lender shall be deemed to have purchased, a participation in each
Letter of Credit issued by the L/C Issuer, in an amount equal to its Applicable
Percentage of such Letter of Credit, and each such Lender agrees to pay to the
Agent, for the account of the L/C Issuer, such Lender’s Applicable Percentage of
any Letter of Credit Disbursement made by the L/C Issuer under the applicable
Letter of Credit.  In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Agent, for the
account of the L/C Issuer, such Lender’s Applicable Percentage of

 

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each Letter of Credit Disbursement made by the L/C Issuer and not reimbursed by
Borrowers on the date due as provided in Section 2.03(d), or of any
reimbursement payment that is required to be refunded (or that the Agent or the
L/C Issuer elects, based upon the advice of counsel, to refund) to the Borrowers
for any reason.  Each Lender acknowledges and agrees that its obligation to
deliver to the Agent, for the account of the L/C Issuer, an amount equal to its
respective Applicable Percentage of each Letter of Credit Disbursement pursuant
to this Section 2.03(e) shall be absolute and unconditional and such remittance
shall be made notwithstanding the occurrence or continuation of a Default or
Event of Default or the failure to satisfy any condition set forth in
Section 4.02 hereof.  If any such Lender fails to make available to the Agent
the amount of such Lender’s Applicable Percentage of a Letter of Credit
Disbursement as provided in this Section, such Lender shall be deemed to be a
Defaulting Lender and the Agent (for the account of the L/C Issuer) shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.

 

(f)                                   Each Borrower agrees to indemnify, defend
and hold harmless each Credit Party (including the L/C Issuer and its branches,
Affiliates, and correspondents) and each such Person’s respective directors,
officers, employees, attorneys and agents (each, including the L/C Issuer, a
“Letter of Credit Related Person”) (to the fullest extent permitted by Law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, liabilities, fines, costs, penalties, and damages, and all
reasonable and documented fees and disbursements of one primary counsel and
local counsel, if necessary, experts, or consultants and all other reasonable
and documented costs and expenses actually incurred in connection therewith or
in connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought), which may be incurred by
or awarded against any such Letter of Credit Related Person (other than Taxes,
which shall be governed by Section 3.01) (the “Letter of Credit Indemnified
Costs”), and which arise out of or in connection with, or as a result of:

 

(i)                                     any Letter of Credit or any pre-advice
of its issuance;

 

(ii)                                  any transfer, sale, delivery, surrender or
endorsement of any Drawing Document at any time(s) held by any such Letter of
Credit Related Person in connection with any Letter of Credit;

 

(iii)                               any action or proceeding arising out of, or
in connection with, any Letter of Credit (whether administrative, judicial or in
connection with arbitration), including any action or proceeding to compel or
restrain any presentation or payment under any Letter of Credit, or for the
wrongful dishonor of, or honoring a presentation under, any Letter of Credit;

 

(iv)                              any independent undertakings issued by the
beneficiary of any Letter of Credit;

 

(v)                                 any unauthorized instruction or request made
to the L/C Issuer in connection with any Letter of Credit or requested Letter of
Credit or error in computer or electronic transmission;

 

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(vi)                              an adviser, confirmer or other nominated
person seeking to be reimbursed, indemnified or compensated;

 

(vii)                           any third party seeking to enforce the rights of
an applicant, beneficiary, nominated person, transferee, assignee of Letter of
Credit proceeds or holder of an instrument or document;

 

(viii)                        the fraud, forgery or illegal action of parties
other than the Letter of Credit Related Person;

 

(ix)                              the L/C Issuer’s performance of the
obligations of a confirming institution or entity that wrongfully dishonors a
confirmation; or

 

(x)                                 the acts or omissions, whether rightful or
wrongful, of any present or future de jure or de facto governmental or
regulatory authority or cause or event beyond the control of the Letter of
Credit Related Person;

 

in each case, including that resulting from the Letter of Credit Related
Person’s own negligence; provided, however,  that such indemnity shall not be
available to any Letter of Credit Related Person claiming indemnification under
clauses (i) through (x) above to the extent that such Letter of Credit
Indemnified Costs may be determined in a final, non-appealable judgment of a
court of competent jurisdiction to have resulted directly from the gross
negligence or willful misconduct of the Letter of Credit Related Person claiming
indemnity.  The Borrowers hereby agree to pay the Letter of Credit Related
Person claiming indemnity promptly after demand from time to time all amounts
owing under this Section 2.03(f).  If and to the extent that the obligations of
the Borrowers under this Section 2.03(f) are unenforceable for any reason, the
Borrowers agree to make the maximum contribution to the Letter of Credit
Indemnified Costs permissible under applicable Law.  This indemnification
provision shall survive termination of this Agreement and all Letters of Credit.

 

(g)                                  The liability of the L/C Issuer (or any
other Letter of Credit Related Person) under, in connection with or arising out
of any Letter of Credit (or pre-advice), regardless of the form or legal grounds
of the action or proceeding, shall be limited to direct damages suffered by the
Borrowers that are caused directly by the L/C Issuer’s gross negligence or
willful misconduct in (i) honoring a presentation under a Letter of Credit that
on its face does not at least substantially comply with the terms and conditions
of such Letter of Credit, (ii) failing to honor a presentation under a Letter of
Credit that strictly complies with the terms and conditions of such Letter of
Credit or (iii) retaining Drawing Documents presented under a Letter of Credit. 
The L/C Issuer shall be deemed to have acted with due diligence and reasonable
care if the L/C Issuer’s conduct is in accordance with Standard Letter of Credit
Practice or in accordance with this Agreement.  The Borrowers’ aggregate
remedies against the L/C Issuer and any Letter of Credit Related Person for
wrongfully honoring a presentation under any Letter of Credit or wrongfully
retaining honored Drawing Documents shall in no event exceed the aggregate
amount paid by the Borrowers to the L/C Issuer in respect of the honored
presentation in connection with such Letter of Credit under Section 2.03(d),
plus interest at the rate then applicable to Base Rate

 

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Loans hereunder.  The Borrowers shall take action to avoid and mitigate the
amount of any damages claimed against the L/C Issuer or any other Letter of
Credit Related Person, including by enforcing its rights against the
beneficiaries of the Letters of Credit.  Any claim by the Borrowers under or in
connection with any Letter of Credit shall be reduced by an amount equal to the
sum of (x) the amount (if any) saved by the Borrowers as a result of the breach
or alleged wrongful conduct complained of; and (y) the amount (if any) of the
loss that would have been avoided had the Borrowers taken all reasonable steps
to mitigate any loss, and in case of a claim of wrongful dishonor, by
specifically and timely authorizing the L/C Issuer to effect a cure.

 

(h)                                 The Borrowers shall be responsible for
preparing or approving the final text of the Letter of Credit as issued by the
L/C Issuer, irrespective of any assistance the L/C Issuer may provide such as
drafting or recommending text or by the L/C Issuer’s use or refusal to use text
submitted by the Borrowers.  The Borrowers are solely responsible for the
suitability of the Letter of Credit for the Borrowers’ purposes.  With respect
to any Letter of Credit containing an “automatic amendment” to extend the
expiration date of such Letter of Credit, the L/C Issuer, in its sole and
absolute discretion, may give notice of nonrenewal of such Letter of Credit and,
if the Borrowers do not at any time want such Letter of Credit to be renewed,
the Borrowers will so notify the Agent and the L/C Issuer at least 15 calendar
days before the L/C Issuer is required to notify the beneficiary of such Letter
of Credit or any advising bank of such nonrenewal pursuant to the terms of such
Letter of Credit.

 

(i)                                     The Borrowers’ reimbursement and payment
obligations under this Section 2.03 are absolute, unconditional and irrevocable
and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever, including:

 

(i)                                     any lack of validity, enforceability or
legal effect of any Letter of Credit or this Agreement or any term or provision
therein or herein;

 

(ii)                                  payment against presentation of any draft,
demand or claim for payment under any Drawing Document that does not comply in
whole or in part with the terms of the applicable Letter of Credit or which
proves to be fraudulent, forged or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, or which is signed, issued or
presented by a Person or a transferee of such Person purporting to be a
successor or transferee of the beneficiary of such Letter of Credit;

 

(iii)                               the L/C Issuer or any of its branches or
Affiliates being the beneficiary of any Letter of Credit;

 

(iv)                              the L/C Issuer or any correspondent honoring a
drawing against a Drawing Document up to the amount available under any Letter
of Credit even if such Drawing Document claims an amount in excess of the amount
available under the Letter of Credit;

 

(v)                                 the existence of any claim, set-off, defense
or other right that the Lead Borrower or any of its Subsidiaries may have at any
time against any beneficiary, any assignee of proceeds, the L/C Issuer or any
other Person;

 

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(vi)                              any other event, circumstance or conduct
whatsoever, whether or not similar to any of the foregoing that might, but for
this Section 2.03(i), constitute a legal or equitable defense to or discharge
of, or provide a right of set-off against, any Borrower’s or any of its
Subsidiaries’ reimbursement and other payment obligations and liabilities,
arising under, or in connection with, any Letter of Credit, whether against the
L/C Issuer, the beneficiary or any other Person; or

 

(vii)                           the fact that any Default or Event of Default
shall have occurred and be continuing;

 

provided, however, that subject to Section 2.03(g) above, the foregoing shall
not release the L/C Issuer from such liability to the Borrowers as may be
finally determined in a final, non-appealable judgment of a court of competent
jurisdiction against the L/C Issuer following reimbursement or payment of the
obligations and liabilities, including reimbursement and other payment
obligations, of the Borrowers to the L/C Issuer arising under, or in connection
with, this Section 2.03 or any Letter of Credit.

 

(j)                                    Without limiting any other provision of
this Agreement, the L/C Issuer and each other Letter of Credit Related Person
(if applicable) shall not be responsible to the Borrowers for, and the L/C
Issuer’s rights and remedies against the Borrowers and the obligation of the
Borrowers to reimburse the L/C Issuer for each drawing under each Letter of
Credit shall not be impaired by:

 

(i)                                     honor of a presentation under any Letter
of Credit that on its face substantially complies with the terms and conditions
of such Letter of Credit, even if the Letter of Credit requires strict
compliance by the beneficiary;

 

(ii)                                  honor of a presentation of any Drawing
Document that appears on its face to have been signed, presented or issued
(A) by any purported successor or transferee of any beneficiary or other Person
required to sign, present or issue such Drawing Document or (B) under a new name
of the beneficiary;

 

(iii)                               acceptance as a draft of any written or
electronic demand or request for payment under a Letter of Credit, even if
nonnegotiable or not in the form of a draft or notwithstanding any requirement
that such draft, demand or request bear any or adequate reference to the Letter
of Credit;

 

(iv)                              the identity or authority of any presenter or
signer of any Drawing Document or the form, accuracy, genuineness or legal
effect of any Drawing Document (other than the L/C Issuer’s determination that
such Drawing Document appears on its face substantially to comply with the terms
and conditions of the Letter of Credit);

 

(v)                                 acting upon any instruction or request
relative to a Letter of Credit or requested Letter of Credit that the L/C Issuer
in good faith believes to have been given by a Person authorized to give such
instruction or request;

 

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(vi)                              any errors, omissions, interruptions or delays
in transmission or delivery of any message, advice or document (regardless of
how sent or transmitted) or for errors in interpretation of technical terms or
in translation or any delay in giving or failing to give notice to the
Borrowers;

 

(vii)                           any acts, omissions or fraud by, or the
insolvency of, any beneficiary, any nominated person or entity or any other
Person or any breach of contract between any beneficiary and any Borrower or any
of the parties to the underlying transaction to which the Letter of Credit
relates;

 

(viii)                        assertion or waiver of any provision of the ISP or
UCP that primarily benefits an issuer of a letter of credit, including any
requirement that any Drawing Document be presented to it at a particular hour or
place;

 

(ix)                              payment to any paying or negotiating bank
(designated or permitted by the terms of the applicable Letter of Credit)
claiming that it rightfully honored or is entitled to reimbursement or indemnity
under Standard Letter of Credit Practice applicable to it;

 

(x)                                 acting or failing to act as required or
permitted under Standard Letter of Credit Practice applicable to where the L/C
Issuer has issued, confirmed, advised or negotiated such Letter of Credit, as
the case may be;

 

(xi)                              honor of a presentation after the expiration
date of any Letter of Credit notwithstanding that a presentation was made prior
to such expiration date and dishonored by the L/C Issuer if subsequently the L/C
Issuer or any court or other finder of fact determines such presentation should
have been honored;

 

(xii)                           dishonor of any presentation that does not
strictly comply or that is fraudulent, forged or otherwise not entitled to
honor; or

 

(xiii)                        honor of a presentation that is subsequently
determined by the L/C Issuer to have been made in violation of international,
federal, state or local restrictions on the transaction of business with certain
prohibited Persons.

 

(k)                                 Upon the written request of the Agent,
(i) if the L/C Issuer has honored any full or partial drawing request under any
Letter of Credit and such drawing has resulted in an L/C Obligation that remains
outstanding, or (ii) if, as of the Letter of Credit Expiration Date, any L/C
Obligation for any reason remains outstanding, the Borrowers shall, in each
case, immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations.  Sections 2.04 and 8.02(c) set forth certain additional
requirements to deliver Cash Collateral hereunder.  For purposes of this
Section 2.03, Section 2.04 and Section 8.02(c), “Cash Collateralize” means to
pledge and deposit with or deliver to the Agent, for the benefit of the L/C
Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit
account balances in an amount equal to 103% of the Outstanding Amount of all L/C
Obligations (other than L/C Obligations with respect to Letters of Credit
denominated in a currency other than Dollars, which L/C

 

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Obligations shall be Cash Collateralized in an amount equal to 115% of the
Outstanding Amount of such L/C Obligations), pursuant to documentation in form
and substance reasonably satisfactory to the Agent and the L/C Issuer (which
documents are hereby consented to by the Lenders).  The Borrowers hereby grant
to the Agent a security interest in all such cash, deposit accounts and all
balances therein and all proceeds of the foregoing.  Cash Collateral shall be
maintained in blocked, non-interest bearing deposit accounts at Wells Fargo
except that Permitted Investments of the type listed in clauses (a) through
(f) of the definition thereof  may be made at the request of the Lead Borrower
at the option and in the reasonable discretion of the Agent (and at the
Borrowers’ risk and expense); interest or profits, if any, on such investments
shall accumulate in such account.  If at any time the Agent reasonably
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Agent or that the total amount of such funds
is less than the aggregate Outstanding Amount of all L/C Obligations, the
Borrowers will, forthwith upon demand by the Agent, pay to the Agent, as
additional funds to be deposited as Cash Collateral, an amount equal to the
excess of (x) such aggregate Outstanding Amount over (y) the total amount of
funds, if any, then held as Cash Collateral that the Agent reasonably determines
to be free and clear of any such right and claim.  Upon the drawing of any
Letter of Credit for which funds are on deposit as Cash Collateral, such funds
shall be applied, to the extent permitted under applicable Laws, to reimburse
the L/C Issuer and, to the extent not so applied, shall thereafter be applied to
satisfy other Obligations.

 

(l)                                     The Borrowers shall pay to the Agent for
the account of each Lender in accordance with its Applicable Percentage a Letter
of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to
the Applicable Margin times the daily Stated Amount under each such Letter of
Credit (whether or not such maximum amount is then in effect under such Letter
of Credit).  For purposes of computing the daily amount available to be drawn
under any Letter of Credit, the amount of the Letter of Credit shall be
determined in accordance with Section 1.05.  Letter of Credit Fees shall be
(i) due and payable on the first day after the end of each month commencing with
the first such date to occur after the issuance of such Letter of Credit, and
after the Letter of Credit Expiration Date, on demand, and (ii) computed on a
monthly basis in arrears.  Notwithstanding anything to the contrary contained
herein, while any Event of Default exists, all Letter of Credit Fees shall
accrue at the Default Rate as provided in Section 2.07(b) hereof.

 

(m)                             In addition to the Letter of Credit Fees as set
forth in Section 2.03(l) above, the Borrowers shall pay immediately upon demand
to the Agent for the account of the L/C Issuer as non-refundable fees,
commissions, and charges (it being acknowledged and agreed that any charging of
such fees, commissions, and charges to the Loan Account pursuant to the
provisions of Section 2.02(d) shall be deemed to constitute a demand for payment
thereof for the purposes of this Section 2.03(m)):  (i) a fronting fee which
shall be imposed by the L/C Issuer upon the issuance of each Letter of Credit of
.125% per annum of the face amount of each Commercial Letter of Credit, and
.375% per annum of the face amount of each Standby letter of Credit, plus
(ii) any and all other customary commissions, fees and charges then in effect
imposed by, and any and all reasonable and documented expenses incurred by, the
L/C Issuer, or by any adviser, confirming institution or entity or other
nominated person, relating to Letters of Credit, at the time of issuance of any
Letter of Credit and upon the occurrence of any other

 

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activity with respect to any Letter of Credit (including transfers, assignments
of proceeds, amendments, drawings, renewals or cancellations).

 

(n)                                 Unless otherwise expressly agreed by the L/C
Issuer and the Borrowers when a Letter of Credit is issued, (i) the rules of the
ISP and the UCP shall apply to each Standby Letter of Credit, and (ii) the
rules of the UCP shall apply to each Commercial Letter of Credit.

 

(o)                                 The L/C Issuer shall act on behalf of the
Lenders with respect to any Letters of Credit issued by it and the documents
associated therewith, and the L/C Issuer shall have all of the benefits and
immunities (A) provided to the Agent in Article IX with respect to any acts
taken or omissions suffered by the L/C Issuer in connection with Letters of
Credit issued by it or proposed to be issued by it and Issuer Documents
pertaining to such Letters of Credit as fully as if the term “Agent” as used in
Article IX included the L/C Issuer with respect to such acts or omissions, and
(B) as additionally provided herein with respect to the L/C Issuer.

 

(p)                                 In the event of a direct conflict between
the provisions of this Section 2.03 and any provision contained in any Issuer
Document, it is the intention of the parties hereto that such provisions be read
together and construed, to the fullest extent possible, to be in concert with
each other.  In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this Section 2.03 shall
control and govern.

 

2.04                        Prepayments.

 

(a)                                 The Borrowers may, upon notice from the Lead
Borrower to the Agent, at any time or from time to time voluntarily prepay
Committed Loans in whole or in part without premium or penalty; provided that
(i) such notice must be received by the Agent not later than 11:00 a.m.
(A) three Business Days prior to any date of prepayment of LIBO Rate Loans and
(B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBO
Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof; and (iii) unless a Cash Dominion Event has occurred
and is continuing, any prepayment of Base Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each
case, if less, the entire principal amount thereof then outstanding.  Each such
notice shall specify the date and amount of such prepayment and the Type(s) of
Committed Loans to be prepaid and, if LIBO Rate Loans, the Interest Period(s) of
such Committed Loans.  The Agent will promptly notify each Lender of its receipt
of each such notice, and of the amount of such Lender’s Applicable Percentage of
such prepayment.  If such notice is given by the Lead Borrower, the Borrowers
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein.  Any prepayment of a LIBO Rate
Loan shall be accompanied by all accrued interest on the amount prepaid,
together with any additional amounts required pursuant to Section 3.05.  Each
such prepayment shall be applied to the Committed Loans of the Lenders in
accordance with their respective Applicable Percentages.  Notwithstanding
anything to the contrary contained in this Agreement, the Borrower may rescind
any notice of prepayment under this Section 2.04(a) if such prepayment would
have resulted from a refinancing of the Obligations, which refinancing shall not
be consummated or shall otherwise be delayed.

 

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(b)                                 If for any reason the Total Outstandings at
any time exceed the Loan Cap as then in effect, the Borrowers shall immediately
prepay Committed Loans and/or Cash Collateralize the L/C Obligations in an
aggregate amount equal to such excess; provided, however, that the Borrowers
shall not be required to Cash Collateralize the L/C Obligations pursuant to this
Section 2.04(c) unless after the prepayment in full of the Loans the Total
Outstandings exceed the Loan Cap as then in effect.

 

(c)                                  After the occurrence and during the
continuance of a Cash Dominion Event, the Borrower shall prepay the Loans and
Cash Collateralize the L/C Obligations with the proceeds and collections
received by the Loan Parties to the extent so required under the provisions of
Section 6.13 hereof.

 

(d)                                 The Borrowers shall prepay the Loans and
Cash Collateralize the L/C Obligations in an amount equal to the Net Cash
Proceeds received by a Loan Party on account of a Prepayment Event, irrespective
of whether a Cash Dominion Event then exists and is continuing.

 

(e)                                  Prepayments made pursuant to
Section 2.04(b), (c) and (d) above, first, shall be applied ratably to the
outstanding Committed Loans, second, shall be used to Cash Collateralize the
remaining L/C Obligations if an Event of Default has occurred and is continuing;
and, third, the amount remaining, if any, after the prepayment in full of all
Committed Loans outstanding at such time and the Cash Collateralization of the
remaining L/C Obligations in full may be retained by the Borrowers for use in
the ordinary course of its business.  Upon the drawing of any Letter of Credit
that has been Cash Collateralized, the funds held as Cash Collateral shall be
applied (without any further action by or notice to or from the Borrowers or any
other Loan Party) to reimburse the L/C Issuer or the Lenders, as applicable.

 

2.05                        Termination or Reduction of Commitments.

 

(a)                                 The Borrowers may, upon notice from the Lead
Borrower to the Agent, terminate the Aggregate Commitments or the Letter of
Credit Sublimit or from time to time permanently reduce the Aggregate
Commitments or the Letter of Credit Sublimit; provided that (i) any such notice
shall be received by the Agent not later than 11:00 a.m. five Business Days
prior to the date of termination or reduction, (ii) any such partial reduction
shall be in an aggregate amount of $5,000,000 or any whole multiple of
$1,000,000 in excess thereof, (iii) any such notice may provide that it is
conditioned upon the consummation of a refinancing of the Obligations, in which
case, such notice may be revoked or extended by the Lead Borrower if any such
refinancing shall not be consummated or shall otherwise be delayed prior to the
date provided in such notice of termination or reduction of the Aggregate
Commitments or the Letters of Credit Sublimit and (iv) the Borrowers shall not
terminate or reduce (A) the Aggregate Commitments if, after giving effect
thereto and to any concurrent prepayments hereunder, the Total Outstandings
would exceed the Aggregate Commitments, or (B) the Letter of Credit Sublimit if,
after giving effect thereto, the Outstanding Amount of L/C Obligations not fully
Cash Collateralized hereunder would exceed the Letter of Credit Sublimit.

