Exhibit 10.1
EXECUTION VERSION
 
 
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 19, 2011
among
KIRKLAND’S STORES, INC.,
as the Lead Borrower
For
The Borrowers Named Herein
The Guarantors Named Herein
BANK OF AMERICA, N.A.
as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer
and
The Other Lenders Party Hereto
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Sole Lead Arranger and Sole Bookrunner
 
 

 

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

 

TABLE OF CONTENTS

          Section   Page  
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
    1  
 
       
1.01 Defined Terms
    1  
1.02 Other Interpretive Provisions
    41  
1.03 Accounting Terms
    42  
1.04 Rounding
    43  
1.05 Times of Day
    43  
1.06 Letter of Credit Amounts
    43  
 
       
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS
    43  
 
       
2.01 Committed Loans; Reserves
    43  
2.02 Borrowings, Conversions and Continuations of Committed Loans
    44  
2.03 Letters of Credit
    46  
2.04 Swing Line Loans
    54  
2.05 Prepayments
    56  
2.06 Termination or Reduction of Commitments
    57  
2.07 Repayment of Loans
    58  
2.08 Interest
    58  
2.09 Fees
    59  
2.10 Computation of Interest and Fees
    59  
2.11 Evidence of Debt.
    59  
2.12 Payments Generally; Agent’s Clawback
    60  
2.13 Sharing of Payments by Lenders
    61  
2.14 Settlement Amongst Lenders
    62  
 
       
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER
    62  
 
       
3.01 Taxes
    62  
3.02 Illegality
    64  
3.03 Inability to Determine Rates
    64  
3.04 Increased Costs; Reserves on LIBOR Rate Loans
    65  
3.05 Compensation for Losses
    66  
3.06 Mitigation Obligations; Replacement of Lenders
    67  
3.07 Survival
    67  
3.08 Designation of Lead Borrower as Borrowers’ Agent
    67  
 
       
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
    68  
 
       
4.01 Conditions of Initial Credit Extension
    68  
4.02 Conditions to all Credit Extensions
    70  
 
       
ARTICLE V REPRESENTATIONS AND WARRANTIES
    71  
 
       
5.01 Existence, Qualification and Power
    71  
5.02 Authorization; No Contravention
    72  
5.03 Governmental Authorization; Other Consents
    72  
5.04 Binding Effect
    72  
5.05 Financial Statements; No Material Adverse Effect
    72  
5.06 Litigation
    73  

(i)

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

 

          Section   Page  
5.07 No Default
    73  
5.08 Ownership of Property; Liens
    73  
5.09 Environmental Compliance
    74  
5.10 Insurance
    74  
5.11 Taxes
    74  
5.12 ERISA Compliance
    75  
5.13 Subsidiaries; Equity Interests
    75  
5.14 Margin Regulations; Investment Company Act
    76  
5.15 Disclosure
    76  
5.16 Compliance with Laws
    76  
5.17 Intellectual Property; Licenses, Etc.
    76  
5.18 Labor Matters
    76  
5.19 Security Documents
    77  
5.20 Solvency
    78  
5.21 Deposit Accounts; Credit Card Arrangements
    78  
5.22 Brokers
    78  
5.23 Customer and Trade Relations
    78  
5.24 Material Contracts
    78  
5.25 Casualty
    78  
 
       
ARTICLE VI AFFIRMATIVE COVENANTS
    78  
 
       
6.01 Financial Statements
    78  
6.02 Certificates; Other Information
    79  
6.03 Notices
    81  
6.04 Payment of Obligations
    82  
6.05 Preservation of Existence, Etc.
    82  
6.06 Maintenance of Properties
    82  
6.07 Maintenance of Insurance
    83  
6.08 Compliance with Laws
    84  
6.09 Books and Records; Accountants
    84  
6.10 Inspection Rights
    84  
6.11 Additional Loan Parties
    85  
6.12 Cash Management
    86  
6.13 Information Regarding the Collateral
    87  
6.14 Physical Inventories
    87  
6.15 Environmental Laws
    88  
6.16 Further Assurances
    88  
6.17 Compliance with Terms of Leaseholds
    89  
6.18 Material Contracts
    89  
 
       
ARTICLE VII NEGATIVE COVENANTS
    89  
 
       
7.01 Liens
    89  
7.02 Investments
    89  
7.03 Indebtedness; Disqualified Stock; Equity Issuances
    89  
7.04 Fundamental Changes
    90  
7.05 Dispositions
    90  
7.06 Restricted Payments
    90  
7.07 Prepayments of Indebtedness
    91  
7.08 Change in Nature of Business
    91  
7.09 Transactions with Affiliates
    91  
7.10 Burdensome Agreements
    92  

(ii)

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

 

          Section   Page  
7.11 Use of Proceeds
    92  
7.12 Amendment of Material Documents
    92  
7.13 Fiscal Year
    92  
7.14 Deposit Accounts; Credit Card Processors
    92  
7.15 Consolidated Fixed Charge Coverage Ratio
    93  
 
       
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
    93  
 
       
8.01 Events of Default
    93  
8.02 Remedies Upon Event of Default
    95  
8.03 Application of Funds
    96  
 
       
ARTICLE IX THE AGENT
    98  
 
       
9.01 Appointment and Authority
    98  
9.02 Rights as a Lender
    98  
9.03 Exculpatory Provisions
    98  
9.04 Reliance by Agent
    99  
9.05 Delegation of Duties
    99  
9.06 Resignation of Agent
    99  
9.07 Non-Reliance on Agent and Other Lenders
    100  
9.08 No Other Duties, Etc.
    100  
9.09 Agent May File Proofs of Claim
    100  
9.10 Collateral and Guaranty Matters
    101  
9.11 Notice of Transfer
    102  
9.12 Reports and Financial Statements
    102  
9.13 Agency for Perfection
    103  
9.14 Indemnification of Agent
    103  
9.15 Relation among Lenders
    103  
9.16 Defaulting Lender
    103  
 
       
ARTICLE X MISCELLANEOUS
    104  
 
       
10.01 Amendments, Etc.
    104  
10.02 Notices; Effectiveness; Electronic Communications
    106  
10.03 No Waiver; Cumulative Remedies
    107  
10.04 Expenses; Indemnity; Damage Waiver
    108  
10.05 Payments Set Aside
    109  
10.06 Successors and Assigns
    109  
10.07 Treatment of Certain Information; Confidentiality
    113  
10.08 Right of Setoff
    114  
10.09 Interest Rate Limitation
    114  
10.10 Counterparts; Integration; Effectiveness
    114  
10.11 Survival
    114  
10.12 Severability
    115  
10.13 Replacement of Lenders
    115  
10.14 Governing Law; Jurisdiction; Etc.
    116  
10.15 Waiver of Jury Trial
    117  
10.16 No Advisory or Fiduciary Responsibility
    117  
10.17 USA PATRIOT Act Notice
    117  
10.18 Foreign Asset Control Regulations
    118  
10.19 Time of the Essence
    118  
10.20 Press Releases
    118  
10.21 Additional Waivers
    118  

(iii)

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

 

          Section   Page  
10.22 No Strict Construction
    120  
10.23 Attachments
    120  
10.24 Amendment and Restatement
    120  
 
       
SIGNATURES
    S-1  

(iv)

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

 

SCHEDULES

     
1.01
  Borrowers
2.01
  Commitments and Applicable Percentages
5.01
  Loan Parties Organizational Information
5.08(b)(1)
  Owned Real Estate
5.08(b)(2)
  Leased Real Estate
5.10
  Insurance
5.13
  Subsidiaries; Other Equity Investments
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
10.02
  Agent’s Office; Certain Addresses for Notices

EXHIBITS

     
 
  Form of
 
   
A
  Committed Loan Notice
B
  Swing Line Loan Notice
C-1
  Revolving Note
C-2
  Swing Line Note
D
  Compliance Certificate
E
  Assignment and Assumption
F
  Borrowing Base Certificate
G
  Credit Card Notification

(v)

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

 

AMENDED AND RESTATED CREDIT AGREEMENT
     This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of August 19,
2011, among
     KIRKLAND’S STORES, INC., a Tennessee corporation (the “Lead Borrower”);
     the Persons named on Schedule 1.01 hereto (collectively with the Lead
Borrower, the “Borrowers”);
     the Guarantors (as defined herein);
     each lender from time to time party hereto (collectively, the “Lenders” and
individually, a “Lender”);
     BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent, Swing
Line Lender and an L/C Issuer (each as defined herein); and
     WELLS FARGO BANK, NATIONAL ASSOCIATION, as an L/C Issuer (as defined
herein).
W I T N E S S E T H:
     WHEREAS, the Borrowers have requested that the Lenders make available to
the Borrowers a revolving credit facility (including a letter of credit
sub-facility) in an initial maximum amount not to exceed $50,000,000, the
proceeds of which, in each case, shall be used by the Borrowers for purposes
permitted under, and otherwise in accordance with and subject to the terms of,
this Agreement;
     WHEREAS, prior to the date of this Agreement, the Loan Parties, on the one
hand, and Bank of America, N.A. (as successor in interest to Fleet Retail Group,
Inc.), as Agent thereunder, and the lenders party thereto, on the other hand,
previously entered into a Loan and Security Agreement dated as of October 4,
2004 (as amended and in effect, the “Existing Credit Agreement”), pursuant to
which the lenders party thereto provided the Borrowers with certain financial
accommodations; and
     WHEREAS, in accordance with Section 11.3 of the Existing Credit Agreement,
the Loan Parties, the Lenders, and the Agent desire to amend and restate the
Existing Credit Agreement as provided herein and in the Security Agreement.
     NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the undersigned hereby agree that the
Existing Credit Agreement shall be amended and restated in its entirety to read
as set forth herein and in the Security Agreement (it being agreed that neither
this Agreement nor the Security Agreement shall be deemed to evidence or result
in a novation or repayment and reborrowing of the Obligations under the Existing
Credit Agreement):
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:

1

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

 

     “Accelerated 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 the greater of (x) 17.5% of the Loan Cap
and (y) $7,000,000. For purposes of this Agreement, the occurrence of an
Accelerated Borrowing Base Delivery Event shall be deemed continuing (i) so long
as such Event of Default has not been waived, and/or (ii) if the Accelerated
Borrowing Base Delivery Event arises as a result of the Borrowers’ failure to
achieve Availability as required hereunder, until Availability has exceeded the
greater of (x) 17.5% of the Loan Cap and (y) $7,000,000 for thirty
(30) consecutive calendar days, in which case an Accelerated Borrowing Base
Delivery Event shall no longer be deemed to be continuing for purposes of this
Agreement; provided that an Accelerated Borrowing Base Delivery Event shall be
deemed continuing (even if an Event of Default is no longer continuing and/or
Availability exceeds the required amount for thirty (30) consecutive days) at
all times during any Fiscal Year after an Accelerated Borrowing Base Delivery
Event has occurred and been discontinued on two (2) occasions in such Fiscal
Year. The termination of an Accelerated Borrowing Base Delivery Event as
provided herein shall in no way limit, waive or delay the occurrence of a
subsequent Accelerated Borrowing Base Delivery Event in the event that the
conditions set forth in this definition again arise.
     “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, to the order of the Agent, (c) names the Agent as a notify party and
bears a conspicuous notation on its face of the Agent’s security interest
therein, (d) is not subject to any Lien (other than in favor of the Agent), and
(e) is on terms otherwise reasonably acceptable to the Agent.
     “ACH” means automated clearing house transfers.
     “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
secondary obligation incurred or to be incurred or (d) arising out of the use of
a credit or charge card or information contained on or for use with the card.
     “Acquisition” 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 of another Person, (c) any
merger or consolidation of such Person with any other Person or other
transaction or series of transactions resulting in the acquisition of all or
substantially all of the assets, or a Controlling interest in the Equity
Interests, of any Person, or (d) any acquisition of any Store locations of any
Person, in each case in any transaction or group of transactions which are part
of a common plan.
     “Act” shall have the meaning provided in Section 10.17.
     “Adjusted LIBOR Rate” means, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of one percent (1%)) equal the LIBOR Rate for such Interest Period
multiplied by the Statutory Reserve Rate. The Adjusted LIBOR Rate will be
adjusted automatically as to all LIBOR Borrowings then outstanding as of the
effective date of any change in the Statutory Reserve Rate.

2

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

 

     “Adjustment Date” means the first day of each Fiscal Quarter, commencing
October 30, 2011.
     “Administrative Agent” means Bank of America, in its capacity as
administrative agent under any of the Loan Documents, or any successor thereto.
     “Administrative Questionnaire” means an Administrative Questionnaire in a
form supplied by the Agent.
     “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
director, officer, managing member, partner, trustee, or beneficiary of that
Person, (iii) any other Person directly or indirectly holding 10% or more of any
class of the Equity Interests of that Person, and (iv) any other Person 10% or
more of any class of whose Equity Interests is held directly or indirectly by
that Person.
     “Agent” means Bank of America in its capacity as Administrative Agent and
Collateral Agent, or any successor thereto.
     “Agent Parties” shall have the meaning specified in Section 10.02(c).
     “Agent’s Office” means the Agent’s address and, as appropriate, 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
Effective Date, the Aggregate Commitments are $50,000,000.
     “Agreement” means this Amended and Restated Credit Agreement, as amended,
modified, waived, supplemented or restated from time to time.
     “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 Effective 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 that notwithstanding
anything to the contrary set forth herein, upon the occurrence of an Event of
Default, the Agent may, and at the direction of the Required Lenders shall,
immediately increase the Applicable Margin to that set forth in Level III (even
if the Average Daily Availability requirements for a different Level have been
met) and interest shall accrue at the Default Rate; provided further if any
Borrowing Base Certificate 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

3

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

 

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 I   Greater than $30,000,000   1.75%   0.75%               II   Equal to
or less than
$30,000,000 but greater than
$15,000,000   2.00%   1.00%               III   Equal to or less than
$15,000,000   2.25%   1.25%

     “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 Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 2.06 or 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 Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to
which such Lender becomes a party hereto, as applicable.
     “Applicable Rate” means, at any time of calculation, (a) with respect to
Commercial Letters of Credit, a per annum rate equal to fifty percent (50%) of
the Applicable Margin for Loans which are LIBOR Rate Loans, and (b) with respect
to Standby Letters of Credit, a per annum rate equal to the Applicable Margin
for Loans which are LIBOR Rate Loans.
     “Appraised Value” means the appraised orderly liquidation value, net of
costs and expenses to be incurred in connection with any such liquidation, which
value is expressed as a percentage of Cost of Eligible Inventory as set forth in
the inventory stock ledger of the Lead Borrower, which value shall be determined
from time to time by the most recent appraisal undertaken by an independent
appraiser engaged by the Agent.
     “Approved Fund” means any Fund 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.
     “Approved Foreign Vendor” means a Foreign Vendor which (a) is located in
any country acceptable to the Agent in its discretion, (b) has received timely
payment or performance of all obligations owed to it by the Loan Parties,
(c) has not asserted and has no right to assert any reclamation,

4

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

 

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.
     “Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its
capacity as sole lead arranger and sole bookrunner.
     “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 E or any other form approved by the Agent.
     “Attributable Indebtedness” means, on any date, (a) in respect of any
Capital Lease Obligation 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 Obligation, 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.
     “Audited Financial Statements” means the audited consolidated balance sheet
of the Parent and its Subsidiaries for the fiscal year ended January 29, 2011,
and the related consolidated statements of income or operations, Shareholders’
Equity and cash flows for such fiscal year of the Parent and its Subsidiaries,
including the notes thereto.
     “Auto-Extension Letter of Credit” shall have the meaning specified in
Section 2.03(b)(iii).
     “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 aggregate unpaid balance of Credit Extensions to, or for the
account of, the Borrowers.
     In calculating Availability at any time and for any purpose under this
Agreement, the Lead Borrower shall certify to the Agent that all accounts
payable and Taxes are being paid on a timely basis.
     “Availability Period” means the period from and including the Effective
Date to the earliest of (a) the Maturity Date, (b) the date of termination of
the Aggregate Commitments pursuant to Section 2.06, and (c) the date of
termination of the Commitment of each Lender to make 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 that are otherwise addressed or excluded through eligibility criteria,
such reserves as the Agent from time to time determines in its discretion as
being appropriate (a) to reflect the impediments to the Agent’s ability to

5

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

 

realize upon the Collateral, (b) to reflect claims and liabilities that the
Agent determines may need to be satisfied in connection with the realization
upon the Collateral, (c) to reflect criteria, events, conditions, contingencies
or risks which the Agent believes in good faith could 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 discretion, (but are not
limited to) reserves based on: (i) rent; (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 interests of the Agent in
the Collateral; (iv) salaries, wages and benefits due to employees of any
Borrower, (v) Customer Credit Liabilities, (vi) customer deposits,
(viii) 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 interests of
the Agent in the Collateral, (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” shall mean the average daily Availability for
the immediately preceding Fiscal Quarter.
     “Bank of America” means Bank of America, N.A. and its successors.
     “Bank Products” means any services of facilities provided to any Loan Party
by the Agent, any Lender, or any of their respective Affiliates, including,
without limitation, on account of (a) Swap Contracts, (b) purchase cards,
(c) leasing, and (d) supply chain finance services (including, without
limitation, trade payable services and supplier accounts receivable purchases),
but excluding Cash Management Services.
     “Bank Product Reserves” means such reserves as the Agent from time to time
determine in its discretion as being appropriate to reflect the liabilities and
obligations of the Loan Parties with respect to Bank Products then provided or
outstanding.
     “Banker’s Acceptance” means a time draft or bill of exchange or other
deferred payment obligation relating to a Commercial Letter of Credit which has
been accepted by the L/C Issuer.
     “Bankruptcy Code” means the federal Bankruptcy Code of the United States,
Title 11 of the United States Code, as amended from time to time.
     “Base Rate” means for any day a fluctuating rate per annum equal to the
highest of (a) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America as its “prime rate”; (b) the Federal Funds
Rate for such day, plus 0.50%; and (c) the LIBOR Rate for a 30 day interest
period as determined on such day, plus 1.0%. The “prime rate” is a rate set by
Bank of America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in Bank of America’s prime rate, the Federal
Funds Rate or the LIBOR Rate for a 30 day interest period as determined on such
day, respectively, shall take effect at the opening of business on the day
specified in the public announcement of such change.
     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.

