EXHIBIT 10.1
 
(JPMORGAN LOGO) [a40412a4041201.gif]
CREDIT AGREEMENT
dated as of
April 29, 2008
among
PACIFIC SUNWEAR OF CALIFORNIA, INC.
The Lenders Party Hereto;
JPMORGAN CHASE BANK, N.A.
as Administrative Agent;
BANK OF AMERICA, N.A.,
as Syndication Agent;
J.P. MORGAN SECURITIES INC. and BANC OF AMERICA SECURITIES LLC,
as Joint Bookrunners and Joint Lead Arrangers;
and
BRANCH BANKING AND TRUST COMPANY,
U.S. BANK NATIONAL ASSOCIATION and
WELLS FARGO RETAIL FINANCE, LLC
as Co-Documentation Agents
 

 

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TABLE OF CONTENTS

              Page
ARTICLE I Definitions
    1  
 
       
SECTION 1.01. Defined Terms
    1  
SECTION 1.02. Classification of Loans and Borrowings
    30  
SECTION 1.03. Terms Generally
    31  
SECTION 1.04. Accounting Terms; GAAP
    31  
 
       
ARTICLE II The Credits
    31  
 
       
SECTION 2.01. Commitments
    31  
SECTION 2.02. Loans and Borrowings
    31  
SECTION 2.03. Requests for Revolving Borrowings
    32  
SECTION 2.04. [Intentionally Omitted.]
    33  
SECTION 2.05. Swingline Loans and Overadvances
    33  
SECTION 2.06. Letters of Credit
    35  
SECTION 2.07. Funding of Borrowings
    39  
SECTION 2.08. Interest Elections
    40  
SECTION 2.09. Termination and Reduction of Commitments
    41  
SECTION 2.10. Repayment of Loans; Evidence of Debt
    42  
SECTION 2.11. Prepayment of Loans
    43  
SECTION 2.12. Fees
    43  
SECTION 2.13. Interest
    45  
SECTION 2.14. Alternate Rate of Interest
    45  
SECTION 2.15. Increased Costs
    46  
SECTION 2.16. Break Funding Payments
    47  
SECTION 2.17. Taxes
    48  
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
    50  
SECTION 2.19. Mitigation Obligations; Replacement of Lenders
    52  
SECTION 2.20. Expansion Option
    53  
 
       
ARTICLE III Representations and Warranties
    54  
 
       
SECTION 3.01. Organization; Powers; Subsidiaries
    54  
SECTION 3.02. Authorization; Enforceability
    54  
SECTION 3.03. Governmental Approvals; No Conflicts
    54  
SECTION 3.04. Financial Condition; No Material Adverse Change
    55  
SECTION 3.05. Properties
    55  
SECTION 3.06. Litigation and Environmental Matters
    55  
SECTION 3.07. Compliance with Laws and Agreements
    56  
SECTION 3.08. Investment Company Status
    56  
SECTION 3.09. Taxes
    56  
SECTION 3.10. ERISA
    56  
SECTION 3.11. Disclosure
    56  
SECTION 3.12. Federal Reserve Regulations
    57  
SECTION 3.13. No Default
    57  

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TABLE OF CONTENTS
(continued)

              Page
SECTION 3.14. [Intentionally Omitted]
    57  
SECTION 3.15. Solvency
    57  
SECTION 3.16. Insurance
    57  
SECTION 3.17. Security Interest in Collateral
    57  
SECTION 3.18. Credit Card Processors
    58  
 
       
ARTICLE IV Conditions
    58  
 
       
SECTION 4.01. Effective Date
    58  
SECTION 4.02. Each Credit Event
    60  
 
       
ARTICLE V Affirmative Covenants
    61  
 
       
SECTION 5.01. Financial Statements; Borrowing Base and Other Information
    61  
SECTION 5.02. Notices of Material Events
    64  
SECTION 5.03. Existence; Conduct of Business
    65  
SECTION 5.04. Payment of Obligations
    65  
SECTION 5.05. Maintenance of Properties
    66  
SECTION 5.06. Books and Records; Inspection Rights
    66  
SECTION 5.07. Compliance with Laws
    66  
SECTION 5.08. Use of Proceeds and Letters of Credit
    66  
SECTION 5.09. Insurance
    66  
SECTION 5.10. Casualty and Condemnation
    67  
SECTION 5.11. Field Examinations and Appraisals
    67  
SECTION 5.12. Depository Banks; Control Agreements
    68  
SECTION 5.13. Credit Card Processors
    68  
SECTION 5.14. Additional Collateral; Further Assurances
    69  
 
       
ARTICLE VI Negative Covenants
    70  
 
       
SECTION 6.01. Indebtedness
    70  
SECTION 6.02. Liens
    72  
SECTION 6.03. [Intentionally Omitted]
    73  
SECTION 6.04. Fundamental Changes
    73  
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions
    74  
SECTION 6.06. Asset Sales
    75  
SECTION 6.07. Sale and Leaseback Transactions
    76  
SECTION 6.08. Swap Agreements
    76  
SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness
    76  
SECTION 6.10. Transactions with Affiliates
    77  
SECTION 6.11. Restrictive Agreements
    78  
SECTION 6.12. Minimum Fixed Charge Coverage Ratio
    78  
 
       
ARTICLE VII Events of Default
    78  
 
       
ARTICLE VIII The Administrative Agent
    81  

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TABLE OF CONTENTS
(continued)

              Page
ARTICLE IX Miscellaneous
    84  
 
       
SECTION 9.01. Notices
    84  
SECTION 9.02. Waivers; Amendments
    85  
SECTION 9.03. Expenses; Indemnity; Damage Waiver
    87  
SECTION 9.04. Successors and Assigns
    89  
SECTION 9.05. Survival
    92  
SECTION 9.06. Counterparts; Integration; Effectiveness
    92  
SECTION 9.07. Severability
    92  
SECTION 9.08. Right of Setoff
    93  
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process
    93  
SECTION 9.10. WAIVER OF JURY TRIAL
    94  
SECTION 9.11. Headings
    94  
SECTION 9.12. Confidentiality
    94  
SECTION 9.13. USA PATRIOT Act
    95  
SECTION 9.14. Appointment for Perfection
    95  
SECTION 9.15. Interest Rate Limitation
    95  
SECTION 9.16. Waiver of California Suretyship Laws
    96  

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TABLE OF CONTENTS
(continued)
SCHEDULES:
Schedule 2.01 – Commitments
Schedule 2.06 – Existing Letters of Credit
Schedule 3.01 – Subsidiaries
Schedule 3.06 – Disclosed Matters
Schedule 3.18 – Credit Card Processors
Schedule 6.01 – Existing Indebtedness
Schedule 6.02 – Existing Liens
Schedule 6.05 – Existing Investments
Schedule 6.11 — Restrictive Agreements
EXHIBITS:
Exhibit A – Form of Assignment and Assumption
Exhibit B – Form of Opinion of Loan Parties’ Counsel
Exhibit C – Form of Increasing Lender Supplement
Exhibit D – Form of Augmenting Lender Supplement
Exhibit E – List of Closing Documents
Exhibit F – Form of Borrowing Base Certificate
Exhibit G– Form of Applicable Rate Certificate

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          CREDIT AGREEMENT dated as of April 29, 2008 among PACIFIC SUNWEAR OF
CALIFORNIA, INC., the LENDERS party hereto, JPMORGAN CHASE BANK, N.A., as
Administrative Agent, BANK OF AMERICA, N.A. as Syndication Agent, J.P. MORGAN
SECURITIES INC. as Joint Lead Arranger and Joint Bookrunner, BANC OF AMERICA
SECURITIES LLC as Joint Lead Arranger and Joint Bookrunner, BRANCH BANK AND
TRUST COMPANY as Co-Documentation Agent, U.S. BANK NATIONAL ASSOCIATION as
Co-Documentation Agent and WELLS FARGO RETAIL FINANCE, LLC as Co-Documentation
Agent.
          The parties hereto agree as follows:
ARTICLE I
Definitions
          SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
          “ABR”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
          “Account” has the meaning assigned to such term in the Security
Agreement.
          “Account Debtor” means any Person obligated on an Account.
          “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
          “Administrative Agent” means JPMorgan Chase Bank, N.A., in its
capacity as administrative agent for the Lenders hereunder.
          “Administrative Questionnaire” means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
          “Affiliate” means, with respect to a specified Person, another Person
(other than any officer or director of such specified Person in their capacity
as an officer or director of such specified Person) that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.
          “Aggregate Revolving Credit Exposure” means, at any time, the
aggregate Revolving Credit Exposure of all of the Lenders.
          “Alternate Base Rate” means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime

 

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Rate or the Federal Funds Effective Rate shall be effective from and including
the effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
          “Applicable Inventory Advance Rate” means (a) at any time during the
third fiscal quarter of each fiscal year, 80% and (b) at any time (other than
the period referred to in clause (a)), 75%
          “Applicable Inventory Percentage” means (a) at any time during the
third fiscal quarter of each fiscal year, 90% and (b) at any time (other than
the period referred to in clause (a)), 85%.
          “Applicable Percentage” means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender’s Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
          “Applicable Rate” means, for any day, with respect to any ABR Loan or
Eurodollar Revolving Loan, or with respect to the commercial Letter of Credit
fees payable hereunder, as the case may be, the applicable rate per annum set
forth below under the caption “ABR Spread”, “Eurodollar Spread” or “Commercial
Letter of Credit Rate”, as the case may be, based upon the Trailing Average
Quarterly Availability as of the most recent determination date:

                              Eurodollar   ABR   Commercial Letter Trailing
Average Quarterly Availability:   Spread   Spread   of Credit Rate
Level I: < $35,000,000
    1.75 %     0.75 %     0.70 %
Level II: > $35,000,000 but < $75,000,000
    1.50 %     0.50 %     0.60 %
Level III: > $75,000,000
    1.25 %     0.25 %     0.45 %

     For purposes of the foregoing, (a) the Applicable Rate shall be determined
as of the end of each fiscal quarter based upon the Borrowing Base Certificates
and related information delivered pursuant to Section 5.01 and (b) each change
in the Applicable Rate resulting from a change in Trailing Average Quarterly
Availability shall be effective during the period commencing on and including
the date of delivery to the Administrative Agent of the Borrowing Base
Certificate as of the end of the most recent fiscal quarter and ending on the
date immediately preceding the effective date of the next such change, provided
that the Trailing Average Quarterly Availability shall be deemed to be (i) in
Level III during the period from the Effective Date to the date of delivery to
the Administrative Agent of the Borrowing Base Certificate for the fiscal period
ending November 1, 2008; and (ii) in Level I at the option of the Administrative
Agent or at the request of the Required Lenders (x) at any time that an Event of
Default has occurred and is continuing or (y) if the Borrower fails to deliver
any Borrowing Base Certificate or related information required to be delivered
pursuant to Section 5.01, during the period from the expiration of the time for
delivery thereof until such Borrowing Base Certificate and related information
are delivered. The Borrower shall deliver to the Administrative Agent, together
with each Borrowing Base Certificate delivered pursuant to Section 5.01(e) in
respect of