 

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(b)                                 If, after giving effect to any reduction of
the Aggregate Commitments, the Letter of Credit Sublimit exceeds the amount of
the Aggregate Commitments, such Letter of Credit Sublimit shall be automatically
reduced by the amount of such excess.

 

(c)                                  The Agent will promptly notify the Lenders
of any termination or reduction of the Letter of Credit Sublimit or the
Aggregate Commitments under this Section 2.05.  Upon any reduction of the
Aggregate Commitments, the Commitment of each Lender shall be reduced by such
Lender’s Applicable Percentage of such reduction amount.  All fees and interest
in respect of the Aggregate Commitments accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of
such termination.

 

2.06                        Repayment of Loans.

 

The Borrowers shall repay to the Lenders on the Termination Date the aggregate
principal amount of Committed Loans outstanding on such date.

 

2.07                        Interest.

 

(a)                                 Subject to the provisions of
Section 2.07(b) below, (i) each LIBO Rate Loan shall bear interest on the
outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the Adjusted LIBO Rate for such Interest Period plus the
Applicable Margin; and (ii) each Base Rate Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Margin.

 

(b)                                 (i)                                     If
any amount payable under any Loan Document is not paid when due (without regard
to any applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws while such Event of Default is continuing.

 

(ii)                                  If any other Event of Default exists, then
the Agent may, and upon the request of the Required Lenders shall, notify the
Lead Borrower that all outstanding Obligations shall thereafter bear interest at
a fluctuating interest rate per annum at all times equal to the Default Rate and
thereafter such Obligations shall bear interest at the Default Rate to the
fullest extent permitted by applicable Laws while such Event of Default is
continuing.

 

(iii)                               Accrued and unpaid interest on past due
amounts (including interest on past due interest) shall be due and payable upon
demand.

 

(c)                                  Interest on each Committed Loan shall be
due and payable in arrears on each Interest Payment Date applicable thereto and
at such other times as may be specified herein.  Interest hereunder shall be due
and payable in accordance with the terms hereof before and after judgment, and
before and after the commencement of any proceeding under any Debtor Relief Law.

 

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2.08                        Fees.  In addition to certain fees described in
subsections (l) and (m) of Section 2.03:

 

(a)                                 Commitment Fee.  The Borrowers shall pay to
the Agent for the account of each Lender in accordance with its Applicable
Percentage, a commitment fee calculated on a per annum basis equal to 0.25%
times the actual daily amount by which the Aggregate Commitments exceed the
Total Outstandings.  The commitment fee shall accrue at all times during the
Availability Period, including at any time during which one or more of the
conditions in Article IV is not met, and shall be due and payable monthly in
arrears on the first day after the end of each month, commencing with the first
such date to occur after the Closing Date, and on the last day of the
Availability Period.  The commitment fee shall be calculated quarterly in
arrears.

 

(b)                                 Other Fees.  The Borrowers shall pay to the
Arranger and the Agent for their own respective accounts fees in the amounts and
at the times specified in the Fee Letter.  Such fees shall be fully earned when
paid and shall not be refundable for any reason whatsoever.

 

2.09                        Computation of Interest and Fees.  All computations
of fees and interest shall be made on the basis of a 360-day year and actual
days elapsed.  Interest shall accrue on each outstanding Committed Loan
beginning, and including the day, such Committed Loan is made and until (but not
including) the day on which such Committed Loan (or such portion thereof) is
paid, provided that any Committed Loan that is repaid on the same day on which
it is made shall, subject to Section 2.11(a), bear interest for one day.  Each
determination by the Agent of an interest rate or fee hereunder shall be
conclusive and binding for all purposes, absent manifest error.

 

2.10                        Evidence of Debt.

 

(a)                                 The Credit Extensions made by each Lender
shall be evidenced by one or more accounts or records maintained by the Agent
(the “Loan Account”) in the ordinary course of business.  In addition, each
Lender may record in such Lender’s internal records, an appropriate notation
evidencing the date and amount of each Committed Loan from such Lender, each
payment and prepayment of principal of any such Committed Loan, and each payment
of interest, fees and other amounts due in connection with the Obligations due
to such Lender.  The accounts or records maintained by the Agent and each Lender
shall be conclusive absent manifest error of the amount of the Credit Extensions
made by the Lenders to the Borrowers and the interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Obligations.  In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of
the Agent in respect of such matters, the accounts and records of the Agent
shall control in the absence of manifest error.  Upon the request of any Lender
made through the Agent, the Borrowers shall execute and deliver to such Lender
(through the Agent) a Note, which shall evidence such Lender’s Committed Loans
in addition to such accounts or records.  Each Lender may attach schedules to
its Note and endorse

 

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thereon the date, Type (if applicable), amount and maturity of its Committed
Loans and payments with respect thereto.  Upon receipt of an affidavit of a
Lender as to the loss, theft, destruction or mutilation of such Lender’s Note
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.

 

(b)                                 In addition to the accounts and records
referred to in Section 2.10(a), each Lender and the Agent shall maintain in
accordance with its usual practice accounts or records evidencing the purchases
and sales by such Lender of participations in Letters of Credit.  In the event
of any conflict between the accounts and records maintained by the Agent and the
accounts and records of any Lender in respect of such matters, the accounts and
records of the Agent shall control in the absence of manifest error.

 

2.11                        Payments Generally; Agent’s Clawback.

 

(a)                                 General.  All payments to be made by the
Borrowers shall be made without condition or deduction for any counterclaim,
defense, recoupment or setoff.  Except as otherwise expressly provided herein,
all payments by the Borrowers hereunder shall be made to the Agent, for the
account of the respective Lenders to which such payment is owed, at the Agent’s
Office in Dollars and in immediately available funds not later than 2:00 p.m. on
the date specified herein.  Subject to Section 2.13 hereof, the Agent will
promptly distribute to each Lender its Applicable Percentage (or other
applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lender’s Lending Office.  All payments received by the
Agent after 2:00 p.m., at the option of the Agent, shall be deemed received on
the next succeeding Business Day and any applicable interest or fee shall
continue to accrue.  If any payment to be made by the Borrowers shall come due
on a day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing
interest or fees, as the case may be.

 

(b)                                 (i)                                    
Funding by Lenders; Presumption by Agent.  Unless the Agent shall have received
notice from a Lender prior to the proposed date of any Committed Borrowing of
LIBO Rate Loans (or in the case of any Committed Borrowing of Base Rate Loans,
prior to 12:00 noon on the date of such Committed Borrowing) that such Lender
will not make available to the Agent such Lender’s share of such Committed
Borrowing, the Agent may assume that such Lender has made such share available
on such date in accordance with Section 2.02 (or in the case of a Committed
Borrowing of Base Rate Loans, that such Lender has made such share available in
accordance with and at the time required by Section 2.02) 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
Committed Borrowing available to the Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Agent forthwith on demand such
corresponding amount in immediately available funds 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 Agent, at (A) in the case
of a payment to be made by such Lender, the greater of the Federal Funds Rate
and a rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative processing

 

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or similar fees customarily charged by the Agent in connection with the
foregoing, and (B) in the case of a payment to be made by the Borrowers, the
interest rate applicable to Base Rate Loans.  If the Borrowers and such Lender
shall pay such interest to the Agent for the same or an overlapping period, the
Agent shall promptly remit to the Borrowers the amount of such interest paid by
the Borrowers for such period.  If such Lender pays its share of the applicable
Committed Borrowing to the Agent, then the amount so paid shall constitute such
Lender’s Committed Loan included in such Committed Borrowing.  Any payment by
the Borrowers shall be without prejudice to any claim the Borrowers may have
against a Lender that shall have failed to make such payment to the Agent.

 

(ii)                                  Payments by Borrowers; Presumptions by
Agent.  Unless the Agent shall have received notice from the Lead Borrower prior
to the time at which any payment is due to the Agent for the account of the
Lenders or the L/C Issuer hereunder that the Borrowers will not make such
payment, the 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 L/C Issuer, 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 L/C Issuer, as the case may be, severally agrees to
repay to the Agent forthwith on demand the amount so distributed to such Lender
or the L/C Issuer, in immediately available funds 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 Agent, at the greater of the Federal Funds
Rate and a rate determined by the Agent in accordance with banking industry
rules on interbank compensation.

 

A notice of the Agent to any Lender or the Lead Borrower with respect to any
amount owing under this subsection (b) shall be conclusive, absent manifest
error.

 

(c)                                  Failure to Satisfy Conditions Precedent. 
If any Lender makes available to the Agent funds for any Loan to be made by such
Lender as provided in the foregoing provisions of this Article II, and such
funds are not made available to the Borrowers by the Agent because the
conditions to the applicable Credit Extension set forth in Article IV are not
satisfied or waived in accordance with the terms hereof (subject to the
provisions of the last paragraph of Section 4.02 hereof), the Agent shall return
such funds (in like funds as received from such Lender) to such Lender, without
interest.

 

(d)                                 Obligations of Lenders Several.  The
obligations of the Lenders hereunder to make Committed Loans, to fund
participations in Letters of Credit and to make payments hereunder are several
and not joint.  The failure of any Lender to make any Committed Loan, to fund
any such participation or to make any payment hereunder on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to
do so on such date, and no Lender shall be responsible for the failure of any
other Lender to so make its Committed Loan, to purchase its participation or to
make its payment hereunder.

 

(e)                                  Funding Source.  Nothing herein shall be
deemed to obligate any Lender to obtain the funds for any Loan in any particular
place or manner or to constitute a representation by any Lender that it has
obtained or will obtain the funds for any Loan in any particular place or
manner.

 

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2.12                        Sharing of Payments by Lenders.  If any Credit Party
shall, by exercising any right of setoff or counterclaim or otherwise, obtain
payment in respect of any principal of, interest on, or other amounts with
respect to, any of the Obligations resulting in such Lender’s receiving payment
of a proportion of the aggregate amount of such Obligations greater than its pro
rata share thereof as provided herein (including as in contravention of the
priorities of payment set forth in Section 8.03), then the Credit Party
receiving such greater proportion shall (a) notify the Agent of such fact, and
(b) purchase (for cash at face value) participations in the Obligations of the
other Credit Parties, or make such other adjustments as shall be equitable, so
that the benefit of all such payments shall be shared by the Credit Parties
ratably and in the priorities set forth in Section 8.03, provided that:

 

(i)                                     if any such participations or
subparticipations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest; and

 

(ii)                                  the provisions of this Section shall not
be construed to apply to (x) any payment made by the Loan Parties pursuant to
and in accordance with the express terms of this Agreement or (y) any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Committed Loans or subparticipations in L/C
Obligations to any assignee or participant, other than to the Borrowers or any
Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation.

 

2.13                        Settlement Amongst Lenders.

 

(a)                                 The amount of each Lender’s Applicable
Percentage of outstanding Committed Loans shall be computed weekly (or more
frequently in the Agent’s discretion) and shall be adjusted upward or downward
based on all Committed Loans and repayments of Committed Loans received by the
Agent as of 3:00 p.m. on the first Business Day (such date, the “Settlement
Date”) following the end of the period specified by the Agent.

 

(b)                                 The Agent shall deliver to each of the
Lenders promptly after a Settlement Date a summary statement of the amount of
outstanding Committed Loans for the period and the amount of repayments received
for the period.  As reflected on the summary statement, (i) the Agent shall
transfer to each Lender its Applicable Percentage of repayments, and (ii) each
Lender shall transfer to the Agent (as provided below) or the Agent shall
transfer to each Lender, such amounts as are necessary to insure that, after
giving effect to all such transfers, the amount of Committed Loans made by each
Lender shall be equal to such Lender’s Applicable Percentage of all Committed
Loans outstanding as of such

 

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Settlement Date.  If the summary statement requires transfers to be made to the
Agent by the Lenders and is received prior to 1:00 p.m. on a Business Day, such
transfers shall be made in immediately available funds no later than 3:00 p.m.
that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the
next Business Day. The obligation of each Lender to transfer such funds is
irrevocable, unconditional and without recourse to or warranty by the Agent.  If
and to the extent any Lender shall not have so made its transfer to the Agent,
such Lender agrees to pay to the 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 Agent, equal to the greater of the Federal Funds Rate and
a rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative, processing, or similar fees
customarily charged by the Agent in connection with the foregoing.

 

ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY;
APPOINTMENT OF LEAD BORROWER

 

3.01                        Taxes.

 

(a)                                 Payments Free of Taxes.  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 reduction or
withholding for any Indemnified Taxes or Other Taxes, provided that if the
Borrowers shall be required by applicable law to deduct any Indemnified Taxes
(including any 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 Agent, Lender or L/C Issuer, 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 timely pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.

 

(b)                                 Payment of Other Taxes by the Borrowers. 
Without limiting the provisions of subsection (a) above, the Borrowers shall
timely pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable law.

 

(c)                                  Indemnification by the Loan Parties.  The
Loan Parties shall indemnify the Agent, each Lender and the L/C Issuer, within
10 days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) paid by the Agent, such
Lender or the L/C Issuer, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, 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 Lead Borrower by a Lender or the
L/C Issuer (with a copy to the Agent), or by the Agent on its own behalf or on
behalf of the Agent, a Lender or the L/C Issuer, shall be conclusive absent
manifest error.

 

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(d)                                 Evidence of Payments.  As soon as
practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrowers to a Governmental Authority, the Lead Borrower shall deliver to the
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 Agent.

 

(e)                                  Status of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which any Borrower is resident for tax purposes, or any
treaty to which such jurisdiction is a party, with respect to payments hereunder
or under any other Loan Document shall deliver to the Lead Borrower (with a copy
to the Agent), at the time or times prescribed by applicable law or reasonably
requested by the Lead Borrower or the Agent, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate of withholding. Such
delivery shall be provided on the Closing Date and on or before such
documentation expires or becomes obsolete or after the occurrence of an event
requiring a change in the documentation most recently delivered.  In addition,
any Lender, if requested by the Lead Borrower or the Agent, shall deliver such
other documentation prescribed by applicable law or reasonably requested by the
Lead Borrower or the Agent as will enable the Lead Borrower or the Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements.

 

Without limiting the generality of the foregoing, in the event that any Borrower
is resident for tax purposes in the United States, any Lender shall deliver to
the Lead Borrower and the Agent (in such number of copies as shall be requested
by the recipient) on or prior to the date on which such Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the request of the
Lead Borrower or the Agent, but only if such Lender is legally entitled to do
so), whichever of the following is applicable:

 

(i)                                     duly completed originals of Internal
Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States is a party,

 

(ii)                                  duly completed originals of Internal
Revenue Service Form W-8ECI,

 

(iii)                               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 originals of  Internal Revenue
Service Form W-8BEN, or

 

(iv)                              duly completed originals of Internal Revenue
Service Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax, or

 

(v)                                 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

 

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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.

 

Without limiting the generality of the foregoing, if a payment made to a Lender
under any Loan Document would be subject to U.S. federal withholding Tax imposed
by FATCA if such Lender were to fail to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b)
of the Code, as applicable), such Lender shall deliver to the Lead Borrower and
the Agent at the time or times prescribed by law and at such time or times
reasonably requested by the Lead Borrower or the Agent such documentation
prescribed by applicable law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Lead Borrower or the Agent as may be necessary for the Lead
Borrower and the Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment. 
Solely for purposes of this clause (D), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Lead Borrower and the Agent in
writing of its legal inability to do so.

 

(f)                                   Treatment of Certain Refunds.  If the
Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which the Borrowers have paid
additional amounts pursuant to this Section, it shall pay to the Borrowers an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrowers under this Section with respect to
the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Agent, such Lender or the L/C Issuer, as the case may be, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that the Borrowers, upon the
request of the Agent, such Lender or the L/C Issuer, agree to repay the amount
paid over to the Borrowers (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Agent, such Lender or the
L/C Issuer in the event the Agent, such Lender or the L/C Issuer is required to
repay such refund to such Governmental Authority.  This subsection shall not be
construed to require the Agent, any Lender or the L/C Issuer to make available
its tax returns (or any other information relating to its taxes that it deems
confidential) to the Borrowers or any other Person.

 

3.02                        Illegality.  If any Lender determines that any Law
has made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund LIBO Rate Loans, or to determine or charge interest rates based upon the
LIBO Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to the Lead Borrower

 

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through the Agent, any obligation of such Lender to make or continue LIBO Rate
Loans or to convert Base Rate Loans to LIBO Rate Loans shall be suspended until
such Lender notifies the Agent and the Lead Borrower that the circumstances
giving rise to such determination no longer exist.  Upon receipt of such notice,
the Borrowers shall, upon demand from such Lender (with a copy to the Agent),
prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Base
Rate Loans, either on the last day of the Interest Period therefor, if such
Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such LIBO Rate
Loans.  Upon any such prepayment or conversion, the Borrowers shall also pay
accrued interest on the amount so prepaid or converted.

 

3.03                        Inability to Determine Rates.  If the Required
Lenders determine that for any reason in connection with any request for a LIBO
Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits
are not being offered to banks in the London interbank market for the applicable
amount and Interest Period of such LIBO Rate Loan, (b) adequate and reasonable
means do not exist for determining the LIBO Rate for any requested Interest
Period with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any
requested Interest Period with respect to a proposed LIBO Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such Committed
Loan, the Agent will promptly so notify the Lead Borrower and each Lender. 
Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans
shall be suspended until the Agent (upon the instruction of the Required
Lenders) revokes such notice.  Upon receipt of such notice, the Lead Borrower
may revoke any pending request for a Committed Borrowing of, conversion to or
continuation of LIBO Rate Loans or, failing that, will be deemed to have
converted such request into a request for a Committed Borrowing of Base Rate
Loans in the amount specified therein.

 

3.04                        Increased Costs; Reserves on LIBO Rate Loans.

 

(a)                                 Increased Costs Generally.  If any Change in
Law shall:

 

(i)                                     impose, modify or deem applicable any
reserve, special deposit, compulsory loan, insurance charge or similar
requirement against assets of, deposits with or for the account of, or credit
extended or participated in by, any Lender (except any reserve requirement
reflected in the LIBO Rate) or the L/C Issuer;

 

(ii)                                  subject any Lender or the L/C Issuer to
any tax of any kind whatsoever with respect to this Agreement, any Letter of
Credit, any participation in a Letter of Credit or any LIBO Rate Loan made by
it, or change the basis of taxation of payments to such Lender or the L/C Issuer
in respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 3.01 and the imposition of, or any change in the rate of, any Excluded
Tax payable by such Lender or the L/C Issuer); or

 

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(iii)                               impose on any Lender or the L/C Issuer or
the London interbank market any other condition, cost or expense affecting this
Agreement or LIBO Rate 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 Rate Loan (or of maintaining its
obligation to make any such Committed Loan), or to increase the cost to such
Lender or the L/C Issuer of participating in, issuing or maintaining any Letter
of Credit (or of maintaining its obligation to participate in or to issue any
Letter of Credit), or to reduce the amount of any sum received or receivable by
such Lender or the L/C Issuer hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender or the L/C Issuer and delivery
of the certificate contemplated by Section 3.04(c), the Borrowers will pay to
such Lender or the L/C Issuer, as the case may be, such additional amount or
amounts as will compensate such Lender or the L/C Issuer, as the case may be,
for such additional costs incurred or reduction suffered.

 

(b)                                 Capital Requirements.  If any Lender or the
L/C Issuer determines that any Change in Law affecting such Lender or the L/C
Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s
holding company, if any, regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s or the L/C Issuer’s
capital or on the capital of such Lender’s or the L/C Issuer’s holding company,
if any, as a consequence of this Agreement, the Commitments of such Lender or
the Committed Loans made by, or participations in Letters of Credit held by,
such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below
that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s
holding company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the L/C Issuer’s policies and the policies of
such Lender’s or the L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s
holding company for any such reduction suffered.

 

(c)                                  Certificates for Reimbursement.  A
certificate of a Lender or the L/C Issuer setting forth the amount or amounts
necessary to compensate such Lender or the L/C Issuer or its holding company, as
the case may be, as specified in subsection (a) or (b) of this Section and
delivered to the Lead Borrower shall be conclusive absent manifest error.  The
Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the
amount shown as due on any such certificate within 20 days after receipt
thereof.

 

(d)                                 Delay in Requests.  Failure or delay on the
part of any Lender or the L/C Issuer to demand compensation pursuant to the
foregoing provisions of this Section shall not constitute a waiver of such
Lender’s or the L/C Issuer’s right to demand such compensation, provided that
the Borrowers shall not be required to compensate a Lender or the L/C Issuer
pursuant to the foregoing provisions of this Section for any increased costs
incurred or reductions suffered more than nine months prior to the date that
such Lender or the L/C Issuer, as the case may be, notifies the Lead Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the L/C Issuer’s intention to claim compensation therefor (except
that, if the Change in Law giving rise to such increased costs or

 

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reductions is retroactive, then the nine-month period referred to above shall be
extended to include the period of retroactive effect thereof).

 

(e)                                  Reserves on LIBO Rate Loans.  The Borrowers
shall pay to each Lender, as long as such Lender shall be required to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”),
additional interest on the unpaid principal amount of each LIBO Rate Loan equal
to the actual costs of such reserves allocated to such Committed Loan by such
Lender (as determined by such Lender in good faith, which determination shall be
conclusive), which shall be due and payable on each date on which interest is
payable on such Committed Loan, provided the Lead Borrower shall have received
at least 10 days’ prior notice (with a copy to the Agent) of such additional
interest from such Lender.  If a Lender fails to give notice 10 days prior to
the relevant Interest Payment Date, such additional interest shall be due and
payable 10 days from receipt of such notice.