6

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

 

     “Blocked Account” has the meaning provided in Section 6.12(a)(ii).
     “Blocked Account Agreement” means with respect to an account established by
a Loan Party, an agreement, in form and substance satisfactory to the Agent,
establishing control (as defined in the UCC) of such account by the Agent and
whereby the bank maintaining such account agrees, upon 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 deposit accounts are
maintained in which any funds of any of the Loan Parties from one or more DDAs
are concentrated and with whom a Blocked Account Agreement has been, or is
required to be, executed in accordance with the terms hereof.
     “Borrower Materials” has the meaning specified in Section 6.02.
     “Borrowers” has the meaning specified in the introductory paragraph hereto.
     “Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the
context may require.
     “Borrowing Base” means, at any time of calculation, an amount equal to:
          (a) the face amount of Eligible Credit Card Receivables multiplied by
90%;
          plus
          (b) the product of (i) 90% multiplied by (ii) the Appraised Value of
Eligible Inventory of the Loan Parties, net of Inventory Reserves, multiplied by
(iii) the Cost of Eligible Inventory of the Loan Parties;
          minus
          (c) the then amount of all Availability Reserves;
provided that in no event shall the amounts available to be borrowed against
Eligible In-Transit Inventory hereunder exceed the In-Transit Cap.
     “Borrowing Base Certificate” means a certificate substantially in the form
of Exhibit F 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 LIBOR Rate Loan, means any such day on which dealings in Dollar
deposits are conducted by and between banks in the London interbank market.
     “Capital Expenditures” means, with respect to any Person for any period,
the sum of (a) (x) all expenditures made (whether made in the form of cash or
other property) or costs incurred for the acquisition or improvement of fixed or
capital assets of such Person (excluding normal replacements and

7

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

 

maintenance which are properly charged to current operations), in each case that
are (or should be) set forth as capital expenditures in a Consolidated statement
of cash flows of such Person for such period, in each case prepared in
accordance with GAAP, minus (y) tenant allowances received in cash during such
period from landlords for operating lease agreements for new Stores, and
(b) Capital Lease Obligations incurred by a Person during such period.
     “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 Bank of America, and in the name of, the
Agent (or as the Agent shall otherwise direct) and 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(g) or 8.02(c).
     “Cash Collateralize” has the meaning specified in Section 2.03(g).
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 at any time to
maintain Availability of at least the greater of (x) 17.5% of the Loan Cap or
(y) $7,000,000. For purposes of this Agreement, the occurrence of a Cash
Dominion Event shall be deemed continuing (i) so long as such Event of Default
has not been waived, and/or (ii) if the Cash Dominion Event arises as a result
of the Borrowers’ failure to achieve Availability as required hereunder, until
Availability has exceeded the greater of (x) 17.5% of the Loan Cap or (y)
$7,000,000 for thirty (30) consecutive days, in which case a Cash Dominion Event
shall no longer be deemed to be continuing for purposes of this Agreement;
provided that 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 thirty (30) consecutive days) at all times during any Fiscal
Year after a Cash Dominion Event has occurred and been discontinued on two
(2) occasions in such Fiscal Year. 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 Management Reserves “ means such reserves as the Agent, from time to
time, determines in its 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 provided to
any Loan Party by the Agent or any Lender or any of their respective Affiliates,
including, without limitation, (a) ACH transactions, (b) controlled disbursement
services, treasury, depository, overdraft, and electronic funds transfer
services, (c) credit card processing services, and (d) credit or debit 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 a Person that is a controlled foreign corporation under
Section 957 of the Code.

8

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

 

     “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
however, for purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform
and Consumer Protection Act and all requests, guidelines or directives in
connection therewith, and (ii) all 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
regulatory authorities, in each case pursuant to Basel III, shall be deemed to
have gone into effect and been adopted after the Effective Date.
     “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 25% or more of the Equity Interests of the Parent entitled to
vote for members of the board of directors or equivalent governing body of the
Parent 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 Parent 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 (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or
     (c) any Person or two or more Persons acting in concert shall have acquired
by contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation thereof, will result in its or their acquisition of the
power to exercise, directly or indirectly, a controlling influence over the
management or policies of the Parent, or control over the Equity Interests of
the Parent entitled to vote for members of the board of directors or equivalent
governing body of the Parent on a fully-diluted basis (and taking into account
all such securities that such Person or Persons have the right to acquire
pursuant to any option right) representing 25% or more of the combined voting
power of such securities; or

9

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

 

     (d) any “change in control” or “sale” or “disposition” or similar event as
defined in any Organizational Document of any Loan Party or in any Material
Contract, or any document governing Material Indebtedness of any Loan Party; or
     (e) the Parent 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), except where such failure is as a result
of a transaction permitted by the Loan Documents.
     “Code” means the Internal Revenue Code of 1986, and the regulations
promulgated thereunder, as amended and in effect from time to time.
     “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.
     “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.
     “Collateral Agent” means Bank of America, acting in such capacity under any
of the Loan Documents for its own benefit and the ratable benefit of the other
Credit Parties, or any successor thereto.
     “Commercial Letter of Credit” means any letter of credit or similar
instrument (including, without limitation, Bankers’ Acceptances) 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.
     “Commitment” means, as to each Lender, its obligation to (a) make Committed
Loans to the Borrowers pursuant to Section 2.01, (b) purchase participations in
L/C Obligations, and (c) purchase participations in Swing Line Loans, 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.
     “Commitment Fee Percentage” means .375% per annum.
     “Committed Borrowing” means a borrowing consisting of simultaneous
Committed Loans of the same Type and, in the case of LIBOR 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 LIBOR Rate Loans, pursuant to Section 2.02(b), which, if in writing, shall be
substantially in the form of Exhibit A.

10

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

 

     “Compliance Certificate” means a certificate substantially in the form of
Exhibit D.
     “Concentration Account” has the meaning provided in Section 6.12(c).
     “Consent” means actual consent given by a Lender from whom such consent is
sought.
     “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.
     “Consolidated EBITDA” means, at any date of determination, an amount equal
to Consolidated Net Income of the Parent and its Subsidiaries for the most
recently completed Measurement Period, plus (a) the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Interest
Charges, (ii) the provision for Federal, state, local and foreign income Taxes,
(iii) depreciation and amortization expense, (iv) stock compensation charges
which do not represent a cash item in such period or any future period, and
(v) other non-recurring expenses reducing such Consolidated Net Income which do
not represent a cash item in such period or any future period (in each case of
or by the Parent and its Subsidiaries for such Measurement Period), minus
(b) the following to the extent included in calculating such Consolidated Net
Income: (i) Federal, state, local and foreign income tax credits and (ii) all
non-cash items increasing Consolidated Net Income (in each case of or by the
Parent and its Subsidiaries for such Measurement Period), all as determined on a
Consolidated basis in accordance with GAAP.
     “Consolidated Fixed Charge Coverage Ratio” means, at any date of
determination, the ratio of (a) (i) Consolidated EBITDA for such period minus
(ii) Capital Expenditures made during such period, minus (iii) the aggregate
amount of Federal, state, local and foreign income taxes paid in cash during
such period (but not less than zero) to (b) the sum of (i) Debt Service Charges
plus (ii) the aggregate amount of all Restricted Payments, in each case, of or
by the Parent and its Subsidiaries for the most recently completed Measurement
Period, all as determined on a Consolidated basis in accordance with GAAP.
     “Consolidated Interest Charges” means, for any Measurement Period, an
amount equal to (a) the sum of (x) all interest, premium payments, debt
discount, fees, charges and related expenses in connection with borrowed money
(including capitalized interest) or in connection with the deferred purchase
price of assets, in each case to the extent treated as interest in accordance
with GAAP, including, without limitation, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers’ acceptance
financing and net costs under Swap Contracts, but excluding any non-cash or
deferred interest financing costs, and (y) the portion of rent expense with
respect to such period under Capital Lease Obligations that is treated as
interest in accordance with GAAP, minus (b) interest income during such period
(excluding any portion of interest income representing accruals of amounts
received in a previous period), in each case of or by the Parent and its
Subsidiaries for the most recently completed Measurement Period, all as
determined on a Consolidated basis in accordance with GAAP.
     “Consolidated Net Income” means, as of any date of determination, the net
income of the Parent and its Subsidiaries for the most recently completed
Measurement Period, all as determined on a Consolidated basis in accordance with
GAAP, provided, however, that there shall be excluded (a) extraordinary gains
and extraordinary losses for such Measurement Period, (b) the income (or loss)
of any Subsidiary during such Measurement Period in which any other Person has a
joint interest, except to the extent of the amount of cash dividends or other
distributions actually paid in cash to any of the Parent or its Subsidiaries
during such period, (c) the income (or loss) of a Subsidiary during such
Measurement

11

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

 

Period and accrued prior to the date it becomes a Subsidiary of the Parent and
its Subsidiaries or is merged into or consolidated with the Parent or any of its
Subsidiaries or such Person’s assets are acquired by the Parent or any of its
Subsidiaries, and (d) the income of any direct or indirect Subsidiary of the
Parent to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its Organization Documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, except that the Parent’s equity in any net loss
of any such Subsidiary for such Measurement Period shall be included in
determining Consolidated Net Income.
     “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.
     “Convert”, “Conversion” and “Converted” each refers to a conversion of
Committed Loans of one Type into Committed Loans of the other Type.
     “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 Effective 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.
     “Covenant Compliance Event” means that Availability at any time is less
than or equal to the greater of (x) 10% of the Loan Cap or (y) $5,000,000. For
purposes hereof, the occurrence of a Covenant Compliance Event shall be deemed
continuing until Availability has exceeded the greater of (x) 10% of the Loan
Cap or (y) $5,000,000 for sixty (60) consecutive days, in which case a Covenant
Compliance Event shall no longer be deemed to be continuing for purposes of this
Agreement; provided that a Covenant Compliance Event shall be deemed continuing
(even if Availability exceeds the required amount for sixty (60) consecutive
days) at all times during any Fiscal Year after a Covenant Compliance Event has
occurred and been discontinued on two (2) occasions in such Fiscal Year. The
termination of a Covenant Compliance as provided herein shall in no way limit,
waive or delay the occurrence of a subsequent Covenant Compliance Event in the
event that the conditions set forth in this definition again arise.
     “Credit Card Notifications” has the meaning provided in Section 6.12(a)(i).
     “Credit Card Receivables” means each “Account” (as defined in the UCC)
together with all income, payments and proceeds thereof, owed by a major credit
or debit card issuer (including, but not limited to, Visa, MasterCard and
American Express and such other issuers approved by the Agent) to a Loan Party
resulting from charges by a customer of a Loan Party on credit or debit cards
issued by such 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.
     “Credit Extensions” mean each of the following: (a) a Borrowing and (b) an
L/C Credit Extension.

12

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

 

     “Credit Party” or “Credit Parties” means (a) individually, (i) each Lender
and its Affiliates, (ii) the Administrative Agent and the Collateral Agent,
(iii) each L/C Issuer, (iv) the Arranger, (v) each beneficiary of each
indemnification obligation undertaken by any Loan Party under any Loan Document,
(vi) any other Person to whom Obligations under this Agreement and other Loan
Documents are owing, and (vii) the successors and assigns of each of the
foregoing, and (b) collectively, all of the foregoing.
     “Credit Party Expenses” means (a) all reasonable out-of-pocket expenses
incurred by the Agent, the Arranger and their respective Affiliates, in
connection with this Agreement and the other Loan Documents, including without
limitation (i) the reasonable fees, charges and disbursements of (A) counsel for
the Agent and the Arranger, (B) outside consultants for the Agent,
(C) appraisers, and (D) commercial finance examiners, and (ii) in connection
with (A) the syndication of the credit facilities provided for herein, (B) 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), (C) 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 in connection with
any proceeding under any Debtor Relief Laws, or (D) any workout, restructuring
or negotiations in respect of any Obligations; (b) with respect to any L/C
Issuer, and its Affiliates, all reasonable 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
out-of-pocket expenses incurred by the Credit Parties who are not the Agent, the
Arranger, an 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).
     “Customer Credit Liabilities” means at any time, 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, and (b) outstanding merchandise credits of the Borrowers.
     “Customs Broker/Carrier Agreement” means an agreement in form and substance
satisfactory to the Agent among a Loan Party, 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.
     “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.
     “Debt Service Charges” means for any Measurement Period, the sum of
(a) Consolidated Interest Charges paid or required to be paid for such
Measurement Period, plus (b) principal payments made or required to be made on
account of Indebtedness (excluding the Obligations and any Synthetic Lease
Obligations but including, without limitation, Capital Lease Obligations) for
such Measurement Period, in each case determined on a Consolidated basis in
accordance with GAAP.

13

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

 

     “Debtor Relief Laws” means the Bankruptcy Code, 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 rate per annum equal to the applicable rate of
interest with respect to each Loan (including the Applicable Margin) otherwise
in effect from time to time plus 2.00% per annum.
     “Defaulting Lender” means any Lender that (a) has failed to fund any
portion of the Committed Loans, participations in L/C Obligations or
participations in Swing Line Loans required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Agent, any L/C Issuer, or any other Lender
any other amount required to be paid by it hereunder within one Business Day of
the date when due, or (c) has been deemed insolvent or become the subject of a
bankruptcy or insolvency proceeding.
     “Deteriorating Lender” means any Defaulting Lender or any Lender as to
which (a) the Agent has a good faith belief that such Lender has defaulted in
fulfilling its obligations under one or more other syndicated credit facilities,
or (b) a Person that Controls such Lender has been deemed insolvent or become
the subject of a bankruptcy, insolvency or similar proceeding.
     “Disposition” or “Dispose” means the sale, transfer, 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) by any Person (or the granting of any option or other right to
do any of the foregoing), 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 91 days after the
date on which the 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.
     “Effective Date” means the first date all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 10.01.
     “Eligible Assignee” means (a) a Credit Party 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 Credit Party assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Credit Party’s rights in
and to a material portion of such Credit Party’s

14

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

 

portfolio of asset based credit facilities, and (e) any other Person (other than
a natural person) approved by (i) the Agent, the L/C Issuers and the Swing Line
Lender, 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 at
the time of creation and continues to meet the same at the time of such
determination: such Credit Card Receivable (i) has been earned by performance
and represents the bona fide amounts due to a Loan Party from a credit card
payment processor and/or credit card issuer, and in each case originated in the
ordinary course of business of such Loan Party, and (ii) in each case is
acceptable to the Agent in its discretion, and is not ineligible for inclusion
in the calculation of the Borrowing Base pursuant to any of clauses (a) through
(k) below. Without limiting the foregoing, to qualify as an Eligible Credit Card
Receivable, an Account shall indicate no Person other than a Loan Party as payee
or remittance party. In determining the amount to be so included, the face
amount of an Account 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 Loan Party may be obligated to rebate to a customer, a credit card
payment processor, or credit card issuer pursuant to the terms of any agreement
or understanding (written or oral)) and (ii) the aggregate amount of all cash
received in respect of such Account but not yet applied by the Loan Parties to
reduce the amount of such Credit Card Receivable. Except as otherwise agreed by
the Agent, any Credit Card Receivable included within any of the following
categories shall not constitute an Eligible Credit Card Receivable:
     (a) Credit Card Receivable which do not constitute an “Account” (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 Loan Party 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);
     (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 processor has the right under
certain circumstances to require a Loan Party to repurchase the Accounts from
such credit card processor;
     (f) Credit Card Receivables due from an issuer or payment processor of the
applicable credit card 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 issuer with respect thereto;

15

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

 

     (h) Credit Card Receivables which do not conform to all representations,
warranties or other provisions in the Loan Documents relating to Credit Card
Receivables;
     (i) Credit Card Receivables which are evidenced by “chattel paper” or an
“instrument” of any kind unless such “chattel paper” or “instrument” is in the
possession of the Agent, and to the extent necessary or appropriate, endorsed to
the Agent; or
     (j) Credit Card Receivables which the Agent determines in its 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.
     “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 Loan
Party, but which has not yet been delivered to such Loan Party, which In-Transit
Inventory has been in transit for sixty (60) days or less from the date of
shipment of such Inventory;
     (b) For which the purchase order is in the name of a Loan Party and title
and risk of loss has passed to such Loan Party;
     (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 to the reasonable satisfaction of the Agent
(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 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 the
ability of the Agent to realize upon such Inventory.
     “Eligible Inventory” means, as of the date of determination thereof,
without duplication, (i) Eligible In-Transit Inventory, and (ii) items of
Inventory of a Loan Party that are finished goods, merchantable and readily
saleable to the public in the ordinary course of the Loan Party’s business
deemed by the Agent in its discretion to be eligible for inclusion in the
calculation of the Borrowing Base, in each case that, except as otherwise agreed
by the Agent, (A) complies with each of the 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. Except as otherwise agreed

16

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

 

by the Agent, in its discretion, the following items of Inventory shall not be
included in Eligible Inventory:
     (a) Inventory that is not solely owned by a Loan Party or a Loan Party does
not have good and valid title thereto;
     (b) Inventory that is leased by or is on consignment to a Loan Party or
which is consigned by a Loan Party 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) at a location that is owned or leased by a Loan Party, except
(i) Inventory in transit in the continental United States between such owned or
leased locations, or (ii) to the extent that the Loan Parties have furnished the
Agent with (A) any UCC financing statements or other documents that the Agent
may determine to be necessary to perfect its security interest in such Inventory
at such location, and (B) a Collateral Access Agreement executed by the Person
owning any such location on terms reasonably acceptable to the Agent;
     (d) Inventory that is located in a distribution center leased by a Loan
Party unless the applicable lessor has delivered to the Agent a Collateral
Access Agreement;
     (e) 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 Loan Party’s business, (iv) are seasonal in nature and which have
been packed away for sale in the subsequent season, (v) not in compliance 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;
     (f) Inventory that is not subject to a perfected first-priority security
interest in favor of the Agent;
     (g) Inventory that is not insured in compliance with the provisions of
Section 5.10 hereof;
     (h) Inventory that has been sold but not yet delivered or as to which a
Loan Party has accepted a deposit;
     (i) Inventory that is subject to any licensing, patent, royalty, trademark,
trade name or copyright agreement with any third party from which any Loan Party
or any of its Subsidiaries has received notice of a dispute in respect of any
such agreement; or
     (j) Inventory acquired in a Permitted Acquisition or which is not of the
type usually sold in the ordinary course of the Loan Parties’ business, unless
and until the Agent has completed or received (A) an appraisal of such Inventory
from appraisers satisfactory to the Agent and establishes 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.

17

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

 

     “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 directly or
indirectly 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.
     “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 the Borrower 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 of the Code).
     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrower 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 the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification 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 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 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 10.01 hereof.

18

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

 

     “Excluded Taxes” means, with respect to the Agent, any Lender, any 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
(in lieu of net income taxes), 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 or L/C Issuer, 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 any Loan Party is located, (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Lead Borrower under
Section 10.13), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.01(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from the Loan Parties with respect to
such withholding tax pursuant to Section 3.01(a), (d) any U.S. federal, state or
local backup withholding tax, and (e) any U.S. federal withholding tax imposed
under FATCA.
     “Executive Order” has the meaning set forth in Section 10.18.
     “Existing Credit Agreement” has the meaning given such term in the recitals
hereto.
     “Existing Letters of Credit” means all Letter of Credit Accommodations (as
defined in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement on the Effective Date.
     “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, indemnity payments and any purchase price
adjustments.
     “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.
     “FATCA” means current Section 1471 through 1474 of the Code or any amended
version or successor provision that is substantively similar and, in each case,
any regulations promulgated thereunder and any interpretation and other guidance
issued in connection therewith.
     “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 Bank of
America on such day on such transactions as determined by the Agent.
     “Fee Letter” means the letter agreement, dated the Effective Date, among
the Borrowers and the Agent.