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the last month of each fiscal quarter (or in respect of each fiscal quarter, as
applicable), an Applicable Rate Certificate setting forth the Trailing Average
Quarterly Availability for the fiscal quarter then ended and corresponding
Applicable Rate.
          “Applicable Rate Certificate” means a certificate, signed by a
Financial Officer of the Borrower, in substantially the form of Exhibit G
attached hereto.
          “Approved Fund” has the meaning assigned to such term in Section 9.04.
          “Assignment and Assumption” means an assignment and assumption entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
          “Augmenting Lender” has the meaning assigned to such term in
Section 2.20.
          “Availability” means, at any time, an amount equal to (a) the lesser
of the total Commitments of all of the Lenders and the Borrowing Base minus
(b) the Aggregate Revolving Credit Exposure.
          “Availability Period” means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
          “Banking Services” means each and any of the following bank services
provided to any Loan Party by any Lender or any of its Affiliates:
(a) commercial credit cards, (b) stored value cards and (c) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).
          “Banking Services Obligations” of the Loan Parties means any and all
obligations of the Loan Parties, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.
          “Banking Services Reserves” means all Reserves which the
Administrative Agent from time to time establishes in its Permitted Discretion
for Banking Services then provided or outstanding.
          “Board” means the Board of Governors of the Federal Reserve System of
the United States of America.
          “Borrower” means Pacific Sunwear of California, Inc., a California
corporation.
          “Borrowing” means (a) Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, (b) a Swingline Loan, and (c) an
Overadvance.
          “Borrowing Base” means, at any time, the sum of:

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          (a) 90% of the Loan Parties’ Eligible Credit Card Accounts at such
time, plus
          (b) the lesser of (i) the product of (x) the Applicable Inventory
Advance Rate multiplied by (y) the Loan Parties’ Eligible Inventory, valued at
the lower of cost (determined on a first-in-first-out basis) or market value at
such time and (ii) the product of (x) up the Applicable Inventory Percentage at
such time multiplied by (y) the Net Orderly Liquidation Value Percentage
identified in or derived from the most recent inventory appraisal ordered by the
Administrative Agent multiplied by (z) the Loan Parties’ Eligible Inventory,
valued at the lower of cost (determined on a first-in-first-out basis) or market
value at such time, plus
          (c) the lesser of (i) the product of (x) the Applicable Inventory
Advance Rate multiplied by (y) the Loan Parties’ Eligible LC Inventory, valued
at the lower of cost (determined on a first-in-first-out basis) or market value
at such time and (ii) the product of (x) up the Applicable Inventory Percentage
at such time multiplied by (y) the Net Orderly Liquidation Value Percentage
identified in or derived from the most recent inventory appraisal ordered by the
Administrative Agent multiplied by (z) the Loan Parties’ Eligible LC Inventory,
valued at the lower of cost (determined on a first-in-first-out basis) or market
value at such time, plus
          (d) 100% of Eligible Cash at such time, minus
          (e) Reserves.
          “Borrowing Base Certificate” means a certificate, signed by a
Financial Officer of the Borrower, in substantially the form of Exhibit F or
another form which is acceptable to the Administrative Agent in its sole
discretion.
          “Borrowing Request” means a request by the Borrower for a Revolving
Borrowing in accordance with Section 2.03.
          “Business Day” means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
          “Capital Expenditures” means, without duplication, any expenditures
that should be included in “additions to property, plant or equipment” or
comparable items reflected in the consolidated statement of cash flows of the
Borrower and its Subsidiaries prepared in accordance with GAAP.
          “Capital Lease Obligations” of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.

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          “Cash Dominion Restoration Period” means (a) in respect of any Cash
Dominion Triggering Event under clause (a) of the definition of “Cash Dominion
Triggering Event”, the period commencing on the date upon which such Event of
Default first occurred and continuing until such time as such Event of Default
is no longer continuing or has been cured or waived in accordance with this
Agreement (or such earlier time as there shall be no Loans or Letters of Credit
(other than Letters of Credit that have been fully cash collateralized in
accordance with Section 2.06(j)) outstanding hereunder) or (b) in respect of any
Cash Dominion Triggering Event under clause (b) of the definition of “Cash
Dominion Triggering Event”, any period of ninety (90) consecutive days following
the occurrence of such Cash Dominion Triggering Event during which Availability
shall exceed the greater of (i) $20,000,000 and (ii) 13.33% of the total
Commitments in effect at such time.
          “Cash Dominion Triggering Event” shall mean the occurrence of either
of the following: (a) an Event of Default shall have occurred and be continuing
and there shall be any Loans or Letters of Credit (other than Letters of Credit
that are fully cash collateralized in accordance with Section 2.06(j) within
three Business Days after receipt of notice from the Administrative Agent of
such Event of Default) outstanding hereunder or (b) for a period of ten
consecutive days, Availability shall fall below the greater of (i) $20,000,000
or (ii) 13.33% of the total Commitments in effect at such time.
          “Change in Control” means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the
date hereof), of Equity Interests representing more than 35% of the aggregate
ordinary voting power represented by the issued and outstanding Equity Interests
of the Borrower; or (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither
(i) nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated; provided, however, that any merger effected for the sole
purpose of reincorporating the Borrower in Delaware (other than through the
formation of a holding company that will own any portion of the Equity Interest
of the Borrower following such merger) and any changes in ownership resulting
therefrom shall not constitute a Change in Control.
          “Change in Law” means (a) the adoption of any law, rule, treaty or
regulation after the date of this Agreement, (b) any change in any law, rule,
treaty or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by any
Lender or any Issuing Bank (or, for purposes of Section 2.15(b), by any office
of such Lender from or at which Loans and/or Letters of Credit are made or
issued, or are booked, as the case may be, in accordance with the terms of this
Agreement) with any request, guideline or directive (whether or not having the
force of law) of any Governmental Authority made or issued after the date of
this Agreement.
          “Charges” has the meaning assigned to such term in Section 9.15.
          “Chase” means JPMorgan Chase Bank, N.A., a national banking
association, in its individual capacity, and its successors.

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          “Class”, when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Swingline Loans or Overadvances.
          “Code” means the Internal Revenue Code of 1986, as amended from time
to time.
          “Collateral” has the meaning assigned to such term in the Security
Agreement.
          “Collateral Access Agreement” has the meaning assigned to such term in
the Security Agreement.
          “Collateral Documents” means, collectively, the Security Agreement and
any other documents granting a Lien upon the Collateral as security for payment
of the Secured Obligations.
          “Commitment” means, with respect to each Lender, the commitment of
such Lender to make Revolving Loans and to acquire participations in Letters of
Credit, Swingline Loans and Overadvances hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Revolving Credit
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.09, (b) increased from time to time pursuant to
Section 2.20 and (c) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount of
each Lender’s Commitment is set forth on Schedule 2.01, or in the Assignment and
Assumption pursuant to which such Lender shall have assumed its Commitment, as
applicable. The initial aggregate amount of the Lenders’ Commitments is
$150,000,000.
          “Commitment Fee Rate” means 0.25% per annum.
          “Concentration Account” has the meaning assigned to such term in the
Security Agreement.
          “Consolidated Capital Expenditures” means, with reference to any
period, the Capital Expenditures of the Borrower and its Subsidiaries calculated
on a consolidated basis for such period; provided that (i) expenditures for
Permitted Acquisitions and other investments and (ii) replacement Capital
Expenditures from insurance and condemnation proceeds shall be excluded from
this definition.
          “Consolidated EBITDAR” means, with reference to any period,
Consolidated Net Income for such period plus, to the extent deducted in
determining such Consolidated Net Income, (i) Consolidated Interest Expense,
(ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization,
(v) Consolidated Rent Expense, (vi) charges arising from the impairment of
goodwill, (vii) any non-cash charges or expenses resulting from any currently
outstanding stock options or any future grant, exercise or cancellation of stock
options, shares of restricted stock, or warrants or from any restructuring or
consolidation, and (viii) any other non-cash charges or expenses which do not
represent a cash item in such period or any future period (it being understood
and agreed that a write-down of inventory shall be considered a cash expense in
the relevant period) minus, to the extent included in determining such
Consolidated Net Income, any extraordinary non-cash income or gains which do not
represent a cash item in

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such period or any future period, all calculated for the Borrower and its
Subsidiaries in accordance with GAAP on a consolidated basis.
          “Consolidated Fixed Charges” means, with reference to any period,
Consolidated Interest Expense paid during such period (excluding Non-Cash
Interest Expense) plus Consolidated Rent Expense for such period plus scheduled
principal payments on Indebtedness of the Borrower or any Subsidiary paid in
cash during such period plus expense for taxes of the Borrower or any Subsidiary
paid in cash during such period (net of any tax refunds received in cash) plus
dividends or distributions (excluding payments made for stock repurchases) paid
by the Borrower or any Subsidiary in cash during such period (which, for the
avoidance of doubt, shall exclude any dividends or distributions made to any
Loan Party) plus cash payments by the Borrower or any Subsidiary in respect of
Capital Lease Obligations during such period (which, for the avoidance of doubt,
shall exclude any dividends or distributions made to any Loan Party), all of the
foregoing calculated for the Borrower and its Subsidiaries on a consolidated
basis without duplication.
          “Consolidated Interest Expense” means, with reference to any period,
total interest expense (including that attributable to Capital Lease
Obligations) of the Borrower and its Subsidiaries for such period with respect
to all outstanding Indebtedness of the Borrower and its Subsidiaries (including
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers’ acceptance financing and net costs under Swap
Agreements in respect of interest rates to the extent such net costs are
allocable to such period in accordance with GAAP), minus total interest income
of the Borrower and its Subsidiaries not exceeding $25,000,000 for such period
(including net interest income under Swap Agreements in respect of interest
rates to the extent such net interest income is allocable to such period), all
calculated on a consolidated basis for the Borrower and its Subsidiaries for
such period in accordance with GAAP.
          “Consolidated Net Income” means, with reference to any period, the net
income (or loss) of the Borrower and its Subsidiaries calculated in accordance
with GAAP on a consolidated basis (without duplication) for such period.
          “Consolidated Rent Expense” means, with reference to any period, all
rent and common area maintenance payments payable under Operating Leases to the
extent deducted in computing Consolidated Net Income, calculated in accordance
with GAAP for the Borrower and its Subsidiaries on a consolidated basis for such
period.
          “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.
          “Control Agreement” means an agreement, in form and substance
reasonably satisfactory to the Administrative Agent, among (i) the applicable
Loan Party, (ii) a banking institution, securities broker or securities
intermediary at which such Loan Party maintains a Deposit Account or a
Securities Account, and (iii) the Administrative Agent, providing for the