 

3.05                        Compensation for Losses.  Upon demand of any Lender
(with a copy to the Agent) from time to time, the Borrowers shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:

 

(a)                                 any continuation, conversion, payment or
prepayment of any Committed Loan other than a Base Rate Loan on a day other than
the last day of the Interest Period for such Committed Loan (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)                                 any failure by the Borrowers (for a reason
other than the failure of such Lender to make a Committed Loan) to prepay,
borrow, continue or convert any Committed Loan other than a Base Rate Loan on
the date or in the amount notified by the Lead Borrower; or

 

(c)                                  any assignment of a LIBO Rate Loan on a day
other than the last day of the Interest Period therefor as a result of a request
by the Lead Borrower pursuant to Section 10.13;

 

including any loss of anticipated profits (other than interest calculated on
account of the Applicable Margin) and any loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain such Committed
Loan or from fees payable to terminate the deposits from which such funds were
obtained.  The Borrowers shall also pay any customary administrative fees
charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrowers to the Lenders
under this Section 3.05, each Lender shall be deemed to have funded each LIBO
Rate Loan made by it at the LIBO Rate for such Loan by a matching deposit or
other borrowing in the London interbank market for a comparable amount and for a
comparable period, whether or not such LIBO Rate Loan was in fact so funded.

 

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3.06                        Mitigation Obligations; Replacement of Lenders.

 

(a)                                 Designation of a Different Lending Office. 
If any Lender requests compensation under Section 3.04, or 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 3.01, or if any
Lender gives a notice pursuant to Section 3.02, then such Lender shall use
reasonable efforts to designate a different Lending Office for funding or
booking its Committed 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 3.01 or 3.04, as the case may be, in the
future, or eliminate the need for the notice pursuant to Section 3.02, as
applicable, and (ii) in each case, 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.

 

(b)                                 Replacement of Lenders.  If any Lender
requests compensation under Section 3.04, 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 3.01, the Borrowers may replace such
Lender in accordance with Section 10.13.

 

3.07                        Survival.  All of the Borrowers’ obligations under
this Article III shall survive termination of the Aggregate Commitments and
repayment of all other Obligations hereunder.

 

3.08                        Designation of Lead Borrower as Borrowers’ Agent.

 

(a)                                 Each Borrower hereby irrevocably designates
and appoints the Lead  Borrower as such Borrower’s agent to obtain Credit
Extensions, the proceeds of which shall be available to each Borrower for such
uses as are permitted under this Agreement.  As the disclosed principal for its
agent, each Borrower shall be obligated to each Credit Party on account of
Credit Extensions so made as if made directly by the applicable Credit Party to
such Borrower, notwithstanding the manner by which such Credit Extensions are
recorded on the books and records of the Lead Borrower and of any other
Borrower.  In addition, each Loan Party other than the Borrowers hereby
irrevocably designates and appoints the Lead  Borrower as such Loan Party’s
agent to represent such Loan Party in all respects under this Agreement and the
other Loan Documents.

 

(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 each of the other Borrowers.

 

(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 Credit Extension.  Neither the Agent nor any other
Credit Party shall have any obligation to see to the application of such
proceeds therefrom.

 

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ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01                        Conditions of Initial Credit Extension.  The
obligation of the L/C Issuer and each Lender to make its initial Credit
Extension hereunder is subject to satisfaction of the following conditions
precedent:

 

(a)                                 The Agent’s receipt of the following, each
of which shall be originals, telecopies or other electronic image scan
transmission (e.g., “pdf” or “tif “ via e-mail) (followed promptly by originals)
unless otherwise specified, each properly executed by a Responsible Officer of
the signing Loan Party or the Lenders, as applicable, each dated the Closing
Date (or, in the case of certificates of governmental officials, a recent date
before the Closing Date) and each in form and substance reasonably satisfactory
to the Agent:

 

(i)                                     executed counterparts of this Agreement
sufficient in number for distribution to the Agent, each Lender and the Lead
Borrower;

 

(ii)                                  a Note executed by the Borrowers in favor
of each Lender requesting a Note;

 

(iii)                               such certificates of resolutions or other
action, incumbency certificates and/or other certificates of Responsible
Officers of each Loan Party as the Agent may reasonably require evidencing (A)
the authority of each Loan Party to enter into this Agreement and the other Loan
Documents to which such Loan Party is a party or is to become a party and (B)
the identity, authority and capacity of each Responsible Officer thereof
authorized to act as a Responsible Officer in connection with this Agreement and
the other Loan Documents to which such Loan Party is a party or is to become a
party;

 

(iv)                              copies of each Loan Party’s Organization
Documents and such other documents and certifications as the Agent may
reasonably require to evidence that each Loan Party is duly organized or formed,
and that each Loan Party is validly existing, in good standing and qualified to
engage in business in each jurisdiction where its ownership, lease or operation
of properties or the conduct of its business requires such qualification, except
to the extent that failure to so qualify in such jurisdiction could not
reasonably be expected to have a Material Adverse Effect;

 

(v)                                 a favorable opinion of Schulte Roth & Zabel
LLP, counsel to the Loan Parties, addressed to the Agent and each Lender, as to
such matters concerning the Loan Parties and the Loan Documents as the Agent may
reasonably request;

 

(vi)                              a certificate signed by a Responsible Officer
of the Lead Borrower certifying (A) that the conditions specified in Sections
4.02(a) and (b) have been satisfied, (B) that there has been no event or
circumstance since the date of the Audited

 

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Financial Statements that has had or could be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect, (C) to the
Solvency of the Loan Parties, on a consolidated basis, as of the Closing Date
after giving effect to the transactions contemplated hereby, and (D) either that
(1) no consents, licenses or approvals are required in connection with the
execution, delivery and performance by such Loan Party and the validity against
such Loan Party of the Loan Documents to which it is a party, or (2) that all
such consents, licenses and approvals have been obtained and are in full force
and effect other than those, the failure of which to obtain, would not
reasonably be expected to result in a Material Adverse Effect;

 

(vii)                           evidence that all insurance required to be
maintained pursuant to the Loan Documents and all endorsements in favor of the
Agent required under the Loan Documents have been obtained and are in effect;

 

(viii)                        the Security Documents and certificates evidencing
any stock being pledged thereunder, together with undated stock powers executed
in blank, each duly executed by the applicable Loan Parties;

 

(ix)                              all other Loan Documents, each duly executed
by the applicable Loan Parties;

 

(x)                                 (A)                               appraisals
(based on net liquidation value) by a third party appraiser reasonably
acceptable to the Agent of all Inventory of the Borrowers, the results of which
are reasonably satisfactory to the Agent and (B) a written report regarding the
results of a commercial finance examination of the Loan Parties, which shall be
reasonably satisfactory to the Agent;

 

(xi)                              results of searches or other evidence
reasonably satisfactory to the Agent (in each case dated as of a date reasonably
satisfactory to the Agent) indicating the absence of Liens on the assets of the
Loan Parties, except for Permitted Encumbrances and Liens for which termination
statements and releases, satisfactions and discharges of any mortgages, and
releases  or subordination agreements reasonably satisfactory to the Agent are
being tendered concurrently with such extension of credit or other arrangements
reasonably satisfactory to the Agent for the delivery of such termination
statements and releases, satisfactions and discharges have been made;

 

(xii)                           (A)                               all documents
and instruments, including Uniform Commercial Code financing statements,
required by law or reasonably requested by the 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 Agent, (B) Credit
Card Notifications, and Blocked Account Agreements required pursuant to Section
6.13 hereof, (C) control agreements with respect to the Loan Parties’ securities
and

 

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investment accounts, and (D) Collateral Access Agreements as required by the
Agent; and

 

(xiii)                        such other assurances, certificates, documents,
consents or opinions as the Agent reasonably may require.

 

(b)                                 After giving effect to (i) the first funding
under the Committed Loans, (ii) any charges to the Loan Account made in
connection with the establishment of the credit facility contemplated hereby and
(iii) all Letters of Credit to be issued at, or immediately subsequent to, such
establishment, Availability shall be not less than $10,000,000.

 

(c)                                  The Agent shall have received a Borrowing
Base Certificate dated the Closing Date, relating to the month ended on June 29,
2013, and executed by a Responsible Officer of the Lead Borrower.

 

(d)                                 The Agent shall be reasonably satisfied that
any financial statements delivered to it fairly present in all material respects
the business and financial condition of the Loan Parties and that there has been
no Material Adverse Effect since the date of the Audited Financial Statements.

 

(e)                                  The Agent shall have received and be
satisfied with (i) a detailed forecast for the period commencing on the Closing
Date and for the subsequent twelve month period following the Closing Date,
which shall include an Availability model, Consolidated income statement,
balance sheet, and statement of cash flow, by month, each prepared in conformity
with GAAP and consistent with the Loan Parties’ then current practices and (b)
such other information (financial or otherwise) reasonably requested by the
Agent.

 

(f)                                   There shall not be pending any litigation
or other proceeding, the result of which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(g)                                  The consummation of the transactions
contemplated hereby shall not violate any applicable Law or any Organization
Document.

 

(h)                                 All fees and expenses required to be paid to
the Agent or the Arranger on or before the Closing Date shall have been paid in
full (or substantially contemporaneously with the initial funding will be paid
in full), and all fees and expenses required to be paid to the Lenders on or
before the Closing Date shall have been paid in full (or substantially
contemporaneously with the initial funding will be paid in full).

 

(i)                                     The Borrowers shall have paid (or
substantially contemporaneously with the initial funding will pay) all fees,
charges and disbursements of counsel to the Agent to the extent invoiced prior
to or on the Closing Date, plus such additional amounts of such fees, charges
and disbursements as shall constitute its reasonable estimate of such fees,
charges and

 

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disbursements incurred or to be incurred by it through the Closing Date
(provided that such estimate shall not thereafter preclude a final settling of
accounts between the Borrowers and the Agent).

 

(j)                                    The Agent and the Lenders shall have
received all documentation and other information required by regulatory
authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the USA PATRIOT Act in each
case, the results of which are satisfactory to the Agent.

 

Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

 

4.02                        Conditions to all Credit Extensions.  The obligation
of each Lender to honor any Request for Credit Extension (other than a Committed
Loan Notice requesting only a conversion of Committed Loans to the other Type,
or a continuation of LIBO Rate Loans) and each L/C Issuer to issue each Letter
of Credit is subject to the following conditions precedent:

 

(a)                                 The representations and warranties of each
Loan Party contained in Article V or in any other Loan Document, shall be true
and correct in all material respects on and as of the date of such Credit
Extension, except (i) to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct in all material respects as of such earlier date, (ii) in the case of
any representation and warranty qualified by materiality, they shall be true and
correct in all respects (subject to such qualification), and (iii) for purposes
of this Section 4.02, the representations and warranties contained in
subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most
recent statements furnished pursuant to clauses (a) and (b), respectively, of
Section 6.01;

 

(b)                                 No Default or Event of Default shall exist,
or would result from such proposed Credit Extension or from the application of
the proceeds thereof;

 

(c)                                  The Agent and, if applicable, the L/C
Issuer shall have received a Request for Credit Extension or an updated
Borrowing Base Certificate, as applicable, in accordance with the requirements
hereof; and

 

(d)                                 No Overadvance shall result from such Credit
Extension.

 

Each Request for Credit Extension (other than a Committed Loan Notice requesting
only a conversion of Committed Loans to the other Type or a continuation of LIBO
Rate Loans) submitted by the Borrower shall be deemed to be a representation and
warranty by the Borrowers that the conditions specified in Sections 4.02(a) and
(b) have been satisfied on and as of the date of the applicable Credit
Extension.

 

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The conditions set forth in this Section 4.02 are for the sole benefit of the
Credit Parties but until the Required Lenders otherwise direct the Agent to
cease making Loans and issuing Letters of Credit, the Lenders will fund their
Applicable Percentage of all Committed Loans and participate in all Letters of
Credit whenever made or issued, which are requested by the Lead Borrower and
which, notwithstanding the failure of the Loan Parties  to comply with the
provisions of this Article IV, agreed to by the Agent, provided, however, the
making of any such Committed Loans or the issuance of any Letters of Credit
shall not be deemed a modification or waiver by any Credit Party of the
provisions of this Article IV on any future occasion or a waiver of any rights
or the Credit Parties as a result of any such failure to comply.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Committed
Loans and to issue Letters of Credit hereunder, each Loan Party represents and
warrants to the Agent and the other Credit Parties that:

 

5.01                        Existence, Qualification and Power.  Each Loan Party
and each Subsidiary thereof (a) is a corporation, limited liability company,
partnership or limited partnership, duly incorporated, organized or formed,
validly existing and, where applicable, in good standing under the Laws of the
jurisdiction of its incorporation, organization, or formation (b) has all
requisite power and authority and all requisite governmental licenses, permits,
authorizations, consents and approvals to (i) own or lease its assets and carry
on its business and (ii) execute, deliver and perform its obligations under the
Loan Documents to which it is a party, and (c) is duly qualified and is licensed
and, where applicable, in good standing under the Laws of each jurisdiction
where its ownership, lease or operation of properties or the conduct of its
business requires such qualification or license; except in each case referred to
in clause (b)(i) or (c), to the extent that failure to do so would not
reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed
hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears
in official filings in its state of incorporation or organization, its state of
incorporation or organization, organization type, organization number, if any,
issued by its state of incorporation or organization, and its federal employer
identification number.

 

5.02                        Authorization; No Contravention.  The execution,
delivery and performance by each Loan Party of each Loan Document to which such
Person is or is to be a party, has been duly authorized by all necessary
corporate or other organizational action, and does not and will not (a)
contravene the terms of any of such Person’s Organization Documents; (b)
conflict with or result in any breach, termination, or contravention of, or
constitute a default under, or require any payment to be made under (i) any
Material Contract or any Material Indebtedness to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental
Authority or

 

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any arbitral award to which such Person or its property is subject, in each
case, which would reasonably be expected to have a Material Adverse Effect;
(c) result in or require the creation of any Lien upon any asset of any Loan
Party (other than Liens in favor of the Agent under the Security Documents); or
(d) violate any Law where such violation would reasonably be expected to have a
Material Adverse Effect.

 

5.03                        Governmental Authorization; Other Consents.  No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document, except for (a) the perfection or maintenance of the Liens created
under the Security Documents (including the first priority nature thereof),
(b) such as have been obtained or made and are in full force and effect, and
(c) those approvals, consents, exemptions, authorizations or other actions,
notices or filings, the failure of which to obtain would reasonably be expected
to have a Material Adverse Effect.

 

5.04                        Binding Effect.  This Agreement has been, and each
other Loan Document, when delivered, will have been, duly executed and delivered
by each Loan Party that is party thereto.  This Agreement constitutes, and each
other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto 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.

 

5.05                        Financial Statements; No Material Adverse Effect.

 

(a)                                 The Audited Financial Statements (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein; (ii) fairly
present in all material respects the financial condition of the Lead Borrower
and its Subsidiaries as of the date thereof and their results of operations for
the period covered thereby in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; and (iii) show all Material Indebtedness of the Lead Borrower and its
Subsidiaries as of the date thereof to the extent required by GAAP.

 

(b)                                 The unaudited Consolidated balance sheet of
the Lead Borrower and its Subsidiaries dated March 30, 2013, and the related
Consolidated statements of operations and Consolidated statements of cash flows
for the Fiscal Quarter ended on that date (i) were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly present in all material
respects the financial condition of the Lead Borrower and its Subsidiaries as of
the date thereof and their results of operations for the period

 

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covered thereby, subject, in the case of clauses (i) and (ii), to the absence of
footnotes and to normal year-end audit adjustments.

 

(c)                                  Since the date of the Audited Financial
Statements, there has been no event or circumstance, either individually or in
the aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

 

(d)                                 To the best knowledge of the Lead Borrower,
no Internal Control Event exists or has occurred since the date of the Audited
Financial Statements that has resulted in or would reasonably be expected to
result in a misstatement in any material respect, (i) in any financial
information delivered or to be delivered to the Agent or the Lenders, (ii) of
the Borrowing Base, or (iii) of covenant compliance calculations provided
hereunder.

 

(e)                                  The Consolidated forecasted balance sheet
and statements of income and cash flows of the Lead Borrower and its
Subsidiaries delivered pursuant to Section 6.01(d) were prepared in good faith
on the basis of the assumptions stated therein, which assumptions were fair in
light of the conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Loan Parties’ best estimate of its
future financial performance, it being understood that forecasts are estimates
and such forecasts are not facts, and that actual results may differ materially
from such forecasts.

 

5.06                        Litigation.  There are no actions, suits,
proceedings, claims or disputes pending or, to the knowledge of the Loan
Parties, threatened in writing, at law, in equity, in arbitration or before any
Governmental Authority, by or against any Loan Party or any of its Subsidiaries
or against any of its properties or revenues that (a) purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby, or (b) except as disclosed in Schedule 5.06, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

 

5.07                        No Default.  No Loan Party or any Subsidiary is in
default under or with respect to, any Material Contract.  No Default or Event of
Default has occurred and is continuing or would result from the consummation of
the transactions contemplated by this Agreement or any other Loan Document.

 

5.08                        Ownership of Property; Liens.

 

(a)                                 Each of the Loan Parties and each Subsidiary
thereof has good record and valid title in fee simple to or valid leasehold
interests in, all Real Estate necessary or used in the ordinary conduct of its
business, except for Permitted Encumbrances and such defects in title as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Each of the Loan Parties and each Subsidiary has good and valid
title to, valid leasehold interests in, or valid licenses to use all personal
property and assets material to the ordinary conduct of its business (subject to
Permitted Encumbrances).

 

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(b)                                 Schedule 5.08(b)(1) sets forth the address
(including street address, county and state) of all Real Estate that is owned by
the Loan Parties, together with a list of the holders of any mortgage or other
Lien thereon as of the Closing Date.  Schedule 5.08(b)(2) sets forth the address
(including street address, county and state) of all Leases of the Loan Parties
in effect on the Closing Date, together with a list of the lessor and its
contact information with respect to each such Lease as of the Closing Date.  As
of the Closing Date each of such Leases is in full force and effect and to the
knowledge of the Loan Parties, the Loan Parties are not in default of the terms
thereof, except, in each case, except for any deficiency or defect as would not
reasonably be expected to have a Material Adverse Effect.

 

5.09                        Environmental Compliance.

 

Except as set forth in Schedule 5.09:

 

(a)                                 No Loan Party or any Subsidiary thereof
(i) is in violation of any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) to the knowledge of the Loan Parties, has become subject to any
Environmental Liability, (iii) has received written notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability, except, in each case, as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)                                 None of the properties currently or formerly
owned or operated by any Loan Party or any Subsidiary thereof is listed or
proposed for listing on the NPL or on the CERCLIS or any analogous foreign,
state or local list or is adjacent to any such property; there are no and never
have been any underground or above-ground storage tanks or any surface
impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials
are being or have been treated, stored or disposed on any property currently
owned or operated by any Loan Party or any Subsidiary thereof or, to the best of
the knowledge of the Loan Parties, on any property formerly owned or operated by
any Loan Party or Subsidiary thereof; there is no asbestos or
asbestos-containing material on any property currently owned or operated by any
Loan Party or Subsidiary thereof; and Hazardous Materials have not been
released, discharged or disposed of on any property currently or formerly owned
or operated by any Loan Party or any Subsidiary thereof, except, in each case,
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

(c)                                  No Loan Party or any Subsidiary thereof is
undertaking, and no Loan Party or any Subsidiary thereof has completed, either
individually or together with other potentially responsible parties, any
investigation or assessment or remedial or response action relating to any
actual or threatened release, discharge or disposal of Hazardous Materials at
any site, location or operation, either voluntarily or pursuant to the order of
any Governmental Authority or the requirements of any Environmental Law; and all
Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or operated by
any Loan Party or any Subsidiary thereof have been disposed of in a manner not
reasonably expected to have a Material Adverse Effect.

 

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5.10                        Insurance.  The properties of the Loan Parties and
their Subsidiaries are insured with financially sound and reputable insurance
companies which are not Affiliates of the Loan Parties, in such amounts (after
giving effect to any self-insurance), with such deductibles and covering such
risks (including, without limitation, workmen’s compensation, public liability,
business interruption and property damage insurance) as are customarily carried
by companies similarly situated, engaged in similar businesses and owning
similar properties in localities where the Loan Parties or the applicable
Subsidiary operates.  Schedule 5.10 sets forth a description of all insurance
maintained by or on behalf of the Loan Parties as of the Closing Date. As of the
Closing Date, each insurance policy listed on Schedule 5.10 is in full force and
effect and all premiums in respect thereof that are due and payable have been
paid.

 

5.11                        Taxes.  The Loan Parties and their Subsidiaries have
filed all Federal, state and other material tax returns and reports required to
be filed, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except (i) those
which are being contested in good faith by appropriate proceedings being
diligently conducted, for which adequate reserves have been provided in
accordance with GAAP, as to which Taxes no Lien has been filed and which contest
effectively suspends the collection of the contested obligation and the
enforcement of any Lien securing such obligation, or (ii) to the extent that the
failure to do so would not reasonably be expected to result in a Material
Adverse Effect.  There is no proposed tax assessment against any Loan Party or
any Subsidiary that would, if made, have a Material Adverse Effect.

 

5.12                        ERISA Compliance.

 

(a)                                 Except as would not, either individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect,
each Plan is in compliance with the applicable provisions of ERISA, the Code and
other Federal or state Laws.  Except as would not reasonably be expected to have
a Material Adverse Effect, each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the IRS or an application for such a letter is currently being processed by the
IRS with respect thereto and, to the best knowledge of the Lead Borrower,
nothing has occurred which would prevent, or cause the loss of, such
qualification.  The Loan Parties and each ERISA Affiliate have made all required
contributions to each Plan subject to Sections 412 or 430 of the Code and to
each Multiemployer Plan, and no application for a funding waiver or an extension
of any amortization period pursuant to Sections 412 or 430 of the Code has been
made with respect to any Plan, except to the extent such failure or such
application would not reasonably be expected to have a Material Adverse Effect. 
No Lien imposed under the Code or ERISA exists or is likely to arise on account
of any Plan or Multiemployer Plan, except as would not, either individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

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(b)                                 There are no pending or, to the best
knowledge of the Lead Borrower, threatened claims, actions or lawsuits, or
action by any Governmental Authority, with respect to any Plan that could
reasonably be expected to have a Material Adverse Effect.  There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has resulted or could reasonably be expected to result
in a Material Adverse Effect.

 

(c)                                  Except as would not reasonably be expected
to have a Material Adverse Effect, (i) no ERISA Event has occurred or is
reasonably expected to occur; (ii) neither any Loan Party nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and to the knowledge of the Loan Parties, no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction
that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13                        Subsidiaries; Equity Interests.