19

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

 

     “Fiscal Month” means any fiscal month of any Fiscal Year, which month shall
generally end on the Saturday closest to the end 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 Saturday closest to the end of each April,
July, October and January of such Fiscal Year in accordance with the fiscal
accounting calendar of the Loan Parties.
     “Fiscal Year” means any 52 week period or 53 week period ending on the
Saturday closest to January 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 Loan
Party.
     “Foreign Vendor Agreement” means an agreement between a Foreign Vendor and
the Agent in form and substance 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 Loan Party purchased from such Foreign
Vendor.
     “FRB” means the Board of Governors of the Federal Reserve System of the
United States.
     “Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.
     “GAAP” means generally accepted accounting principles in the United States
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 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,

20

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

 

(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” means the Parent and each Subsidiary of the Parent or any
Borrower (other than the Borrowers) existing on the Effective Date and each
other Subsidiary of the Parent or any Borrower that shall be required to execute
and deliver a Facility Guaranty pursuant to Section 6.11.
     “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.
     “Honor Date” has the meaning specified in Section 2.03(c)(i).
     “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;
     (b) the maximum amount 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 trade accounts payable in the ordinary course
of business and, in each case, not past due for more than 60 days);
     (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 Attributable Indebtedness of such Person;
     (g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person or
any other Person (including, without limitation, Disqualified Stock), or any
warrant, right or option to acquire such

21

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

 

Equity Interest, 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. 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.
     “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,
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 LIBOR Rate Loan, the last day
of each Interest Period applicable to such Loan and the Maturity Date; provided,
however, that if any Interest Period for a LIBOR 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 (including a Swing Line Loan), the first Business Day of each month
and the Maturity Date.
     “Interest Period” means, as to each LIBOR Rate Loan, the period commencing
on the date such LIBOR Rate Loan is disbursed or Converted to or continued as a
LIBOR 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;

22

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

 

     (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 LIBOR Borrowing would be for a shorter period, such Interest
Period shall not be available hereunder.
For purposes hereof, the date of a Borrowing initially shall be the date on
which such Borrowing is made and thereafter shall be the effective date of the
most recent Conversion or continuation of such Borrowing.
     “Internal Control Event” means a material weakness in, or fraud that
involves management or other employees who have a significant role in, the
Parent’s and/or its Subsidiaries’ internal controls over financial reporting, in
each case as described in the Securities Laws.
     “In-Transit Cap” means, as of any date of determination, ten percent (10%)
of the Loan Cap (without giving effect to this In-Transit Cap in the calculation
of the Borrowing Base).
     “In-Transit Inventory” means Inventory of a Loan Party which is in the
possession of a common carrier and is in transit from a Foreign Vendor of a Loan
Party from a location outside of the continental United States to a location of
a Loan Party 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 such reserves as may be established from time to
time by the Agent in its discretion with respect to the determination of the
saleability, at retail, of the Eligible Inventory, which reflect such other
factors as affect the market value of the Eligible Inventory or which reflect
claims and liabilities that the Agent determines will need to be satisfied in
connection with the realization upon the Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may, in the Agent’s 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;
     (h) Mark-downs (both permanent and point of sale);

23

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

 

     (i) Retail mark-ons and mark-ups 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) any other investment of money or capital in order to obtain
a profitable return. 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.
     “IRS” means the United States Internal Revenue Service.
     “ISP” means, with respect to any Letter of Credit, the “International
Standby Practices 1998” published by the Institute of International Banking Law
& Practice (or such later version thereof as may be in effect at the time of
issuance).
     “Issuer Documents” means with respect to any Letter of Credit, the Letter
Credit Application, and any other document, agreement and instrument entered
into by the applicable L/C Issuer and any Borrower (or any Subsidiary) or in
favor such L/C Issuer and relating to any such Letter of Credit.
     “Joinder Agreement” means an agreement, in form satisfactory to the Agent
pursuant to which, among other things, a Person becomes a party to, and bound by
the terms of, this Agreement and/or the other Loan Documents in the same
capacity and to the same extent as either a Borrower or a Guarantor, as the
Agent may determine.
     “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 Advance” means, with respect to each Lender, such Lender’s funding of
its participation in any L/C Borrowing in accordance with its Applicable
Percentage.
     “L/C Borrowing” means an extension of credit resulting from a drawing under
any Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Committed Borrowing.
     “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.
     “L/C Issuer” means, individually and collectively, each of Bank of America
and Wells Fargo Bank, National Association in its respective capacity as issuer
of Letters of Credit hereunder, or any

24

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

 

successor issuer of Letters of Credit hereunder (which successor may only be a
Lender selected by the Agent in its discretion). An L/C Issuer may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of such L/C Issuer, 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
plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.
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 1.06. 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 UCP 600, such Letter of Credit shall be deemed to be
“outstanding” in the amount so remaining available to be drawn.
     “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 real property for any period of time.
     “Lender” has the meaning specified in the introductory paragraph hereto
and, as the context requires, includes the Swing Line Lender.
     “Lending Office” means, as to any Lender, the office or offices of such
Lender described as such in such Lender’s Administrative Questionnaire, or such
other office or offices as a Lender may from time to time notify the Lead
Borrower and the Agent.
     “Letter of Credit” means each Banker’s Acceptance, each Standby Letter of
Credit and each Commercial Letter of Credit issued hereunder, and shall include
the Existing Letters of Credit.
     “Letter of Credit Application” means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by the applicable L/C Issuer.
     “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(i).
     “Letter of Credit Sublimit” means an amount equal to $15,000,000. 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 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.
     “LIBOR Borrowing” means a Borrowing comprised of LIBOR Rate Loans.
     “LIBOR Rate” means for any Interest Period with respect to a LIBOR Rate
Loan, the rate per annum equal to the British Bankers Association LIBOR Rate
(“BBA LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as designated by the 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

25

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

 

Period) with a term equivalent to such Interest Period. If such rate is not
available at such time for any reason, then the “LIBOR 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 LIBOR Rate Loan being made,
continued or Converted by Bank of America and with a term equivalent to such
Interest Period would be offered by Bank of America’s London Branch to major
banks in the London interbank eurodollar market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
     “LIBOR Rate Loan” means a Committed Loan that bears interest at a rate
based on the Adjusted LIBOR Rate.
     “Lien” means (a) any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge,
or preference, priority 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.
     “Liquidation” means the exercise by the Agent of those rights and remedies
accorded to the Agent under the Loan Documents and applicable Laws as a creditor
of the Loan Parties with respect to the realization on the Collateral, including
(after the occurrence and during the continuation of an Event of Default) the
conduct by the Loan Parties acting with the consent of the Agent, of any public,
private or “going-out-of-business”, “store closing” or other similar sale or any
other disposition of the Collateral for the purpose of liquidating the
Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used
with like meaning in this Agreement.
     “Loan” means an extension of credit by a Lender to the Borrower under
Article II in the form of a Committed Loan or a Swing Line Loan.
     “Loan Account” has the meaning assigned to such term in Section 2.11(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 Security Documents, the
Facility Guaranty, and any other instrument or agreement now or hereafter
executed and delivered in connection herewith, or in connection with any
transaction arising out of any Cash Management Services and Bank Products
provided by any Lender or any of its Affiliates, each as amended and in effect
from time to time.
     “Loan Parties” means, collectively, the Borrowers and the Guarantors.
     “Material Adverse Effect” means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, liabilities
(actual or contingent), condition (financial or otherwise) or prospects of any
Loan Party or the Parent and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of any Loan Party to perform its obligations under any
Loan Document to which it is a party; or (c) a material impairment of the rights
and remedies of the Agent or the Credit Parties under any Loan Document or a
material adverse effect upon the legality, validity, binding effect or

26

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

 

enforceability against any Loan Party of any Loan Document to which it is a
party. 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 involving aggregate consideration payable to or by
such Person of $250,000 or more in any Fiscal Year or otherwise material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
     “Material Indebtedness” means Indebtedness (other than the Obligations) of
the Loan Parties in an aggregate principal amount exceeding $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 August 19, 2016.
     “Maximum Rate” has the meaning provided therefor in Section 10.09.
     “Measurement Period” means, at any date of determination, the most recently
completed twelve Fiscal Months of the Parent.
     “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 during the preceding
five plan years, 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 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
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), (B) the reasonable and customary out-of-pocket expenses incurred by
such Loan Party or such Subsidiary in connection with such transaction
(including, without limitation, appraisals, and brokerage, legal, title and
recording or transfer tax expenses and commissions) paid by any Loan Party to
third parties (other than Affiliates)); and
     (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, incurred by such Loan Party or
such Subsidiary in connection therewith.

27

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

 

     “Non-Consenting Lender” has the meaning provided therefor in Section 10.01.
     “Non-Extension Notice Date” has the meaning specified in
Section 2.03(b)(iii).
     “Note” means (a) a promissory note made by the Borrowers in favor of a
Lender evidencing Committed Loans made by such Lender, substantially in the form
of Exhibit C-1, and (b) the Swing Line Note, as each may be amended,
supplemented or modified from time to time.
     “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 or
otherwise with respect to any Loan or Letter of Credit (including payments in
respect of reimbursement of disbursements, interest thereon and obligations to
provide cash collateral therefor), whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest, fees, costs, expenses and
indemnities that accrue after the commencement by or against any Loan Party or
any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest,
fees costs, expenses and indemnities are allowed claims in such proceeding, and
(b) any Other Liabilities.
     “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 any obligation on account of (a) any Cash
Management Services furnished to any of the Loan Parties or any of their
Subsidiaries and/or (b) any Bank Product furnished to any of the Loan Parties
and/or any of their Subsidiaries.
     “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, excluding, however, any such amounts imposed as a result of
an assignment by a Lender of its Loan or Commitment.
     “Outstanding Amount” means (i) with respect to Committed Loans and Swing
Line Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of Committed Loans
and Swing Line Loans, as the case may be, 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, including as a result of any reimbursements by the Borrowers of
Unreimbursed Amounts.

28

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

 

     “Overadvance” means a Credit Extension to the extent that, immediately
after its having been made, Availability is less than zero.
     “Parent” means Kirkland’s, Inc., a Tennessee corporation.
     “Participant” has the meaning specified in Section 10.06(d).
     “Participation Register” has the meaning provided therefor in
Section 10.06(d).
     “Payment Conditions” means, at the time of determination with respect to
any specified transaction or payment, that (a) no Default or Event of Default
then exists or would arise as a result of entering into such transaction or the
making of such payment, and (b) after giving effect to such transaction or
payment, the Pro Forma Availability Condition has been satisfied and the
Consolidated Fixed Charge Coverage Ratio, as projected on a pro-forma basis for
the twelve months immediately preceding such transaction or payment, will be
equal to or greater than 1.1:1.0. Prior to undertaking any transaction or
payment which is subject to the Payment Conditions, the Loan Parties shall
deliver to the Agent evidence of satisfaction of the conditions contained in
clause (b) above on a basis (including, without limitation, giving due
consideration to results for prior periods) reasonably satisfactory to the
Agent.
     “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, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.
     “Permitted Acquisition” means an Acquisition in which all of the following
conditions are satisfied:
     (a) Such Acquisition shall have been approved by the Board of Directors of
the Person (or similar governing body if such Person is not a corporation) which
is the subject of such Acquisition and such Person shall not have announced that
it will oppose such Acquisition or shall not have commenced any action which
alleges that such Acquisition shall violate applicable Law;
     (c) The Lead Borrower shall have furnished the Agent with thirty (30) days’
prior written notice of such intended Acquisition and shall have furnished the
Agent with a current draft of the Acquisition documents (and final copies
thereof as and when executed), a summary of any due diligence undertaken by the
Loan Parties in connection with such Acquisition, appropriate financial
statements of the Person which is the subject of such Acquisition, pro forma
projected financial statements for the twelve (12) month period following such
Acquisition after giving effect to such Acquisition (including balance sheets,
cash flows and income statements by month for the acquired Person, individually,
and on a Consolidated basis with all Loan Parties), and such other information
as the Agent may reasonably require, all of which shall be reasonably
satisfactory to the Agent;

29

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

 

     (d) Either (i) the legal structure of the Acquisition shall be acceptable
to the Agent in its discretion, or (ii) the Loan Parties shall have provided the
Agent with a favorable solvency opinion from an unaffiliated third party
valuation firm reasonably satisfactory to the Agent;
     (f) After giving effect to the Acquisition, if the Acquisition is an
Acquisition of 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;
     (g) 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;
     (h) If the Person which is the subject of such Acquisition will be
maintained as a Subsidiary of a Loan Party, or if the assets acquired in an
Acquisition will be transferred to a Subsidiary which is not then 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 a
first priority security interest in such Subsidiary’s Equity Interests and
property of such Subsidiary and of the same nature as constitutes Collateral
under the Security Documents; and
     (i) The Loan Parties shall have satisfied the Payment Conditions.
     “Permitted Disposition” means any of the following:
     (a) dispositions of inventory in the ordinary course of business;
     (b) bulk sales or other dispositions of the Inventory of a Loan Party not
in the ordinary course of business in connection with Permitted Store Closings,
at arm’s length;
     (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
substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no
longer useful or necessary in its business or that of any Subsidiary so long as
such dispositions do not involve Equipment having an aggregate fair market value
in excess of $500,000 for all such Equipment disposed of by all Loan Parties in
any Fiscal Year;
     (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; and

30

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

 

     (h) as long as no Default or Event of Default then exists or would arise
therefrom, sales of Real Estate of any Loan Party (or sales of any Person or
Persons created to hold such Real Estate or the Equity Interests in such Person
or Persons), including sale-leaseback transactions involving any such Real
Estate pursuant to leases on market terms, as long as, (A) such sale is made for
fair market value, and (B) in the case of any sale-leaseback transaction
permitted hereunder, the Agent shall have received from each such purchaser or
transferee a Collateral Access Agreement on terms and conditions reasonably
satisfactory to the Agent.
     “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 Laws, arising in the ordinary course of
business and securing obligations that are not overdue by more than thirty
(30) 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), statutory obligations, 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 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 a Loan Party 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 Effective 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 ninety (90) 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;
     (i) Liens in favor of the Agent arising under or pursuant to the Loan
Documents;
     (j) Landlords’ and lessors’ Liens in respect of rent not in default;

31

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

 

     (k) Possessory Liens in favor of brokers and dealers arising in connection
with the acquisition or disposition of Investments owned as of the Effective
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) Liens arising solely by virtue of any statutory or common law
provisions relating to 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;
     (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 on such property of a Subsidiary of a
Loan Party in existence at the time such Subsidiary is acquired pursuant to a
Permitted Acquisition; provided, that such Liens are not incurred in connection
with or in anticipation of such Permitted Acquisition and do not attach to any
other assets of any Loan Party or any Subsidiary; and
     (o) Liens in favor of customs and revenues authorities imposed by
applicable Laws arising in the ordinary course of business in connection with
the importation of goods and securing obligations (i) that are not overdue by
more than thirty (30) days, or (ii)(A) 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.
     “Permitted Indebtedness” means each of the following as long as no Default
or Event of Default exists or would arise from the incurrence thereof:
     (a) Indebtedness outstanding on the Effective 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 Refinancings
thereof, provided, however, that the aggregate principal amount of Indebtedness
permitted by this clause (c) shall not exceed $2,500,000 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 an access and use agreement on terms reasonably satisfactory to the
Agent;
     (d) Indebtedness incurred for the construction or acquisition or
improvement of, or to finance or to refinance, any Real Estate owned by any Loan
Party (including therein any Indebtedness incurred in connection with
sale-leaseback transactions permitted hereunder and any

32

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

 

Synthetic Lease Obligations), provided that, the Loan Parties shall use
commercially reasonable efforts to cause the holders of such Indebtedness and
the lessors under any sale-leaseback transaction to enter into a Collateral
Access Agreement on terms reasonably satisfactory to the Agent;
     (e) Contingent liabilities under surety bonds or similar instruments
incurred in the ordinary course of business in connection with the construction
or improvement of Stores;
     (f) 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;”
     (g) Indebtedness with respect to the deferred purchase price for any
Permitted Acquisition, provided that such Indebtedness does not require the
payment in cash of principal (other than in respect of working capital
adjustments) prior to the Maturity Date, has a final maturity which extends
beyond the Maturity Date, and is subordinated to the Obligations on terms
reasonably acceptable to the Agent;
     (h) 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);
     (i) The Obligations; and
     (j) unsecured Subordinated Indebtedness.
     “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 360 days 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) 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, in each case with maturities of not more than 180 days from the date of
acquisition thereof;
     (c) time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) (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 (b) 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 180 days from the date of acquisition thereof;

33

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

 

     (d) 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 (c) 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;
     (e) 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 which invest solely in one or
more of the types of securities described in clauses (a) through (d) above;
     (f) Investments existing on the Effective Date, and set forth on
Schedule 7.02, but not any increase in the amount thereof or any other
modification of the terms thereof;
     (g) (i) Investments by any Loan Party and its Subsidiaries in their
respective Subsidiaries outstanding on the Effective Date, (ii) additional
Investments by any Loan Party and its Subsidiaries in Loan Parties (other than
the Parent), and (iii) additional Investments by Subsidiaries of the Loan
Parties that are not Loan Parties in other Subsidiaries that are not Loan
Parties;
     (h) 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 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;
     (i) Guarantees constituting Permitted Indebtedness;
     (j) so long as no Default or Event of Default has occurred and is
continuing or would result from such Investment, Investments by any Loan Party
in Swap Contracts permitted hereunder;
     (k) 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;
     (l) advances to officers, directors and employees of the Loan Parties and
Subsidiaries in the ordinary course of business (i) in an aggregate amount not
to exceed $250,000 at any time outstanding, for travel, entertainment,
relocation and analogous ordinary business purposes, and (ii) in an aggregate
amount not to exceed $1,000,000 at any time outstanding to permit such officers,
directors and employees to purchase Equity Interests in a Loan Party so long as
no Default or Event of Default shall have occurred and be continuing;
     (m) Investments constituting Permitted Acquisitions; and
     (n) Capital contributions made by any Loan Party to another Loan Party;

34

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

 

provided, however, that notwithstanding the foregoing, (i) after the occurrence
and during the continuance of a Cash Dominion Event, no such Investments
specified in clauses (a) through (e) shall be permitted unless either (A) no
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 LIBOR 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:
     (a) Is made 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) Is made to enhance the likelihood of, or to maximize the amount of,
repayment of any Obligation;
     (c) Is made to pay any other amount chargeable to any Loan Party hereunder;
and
     (d) Together with all other Permitted Overadvances then outstanding, shall
not (i) exceed ten percent (10%) of the Borrowing Base at any time or
(ii) unless a Liquidation is occurring, remain outstanding for more than
forty-five (45) consecutive Business Days, unless in each case, the Required
Lenders otherwise agree;
provided however, that the foregoing shall not (i) modify or abrogate any of the
provisions of Section 2.03 regarding the Lenders’ obligations with respect to
Letters of Credit or Section 2.04 regarding the Lenders’ obligations with
respect to Swing Line Loans, or (ii) result in any claim or liability against
the Agent (regardless of the amount of any Overadvance) for Unintentional
Overadvances, and such Unintentional Overadvances shall not reduce the amount of
Permitted Overadvances allowed hereunder, and further provided that in no event
shall the Agent make an 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 2.06 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 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 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 not
materially less favorable to the Credit Parties than those contained in the
documentation governing the Indebtedness being

35

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

 

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 then applicable market interest rate,
and (h) at the time thereof, no Default or Event of Default shall have occurred
and be continuing.
     “Permitted Store Closings” means (a) Store closures and related Inventory
dispositions which do not exceed in any Fiscal Year of the Parent and its
Subsidiaries, ten percent (10%) of the number of the Loan Parties’ Stores as of
the beginning of such Fiscal Year (net of Store relocations and openings for
such Fiscal Year), and (b) the related Inventory is either moved to a
distribution center or another retail location of the Loan Parties for future
sale in the ordinary course of business or is disposed of, if requested by the
Agent, in accordance with liquidation agreements and with professional
liquidators reasonably acceptable to the Agent.
     “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 the Lead Borrower or, with respect to any
such plan that is subject to Section 412 of the Code or Title IV of ERISA, any
ERISA Affiliate.
     “Platform” has the meaning specified in Section 6.02.
     “Prepayment Event” means:
     (a) Any Disposition (including pursuant to a sale and leaseback
transaction) of any property or asset of a Loan Party provided that any
Disposition of property and assets of the type not included in the Borrowing
Base in an amount in excess of $500,000 in any Fiscal Year or $1,000,000 in the
aggregate for all such Dispositions after the Effective Date, in each case prior
to the occurrence of a Cash Dominion Event, shall not be deemed a Prepayment
Event;
     (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 in an amount in excess of
$100,000, 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 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;
     (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.