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Administrative Agent to have control over the funds or securities and other
financial assets held in such Deposit Account or Securities Account.
          “Credit Card Accounts” means any Account, right of payment or Payment
Intangible due to any Loan Party from a Credit Card Processor.
          “Credit Card Processor” means a Person that provides credit card or
debit card processing services for any merchant, including without limitation,
the establishment of one or more credit card or debit card merchant accounts on
behalf of such merchant to accept payments for retail transactions.
          “Default” means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
          “Deposit Account” has the meaning set forth in Article 9 of the UCC.
          “Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
          “Document” has the meaning assigned to such term in the Security
Agreement.
          “Dollars” or “$” refers to lawful money of the United States of
America.
          “Domestic Subsidiary” means a Subsidiary organized under the laws of a
jurisdiction located in the United States of America.
          “Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
          “Eligible Cash” means, at of any date of determination, the amount of
cash, Permitted Investments or other cash equivalents of any Loan Party
(a) which is subject to a first priority Lien in favor the Administrative Agent
(subject to Permitted Encumbrances), (b) which is not subject to any Lien (other
than the Liens in favor of the Administrative Agent to secure the Secured
Obligations, Permitted Encumbrances and customary rights of setoff of the
institution maintaining the Deposit Account or Securities Account in which such
cash, Permitted Investment or other cash equivalent is deposited), (c) which is
not held or earmarked for the specific purpose of payroll, payroll taxes,
earnest money, escrows or deposits and which is otherwise generally available to
satisfy the claims of creditors of the Loan Parties, and (d) which is deposited
in or credited to a Deposit Account or Securities Account maintained by the Loan
Parties with Chase or Bank of America, N.A. or any of their respective
Affiliates, which Deposit Account or Securities Account is subject to a Control
Agreement (provided that the Administrative Agent may determine, in its
Permitted Discretion, that Control Agreements shall not be required for certain
Deposit Accounts maintained at Chase or any of its Affiliates and certain
Securities Accounts maintained with Chase or any of its Affiliates (all such
Deposit Accounts and Securities Accounts so determined by the Administrative
Agent shall be collectively referred to herein as the “Specified Chase
Accounts”)).

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          “Eligible Credit Card Accounts” means, at any time, Credit Card
Accounts due to any Loan Party on a non-recourse basis (other than standard
chargebacks and standard fees due to the Credit Card Processor) from (i) Visa,
MasterCard, American Express Co., PNC Merchant Services, Alliance Data Systems,
World Financial Network Bank, First Data Merchant Services or Discover or
(ii) any other Credit Card Processor acceptable to the Administrative Agent,
arising in the ordinary course of business for the purchase of goods sold by
such Loan Party; provided, however, that Eligible Credit Card Accounts shall be
calculated net of fees and chargebacks owed to Credit Card Processors and
deposits, holdbacks or escrows held by Credit Card Processors and shall in no
event include:
          (a) Credit Card Accounts that have been outstanding for more than five
(5) Business Days from the date of sale, or for such longer period(s) as may be
approved by the Administrative Agent in its reasonable discretion;
          (b) Credit Card Accounts with respect to which the Loan Parties do not
have good, valid and marketable title thereto, free and clear of any Lien (other
than (i) Liens granted to the Administrative Agent, and (ii) Permitted
Encumbrances);
          (c) Credit Card Accounts that are not subject to Liens in favor of the
Administrative Agent that are senior in priority to all other Liens (except for
(i) standard fees due by any Loan Party, and (ii) Permitted Encumbrances);
          (d) Credit Card Accounts which are disputed, or with respect to which
a claim, counterclaim, offset or chargeback (other than setoffs and chargebacks
in the ordinary course by the Credit Card Processors) has been asserted, by the
related Credit Card Processor (but only to the extent of such dispute,
counterclaim, offset or chargeback);
          (e) Credit Card Accounts arising from any private label credit card
receivables of any Loan Party or Credit Card Accounts as to which the Credit
Card Processor has the right under certain circumstances to require the
applicable Loan Party to repurchase the Credit Card Accounts from such Credit
Card Processor; provided that Credit Card Accounts owing from (i) World
Financial Network Bank or any of its Affiliates, or (ii) any other Credit Card
Processor acceptable to the Administrative Agent in its Permitted Discretion
that may administer private label credit cards for any Loan Party after the
Effective Date, in each case, shall not be excluded from “Eligible Credit Card
Accounts” pursuant to this clause (e) so long as (x) such Credit Card Accounts
meet all other criteria for eligibility set forth herein and (y) World Financial
Network Bank or its Affiliates, or such other Credit Card Processor, retains the
consumer credit risk with respect to such Credit Card Accounts;
          (f) Credit Card Accounts due from a Credit Card Processor which the
Administrative Agent determines in its Permitted Discretion to be unlikely to be
collected;
          (g) Credit Card Accounts due from a Credit Card Processor with respect
to which a Processor Control Agreement/Letter has not been obtained; and
          (h) Purchased Private Label Accounts.
          “Eligible Inventory” means, at any time, the Inventory of a Loan Party
which the

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Administrative Agent determines in its Permitted Discretion is eligible as the
basis for the extension of Revolving Loans, Swingline Loans and the issuance of
Letters of Credit hereunder. Without limiting the Administrative Agent’s
discretion provided herein, Eligible Inventory shall not include any Inventory:
          (a) which is not subject to a first priority perfected Lien in favor
of the Administrative Agent (other than Permitted Encumbrances);
          (b) which is subject to any Lien other than (i) Liens in favor of the
Administrative Agent and (ii) Permitted Encumbrances;
          (c) which is, in the Administrative Agent’s Permitted Discretion, slow
moving, obsolete, unmerchantable, defective, used, unfit for sale, not salable
at prices approximating at least the cost of such Inventory in the ordinary
course of business or unacceptable due to age, type, category and/or quantity;
          (d) which does not conform in all material respects to standards
imposed by any Governmental Authority;
          (e) in which any Person other than such Loan Party shall (i) have any
direct or indirect ownership, interest or title to such Inventory or (ii) be
indicated on any purchase order or invoice with respect to such Inventory as
having or purporting to have an interest therein;
          (f) which is not finished goods or which constitutes work-in-process,
raw materials, spare or replacement parts, subassemblies, packaging and shipping
material, manufacturing supplies, samples, prototypes, displays or display
items, bill-and-hold goods, goods that are returned or marked for return,
repossessed goods, defective or damaged goods, goods held on consignment, or
goods which are not of a type held for sale in the ordinary course of business;
          (g) which is not located in the U.S. or is in transit with a common
carrier from vendors and suppliers; provided that goods in transit within the
U.S. or on the high seas with a common carrier having a value (based on invoiced
amounts) not exceeding $20,000,000 in the aggregate at any time shall not be
excluded from “Eligible Inventory” pursuant to this clause (g) so long as
(i) such Inventory has been paid for in full by the applicable Loan Party,
(ii) the Administrative Agent shall have received evidence that such Inventory
is covered by casualty insurance and the Administrative Agent shall have been
named as loss payee with respect to such casualty insurance, and (iii) if
Availability at such time shall be less than $50,000,000, the Administrative
Agent shall have received a duly executed Collateral Access Agreement from the
applicable Loan Party’s customs broker with respect to such Inventory;
          (h) which is located in (i) any Leased Distribution Center (other than
the Kansas Distribution Facility) or (ii) any location leased by such Loan Party
(other than a Leased Distribution Center) in any Landlord Lien State, in each
case, unless (A) the lessor has delivered to the Administrative Agent a
Collateral Access Agreement or (B) a Reserve for rent, charges, and other
amounts due or to become due with respect to such facility has been established
by the Administrative Agent in its Permitted Discretion, provided that such
Reserve shall not exceed two month’s rent for the applicable location;

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          (i) which is located in any third party warehouse or is in the
possession of a bailee (other than a third party processor) (in either case,
other than (for avoidance of doubt) the Kansas Distribution Facility) and is not
evidenced by a Document, unless (i) such warehouseman or bailee has delivered to
the Administrative Agent a Collateral Access Agreement and such other
documentation as the Administrative Agent may require or (ii) an appropriate
Reserve has been established by the Administrative Agent in its Permitted
Discretion, provided that such Reserve shall not exceed two month’s rent for the
applicable location;
          (j) which is being processed offsite at a third party location or
outside processor;
          (k) which is a discontinued product or component thereof;
          (l) which is the subject of a consignment by such Loan Party as
consignor;
          (m) which contains or bears any intellectual property rights licensed
to such Loan Party unless the Administrative Agent is satisfied that it may sell
or otherwise dispose of such Inventory without (i) infringing the rights of such
licensor, (ii) violating any contract with such licensor, or (iii) incurring any
liability with respect to payment of royalties other than royalties incurred
pursuant to sale of such Inventory under the current licensing agreement;
          (n) which is not reflected in the applicable Loan Party’s merchandise
management reports or other inventory reports; or
          (o) for which reclamation rights have been asserted by the seller.
          “Eligible LC Inventory” means, at any time, Inventory of the Loan
Parties that would be Eligible Inventory but for the fact that the Loan Parties
have not paid for such Inventory and instead, such Inventory is subject to
commercial Letters of Credit issued for the account(s) of one or more of the
Loan Parties and for the benefit of the sellers of such Inventory, which
commercial Letters of Credit have expiry dates that are no later than ninety
(90) days from the date of the most recent Borrowing Base Certificate delivered
to the Administrative Agent, and which Inventory is and at all times continues
to be acceptable to the Administrative Agent in its Permitted Discretion.
          “Environmental Laws” means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in
any way to the environment, preservation or reclamation of natural resources,
the management, release or threatened release of any Hazardous Material or to
health and safety matters.
          “Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract,

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agreement or other consensual arrangement pursuant to which liability is assumed
or imposed with respect to any of the foregoing.
          “Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
          “ERISA Affiliate” means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
          “ERISA Event” means (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(f) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
          “Eurodollar”, when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
          “Event of Default” has the meaning assigned to such term in
Article VII.
          “Excluded Accounts” means, collectively, (i) any Deposit Account of
any Loan Party which is used exclusively for the payment of payroll, payroll
taxes, employee benefits or escrow deposits, (ii) any other Deposit Account of
any Loan Party, so long as at least once during any period of six
(6) consecutive Business Days occurring after the Effective Date, the aggregate
amount of available funds on deposit in such Deposit Account does not exceed
$100,000, (iii) any Securities Account used exclusively to hold the bonds issued
pursuant to the Kansas IRB Documents and (iv) any Securities Account of any Loan
Party, so long as at least once during any period of six (6) consecutive
Business Days occurring after the Effective Date,