 

As of the Closing Date, the Loan Parties have no Subsidiaries other than those
specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth,
as of the Closing Date, the legal name, jurisdiction of incorporation or
formation and authorized Equity Interests of each such Subsidiary.  All of the
outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and non-assessable and as of the Closing Date are owned by a Loan
Party (or a Subsidiary of a Loan Party) in the amounts specified on Part (a) of
Schedule 5.13 free and clear of all Liens except for those created under the
Security Documents and Permitted Encumbrances.  Except as set forth in Schedule
5.13, as of the Closing Date, there are no outstanding rights to purchase any
Equity Interests in any Subsidiary.  As of the Closing Date, the Loan Parties
have no equity investments in any other corporation or entity other than those
specifically disclosed in Part (b) of Schedule 5.13.  All of the outstanding
Equity Interests in the Loan Parties have been validly issued, and are fully
paid and non-assessable and as of the Closing Date are owned in the amounts
specified on Part (c) of Schedule 5.13 free and clear of all Liens except for
those created under the Security Documents and Permitted Encumbrances.  The
copies of the Organization Documents of each Loan Party and each amendment
thereto provided pursuant to Section 4.01 are true and correct copies of each
such document as of the Closing Date, each of which is valid and in full force
and effect.

 

5.14                        Margin Regulations; Investment Company Act.

 

(a)                                 No Loan Party is engaged or will be engaged,
principally or as one of its important activities, in the business of purchasing
or carrying margin stock (within the meaning of Regulation U issued by the FRB),
or extending credit for the purpose of purchasing or carrying margin stock in
violation of Regulations T, U or X.  None of the proceeds of the Credit
Extensions shall be used directly or indirectly for the purpose of purchasing or
carrying any margin stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any margin stock

 

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or for any other purpose that would reasonably be expected to cause or would
cause any of the Credit Extensions to be considered a “purpose credit” within
the meaning of Regulations T, U, or X issued by the FRB.

 

(b)                                 None of the Loan Parties or any Subsidiary
is or is required to be registered as an “investment company” under the
Investment Company Act of 1940.

 

5.15                        Disclosure.  Each Loan Party has disclosed to the
Agent and the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.  No report, financial
statement, certificate or other information (other than any projections, any
information of a forward looking nature and any general economic or specific
industry information developed by, and obtained from, third-party sources)
furnished in writing by or on behalf of any Loan Party to the Agent or any
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case, as modified or supplemented by other reports,
certificates and other information so furnished) when taken as a whole contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein when taken as a whole, in the light of the
circumstances under which they were made, not misleading in any material
respect; provided that, with respect to projected financial information and any
other forward-looking information, the Loan Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

 

5.16                        Compliance with Laws.  Each of the Loan Parties and
each Subsidiary is in compliance (A) in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its properties, except in such instances in which
(i) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or
(ii) the failure to comply therewith, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect and (B) with
Section 10.17 and 10.18 in all material respects.

 

5.17                        Intellectual Property; Licenses, Etc.  The Loan
Parties and their Subsidiaries own, or possess the right to use, all of the
Intellectual Property, licenses, permits and other authorizations that are
reasonably necessary for the operation of their respective businesses as
currently conducted.  To the best knowledge of the Lead Borrower, (i) no slogan
or other advertising device, product, process, method, substance, part or other
material now employed by any Loan Party or any Subsidiary infringes upon any
Intellectual Property rights held by any other Person, and (ii) except as
disclosed in Schedule 5.17, no claim or litigation regarding any of the
foregoing is pending or, to the best knowledge of the Lead Borrower, threatened
in

 

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writing against any Loan Party, which in any case in respect of clause (i) or
(ii), either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

 

5.18                        Labor Matters.

 

There are no strikes, lockouts, slowdowns or other material labor disputes
against any Loan Party or any Subsidiary thereof pending or, to the knowledge of
any Loan Party, threatened. The hours worked by and payments made to employees
of the Loan Parties comply with the Fair Labor Standards Act and any other
applicable federal, state, local or foreign Law dealing with such matters except
to the extent that any such violation could not reasonably be expected to have a
Material Adverse Effect. No Loan Party or any of its Subsidiaries has incurred
any liability or obligation under the Worker Adjustment and Retraining Act or
similar state Law except as would not reasonably be expected to have a Material
Adverse Effect.  All payments due from any Loan Party and its Subsidiaries, or
for which any claim may be made against any Loan Party or any of its
Subsidiaries, on account of wages and employee health and welfare insurance and
other benefits, have been paid or properly accrued in all material respects in
accordance with GAAP as a liability on the books of such Loan Party. Except as
set forth on Schedule 5.18, as of the Closing Date, no Loan Party or any
Subsidiary is a party to or bound by any collective bargaining agreement,
management agreement, employment agreement, or stock plan agreement which
constitutes a Material Contract. There are no representation proceedings pending
or, to any Loan Party’s knowledge, threatened to be filed with the National
Labor Relations Board, and no labor organization or group of employees of any
Loan Party or any Subsidiary has made a pending demand for recognition, in any
case that would reasonably be expected to have a Material Adverse Effect. There
are no complaints, unfair labor practice charges, grievances, arbitrations,
unfair employment practices charges or any other claims or complaints against
any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party,
threatened to be filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any employee of any Loan Party or any of its
Subsidiaries, in any case that would reasonably be expected to have a Material
Adverse Effect. 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 or any of its Subsidiaries is bound.

 

5.19                        Security Documents.

 

(a)                                 The Security Agreement creates in favor of
the Agent, for the benefit of the Credit Parties, a legal, valid, continuing and
enforceable security interest in the Collateral, the enforceability of which is
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.  Upon the filing of the UCC financing statements in proper form,
and/or the obtaining of “control” (as defined in the UCC), the Agent will have a
perfected Lien on, and security interest in, to and under all right, title and
interest of the grantors thereunder in all Collateral described therein (other
than those DDAs or securities accounts for which a

 

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Blocked Account Agreement have not been delivered) that may be perfected by
filing, recording or registering a financing statement or analogous document
(including without limitation the proceeds of such Collateral subject to the
limitations relating to such proceeds in the UCC) or by obtaining control, under
the UCC (in effect on the date this representation is made) in each case prior
and superior in right to any other Person to the extent required under the Loan
Documents, subject to Permitted Encumbrances having priority by operation of
applicable Law.

 

(b)                                 When the Security Agreement (or a short form
thereof) in proper form is filed in the United States Patent and Trademark
Office and the United States Copyright Office and when financing statements,
releases and other filings in appropriate form are filed in the offices
specified in Schedule II of the Security Agreement, the Agent shall have a fully
perfected Lien on, and security interest in, all right, title and interest of
the applicable Loan Parties in the Intellectual Property (as defined in the
Security Agreement) in which a security interest may be perfected by filing,
recording or registering a security agreement, financing statement or analogous
document in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, in each case prior and superior in right to any
other Person to the extent required by the Loan Documents, subject to Permitted
Encumbrances having priority by operation of applicable Law (it being understood
that subsequent recordings in the United States Patent and Trademark Office and
the United States Copyright Office may be necessary to perfect a Lien on
registered trademarks, trademark applications and copyrights acquired by the
Loan Parties after the Closing Date).

 

Notwithstanding anything herein to the contrary, at no time shall (i) an asset
of a CFC serve as Collateral for any obligation hereunder, (ii) a CFC be a
Guarantor hereunder and (iii) a Person be required to pledge any stock of a CFC
(except for 65% of the voting stock of a first-tier CFC) in support of any
obligation hereunder.

 

5.20                        Solvency.

 

After giving effect to the transactions contemplated by this Agreement, and
before and after giving effect to each Credit Extension, the Loan Parties, on a
Consolidated basis, are Solvent. No transfer of property has been or will be
made by any Loan Party and no obligation has been or will be 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.

 

5.21                        Deposit Accounts; Credit Card Arrangements.

 

(a)                                 Annexed hereto as Schedule 5.21(a) is a list
of all DDAs maintained by the Loan Parties as of the Closing Date, which
Schedule includes, with respect to each DDA (i) the name and address of the
depository; (ii) the account number(s) maintained with such depository; (iii) a
contact person at such depository, and (iv) the identification of each Blocked
Account Bank.

 

(b)                                 Annexed hereto as Schedule 5.21(b) is a list
describing all arrangements as of the Closing Date to which any Loan Party is a
party with respect to the processing and/or payment to

 

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such Loan Party of the proceeds of any credit card charges and debit card
charges for sales made by such Loan Party.

 

5.22                        Brokers.  No broker or finder brought about the
obtaining, making or closing of the Committed Loans or transactions contemplated
by the Loan Documents, and no Loan  Party or Affiliate thereof has any
obligation to any Person in respect of any finder’s or brokerage fees in
connection therewith.

 

5.23                        Trade Relations.  There exists no actual or, to the
knowledge of any Loan Party, threatened, termination or cancellation of, or any
material adverse modification or change in the business relationship of any Loan
Party with any supplier material to its operations that would reasonably be
expected to have a Material Adverse Effect.

 

5.24                        Material Contracts.  Schedule 5.24 sets forth all
Material Contracts to which any Loan Party is a party or is bound as of the
Closing Date.  The Loan Parties have delivered true, correct and complete copies
of such Material Contracts to the Agent on or before the Closing Date.  The Loan
Parties are not in breach or in default in any material respect of or under any
Material Contract and have not received any notice of the intention of any other
party thereto to terminate any Material Contract.

 

ARTICLE VI
AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Committed Loan or
other Obligation hereunder shall remain unpaid or unsatisfied (other than
contingent indemnification obligations for which a claim has not been asserted)
, or any Letter of Credit shall remain outstanding, the Loan Parties shall, and
shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and
6.03) cause each Subsidiary to:

 

6.01                        Financial Statements.  Deliver to the Agent, in form
and detail reasonably satisfactory to the Agent:

 

(a)                                 as soon as available, but in any event
within 95 days after the end of each Fiscal Year, a Consolidated balance sheet
of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Year, and
the related consolidated statements of operations, stockholders’ equity and cash
flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all in reasonable detail and prepared in
accordance with GAAP, audited and accompanied by (i) a report and unqualified
opinion of a Registered Public Accounting Firm of nationally recognized standing
reasonably acceptable to the Agent, which report and opinion shall be prepared
in accordance with generally accepted auditing standards and shall not be
subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit (other than any
qualification that is expressly with respect to, or expressly resulting from, an
upcoming maturity date of Indebtedness that is scheduled to occur

 

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within 15 months from the time such report is delivered) and (ii) if required by
the SEC or otherwise pursuant to the Securities Laws, an opinion of such
Registered Public Accounting Firm independently assessing the Loan Parties’
internal controls over financial reporting in accordance with Item 308 of SEC
Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley
expressing a conclusion that contains no statement that there is a material
weakness in such internal controls, except for such material weaknesses as to
which the Required Lenders do not object;

 

(b)                                 as soon as available, but in any event
within 50 days after the end of each Fiscal Quarter of each Fiscal Year, a
Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the
end of such Fiscal Quarter, and the related statements of operations,
stockholders’ equity and cash flows for such Fiscal Quarter and for the portion
of the Lead Borrower’s Fiscal Year then ended, setting forth in each case in
comparative form the figures for (A) such period set forth in the projections
delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal
Quarter of the previous Fiscal Year and (C) the corresponding portion of the
previous Fiscal Year, all in reasonable detail, certified by a Responsible
Officer of the Lead Borrower as fairly presenting in all material respects the
financial condition, results of operations, stockholders’ equity and cash flows
of the Lead Borrower and its Subsidiaries as of the end of such Fiscal Quarter
in accordance with GAAP, subject only to customary year-end audit adjustments
and the absence of footnotes;

 

(c)                                  if Availability is at any time less than
15% of the Loan Cap, then as soon as available, but in any event within 35 days
after the end of each Fiscal Month of each Fiscal Year, a Consolidated balance
sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal
Month, and the related Consolidated statements of operations, stockholders’
equity and cash flows for such Fiscal Month, and for the portion of the Lead
Borrower’s Fiscal Year then ended, setting forth in each case in comparative
form the figures for (A) such period set forth in the projections delivered
pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Month of the
previous Fiscal Year and (C) the corresponding portion of the previous Fiscal
Year, all in reasonable detail, certified by a Responsible Officer of the Lead
Borrower as fairly presenting in all material respects the financial condition,
results of operations, stockholders’ equity and cash flows of the Lead Borrower
and its Subsidiaries as of the end of such Fiscal Month in accordance with GAAP,
subject only to customary year-end audit adjustments and the absence of
footnotes;

 

(d)                                 as soon as available, but in any event no
more than forty-five (45) days after the end of each Fiscal Year of the Lead
Borrower, forecasts prepared by management of the Lead Borrower, in form
reasonably satisfactory to the Agent, of Consolidated balance sheets and
statements of operations and cash flows of the Lead Borrower and its
Subsidiaries on a monthly basis for the immediately following Fiscal Year
(including the Fiscal Year in which the Maturity Date occurs), and as soon as
available, any significant revisions to such forecast with respect to such
Fiscal Year.

 

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6.02                        Certificates; Other Information.  Deliver to the
Agent, in form and detail reasonably satisfactory to the Agent:

 

(a)                                 concurrently with the delivery of the
financial statements referred to in Sections 6.01(a) and (b) and (c) (if
applicable), a duly completed Compliance Certificate signed by a Responsible
Officer of the Lead Borrower, and in the event of any change in generally
accepted accounting principles used in the preparation of such financial
statements, the Lead Borrower shall also provide: (i) a statement of
reconciliation conforming such financial statements to GAAP and (ii) a copy of
management’s discussion and analysis with respect to such financial statements;

 

(b)                                 (x) at any time when no Committed Loans are
outstanding and the outstanding L/C Obligations are less than $5,000,000, on the
fifteenth (15th) day of each Fiscal Quarter (or, if such day is not a Business
Day, on the next succeeding Business Day), or (y) at any other time, on the
fifteenth (15th) day of each Fiscal Month (or, if such day is not a Business
Day, on the next succeeding Business Day), a Borrowing Base Certificate showing
the Borrowing Base as of the close of business as of the last day of the
immediately preceding Fiscal Quarter or Fiscal Month, as applicable (provided
that the Appraised Value applied to the Eligible Inventory set forth in each
Borrowing Base Certificate shall be the Appraised Value set forth in the most
recent appraisal obtained by the Agent pursuant to Section 6.10 hereof for the
applicable period to which such Borrowing Base Certificate relates), each
Borrowing Base Certificate to be certified as complete and correct by a
Responsible Officer of the Lead Borrower; provided that at any time that a
Weekly Borrowing Base Delivery Event has occurred and is continuing, at the
election of the Agent, such Borrowing Base Certificate shall be delivered on the
third (3rd) Business Day of each week, as of the close of business on the
immediately preceding Saturday;

 

(c)                                  promptly upon receipt, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of any
Loan Party by its Registered Public Accounting Firm in connection with the
accounts or books of the Loan Parties or any Subsidiary, or any audit of any of
them, including, without limitation, specifying any Internal Control Event;

 

(d)                                 promptly after the same are available,
copies of each annual report, proxy or financial statement or other material
report or material communication sent to the stockholders of the Lead Borrower,
and copies of all annual, regular, periodic and special reports and registration
statements which any Loan Party may file or be required to file with the SEC
under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any
national securities exchange, and in any case not otherwise required to be
delivered to the Agent pursuant hereto;

 

(e)                                  the financial and collateral reports
described on Schedule 6.02 hereto, at the times set forth in such Schedule;

 

(f)                                   as soon as available, but in any event on
or before November 30 of each calendar year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for

 

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each Loan Party and its Subsidiaries and containing such additional information
as the Agent, or any Lender through the Agent, may reasonably specify;

 

(g)                                  promptly after the Agent’s request
therefor, copies of all Material Contracts and documents evidencing Material
Indebtedness not otherwise previously provided;

 

(h)                                 promptly, and in any event within five
Business Days after receipt thereof by any Loan Party or any Subsidiary thereof,
copies of each material notice received from any Governmental Authority
(including, without limitation, the SEC (or comparable agency in any applicable
non-U.S. jurisdiction)) concerning any proceeding with, or investigation or
possible investigation or other inquiry by such Governmental Authority regarding
financial or other operational results of any Loan Party or any Subsidiary
thereof (exclusive of any state or municipal sales tax audits unless the result
thereof would reasonably be expected to have a Material Adverse Effect) or any
other matter which, would reasonably expected to have a Material Adverse Effect;
and

 

(i)                                     promptly, such additional information
regarding the business affairs, financial condition or operations of any Loan
Party or any Subsidiary, or compliance with the terms of the Loan Documents, as
the Agent or any Lender may from time to time reasonably request.

 

Documents and notices required to be delivered pursuant to Section 6.01(a), (b),
or (c) or Section 6.02(c) or (d), or Section 6.03 (to the extent any such
documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Lead Borrower posts such documents or
notices, or provides a link thereto on the Lead Borrower’s website on the
Internet at the website address listed on Schedule 10.02; or (ii) on which such
documents or notices are posted on the Lead Borrower’s behalf on an Internet or
intranet website, if any, to which each Lender and the Agent have access
(whether a commercial, third-party website or whether sponsored by the Agent);
provided that: (i) the Lead Borrower shall deliver paper copies of such
documents or notices to the Agent if the Agent requests the Lead Borrower to
deliver such paper copies until a written request to cease delivering paper
copies is given by the Agent and (ii) the Lead Borrower shall notify the Agent
(by telecopier or electronic mail) of the posting of any such documents and
provide to the Agent by electronic mail electronic versions (i.e., soft copies)
of such documents.  Notwithstanding anything contained herein, in every instance
the Lead Borrower shall be required to provide paper copies of the Compliance
Certificates required by Section 6.02(a) to the Agent.  The Agent shall have no
obligation to request the delivery or to maintain copies of the documents or
notices referred to above, and in any event shall have no responsibility to
monitor compliance by the Loan Parties with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents or notices.

 

6.03                        Notices.  Promptly after any Executive Officer of
the Lead Borrower obtains actual or constructive knowledge thereof, notify the
Agent:

 

(a)                                 of the occurrence of any Default or Event of
Default;

 

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(b)                                 of any matter that has resulted or would
reasonably be expected to result in a Material Adverse Effect;

 

(c)                                  of any material breach or non-performance
of, or any payment or other default under, a Material Contract or with respect
to Material Indebtedness of any Loan Party or any Subsidiary thereof;

 

(d)                                 of any material dispute, litigation,
investigation, proceeding or suspension between any Loan Party or any Subsidiary
thereof and any Governmental Authority or the commencement of, or any material
development in, any material litigation or proceeding affecting any Loan Party
or any Subsidiary thereof, including pursuant to any applicable Environmental
Laws;

 

(e)                                  of the occurrence of any ERISA Event that
could reasonably be expected to result in a material liability to any Loan
Party;

 

(f)                                   of any material change in accounting
policies or financial reporting practices by any Loan Party or any Subsidiary
thereof;

 

(g)                                  of any change in the Lead Borrower’s
Executive Officers;

 

(h)                                 of the discharge by any Loan Party of its
present Registered Public Accounting Firm or any withdrawal or resignation by
such Registered Public Accounting Firm;

 

(i)                                     of any collective bargaining agreement
or other labor contract to which a Loan Party becomes a party, or the
application for the certification of a collective bargaining agent;

 

(j)                                    of the filing of any Lien for unpaid
Taxes against any Loan Party in excess of $250,000;

 

(k)                                 of any casualty or other insured damage to
any material portion of the Collateral or the commencement of any action or
proceeding for the taking of any interest in a material portion of the
Collateral under power of eminent domain or by condemnation or similar
proceeding or if any material portion of the Collateral is damaged or destroyed;
and

 

(l)                                     of any failure by any Loan Party to pay
rent or such other amounts due at (i) any distribution centers or warehouses;
(ii) ten percent (10%) or more of such Loan Party’s locations; or (iii) any of a
Loan Party’s locations if such failure continues for more than ten (10) days
following the day on which such rent first came due and such failure would be
reasonably likely to result in a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Lead Borrower setting forth details of the occurrence
referred to therein and stating what action the Lead Borrower has taken and
proposes to take with respect thereto.  Each notice pursuant to Section

 

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6.03(a) shall describe with particularity any and all provisions of this
Agreement and any other Loan Document that have been breached.

 

6.04                        Payment of Obligations.  Pay and discharge as the
same shall become due and payable, all its obligations and liabilities,
including (a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, (b) all lawful claims (including,
without limitation, claims of landlords, warehousemen, customs brokers, freight
forwarders, consolidators and carriers) which, if unpaid, would by law become a
Lien upon its property; and (c) all Indebtedness that, if not paid, would
constitute an Event of Default under Section 8.01(e), as and when due and
payable, but subject to any grace periods and subordination provisions contained
in any instrument or agreement evidencing such Indebtedness, except, in each
case, where the validity or amount thereof is being contested in good faith by
appropriate proceedings and either (x) (i) such Loan Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP, (ii) such
contest effectively suspends collection of the contested obligation and
enforcement of any Lien securing such obligation, and (iii) no Lien has been
filed with respect thereto or (y) the failure to make payment pending such
contest would not reasonably be expected to result in a Material Adverse Effect.
Nothing contained herein shall be deemed to limit the rights of the Agent with
respect to determining Reserves in its Permitted Discretion pursuant to this
Agreement.

 

6.05                        Preservation of Existence, Etc.

 

(a)                                 Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization or formation except in a transaction permitted
by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (c) preserve
or renew all of its Intellectual Property, except to the extent such
Intellectual Property is no longer used or useful in the conduct of the business
of the Loan Parties.

 

6.06                        Maintenance of Properties.

 

(a)                                 Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good working order and condition, ordinary wear and tear excepted; and (b) make
all necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.

 

6.07                        Maintenance of Insurance.

 

(a)                                 Maintain with financially sound and
reputable insurance companies which are not Affiliates of the Loan Parties,
insurance with respect to its properties and business of such types and in such
amounts (after giving effect to any self-insurance for health care and/or
workers compensation)

 

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against loss or damage, in each case, as are customarily insured against by
Persons similarly situated, engaged in the same or similar business and
operating in the same or similar locations or as is required by applicable Law,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Agent, and delivery to the Agent a copy of all renewal or replacement policies
(or other evidence of renewal of a policy previously delivered to the Agent,
including an insurance binder) together with evidence satisfactory to the Agent
of payment of the premium therefor.