36

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

 

     “Pro Forma Availability Condition” shall mean, for any date of calculation
with respect to any transaction or payment, the Pro Forma Excess Availability
following, and after giving effect to, such transaction or payment, will be
equal to or greater than the greater of (i) 20% of the Loan Cap and (ii)
$10,000,000.
     “Pro Forma Excess Availability” shall mean, for any date of calculation,
after giving pro forma effect to the transaction then to be consummated, the
projected Availability as of the end of each Fiscal Month during any subsequent
projected twelve (12) Fiscal Months.
     “Public Lender” has the meaning specified in Section 6.02.
     “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 Parent 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.
     “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 9.12(b).
     “Request for Credit Extension” means (a) with respect to a Borrowing,
Conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with
respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with
respect to a Swing Line Loan, a Swing Line Loan Notice.
     “Required Lenders” means, as of any date of determination, at least two
Lenders holding more than 50% of the Aggregate Commitments or, if the commitment
of each Lender to make Loans and the obligation of the L/C Issuer to make L/C
Credit Extensions have been terminated pursuant to Section 8.02, at least two
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 and Swing Line Loans 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 or Deteriorating Lender shall be excluded for purposes of making a
determination of Required Lenders.
     “Reserves” means all Inventory Reserves and Availability Reserves. The
Agent shall have the right, at any time and from time to time after the
Effective Date in its discretion to establish, modify or eliminate Reserves.
     “Responsible Officer” means the chief executive officer, president, chief
financial officer, any vice president, secretary or assistant secretary,
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

37

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

 

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.
     “Security Agreement” means the Amended and Restated Security Agreement
dated as of the Effective Date among the Loan Parties and the Agent.
     “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 2.14(a).
     “Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of the Parent 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 on a particular
date, that on such date (a) at fair valuation, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair saleable value of the
properties and assets of such Person is not less than the amount that would be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person’s ability to pay as such debts mature, and (e)

38

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

 

such Person is not engaged in a business or a transaction, and is not about to
engage in a business or transaction, for which such Person’s properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. The amount of all guarantees at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
can reasonably be expected to become an actual or matured liability.
     “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 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.
     “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 LIBOR 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. LIBOR
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

39

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

 

(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 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 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).
     “Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to
Section 2.04.
     “Swing Line Lender” means Bank of America in its capacity as provider of
Swing Line Loans, or any successor swing line lender hereunder.
     “Swing Line Loan” has the meaning specified in Section 2.04(a).
     “Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant
to Section 2.04(b), which, if in writing, shall be substantially in the form of
Exhibit B.
     “Swing Line Note” means the promissory note of the Borrowers substantially
in the form of Exhibit C-2, payable to the order of the Swing Line Lender,
evidencing the Swing Line Loans made by the Swing Line Lender.
     “Swing Line Sublimit” means an amount equal to the lesser of (a) $5,000,000
and (b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not
in addition to, the Aggregate Commitments.
     “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, 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 2.06 hereof.

40

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

 

     “Total Outstandings” means the aggregate Outstanding Amount of all 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 LIBOR 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 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 600” means the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of
Commerce and dated as of July 1, 2007 (or such later version thereof as may be
in effect at the time of issuance).
     “UFCA” has the meaning specified in Section 10.21(d).
     “UFTA” has the meaning specified in Section 10.21(d).
     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
     “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 or misrepresentation
by the Loan Parties.
     “United States” and “U.S.” mean the United States of America.
     “Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).
     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

41

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

 

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 with respect to Letters of Credit and Bank
Products (other than Swap Contracts), 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) unasserted contingent indemnification 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.
     (b) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or 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

42

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

 

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 Rounding. Any financial ratios required to be maintained by the Loan
Parties pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).
     1.05 Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Eastern time (daylight or standard, as
applicable).
     1.06 Letter of Credit Amounts. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to be the
Stated Amount of such Letter of Credit in effect at such time; provided,
however, that with respect to any Letter of Credit that, by its terms of any
Issuer Documents related thereto, provides for one or more automatic increases
in the Stated Amount thereof, the amount of such Letter of Credit shall be
deemed to be the maximum Stated Amount of such Letter of Credit after giving
effect to all such increases, whether or not such maximum Stated Amount is in
effect at such time.
ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS
     2.01 Committed Loans; Reserves. 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, plus
such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line
Loans 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 2.05, and reborrow under this

43

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

 

Section 2.01. Committed Loans may be Base Rate Loans or LIBOR Rate Loans, as
further provided herein.
     2.02 Borrowings, Conversions and Continuations of Committed Loans.
          (a) Committed Loans (other than Swing Line Loans) shall be either Base
Rate Loans or LIBOR Rate Loans as the Lead Borrower may request subject to and
in accordance with this Section 2.02. All Swing Line Loans shall be only Base
Rate Loans. 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 LIBOR 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
11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing
of, Conversion to or continuation of LIBOR Rate Loans or of any Conversion of
LIBOR Rate Loans to Base Rate Loans, and (ii) one Business Day prior to 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, appropriately
completed and signed by a Responsible Officer of the Lead Borrower. Each
Borrowing of, Conversion to or continuation of LIBOR Rate Loans shall be in a
principal amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of
or Conversion to Base Rate Loans shall be in such minimum amounts as the Agent
may require. 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
LIBOR Rate Loans, (ii) the requested date of the 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 LIBOR Rate
Loans. If the Lead Borrower requests a Borrowing of, Conversion to, or
continuation of LIBOR 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. Notwithstanding anything to the contrary herein, a Swing
Line Loan may not be Converted to a LIBOR Rate Loan.
          (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 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 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 Bank of America 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

44

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

 

Agent by the Lead Borrower; provided, however, that if, on the date the
Committed Loan Notice with respect to such Borrowing is given by the Lead
Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Borrowing, first, shall be applied to the payment in full of any such L/C
Borrowings, and second, shall be made available to the Borrowers as provided
above.
          (d) The Agent, without the request of the Lead Borrower, may advance
any interest, fee, service charge (including direct wire fees), 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 2.05(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 LIBOR Rate Loan may be
continued or Converted only on the last day of an Interest Period for such LIBOR
Rate Loan. During the existence of a Default or an Event of Default, no Loans
may be requested as, Converted to or continued as LIBOR 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 LIBOR 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 Bank of America’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 five (5) Interest
Periods in effect with respect to LIBOR Rate Loans.
          (h) The Agent, the Lenders, the Swing Line Lender and the L/C Issuer
shall have no obligation to make any 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, the Swing Line
Lender and the L/C Issuer, and the Borrowers and each Lender, the Swing Line
Lender and L/C Issuer shall be bound thereby. Any Permitted Overadvance may
constitute a Swing Line Loan. 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 2.05(c).
The making of any such Permitted Overadvance on any one occasion shall not
obligate the Agent or any Lender to 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 or of
Section 2.04 regarding the Lenders’ obligations to purchase participations with
respect to Swing Line Loans. 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 Overadvances.

45

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

 

     2.03 Letters of Credit.
          (a) The Letter of Credit Commitment.
               (i) Subject to the terms and conditions set forth herein,
(A) each L/C Issuer agrees, in reliance upon the agreements of the Lenders set
forth in this Section 2.03, (1) from time to time on any Business Day during the
period from the Effective Date until the Letter of Credit Expiration Date, to
issue Letters of Credit for the account of the Loan Parties, and to amend or
extend Letters of Credit previously issued by it, in accordance with
Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit;
and (B) the Lenders severally agree to participate in Letters of Credit issued
for the account of the Loan Parties and any drawings thereunder; provided that
after giving effect to any L/C Credit Extension with respect to any Letter of
Credit, (x) the Total Outstandings shall not exceed the Loan Cap, (y) 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,
plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing
Line Loans shall not exceed such Lender’s Commitment, and (z) the Outstanding
Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.
Each request by the Lead Borrower for the issuance or amendment of a Letter of
Credit shall be deemed to be a representation by the Borrowers that the L/C
Credit Extension so requested complies with the conditions set forth in the
proviso to the preceding sentence. Within the foregoing limits, and subject to
the terms and conditions hereof, the Borrowers’ ability to obtain Letters of
Credit shall be fully revolving, and accordingly the Borrowers may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit that
have expired or that have been drawn upon and reimbursed. Any L/C Issuer (other
than Bank of America or any of its Affiliates) shall notify the Agent in writing
on each Business Day of all Letters of Credit issued on the prior Business Day
by such L/C Issuer, provided that (A) until the Agent advises any such Issuing
Bank that the provisions of Section 4.02 are not satisfied, or (B) the aggregate
amount of the Letters of Credit issued in any such week exceeds such amount as
shall be agreed by the Agent and the L/C Issuer, such L/C Issuer shall be
required to so notify the Agent in writing only once each week of the Letters of
Credit issued by such L/C Issuer during the immediately preceding week as well
as the daily amounts outstanding for the prior week, such notice to be furnished
on such day of the week as the Agent and such L/C Issuer may agree. In
connection with any distributions to be made hereunder or any other Credit
Extensions made by the Agent on behalf of the Lenders, the Agent shall be
entitled to assume that no Letters of Credit have been issued by such L/C Issuer
and are outstanding unless the Agent has received written notice thereof from
such L/C Issuer in accordance with the immediately preceding sentence. All
Existing Letters of Credit shall be deemed to have been issued pursuant hereto,
and from and after the Effective Date shall be subject to and governed by the
terms and conditions hereof.
               (ii) No L/C Issuer shall issue any Letter of Credit, if:
               (A) subject to Section 2.03(b)(iii), the expiry date of such
requested Standby Letter of Credit would occur more than twelve months after the
date of issuance or last extension, unless the Required Lenders have approved
such expiry date; or
               (B) subject to Section 2.03(b)(iii), the expiry date of such
requested Commercial Letter of Credit would occur more than 120 days after the
date of issuance or last extension, unless the Required Lenders have approved
such expiry date; or
               (C) 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

46

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

 

which the Agent and the applicable L/C Issuer may agree) or all the Lenders have
approved such expiry date.
               (iii) No L/C Issuer shall issue any Letter of Credit without the
prior consent of the Agent 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 shall impose upon the L/C
Issuer with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the L/C Issuer is not otherwise compensated hereunder)
not in effect on the Effective Date, or shall impose upon the L/C Issuer any
unreimbursed loss, cost or expense which was not applicable on the Effective
Date and which the L/C Issuer in good faith deems material to it;
               (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;
               (C) such Letter of Credit is to be denominated in a currency
other than Dollars; provided that if the L/C Issuer, in its discretion, issues a
Letter of Credit denominated in a currency other than Dollars, all
reimbursements by the Borrowers of the honoring of any drawing under such Letter
of Credit shall be paid in the currency in which such Letter of Credit was
denominated;
               (D) such Letter of Credit contains any provisions for automatic
reinstatement of the Stated Amount after any drawing thereunder; or
               (E) a default of any Lender’s obligations to fund under
Section 2.03(c) exists or any Lender is at such time a Defaulting Lender or
Deteriorating Lender hereunder, unless the L/C Issuer has entered into
satisfactory arrangements with the Borrowers or such Lender to eliminate the L/C
Issuer’s risk with respect to such Lender.
               (iv) No L/C Issuer shall amend any Letter of Credit if the L/C
Issuer would not be permitted at such time to issue such Letter of Credit in its
amended form under the terms hereof or if the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.
               (v) Each 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 each 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 such 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 such L/C Issuer with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the L/C Issuers.

47

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

 

          (b) Procedures for Issuance and Amendment of Letters of Credit;
Auto-Extension Letters of Credit.
               (i) Each Letter of Credit shall be issued or amended, as the case
may be, upon the request of the Lead Borrower delivered to an L/C Issuer (with a
copy to the Agent) in the form of a Letter of Credit Application, appropriately
completed and signed by a Responsible Officer of the Lead Borrower. Such Letter
of Credit Application must be received by the L/C Issuer and the Agent not later
than 11:00 a.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 proposed issuance date or date of amendment, as the
case may be. In the case of a request for an initial issuance of a Letter of
Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested
Letter of Credit (which shall be a Business Day); (B) the amount thereof;
(C) the expiry date thereof; (D) the name and address of the beneficiary
thereof; (E) the documents to be presented by such beneficiary in case of any
drawing thereunder; (F) the full text of any certificate to be presented by such
beneficiary in case of any drawing thereunder; and (G) such other matters as the
L/C Issuer may require. In the case of a request for an amendment of any
outstanding Letter of Credit, such Letter of Credit Application shall specify in
form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be
amended; (B) the proposed date of amendment thereof (which shall be a Business
Day); (C) the nature of the proposed amendment; and (D) such other matters as
the L/C Issuer may require. Additionally, the Lead Borrower shall furnish to the
L/C Issuer and the Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Agent may require.
               (ii) Promptly after receipt of any Letter of Credit Application,
the L/C Issuer will confirm with the Agent (by telephone or in writing) that the
Agent has received a copy of such Letter of Credit Application from the Lead
Borrower and, if not, the L/C Issuer will provide the Agent with a copy thereof.
Unless the L/C Issuer has received written notice from any Lender, the Agent or
any Loan Party, at least one Business Day prior to the requested date of
issuance or amendment of the applicable Letter of Credit, that one or more
applicable conditions contained in Article IV shall not then be satisfied or
unless the L/C Issuer would not be permitted, or would have no obligation, at
such time to issue such Letter of Credit under the terms hereof (by reason of
the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), then,
subject to the terms and conditions hereof, the L/C Issuer shall, on the
requested date, issue a Letter of Credit for the account of the applicable Loan
Party or enter into the applicable amendment, as the case may be, in each case
in accordance with the L/C Issuer’s usual and customary business practices.
Immediately upon the issuance or amendment of each Letter of Credit, each Lender
shall be deemed to (without any further action), and hereby irrevocably and
unconditionally agrees to, purchase from the L/C Issuer, without recourse or
warranty, a risk participation in such Letter of Credit in an amount equal to
the product of such Lender’s Applicable Percentage times the Stated Amount of
such Letter of Credit. Upon any change in the Commitments under this Agreement,
it is hereby agreed that with respect to all L/C Obligations, there shall be an
automatic adjustment to the participations hereby created to reflect the new
Applicable Percentages of the assigning and assignee Lenders.
               (iii) If the Lead Borrower so requests in any applicable Letter
of Credit Application, the L/C Issuer may, in its sole and absolute discretion,
agree to issue a Standby Letter of Credit that has automatic extension
provisions (each, an “Auto-Extension Letter of Credit”); provided that any such
Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such
extension at least once in each twelve-month period (commencing with the date of
issuance of such Standby Letter of Credit) by giving prior notice to the
beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in
each such twelve-month period to be agreed upon at the time such Standby Letter
of Credit is issued. Unless otherwise directed by the L/C Issuer, the Lead
Borrower shall not be required to make a

48

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

 

specific request to the L/C Issuer for any such extension. Once an
Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to
have authorized (but may not require) the L/C Issuer to permit the extension of
such Standby Letter of Credit at any time to an expiry date not later than the
Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall
not permit any such extension if (A) the L/C Issuer has determined that it would
not be permitted, or would have no obligation, at such time to issue such
Standby Letter of Credit in its revised form (as extended) under the terms
hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a)
or otherwise), or (B) it has received notice (which may be by telephone or in
writing) on or before the day that is five Business Days before the
Non-Extension Notice Date (1) from the Agent that the Required Lenders have
elected not to permit such extension or (2) from the Agent, any Lender or the
Lead Borrower that one or more of the applicable conditions specified in
Section 4.02 is not then satisfied, and in each such case directing the L/C
Issuer not to permit such extension.
               (iv) Promptly after its delivery of any Letter of Credit or any
amendment to a Letter of Credit to an advising bank with respect thereto or to
the beneficiary thereof, the L/C Issuer will also deliver to the Lead Borrower
and the Agent a true and complete copy of such Letter of Credit or amendment.
          (c) Drawings and Reimbursements; Funding of Participations.
               (i) Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the applicable L/C Issuer
shall notify the Lead Borrower and the Agent thereof not less than two
(2) Business Days prior to the Honor Date (as defined below); provided, however,
that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the L/C Issuer and the Lenders with
respect to any such payment. On the date of any payment by the L/C Issuer under
a Letter of Credit (each such date, an “Honor Date”), the Borrowers shall be
deemed to have requested a Committed Borrowing of Base Rate Loans to be
disbursed on the Honor Date in an amount equal to the amount of such payment,
without regard to the minimum and multiples specified in Section 2.02(b) for the
principal amount of Base Rate Loans, but subject to the amount of the unutilized
portion of the Loan Cap and the conditions set forth in Section 4.02 (other than
the delivery of a Committed Loan Notice). In the event that such Committed
Borrowing cannot be made pursuant to the terms hereof, then not later than
11:00 a.m. on the Honor Date, the Borrowers shall reimburse the L/C Issuer
through the Agent in an amount equal to the amount of such drawing. If the
Borrowers fail to so reimburse the L/C Issuer by such time, the Agent shall
promptly notify each Lender of the Honor Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable
Percentage thereof. Any notice given by the L/C Issuer or the Agent pursuant to
this Section 2.03(c)(i) may be given by telephone if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
               (ii) Each Lender shall upon any notice from the Agent pursuant to
Section 2.03(c)(i) make funds available to the Agent for the account of the L/C
Issuer at the Agent’s Office in an amount equal to its Applicable Percentage of
the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified
in such notice by the Agent, whereupon, subject to the provisions of
Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Loan to the Borrowers in such amount. The Agent shall
remit the funds so received to the L/C Issuer.
               (iii) With respect to any Unreimbursed Amount that is not fully
refinanced by a Committed Borrowing of Base Rate Loans because the conditions
set forth in Section 4.02 cannot be satisfied or for any other reason, the
Borrowers shall be deemed to have incurred from the L/C Issuer an

49

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

 

L/C Borrowing in the amount of the Unreimbursed Amount that is not so
refinanced, which L/C Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at the Default Rate. In such event, each
Lender’s payment to the Agent for the account of the L/C Issuer pursuant to
Section 2.03(c)(ii) shall be deemed payment in respect of its participation in
such L/C Borrowing and shall constitute an L/C Advance from such Lender in
satisfaction of its participation obligation under this Section 2.03.
               (iv) Until each Lender funds its Committed Loan or L/C Advance
pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount
drawn under any Letter of Credit, interest in respect of such Lender’s
Applicable Percentage of such amount shall be solely for the account of the L/C
Issuer.
               (v) Each Lender’s obligation to make Committed Loans or L/C
Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit,
as contemplated by this Section 2.03(c), shall be absolute and unconditional and
shall not be affected by any circumstance, including (A) any setoff,
counterclaim, recoupment, defense or other right which such Lender may have
against the L/C Issuer, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of a Default or Event of Default,
or (C) any other occurrence, event or condition, whether or not similar to any
of the foregoing; provided, however, that each Lender’s obligation to make
Committed Loans pursuant to this Section 2.03(c) is subject to the conditions
set forth in Section 4.02 (other than delivery by the Lead Borrower of a
Committed Loan Notice). No such making of an L/C Advance shall relieve or
otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for
the amount of any payment made by the L/C Issuer under any Letter of Credit,
together with interest as provided herein.
               (vi) If any Lender fails to make available to the Agent for the
account of the L/C Issuer any amount required to be paid by such Lender pursuant
to the foregoing provisions of this Section 2.03(c) by the time specified in
Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such
Lender (acting through the Agent), on demand, such amount with interest thereon
for the period from the date such payment is required to the date on which such
payment is immediately available to the L/C Issuer at a rate per annum equal to
the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in
accordance with banking industry rules on interbank compensation plus any
administrative, processing or similar fees customarily charged by the L/C Issuer
in connection with the foregoing. If such Lender pays such amount (with interest
and fees as aforesaid), the amount so paid shall constitute such Lender’s
Committed Loan included in the relevant Committed Borrowing or L/C Advance in
respect of the relevant L/C Borrowing, as the case may be. A certificate of the
L/C Issuer submitted to any Lender (through the Agent) with respect to any
amounts owing under this clause (vi) shall be conclusive absent manifest error.
          (d) Repayment of Participations.
               (i) At any time after the L/C Issuer has made a payment under any
Letter of Credit and has received from any Lender its L/C Advance in respect of
such payment in accordance with Section 2.03(c), if the Agent receives for the
account of the L/C Issuer any payment in respect of the related Unreimbursed
Amount or interest thereon (whether directly from the Borrowers or otherwise,
including proceeds of cash collateral applied thereto by the Agent pursuant to
Section 2.03(g)), the Agent will distribute to such Lender its Applicable
Percentage thereof (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender’s L/C Advance was
outstanding) in the same funds as those received by the Agent.