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the aggregate value of the securities, cash and cash equivalents maintained in
such Securities Account does not exceed $500,000.
          “Excluded Taxes” means, with respect to the Administrative Agent, any
Lender, any Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by any other Governmental Authority as a result of a present or
former connection between the Administrative Agent, any Lender, any Issuing Bank
or any other recipient of any payment to be made by the Borrower under this
Agreement and the jurisdiction of the Governmental Authority imposing such tax
or any political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by the
Borrower under this Agreement having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document), (b) any branch profits taxes imposed by the United States
of America or any similar tax imposed by any other jurisdiction described in
clause (a) above and (c) in the case of a Foreign Lender, including any Issuing
Bank that is a Foreign Lender (other than an assignee pursuant to a request by
the Borrower under Section 2.19(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes a
party to this Agreement (or (i) causes pursuant to Section 2.02(b) a new branch
or an Affiliate to make any Loan, or (ii) designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.17(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 Borrower with respect to such withholding
tax pursuant to Section 2.17(a), and (d) any amounts with respect to any taxes
described in clause (a), (b) or (c) above that are imposed as a result of any
event occurring after the Administrative Agent, any Lender, any Issuing Bank or
any other recipient of any payment to be made by the Borrower under this
Agreement becomes a party to this Agreement, other than a Change in Law.
          “Existing Credit Agreement” means the Credit Agreement dated as of
September 13, 2005 among the Borrower, the lenders party thereto, National City
Bank and U.S. Bank National Association, as Co-Documentation Agents, Bank of
America, N.A., as Syndication Agent, and JPMorgan Chase Bank, N.A., as
Administrative Agent, as amended from time to time.
          “Existing Letters of Credit” has the meaning assigned to such term in
Section 2.06.
          “Federal Funds Effective Rate” means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

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          “Financial Covenant Period” has the meaning assigned to such term in
Section 6.12.
          “Financial Officer” means the chief financial officer, vice president
of finance, principal accounting officer, treasurer or controller of the
Borrower.
          “Fitch” means Fitch Ratings.
          “Fixed Charge Coverage Ratio” means the ratio, determined as of the
end of each fiscal quarter of the Borrower for the most-recently ended four
fiscal quarters, of (a) Consolidated EBITDAR minus the unfinanced portion of
Consolidated Capital Expenditures (in any event, excluding any Consolidated
Capital Expenditures to be funded with any insurance proceeds or condemnation
awards or with any proceeds of Indebtedness permitted hereunder (other than
proceeds of Revolving Loans)) to (b) Consolidated Fixed Charges, all calculated
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
          For the purposes of calculating the Fixed Charge Coverage Ratio for
any period of four consecutive fiscal quarters (each, a “Reference Period”),
(i) if at any time during such Reference Period the Borrower or any Subsidiary
shall have made any Material Disposition, the Consolidated EBITDAR, Consolidated
Capital Expenditures and Consolidated Fixed Charges for such Reference Period
shall be reduced by an amount equal to the Consolidated EBITDAR, Consolidated
Capital Expenditures and Consolidated Fixed Charges (in each case, if positive)
attributable to the property that is the subject of such Material Disposition
for such Reference Period or increased by an amount equal to the Consolidated
EBITDAR, Consolidated Capital Expenditures and Consolidated Fixed Charges (in
each case, if negative) attributable thereto for such Reference Period, and (ii)
if during such Reference Period the Borrower or any Subsidiary shall have made a
Material Acquisition, Consolidated EBITDAR, Consolidated Capital Expenditures
and Consolidated Fixed Charges for such Reference Period shall be calculated
after giving pro forma effect thereto (taking into account (A) such adjustments
with respect to cost savings as are consistent with the standards set forth in
Rule 11-02(b)(6) of Regulation S-X and (B) all transactions that are directly
related to such Material Acquisition and are entered into in connection and
substantially contemporaneously therewith) as if such Material Acquisition
occurred on the first day of such Reference Period. As used in this definition,
“Material Acquisition” means any acquisition of property or series of related
acquisitions of property that (a) constitutes (i) assets comprising all or
substantially all or any significant portion of a business or operating unit of
a business, or (ii) all or substantially all of the common stock or other Equity
Interests of a Person, and (b) involves the payment of consideration and/or the
assumption of Indebtedness by the Borrower and its Subsidiaries in an aggregate
amount in excess of $10,000,000; “Material Disposition” means any disposition of
property or series of related dispositions of property that yields gross
proceeds to the Borrower or any of its Subsidiaries in excess of $10,000,000 (it
being understood, for the avoidance of doubt, that any disposition or shutting
down of any d.e.m.o. stores or One Thousand Steps stores, any disposition of the
Anaheim distribution center or any other disposition of real property by the
Borrower or any Subsidiary shall be deemed to be a Material Disposition). In
making any calculation pursuant to this paragraph with respect to a Material
Acquisition of a Person, business or rights for which quarterly financial
statements are not available, the Borrower shall base such calculation on the
financial statements of such Person, business or rights for the then most
recently completed

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period of twelve consecutive calendar months for which such financial statements
are available and shall deem the contribution of such Person, business or rights
to Consolidated EBITDAR, Consolidated Capital Expenditures and Consolidated
Fixed Charges, respectively, for the period from the beginning of the applicable
Reference Period to the date of such Material Acquisition to be equal to the
product of (x) the number of days in such period divided by 365 multiplied by
(y) the amount of Consolidated EBITDAR, Consolidated Capital Expenditures and
Consolidated Fixed Charges, respectively, of such Person, business or rights for
the twelve-month period referred to above (calculated on the basis set forth in
this definition)
          “Fixed Charge Coverage Restoration Period” means, with respect to any
Fixed Charge Coverage Ratio Triggering Event, any period of ninety
(90) consecutive days following the occurrence of such Fixed Charge Coverage
Ratio Triggering Event during which Availability shall exceed the greater of (a)
$15,000,000 and (b) 10% of the aggregate Commitments of all of the Lenders in
effect at such time.
          “Fixed Charge Coverage Ratio Triggering Event” means that, at any
time, Availability shall fall below the greater of (a) $15,000,000 or (b) 10% of
the aggregate Commitments of all of the Lenders in effect at such time.
          “Foreign Lender” means any Lender that is organized under the laws of
(or the applicable lending office of which is located in) a jurisdiction other
than that in which the Borrower is located. For purposes of this definition, the
United States of America, each State thereof and the District of Columbia shall
be deemed to constitute a single jurisdiction.
          “Funding Accounts” has the meaning assigned to such term in
Section 4.01(i).
          “GAAP” means generally accepted accounting principles in the United
States of America.
          “Governmental Authority” means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
          “Guarantee” of or by any Person (the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term

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Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
          “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.
          “Hostile Acquisition” means (a) the acquisition of the Equity
Interests of a Person through a tender offer or similar solicitation of the
owners of such Equity Interests which has not been approved (prior to such
acquisition) by the board of directors (or any other applicable governing body)
of such Person or by similar action if such Person is not a corporation and
(b) any such acquisition as to which such approval has been withdrawn.
          “Increasing Lender” has the meaning assigned to such term in
Section 2.20.
          “Indebtedness” of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding accounts payable and
accrued expense obligations incurred in the ordinary course of business),
(e) all Indebtedness of others secured by any Lien on property owned or acquired
by such Person (to the extent of such Person’s interest in such property),
whether or not the Indebtedness secured thereby has been assumed, (f) all
Guarantees by such Person of Indebtedness of others, (g) all Capital Lease
Obligations of such Person, (h) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty and (i) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor. For purposes of all calculations provided for in
this Agreement, there shall be disregarded any Guarantee of any Person in
respect of any Indebtedness of any other Person with which the accounts of such
first Person are then required to be consolidated in accordance with GAAP.
          “Indemnified Taxes” means Taxes other than Excluded Taxes.
          “Information Memorandum” means the Confidential Information Memorandum
dated March 2008 relating to the Borrower and the Transactions.
          “Interest Election Request” means a request by the Borrower to convert
or continue a Revolving Borrowing in accordance with Section 2.08.
          “Interest Payment Date” means (a) with respect to any ABR Loan (other
than a Swingline Loan), the first day of each month for the prior month then
ended and the Maturity

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Date, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid and the Maturity Date.
          “Interest Period” means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, in the case of
a Revolving Borrowing, thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.
          “Inventory” has the meaning assigned to such term in the Security
Agreement.
          “Investment” means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of Equity Interests or other
securities of, or any assets constituting a business unit of, any other Person,
or any direct or indirect loan, advance or capital contribution by such Person
to any other Person. In computing the amount involved in any Investment at the
time outstanding, (a) undistributed earnings of, and unpaid interest accrued in
respect of Indebtedness owing by, such other Person shall not be included,
(b) there shall not be deducted from the amounts invested in such other Person
any amounts received as earnings (in the form of dividends, interest or
otherwise) on such Investment or as loans from such other Person and
(c) unrealized increases or decreases in value, or write-ups, write-downs or
write-offs, of Investments in such other Person shall be disregarded.
          “Issuing Bank” means, as the context may require, (a) JPMorgan Chase
Bank, N.A. and Bank of America, N.A., each with respect to Letters of Credit
issued by it, or (b) any other Lender that becomes an Issuing Bank pursuant to
Section 2.06(k), with respect to Letters of Credit issued by it, and in each
case its successors in such capacity as provided in Section 2.06(i). Each
Issuing Bank may, in its discretion, arrange for one or more Letters of Credit
to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing
Bank” shall include any such Affiliate with respect to Letters of Credit issued
by such Affiliate; provided, however, that no arrangement of a type described in
this sentence shall be permitted if, immediately after giving effect thereto,
amounts would become payable by the Borrower under Section 2.15 or 2.17 that are
in excess of those that would be payable under such Section if such arrangement
were not implemented and, provided further, that the fees payable to any such
Affiliate shall be subject to the second sentence of Section 2.12(b).

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          “Joinder Agreements” has the meaning assigned to such term in
Section 5.14.
          “Kansas Distribution Facility” has the meaning assigned to such term
in the definition of “Kansas IRB Financing”.
          “Kansas IRB Documents” means all agreements and documents which
evidence the Kansas IRB Financing, including (i) the Trust Indenture dated as of
July 1, 2007 by and between the City of Olathe, Kansas and U.S. Bank National
Association, as trustee, (ii) the Bond Purchase Agreement dated as of July 4,
2007 by and between the City of Olathe, Kansas and Pacific Sunwear Stores Corp.,
(iii) the Performance Agreement dated as of July 1, 2007 by and between the City
of Olathe, Kansas and Pacific Sunwear Stores Corp. and (iv) the Lease Agreement
dated as of July 1, 2007 by and between the City of Olathe, Kansas and Pacific
Sunwear Stores Corp., each as amended, supplemented or otherwise modified from
time to time.
          “Kansas IRB Financing” means that certain industrial revenue bond
financing, structured as a sale and leaseback transaction, entered into on
July 1, 2007 between the City of Olathe, Kansas and Pacific Sunwear Stores
Corp., whereby the City of Olathe, Kansas issued Industrial Revenue Bonds
(PacSun Project), Series 2007, purchased by Pacific Sunwear Stores Corp. for the
purpose of financing the acquisition, construction and installation of certain
real property, machinery and equipment constituting a distribution facility
located in the City of Olathe, Johnson County, Kansas (the “Kansas Distribution
Facility”), which facility was sold and deeded by Pacific Sunwear Stores Corp.
to the City of Olathe, Kansas and leased back by the City of Olathe, Kansas to
Pacific Sunwear Stores Corp.
          “Kansas IRB Unwind Transaction” means (i) the purchase by Pacific
Sunwear Stores Corp. of the Kansas Distribution Facility from the City of
Olathe, Kansas pursuant to Article XI of the lease described in clause (iv) of
the definition of the term Kansas IRB Documents, (ii) the redemption of bonds
outstanding under the indenture described in clause (i) of the definition of the
term Kansas IRB Documents and the funding of such redemption by the Loan
Parties, and (iii) all other transactions related to clauses (i) and (ii).
          “Landlord Lien State” means the States of Pennsylvania, Washington and
Virginia and the Commonwealth of Puerto Rico; provided that if the laws of any
such jurisdiction are changed after the Effective Date so as to provide for the
liens in favor of the Administrative Agent on Inventory to have priority over
the liens in favor of the landlords of such jurisdiction, then such jurisdiction
shall no longer be a “Landlord Lien State” as such term is used herein.
          “LC Collateral Account” has the meaning assigned to such term in
Section 2.06(j).
          “LC Disbursement” means a payment made by an Issuing Bank pursuant to
a Letter of Credit.
          “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time.