 

(b)                                 Cause fire and extended coverage policies
maintained with respect to any Collateral to be endorsed or otherwise amended to
include a lenders’ loss payable clause (regarding personal property), in form
and substance reasonably satisfactory to the 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 Agent.

 

(c)                                  Cause commercial general liability policies
to be endorsed to name the Agent as an additional insured.

 

(d)                                 Cause business interruption policies to name
the Agent as a loss payee and to be endorsed or amended to include a provision
that, from and after the Closing Date, the insurer shall pay all proceeds
otherwise payable to the Loan Parties under the policies directly to the Agent.

 

(e)                                  Cause each such policy referred to in this
Section 6.07 to also provide that it shall not be canceled, modified or not
renewed (i) by reason of nonpayment of premium except upon not less than ten
(10) days’ prior written notice thereof by the insurer to the Agent (giving the
Agent the right to cure defaults in the payment of premiums) or (ii) for any
other reason except upon not less than thirty (30) days’ prior written notice
thereof by the insurer to the Agent.

 

(f)                                   Maintain for themselves and their
Subsidiaries, a Directors and Officers insurance policy, and a “Blanket Crime”
policy including employee dishonesty, forgery or alteration, theft,
disappearance and destruction, robbery and safe burglary, property, and computer
fraud coverage with responsible companies in such amounts as are customarily
carried by business entities engaged in similar businesses similarly situated,
and will upon request by the Agent furnish the Agent certificates evidencing
renewal of each such policy.

 

None of the Credit Parties, or their agents or employees shall be liable for any
loss or damage insured by the insurance policies required to be maintained under
this Section 6.07.  Each Loan Party shall look solely to its insurance companies
or any other parties other than the Credit Parties for the recovery of such loss
or damage and such insurance companies shall have no rights of subrogation
against any Credit Party or its agents or employees.  If, however, the insurance
policies do not provide waiver of subrogation rights against such parties, as
required above, then the Loan Parties hereby agree, to the extent permitted by
law, to waive their right of recovery, if any, against the Credit Parties and
their agents and employees.  The designation of any form, type or amount of
insurance coverage by any Credit Party under this Section 6.07 shall in no event
be deemed a representation, warranty or advice by

 

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such Credit Party that such insurance is adequate for the purposes of the
business of the Loan Parties or the protection of their properties.

 

6.08                        Compliance with Laws.  Comply (a) in all material
respects with the requirements of all Laws and all orders, writs, injunctions
and decrees applicable to it or to its business or property, except in such
instances in which (i)(x) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently
conducted, (y) with respect to which adequate reserves have been set aside and
maintained by the Loan Parties in accordance with GAAP, and (z) such contest
effectively suspends enforcement of the contested Laws, or (ii) the failure to
comply therewith would not reasonably be expected to have a Material Adverse
Effect, and (b) with Sections 10.17 and 10.18 in all material respects.

 

6.09                        Books and Records; Accountants.

 

(a)                                 Maintain proper books of record and account,
in which entries are full, true and correct in all material respects to the
extent required by GAAP consistently applied shall be made of all material
financial transactions and matters involving the assets and business of the Loan
Parties or such Subsidiary, as the case may be; and (ii) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over the Loan Parties
or such Subsidiary, as the case may be.

 

(b)                                 At all times retain a Registered Public
Accounting Firm which is reasonably satisfactory to the Agent and shall instruct
such Registered Public Accounting Firm to cooperate with, and be available to,
the Agent or its representatives to discuss the Loan Parties’ financial
performance, financial condition, operating results, controls, and such other
matters, within the scope of the retention of such Registered Public Accounting
Firm, as may be raised by the Agent; provided that the Lead Borrower or such
Subsidiary, as the case may be, shall have received reasonable advance notice
thereof and a reasonable opportunity to participate therein and such discussions
shall be subject to the execution of any indemnity, non-reliance letter or
similar letter requested by such accountants.

 

6.10                        Inspection Rights.

 

(a)                                 Permit representatives and independent
contractors of the Agent to visit and inspect any of its properties, to examine
its corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss its affairs, finances and accounts with its
directors, officers, and Registered Public Accounting Firm, and permit the Agent
or professionals (including investment bankers, consultants, accountants, and
lawyers) retained by the Agent to conduct evaluations of the Loan Parties’
business plan, forecasts and cash flows, all at the expense of the Loan Parties
and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Lead Borrower;
provided, however, that so long as no Default or Event of Default exists, there
shall be no more than one (1) such inspection in any twelve-month period, and
provided, further, that when a Default or Event of Default exists the Agent (or
any of

 

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its representatives or independent contractors) may do any of the foregoing at
the expense of the Loan Parties at any time during normal business hours and
without advance notice.  Notwithstanding the foregoing or anything to the
contrary contained herein, neither the Lead Borrower nor any of its Subsidiaries
will be required to disclose, discuss, permit the inspection, examination or
making copies or abstracts of any document, record, information or other matter
(A) the disclosure, inspection, examination, copying or discussion of which is
prohibited by Law or (B) that is subject to bona fide attorney-client or similar
privilege or constitutes bona fide attorney work product.

 

(b)                                 Upon the request of the Agent after
reasonable prior notice, permit the Agent or professionals (including investment
bankers, consultants, accountants, lawyers and appraisers) retained by the Agent
to conduct appraisals, commercial finance examinations and other evaluations,
including, without limitation, of (i) the Lead Borrower’s 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; provided that the Agent agrees that it
shall not undertake any such appraisals, commercial finance examinations and
other evaluations during any twelve month period for which no Committed Loans
are outstanding and the outstanding amount of L/C Obligations is less than
$5,000,000.  The Loan Parties shall pay the fees and expenses of the Agent and
such professionals with respect to up to one (1) commercial finance examination
and one (1) appraisal in each twelve  month period during which any Committed
Loans are outstanding or the outstanding amount of L/C Obligations is equal to
$5,000,000; provided that, at any time that Availability is less than 15% of the
Loan Cap, then the Agent may, in its reasonable discretion, undertake up to two
(2) commercial finance examinations and two (2) appraisals in such twelve month
period at the Loan Parties’ expense. Notwithstanding the foregoing, the Agent
may cause additional appraisals and commercial finance examinations to be
undertaken (i) as it in its reasonable discretion deems necessary or
appropriate, at its own expense or, (ii) if required by Law or if a Default or
Event of Default shall have occurred and be continuing, at the expense of the
Loan Parties.

 

6.11                        Use of Proceeds.  Use the proceeds of the Credit
Extensions (a) to finance the acquisition of working capital assets of the Loan
Parties, including, without limitation, the purchase of inventory and equipment,
(b) to finance capital expenditures of the Loan Parties, and (c) for general
corporate or organizational purposes of the Loan Parties, in each case to the
extent not prohibited under applicable Law or the Loan Documents.

 

6.12                        Additional Loan Parties.  Notify the Agent at the
time that any Person becomes a Subsidiary, and promptly thereafter (and in any
event within twenty (20) days, which deadline may be extended by the Agent in
its discretion), cause any such Person (a) which is not a CFC, to (i) become a
Loan Party by executing and delivering to the Agent a joinder to this Agreement
or the Facility Guaranty or such other documents as the Agent shall deem
reasonably appropriate for such purpose, (ii) grant a Lien to the Agent on such
Person’s assets of the same type that constitute Collateral to secure the
Obligations, and (iii) deliver to the Agent documents of the types referred to
in clauses (iii) and (iv) of Section 4.01(a) and, upon the request of the Agent,

 

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customary opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), and (b) if any Equity Interests or
Indebtedness of such Person are owned by or on behalf of any Loan Party, to
pledge such Equity Interests and promissory notes evidencing such Indebtedness
(except that, if such Subsidiary is a CFC, the Equity Interests of such
Subsidiary to be pledged will be limited to 65% of the outstanding voting Equity
Interests of such Subsidiary and 100% of the non-voting Equity Interests of such
Subsidiary and such time period may be extended based on local law or practice),
in each case in form, content and scope reasonably satisfactory to the Agent. 
In no event shall compliance with this Section 6.12 waive or be deemed a waiver
or consent to any transaction giving rise to the need to comply with this
Section 6.12 if such transaction was not otherwise expressly permitted by this
Agreement or constitute or be deemed to constitute, with respect to any
Subsidiary, an approval of such Person as a Borrower or permit the inclusion of
any acquired assets in the computation of the Borrowing Base.

 

6.13                        Cash Management.

 

(a)                                 To the extent required by the Agent, on or
prior to the date which is forty-five (45) days following the Closing Date:

 

(i)                                     deliver to the Agent copies of
notifications (each, a “Credit Card Notification”) substantially in the form
attached hereto as Exhibit F which have been executed on behalf of such Loan
Party and delivered to such Loan Party’s Credit Card Issuers and Credit Card
Processors  listed on Schedule 5.21(b); and

 

(ii)                                  enter into a Blocked Account Agreement
reasonably satisfactory in form and substance to the Agent with each Blocked
Account Bank.

 

(b)                                 The Loan Parties shall ACH or wire transfer
no less frequently than daily (and whether or not there are then any outstanding
Obligations) to a Blocked Account all amounts on deposit in each DDA in excess
of $7,500 for each DDA (other than on account of Excluded Accounts) and $600,000
for all such DDAs (other than on account of Excluded Accounts) and all payments
received from all Credit Card Issuers and Credit Card Processors.

 

(c)                                  Each Blocked Account Agreement shall
require upon notice from Agent which notice shall be delivered only after the
occurrence and during the continuance of a Cash Dominion Event the ACH or wire
transfer no less frequently than daily (and whether or not there are then any
outstanding Obligations) to the concentration account maintained by the Agent at
Wells Fargo (the “Concentration Account”), of all cash receipts and collections
received by each Loan Party from all sources, including, without limitation, the
following:

 

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(i)                                     all available cash receipts from the
sale of Inventory and other assets (whether or not constituting Collateral);

 

(ii)                                  all proceeds of collections of Accounts;

 

(iii)                               all Net Proceeds, and all other cash
payments received by a Loan Party from any Person or from any source or on
account of any Disposition or other transaction or event, including, without
limitation, any Prepayment Event;

 

(iv)                              the then contents of each DDA (other than any
Excluded Account, and net of any minimum balance as may be required to be kept
in the subject DDA by the depository institution at which such DDA is
maintained);

 

(v)                                 the then entire ledger balance of each
Blocked Account (net of any minimum balance as may be required to be kept in the
subject Blocked Account by the Blocked Account Bank); and

 

(vi)                              the proceeds of all Credit Card Receivables
received by a Loan Party.

 

(d)                                 The Concentration Account shall at all times
be under the sole dominion and control of the Agent.  The Loan Parties hereby
acknowledge and agree that (i) the Loan Parties have no right of withdrawal from
the Concentration Account, (ii) the funds on deposit in the Concentration
Account shall at all times be collateral security for all of the Obligations and
(iii) the funds on deposit in the Concentration Account shall be applied to the
Obligations as provided in this Agreement.  In the event that, notwithstanding
the provisions of this Section 6.13, any Loan Party receives or otherwise has
dominion and control of any such cash receipts or collections, such receipts and
collections shall be held in trust by such Loan Party for the Agent, shall not
be commingled with any of such Loan Party’s other funds or deposited in any
account of such Loan Party and shall, not later than the Business Day after
receipt thereof, be deposited into the Concentration Account or dealt with in
such other fashion as such Loan Party may be instructed by the Agent.

 

(e)                                  Upon the written request of the Agent, the
Loan Parties shall cause bank statements and/or other reports to be delivered to
the Agent not less often than monthly, accurately setting forth all amounts
deposited in each Blocked Account to ensure the proper transfer of funds as set
forth above.

 

Notwithstanding anything to the foregoing set forth in this Section 6.13 or
otherwise herein, the Agent agrees that unless a Cash Dominion Event is
continuing or the Lead Borrower otherwise consents in writing, the Agent shall
instruct Wells Fargo Bank, National Association, in its capacity as depository
bank (in such capacity, “Depository Bank”), pursuant to that certain Deposit
Account Control Agreement (Access Restricted Immediately — ZBA Transfers), by
and among Depository Bank, the Lead Borrower and Agent (the “ZBA DACA”), to
transfer to the Destination Account (as defined in the ZBA DACA) the full amount
of the collected and available balance in the Collateral Accounts (as defined in
the ZBA DACA) at the end of each Business Day.

 

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6.14                        Information Regarding the Collateral.

 

(a)                                 Furnish to the Agent (i) at least fifteen
(15) days prior written notice of any change in any Loan Party’s name, and
(ii) at least ten (10) days prior written notice of (x) 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 and having a book value of
more than $250,000 is located (including the establishment of any such new
office or facility), excluding Store locations, any location disclosed to the
Agent in writing on or prior to the Closing Date, Collateral in transit in the
ordinary course of business, equipment in connection with the repair or
refurbishment thereof in the ordinary course of business, or Collateral in the
possession of employees in the ordinary course of business; (y) any Loan Party’s
organizational structure or jurisdiction of incorporation or formation; or
(z) any Loan Party’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its state of organization. The Loan
Parties agree not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the UCC or otherwise that are
required in order for the Agent to continue at all times following such change
to have a valid, legal and perfected first priority security interest in all the
Collateral subject to Permitted Encumbrances having priority by operation of
applicable Law for its own benefit and the benefit of the other Credit Parties.

 

(b)                                 Should any of the information on any of the
Schedules hereto which are not limited to being true only as of the Closing
Date, become inaccurate or misleading in any material respect as a result of
changes after the Closing Date, the Lead Borrower shall advise the Agent in
writing quarterly of such revisions or updates as may be necessary or
appropriate to update or correct the same.  As may be reasonably requested by
the Agent (which request shall not be made more than two (2) times in any Fiscal
Year), the Lead Borrower shall supplement quarterly each Schedule hereto, or any
representation herein or in any other Loan Document, with respect to any matter
arising after the Closing Date that is required to be set forth or described in
such Schedule or as an exception to such representation or that is necessary to
correct any information in such Schedule or representation which has been
rendered materially inaccurate thereby (and, in the case of any supplements to
any Schedule, such Schedule shall be appropriately marked to show the changes
made therein).  Notwithstanding the foregoing, no supplement or revision to any
Schedule or representation shall be deemed the Credit Parties’ consent to the
matters reflected in such updated Schedules or revised representations nor
permit the Loan Parties to undertake any actions otherwise prohibited hereunder
or fail to undertake any action required hereunder from the restrictions and
requirements in existence prior to the delivery of such updated Schedules or
such revision of a representation; nor shall any such supplement or revision to
any Schedule or representation be deemed the Credit Parties’ waiver of any
Default or Event of Default resulting from the matters disclosed therein.

 

6.15                        Physical Inventories.

 

(a)                                 Cause not less than one physical inventory
to be undertaken, at the expense of the Loan Parties, in each twelve (12) month
period and periodic cycle counts, in each case consistent with past practices,
conducted by such inventory takers as are reasonably satisfactory to the Agent
and

 

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following such methodology as is consistent with the methodology used in the
immediately preceding inventory or as otherwise may be satisfactory to the
Agent. The Agent, at the expense of the Loan Parties, may participate in and/or
observe each scheduled physical count of Inventory which is undertaken on behalf
of any Loan Party.   The Lead Borrower, within thirty (30) days following the
completion of such inventory, shall provide the Agent with a reconciliation of
the results of such inventory (as well as of any other physical inventory or
cycle counts undertaken by a Loan Party) and shall post such results to the Loan
Parties’ stock ledgers and general ledgers, as applicable.

 

(b)                                 Permit the Agent, in its discretion, if any
Event of Default exists, to cause additional such inventories to be taken as the
Agent determines (each, at the expense of the Loan Parties).

 

6.16                        Environmental Laws.

 

Except to the extent the failure to do so could not reasonably be expected to
have a Material Adverse Effect: (a) conduct its operations and keep and maintain
its Real Estate in material compliance with all Environmental Laws; (b) obtain
and renew all environmental permits necessary for its operations and properties;
and (c) implement any and all investigation, remediation, removal and response
actions that are necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws pertaining to the
presence, generation, treatment, storage, use, disposal, transportation or
release of any Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, provided, however, that neither a Loan Party nor any of
its Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and adequate reserves have
been set aside and are being maintained by the Loan Parties with respect to such
circumstances in accordance with GAAP.

 

6.17                        Further Assurances.

 

(a)                                 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 the Agent
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.

 

(b)                                 If any material assets (other than Excluded
Collateral (as defined in the Security Agreement)) are acquired by any Loan
Party after the Closing Date (other than assets constituting Collateral under
the Security Documents that become subject to the Lien under the Security
Documents upon acquisition thereof), notify the Agent 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 to grant and
perfect such Liens, including actions described in paragraph (a) of this
Section 6.17, all at the expense of the Loan Parties. In no event shall
compliance with this Section 6.17(b) waive or be deemed a waiver or consent to
any transaction giving rise to the need to comply with this Section 6.17(b) if
such transaction

 

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was not otherwise expressly permitted by this Agreement or constitute or be
deemed to constitute consent to the inclusion of any acquired assets in the
computation of the Borrowing Base.

 

(c)                                  Upon the request of the Agent, use
commercially reasonable efforts to cause each of its customs brokers, freight
forwarders, consolidators and/or carriers in possession of Eligible In-Transit
Inventory to deliver an agreement (including, without limitation, a Customs
Broker/Carrier Agreement) to the Agent covering such matters and in such form as
the Agent may reasonably require.

 

(d)                                 Upon the request of the Agent, use
commercially reasonable efforts to cause each of its landlords to deliver a
Collateral Access Agreement to the Agent (in such form as the Agent may
reasonably require) for each leased location (other than Stores) of such Loan
Party or Subsidiary at which Collateral included in the Borrowing Base with a
book value in excess of $500,000 is located; provided that nothing herein shall
affect the Agent’s ability to impose Reserves as set forth herein.

 

6.18                        Compliance with Terms of Leaseholds.

 

Except as otherwise expressly permitted hereunder, (a) make all payments and
otherwise perform all obligations in respect of all Leases to which any Loan
Party or any of its Subsidiaries is a party, keep such Leases in full force and
effect, (b) not allow such Leases to lapse or be terminated or any rights to
renew such Leases to be forfeited or cancelled, in each case, except in the
ordinary course of business, consistent with past practices, (c) notify the
Agent of any default by any party with respect to such Leases and cooperate with
the Agent in all respects to cure any such default, and (d) cause each of its
Subsidiaries to do the foregoing, except, in the case of any of clauses
(a) through (d) above, where the failure to do so, either individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.

 

6.19                        Material Contracts.  (a) Perform and observe all the
terms and provisions of each Material Contract to be performed or observed by
it, (b) maintain each such Material Contract in full force and effect except to
the extent such Material Contract is no longer used or useful in the conduct of
the business of the Loan Parties in the ordinary course of business, consistent
with past practices, (c) enforce each such Material Contract in accordance with
its terms, and  (d) cause each of its Subsidiaries to do the foregoing, except,
in any case, where the failure to do so, either individually or in the
aggregate, could not be reasonably likely to have a Material Adverse Effect.

 

ARTICLE VII

NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Committed Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding (other than Unmatured Surviving Obligations), no
Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:

 

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7.01                        Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired or sign or file or authorize to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any
security agreement authorizing any Person thereunder to file such financing
statement; sell any of its property or assets subject to an understanding or
agreement (contingent or otherwise) to repurchase such property or assets with
recourse to it or any of its Subsidiaries; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances.

 

7.02                        Investments.  Make any Investments, except Permitted
Investments.

 

7.03                        Indebtedness; Disqualified Stock.

 

(a)                                 Create, incur, assume, guarantee, suffer to
exist or otherwise become or remain liable with respect to, any Indebtedness,
except Permitted Indebtedness; (b) issue Disqualified Stock, or (c) issue and
sell any other Equity Interests if a Change of Control or other Event of Default
would result therefrom.

 

7.04                        Fundamental Changes.  Merge, dissolve, liquidate,
consolidate with or into another Person, except that, so long as no Event of
Default shall have occurred and be continuing prior to or immediately after
giving effect to any action described below or would result therefrom:

 

(a)                                 any Subsidiary which is not a Loan Party may
merge with (i) a Loan Party, provided that the Loan Party shall be the
continuing or surviving Person, or (ii) any one or more other Subsidiaries which
are not Loan Parties, provided that when any wholly-owned Subsidiary is merging
with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or
surviving Person;

 

(b)                                 any Subsidiary which is a Loan Party may
merge into any Subsidiary which is a Loan Party or into a Borrower, provided
that in any merger involving a Borrower, such Borrower shall be the continuing
or surviving Person;

 

(c)                                  the Lead Borrower may consummate the
Permitted Reorganization; provided that the Lead Borrower shall cause all
filings to be made under the UCC or otherwise that are required in order for the
Agent to continue at all times following the Permitted Reorganization to have a
valid, legal and perfected first priority security interest in all the
Collateral (subject to Permitted Encumbrances having priority by operation of
applicable Law) for its own benefit and the benefit of the other Credit Parties;

 

(d)                                 in connection with a Permitted Acquisition
or a Permitted Investment, any Subsidiary of a Loan Party may merge with or into
or consolidate with any other Person or

 

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permit any other Person to merge with or into or consolidate with it; provided
that (i) the Person surviving such merger shall be a wholly-owned Subsidiary of
a Loan Party and such Person shall become a Loan Party in accordance with the
provisions of Section 6.12 hereof, and (ii) in the case of any such merger to
which any Loan Party is a party, such Loan Party is the surviving Person;

 

(e)                                  any Loan Party or any of its Subsidiaries
(other than the Lead Borrower) may liquidate, wind-up or dissolve or change its
legal form, provided, that, promptly upon the commencement of the winding up,
any action to dissolve or change such Loan Party or such Subsidiary, as the case
may be, any assets of such Loan Party which constitute Collateral are either
(i) transferred to any other Loan Party and are subject to the valid perfected
security interests of the Agent or (ii) are subject to a Disposition which is a
Permitted Disposition; and

 

(f)                                   any Loan Party or any of its Subsidiaries
(other than the Lead Borrower) may consummate a merger, dissolution,
liquidation, consolidation or Disposition, the purpose of which is to effect a
Disposition permitted pursuant to Section 7.05.