50

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

 

               (ii) If any payment received by the Agent for the account of the
L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any
of the circumstances described in Section 10.05 (including pursuant to any
settlement entered into by the L/C Issuer in its discretion), each Lender shall
pay to the Agent for the account of the L/C Issuer its Applicable Percentage
thereof on demand of the Agent, plus interest thereon from the date of such
demand to the date such amount is returned by such Lender, at a rate per annum
equal to the Federal Funds Rate from time to time in effect. The obligations of
the Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.
          (e) Obligations Absolute. The obligation of the Borrowers to reimburse
the L/C Issuer for each drawing under each Letter of Credit and to repay each
L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following:
               (i) any lack of validity or enforceability of such Letter of
Credit, this Agreement, or any other Loan Document;
               (ii) the existence of any claim, counterclaim, setoff, defense or
other right that the Borrowers or any Subsidiary may have at any time against
any beneficiary or any transferee of such Letter of Credit (or any Person for
whom any such beneficiary or any such transferee may be acting), the L/C Issuer
or any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;
               (iii) any draft, demand, certificate or other document presented
under such Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; or any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under such Letter of Credit;
               (iv) any payment by the L/C Issuer under such Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit; or any payment made by the L/C Issuer
under such Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit, including any arising in connection
with any proceeding under any Debtor Relief Law;
               (v) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrowers or
any of their Subsidiaries; or
               (vi) the fact that any Default or Event of Default shall have
occurred and be continuing.
     The Lead Borrower shall promptly examine a copy of each Letter of Credit
and each amendment thereto that is delivered to it and, in the event of any
claim of noncompliance with the Lead Borrower’s instructions or other
irregularity, the Lead Borrower will immediately notify the L/C Issuer. The
Borrowers shall be conclusively deemed to have waived any such claim against the
L/C Issuer and its correspondents unless such notice is given as aforesaid.

51

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

 

          (f) Role of L/C Issuer. Each Lender and the Borrowers agree that, in
paying any drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the L/C Issuer,
the Agent, any of their respective Related Parties nor any correspondent,
participant or assignee of the L/C Issuer shall be liable to any Lender for
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Lenders or the Required Lenders, as applicable; (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or enforceability of
any document or instrument related to any Letter of Credit or Issuer Document.
The Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrowers pursuing such rights and remedies as they may have
against the beneficiary or transferee at law or under any other agreement. None
of the L/C Issuer, the Agent, any of their respective Related Parties nor any
correspondent, participant, or assignee of the L/C Issuer shall be liable or
responsible to the Loan Parties for any of the matters described in clauses (i)
through (iv) above, or for any action, neglect or omission under or in
connection with any Letter of Credit or Issuer Documents, including, without
limitation, the issuance or amendment of any Letter of Credit, the failure to
issue or amend any Letter of Credit, or the honoring or dishonoring of any
demand under any Letter of Credit, and such action or neglect or omission will
be binding upon the Borrowers; provided that, anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer,
and the L/C Issuer may be liable to the Borrowers, to the extent, but only to
the extent, of any direct, as opposed to punitive, consequential or exemplary,
damages suffered by the Borrowers which the Borrowers prove were caused by the
L/C Issuer’s willful misconduct or gross negligence. In furtherance and not in
limitation of the foregoing, the L/C Issuer may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary (or the L/C Issuer may
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit and may disregard
any requirement in a Letter of Credit that notice of dishonor be given in a
particular manner and any requirement that presentation be made at a particular
place or by a particular time of day), and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason. The L/C Issuer shall not be
responsible for the wording of any Letter of Credit (including, without
limitation, any drawing conditions or any terms or conditions that are
ineffective, ambiguous, inconsistent, unduly complicated or reasonably
impossible to satisfy), notwithstanding any assistance the L/C Issuer may
provide to the Borrowers with drafting or recommending text for any Letter of
Credit Application or with the structuring of any transaction related to any
Letter of Credit, and the Borrowers hereby acknowledge and agree that any such
assistance will not constitute legal or other advice by the L/C Issuer or any
representation or warranty by the L/C Issuer that any such wording or such
Letter of Credit will be effective. Without limiting the foregoing, the L/C
Issuer may, as it deems appropriate, modify or alter and use in any Letter of
Credit the terminology contained on the Letter of Credit Application for such
Letter of Credit.
          (g) Cash Collateral. Upon the request of the Agent, 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 2.05 and 8.02(c)
set forth certain additional requirements to deliver Cash Collateral hereunder.
For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), “Cash
Collateralize” means to pledge and deposit

52

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

 

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 105% of the Outstanding Amount of all L/C Obligations, pursuant
to documentation in form and substance 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 to secure all
Obligations. Such cash collateral shall be maintained in blocked, non-interest
bearing deposit accounts at Bank of America (except that Permitted Investments
of the type listed in clauses (a) through (e) of the definition thereof may be
made at the request of the Lead Borrower at the option and in the sole
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 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 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 reimburse the L/C Issuer and, to the extent not so applied, shall
thereafter be applied to satisfy other Obligations.
          (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by
the L/C Issuer and the Lead Borrower when a Letter of Credit is issued
(including any such agreement applicable to an Existing Letter of Credit),
(i) the rules of the ISP shall apply to each Standby Letter of Credit, and
(ii) the rules of the UCP shall apply to each Commercial Letter of Credit.
          (i) Letter of Credit Fees. 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 Rate 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 1.06. Letter of Credit Fees shall be
(i) due and payable on the first Business Day of each April, July, October and
January, commencing with the first such date to occur after the issuance of such
Letter of Credit, on the Letter of Credit Expiration Date and thereafter on
demand, and (ii) computed on a quarterly basis in arrears for the immediately
preceding quarter. 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 2.08(b) hereof.
          (j) Fronting Fee and Documentary and Processing Charges Payable to L/C
Issuer. The Borrowers shall pay directly to the L/C Issuer for its own account a
fronting fee (i) with respect to each Commercial Letter of Credit, at a rate
equal to 0.125% per annum, computed on the Stated Amount of such Letter of
Credit, and payable upon the issuance or amendment thereof, and (ii) with
respect to each Standby Letter of Credit, at a rate equal to 0.125% per annum,
computed on the Stated Amount available to be drawn under such Letter of Credit
and on a quarterly basis in arrears for the immediately preceding quarter. Such
fronting fees shall be due and payable on the first Business Day of each April,
July, October and January, commencing with the first such date to occur after
the issuance of such Letter of Credit, on the Letter of Credit Expiration Date
and thereafter on demand. 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 1.06. In addition, the Borrowers shall
pay directly to the L/C Issuer for its own account the customary issuance,
presentation, amendment and other processing fees, and other standard costs and
charges, of the L/C Issuer relating to letters of credit as from time to time in

53

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

 

effect. Such customary fees and standard costs and charges are due and payable
on demand and are nonrefundable.
          (k) Conflict with Issuer Documents. In the event of any conflict
between the terms hereof and the terms of any Issuer Document, the terms hereof
shall control.
     2.04 Swing Line Loans.
          (a) The Swing Line. Subject to the terms and conditions set forth
herein, the Swing Line Lender may, in its discretion, in reliance upon the
agreements of the other Lenders set forth in this Section 2.04, make loans (each
such loan, a “Swing Line 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 amount of the Swing Line Sublimit, notwithstanding
the fact that such Swing Line Loans, when aggregated with the Applicable
Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of
the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s
Commitment; provided, however, that after giving effect to any Swing Line Loan,
(i) the Total Outstandings shall not exceed Loan Cap, and (ii) the aggregate
Outstanding Amount of the Committed Loans of any Lender at such time, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations
at such time, plus such Lender’s Applicable Percentage of the Outstanding Amount
of all Swing Line Loans at such time shall not exceed such Lender’s Commitment,
and provided, further, that the Borrowers shall not use the proceeds of any
Swing Line Loan to refinance any outstanding Swing Line Loan, and provided
further that the Swing Line Lender may refuse, and such refusal shall not be
deemed an abuse of the Swing Line Lender’s discretion to make Swing Line Loans
as provided herein, to make any Swing Line Loan at any time when any Lender is
at such time a Defaulting Lender or Deteriorating Lender hereunder, unless the
Swing Line Lender has entered into satisfactory arrangements with the Borrower
or such Lender to eliminate the Swing Line Lender’s risk with respect to such
Lender. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrowers may borrow under this Section 2.04, prepay
under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan
shall bear interest only at a rate based on the Base Rate. Immediately upon the
making of a Swing Line Loan, each Lender shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a
risk participation in such Swing Line Loan in an amount equal to the product of
such Lender’s Applicable Percentage multiplied by the amount of such Swing Line
Loan. The Swing Line Lender 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 Swing Line Lender in connection with Swing Line Loans
made by it or proposed to be made by it as if the term “Agent” as used in
Article IX included the Swing Line Lender with respect to such acts or
omissions, and (B) as additionally provided herein with respect to the Swing
Line Lender.
          (b) Borrowing Procedures. Each Swing Line Borrowing may, in the Swing
Line Lender’s discretion, be made upon the Lead Borrower’s irrevocable notice to
the Swing Line Lender and the Agent, which may be given by telephone. Each such
notice must be received by the Swing Line Lender and the Agent not later than
1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to
be borrowed, which shall be a minimum of $100,000, and (ii) the requested
borrowing date, which shall be a Business Day. Each such telephonic notice must
be confirmed promptly by delivery to the Swing Line Lender and the Agent of a
written Swing Line Loan Notice, appropriately completed and signed by a
Responsible Officer of the Lead Borrower. Promptly after receipt by the Swing
Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will
confirm with the Agent (by telephone or in writing) that the Agent has also
received such Swing Line Loan Notice and, if not, the Swing Line Lender will
notify the Agent (by telephone or in writing) of the contents thereof. Unless
the Swing Line Lender has received notice (by telephone or in writing) from the
Agent at the request of the

54

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

 

Required Lenders prior to 2:00 p.m. on the date of the proposed Swing Line
Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan
as a result of the limitations set forth in the proviso to the first sentence of
Section 2.04(a), or (B) that one or more of the applicable conditions specified
in Article IV is not then satisfied, then, subject to the terms and conditions
hereof, the Swing Line Lender may, not later than 4:00 p.m. on the borrowing
date specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan available to the Borrowers either by (i) crediting the account of the Lead
Borrower on the books of Bank of America 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 Swing Line Lender by the Lead
Borrower; provided, however, that if, on the date of the proposed Swing Line
Loan, there are L/C Borrowings outstanding, then the proceeds of such Borrowing,
first, shall be applied to the payment in full of any such L/C Borrowings, and
second, shall be made available to the Borrowers as provided above.
          (c) Refinancing of Swing Line Loans.
               (i) The Swing Line Lender at any time in its sole and absolute
discretion may request, on behalf of the Borrowers (which hereby irrevocably
authorize the Swing Line Lender to so request on their behalf), that each Lender
make a Base Rate Loan in an amount equal to such Lender’s Applicable Percentage
of the amount of Swing Line Loans then outstanding. Such request shall be made
in writing (which written request shall be deemed to be a Committed Loan Notice
for purposes hereof) and in accordance with the requirements of Section 2.02,
without regard to the minimum and multiples specified therein for the principal
amount of Base Rate Loans, but subject to the unutilized portion of the Loan Cap
and the conditions set forth in Section 4.02. The Swing Line Lender shall
furnish the Lead Borrower with a copy of the applicable Committed Loan Notice
promptly after delivering such notice to the Agent. Each Lender shall make an
amount equal to its Applicable Percentage of the amount specified in such
Committed Loan Notice available to the Agent in immediately available funds for
the account of the Swing Line Lender at the Agent’s Office not later than 1:00
p.m. on the day specified in such Committed Loan Notice, whereupon, subject to
Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Loan to the Borrowers in such amount. The Agent shall
remit the funds so received to the Swing Line Lender.
               (ii) If for any reason any Swing Line Loan cannot be refinanced
by such a Committed Borrowing in accordance with Section 2.04(c)(i), the request
for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall
be deemed to be a request by the Swing Line Lender that each of the Lenders fund
its risk participation in the relevant Swing Line Loan and each Lender’s payment
to the Agent for the account of the Swing Line Lender pursuant to Section
2.04(c)(i) shall be deemed payment in respect of such participation.
               (iii) If any Lender fails to make available to the Agent for the
account of the Swing Line Lender any amount required to be paid by such Lender
pursuant to the foregoing provisions of this Section 2.04(c) by the time
specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to
recover from such Lender (acting through the Agent), on demand, such amount with
interest thereon for the period from the date such payment is required to the
date on which such payment is immediately available to the Swing Line Lender at
a rate per annum equal to the greater of the Federal Funds Rate and a rate
determined by the Swing Line Lender in accordance with banking industry rules on
interbank compensation plus any administrative, processing or similar fees
customarily charged by the Swing Line Lender in connection with the foregoing.
If such Lender pays such amount (with interest and fees as aforesaid), the
amount so paid shall constitute such Lender’s Committed Loan included in the
relevant Committed Borrowing or funded participation in the relevant Swing Line
Loan, as the case may be. A

55

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

 

certificate of the Swing Line Lender submitted to any Lender (through the Agent)
with respect to any amounts owing under this clause (iii) shall be conclusive
absent manifest error.
               (iv) Each Lender’s obligation to make Committed Loans or to
purchase and fund risk participations in Swing Line Loans pursuant to this
Section 2.04(c) shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right which such Lender may have against the Swing Line Lender, the
Borrowers or any other Person for any reason whatsoever, (B) the occurrence or
continuance of a Default or an Event of Default, or (C) any other occurrence,
event or condition, whether or not similar to any of the foregoing; provided,
however, that each Lender’s obligation to make Committed Loans pursuant to this
Section 2.04(c) is subject to the conditions set forth in Section 4.02. No such
funding of risk participations shall relieve or otherwise impair the obligation
of the Borrowers to repay Swing Line Loans, together with interest as provided
herein.
          (d) Repayment of Participations.
               (i) At any time after any Lender has purchased and funded a risk
participation in a Swing Line Loan, if the Swing Line Lender receives any
payment on account of such Swing Line Loan, the Swing Line Lender will
distribute to such Lender its Applicable Percentage of such payment
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender’s risk participation was funded) in the same
funds as those received by the Swing Line Lender.
               (ii) If any payment received by the Swing Line Lender in respect
of principal or interest on any Swing Line Loan is required to be returned by
the Swing Line Lender under any of the circumstances described in Section 10.05
(including pursuant to any settlement entered into by the Swing Line Lender in
its discretion), each Lender shall pay to the Swing Line Lender its Applicable
Percentage thereof on demand of the Agent, plus interest thereon from the date
of such demand to the date such amount is returned, at a rate per annum equal to
the Federal Funds Rate. The Agent will make such demand upon the request of the
Swing Line Lender. The obligations of the Lenders under this clause shall
survive the payment in full of the Obligations and the termination of this
Agreement.
          (e) Interest for Account of Swing Line Lender. The Swing Line Lender
shall be responsible for invoicing the Borrowers for interest on the Swing Line
Loans. Until each Lender funds its Base Rate Loan or risk participation pursuant
to this Section 2.04 to refinance such Lender’s Applicable Percentage of any
Swing Line Loan, interest in respect of such Applicable Percentage shall be
solely for the account of the Swing Line Lender.
          (f) Payments Directly to Swing Line Lender. The Borrowers shall make
all payments of principal and interest in respect of the Swing Line Loans
directly to the Swing Line Lender.
     2.05 Prepayments.
          (a) The Borrowers may, upon irrevocable 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 LIBOR Rate Loans and (B) on the
date of prepayment of Base Rate Loans; (ii) any prepayment of LIBOR Rate Loans
shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof; and (iii) 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

56

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

 

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 Loans to be prepaid and, if LIBOR Rate Loans, the Interest Period(s) of such
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 LIBOR 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.
          (b) The Borrowers may, upon irrevocable notice from the Lead Borrower
to the Swing Line Lender (with a copy to the Agent), at any time or from time to
time, voluntarily prepay Swing Line Loans in whole or in part without premium or
penalty; provided that (i) such notice must be received by the Swing Line Lender
and the Agent not later than 1:00 p.m. on the date of the prepayment, and
(ii) any such prepayment shall be in a minimum principal amount of $100,000.
Each such notice shall specify the date and amount 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.
          (c) If for any reason the Total Outstandings at any time exceed the
Loan Cap as then in effect, the Borrowers shall immediately prepay the Loans and
L/C Borrowings and Cash Collateralize the L/C Obligations (other than L/C
Borrowings) 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 2.05(c) unless after the prepayment in full of the
Loans the Total Outstandings exceed the Loan Cap as then in effect.
          (d) The Borrower shall prepay the Loans and Cash Collateralize the L/C
Obligations to the extent required pursuant to the provisions of Section 6.12
hereof.
          (e) The Borrowers shall prepay the Loans and Cash Collateralize the
L/C Obligations in an amount equal to the Net Proceeds received by a Loan Party
on account of a Prepayment Event, irrespective of whether a Cash Dominion Event
then exists and is continuing.
          (f) Prepayments made pursuant to Section 2.05(c), (d) and (e) above,
first, shall be applied ratably to the L/C Borrowings and the Swing Line Loans,
second, shall be applied ratably to the outstanding Committed Loans, third,
shall be used to Cash Collateralize the remaining L/C Obligations (except that
with respect to Section 2.05(d) and (e), such Cash Collateralization shall be
required only if an Event of Default is then continuing); and, fourth, the
amount remaining, if any, after the prepayment in full of all L/C Borrowings,
Swing Line Loans and Committed Loans outstanding at such time and the Cash
Collateralization of the remaining L/C Obligations (to the extent required
hereunder) 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.
     2.06 Termination or Reduction of Commitments.
          (a) The Borrowers may, upon irrevocable notice from the Lead Borrower
to the Agent, terminate the Aggregate Commitments, the Letter of Credit Sublimit
or the Swing Line Sublimit or from time to time permanently reduce the Aggregate
Commitments, the Letter of Credit Sublimit or the

57

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

 

Swing Line 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 $10,000,000 or any whole multiple of $1,000,000 in excess
thereof, (iii) 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,
(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, and (C) the Swing Line Sublimit if,
after giving effect thereto, and to any concurrent payments hereunder, the
Outstanding Amount of Swing Line Loans hereunder would exceed the Swing Line
Sublimit.
          (b) If, after giving effect to any reduction of the Aggregate
Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds
the amount of the Aggregate Commitments, such Letter of Credit Sublimit or Swing
Line 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, Swing Line Sublimit or the Aggregate
Commitments under this Section 2.06. 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 (including, without
limitation, commitment fees, and Letter of Credit 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.
     2.07 Repayment of Loans.
          (a) The Borrower shall repay to the Lenders on the Termination Date
the aggregate principal amount of Committed Loans outstanding on such date.
          (b) To the extent not previously paid, the Borrower shall repay the
outstanding balance of the Swing Line Loans on the Termination Date.
     2.08 Interest.
          (a) Subject to the provisions of Section 2.08(b) below, (i) each LIBOR
Rate Loan shall bear interest on the outstanding principal amount thereof for
each Interest Period at a rate per annum equal to the Adjusted LIBOR Rate for
such Interest Period plus the Applicable Margin; (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; and (iii) each Swing Line 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 Law.
               (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 Law.

58

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

 

               (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 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.
     2.09 Fees. In addition to certain fees described in subsections (i) and
(j) 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 equal to the Commitment Fee Percentage multiplied by 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 quarterly in arrears for the
immediately preceding quarter on the first Business Day of each April, July,
October, and January, commencing with the first such date to occur after the
Effective Date, and on the last day of the Availability Period.
          (b) Other Fees. The Borrower 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.
     2.10 Computation of Interest and Fees. All computations of interest for
Base Rate Loans when the Base Rate is determined by Bank of America’s “prime
rate” shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other 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 Loan for the day on which the Loan is made, and shall not accrue
on a Loan, or any portion thereof, for the day on which the Loan or such portion
is paid, provided that any Loan that is repaid on the same day on which it is
made shall, subject to Section 2.12(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.
     2.11 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 Loan from such Lender, each payment and prepayment of principal
of any such 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 Loans in addition to such accounts or
records. Each Lender may attach schedules to its Note and endorse thereon the
date, Type (if applicable), amount and

59

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

 

maturity of its 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 2.11(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 and Swing Line Loans. 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.
     2.12 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. 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. shall, at the option
of the Agent, be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. If any payment (other than
with respect to payment of a LIBOR Loan) 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
Borrowing of LIBOR Rate Loans (or in the case of any Borrowing of Base Rate
Loans, prior to 12:00 noon on the date of such Borrowing) that such Lender will
not make available to the Agent such Lender’s share of such 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 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 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.