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The LC Exposure of any Lender at any time shall be its Applicable Percentage of
the total LC Exposure at such time.
          “Leased Distribution Center” means any distribution center or facility
leased or subleased by any Loan Party (as lessee or sub-lessee, as applicable),
including the Kansas Distribution Facility and any other distribution center or
facilities that any Loan Party leases (as lessee) pursuant to any sale leaseback
transaction permitted under Section 6.07, in each case where the average monthly
book value of Inventory in such distribution center or facility exceeds
$1,000,000.
          “Lenders” means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Assumption or an Augmenting Lender Supplement, other than any such Person that
ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the
context otherwise requires, the term “Lenders” includes the Swingline Lender.
          “Letter of Credit” means any standby or commercial letter of credit
issued pursuant to this Agreement, including but not limited to, any Existing
Letter of Credit.
          “LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to deposits in Dollars in the London interbank market)
at approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period, as the rate for deposits in Dollars with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which
deposits in Dollars of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two (2) Business Days prior to the commencement of such
Interest Period.
          “Lien” means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
          “Loan Documents” means this Agreement, the Subsidiary Guaranty, any
promissory notes executed and delivered pursuant to Section 2.10, the Collateral
Documents and all other agreements, documents and certificates identified in
Section 4.01 executed and delivered to, or in favor of, the Administrative Agent
or any Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, letter of credit agreements and all other
written matter whether heretofore, now or hereafter delivered to the
Administrative

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Agent or any Lender in connection with this Agreement or the transactions
contemplated thereby. Any reference in the Agreement or any other Loan Document
to a Loan Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications thereto,
and shall refer to this Agreement or such Loan Document as the same may be in
effect at any and all times such reference becomes operative.
          “Loan Parties” means, collectively, the Borrower and the Subsidiary
Guarantors.
          “Loans” means the loans and advances made by the Lenders to the
Borrower pursuant to this Agreement, including Swingline Loans and Overadvances.
          “Material Adverse Effect” means a material adverse effect on (a) the
business, assets, condition, financial or otherwise, of the Borrower and the
Subsidiaries taken as a whole, (b) the validity or enforceability of the Loan
Documents, (c) the rights or remedies of the Administrative Agent and the
Lenders under the Loan Documents or (d) the Collateral or the Administrative
Agent’s Liens (on behalf of itself and the Lenders) on the Collateral or the
priority of such Liens.
          “Material Indebtedness” means Indebtedness (other than the Loans,
obligations under the Subsidiary Guaranty and Letters of Credit), or obligations
in respect of one or more Swap Agreements, of any one or more of the Borrower
and its Subsidiaries in an aggregate principal amount exceeding $10,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of the Borrower or any Subsidiary in respect of any Swap Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Subsidiary would be required to pay if
such Swap Agreement were terminated at such time.
          “Maturity Date” means April 29, 2013.
          “Maximum Rate” has the meaning assigned to such term in Section 9.15.
          “Moody’s” means Moody’s Investors Service, Inc.
          “Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
          “Net Orderly Liquidation Value Percentage” means, with respect to
Inventory of any Loan Party, the fraction, expressed as a percentage (a) the
numerator of which is the amount equal to the orderly liquidation value thereof
to be realized at an orderly, negotiated sale, as determined in a manner
reasonably acceptable to the Administrative Agent by an appraiser acceptable to
the Administrative Agent in the most recent appraisal conducted as set forth in
Section 5.11(b), net of all costs of liquidation thereof, and (b) the
denominator of which is the lower of the cost (based on first-in, first out) or
market value of such Inventory.
          “Net Proceeds” means, with respect to any event relating to the assets
of any Loan Party, (a) the cash proceeds received by such Loan Party in respect
of such event including (i) any cash received in respect of any non-cash
proceeds (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase

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price adjustment receivable or otherwise, but excluding any interest payments),
but only as and when received, (ii) in the case of a casualty, insurance
proceeds, and (iii) in the case of a condemnation or similar event, condemnation
awards and similar payments, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale, transfer or other
disposition of an asset (including pursuant to a sale and leaseback transaction
or a casualty or a condemnation or similar proceeding), the amount of all
payments required to be made as a result of such event to repay Indebtedness
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) and the amount of any reserves established
to fund contingent liabilities reasonably estimated to be payable, in each case
during the year that such event occurred or the next succeeding year and that
are directly attributable to such event (as determined reasonably and in good
faith by a Financial Officer).
          “Non-Cash Interest Expense” means, with respect to the Borrower and
its Subsidiaries for any period, the sum of the following amounts to the extent
included in the definition of Interest Expense: (a) the amount of debt discount
and debt issuance costs amortized, (b) charges relating to write-ups or
write-downs in the book or carrying value of existing Indebtedness, (c) interest
payable in evidences of Indebtedness or by addition to the principal of the
related Indebtedness and (d) other non-cash interest.
          “Obligations” means all unpaid principal of and accrued and unpaid
interest on the Loans, all LC Exposure, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Loan Parties
to the Lenders or to any Lender, the Administrative Agent, the Issuing Banks or
any indemnified party arising under the Loan Documents.
          “Operating Lease” of a Person means any lease of property (other than
a capital lease under GAAP) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
          “Other Taxes” means any and 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 from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
          “Overadvance” has the meaning assigned to such term in
Section 2.05(d).
          “Participant” has the meaning set forth in Section 9.04.
          “Payment Intangible” has the meaning assigned to such term in the
Security Agreement.
          “PBGC” means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
          “Permitted Acquisition” means any acquisition (whether by purchase,
merger, consolidation or otherwise but excluding in any event a Hostile
Acquisition) or series of related

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acquisitions by any Loan Party of (i) all or substantially all or any
significant portion of the assets of a Person or division or line of business or
a business unit of a Person, (ii) the Equity Interests of a Person or (iii) if
clauses (i) and (ii) above are inapplicable, the rights of any licensee
(including by means of the termination of such licensee’s rights under such
license) under a trademark license to such licensee from the Borrower or any
Subsidiary Guarantor, if, at the time of and immediately after giving effect
thereto:
          (a) no Default has occurred and is continuing or would arise after
giving effect thereto;
          (b) the assets so acquired or the assets of a Person so acquired, as
the case may be, shall be in a Related Line of Business;
          (c) if (i) such acquisition is consummated during a Financial Covenant
Period, (ii) Availability (determined on a pro forma basis taking into account
the financing required for such acquisition but excluding the Collateral to be
acquired) shall be less than $50,000,000, or (iii) the aggregate consideration
paid and Indebtedness assumed in respect of such acquisition exceeds
$100,000,000, then Borrower and the Subsidiaries shall be in compliance, on a
pro forma basis after giving effect to such acquisition (taking into account
such adjustments with respect to cost savings as are consistent with the
standards set forth in Rule 11-02(b)(6) of Regulation S-X), with the covenant
contained in Section 6.12 recomputed as of the last day of the most recently
ended fiscal quarter of the Borrower for which financial statements are
available, as if such acquisition (and any related incurrence or repayment of
Indebtedness, with any new Indebtedness being deemed to be amortized over the
applicable testing period in accordance with its terms) had occurred on the
first day of each relevant period for testing such compliance, and the Borrower
shall have delivered to the Administrative Agent a certificate of a Financial
Officer of the Borrower to such effect, together with all relevant material
financial information utilized by the Borrower in making its determination to
complete such acquisition included in any pro forma calculations described in
this clause (c);
          (d) in the case of a merger, consolidation or amalgamation involving
the Borrower or a Subsidiary Guarantor, the Borrower or a Subsidiary Guarantor
is the surviving entity of such merger, consolidation and/or amalgamation (or,
in the case of a merger involving a Subsidiary Guarantor, the surviving entity
is a Person that will become a Subsidiary Guarantor upon the effectiveness of
such merger, consolidation or amalgamation); provided that in the case of a
merger, consolidation or amalgamation in which the Borrower is one of the
entities being merged, consolidated and/or amalgamated, the Borrower shall be
the surviving entity of such merger, consolidation and/or amalgamation;
          (e) the assets or equity interests being acquired shall be located in
the United States and, in the case of an acquisition structured as a stock or
other equity acquisition, the entity whose equity interests are being acquired
shall be organized under the laws of the United States or any state thereof and
either (i) the Person so acquired shall become a direct wholly-owned Subsidiary
of a Loan Party and a Subsidiary Guarantor or (ii) such Person shall be merged
with and into a Loan Party (subject to the foregoing clause (d));

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          (f) the Administrative Agent shall have received Lien searches
reasonably satisfactory to the Administrative Agent with respect to the assets
or Person being acquired; and
          (g) with respect to any acquisition involving the payment of
consideration and/or the assumption of Indebtedness by the Borrower and its
Subsidiaries in an aggregate amount in excess of $10,000,000, the Administrative
Agent shall have received a Borrowing Base Certificate dated as of the last day
of the month most recently ended prior to the date of consummation of such
acquisition, demonstrating that, after giving effect to the consummation of such
acquisition, Availability (determined on a pro forma basis taking into account
the financing required for such acquisition but excluding the Collateral to be
acquired (unless the Administrative Agent in its Permitted Discretion shall have
determined that all requirements set forth in the last sentence of this
definition will be satisfied as of the date of consummation of such
acquisition)) shall not be less than the greater of (A) $22,500,000 or (B) 15%
of the aggregate Commitments of all of Lenders in effect at such time.
          For the avoidance of doubt, no portion of the Collateral acquired in
such acquisition or owned by the Person so acquired shall be eligible for
inclusion in the Borrowing Base until (i) the Administrative Agent shall have
obtained a perfected Lien on such Collateral, and (ii) unless otherwise approved
by the Administrative Agent in its Permitted Discretion, the Administrative
Agent shall have performed and been satisfied with the results of its field
examination (and, if reasonably requested by the Administrative Agent,
appraisals) of the Person or Collateral so acquired.
          “Permitted Discretion” means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
          “Permitted Encumbrances” means:
          (a) Liens imposed by law for taxes and duties, assessments,
governmental charges or levies that are not yet due or are being contested in
compliance with Section 5.04;
          (b) (i) landlords’, carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s and other like Liens imposed by law, Liens of
collecting banks under the Uniform Commercial Code on items in the course of
collection, Liens and rights of set-off of banks, in each case 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 5.04, (ii) landlord’s Liens arising by operation of law which are
subordinated to the Liens in favor of the Administrative Agent, and
(iii) landlord’s Liens in Landlord Lien States arising by operation of law;
          (c) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;
          (d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business or letter of credit guarantees issued in respect thereof;