 

7.05                        Dispositions.  Make any Disposition except Permitted
Dispositions.

 

7.06                        Restricted Payments.  Declare or make, directly or
indirectly, any Restricted Payment, except:

 

(a)                                 each Subsidiary of a Loan Party may make
Restricted Payments to any Loan Party;

 

(b)                                 the Loan Parties and each Subsidiary may
declare and make dividend payments or other distributions payable solely in the
common stock or other common Equity Interests of such Person;

 

(c)                                  so long as no Event of Default shall have
occurred and be continuing prior to or immediately after giving effect thereto
or would result therefrom, the Loan Parties and their Subsidiaries may make
payments (or make Restricted Payments to the Lead Borrower to pay) for the
repurchase, retirement or other acquisition or retirement for value of Equity
Interests of the Lead Borrower held by any future, present or former employee,
director, advisor, consultant or distributor (or any spouses, former spouses,
domestic partners, executors, administrators, heirs, legatees or distributes of
any of the foregoing) of the Loan Parties upon the death, disability, retirement
or termination of employment of any such Person or otherwise pursuant to any
exercise of a stock option, stock appreciation rights or other equity incentive
or equity based incentives or any employee or director equity plan, employee or
director stock option plan or any other employee or director benefit plan or any
agreement (including any stock subscription or shareholder agreement) with any
employee, director, consultant or distributor of the Loan Parties in an
aggregate amount after the Closing Date not to exceed $500,000 in any Fiscal
Year of the Lead Borrower;

 

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(d)                                 the Loan Parties and their Subsidiaries may
acquire Equity Interests arising from cashless repurchases of Equity Interests
deemed to occur upon the exercise of stock options if such stock represents a
portion of the exercise price thereof;

 

(e)                                  the Loan Parties and their Subsidiaries may
purchase, redeem or acquire fractional shares of Equity Interests arising out of
stock dividends, splits or combinations or business combinations;

 

(f)                                   to the extent constituting Restricted
Payments, the Loan Parties and Restricted Subsidiaries may enter into and
consummate transactions expressly permitted by any provision of Section 7.02,
7.04 or 7.09 so long as such Restricted Payment is otherwise permitted to be
made pursuant to this Section 7.06; and

 

(g)                                  notwithstanding anything to the contrary
above, so long as no Event of Default shall have occurred and be continuing
prior to or immediately after giving effect thereto or would result therefrom,
in addition to the cash dividends permitted to be paid pursuant to the other
subsections of this Section 7.06, the Lead Borrower may declare or pay regularly
scheduled cash dividends to holders of its Equity Interests if (i) the Total
Outstandings is less than $5,000,000 and (ii) after giving pro forma effect to
such dividends, and on a projected basis as of the end of each Fiscal Month
during any subsequent projected twelve (12) Fiscal Months, Availability plus all
cash and cash equivalents of the Borrowers will be equal to or greater than 25%
of the Loan Cap.

 

7.07                        Prepayments of Indebtedness.  Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner any Indebtedness, except (a) as long as no Default or Event of
Default then exists, regularly scheduled or mandatory repayments, repurchases,
redemptions or defeasances of Permitted Indebtedness, (b) voluntary prepayments,
repurchases, redemptions or defeasances of Permitted Indebtedness as long as
after giving pro forma effect to such prepayments, repurchases, redemptions or
defeasances, and on a projected basis as of the end of each Fiscal Month during
any subsequent projected twelve (12) Fiscal Months, Availability plus all cash
and cash equivalents of the Borrowers will be equal to or greater than 25% of
the Loan Cap, and (c) Permitted Refinancings of any such Indebtedness.

 

7.08                        Change in Nature of Business.

 

Engage in any line of business substantially different from the business
conducted by the Loan Parties and their Subsidiaries on the Closing Date other
than businesses that are a reasonable extension of, or are reasonably related,
ancillary, supplementary or complementary to the business line or lines of
business, or a reasonable expansion or extension thereof, of the Loan Parties
and their Subsidiaries.

 

7.09                        Transactions with Affiliates.  Enter into, renew,
extend or be a party to any transaction of any kind with any Affiliate of any
Loan Party, whether or not in the ordinary

 

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course of business, on terms less favorable to the Loan Parties or such
Subsidiary as would reasonably be expected to be obtained by the Loan Parties or
such Subsidiary at the time in a comparable arm’s length transaction with a
Person other than an Affiliate, provided that the foregoing restriction shall
not apply to (a) a transaction between or among the Loan Parties, including any
entity that becomes a Loan Party as a result of such transactions, (b) advances
for commissions, travel and other similar purposes in the ordinary course of
business to directors, officers and employees, (c) the issuance of Equity
Interests in the Lead Borrower to any officer, director, employee or consultant
of the Lead Borrower or any of its Subsidiaries, (d) the payment of customary
fees and out-of-pocket costs to directors, and compensation (including bonuses)
and employee benefit arrangements paid to, and indemnities provided for the
benefit of, directors, officers or employees of the Lead Borrower or any of its
Subsidiaries, (e) any issuances of securities of the Lead Borrower (other than
Disqualified Stock) or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment agreements, employee
benefit plans, stock options and stock ownership plans, including restricted
stock plans, stock grants, directed share programs, profits interest plans and
other equity-based plans, and the granting of registration rights and other
stockholder rights approved by the Lead Borrower’s Board of Directors (in each
case in respect of Equity Interests in the Lead Borrower), (f) employment and
severance arrangements between the Loan Parties and their respective officers
and employees in the ordinary course of business, (g) any transaction with and
Affiliate where the only consideration paid by any Loan Party is Equity
Interests of the Lead Borrower, and (h) transactions permitted pursuant to
Section 7.02, Section 7.03, Section 7.04, Section 7.05 and Section 7.06.

 

7.10                        Burdensome Agreements.  Enter into or permit to
exist any Contractual Obligation (other than this Agreement or any other Loan
Document) that (a) limits the ability (i) of any Subsidiary to make Restricted
Payments or other distributions to any Loan Party or to otherwise transfer
property to or invest in a Loan Party, (ii) of any Subsidiary to Guarantee the
Obligations, (iii) of any Subsidiary to make or repay loans to a Loan Party, or
(iv) of the Loan Parties or any Subsidiary to create, incur, assume or suffer to
exist Liens on property of such Person in favor of the Agent; provided, however,
that this clause (iv) shall not prohibit any negative pledge (A) incurred or
provided in favor of any holder of Indebtedness permitted under clauses (c) of
the definition of Permitted Indebtedness solely to the extent any such negative
pledge relates to the property financed by or the subject of such Indebtedness
or any replacement costs, (B) (x) that exists on the date hereof and (to the
extent not otherwise permitted by this Section 7.10) is listed on Schedule 7.10
hereto and (y) to the extent Contractual Obligations permitted by clause (x) are
set forth in an agreement evidencing Indebtedness, are set forth in any
agreement evidencing any Permitted Refinancing of such Indebtedness, (C) that
constitutes customary restrictions set forth in software or other end user

 

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license agreements or in leases or subleases with respect to real estate
fixtures, (D) that constitutes customary provisions restricting assignment of
any agreements permitted hereunder, (E) that constitutes restrictions on cash or
other deposits made by customers under contracts entered into in the ordinary
course of business, or (F) that is part of customary provisions in joint venture
agreements and other similar agreements applicable to joint ventures permitted
under Section 7.02; or (b) requires the grant of a Lien to secure an obligation
of such Person if a Lien is granted to secure another obligation of such Person.

 

7.11                        Use of Proceeds.  Use the proceeds of any Credit
Extension, whether directly or indirectly, and whether immediately, incidentally
or ultimately, (a) to purchase or carry margin stock (within the meaning of
Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund Indebtedness originally
incurred for such purpose, in each case in violation of Regulations T, U or X
promulgated by the Board of Governors of the Federal Reserve System; or (b) for
purposes other than those permitted under this Agreement.

 

7.12                        Amendment of Material Documents.

 

Amend, modify or waive any of a Loan Party’s rights under (a) its Organization
Documents in a manner materially adverse to the Credit Parties, or (b) any
Material Contract or Material Indebtedness (other than on account of any
refinancing thereof otherwise permitted hereunder), in each case to the extent
that such amendment, modification or waiver would result in a Default or Event
of Default under any of the Loan Documents or otherwise would be reasonably
likely to have a Material Adverse Effect.

 

7.13                        Fiscal Year.

 

Change the Fiscal Year of any Loan Party, or the accounting policies or
reporting practices of the Loan Parties, except as permitted by GAAP; provided
that upon notice to the Agent, the Loan Parties may change (a) their Fiscal
Years to end on the Saturday closest to January 31st.

 

7.14                        Deposit Accounts; Credit Card Processors.

 

Open new DDAs unless the Loan Parties shall have delivered to the Agent
appropriate Blocked Account Agreements consistent with the provisions of and to
the extent required by Section 6.13 and otherwise reasonably satisfactory to the
Agent.  No Loan Party shall maintain any bank accounts or enter into any
agreements with Credit Card Issuers or Credit Card Processors other than the
ones expressly contemplated herein or in Section 6.13 hereof unless the Loan
Parties shall have delivered to the Agent appropriate Credit Card Notifications
consistent with the provisions of Section 6.13.

 

7.15                        Uncapped Availability.

 

Permit Uncapped Availability at any time to be less than the greater of (i) ten
percent (10%) of the Borrowing Base or (ii) $1,000,000.

 

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

8.01                        Events of Default.  Any of the following shall
constitute an Event of Default:

 

(a)                                 Non-Payment.  The Borrowers or any other
Loan Party fails to pay when and as required to be paid herein, (i) any amount
of principal of any Committed Loan or any L/C Obligation, or deposit any funds
as Cash Collateral in respect of L/C Obligations, or (ii) within three
(3) Business Days after the same comes due, any interest on any Committed Loan
or on any L/C Obligation, or any fee due hereunder, or any other amount payable
hereunder or under any other Loan Document; or

 

(b)                                 Specific Covenants.  Any Loan Party fails to
perform or observe any term, covenant or agreement contained in any of
Section 6.01, 6.02, 6.03(a), (b), (e), (j) or (m), 6.05(a) (solely with respect
to the requirement to maintain the Loan Parties’ legal existence), 6.07, 6.10,
6.11, 6.12, 6.13(b) or (c) or 6.14(a)(i) or Article VII; or

 

(c)                                  Other Defaults.

 

(i)                                     Any Loan Party fails to perform or
observe any term, covenant or agreement contained in any of Sections 6.03 (other
than 6.03(a), (b), (e), (j) or (m)), 6.05 (other than 6.05(a)), 6.13 (other than
6.13(b) and (c)) or 6.14 (other than 6.14(a)(i)) and such failure continues for
15 days after the earlier of (i) the Lead Borrower’s obtaining actual or
constructive knowledge of such default and (ii) notice by the Agent; or

 

(ii)                                  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a), (b) or
(c)(i) above) contained in any Loan Document on its part to be performed or
observed and such failure continues for 30 days after the earlier of (i) the
Lead Borrower’s obtaining actual or constructive knowledge of such default and
(ii) notice by the Agent; or

 

(d)                                 Representations and Warranties.  Any
representation, warranty, certification or statement of fact made or deemed made
by or on behalf of any Borrower or any other Loan Party herein, in any other
Loan Document, or in any document delivered in connection herewith or therewith
(including, without limitation, any Borrowing Base Certificate) shall be
incorrect or misleading in any material respect when made or deemed made; or

 

(e)                                  Cross-Default.  (i) Any Loan Party or any
Subsidiary thereof (A) fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect of
any Material Indebtedness (including amounts owing to all creditors under any
combined or syndicated credit arrangement) and such failure shall continue after
the applicable grace period, if any, specified in the agreement or instrument
relating to such Material Indebtedness, or (B) fails to observe or perform any
other agreement or condition relating to any such Material Indebtedness or
contained in any instrument or agreement

 

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evidencing, securing or relating thereto, or any other event occurs and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Material Indebtedness, the effect
of which default or other event is to cause, or to permit the holder or holders
of such Material Indebtedness or the beneficiary or beneficiaries of any
Guarantee thereof that constitutes Material Indebtedness (or a trustee or agent
on behalf of such holder or holders or beneficiary or beneficiaries) to cause,
with the giving of notice if required, such Indebtedness to be demanded or to
become due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or
(ii) there occurs under any Swap Contract an Early Termination Date (as defined
in such Swap Contract) resulting from (A) any event of default under such Swap
Contract as to which a Loan Party or any Subsidiary thereof is the Defaulting
Party (as defined in such Swap Contract) or (B) any Termination Event (as so
defined) under such Swap Contract as to which a Loan Party or any Subsidiary
thereof is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by the Loan Party or such Subsidiary as a result thereof
is greater than $500,000; or

 

(f)                                   Insolvency Proceedings, Etc.  Any Loan
Party or any of its Subsidiaries institutes, consents to the institution of or
declares its intention to institute any proceeding under any Debtor Relief Law,
or makes an assignment for the benefit of creditors; or applies for or consents
to the appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or substantially all of its
property; or a proceeding shall be commenced or a petition filed, without the
application or consent of such Person, seeking or requesting the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed and the appointment continues undischarged,
undismissed or unstayed for 30 calendar days or an order or decree approving or
ordering any of the foregoing shall be entered; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material part of
its property is instituted without the consent of such Person and continues
undismissed or unstayed for 30 calendar days, or an order for relief is entered
in any such proceeding; or

 

(g)                                  Inability to Pay Debts; Attachment. 
(i) Any Loan Party or any Subsidiary thereof becomes unable or admits in writing
its inability or fails generally to pay its debts as they become due in the
ordinary course of business, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the property of any such Person and is not released, vacated or fully
bonded within 30 days after its issuance or levy; or

 

(h)                                 Judgments.  There is entered against any
Loan Party or any Subsidiary thereof (i) one or more judgments or orders for the
payment of money in an aggregate amount (as to all such judgments and orders)
exceeding $2,500,000 (to the extent not covered by independent third-party
insurance as to which the insurer is rated at least “A” by A.M. Best Company,
has

 

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been notified of the potential claim and does not dispute coverage), or (ii) any
one or more non-monetary judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either
case with respect to clauses (i) and (ii) above, (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) there is 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

 

(i)                                     ERISA.  (i) An ERISA Event occurs with
respect to a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of any Loan Party under Title IV
of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of $2,500,000 or which would reasonably likely result in a
Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to
pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$2,500,000 or which would reasonably likely result in a Material Adverse Effect;
or

 

(j)                                    Invalidity of Loan Documents.  (i)  Any
material provision of any Loan Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or
thereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or any Loan Party or any Affiliate thereof contests in any
manner the validity or enforceability of any material provision of any Loan
Document; or any Loan Party denies that it has any or further liability or
obligation under any material provision of any Loan Document, or purports to
revoke, terminate or rescind any material provision of any Loan Document or
seeks to avoid, limit or otherwise adversely affect any Lien purported to be
created under any Security Document; or (ii) any Lien purported to be created
under any Security Document shall cease to be, or shall be asserted by any Loan
Party or any other Person not to be, a valid and perfected Lien on any
Collateral (other than an immaterial portion of the Collateral of the type not
included in the Borrowing Base), with the priority required by the applicable
Security Document; or

 

(k)                                 Change of Control.  There occurs any Change
of Control; or

 

(l)                                     Cessation of Business.  Except with
respect to Permitted Dispositions or as otherwise expressly permitted hereunder,
any Loan Party shall take any action, or shall make a determination, whether or
not formally approved by any Loan Party’s board of directors, to suspend the
operation of its business in the ordinary course, liquidate all or a material
portion of its assets or Store locations, or employ an agent or other third
party to conduct a program of closings, liquidations or “Going-Out-Of-Business”
sales of any material portion of its business; or

 

(m)                             Loss of Collateral.  There occurs any uninsured
loss to any material portion of the Collateral; or

 

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(n)                                 Breach of Contractual Obligation.  Any Loan
Party or any Subsidiary thereof fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Material Contract or fails to observe or perform any other
agreement or condition relating to any such Material Contract or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event occurs, the effect of which default or other event is to cause, or
to permit the counterparty to such Material Contract to terminate such Material
Contract; or

 

(o)                                 Indictment.  The indictment or institution
of any legal process or proceeding against, any Loan Party or any Subsidiary
thereof, under any federal or state, criminal statute, rule, regulation, order,
or other requirement having the force of law for a felony and such action or
proceeding would reasonably be expected to have a Material Adverse Effect, which
indictment or proceeding remains undismissed or undischarged for a period of
sixty (60) days; or

 

(p)                                 Guaranty.  The termination or attempted
termination of any Facility Guaranty except as expressly permitted hereunder or
under any other Loan Document.

 

8.02                        Remedies Upon Event of Default.  If any Event of
Default occurs and is continuing, the Agent may, or, at the request of the
Required Lenders shall, take any or all of the following actions:

 

(a)                                 declare the Commitments of each Lender to
make Committed Loans and any obligation of the L/C Issuer to make L/C Credit
Extensions to be terminated, whereupon such Commitments and obligation shall be
terminated;

 

(b)                                 declare the unpaid principal amount of all
outstanding Committed Loans, all interest accrued and unpaid thereon, and all
other Obligations (other than Obligations under any Swap Contract) to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Loan
Parties;

 

(c)                                  require that the Loan Parties Cash
Collateralize the L/C Obligations; and

 

(d)                                 whether or not the maturity of the
Obligations shall have been accelerated pursuant hereto, proceed to protect,
enforce and exercise all rights and remedies of the Credit Parties under this
Agreement, any of the other Loan Documents or applicable Law, including, but not
limited to, 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 Credit Parties;

 

provided, however, that upon the occurrence of any Event of Default with respect
to any Loan Party or any Subsidiary thereof under Section 8.01(f), the
obligation of each Lender to make Committed Loans

 

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and any obligation of the L/C Issuer to make L/C Credit Extensions shall
automatically terminate, the unpaid principal amount of all outstanding
Committed Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of the Loan Parties to
Cash Collateralize the L/C Obligations as aforesaid shall automatically become
effective, in each case without further act of the Agent or any Lender.

 

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.

 

Each of the Lenders agrees that it shall not, unless specifically requested to
do so in writing by Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings to enforce any Loan Document
against any Loan Party or to foreclose any Lien on, or otherwise enforce any
security interest in, or other rights to, any of the Collateral.

 

8.03                        Application of Funds.  After the exercise of
remedies provided for in Section 8.02 (or after the Committed Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the Obligations
shall be applied by the Agent in the following order:

 

First, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting fees, indemnities, Credit Party Expenses and other
amounts (including fees, charges and disbursements of counsel to the Agent and
amounts payable under Article III) payable to the Agent;

 

Second, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting indemnities, Credit Party Expenses, and other amounts
(other than principal, interest and fees) payable to the Lenders and the L/C
Issuer (including fees, charges and disbursements of counsel to the respective
Lenders and the L/C Issuer and amounts payable under Article III), ratably among
them in proportion to the amounts described in this clause Second payable to
them;

 

Third, to the extent not previously reimbursed by the Lenders, to payment to the
Agent of that portion of the Obligations constituting principal and accrued and
unpaid interest on any Permitted Overadvances;

 

Fourth, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Committed Loans and other Obligations, and fees, ratably
among the Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Fourth payable to them;

 

Fifth, to payment of that portion of the Obligations constituting unpaid
principal of the Committed Loans, ratably among the Lenders in proportion to the
respective amounts described in this clause Fifth held by them;

 

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Sixth, to the Agent for the account of the L/C Issuer, to Cash Collateralize
that portion of L/C Obligations comprised of the aggregate undrawn amount of
Letters of Credit;

 

Seventh, to payment of all other Obligations (including without limitation the
cash collateralization of asserted but unliquidated indemnification obligations
of the Loan Parties under Section 10.04, but excluding any Other Liabilities),
ratably among the Credit Parties in proportion to the respective amounts
described in this clause Seventh held by them;

 

Eighth, to payment of that portion of the Obligations arising from Cash
Management Services to the extent secured under the Security Documents, ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Eighth held by them;

 

Ninth, to payment of all other Obligations arising from Bank Products to the
extent secured under the Security Documents, ratably among the Credit Parties in
proportion to the respective amounts described in this clause Ninth held by
them; and

 

Last, the balance, if any, after all of the Obligations have been paid in full,
to the Loan Parties or as otherwise required by Law.

 

Amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Sixth above shall be applied to satisfy drawings under
such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE IX

THE AGENT

 

9.01                        Appointment and Authority.

 

Each of the Lenders hereby irrevocably appoints Wells Fargo to act on its behalf
as the Agent hereunder and under the other Loan Documents (other than the Swap
Contracts) and authorizes the Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Agent by the terms hereof or
thereof (including, without limitation, acquiring, holding and enforcing any and
all Liens on Collateral granted by any of the Loan Parties to secure any of the
Obligations), together with such actions and powers as are reasonably incidental
thereto.  Except as expressly provided herein, the provisions of this
Article are solely for the benefit of the Agent, the Lenders and the L/C Issuer,
and no Loan Party or any Subsidiary thereof shall have rights as a third party
beneficiary of any of such provisions.

 

9.02                        Rights as a Lender.  The Person serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though they were not the Agent and
the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or
unless the context otherwise requires, include the Person

 

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serving as the Agent hereunder in its individual capacity.  Such Person and its
Affiliates may accept deposits from, lend money to, act as the financial advisor
or in any other advisory capacity for and generally engage in any kind of
business with the Loan Parties or any Subsidiary or other Affiliate thereof as
if such Person were not the hereunder and without any duty to account therefor
to the Lenders.