60

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

 

               (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 Swing Line Loans 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.
     2.13 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

61

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

 

     (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 or Swing Line Loans 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 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.
     2.14 Settlement Amongst Lenders
          (a) The amount of each Lender’s Applicable Percentage of outstanding
Loans (including outstanding Swing Line Loans), shall be computed weekly (or
more frequently in the Agent’s discretion) and shall be adjusted upward or
downward based on all Loans (including Swing Line Loans) and repayments of Loans
(including Swingline 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
and Swing Line 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 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 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,

62

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

 

Lenders 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 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 Law.
          (c) Indemnification by the Loan Parties. The Loan Parties shall
indemnify the Agent, each Lender and each L/C Issuer, within 20 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 such Agent, such
Lender or such 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.
          (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 Law or reasonably requested by the Lead Borrower
or the Agent, such properly completed and executed documentation prescribed by
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 Effective 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 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, (A) any Lender that
is a “United States person” within the meaning of Section 7701(a)(30) of the
Code shall deliver to the Lead Borrower and the Agent executed originals of IRS
Form W-9 or such other documentation or information prescribed by applicable
Laws or reasonably requested by on behalf of such Borrower or the Agent as will
enable such Lead Borrower or the Agent, as the case may be, to determine whether
or not such Lender is subject to backup withholding or information reporting
requirements; and (B) any Foreign 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 Foreign 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 Foreign Lender is legally entitled to do
so), whichever of the following is applicable:

63

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

 

          (i) duly completed copies 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 copies 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 copies of Internal Revenue Service Form W-8BEN, or
          (iv) any other form prescribed by Law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
Law to permit the Lead Borrower to determine the withholding or deduction
required to be made.
          (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 Loan Parties or
with respect to which the Borrowers have paid additional amounts pursuant to
this Section, it shall pay to the Lead Borrower 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 Loan Parties, upon the request of such Agent,
such Lender or the L/C Issuer, agree to repay the amount paid over to the Lead
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to such Agent, such Lender or the L/C Issuer in the
event that such 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 Loan Parties 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 LIBOR
Rate Loans, or to determine or charge interest rates based upon the LIBOR 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 through the Agent, any obligation of such Lender to make or continue
LIBOR Rate Loans or to Convert Base Rate Loans to LIBOR 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 LIBOR 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 LIBOR Rate Loans
to such day, or immediately, if such Lender may not lawfully continue to
maintain such LIBOR 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 LIBOR Rate Loan or a
Conversion to or continuation thereof that

64

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

 

(a) Dollar deposits are not being offered to banks in the London interbank
market for the applicable amount and Interest Period of such LIBOR Rate Loan,
(b) adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
(c) the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan does not adequately and fairly reflect the cost to such Lenders
of funding such Loan, the Agent will promptly so notify the Lead Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR
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 Borrowing of, Conversion to or
continuation of LIBOR 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 LIBOR 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 LIBOR 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 LIBOR 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
          (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 LIBOR
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 LIBOR Rate Loan (or of maintaining its
obligation to make any such 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, the Loan Parties
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 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

65

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

 

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 Loan Parties 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 Loan Parties 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 Loan Parties 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 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 LIBOR 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 LIBOR Rate Loan equal to the actual costs
of such reserves allocated to such 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 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 Loan other
than a Base Rate Loan on a day other than the last day of the Interest Period
for such 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 Loan) to prepay, borrow, continue or Convert any 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 LIBOR 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;

66

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

 

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such 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 LIBOR
Rate Loan made by it at the LIBOR 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 LIBOR Rate Loan was in fact so funded.
     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 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.

67

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

 

          (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.
ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
     4.01 Conditions of Initial Credit Extension. The effectiveness of this
Agreement 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
dated the Effective Date (or, in the case of certificates of governmental
officials, a recent date before the Effective Date) and each in form and
substance satisfactory to the Agent:
     (i) counterparts of this Agreement each properly executed by a Responsible
Officer of the signing Loan Party and the Lenders 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 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 Pepper Hamilton 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 of 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 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 as of the Effective 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

68

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

 

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;
     (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) 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
or subordination agreements satisfactory to the Agent are being tendered
concurrently herewith or other arrangements satisfactory to the Agent for the
delivery of such termination statements and releases have been made;
     (xi) (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) the Credit Card Notifications, and Blocked Account Agreements
required pursuant to Section 6.12 hereof shall have been obtained, and
(C) control agreements with respect to the Loan Parties’ securities and
investment accounts have been obtained; and
     (xii) such other assurances, certificates, documents, consents or opinions
as the Agent reasonably may require.
     (b) After giving effect to (i) any Loans outstanding hereunder, (ii) any
charges to the Loan Account made in connection herewith and (iii) all Existing
Letters of Credit and any other Letters of Credit to be issued at, or
immediately subsequent to, such establishment, Availability shall be greater
than $20,000,000.
     (c) The Agent shall have received a Borrowing Base Certificate dated the
Effective Date, relating to the month ended on July 31, 2011, and executed by a
Responsible Officer of the Lead Borrower.
     (d) The Agent shall be reasonably satisfied that any financial statements
delivered to it and the Lenders fairly present 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 and the Lenders shall have received and be satisfied with
(i) updated projections, which shall include an Availability model, Consolidated
income statement, balance

69

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

 

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) There shall not have occurred any default of any Material Contract of
any Loan Party which could reasonably be expected to have a Material Adverse
Effect.
     (h) The consummation of the transactions contemplated hereby shall not
violate any Law or any Organization Document.
     (i) All fees required to be paid to the Agent or the Arranger on or before
the Effective Date shall have been paid in full, and all fees required to be
paid to the Lenders on or before the Effective Date shall have been paid in
full.
     (j) The Borrowers shall have paid all fees, charges and disbursements of
counsel to the Agent to the extent invoiced prior to or on the Effective Date,
plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements
incurred or to be incurred by it through the Effective Date (provided that such
estimate shall not thereafter preclude a final settling of accounts between the
Borrowers and the Agent).
     (k) 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.
     (l) No material changes in governmental regulations or policies affecting
any Loan Party or any Credit Party shall have occurred prior to the Effective
Date.
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 Effective 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 LIBOR Rate Loans) and of 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, or which are contained in any document
furnished at any time under or in connection herewith or therewith, shall be
true and correct 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 as of such earlier
date, (ii) in the case of any representation and warranty qualified by
materiality, they shall be true

70

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

 

and correct in all respects 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 or the Swing Line Lender
shall have received a Request for Credit Extension in accordance with the
requirements hereof.
     (d) No event or circumstance which could reasonably be expected to result
in a Material Adverse Effect shall have occurred.
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
LIBOR Rate Loans) submitted by the Lead Borrower shall be deemed to be a
representation and warranty by the Borrowers that the conditions specified in
Sections 4.02(a), (b) and (d) have been satisfied on and as of the date of the
applicable Credit Extension. The conditions set forth in this Section 4.02 are
for the sole benefit of the Credit Parties, but until the Required Lenders (or,
if there are two (2) or fewer Lenders, any Lender) otherwise direct the Agent to
cease making Loans and issuing Letters of Credit, the Lenders will fund their
Applicable Percentage of all Loans and L/C Advances and participate in all Swing
Line Loans and 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 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 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 (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 could not reasonably be expected to
have a Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of
the Effective 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.

71

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

 

     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 any arbitral award
to which such Person or its property is subject; (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.
     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) or (b) such as have been
obtained or made and are in full force and 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 the financial condition
of the Parent 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 and other liabilities,
direct or contingent, of the Parent and its Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Indebtedness.
          (b) The unaudited Consolidated balance sheet of the Parent and its
Subsidiaries dated April 30, 2011, and the related Consolidated statements of
income or operations, Shareholders’ Equity and 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 the financial condition of the Parent and
its Subsidiaries as of the date thereof and their results of operations for the
period 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 could reasonably be

72

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

 

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, (iii) of covenant compliance calculations provided
hereunder or (iv) of the assets, liabilities, financial condition or results of
operations of the Parent and its Subsidiaries on a Consolidated basis.
          (e) The Consolidated forecasted balance sheet and statements of income
and cash flows of the Parent and its Subsidiaries delivered pursuant to
Section 6.01(c) 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.
     5.06 Litigation. There are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of the Loan Parties after due and diligent
investigation, threatened or contemplated, 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) either individually or in the
aggregate, if determined adversely, could 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, or party to, any Material Contract or any Material
Indebtedness. 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 has good record and marketable 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 such defects in title as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each of the Loan Parties has good and marketable title
to, valid leasehold interests in, or valid licenses to use all personal property
and assets material to the ordinary conduct of its business.
          (b) Schedule 5.08(b)(1) sets forth the address (including street
address, county and state) of all Real Estate (excluding Leases) that is owned
by the Loan Parties, together with a list of the holders of any mortgage or
other Lien thereon as of the Effective Date. Each Loan Party has good,
marketable and insurable fee simple title to the Real Estate owned by such Loan
Party or such Subsidiary, free and clear of all Liens, other than Permitted
Encumbrances. Schedule 5.08(b)(2) sets forth the address (including street
address, county and state) of all Leases of the Loan Parties, together with the
name of each lessor and its contact information with respect to each such Lease
as of the Effective Date. Each of such Leases is in full force and effect and
the Loan Parties are not in default of the terms thereof.
          (c) Schedule 7.01 sets forth a complete and accurate list of all Liens
on the property or assets of each Loan Party, showing as of the Effective Date
the lienholder thereof, the principal amount of the obligations secured thereby
and the property or assets of such Loan Party or such Subsidiary subject
thereto. The property of each Loan Party is subject to no Liens, other than
Permitted Encumbrances.

73

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

 

          (d) Schedule 7.02 sets forth a complete and accurate list of all
Investments held by any Loan Party on the Effective Date, showing as of the
Effective Date the amount, obligor or issuer and maturity, if any, thereof.
          (e) Schedule 7.03 sets forth a complete and accurate list of all
Indebtedness of each Loan Party on the Effective Date, showing as of the
Effective Date the amount, obligor or issuer and maturity thereof.
     5.09 Environmental Compliance.
          (a) No Loan Party (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability, except, in each case, as could 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 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, to the best of the
knowledge of the Loan Parties, on any property formerly owned or operated by any
Loan Party; there is no asbestos or asbestos-containing material on any property
currently owned or operated by any Loan Party; and Hazardous Materials have not
been released, discharged or disposed of on any property currently or formerly
owned or operated by any Loan Party.
          (c) No Loan Party is undertaking, and no Loan Party 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 have been disposed of in a manner not reasonably expected to
result in material liability to any Loan Party.
     5.10 Insurance. The properties of the Loan Parties 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 engaged in similar
businesses and owning similar properties in localities where the Loan Parties
operates. Schedule 5.10 sets forth a description of all insurance maintained by
or on behalf of the Loan Parties as of the Effective Date. As of the Effective
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 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

74

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

 

due and payable, except 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. There is no
proposed tax assessment against any Loan Party that would, if made, have a
Material Adverse Effect. No Loan Party or any Subsidiary thereof is a party to
any tax sharing agreement.
     5.12 ERISA Compliance.
          (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or state Laws. 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 Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan. No Lien imposed under the Code or ERISA exists or is likely
to arise on account of any Plan.
          (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) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) 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);
(iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and 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
(v) 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 Effective Date, the Loan
Parties have no Subsidiaries other than those specifically disclosed in Part
(a) of Schedule 5.13, which Schedule sets forth 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 are owned by 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. Except as set
forth in Schedule 5.13, there are no outstanding rights to purchase any Equity
Interests in any Subsidiary. As of the Effective 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 are owned in the amounts specified on Part (c) of
Schedule 5.13 and, except for the outstanding Equity Interests in the Parent,
are free and clear of all Liens except for those created under the Security
Documents. 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, each of which is valid and in full force and effect.

75

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

 

     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. 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 or for any other purpose that might 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, any Person Controlling any Loan Party,
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 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 furnished
(whether in writing or orally) 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 information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial 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 is in compliance 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 (a) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently
conducted or (b) the failure to comply therewith, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
     5.17 Intellectual Property; Licenses, Etc. The Loan Parties 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, without conflict with the rights of any other Person. To
the best knowledge of the Lead Borrower, no current Intellectual Property
employed, or now contemplated to be employed, by any Loan Party infringes upon
any current Intellectual Property rights held by any other Person. No claim or
litigation regarding any of the foregoing is pending against any of the Loan
Parties or, to the best knowledge of the Lead Borrower, threatened in writing
against any of the Loan Parties, which, 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 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

76

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

 

could not reasonably be expected to have a Material Adverse Effect. No Loan
Party has incurred any liability or obligation under the Worker Adjustment and
Retraining Act or similar state Law. All payments due from any Loan Party, or
for which any claim may be made against any Loan Party, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
properly accrued in accordance with GAAP as a liability on the books of such
Loan Party. Except as set forth on Schedule 5.18, no Loan Party is a party to or
bound by any collective bargaining agreement, management agreement, employment
agreement, bonus, restricted stock, stock option, or stock appreciation plan or
agreement or any similar plan, agreement or arrangement. 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 has made a pending demand for recognition.
There are no complaints, unfair labor practice charges, grievances,
arbitrations, unfair employment practices charges or any other claims or
complaints against any Loan Party 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. The
consummation of the transactions contemplated by the Loan Documents will not
give rise to any right of termination or right of renegotiation on the part of
any union under any collective bargaining agreement to which any Loan Party is
bound.
     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 (as defined in the Security Agreement), 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. The financing statements, releases and other
filings are in appropriate form and have been or will be filed in the offices
specified in Schedule II of the Security Agreement. Upon such filings 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 that may be perfected under the UCC
(in effect on the date this representation is made) 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, in each case prior and
superior in right to any other Person.
          (b) When the Security Agreement (or a short form thereof) 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 on 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 Collateral (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 (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 Effective Date).

77

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

 

     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 Effective 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 Effective Date to which any Loan Party is a party with
respect to the processing and/or payment to 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 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 Customer and 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.
     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 Effective Date. The Loan
Parties have delivered true, correct and complete copies of such Material
Contracts to the Agent on or before the Effective 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.
     5.25 Casualty. Neither the businesses nor the properties of any Loan Party
or any of its Subsidiaries are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
     So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied (other than
contingent indemnification claims 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
satisfactory to the Agent:

78

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

 

     (a) as soon as available, but in any event within 90 days after the end of
each Fiscal Year of the Parent, a Consolidated balance sheet of the Parent and
its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated
statements of income or operations, Shareholders’ 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, such Consolidated statements to be audited and accompanied by 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;
     (b) as soon as available, but in any event within 30 days after the end of
each of the Fiscal Months of each Fiscal Year of the Parent (unless such month
is the last month of a Fiscal Quarter, and then within 45 days after the end of
such month), a Consolidated balance sheet of the Parent and its Subsidiaries as
at the end of such Fiscal Month, and the related Consolidated statements of
income or operations, Shareholders’ Equity and cash flows for such Fiscal Month,
and for the portion of the Parent’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(c) 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, such Consolidated statements
to be certified by a Responsible Officer of the Lead Borrower as fairly
presenting the financial condition, results of operations, Shareholders’ Equity
and cash flows of the Parent and its Subsidiaries as of the end of such Fiscal
Month in accordance with GAAP, subject only to normal year-end audit adjustments
and the absence of footnotes;
     (c) as soon as available, but in any event no more than 30 days after the
end of each Fiscal Year of the Parent, forecasts prepared by management of the
Lead Borrower, in form satisfactory to the Agent, of Availability and the
Consolidated balance sheets and statements of income or operations and cash
flows of the Parent 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.
     6.02 Certificates; Other Information. Deliver to the Agent, in form and
detail satisfactory to the Agent:
     (a) concurrently with the delivery of the financial statements referred to
in Sections 6.01(a) and 6.01(b), (i) 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 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) 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 Month, 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 an Accelerated Borrowing Base
Delivery Event has occurred and is continuing, such Borrowing Base Certificate
shall be delivered on

79

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

 

Wednesday of each week (or, if Wednesday is not a Business Day, on the next
succeeding Business Day), 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 report or communication sent to the
stockholders of the Loan Parties, 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;
     (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 within 30 days after the end of
each Fiscal Year of the Loan Parties, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for 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;
     (h) promptly, and in any event within five Business Days after receipt
thereof by any Loan Party or any Subsidiary thereof, copies of each notice or
other correspondence 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 or any other matter which, if adversely determined, could 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 required to be delivered pursuant to Section 6.01(a) or 6.01(b), or
Section 6.02(c) (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 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 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 to the Agent or any Lender that requests
the Lead Borrower to deliver such paper copies until a written request to cease
delivering paper copies is given by the Agent or such Lender 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. The Agent shall have
no obligation to

80

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

 

request the delivery or to maintain copies of the documents 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.
     The Loan Parties hereby acknowledge that (a) the Agent and/or the Arranger
will make available to the Lenders and the L/C Issuer materials and/or
information provided by or on behalf of the Loan Parties hereunder
(collectively, “Borrower Materials”) by posting the Borrower Materials on
IntraLinks or another similar electronic system (the “Platform”) and (b) certain
of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to
receive material non-public information with respect to the Loan Parties or
their securities) (each, a “Public Lender”). The Loan Parties hereby agree that
they will use commercially reasonable efforts to identify that portion of the
Borrower Materials that may be distributed to the Public Lenders and that
(w) all such Borrower Materials shall be clearly and conspicuously marked
“PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” the Loan Parties shall be deemed to have authorized the Agent, the
Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as not
containing any material non-public information (although it may be sensitive and
proprietary) with respect to the Loan Parties or their securities for purposes
of United States Federal and state securities laws (provided, however, that to
the extent such Borrower Materials constitute Information, they shall be treated
as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are
permitted to be made available through a portion of the Platform designated
“Public Investor”; and (z) the Agent and the Arranger shall be entitled to treat
any Borrower Materials that are not marked “PUBLIC” as being suitable only for
posting on a portion of the Platform not designated “Public Investor.”
     6.03 Notices. Promptly notify the Agent:
     (a) of the occurrence of any Default or Event of Default;
     (b) of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect,
     (c) of any breach or non-performance of, or any default under, a Material
Contract or with respect to Material Indebtedness of any Loan Party or any
Subsidiary thereof;
     (d) of any dispute, litigation, investigation, proceeding or suspension
between any Loan Party or any Subsidiary thereof and any Governmental Authority,
in each case having a value of more than $250,000; or the commencement of, or
any material development in, any litigation or proceeding affecting any Loan
Party or any Subsidiary thereof, including pursuant to any applicable
Environmental Laws, in each case having a value of more than $250,000;
     (e) of the occurrence of any ERISA Event;
     (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 any Loan Party’s senior 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;

81

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

 

     (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;
     (k) of any casualty or other insured damage to any portion of the
Collateral having a value of more than $250,000 or the commencement of any
action or proceeding for the taking of any interest in a portion of the
Collateral having a value of more than $250,000 under power of eminent domain or
by condemnation or similar proceeding or if any portion of the Collateral having
a value of more than $250,000 is damaged or destroyed;
     (l) of any transaction of the nature contained in Article VII hereof,
occurring after the Effective Date, and
     (m) of any failure by any Loan Party to pay rent at (i) any of the Loan
Parties’ distribution centers or warehouses; (ii) ten percent (10%) or more of
such Loan Party’s Store locations or (iii) any of such Loan Party’s locations if
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.
     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 Material Indebtedness, as and when due and payable,
but subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness, except, in each case, where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) such Loan Party has set aside on its books adequate reserves
with respect thereto in accordance with GAAP, (c) such contest effectively
suspends collection of the contested obligation and enforcement of any Lien
securing such obligation, (d) no Lien has been filed with respect thereto and
(e) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect. Nothing contained herein shall
be deemed to limit the rights of the Agent with respect to determining Reserves
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 (i) to the extent
such Intellectual Property is no longer used or useful in the conduct of the
business of the Loan Parties, or (ii) where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
     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

82

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

 

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 reasonably acceptable to the Agent that are not Affiliates
of the Loan Parties, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business and operating in the same or similar
locations or as is required by Law, of such types and in such amounts (after
giving effect to any self-insurance compatible with the following standards) as
are customarily carried under similar circumstances by such other Persons and as
are reasonably acceptable to the Agent.
     (b) 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.
     (c) Cause fire and extended coverage policies maintained with respect to
any Collateral to be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to Real Estate) and
lenders’ loss payable clause (regarding personal property), in form and
substance 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, (ii) a provision to the effect
that none of the Loan Parties, Credit Parties or any other Person shall be a
co-insurer and (iii) such other provisions as the Agent may reasonably require
from time to time to protect the interests of the Credit Parties.
     (d) Cause commercial general liability policies to be endorsed to name the
Agent as an additional insured.
     (e) Cause business interruption policies to name the Agent as a loss payee
and to be endorsed or amended to include (i) a provision that, from and after
the Effective Date, the insurer shall pay all proceeds otherwise payable to the
Loan Parties under the policies directly to the Agent, (ii) a provision to the
effect that none of the Loan Parties, the Agent, the Agent or any other party
shall be a co-insurer and (iii) such other provisions as the Agent may
reasonably require from time to time to protect the interests of the Credit
Parties.
     (f) 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.
     (g) Deliver to the Agent, prior to the cancellation, modification or
non-renewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Agent, including an insurance binder) together with evidence satisfactory to the
Agent of payment of the premium therefor.