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          (e) attachment, judgment or other similar liens in respect of
judgments that do not constitute an Event of Default under clause (k) of
Article VII;
          (f) easements, zoning restrictions, rights-of-way, restrictive
covenants, encroachments, and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary;
          (g) possessory Liens in favor of brokers and dealers arising in
connection with the acquisition or disposition of Permitted Investments;
          (h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods so long as such Liens attach only to the imported goods;
          (i) licenses, leases or subleases granted to third parties and not
interfering in any material respect with the conduct of the business of the
Borrower or any of its Subsidiaries taken as a whole;
          (j) any (i) interest or title of a lessor or sublessor under any
lease, (ii) Lien or restriction that the interest or title of such lessor or
sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any Lien or restriction referred to in
clause (ii); and
          (k) customary rights of setoff and chargebacks of Credit Card
Processors under credit card processing agreements (including Liens granted
under the Credit Card Processor Agreements existing as of the Effective Date to
the extent copies thereof have been provided to the Administrative Agent);
provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.
          “Permitted Investment Policy” shall mean the investment policy of the
Borrower and its Subsidiaries as in effect on the Effective Date, which has been
approved by the board of directors of the Borrower, as amended, restated,
supplemented or otherwise modified from time to time, so long as such amendment,
restatement, supplement or modification has been approved by the Administrative
Agent, which approval shall not be unreasonably withheld.
          “Permitted Investments” means:
          (a) direct obligations of, or obligations the principal of and
interest on which are directly and fully guaranteed or insured by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America);
          (b) investments in commercial paper having, at such date of
acquisition, a credit rating of at least A-2 from S&P or P-2 from Moody’s or F-2
from Fitch;

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          (c) investments in certificates of deposit, eurodollar time deposits,
banker’s acceptances and time deposits maturing within one year from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any Lender or any commercial bank which
has a combined capital and surplus and undivided profits of not less than
$100,000,000;
          (d) repurchase agreements with a term of not more than thirty
(30) days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above;
          (e) securities with maturities of two years or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States or by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth or territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated, at such
date of acquisition, at least A by S&P or A2 by Moody’s or F-2 by Fitch;
          (f) securities with maturities of two years or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (c) of this definition;
          (g) shares of money market funds that (i) comply with the criteria set
forth in Securities and Exchange Commission Rule 2a-7 under the Investment
Company Act of 1940, and (ii) have portfolio assets of at least (x) in the case
of funds that invest exclusively in assets satisfying the requirements of clause
(a) of this definition, $250,000,000 and (y) in all other cases, $500,000,000;
          (h) in the case of investments by any foreign Subsidiary, obligations
of a credit quality and maturity comparable to that of the items referred to in
clauses (a) through (g) above that are available in local markets;
          (i) investments in auction rate securities with a rating of AAA from
S&P or Aaa from Moody’s or AAA from Fitch and a maximum holding period of
forty-five (45) days, for which the reset date will be used to determine the
maturity date;
          (j) investments in short term loan participations of up to thirty-five
(35) days if the short term debt rating thereof is A-2 from S&P or P-2 from
Moody’s or F-2 from Fitch or an equivalent long term rating of investment grade
by Moody’s or S&P of Fitch exists with respect thereto; and
          (k) investments made in accordance with the Permitted Investment
Policy.
          “Person” means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
          “Plan” means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were

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terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.
          “Prime Rate” means the rate of interest per annum publicly announced
from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
          “Processor Control Agreement/Letter” means, with respect to (a) any
Credit Card Processor (other than American Express Co. and its Affiliates or any
other Person that as a policy does not execute an agreement described in this
clause (a)) providing credit or debit card processing services for or on behalf
of any Loan Party, an agreement in form and substance reasonably satisfactory to
the Administrative Agent in its Permitted Discretion, executed and delivered by
the applicable Loan Party, such Credit Card Processor and the Administrative
Agent, pursuant to which such Credit Card Processor shall agree, among other
things, to follow instructions originated by the Administrative Agent regarding
amounts payable by such Credit Card Processor to such Loan Party pursuant to the
applicable credit card processing agreement without the further consent of such
Loan Party under circumstances specified therein, as such agreement may be
amended, supplemented or otherwise modified from time to time, and (b) American
Express Co. and its Affiliates or such other Person, a letter from the
applicable Loan Party to American Express Co. or any of its Affiliates or such
other Person in form and substance reasonably satisfactory to the Administrative
Agent in its Permitted Discretion directing American Express Co. or such
Affiliate or such other Person to remit all payments due under the applicable
credit card processing agreements between the applicable Loan Party and American
Express Co. or such Affiliate or such other Person to a Deposit Account subject
to a Control Agreement in favor of the Administrative Agent, and instructing
American Express Co. or such Affiliate or such other Person not to remit any
payments owing to the applicable Loan Party from American Express Co. or such
Affiliate or such other Person to any other Deposit Account unless otherwise
instructed by the Administrative Agent.
          “Purchased Private Label Accounts” has the meaning assigned to such
term in Section 6.05(k).
          “Register” has the assigned to such term in Section 9.04.
          “Regulation S-X” means Regulation S-X under the Securities Act of
1933, as amended.
          “Related Line of Business” means: (a) any line of business in which
the Borrower or any of its Subsidiaries is engaged as of, or immediately prior
to, the Effective Date, (b) any wholesale, retail or other distribution of
products or services under any domestic or foreign patent, trademark, service
mark, trade name, copyright or license or (c) any similar or related or
complementary business and any business which provides a service and/or supplies
products in connection with any business described in clause (a) or (b) above.

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          “Related Parties” means, with respect to any specified Person, such
Person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.
          “Report” means reports prepared by the Administrative Agent or another
Person showing the results of appraisals, field examinations or audits
pertaining to the Loan Parties’ assets from information furnished by or on
behalf of the Loan Parties, after the Administrative Agent has exercised its
rights of inspection pursuant to this Agreement, which Reports may be
distributed to the Lenders by the Administrative Agent.
          “Required Lenders” means, at any time, Lenders having Revolving Credit
Exposures and unused Commitments representing more than 50% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time; provided
that if at any time there are two or more Lenders having Revolving Credit
Exposures or unused Commitments, “Required Lenders” shall mean at least two
Lenders having Revolving Credit Exposures and unused Commitments representing
more than 50% of the sum of the total Revolving Credit Exposures and unused
Commitments at such time.
          “Reserves” means any and all reserves which the Administrative Agent
deems necessary, in its Permitted Discretion, to maintain (including, without
limitation, Banking Services Reserves, reserves for rent at any retail store
location leased by any Loan Party in any Landlord Lien State for which the
applicable landlord has not executed and delivered a Collateral Access Agreement
(it being agreed that the maximum amount of any Reserve for any retail store in
any Landlord Lien State shall not exceed two month’s rent for such location),
reserves for rent with respect to any Leased Distribution Center (other than the
Kansas Distribution Facility) for which the applicable landlord has not executed
and delivered a Collateral Access Agreement (it being agreed that the maximum
amount of any Reserve for any Leased Distribution Center shall not exceed two
month’s rent for such location) and for consignee’s, warehousemen’s and bailee’s
charges, reserves for gift cards, reserves for Inventory shrinkage, reserves for
customs charges and shipping charges related to any Inventory in transit,
reserves for Swap Obligations, reserves for uninsured losses of any Loan Party,
reserves for uninsured, underinsured, un-indemnified or under-indemnified
liabilities or potential liabilities with respect to any litigation and reserves
for taxes, fees, assessments, and other governmental charges) with respect to
the Collateral or any Loan Party. The Administrative Agent may, in its Permitted
Discretion, implement additional reserves or adjust existing reserves from time
to time upon two (2) Business Days’ prior notice to the Borrower.
          “Restricted Payment” means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any option, warrant or other
right to acquire any such Equity Interests in the Borrower. Notwithstanding the
foregoing, “Restricted Payment” shall not include any of the following: (i) the
repurchase or reacquisition of equity interests of the Borrower deemed to occur
upon the exercise of stock options, warrants or other convertible securities,
(ii) cash payments in lieu of the issuance of fractional shares in connection
with the exercise of warrants, options or other securities convertible into or

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exchangeable for the Borrower’s equity interests, or (iii) the withholding or
reacquisition of equity interests to pay the exercise price of, or tax
withholding obligations arising in connection with, such options, warrants or
other convertible securities or other equity or equity-based awards granted by
the Borrower.
          “Revolving Credit Exposure” means, with respect to any Lender at any
time, the sum of (a) the outstanding principal amount of such Lender’s Revolving
Loans and its LC Exposure and Swingline Exposure at such time (excluding
Overadvances) plus (b) an amount equal to its Applicable Percentage of the
aggregate principal amount of Overadvances at such time.
          “Revolving Loan” means a Loan made pursuant to Section 2.01(a).
          “S&P” means Standard & Poor’s Rating Services, a division of The
McGraw Hill Companies, Inc.
          “Secured Obligations” means all Obligations, together with all
(i) Banking Services Obligations and (ii) Swap Obligations owing to one or more
Lenders or their respective Affiliates; provided that at or prior to the time
that any transaction relating to such Swap Obligation is executed, the Lender
party thereto (other than Chase) shall have delivered written notice to the
Administrative Agent that such a transaction has been entered into and that it
constitutes a Secured Obligation entitled to the benefits of the Collateral
Documents.
          “Security Agreement” means that certain Security Agreement, dated as
of the date hereof, between the Loan Parties and the Administrative Agent, for
the benefit of the Administrative Agent and the Lenders, and any other security
agreement entered into, after the date of this Agreement by any other Loan Party
and the Administrative Agent, for the benefit of itself and the Lenders (as
required by this Agreement or any other Loan Document), in each case, as the
same may be amended, restated or otherwise modified from time to time.
          “Securities Account” has the meaning assigned to such term in
Article 8 of the UCC.
          “Specified Chase Accounts” has the meaning assigned to such term in
the definition of “Eligible Cash”.
          “Statutory Reserve Rate” means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject 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. Eurodollar 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.

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          “Subordinated Indebtedness” means any Indebtedness of any Loan Party
which is contractually subordinated to the payment of the Loans and other
Obligations on terms and pursuant to documentation acceptable to the
Administrative Agent in its Permitted Discretion.
          “subsidiary” means, with respect to any Person (the “parent”) at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
          “Subsidiary” means any subsidiary of the Borrower.
          “Subsidiary Guarantor” means each Domestic Subsidiary that becomes a
party to the Subsidiary Guaranty. The Subsidiary Guarantors on the Effective
Date are identified as such in Schedule 3.01 hereto.
          “Subsidiary Guaranty” means that certain Guaranty dated as of the
Effective Date (including any and all supplements thereto) and executed by each
Subsidiary Guarantor, as amended, restated, supplemented or otherwise modified
from time to time.
          “Supermajority Revolving Lenders” means, at any time, Lenders having
Revolving Exposure and unused Revolving Commitments representing at least 85% of
the sum of the total Revolving Credit Exposure and unused Revolving Commitments
at such time.
          “Swap Agreement” means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.
          “Swap Obligations” of the Borrower or any Subsidiary means any and all
obligations of the Borrower or such Subsidiary, whether absolute or contingent
and howsoever and whensoever created, arising, evidenced or acquired (including
all renewals, extensions and modifications thereof and substitutions therefor),
under (a) any and all Swap Agreements of the Borrower or such Subsidiary, and
(b) any and all cancellations, buy backs, reversals, terminations or assignments
of any Swap Agreement transaction of the Borrower or such Subsidiary.