 

9.03                        Exculpatory Provisions.  The Agent shall not have
any duties or obligations except those expressly set forth herein and in the
other Loan Documents.  Without limiting the generality of the foregoing, the
Agent:

 

(a)                                 shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default or Event of Default has
occurred and is continuing;

 

(b)                                 shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the other Loan Documents
that the Agent is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be expressly
provided for herein or in the other Loan Documents), provided that the Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Agent to liability or that is contrary to any Loan
Document or applicable law; and

 

(c)                                  shall not, except as expressly set forth
herein and in the other Loan Documents, have any duty to disclose, and shall not
be liable for the failure to disclose, any information relating to the Loan
Parties or any of its Affiliates that is communicated to or obtained by the
Person serving as the Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Agent shall believe
in good faith shall be necessary, under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

The Agent shall not be deemed to have knowledge of any Default or Event of
Default unless and until notice describing such Default or Event of Default is
given to the Agent by the Loan Parties, a Lender or the L/C Issuer. Upon the
occurrence of a Default or Event of Default, the Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Applicable Lenders.  Unless and until the Agent shall have received such
direction, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to any such Default or Event of
Default as it shall deem advisable in the best interest of the Credit Parties. 
In no event shall the Agent be required to comply with any such directions to
the extent that the Agent believes that its compliance with such directions
would be unlawful.

 

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The Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default or Event of Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or the creation,
perfection or priority of any Lien purported to be created by the Security
Documents, (v) the value or the sufficiency of any Collateral, or (vi) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent.

 

9.04                        Reliance by Agent.

 

The Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including, but not limited to, any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person.  The Agent also may rely upon any statement made to it orally or
by telephone and believed by it to have been made by the proper Person, and
shall not incur any liability for relying thereon.  In determining compliance
with any condition hereunder to the making of a Committed Loan, or the issuance
of a Letter of Credit, that by its terms must be fulfilled to the satisfaction
of a Lender or the L/C Issuer, the Agent may presume that such condition is
satisfactory to such Lender or the L/C Issuer unless the Agent shall have
received written notice to the contrary from such Lender or the L/C Issuer prior
to the making of such Loan or the issuance of such Letter of Credit.  The Agent
may consult with legal counsel (who may be counsel for any Loan Party),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.

 

9.05                        Delegation of Duties.  The Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Agent.  The Agent and any such sub-agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related
Parties.  The exculpatory provisions of this Article shall apply to any such
sub-agent and to the Related Parties of the Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as the Agent.

 

9.06                        Resignation of Agent.  The Agent may at any time
give written notice of its resignation to the Lenders and the Lead Borrower. 
Upon receipt of any such notice of resignation, the Required Lenders shall have
the right, subject to (as long as no Event of Default exists) the approval of
the Lead Borrower (such consent not to be unreasonably withheld or delayed), to
appoint a successor, which shall be a bank with an office in the United States,
or an

 

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Affiliate of any such bank with an office in the United States.  If no such
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may on behalf of the Lenders and the
L/C Issuer, subject to (as long as no Event of Default exists) the approval of
the Lead Borrower (such consent not to be unreasonably withheld or delayed),
appoint a successor Agent meeting the qualifications set forth above; provided
that if the Agent shall notify the Lead Borrower and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (1) the retiring
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any Collateral held by the
Agent on behalf of the Lenders or the L/C Issuer under any of the Loan
Documents, the retiring Agent shall continue to hold such collateral security
until such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Agent shall instead be made by or to each Lender and the L/C Issuer directly,
until such time as the Required Lenders appoint a successor Agent as provided
for above in this Section.  Upon the acceptance of a successor’s appointment as
Agent hereunder, such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring (or retired) Agent,
and the retiring Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section).  The fees payable by
the Borrowers to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead Borrower and such
successor.  After the retiring Agent’s resignation hereunder and under the other
Loan Documents, the provisions of this Article and Section 10.04 shall continue
in effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Agent was acting as Agent hereunder.

 

Any resignation by Wells Fargo as Agent pursuant to this Section shall also
constitute its resignation as L/C Issuer.  Upon the acceptance of a successor’s
appointment as Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring L/C
Issuer, (b) the retiring L/C Issuer shall be discharged from all of its duties
and obligations hereunder or under the other Loan Documents, and (c) the
successor L/C Issuer shall issue letters of credit in substitution for the
Letters of Credit, if any, outstanding at the time of such succession or make
other arrangements satisfactory to the retiring L/C Issuer to effectively assume
the obligations of the retiring L/C Issuer with respect to such Letters of
Credit.

 

9.07                        Non-Reliance on Agent and Other Lenders.  Each
Lender and the L/C Issuer acknowledges that it has, independently and without
reliance upon the Agent or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.

 

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Each Lender and the L/C Issuer also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender or any of their Related
Parties and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or any
related agreement or any document furnished hereunder or thereunder.  Except as
provided in Section 9.11, the Agent shall not have any duty or responsibility to
provide any Credit Party with any other credit or other information concerning
the affairs, financial condition or business of any Loan Party that may come
into the possession of the Agent.

 

9.08                        Agent May File Proofs of Claim.  In case of the
pendency of any proceeding under any Debtor Relief Law or any other judicial
proceeding relative to any Loan Party, the Agent (irrespective of whether the
principal of any Committed Loan or L/C Obligation shall then be due and payable
as herein expressed or by declaration or otherwise and irrespective of whether
the Agent shall have made any demand on the Loan Parties) shall be entitled and
empowered, by intervention in such proceeding or otherwise

 

(a)                                 to file and prove a claim for the whole
amount of the principal and interest owing and unpaid in respect of the
Committed Loans, L/C Obligations and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders, the L/C Issuer, the Agent and the other
Credit Parties (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders, the L/C Issuer, the Agent, such
Credit Parties and their respective agents and counsel and all other amounts due
the Lenders, the L/C Issuer the Agent and such Credit Parties under Sections
2.03, 2.08 and 10.04) allowed in such judicial proceeding; and

 

(b)                                 to release or collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to the Agent and, if the
Agent shall consent to the making of such payments directly to the Lenders and
the L/C Issuer, to pay to the Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agent and its agents
and counsel, and any other amounts due the Agent under Sections 2.08 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or the L/C Issuer or to authorize the
Agent to vote in respect of the claim of any Lender or the L/C Issuer in any
such proceeding.

 

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9.09                        Collateral and Guaranty Matters.  The Credit Parties
irrevocably authorize and direct the Agent,

 

(a)                                 to release any Lien on any property granted
to or held by the Agent under any Loan Document (i) upon termination of the
Aggregate Commitments and payment in full of all Obligations (other than
Unmatured Surviving Obligations) and the expiration, termination or Cash
Collateralization 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 10.01;

 

(b)                                 to release or subordinate any Lien on any
property granted to or held by the Agent under any Loan Document to the holder
of any Lien on such property that is permitted by clause (h) or clause (n) of
the definition of Permitted Encumbrances; and

 

(c)                                  to release any Guarantor from its
obligations under the Facility Guaranty if such Person ceases to be a Subsidiary
as a result of a transaction permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in
writing the Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Facility Guaranty pursuant to this Section 9.09.  In each
case as specified in this Section 9.09, the Agent 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
Guarantor from its obligations under the Facility Guaranty, in each case in
accordance with the terms of the Loan Documents and this Section 9.09.

 

9.10                        Notice of Transfer.

 

The Agent may deem and treat a Lender party to this Agreement as the owner of
such Lender’s portion of the Obligations for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 10.06.

 

9.11                        Reports and Financial Statements.

 

By signing this Agreement, each Lender:

 

(a)                                 agrees to furnish the Agent after the
occurrence and during the continuance of a Cash Dominion Event (and thereafter
at such frequency as the 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 Agent shall be entitled to assume that
no amounts are due to any Lender on account of Other Liabilities unless the
Agent has received written notice thereof from such Lender;

 

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(b)                                 is deemed to have requested that the Agent
furnish such Lender, promptly after they become available, copies of all
Borrowing Base Certificates and financial statements required to be delivered by
the Lead Borrower hereunder and all commercial finance examinations and
appraisals of the Collateral received by the Agent (collectively, the
“Reports”);

 

(c)                                  expressly agrees and acknowledges that the
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 Agent 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 the provisions of Section 10.07 hereof; and

 

(f)                                   without limiting the generality of any
other indemnification provision contained in this Agreement, agrees: (i) to hold
the Agent 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 Committed
Loan or Committed Loans; and (ii) to pay and protect, and indemnify, defend, and
hold the Agent 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 Agent 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.

 

9.12                        Agency for Perfection.

 

Each Lender hereby appoints each other Lender as agent for the purpose of
perfecting Liens for the benefit of the Agent and the Lenders, in assets which,
in accordance with Article 9 of the UCC or any other applicable Law of the
United States can be perfected only by possession.  Should any Lender (other
than the Agent) obtain possession of any such Collateral, such Lender shall
notify the Agent thereof, and, promptly upon the Agent’s request therefor shall
deliver such Collateral to the Agent or otherwise deal with such Collateral in
accordance with the Agent’s instructions.

 

9.13                        Indemnification of Agent.  Without limiting the
obligations of the Loan Parties hereunder, the Lenders hereby agree to indemnify
the Agent, the L/C Issuer and any Related Party, as the case may be, ratably
according to their Applicable Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,

 

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expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Agent, the L/C Issuer and their Related
Parties in any way relating to or arising out of this Agreement or any other
Loan Document or any action taken or omitted to be taken by the Agent, the L/C
Issuer and their Related Parties in connection therewith; provided, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent’s, the L/C Issuer’s and their Related Parties’ gross
negligence or willful misconduct as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

 

9.14                        Relation among Lenders.  The Lenders are not
partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agent)
authorized to act for, any other Lender.

 

9.15                        Defaulting Lenders.

 

(a)                                 Notwithstanding the provisions of
Section 2.13 hereof, the Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrowers to the Agent for the
Defaulting Lender’s benefit or any proceeds of Collateral that would otherwise
be remitted hereunder to the Defaulting Lender, and, in the absence of such
transfer to the Defaulting Lender, the Agent shall transfer any such payments
(i) first, to the L/C Issuer, to the extent of the portion of a Letter of Credit
Disbursement that was required to be, but was not, paid by the Defaulting
Lender, (ii) second, to each Non-Defaulting Lender ratably in accordance with
their Commitments (but, in each case, only to the extent that such Defaulting
Lender’s portion of a Committed Loan (or other funding obligation) was funded by
such other Non-Defaulting Lender), (iii) to the Cash Collateral Account, the
proceeds of which shall be retained by the Agent and may be made available to be
re-advanced to or for the benefit of the Borrowers (upon the request of the Lead
Borrower and subject to the conditions set forth in Section 4.02) as if such
Defaulting Lender had made its portion of the Committed Loans (or other funding
obligations) hereunder, and (iv) from and after the date on which all other
Obligations have been paid in full, to such Defaulting Lender.  Subject to the
foregoing, the Agent may hold and, in its discretion, re-lend to the Borrowers
for the account of such Defaulting Lender the amount of all such payments
received and retained by the Agent for the account of such Defaulting Lender. 
Solely for the purposes of voting or consenting to matters with respect to the
Loan Documents (including the calculation of Applicable Percentages in
connection therewith) and for the purpose of calculating the fee payable under
Section 2.08(a), such Defaulting Lender shall be deemed not to be a “Lender” and
such Lender’s Commitment shall be deemed to be zero; provided, that the
foregoing shall not apply to any of the matters governed by
Section 10.01(a) through (c).  The provisions of this Section 9.15 shall remain
effective with respect to such Defaulting Lender until the earlier of (y) the
date on which all of the Non-Defaulting Lenders, the Agent, the L/C Issuer, and
the Borrowers shall have waived, in writing, the application of this
Section 9.15 to such Defaulting Lender, or (z) the date on which such Defaulting
Lender pays to the Agent all amounts owing by such Defaulting Lender in respect
of the amounts that it was obligated to fund hereunder, and, if requested by the
Agent, provides adequate assurance of its ability to perform its future
obligations hereunder (on which earlier date, so long as no Event of Default

 

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has occurred and is continuing, any remaining cash collateral held by the Agent
pursuant to Section 9.15(b) shall be released to the Borrowers).  The operation
of this Section 9.15 shall not be construed to increase or otherwise affect the
Commitment of any Lender, to relieve or excuse the performance by such
Defaulting Lender or any other Lender of its duties and obligations hereunder,
or to relieve or excuse the performance by any Borrower of its duties and
obligations hereunder to the Agent, the L/C Issuer, or to the Lenders other than
such Defaulting Lender.  Any failure by a Defaulting Lender to fund amounts that
it was obligated to fund hereunder shall constitute a material breach by such
Defaulting Lender of this Agreement and shall entitle the Borrowers, at their
option, upon written notice to the Agent, to arrange for a substitute Lender to
assume the Commitment of such Defaulting Lender, such substitute Lender to be
reasonably acceptable to the Agent.  In connection with the arrangement of such
a substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Assumption in favor of the substitute Lender (and agrees that it
shall be deemed to have executed and delivered such document if it fails to do
so) subject only to being paid its share of the outstanding Obligations (other
than any Other Liabilities, but including (1) all interest, fees (except any
Commitment Fees or Letter of Credit Fees not due to such Defaulting Lender in
accordance with the terms of this Agreement), and other amounts that may be due
and payable in respect thereof, and (2) an assumption of its Applicable
Percentage of its participation in the Letters of Credit); provided, that any
such assumption of the Commitment of such Defaulting Lender shall not be deemed
to constitute a waiver of any of the Credit Parties’ or the Loan Parties’ rights
or remedies against any such Defaulting Lender arising out of or in relation to
such failure to fund.  In the event of a direct conflict between the priority
provisions of this Section 9.15 and any other provision contained in this
Agreement or any other Loan Document, it is the intention of the parties hereto
that such provisions be read together and construed, to the fullest extent
possible, to be in concert with each other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 9.15 shall control and govern.

 

(b)                                 If any Letter of Credit is outstanding at
the time that a Lender becomes a Defaulting Lender then:

 

(i)                                     such Defaulting Lender’s participation
interest in any Letter of Credit shall be reallocated among the Non-Defaulting
Lenders in accordance with their respective Applicable Percentages but only to
the extent (x) the Outstanding Amount sum of all Non-Defaulting Lenders’ Credit
Extensions after giving effect to such reallocation does not exceed the total of
all Non-Defaulting Lenders’ Commitments and (y) the conditions set forth in
Section 4.02 are satisfied at such time;

 

(ii)                                  if the reallocation described in clause
(b)(i) above cannot, or can only partially, be effected, the Borrowers shall
within one Business Day following notice by the Agent, cash collateralize such
Defaulting Lender’s participation in Letters of Credit (after giving effect to
any partial reallocation pursuant to clause (b)(i) above), pursuant to a cash
collateral agreement to be entered into in form and substance reasonably
satisfactory to the Agent, for so long as such L/C Obligations are outstanding;
provided, that the Borrowers shall not be

 

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obligated to cash collateralize any Defaulting Lender’s participations in
Letters of Credit if such Defaulting Lender is also the L/C Issuer;

 

(iii)                               if the Borrowers cash collateralize any
portion of such Defaulting Lender’s participation in Letters of Credit Exposure
pursuant to this Section 9.15(b), the Borrowers shall not be required to pay any
Letter of Credit Fees to the Agent for the account of such Defaulting Lender
pursuant to Section 2.03 with respect to such cash collateralized portion of
such Defaulting Lender’s participation in Letters of Credit during the period
such participation is cash collateralized;

 

(iv)                              to the extent the participation by any
Non-Defaulting Lender in the Letters of Credit is reallocated pursuant to this
Section 9.15(b), then the Letter of Credit Fees payable to the Non-Defaulting
Lenders pursuant to Section 2.03 shall be adjusted in accordance with such
reallocation;

 

(v)                                 to the extent any Defaulting Lender’s
participation in Letters of Credit is neither cash collateralized nor
reallocated pursuant to this Section 9.15(b), then, without prejudice to any
rights or remedies of the L/C Issuer or any Lender hereunder, all Letter of
Credit Fees that would have otherwise been payable to such Defaulting Lender
under Section 2.03 with respect to such portion of such participation shall
instead be payable to the L/C Issuer until such portion of such Defaulting
Lender’s participation is cash collateralized or reallocated;

 

(vi)                              so long as any Lender is a Defaulting Lender,
the L/C Issuer shall not be required to issue, amend, or increase any Letter of
Credit to the extent (x) the Defaulting Lender’s Applicable Percentage of such
Letter of Credit cannot be reallocated pursuant to this Section 9.15(b) or
(y) the L/C Issuer has not otherwise entered into arrangements reasonably
satisfactory to the L/C Issuer and the Borrowers to eliminate the L/C Issuer’s
risk with respect to the Defaulting Lender’s participation in Letters of Credit;
and

 

(vii)                           The Agent may release any cash collateral
provided by the Borrowers pursuant to this Section 9.15(b) to the L/C Issuer and
the L/C Issuer may apply any such cash collateral to the payment of such
Defaulting Lender’s Applicable Percentage of any Letter of Credit Disbursement
that is not reimbursed by the Borrowers pursuant to Section 2.03.

 

ARTICLE X

MISCELLANEOUS

 

10.01                 Amendments, Etc.  No amendment or waiver of any provision
of this Agreement or any other Loan Document (other than Swap Contracts), and no
consent to any departure by any Loan Party therefrom, shall be effective unless
in writing signed by the Agent, with the consent of the Required Lenders, and
the Lead Borrower or the applicable Loan Party, as the case may be, and
acknowledged by the Agent, and each such waiver or consent shall be

 

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effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, waiver or consent shall:

 

(a)                                 increase the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 8.02) without the
written consent of such Lender;

 

(b)                                 as to any Lender, postpone any date fixed by
this Agreement or any other Loan Document for (i) any scheduled payment
(including the Maturity Date) or mandatory prepayment of principal, interest,
fees or other amounts due hereunder or under any of the other Loan Documents
without the written consent of such Lender entitled to such payment, or (ii) any
scheduled or mandatory reduction or termination of the Aggregate Commitments
hereunder or under any other Loan Document without the written consent of such
Lender;

 

(c)                                  as to any Lender, reduce the principal of,
or the rate of interest specified herein on, any Committed Loan held by such
Lender, or (subject to clause (iii) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document to
or for the account of such Lender, without the written consent of each Lender
entitled to such amount; provided, however, that only the consent of the
Required Lenders shall be necessary to amend the definition of “Default Rate” or
to waive any obligation of the Borrowers to pay interest or Letter of Credit
Fees at the Default Rate;

 

(d)                                 as to any Lender, change Section 2.12 or
Section 8.03 in a manner that would alter the pro rata sharing of payments
required thereby without the written consent of such Lender;

 

(e)                                  change any provision of this Section or the
definition of “Required Lenders” or any other provision hereof specifying the
number or percentage of Lenders required to amend, waive or otherwise modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender;

 

(f)                                   except as expressly permitted hereunder or
under any other Loan Document, release, or limit the liability of, any Loan
Party without the written consent of each Lender;

 

(g)                                  except for Permitted Dispositions, release
all or substantially all of the Collateral from the Liens of the Security
Documents without the written consent of each Lender;

 

(h)                                 increase the Aggregate Commitments without
the written consent of each Lender;

 

(i)                                     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 Agent to change, establish or eliminate any Reserves; and

 

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(j)                                    except as expressly permitted herein or
in any other Loan Document, 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 written consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any Issuer
Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Agent in
addition to the Lenders required above, affect the rights or duties of the Agent
under this Agreement or any other Loan Document; and (iii) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed only
by the parties thereto.

 

Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, no provider or holder of any Bank Products or Cash Management Services
shall have any voting or approval rights hereunder (or be deemed a Lender)
solely by virtue of its status as the provider or holder of such agreements or
products or the Obligations owing thereunder, nor shall the consent of any such
provider or holder be required (other than in their capacities as Lenders, to
the extent applicable) for any matter hereunder or under any of the other Loan
Documents, including as to any matter relating to the Collateral or the release
of Collateral or any Loan Party.

 

If any Lender does not consent (a “Non-Consenting Lender”) to a proposed
amendment, waiver, consent or release with respect to any Loan Document that
requires the consent of each Lender and that has been approved by the Required
Lenders, the Lead Borrower may replace such Non-Consenting Lender in accordance
with Section 10.13.

 

10.02                 Notices; Effectiveness; Electronic Communications.

 

(a)                                 Notices Generally.  Except in the case of
notices and other communications expressly permitted to be given by telephone
(and except as provided in subsection (b) below), 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 telecopier as follows, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as follows:

 

(i)                                     if to the Loan Parties, the Agent or the
L/C Issuer, to the address, telecopier number, electronic mail address or
telephone number specified for such Person on Schedule 10.02; and

 

(ii)                                  if to any other Lender, to the address,
telecopier number, electronic mail address or telephone number specified to the
Lead Borrower and the Agent.

 

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been

 

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given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next Business Day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).

 

(b)                                 Electronic Communications.  Notices and
other communications to the Loan Parties, the Lenders and the L/C Issuer
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by the
Agent, provided that the foregoing shall not apply to notices to any Lender or
the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as
applicable, has notified the Agent that it is incapable of receiving notices
under such Article by electronic communication.  The Agent may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it, provided that
approval of such procedures may be limited to particular notices or
communications.

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c)                                  Change of Address, Etc.  Each of the Loan
Parties, the Agent and the L/C Issuer may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the
other parties hereto.  Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the
Lead Borrower, the Agent and the L/C Issuer.  In addition, each Lender agrees to
notify the Agent from time to time to ensure that the Agent has on record (i) an
effective address, contact name, telephone number, telecopier number and
electronic mail address to which notices and other communications may be sent
and (ii) accurate wire instructions for such Lender.

 

(d)                                 Reliance by Agent, L/C Issuer and Lenders. 
The Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon
any notices (including telephonic Committed Loan Notices) purportedly given by
or on behalf of the Loan Parties even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by any
other form of notice specified herein, or (ii) the terms thereof, as understood
by the recipient, varied from any confirmation thereof.  The Loan Parties shall
indemnify the Agent, the L/C Issuer, each Lender and the Related Parties of each
of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the
Loan Parties.  All telephonic notices to and other

 

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telephonic communications with the Agent may be recorded by the Agent, and each
of the parties hereto hereby consents to such recording.

 

10.03                 No Waiver; Cumulative Remedies.  No failure by any Credit
Party to exercise, and no delay by any such Person in exercising, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or under any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges provided herein and in
the other Loan Documents are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.  Without limiting the
generality of the foregoing, the making of a Committed Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default or Event of
Default, regardless of whether any Credit Party may have had notice or knowledge
of such Default or Event of Default at the time.