83

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

 

     (h) Permit any representatives that are designated by the Agent to inspect
the insurance policies maintained by or on behalf of the Loan Parties and to
inspect books and records related thereto and any properties covered thereby.
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 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 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 (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been set aside and maintained by the
Loan Parties in accordance with GAAP; (b) such contest effectively suspends
enforcement of the contested Laws, and (c) the failure to comply therewith could
not reasonably be expected to have a Material Adverse Effect.
     6.09 Books and Records; Accountants.
          (a) Maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied shall be made
of all 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.
     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, 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 when a Default or an Event of Default exists the Agent
(or any of 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.

84

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

 

          (b) Upon the request of the Agent after reasonable prior notice,
permit the Agent or professionals (including investment bankers, consultants,
accountants, and lawyers) retained by the Agent to conduct commercial finance
examinations and other evaluations, including, without limitation, of (i) the
Lead Borrower’s practices in the computation of the Borrowing Base (ii) the
assets included in the Borrowing Base and related financial information such as,
but not limited to, sales, gross margins, payables, accruals and reserves, and
(iii) the Loan Parties’ business plan, forecasts and cash flows. The Loan
Parties shall pay the reasonable fees and expenses of the Agent and such
professionals with respect to (i) up to one (1) commercial finance examination
in any twelve month period if Availability is greater than the greater of
(x) 50% of the Loan Cap or (y) $7,000,000, (ii) up to two (2) commercial finance
examinations in any twelve month period if Availability is less than 50% of the
Loan Cap but equal to or greater than the greater of (x) 17.5% of the Loan Cap
or (y) $7,000,000, and (iii) up to three (3) commercial finance examinations in
any twelve month period of Availability is less than the greater of (x) 17.5% of
the Loan Cap or (y) $7,000,000. Notwithstanding the foregoing, the Agent may
cause additional commercial finance examinations to be undertaken (i) as it in
its 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.
          (c) Upon the request of the Agent after reasonable prior notice,
permit the Agent or professionals (including appraisers) retained by the Agent
to conduct appraisals of the Collateral, including, without limitation, the
assets included in the Borrowing Base. The Loan Parties shall pay the reasonable
fees and expenses of the Agent and such professionals with respect to (i) up to
one (1) appraisal in any twelve month period if Availability is greater than the
greater of (x) 50% of the Loan Cap or (y) $7,000,000, (ii) up to two
(2) appraisals in any twelve month period if Availability is less than 50% of
the Loan Cap but equal to or greater than the greater of (x) 17.5% of the Loan
Cap or (y) $7,000,000, and (iii) up to three (3) appraisals in any twelve month
period of Availability is less than the greater of (x) 17.5% of the Loan Cap or
(y) $7,000,000. Notwithstanding the foregoing, the Agent may cause additional
appraisals to be undertaken (i) as it in its 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 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 or such longer time period as the Agent may agree in its reasonable
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 a
Joinder to the Facility Guaranty or such other documents as the Agent shall deem
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 favorable 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 may be limited to 65% of the
outstanding voting Equity Interests of such Subsidiary and 100% of the
non-voting Equity Interests of such Subsidiary), in each case in form, content
and scope reasonably satisfactory to the Agent. In no event shall compliance
with this Section 6.11 waive or be deemed a waiver or Consent to any transaction
giving rise to the need to comply with this Section 6.11 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.

85

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

 

     6.12 Cash Management.
          (a) On or prior to the Effective Date:
          (i) deliver to the Agent copies of notifications (each, a “Credit Card
Notification”) substantially in the form attached hereto as Exhibit G which have
been executed on behalf of such Loan Party and delivered to such Loan Party’s
credit card clearinghouses and processors listed on Schedule 5.21(b); and
          (ii) enter into a Blocked Account Agreement satisfactory in form and
substance to the Agent with each Blocked Account Bank (collectively, the
“Blocked Accounts”).
          (b) 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 (net of any minimum balance, not to exceed $2,500.00, as
may be required to be kept in the subject DDA by the depository institution at
which such DDA is maintained) and all payments due from credit card processors.
          (c) After the occurrence and during the continuance of a Cash Dominion
Event, cause the ACH or wire transfer to the concentration account maintained by
the Agent at Bank of America (the “Concentration Account”), no less frequently
than daily (and whether or not there are then any outstanding Obligations), all
cash receipts and collections received by each Loan Party from all sources,
including, without limitation, the following:
          (i) all available cash receipts from the sale of Inventory (including
without limitation, proceeds of credit card charges) 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 (net of any minimum balance, not to
exceed $2,500.00, as may be required to be kept in the subject DDA by the
depository institution at which such DDA is maintained); and
          (v) the then entire ledger balance of each Blocked Account (net of any
minimum balance, not to exceed $2,500.00, as may be required to be kept in the
subject Blocked Account by the Blocked Account Bank).
          (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 6.12, 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

86

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

 

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 request of the Agent, 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.
     6.13 Information Regarding the Collateral.
          (a) Furnish to the Agent at least thirty (30) days prior written
notice of any change in: (i) any Loan Party’s name; (ii) the location of any
Loan Party’s chief executive office, its principal place of business, any office
in which it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located (including the
establishment of any such new office or facility); (iii) any Loan Party’s
organizational structure or jurisdiction of incorporation or formation; or
(iv) any Loan Party’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its state of organization. The Loan
Parties shall not 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 for its own benefit and the benefit of the other Credit Parties.
          (b) Should any of the information on any of the Schedules hereto
become inaccurate or misleading in any material respect as a result of changes
after the Effective Date, advise the Agent in writing of such revisions or
updates as may be necessary or appropriate to update or correct the same. From
time to time as may be reasonably requested by the Agent, the Lead Borrower
shall supplement each Schedule hereto, or any representation herein or in any
other Loan Document, with respect to any matter arising after the Effective Date
that, if existing or occurring on the Effective Date, would have been 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.
     6.14 Physical Inventories.
          (a) Cause not less than one physical inventory to be undertaken, at
the reasonable expense of the Loan Parties, in each Fiscal Year consistent with
past practices, conducted by such inventory takers as are reasonably
satisfactory to the Agent and following such methodology as is consistent with
the methodology used in the immediately preceding inventory or as otherwise may
be reasonably satisfactory to the Agent. The Agent, at the reasonable 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 21 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

87

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

 

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 Default or Event of
Default exists, to cause additional such inventories to be taken as the Agent
determines (each, at the expense of the Loan Parties).
     6.15 Environmental Laws.
          (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 appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise materially 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.
     6.16 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 Law, or which any Agent may 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 reasonable expense of
the Loan Parties. The Loan Parties also agree to provide to the Agent, from time
to time upon request, evidence satisfactory to the Agent as to the perfection
and priority of the Liens created or intended to be created by the Security
Documents.
          (b) If any material assets are acquired by any Loan Party after the
Effective Date (other than assets constituting Collateral under the Security
Documents that become subject to the perfected first-priority 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 or shall be
requested by any Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section 6.16, all at the reasonable expense
of the Loan Parties. In no event shall compliance with this Section 6.16(b)
waive or be deemed a waiver or Consent to any transaction giving rise to the
need to comply with this Section 6.16(b) if such transaction 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) Use, and cause each of the Subsidiaries to use, their commercially
reasonable efforts to obtain lease terms in any Lease entered into by any Loan
Party after the Effective Date not expressly prohibiting the recording in the
relevant real estate filing office of an appropriate memorandum of lease and the
encumbrancing of the leasehold interest of such Loan Party in the property that
is the subject of such Lease.

88

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

 

          (d) Upon the request of the Agent, cause each of its customs brokers,
freight forwarders, consolidators and/or carriers 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.
     6.17 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 to keep such Leases in full force
and effect (except those payments or obligations which are being contested in
good faith by appropriate proceedings being diligently conducted, for which
adequate reserves have been provided in accordance with GAAP), (b) not allow
such Leases to lapse or be terminated or any rights to renew such Leases to be
forfeited or cancelled 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 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.
     6.18 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, (d) upon request of the Agent, make such demands and requests for
information and reports or for action from any other party to each such Material
Contract as any Loan Party or any of its Subsidiaries is entitled to make under
such Material Contract, and (e) cause each of its Subsidiaries to do the
foregoing.
ARTICLE VII
NEGATIVE COVENANTS
     So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied (other than
contingent indemnification claims for which a claim has not been asserted), or
any Letter of Credit shall remain outstanding, no Loan Party shall, nor shall it
permit any Subsidiary to, directly or indirectly:
     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 suffer 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; Equity Issuances
          (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

89

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

 

(c) issue and sell any other Equity Interests (other than compensatory issuances
of Equity Interests to employees, directors or consultants (including under any
option plan) of the Loan Parties) unless (i) such Equity Interests shall be
issued solely by the Parent, (ii) such Equity Interests provide that all
dividends and other Restricted Payments) in respect thereof shall be made solely
in additional shares of such Equity Interests, in lieu of cash, (iii) such
Equity Interests shall not be subject to redemption other than redemption at the
option of the Parent issuing such Equity Interests and in accordance with the
limitations contained in this Agreement, and (iv) all Restricted Payments in
respect of such Equity Interests are expressly subordinated to the Obligations.
     7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or
into another Person, (or agree to do any of the foregoing), except that, so long
as no Default or 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, a Borrower shall be the continuing or surviving Person;
     (c) in connection with a Permitted Acquisition, any Subsidiary of a Loan
Party may merge with or into or consolidate with any other Person or 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 6.11 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; and
     (d) any CFC that is not a Loan Party may merge into any CFC that is not a
Loan Party.
     7.05 Dispositions. Make any Disposition or enter into any agreement to make
any Disposition, except Permitted Dispositions.
     7.06 Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that each of the following shall be permitted so long as no Default or
Event of Default shall have occurred and be continuing prior, or immediately
after giving effect, to the following, or would result therefrom:
     (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;

90

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

 

     (c) if the Payment Conditions are satisfied, the Loan Parties and each
Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by
it; provided that, one (1) time during each twelve month period, solely for the
purposes of determining whether the Payment Conditions have been satisfied under
this Section 7.06(c), the Consolidated Fixed Charge Coverage Ratio shall be
calculated with respect to any Restricted Payment proposed to be made under this
Section 7.06(c) during such period without including such Restricted Payment in
such calculation; and
     (d) if (i) (x) no Loans have been outstanding for the six (6) month period
immediately preceding such payment, (y) no Loans are projected to be borrowed by
the Borrowers pursuant to the projections delivered by the Loan Parties pursuant
to 6.01(c) hereof for the six (6) month period immediately following such
payment, and (z) the Parent uses cash on hand to make such payment, or (ii) the
Payments Conditions are satisfied, the Parent may declare or pay cash dividends
to its stockholders.
     7.07 Prepayments of Indebtedness.
     Prepay, redeem, purchase, defease or otherwise satisfy prior to the
scheduled maturity thereof in any manner any Indebtedness, or make any payment
in violation of any subordination terms of any Subordinated Indebtedness, except
(a) as long as no Default or Event of Default then exists, regularly scheduled
or mandatory repayments, repurchases, redemptions or defeasances of
(i) Permitted Indebtedness (other than Subordinated Indebtedness), and
(ii) Subordinated Indebtedness in accordance with the subordination terms
thereof, (b) voluntary prepayments, repurchases, redemptions or defeasances of
(i) Permitted Indebtedness (but excluding on account of any Subordinated
Indebtedness) as long as the Payment Conditions are satisfied, and
(ii) Subordinated Indebtedness in accordance with the subordination terms
thereof and as long as the Payment Conditions are satisfied, and (c) Permitted
Refinancings of any such Indebtedness.
     7.08 Change in Nature of Business
          (a) In the case of the Parent, engage in any business or activity
other than (a) the direct or indirect ownership of all outstanding Equity
Interests in the other Loan Parties, (b) maintaining its corporate existence,
(c) participating in tax, accounting and other administrative activities as the
parent of the consolidated group of companies, including the Loan Parties,
(d) the execution and delivery of the Loan Documents to which it is a party and
the performance of its obligations thereunder, and (e) activities incidental to
the businesses or activities described in clauses (a) through (d) of this
Section 7.08(a).
          (b) In the case of each of the Loan Parties, engage in any line of
business substantially different from the business conducted by the Loan Parties
and their Subsidiaries on the Effective Date or any business substantially
related or incidental thereto.
     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 course of business, other than on fair and reasonable terms
substantially as favorable to the Loan Parties or such Subsidiary as would be
obtainable 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, (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 Parent to any officer,
director, employee or consultant of the Parent or any of its Subsidiaries,
(d) the payment of reasonable fees and out-of-pocket costs to directors, and
compensation

91

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

 

and employee benefit arrangements paid to, and indemnities provided for the
benefit of, directors, officers or employees of the Parent or any of its
Subsidiaries, and (e) any issuances of securities of the Parent (other than
Disqualified Stock and other Equity Interests not permitted hereunder) or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment agreements, stock options and stock ownership plans (in
each case in respect of Equity Interests in the Parent) of the Parent or any of
its Subsidiaries.
     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 incurred or provided in favor
of any holder of Indebtedness permitted under clauses (c) or (d) 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 (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, or
(b) for any purposes other than (i) the acquisition of working capital assets in
the ordinary course of business, (ii) to finance Capital Expenditures of the
Loan Parties, and (iii) for general corporate purposes, in each case to the
extent expressly permitted under Law and the Loan Documents.
     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
Permitted Refinancing thereof), 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, would be materially adverse to the Credit Parties, 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 required by GAAP.
     7.14 Deposit Accounts; Credit Card Processors.
     Open new DDAs unless the Loan Parties shall have delivered to the Agent
Blocked Account Agreements consistent with the provisions of Section 6.12 and
otherwise satisfactory to the Agent. No Loan Party shall maintain any bank
accounts or enter into any agreements with credit card processors other than the
ones expressly contemplated herein or in Section 6.12 hereof.

92

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

 

     7.15 Consolidated Fixed Charge Coverage Ratio.
     During the continuance of a Covenant Compliance Event, permit the
Consolidated Fixed Charge Coverage Ratio, calculated as of the last day of each
month for each Measurement Period, to be less than 1.1:1.0.
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, or interest
on, any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in
respect of L/C Obligations, or (ii) any fee due hereunder, or (iii) 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 Sections 6.01, 6.02, 6.03, 6.05,
6.07, 6.10, 6.11, 6.12, or 6.13 or Article VII; or
     (c) Other Defaults. Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or (b) above) contained
in any Loan Document on its part to be performed or observed and such failure
continues for 10 days after the sooner to occur of Lead Borrower’s receipt of
notice of such breach or failure from the Agent and the date on which such
breach or failure first becomes known to any Loan Party; or
     (d) Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
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 (A) fails to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any 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 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 holder or holders of such Material
Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (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 Material
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 Material 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 in such Swap Contract) under such Swap
Contract as to which a Loan Party or any Subsidiary thereof is an Affected Party
(as so defined in such Swap Contract) and, in either event,

93

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

 

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 or consents to the institution of 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 any material
part 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 60 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 60 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; 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
amount exceeding $250,000 as to any one such judgment or order or in an
aggregate amount exceeding $500,000 as to all such judgments and orders (in each
case 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 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,
(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 $200,000 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 $200,000 or which would reasonably likely
result in a Material Adverse Effect; or
     (j) Invalidity of Loan Documents. (i) Any provision of any Loan Document,
at any time after its execution and delivery and for any reason, ceases to be in
full force and effect; or any Loan Party or any other Person contests in any
manner the validity or enforceability of any provision of any Loan Document; or
any Loan Party denies that it has any or further liability or obligation under
any provision of any Loan Document, or purports to revoke, terminate or rescind
any 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

94

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

 

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, 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 as otherwise expressly permitted
hereunder, the Loan Parties, taken as a whole, shall take any action to suspend
the operation of their business in the ordinary course, liquidate all or a
material portion of their 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 their business; or
     (m) Loss of Collateral. There occurs any uninsured loss to any material
portion of the Collateral; or
     (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. (i) Any Loan Party is (A) criminally indicted or convicted
of a felony for fraud or dishonesty in connection with the Loan Parties’
business, or (B) charged by a Governmental Authority under any law that would
reasonably be expected to lead to forfeiture of any Collateral having a value in
excess of $250,000, or (ii) any director or senior officer of any Loan Party is
(A) criminally indicted or convicted of a felony for fraud or dishonesty in
connection with the Loan Parties’ business, unless such director or senior
officer promptly resigns or is removed or replaced or (B) charged by a
Governmental Authority under any law that would reasonably be expected to lead
to forfeiture of any material portion of Collateral; or
     (p) Guaranty. The termination or attempted termination of any Facility
Guaranty except as expressly permitted hereunder or under any other Loan
Document; or
     (q) Subordination. (i) The subordination provisions of the documents
evidencing or governing any Subordinated Indebtedness (the “Subordinated
Provisions”) shall, in whole or in part, terminate, cease to be effective or
cease to be legally valid, binding and enforceable against any holder of the
applicable Subordinated Indebtedness; or (ii) any Borrower or any other Loan
Party shall, directly or indirectly, disavow or contest in any manner (A) the
effectiveness, validity or enforceability of any of the Subordination
Provisions, (B) that the Subordination Provisions exist for the benefit of the
Credit Parties, or (C) that all payments of principal of or premium and interest
on the applicable Subordinated Indebtedness, or realized from the liquidation of
any property of any Loan Party, shall be subject to any of the Subordination
Provisions.
     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:

95

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

 

     (a) declare the Commitments of each Lender to make Loans and any obligation
of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such
Commitments and obligations shall be terminated;
     (b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other Obligations 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 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 Default or 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 Loans and any obligation of each L/C
Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid
principal amount of all outstanding 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,
any L/C Issuer 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.
     8.03 Application of Funds. After the exercise of any remedies provided for
in Section 8.02 (or after the 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
Issuers (including Credit Party Expenses to the respective Lenders and the L/C
Issuers and amounts payable under Article III), ratably among them in proportion
to the amounts described in this clause Second payable to them;

96

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

 

     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 the extent that Swing Line Loans have not been refinanced by a
Committed Loan, payment to the Swing Line Lender of that portion of the
Obligations constituting accrued and unpaid interest on the Swing Line Loans;
     Fifth, to the extent that Swing Line Loans have not been refinanced by a
Committed Loan, to payment to the Swing Line Lender of that portion of the
Obligations constituting unpaid principal of the Swing Line Loans;
     Sixth, to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Committed Loans, L/C Borrowings and other
Obligations, and fees (including Letter of Credit Fees), ratably among the
Lenders and the L/C Issuers in proportion to the respective amounts described in
this clause Sixth payable to them;
     Seventh, to payment of that portion of the Obligations constituting unpaid
principal of the Committed Loans and L/C Borrowings, ratably among the Lenders
and the L/C Issuers in proportion to the respective amounts described in this
clause Seventh held by them;
     Eighth, to the Agent for the account of the L/C Issuers, to Cash
Collateralize that portion of L/C Obligations comprised of the aggregate undrawn
amount of Letters of Credit;
     Ninth, to payment of all other Obligations (including without limitation
the cash collateralization of unliquidated indemnification obligations as
provided in Section 10.04(g), but excluding any Other Liabilities), ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Ninth held by them;
     Tenth, to payment of that portion of the Obligations arising from Cash
Management Services, ratably among the Credit Parties in proportion to the
respective amounts described in this clause Tenth held by them;
     Eleventh, to payment of all other Obligations arising from Bank Products,
ratably among the Credit Parties in proportion to the respective amounts
described in this clause Eleventh held by them; and
     Last, the balance, if any, after all of the Obligations have been
indefeasibly paid in full, to the Loan Parties or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Eighth 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.