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          “Swingline Exposure” means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Applicable Percentage of the total
Swingline Exposure at such time.
          “Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as
lender of Swingline Loans hereunder.
          “Swingline Loan” means a Loan made pursuant to Section 2.05.
          “Syndication Agent” means Bank of America, N.A., in its capacity as
syndication agent hereunder.
          “Taxes” means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
          “Trailing Average Quarterly Availability” means, for any fiscal
quarter, an amount equal to the average daily Availability during such fiscal
quarter.
          “Transactions” means the execution, delivery and performance by the
Loan Parties of the Loan Documents, the borrowing of Loans and other credit
extensions, the use of the proceeds thereof and the issuance of Letters of
Credit hereunder and the granting of Liens by the Loan Parties pursuant to the
Loan Documents.
          “Type”, when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
          “UCC” means the Uniform Commercial Code as in effect from time to time
in the State of New York or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.
          “Unliquidated Obligations” means, at any time, any Secured Obligations
(or portion thereof) that are contingent in nature or unliquidated at such time,
including any Secured Obligation that is: (i) an obligation to reimburse a bank
for drawings not yet made under a letter of credit issued by it; (ii) any other
obligation (including any guarantee) that is contingent in nature at such time;
or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.
          “Withdrawal Liability” means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
          SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
“Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type
(e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and
referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a
“Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving
Borrowing”).

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          SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
          SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
          SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, each Lender agrees to make Revolving Loans to the Borrower in
Dollars from time to time during the Availability Period in an aggregate
principal amount that will not result in (a) such Lender’s Revolving Credit
Exposure exceeding such Lender’s Commitment or (b) the Aggregate Revolving
Credit Exposure exceeding the lesser of (i) the total Commitments of all of the
Lenders or (ii) the Borrowing Base, subject to the Administrative Agent’s
authority in its sole discretion, to make Overadvances pursuant to the terms of
Section 2.05(d). Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow
Revolving Loans.
          SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
Swingline Loan or an Overadvance) shall be made as part of a Borrowing
consisting of Loans of the same Class and Type made by the Lenders ratably in
accordance with their respective Commitments.

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The failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender’s failure to make Loans as required. Any Overadvance and any
Swingline Loan shall be made in accordance with the procedures set forth in
Section 2.05.
          (b) Subject to Section 2.14, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at
its option may make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the obligation of the Borrower to repay such
Loan in accordance with the terms of this Agreement; provided further that no
such option may be exercised by any Lender if, immediately after giving effect
thereto, amounts would become payable by the Borrower under Section 2.15 or 2.17
that are in excess of those that would be payable under such Section if such
option were not exercised.
          (c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not less than $500,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is
equal to the entire unused balance of the total Commitments of all of the
Lenders or that is required to finance the reimbursement of an LC Disbursement
as contemplated by Section 2.06(e). Each Swingline Loan shall be in an amount
that is an integral multiple of $500,000 and not less than $1,000,000.
Borrowings of more than one Type and Class may be outstanding at the same time;
provided that there shall not at any time be more than a total of ten
(10) Eurodollar Revolving Borrowings outstanding.
          (d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
          SECTION 2.03. Requests for Revolving Borrowings. To request a
Revolving Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than
1:00 p.m., Chicago time, three (3) Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m.,
Chicago time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
     (i) the aggregate amount of the requested Borrowing;
     (ii) the date of such Borrowing, which shall be a Business Day;

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     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to
be applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and
     (v) the location and number of the Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.07.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.
          SECTION 2.04. [Intentionally Omitted.]
          SECTION 2.05. Swingline Loans and Overadvances. (a) Subject to the
terms and conditions set forth herein, the Swingline Lender agrees to make
Swingline Loans in Dollars to the Borrower from time to time during the
Availability Period, in an aggregate principal amount at any time outstanding
that will not result in (i) the aggregate principal amount of outstanding
Swingline Loans exceeding $15,000,000 or (ii) the Aggregate Revolving Credit
Exposure exceeding the lesser of total Commitments of all of the Lenders and the
Borrowing Base (subject to the Administrative Agent’s authority, in its sole
discretion, to make Overadvances pursuant to the terms of Section 2.05(d));
provided that the Swingline Lender shall not be required to make a Swingline
Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Swingline Loans.
          (b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 1:00 p.m., Chicago time, on the day of a proposed Swingline Loan.
Each such notice shall be irrevocable and shall specify the requested date
(which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the Funding
Account(s) (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e), by
remittance to the relevant Issuing Bank, and, in the case of repayment of
another Loan or fees or expenses as provided by Section 2.18(c), by remittance
to the Administrative Agent to be distributed to the Lenders) by 4:00 p.m.,
Chicago time, on the requested date of such Swingline Loan.
          (c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., Chicago time, on any Business
Day require the Lenders to acquire participations on such Business Day in all or
a portion of the Swingline Loans

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outstanding. Such notice shall specify the aggregate amount of Swingline Loans
in which Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Lender, specifying in such
notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each
Lender hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Administrative Agent, for the account of the
Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or
Loans. Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever. Each Lender shall
comply with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.07 with respect to
Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to
the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that
shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear; provided that any such payment so
remitted shall be repaid to the Swingline Lender or to the Administrative Agent,
as applicable, if and to the extent such payment is required to be refunded to
the Borrower for any reason. The purchase of participations in a Swingline Loan
pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.
          (d) Any provision of this Agreement to the contrary notwithstanding,
the Administrative Agent may in its sole discretion (but with absolutely no
obligation), make Revolving Loans to the Borrower, on behalf of the Lenders, in
amounts that exceed Availability (any such excess Revolving Loans are herein
referred to collectively as “Overadvances”); provided that, no Overadvance shall
result in a Default due to the Borrower’s failure to comply with Section 2.01
for so long as such Overadvance remains outstanding in accordance with the terms
of this paragraph, but solely with respect to the amount of such Overadvance. In
addition, Overadvances may be made even if the condition precedent set forth in
Section 4.02(c) has not been satisfied. All Overadvances shall constitute ABR
Borrowings. The authority of the Administrative Agent to make Overadvances is
limited to an aggregate amount not to exceed $7,500,000 at any time, no
Overadvance may remain outstanding for more than thirty days and no Overadvance
shall cause any Lender’s Revolving Credit Exposure to exceed its Revolving
Commitment; provided that, the Required Lenders may at any time revoke the
Administrative Agent’s authorization to make Overadvances. Any such revocation
must be in writing and shall become effective prospectively upon the
Administrative Agent’s receipt thereof.
          (e) Upon the making of an Overadvance by the Administrative Agent,
each Lender shall be deemed, without further action by any party hereto, to have
unconditionally and

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irrevocably purchased from the Administrative Agent without recourse or
warranty, an undivided interest and participation in such Overadvance in
proportion to its Applicable Percentage of the total Commitments. The
Administrative Agent may, at any time, require the Lenders to fund their
participations. From and after the date, if any, on which any Lender is required
to fund its participation in any Overadvance purchased hereunder, the
Administrative Agent shall promptly distribute to such Lender, such Lender’s
Applicable Percentage of all payments of principal and interest and all proceeds
of Collateral received by the Administrative Agent in respect of such Loan.
          SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of, and each
Issuing Bank agrees to issue, Letters of Credit denominated in Dollars (or the
amendment, renewal or extension of an outstanding Letter of Credit) for its own
account or for the account of any of its Subsidiaries, in a form reasonably
acceptable to the relevant Issuing Bank, at any time and from time to time
during the Availability Period. In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the relevant Issuing Bank relating to any
Letter of Credit, the terms and conditions of this Agreement shall control. The
letters of credit identified on Schedule 2.06 (collectively, the “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 so long as they remain outstanding.
          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the relevant Issuing Bank) to an
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by such Issuing Bank,
the Borrower also shall submit a letter of credit application on such Issuing
Bank’s standard form in connection with any request for a Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension, (a) the Aggregate Revolving Credit
Exposure shall not exceed the lesser of the total Commitments of the Lenders and
the Borrowing Base then in effect, (b) the LC Exposure shall not exceed
$75,000,000 at such time and (c) the aggregate amount available to be drawn
under all outstanding standby Letters of Credit shall not exceed $10,000,000 at
such time.
          (c) Expiration Date. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or

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extension) and (ii) the date that is five (5) Business Days prior to the
Maturity Date; provided that any such Letter of Credit with a tenor of one year
shall, if requested by the Borrower or any of its Subsidiaries, have renewal
periods for additional one year periods so long as the expiration date shall not
extend beyond the date described in clause (ii).
          (d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of any Issuing Bank or the Lenders, each Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from each Issuing
Bank, a participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the relevant Issuing Bank, such Lender’s Applicable Percentage of
each LC Disbursement made by such Issuing Bank and not reimbursed by the
Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
          (e) Reimbursement. If any Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent in Dollars the amount equal
to such LC Disbursement, calculated as of the date such Issuing Bank made such
LC Disbursement not later than 2:00 p.m., Chicago time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 12:00 noon, Chicago time, on such date, or, if such notice
has not been received by the Borrower prior to such time on such date, then not
later than 2:00 p.m., Chicago time, on (i) the Business Day that the Borrower
receives such notice, if such notice is received prior to 12:00 noon, Chicago
time, on the day of receipt, or (ii) the Business Day immediately following the
day that the Borrower receives such notice, if such notice is not received prior
to such time on the day of receipt; provided that, if such LC Disbursement is
not less than $500,000, the Borrower may, subject to the conditions to borrowing
set forth herein, request in accordance with Section 2.03 or 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount of such LC Disbursement and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each Lender
of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender’s Applicable Percentage thereof. Promptly
following receipt of such notice, each Lender (other than such Issuing Bank)
shall pay to the Administrative Agent its Applicable Percentage of the payment
then due from the Borrower, in the same manner as provided in Section 2.07 with
respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative
Agent shall promptly pay to such Issuing Bank the amounts so received by it from
the Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to

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this paragraph, the Administrative Agent shall distribute such payment to the
applicable Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders
and such Issuing Bank as their interests may appear. Any payment made by a
Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC
Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan
as contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
          (f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
relevant Issuing Bank; provided that the foregoing shall not be construed to
excuse any Issuing Bank from liability to the Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by such Issuing Bank’s failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of any Issuing Bank (as finally determined by a court of competent
jurisdiction), such Issuing Bank shall be deemed to have exercised care in each
such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, each Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.
          (g) Disbursement Procedures. Each Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. Such Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether such