 

10.04                 Expenses; Indemnity; Damage Waiver.

 

(a)                                 Costs and Expenses.  The Borrowers shall pay
all Credit Party Expenses.

 

(b)                                 Indemnification by the Loan Parties.  The
Loan Parties shall indemnify the Agent (and any sub-agent thereof), each other
Credit Party, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee harmless
(on an after tax basis) from, any and all losses, claims, causes of action,
damages, liabilities, settlement payments, costs, and related expenses
(including the fees, charges and disbursements of counsel to the Indemnitees,
limited to one primary counsel for all Indemnitees, or in the case of a conflict
of interest, separate counsel for such Indemnitee), incurred by any Indemnitee
or asserted against any Indemnitee by any third party or by any Borrower or any
other Loan Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, or, in the case
of the Agent (and any sub-agents thereof) and their Related Parties only, the
administration of this Agreement and the other Loan Documents, (ii) any
Committed Loan or Letter of Credit or the use or proposed use of the proceeds
therefrom (including any refusal by the L/C Issuer 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, any bank
advising or confirming a Letter of Credit or any other nominated person with
respect to a Letter of Credit seeking to be reimbursed or indemnified or
compensated, and any third party seeking to enforce the rights of a Borrower,
beneficiary, nominated person, transferee, assignee of Letter of Credit
proceeds, or holder of an instrument or document related to any Letter of
Credit), (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property owned or operated by any Loan Party or any of its
Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any
Credit Party to, a Blocked Account Bank or other

 

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Person which has entered into a control agreement with any Credit Party
hereunder, or (v) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by any Borrower or any
other Loan Party or any of the Loan Parties’ directors, shareholders or
creditors, and regardless of whether any Indemnitee is a party thereto, in all
cases, whether or not caused by or arising, in whole or in part, out of the
comparative, contributory or sole negligence of the Indemnitee; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses (x) are determined
by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence, bad faith or willful misconduct of such
Indemnitee (y) arising out of any litigation that does not involve an act or
omission of any of the Loan Parties or their Affiliates or that is brought by an
Indemnitee against any other Indemnitee (except when one of the parties to such
action was acting in its capacity as an agent, an arranger, a bookrunner or
other agency capacity) or (z) result from a claim brought by a Borrower or any
other Loan Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if the
Borrowers or such Loan Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction.  For
the avoidance of doubt, this Section 10.04 shall not apply to Taxes, except any
Taxes that represent liabilities, obligations, losses, damages, penalties,
claims, demands, actions, prepayments, suits, costs, expenses and disbursements
arising from any non-Tax claims.

 

(c)                                  Reimbursement by Lenders.  Without limiting
their obligations under Section 9.13 hereof, to the extent that the Loan Parties
for any reason fail to pay any amount required under subsection (a) or (b) of
this Section to be paid by it, each Lender severally agrees to pay to the Agent
(or any such sub-agent), the L/C Issuer or such Related Party, as the case may
be, such Lender’s Applicable Percentage (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 Agent (or any such sub-agent) or the L/C Issuer in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Agent (or any such sub-agent) or L/C Issuer in connection with such
capacity.  The obligations of the Lenders under this subsection (c) are subject
to the provisions of Section 2.11(d).

 

(d)                                 Waiver of Consequential Damages, Etc.  To
the fullest extent permitted by applicable Law, the Loan Parties shall not
assert, and hereby waive, 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, any other Loan Document or any agreement or instrument
contemplated hereby, the transactions contemplated hereby or thereby, any
Committed Loan or Letter of Credit or the use of the proceeds thereof.  No
Indemnitee shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed to such unintended
recipients by such Indemnitee through telecommunications, electronic or other
information transmission systems in connection with this Agreement or the other
Loan Documents or the transactions contemplated hereby or thereby other

 

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than for direct or actual damages resulting from the gross negligence, bad faith
or willful misconduct of such Indemnitee as determined by a final and
nonappealable judgment of a court of competent jurisdiction.

 

(e)                                  Payments.  All amounts due under this
Section shall be payable on demand therefor (accompanied by a reasonably
detailed invoice or other back-up documentation).

 

(f)                                   Survival.  The agreements in this
Section shall survive the resignation of the Agent and the L/C Issuer, the
assignment of any Commitment or Committed Loan by any Lender, the replacement of
any Lender, the termination of the Aggregate Commitments and the repayment,
satisfaction or discharge of all the other Obligations.

 

10.05                 Payments Set Aside.  To the extent that any payment by or
on behalf of the Loan Parties is made to any Credit Party, or any Credit Party
exercises its right of setoff, and such payment or the proceeds of such setoff
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by such Credit Party in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Law or otherwise, then (a) to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees
to pay to the Agent upon demand its Applicable Percentage (without duplication)
of any amount so recovered from or repaid by the Agent, plus interest thereon
from the date of such demand to the date such payment is made at a rate per
annum equal to the Federal Funds Rate from time to time in effect.  The
obligations of the Lenders and the L/C Issuer under clause (b) of the preceding
sentence shall survive the payment in full of the Obligations and the
termination of this Agreement.

 

10.06                 Successors and Assigns.

 

(a)                                 Successors and Assigns Generally.  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,
except that no Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder or under any other Loan Document without the prior written
consent of the Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of
participation in accordance with the provisions of subsection Section 10.06(d),
or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of Section 10.06(f) (and any other attempted assignment or transfer
by any party hereto 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,
Participants to the extent provided in subsection (d) of this Section and, to
the extent expressly contemplated hereby, the Related Parties of

 

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each of the Credit Parties) any legal or equitable right, remedy or claim under
or by reason of this Agreement.

 

(b)                                 Assignments by Lenders.  Any Lender may at
any time assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment(s) and the Committed Loans (including for purposes of this
Section 10.06(b), participations in L/C Obligations) at the time owing to it);
provided that any such assignment shall be subject to the following conditions:

 

(i)                                     Minimum Amounts

 

(A)                               in the case of an assignment of the entire
remaining amount of the assigning Lender’s Commitment and the Committed Loans at
the time owing to it or in the case of an assignment to a Lender or an Affiliate
of a Lender or an Approved Fund with respect to a Lender, no minimum amount need
be assigned; and

 

(B)                               in any case not described in subsection
(b)(i)(A) of this Section, the aggregate amount of the Commitment (which for
this purpose includes Loans outstanding thereunder) or, if the Commitment is not
then in effect, the principal outstanding balance of the Committed Loans of the
assigning Lender subject to each such assignment, determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of
the Trade Date, shall not be less than $5,000,000 unless each of the Agent and,
so long as no Event of Default has occurred and is continuing, the Lead Borrower
otherwise consents (each such consent not to be unreasonably withheld or delayed
and shall be deemed given if the Lead Borrower has not responded to a request
for such consent within seven (7) Business Days); provided, however, that
concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met;

 

(ii)                                  Proportionate Amounts.  Each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to
the Committed Loans or the Commitment assigned;

 

(iii)                               Required Consents.  No consent shall be
required for any assignment except to the extent required by subsection
(b)(i)(B) of this Section and, in addition:

 

(A)                               the consent of the Lead Borrower (such consent
not to be unreasonably withheld or delayed) shall be required unless (1) an
Event of Default has occurred and is continuing at the time of such assignment
or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved
Fund; and

 

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(B)                               the consent of the Agent (such consent not to
be unreasonably withheld or delayed) shall be required for assignments in
respect of any Commitment if such assignment is to a Person that is not a
Lender, an Affiliate of such Lender or an Approved Fund with respect to such
Lender; and

 

(C)                               the consent of the L/C Issuer (such consent
not to be unreasonably withheld or delayed) shall be required for any assignment
that increases the obligation of the assignee to participate in exposure under
one or more Letters of Credit (whether or not then outstanding).

 

(iv)                              Assignment and Assumption.  The parties to
each assignment shall execute and deliver to the Agent an Assignment and
Assumption, together with a processing and recordation fee of $3,500, provided,
however, that the Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the Eligible Assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Assumption, 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 Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption 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 Sections 3.01, 3.04, 3.05, and 10.04 with
respect to facts and circumstances occurring prior to the effective date of such
assignment.  Upon request, the Borrowers (at their expense) shall execute and
deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender
of rights or obligations under this Agreement that does not comply with this
subsection 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
Section 10.06(d).

 

(c)                                  Register.  The Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Agent’s Office
a copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Committed Loans and L/C Obligations owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).  The
entries in the Register shall be conclusive, absent manifest error, and the Loan
Parties, the Agent 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 and any Lender
at any reasonable time and from time to time upon reasonable prior notice.

 

(d)                                 Participations.  Any Lender may at any time,
without the consent of, or notice to, the Loan Parties or the Agent, sell
participations to any Person (other than a natural person or the

 

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Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of its Commitment and/or the
Committed Loans (including such Lender’s participations in L/C Obligations)
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 Agent, the Lenders and the L/C Issuer shall continue to deal solely
and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any Participant shall agree in writing to
comply with all confidentiality obligations set forth in Section 10.07 as if
such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any  provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant.  Subject to subsection (e) of this
Section, the Loan Parties agree that each Participant shall be entitled to the
benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to
Section 10.06(b).  To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 10.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.12 as though it were
a Lender.  Each Lender that sells a participation, acting solely for this
purpose as an agent of the Borrowers, shall maintain a register on which it
enters the name and address of each Participant and the principal amounts (and
stated interest) of each Participant’s interest in the Loans or other
obligations under the Loan Documents (the “Participant Register”); provided that
no Lender shall have any obligation to disclose all or any portion of the
Participant Register (including the identity of any Participant or any
information relating to a Participant’s interest in any commitments, loans,
letters of credit or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan, letter of credit or other obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations.  The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person whose name is recorded in the
Participant Register as the owner of such participation for all purposes of this
Agreement notwithstanding any notice to the contrary.  For the avoidance of
doubt, the Administrative Agent (in its capacity as Administrative Agent) shall
have no responsibility for maintaining a Participant Register.

 

(e)           Limitations upon Participant Rights.  A Participant shall not be
entitled to receive any greater payment under Section 3.01 or 3.04 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 3.01 unless the Lead Borrower is notified of
the participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Sections 3.01(e) and 3.06 as though
it were a Lender.  Each Lender that sells a participation agrees, at the Lead
Borrower’s request and expense, to

 

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use reasonable efforts to cooperate with the Lead Borrower to effectuate the
provisions of Section 3.06(b) with respect to any applicable Participant.

 

(f)            Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

 

(g)           Electronic Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Assumption
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

 

(h)           Resignation as L/C Issuer after Assignment.  Notwithstanding
anything to the contrary contained herein, if at any time Wells Fargo assigns
all of its Commitment and Committed Loans pursuant to subsection (b) above,
Wells Fargo may, upon 30 days’ notice to the Lead Borrower and the Lenders,
resign as L/C Issuer.  In the event of any such resignation as L/C Issuer, the
Lead Borrower shall be entitled to appoint from among the Lenders a successor
L/C Issuer hereunder; provided, however, that no failure by the Lead Borrower to
appoint any such successor shall affect the resignation of Wells Fargo as L/C
Issuer.  If Wells Fargo resigns as L/C Issuer, it shall retain all the rights,
powers, privileges and duties of the L/C Issuer hereunder with respect to all
Letters of Credit outstanding as of the effective date of its resignation as L/C
Issuer and all L/C Obligations with respect thereto (including the right to
require the Lenders to make Base Rate Loans pursuant to Section 2.03 hereof. 
Upon the appointment of a successor L/C Issuer, (a) such successor shall succeed
to and become vested with all of the rights, powers, privileges and duties of
the retiring L/C Issuer, and (b) the successor L/C Issuer shall issue letters of
credit in substitution for the Letters of Credit, if any, outstanding at the
time of such succession or make other arrangements satisfactory to Wells Fargo
to effectively assume the obligations of Wells Fargo with respect to such
Letters of Credit.

 

10.07      Treatment of Certain Information; Confidentiality.  Each of the
Credit Parties 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

 

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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 Credit Party or any of their respective
Affiliates on a non-confidential basis from a source other than the Loan
Parties.

 

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 Credit Party 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 Closing Date, 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.

 

Each of the Credit Parties 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.

 

10.08      Right of Setoff.  If an Event of Default shall have occurred and be
continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender, the L/C
Issuer and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the Agent or
the Required Lenders, to the fullest extent permitted by applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, the L/C
Issuer or any such Affiliate to or for the credit or the account of the
Borrowers or any other Loan Party against any and all of the Obligations now or
hereafter existing under this Agreement or any other Loan Document to such
Lender or the L/C Issuer, regardless of the adequacy of the Collateral, and
irrespective of whether or not such Lender or

 

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the L/C Issuer shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrowers or such Loan Party may
be contingent or unmatured or are owed to a branch or office of such Lender or
the L/C Issuer different from the branch or office holding such deposit or
obligated on such indebtedness.  The rights of each Lender, the L/C Issuer and
their respective Affiliates under this Section are in addition to other rights
and remedies (including other rights of setoff) that such Lender, the L/C Issuer
or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees
to notify the Lead Borrower and the Agent promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application.

 

10.09      Interest Rate Limitation.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”).  If the Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Committed Loans or, if it
exceeds such unpaid principal, refunded to the Borrowers.  In determining
whether the interest contracted for, charged, or received by the Agent or a
Lender exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) amortize, prorate, allocate, and spread in
equal or unequal parts the total amount of interest throughout the contemplated
term of the Obligations hereunder.

 

10.10      Counterparts; Integration; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto in 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 Agent and when the Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, pdf or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11      Survival.  All representations and warranties made hereunder and in
any other Loan Document or other document delivered pursuant hereto or thereto
or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof.  Such representations and warranties have been or will be
relied upon by the Credit Parties,

 

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regardless of any investigation made by any Credit Party or on their behalf and
notwithstanding that any Credit Party may have had notice or knowledge of any
Default or Event of Default at the time of any Credit Extension, and shall
continue in full force and effect as long as any Committed Loan or any other
Obligation hereunder (other than Unmatured Surviving Obligations) shall remain
unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 
Further, the provisions of Sections 3.01, 3.04, 3.05 and 10.04 and Article IX
shall survive and remain in full force and effect regardless of the repayment of
the Obligations, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.  In
connection with the termination of this Agreement and the release and
termination of the security interests in the Collateral, the Agent may require
such indemnities and collateral security as they shall reasonably deem necessary
or appropriate to protect the Credit Parties against (x) loss on account of
credits previously applied to the Obligations that may subsequently be reversed
or revoked, (y) any obligations that may thereafter arise with respect to the
Other Liabilities and (z) any Obligations (other than Unmatured Surviving
Obligations) that may thereafter arise under Section 10.04.

 

10.12      Severability.  If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.13      Replacement of Lenders.  If any Lender requests compensation under
Section 3.04, 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 3.01, or if any Lender is a Defaulting Lender or a Non-Consenting
Lender, then the Borrowers may, at their sole expense and effort, upon notice to
such Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:

 

(a)           the Borrowers shall have paid to the Agent the assignment fee
specified in Section 10.06(b);

 

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(b)           such Lender shall have received payment of an amount equal to the
outstanding principal of its Committed Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder and under the other Loan
Documents (including any amounts under Section 3.05) 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);

 

(c)           in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made pursuant to
Section 3.01, such assignment will result in a reduction in such compensation or
payments thereafter; and

 

(d)           such assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or 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.

 

10.14      Governing Law; Jurisdiction; Etc.

 

(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

(b)           SUBMISSION TO JURISDICTION.  EACH LOAN PARTY 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 OF THE LOAN PARTIES 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 OF THE LOAN PARTIES 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.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN
THE COURTS OF ANY JURISDICTION.

 

(c)           WAIVER OF VENUE.  EACH LOAN PARTY 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 OF THE LOAN PARTIES
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.

 

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(d)           SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)           ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY
ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF
MANHATTAN OR ANY FEDERAL COURT SITTING THEREIN AS THE AGENT MAY ELECT IN ITS
SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH
RESPECT TO ANY SUCH ACTION.

 

10.15      Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY 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 OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON 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 AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16      No Advisory or Fiduciary Responsibility.  In connection with all
aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, the each Credit Party is and has been acting solely as a
principal and is not the financial advisor, agent or fiduciary, for the Loan
Parties or any of their respective Affiliates, stockholders, creditors or
employees or any other Person; (iii) none of the Credit Parties has assumed or
will assume an advisory, agency or fiduciary responsibility in favor of the Loan
Parties with respect to any of the transactions contemplated hereby or the
process leading thereto, including with respect to any amendment, waiver or
other modification hereof or of any other Loan Document (irrespective of whether
any of the Credit

 

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Parties has advised or is currently advising any Loan Party or any of its
Affiliates on other matters) and none of the Credit Parties has any obligation
to any Loan Party or any of its Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in
the other Loan Documents; (iv) the Credit Parties and their respective
Affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Loan Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any of
such interests by virtue of any advisory, agency or fiduciary relationship; and
(v) the Credit Parties have not provided and will not provide any legal,
accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification
hereof or of any other Loan Document) and each of the Loan Parties has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has
deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the
fullest extent permitted by law, any claims that it may have against each of the
Credit Parties with respect to any breach or alleged breach of agency or
fiduciary duty.

 

10.17      USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as
hereinafter defined) and the Agent (for itself and not on behalf of any Lender)
hereby notifies the Loan Parties that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
each Loan Party and other information that will allow such Lender or the Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each Loan
Party is in compliance, in all material respects, with the Patriot Act.  No part
of the proceeds of the Committed Loans will be used by the Loan Parties,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

10.18      Foreign Asset Control Regulations.  Neither of the advance of the
Committed Loans nor the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading
With the Enemy Act”) or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
(the “Foreign Assets Control Regulations”) or any enabling legislation or
executive order relating thereto (which for the avoidance of doubt shall
include, but shall not be limited to (a) Executive Order 13224 of September 21,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the
“Executive Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of

 

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2001 (Public Law 107-56)).  Furthermore, none of the Borrowers or their
Affiliates (a) is or will become a “blocked person” as described in the
Executive Order, the Trading With the Enemy Act or the Foreign Assets Control
Regulations or (b) engages or will engage in any dealings or transactions, or be
otherwise associated, with any such “blocked person” or in any manner violative
of any such order.

 

10.19      Time of the Essence.  Time is of the essence of the Loan Documents.

 

10.20      Press Releases.

 

Each Loan Party consents to the publication by the Agent or its representatives
of advertising material, including any “tombstone,” press release or comparable
advertising, on its website or in other marketing materials of Agent, relating
to the financing transactions contemplated by this Agreement using any Loan
Party’s name, product photographs, logo, trademark or other insignia.  The Agent
shall provide a draft reasonably in advance of any advertising material, “tomb
stone” or press release to the Lead Borrower for review and comment prior to the
publication thereof.  The Agent reserves the right to provide to industry trade
organizations and loan syndication and pricing reporting services information
necessary and customary for inclusion in league table measurements. 
Notwithstanding the foregoing or anything in the Loan Documents to the contrary,
the Agent and each Lender consents to the disclosure by the Loan Parties of all
information required to be disclosed in accordance with applicable Securities
Laws, as determined by the Lead Borrower

 

10.21      Additional Waivers.

 

(a)           The Obligations are the joint and several obligation of each Loan
Party. To the fullest extent permitted by Applicable Law, the obligations of
each Loan Party shall not be affected by (i) the failure of any Credit 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 or any
other Loan Document, or (iii) the failure to perfect any security interest in,
or the release of, any of the Collateral or other security held by or on behalf
of the Agent or any other Credit Party.

 

(b)           The obligations of each Loan Party  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 after the termination of
the Commitments), including any claim of waiver, release, surrender, alteration
or compromise of any of the Obligations, and shall not be subject to any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of any 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 the Agent or any other Credit 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, any default, failure or delay, willful or otherwise, in the

 

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performance of any 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 after the termination of the Commitments).

 

(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 payment in full in cash of all the Obligations and the
termination of the Commitments. The Agent and the other Credit Parties may, at
their election, foreclose on any security held by one or more of them by one or
more judicial or non-judicial 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 paid in full in cash and the
Commitments have been terminated.  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.

 

(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 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 payment in full of the Obligations and if any Event of
Default has occurred and is continuing, 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 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 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

 

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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.

 

10.22      No Strict Construction.

 

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

 

10.23      Attachments.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.

 

10.24      Keepwell.

 

Each Qualified ECP Guarantor hereby jointly and severally absolutely,
unconditionally and irrevocably undertakes to provide such funds or other
support as may be needed from time to time by each other Loan Party to honor all
of its obligations under the Facility Guaranty in respect of Swap Obligations
(provided, however, that each Qualified ECP Guarantor shall only be liable under
this Section 10.24 for the maximum amount of such liability that can be hereby
incurred without rendering its obligations under this Section 10.24, or
otherwise under the Facility Guaranty, voidable under applicable Law relating to
fraudulent conveyance or fraudulent transfer, and not for any greater amount).
The obligations of each Qualified ECP Guarantor under this Section shall remain
in full force and effect until payment in full of the Obligations. Each
Qualified ECP Guarantor intends that this Section 10.24 constitute, and this
Section 10.24 shall be deemed to constitute, a “keepwell, support, or other
agreement” for the benefit of each other Loan Party for all purposes of
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.

 

 

BORROWERS

 

 

 

Cache, Inc., as Lead Borrower and as a Borrower

 

 

 

By:

/s/ Margaret J. Feeney

 

 

 

 

Name:

 Margaret J. Feeney

 

 

 

 

Title:

Chief Financial Officer and EVP

 

 

 

 

 

Cache of Las Vegas, Inc., as a Borrower

 

 

 

 

 

By:

/s/ Margaret J. Feeney

 

 

 

 

Name:

Margaret J. Feeney

 

 

 

 

Title:

Chief Financial Officer and EVP

 

 

 

 

 

Cache of Virginia, Inc., as a Borrower

 

 

 

 

 

By:

/s/ Margaret J. Feeney

 

 

 

 

Name:

Margaret J. Feeney

 

 

 

 

Title:

Chief Financial Officer and EVP

 

Signature Page to Credit Agreement

 

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WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent, as L/C Issuer and as a Lender

 

 

 

By:

/s/ Cory Loftus

 

Name:

Cory Loftus

 

Title:

Director

 

Signature Page to Credit Agreement

 

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