97

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

 

ARTICLE IX
THE AGENT
     9.01 Appointment and Authority.
          Each of the Lenders (in its capacity as a Lender), the Swing Line
Lender and the L/C Issuer hereby irrevocably appoints Bank of America to act on
its behalf as the administrative agent and collateral agent hereunder and under
the other Loan Documents 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. 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 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
Agent 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 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.

98

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

 

     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. In the event
that the Agent obtains such actual knowledge or receives such a notice, the
Agent shall give prompt notice thereof to each of the other Credit Parties. Upon
the occurrence of a Default or an 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.
     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 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, the L/C Issuer and the Lead Borrower. Upon
receipt of any such notice of resignation, the Required Lenders shall have the
right, in consultation with the Lead Borrower, to appoint a successor,

99

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

 

which shall be a bank with an office in the United States, or an 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, 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 with notice of such acceptance provided to the Lead Borrower,
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 to in writing between the Lead Borrower and such successor
Agent. 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.
     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. 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 9.12,
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 No Other Duties, Etc. Anything herein to the contrary notwithstanding,
none of the Bookrunner, Arranger, Syndication Agent or Documentation Agent, if
any, listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except
in its capacity as the Agent, a Lender or the L/C Issuer hereunder.
     9.09 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 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 Loans, L/C Obligations and all other
Obligations that are owing and

100

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

 

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 reasonable
amounts due the Lenders, the L/C Issuer the Agent and such Credit Parties under
Sections 2.03(i), 2.03(j) and 2.03(k) as applicable, 2.09 and 10.04) allowed in
such judicial proceeding; and
     (b) to 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 reasonable amounts due the Agent under Sections 2.09
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.
     9.10 Collateral and Guaranty Matters. The Credit Parties irrevocably
authorize the Agent, at its option and in its discretion,
     (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 contingent indemnification
obligations for which no claim has been asserted) 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 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) 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 9.10. In each
case as specified in this Section 9.10, the Agent will, at the Loan Parties’
expense, execute and deliver to the applicable Loan Party or any other Person
designated by 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

101

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

 

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 9.10.
     9.11 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.
     9.12 Reports and Financial Statements.
     By signing this Agreement, each Lender:
     (a) agrees to furnish the Agent, with 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;
     (b) is deemed to have requested that the Agent furnish, and the Agent
agrees to 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 Loan or 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.

102

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

 

     9.13 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 Law of the United States
can be perfected only by possession or control. Should any Lender (other than
the Agent) obtain possession or control 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.
     9.14 Indemnification of Agent. Without limiting the obligations of Loan
Parties hereunder, the Lenders shall indemnify the Agent, each 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, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against the Agent, any 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, any 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, any 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.
     9.15 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.
     9.16 Defaulting Lender.
          (a) If for any reason any Lender shall become a Defaulting Lender or
shall fail or refuse to abide by its obligations under this Agreement, including
without limitation its obligation to make available to Agent its Applicable
Percentage of any Loans, expenses or setoff or purchase its Applicable
Percentage of a participation interest in the Swingline Loans or L/C Borrowings
and such failure is not cured within one (1) Business Day after receipt from the
Agent of written notice thereof, then, in addition to the rights and remedies
that may be available to the other Credit Parties, the Loan Parties or any other
party at law or in equity, and not at limitation thereof, (i) such Defaulting
Lender’s right to participate in the administration of, or decision-making
rights related to, the Obligations, this Agreement or the other Loan Documents
shall be suspended during the pendency of such failure or refusal, and (ii) a
Defaulting Lender shall be deemed to have assigned any and all payments due to
it from the Loan Parties, whether on account of outstanding Loans, interest,
fees or otherwise, to the remaining non-Defaulting Lenders for application to,
and reduction of, their proportionate shares of all outstanding Obligations, and
(iii) at the option of the Agent, any amount payable to such Defaulting Lender
hereunder (whether on account of principal, interest, fees or otherwise) shall,
in lieu of being distributed to such Defaulting Lender, be retained by the Agent
as cash collateral for future funding obligations of the Defaulting Lender in
respect of any Loan or existing or future participating interest in any Swing
Line Loan or Letter of Credit. The Defaulting Lender’s decision-making and
participation rights and rights to payments as set forth in clauses (i),
(ii) and (iii) hereinabove shall be restored only upon the payment by the
Defaulting Lender of its Applicable Percentage of any Obligations, any
participation obligation, or expenses as to which it is delinquent, together
with interest thereon at the rate set forth in Section 2.13(c) hereof from the
date when originally due until the date upon which any such amounts are actually
paid.

103

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

 

          (b) The non-Defaulting Lenders shall also have the right, but not the
obligation, in their respective, sole and absolute discretion, to cause the
termination and assignment, without any further action by the Defaulting Lender
for no cash consideration (pro rata, based on the respective Commitments of
those Lenders electing to exercise such right), of the Defaulting Lender’s
Commitment to fund future Loans. Upon any such purchase of the Applicable
Percentage of any Defaulting Lender, the Defaulting Lender’s share in future
Credit Extensions and its rights under the Loan Documents with respect thereto
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and transfer
such interest, including, if so requested, an Assignment and Acceptance.
          (c) Each Defaulting Lender shall indemnify the Agent and each
non-Defaulting Lender from and against any and all loss, damage or expenses,
including but not limited to reasonable attorneys’ fees and funds advanced by
the Agent or by any non-Defaulting Lender, on account of a Defaulting Lender’s
failure to timely fund its Applicable Percentage of a Loan or to otherwise
perform its obligations under the Loan Documents.
ARTICLE X
MISCELLANEOUS
10.01 Amendments, Etc.(a) No amendment or waiver of any provision of this
Agreement or any other Loan Document, 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 each such waiver or Consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, waiver or consent shall:
     (i) increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written Consent of such Lender;
     (ii) 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)
of principal, interest, fees or other amounts due hereunder or under any of the
other Loan Documents without the written Consent of such Lender, 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;
     (iii) as to any Lender, reduce the principal of, or the rate of interest
specified herein on, any Loan or L/C Borrowing held by such Lender, or (subject
to clause (iv) 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 such Lender; 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;
     (iv) as to any Lender, change Section 2.13 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;
     (v) change any provision of this Section or the definition of “Required
Lenders” or any other provision hereof specifying the number or percentage of
Lenders

104

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

 

required to amend, waive or otherwise modify any rights hereunder or under any
other Loan Document or make any determination or grant any consent hereunder or
thereunder, without the written Consent of each Lender;
     (vi) 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;
     (vii) except for Permitted Dispositions or as provided in Section 9.10,
release all or substantially all of the Collateral from the Liens of the
Security Documents without the written Consent of each Lender;
     (viii) change the definition of the term “Borrowing Base” or any component
definition thereof if as a result thereof the amounts available to be borrowed
by the Borrowers would be increased without the written Consent of each Lender,
provided that the foregoing shall not limit the discretion of the Agent to
change, establish or eliminate any Reserves;
     (ix) modify the definition of Permitted Overadvance so as to increase the
amount thereof or, except as otherwise provided in such definition, the time
period for which a Permitted Overadvance may remain outstanding without the
written Consent of each Lender; and
     (x) 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 Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) 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 any Agent under this
Agreement or any other Loan Document; and (iv) 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 herein, no
Deteriorating Lender or Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or Consent hereunder, except that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender.
     (b) Notwithstanding anything to the contrary in this Agreement or any other
Loan Document, (x) 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, and (y) any Loan
Document may be amended and waived with the consent of the Administrative Agent
at the request of the Lead Borrower without the need to obtain the

105

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

 

consent of any other Lender if such amendment or waiver is delivered in order
(i) to comply with local Law or advice of local counsel, (ii) to cure
ambiguities or defects or (iii) to cause any Loan Document to be consistent with
this Agreement and the other Loan Documents.
     (c) 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; provided that such amendment, waiver, consent or
release can be effected as a result of the assignment contemplated by such
Section 10.06 (together with all other such assignments required by the Lead
Borrower to be made pursuant to this paragraph).
     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, Bank of America as L/C Issuer
or the Swing Line Lender, 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 and Wells Fargo Bank, National
Association, as L/C Issuer, to the address, telecopier number, electronic mail
address or telephone number specified in its Administrative Questionnaire.
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 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
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 or
the Lead Borrower 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

106

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

 

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) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”
THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS
OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY
DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO
WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event
shall the Agent or any of its Related Parties (collectively, the “Agent
Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer or
any other Person for losses, claims, damages, liabilities or expenses of any
kind (whether in tort, contract or otherwise) arising out of the Loan Parties’
or the Agent’s transmission of Borrower Materials through the Internet, except
to the extent that such losses, claims, damages, liabilities or expenses are
determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Agent Party; provided, however, that in no event shall any Agent Party have
any liability to any Loan Party, any Lender, the L/C Issuer or any other Person
for indirect, special, incidental, consequential or punitive damages (as opposed
to direct or actual damages).
          (d) Change of Address, Etc. Each of the Loan Parties, the Agent, the
L/C Issuer and the Swing Line Lender 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, the L/C Issuer and the Swing Line Lender. 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.
          (e) 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 and Swing Line 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, reasonable 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 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

107

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

 

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 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 reasonable expenses
(including the reasonable fees, charges and disbursements of any counsel for any
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, the consummation of the transactions
contemplated hereby or thereby, or the administration of this Agreement and the
other Loan Documents, (ii) any 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 and any other
Person seeking to enforce the rights of a Borrower, beneficiary, transferee, or
assignee or Letter of Credit proceeds or the 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 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 reasonable expenses (x) are determined
by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee or
(y) 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.
          (c) Waiver of Consequential Damages, Etc. To the fullest extent
permitted by 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 Loan or Letter of Credit or the
use of the proceeds thereof. No Indemnitee shall be liable for any damages

108

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

 

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 than for direct or actual damages resulting
from the gross negligence or willful misconduct of such Indemnitee as determined
by a final and nonappealable judgment of a court of competent jurisdiction.
          (d) Payments. All amounts due under this Section shall be payable on
demand therefor.
          (e) Survival. The agreements in this Section shall survive the
resignation of any Agent and the L/C Issuer, the assignment of any Commitment or
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 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 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 Loans
(including for purposes of this Section 10.06(b), participations in L/C
Obligations and in Swing Line Loans) at the time owing to it); provided that any
such assignment shall be subject to the following conditions:

109

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

 

          (i) Minimum Amounts.
               (A) in the case of an assignment of the entire remaining amount
of the assigning Lender’s Commitment and the 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 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 Default or
Event of Default has occurred and is continuing, the Lead Borrower otherwise
consents (each such consent not to be unreasonably withheld or delayed);
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 Loans or the Commitment
assigned, except that this clause (ii) shall not apply to the Swing Line
Lender’s rights and obligations in respect of Swing Line Loans;
          (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) a Default or
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 with respect to such Lender; and
               (B) the consent of the Agent, the L/C Issuer and the Swing Line
Lender (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
          (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. The assignee, if it shall not be a Lender, shall
deliver to the Agent an Administrative Questionnaire.
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, including, for the avoidance of doubt, the obligation to provide the
Lead Borrower and the Agent with

110

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

 

any tax forms required by Section 3.01(e) hereof, 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 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 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 Loans (including such Lender’s
participations in L/C Obligations and/or Swing Line Loans) owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Loan Parties, the
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 2.13 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 for the recordation of the names and
addresses of the Participants and principal amounts of the of each Participant’s
interest in the Loans and L/C Obligations (the “Participation Register”). The
entries in the Participation 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 Participation Register pursuant to the terms
hereof as the owner of such participation for all purposes of this Agreement,
notwithstanding notice to the contrary. The

111

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

 

Participation Register shall be available for inspection by the Agent and the
Lead Borrower at any reasonable time and from time to time upon reasonable prior
notice.
          (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 Section 3.01(e) as though it were a
Lender.
          (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 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 or Swing Line Lender after Assignment or
Resignation.
          (i) Notwithstanding anything to the contrary contained herein, if at
any time Bank of America assigns all of its Commitment and Loans pursuant to
subsection (b) above, or resigns as Agent in accordance with the provisions of
Section 9.06, Bank of America may, (i) upon 30 days’ notice to the Lead Borrower
and the Lenders, resign as L/C Issuer and/or (ii) with duplication of any notice
required under Section 9.06, upon 30 days’ notice to the Lead Borrower and the
Lenders, resign as Swing Line Lender. In the event of any such resignation as
L/C Issuer or Swing Line Lender, the Lead Borrower shall be entitled to appoint
from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder;
provided, however, that no failure by the Lead Borrower to appoint any such
successor shall affect the resignation of Bank of America as L/C Issuer or Swing
Line Lender, as the case may be. If Bank of America 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 or
fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).
Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a)
such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender,
as the case may be, 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 Bank of
America to effectively assume the obligations of Bank of America with respect to
such Letters of Credit.

112

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

 

          (ii) Notwithstanding anything to the contrary contained herein, if at
any time Wells Fargo Bank, National Association assigns all of its Commitment
and Loans pursuant to subsection (b) above, Wells Fargo Bank, National
Association 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 Bank,
National Association as L/C Issuer. If Wells Fargo Bank, National Association
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 or fund risk participations in Unreimbursed Amounts
pursuant to Section 2.03(c)). 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 Bank, National Association to
effectively assume the obligations of Wells Fargo Bank, National Association
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, Approved
Funds, and to its and its Affiliates’ and Approved Funds’ 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), (c) to the extent required by 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 Contract 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 Effective 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

113

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

 

compliance procedures regarding the use of material non-public information and
(c) it will handle such material non-public information in accordance with 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 Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) or other property 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 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 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 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 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, 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

114

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

 

Default or Event of Default at the time of any Credit Extension, and shall
continue in full force and effect as long as any Loan or any other Obligation
hereunder 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 that may
thereafter arise under Section 10.04 hereof.
     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 Deteriorating Lender or 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);
     (b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and L/C Advances, 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 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.

115

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

 

     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, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.
          (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 THE BOROUGH OF
MANHATTAN 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 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 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 LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.
          (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 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.

116

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

 

     10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY 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, 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
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, each L/C
Issuer 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 Loans will be used by the Loan
Parties, directly or indirectly, for any

117

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

 

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. The Loan Parties agree that
neither of the advance of the Loans nor the use of the proceeds of any thereof
or of any Letter of Credit 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 2001 (Public Law 107-56)). Furthermore,
none of the Loan Parties 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.
          (a) Each Credit Party executing this Agreement agrees that neither it
nor its Affiliates will in the future issue any press releases or other public
disclosure using the name of the Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days’
prior notice to the Agent and without the prior written consent of the Agent
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under Law and then, in any event, such Credit Party or Affiliate will
consult with the Agent before issuing such press release or other public
disclosure.
          (b) Each Loan Party consents to the publication by the Agent or any
Lender of advertising material relating to the financing transactions
contemplated by this Agreement using any Loan Party’s name, product photographs,
logo or trademark. The Agent or such Lender shall provide a draft reasonably in
advance of any advertising material to the Lead Borrower for review and comment
prior to the publication thereof. The Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.
     10.21 Additional Waivers.
          (a) The Obligations are the joint and several obligation of each Loan
Party. To the fullest extent permitted by 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.

118

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

 

          (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
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 Law, each Loan Party waives any
defense based on or arising out of any defense of any other Loan Party or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any other Loan Party, other than
the indefeasible payment in full in cash of all the Obligations 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 indefeasibly 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 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 Loan Party is obligated to repay the Obligations as joint and
several obligors under this Agreement. Upon payment by any Loan Party of any
Obligations, all rights of such Loan Party against any other Loan Party arising
as a result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the 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

119

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

 

of any date of determination, the “Allocable Amount” of each Borrower shall be
equal to the maximum amount of liability for Accommodation Payments which could
be asserted against such Borrower hereunder without (a) rendering such Borrower
“insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code,
Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the
Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Borrower with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving
such Borrower unable to pay its debts as they become due within the meaning of
Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the
UFCA.
     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 Amendment and Restatement.
     This Agreement, together with the Security Agreement, is an amendment and
restatement of the Existing Credit Agreement, it being acknowledged and agreed
that as of the Effective Date all obligations outstanding under or in connection
with the Existing Credit Agreement and any of the other Loan Documents (such
obligations, collectively, the “Existing Obligations”) constitute obligations
under this Agreement. This Agreement is in no way intended to constitute a
novation of the Existing Credit Agreement or the Existing Obligations. With
respect to (i) any date or time period occurring and ending prior to the
Effective Date, the Existing Credit Agreement and the other Loan Documents shall
govern the respective rights and obligations of any party or parties hereto also
party thereto and shall for such purposes remain in full force and effect; and
(ii) any date or time period occurring or ending on or after the Effective Date,
the rights and obligations of the parties hereto shall be governed by this
Agreement (including, without limitation, the exhibits and schedules hereto) and
the other Loan Documents. From and after the Effective Date, any reference to
the Existing Credit Agreement in any of the other Loan Documents executed or
issued by and/or delivered to any one or more parties hereto pursuant to or in
connection therewith shall be deemed to be a reference to this Agreement, and
the provisions of this Agreement shall prevail in the event of any conflict or
inconsistency between such provisions and those of the Existing Credit
Agreement.

120

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

 

     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:

KIRKLAND’S STORES, INC., as Lead Borrower and
as a Borrower
      By:   /s/ W. Michael Madden         Name:   W. Michael Madden       
Title:   Senior Vice President,
Chief Financial Officer and Secretary        KIRKLANDS.COM, LLC, as a Borrower
      By:   /s/ W. Michael Madden         Name:   W. Michael Madden       
Title:   Senior Vice President,
Chief Financial Officer and Secretary        KIRKLAND’S TEXAS, LLC, as a
Borrower
      By:   /s/ W. Michael Madden         Name:   W. Michael Madden       
Title:   Senior Vice President,
Chief Financial Officer and Secretary        GUARANTORS:

KIRKLAND’S, INC., as Parent and as a Guarantor
      By:   /s/ W. Michael Madden         Name:   W. Michael Madden       
Title:   Senior Vice President,
Chief Financial Officer and Secretary        KIRKLAND’S DC, INC., as a Guarantor
      By:   /s/ W. Michael Madden         Name:   W. Michael Madden       
Title:   Senior Vice President,
Chief Financial Officer and Secretary     

Signature Page to Amended and Restated Credit Agreement

 

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

 

            BANK OF AMERICA, N.A., as Administrative Agent
and Collateral Agent
      By:   /s/ Christine M. Scott         Name:   Christine M. Scott       
Title:   SVP-Director        BANK OF AMERICA, N.A., as a Lender, L/C Issuer
and Swing Line Lender
      By:   /s/ Christine M. Scott         Name:   Christine M. Scott       
Title:   SVP-Director        WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
      By:   /s/ Robert Chakarian         Name:   Robert Chakarian       
Title:   Vice President     

Signature Page to Amended and Restated Credit Agreement