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Issuing Bank has made or will make an LC Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse such Issuing Bank and the Lenders with
respect to any such LC Disbursement. Each Issuing Bank shall, on each Business
Day (or such longer frequency as is agreed to by the Administrative Agent),
deliver to the Administrative Agent and the Borrower a report via facsimile or
e-mail setting forth a list of all Letters of Credit issued by such Issuing Bank
outstanding as of such day (or, if the Administrative Agent has agreed to a
longer frequency, the previous date of delivery of such report by such Issuing
Bank), together with the LC Exposure, the outstanding LC Disbursements and the
expiration date of each such Letter of Credit.
          (h) Interim Interest. Except as otherwise agreed with any Issuing Bank
with respect to any Letter of Credit relating to the period beginning on any
date an LC Disbursement is made and ending two Business Days after the
Borrower’s receiving notice from such Issuing Bank of such LC Disbursement, if
any Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made
(or, if such date is not a Business Day, on or prior to the next Business Day),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such
LC Disbursement when due pursuant to paragraph (e) of this Section, then
Section 2.13(d) shall apply. Interest accrued pursuant to this paragraph shall
be for the account of such Issuing Bank, except that interest accrued on and
after the date of payment by any Lender pursuant to paragraph (e) of this
Section to reimburse such Issuing Bank shall be for the account of such Lender
to the extent of such payment.
          (i) Replacement of Any Issuing Bank. Any Issuing Bank may be replaced
at any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of an Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
          (j) Cash Collateralization. The Borrower may at any time, and if any
Event of Default shall occur and be continuing, on the Business Day that the
Borrower receives notice from the Administrative Agent or the Required Lenders
(or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 50% of the total LC Exposure) demanding the deposit of
cash collateral pursuant to this paragraph, the Borrower shall, deposit in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders (the “LC Collateral Account”), an amount in
cash equal to 103% of the

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LC Exposure as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or (i) of
Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the Secured Obligations. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account and the Borrower hereby grants
the Administrative Agent a security interest in the LC Collateral Account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower’s risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the relevant Issuing Bank for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of Lenders with LC Exposure representing greater than 50%
of the total LC Exposure), be applied to satisfy other Secured Obligations. If
the Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the Borrower within three
(3) Business Days after all Events of Default have been cured or waived. If the
Borrower otherwise provides an amount of cash collateral hereunder, such amount
(to the extent not applied as aforesaid) shall be returned to the Borrower
within three (3) Business Days after the Borrower’s request for such return so
long as no Event of Default shall have occurred and be continuing.
          (k) Additional Issuing Banks. The Borrower may, at any time and from
time to time with the consent of the Administrative Agent (which consent shall
not be unreasonably withheld) and such Lender, designate one or more additional
Lenders to act as an issuing bank under the terms of this Agreement. Any Lender
designated as Issuing Bank pursuant to this paragraph (k) shall be deemed to be
an “Issuing Bank” for the purposes of this Agreement (in addition to being a
Lender) with respect to Letters of Credit issued by such Lender.
          (l) Confirmation of Existing Letters of Credit Issued Under Existing
Credit Agreement. All Existing Letters of Credit (including those issued under
the Existing Credit Agreement) outstanding on the Effective Date shall be deemed
to be Letters of Credit issued hereunder.
          SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 2:00 p.m., Chicago time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders in an amount equal to such Lender’s Applicable Percentage;
provided that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to the Funding Account(s);
provided that ABR Revolving Loans made to finance the reimbursement of (i) an LC
Disbursement as provided in Section 2.06(e) shall be remitted by the
Administrative Agent to the relevant Issuing Bank and (ii) an Overadvance shall
be retained by the Administrative Agent.

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          (b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing.
          SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the Borrower
may elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing. This Section shall
not apply to Swingline Borrowings or Overadvances which may not be converted or
continued.
          (b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
          (c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
     (i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);
     (ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

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     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.
          (d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.
          (e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies the Borrower, then, so long
as an Event of Default is continuing (i) no outstanding Revolving Borrowing may
be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid,
each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at
the end of the Interest Period applicable thereto.
          SECTION 2.09. Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitments shall terminate on the Maturity Date.
          (b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments without premium or penalty but subject to Section 2.16
with respect to any Loans in the event such Loans are required to be repaid as a
result of such termination or reduction; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $100,000 and
not less than $1,000,000 or, if less, the remaining amount of the total
Commitments, and (ii) the Borrower shall not terminate or reduce the Commitments
if, after giving effect to any concurrent prepayment of the Loans in accordance
with Section 2.11, the Aggregate Revolving Credit Exposure would exceed the
total Commitments of all Lenders.
          (c) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (b) of this Section at
least two (2) Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if

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such condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.
          SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
on the Maturity Date, (ii) to the Swingline Lender the then unpaid principal
amount of each Swingline Loan on the earlier of the fifth (5th) Business Day
after such Swingline Loan is made or the Maturity Date; provided that on each
date that a Revolving Borrowing is made, the Borrower shall repay all Swingline
Loans then outstanding and (iii) to the Administrative Agent the then unpaid
principal amount of each Overadvance on the earliest of the Maturity Date, the
30th day after such Overadvance is made, and demand by the Administrative Agent.
          (b) At all times that full cash dominion is in effect pursuant to
Section 7.2 of the Security Agreement, on each Business Day, the Administrative
Agent shall apply all funds credited to the Concentration Account the previous
Business Day (whether or not immediately available) as follows: (i) if no Event
of Default shall have occurred and be continuing at such time, first to prepay
any Overadvances that may be outstanding, pro rata, second to prepay the
Revolving Loans (including Swing Line Loans) pro rata, third, to cash
collateralize outstanding LC Exposure, and fourth, the balance, if any, to the
Borrower’s general operating account; or (ii) if an Event of Default shall have
occurred and be continuing at such time, in accordance with the provisions of
Section 2.18(b).
          (c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
          (d) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share thereof.
          (e) The entries made in the accounts maintained pursuant to paragraph
(c) or (d) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
          (f) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times

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(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
          SECTION 2.11. Prepayment of Loans.
          (a) The Borrower shall have the right at any time and from time to
time to prepay voluntarily any Borrowing in whole or in part, without premium or
penalty, subject to prior notice in accordance with paragraph (d) of this
Section and subject to Section 2.16.
          (b) Except for Overadvances permitted under Section 2.05, in the event
and on such occasion that the Aggregate Revolving Credit Exposure exceeds the
lesser of (A) the aggregate Commitments of all Lenders or (B) the Borrowing Base
then in effect, the Borrower shall prepay the Revolving Loans and/or Swingline
Loans and/or cash collateralize the LC Exposure in an aggregate amount equal to
such excess.
          (c) At all times that full cash dominion is in effect pursuant to
Section 7.2 of the Security Agreement, the Borrower shall prepay the Loans and
cash collateralize the LC Exposure in accordance with Section 2.10(b).
          (d) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 1:00 p.m.,
Chicago time, one (1) Business Day before the date of prepayment, (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 1:00 p.m.,
Chicago time, on the date of prepayment or (iii) in the case of prepayment of a
Swingline Loan, not later than 2:00 p.m., Chicago time, on the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date, the principal amount of each Borrowing or portion thereof to be
prepaid and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each; provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Commitments as contemplated by
Section 2.09, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.09. Promptly following
receipt of any such notice relating to a Revolving Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Revolving Borrowing shall be in an amount that is an integral multiple of
$100,000 and not less than $500,000. Each prepayment of a Revolving Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.13.
          SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Commitment Fee Rate on the average daily unused amount of
the Commitment of such Lender during the period from and including the Effective
Date to but excluding the date on which such Commitment terminates. Accrued
commitment fees shall be payable in arrears on the first day of each calendar
month and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof. All commitment fees shall be
computed on the

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basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
          (b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue, in the case of standby Letters of Credit
at the same Applicable Rate used to determine the interest rate applicable to
Eurodollar Revolving Loans and, in the case of commercial Letters of Credit, at
the Applicable Rate applicable to such Letters of Credit, in each case on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which
such Lender’s Commitment terminates and the date on which such Lender ceases to
have any LC Exposure and (ii) to the applicable Issuing Bank a fronting fee,
which shall accrue at the rate of 0.125% per annum or such other rate as is
separately agreed upon between the Borrower and such Issuing Bank on the average
daily amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) attributable to Letters of Credit issued by such
Issuing Bank during the period from and including the Effective Date to but
excluding the later of the date of termination of the Commitments and the date
on which there ceases to be any LC Exposure, as well as such Issuing Bank’s
standard fees and commissions (including without limitation standard commissions
with respect to commercial Letters of Credit, payable at the time of invoice of
such amounts) with respect to the issuance, amendment, cancellation,
negotiation, transfer, presentment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. For the avoidance of doubt, in any case
where, in accordance with the second sentence of the definition of Issuing Bank,
an Issuing Bank arranges for one or more Letters of Credit to be issued by an
Affiliate of such Issuing Bank, the fees agreed upon by such Issuing Bank with
the Borrower shall be deemed to have been agreed upon by such Affiliate unless
the Borrower and such Affiliate otherwise agree. Unless otherwise specified
above, participation fees and fronting fees accrued through and including the
last day of each calendar month shall be payable on the first day of each
calendar month following such last day, commencing on the first such date to
occur after the Effective Date; provided that all such fees shall be payable on
the date on which the Commitments terminate and any such fees accruing after the
date on which the Commitments terminate shall be payable on demand. Any other
fees payable to any Issuing Bank pursuant to this paragraph shall be payable
within ten (10) days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
          (c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
          (d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the relevant
Issuing Bank, in the case of fees payable to it) for distribution, in the case
of commitment fees and participation fees, to the Lenders. Fees paid shall not
be refundable under any circumstances (other than in the case, and to the
extent, of any overpayment thereof by the Loan Parties).

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          SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
          (b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.
          (c) Each Overadvance shall bear interest at the Alternate Base Rate
plus the Applicable Rate for Revolving Loans plus 2%.
          (d) Notwithstanding the foregoing, during the occurrence and
continuance of an Event of Default, the Administrative Agent or the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 9.02 requiring the consent of “each Lender affected thereby” for
reductions in interest rates), declare that (i) all Loans shall bear interest at
2% plus the rate otherwise applicable to such Loans as provided in the preceding
paragraphs of this Section or (ii) in the case of any other amount outstanding
hereunder, such amount shall accrue at 2% plus the rate applicable to such fee
or other obligation as provided hereunder.
          (e) Accrued interest on each Loan (for ABR Loans, accrued through the
last day of the prior calendar month) shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Commitments; provided that (i) interest accrued pursuant to
paragraph (d) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
          (f) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year) and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
          SECTION 2.14. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
          (a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
          (b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately

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and fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing; provided that if
the circumstances giving rise to such notice affect only one Type of Borrowings,
then the other Type of Borrowings shall be permitted.
          SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
     (i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or any Issuing Bank; or
     (ii) impose on any Lender or any Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar 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 Eurodollar Loan (or of maintaining its
obligation to make such Loan) or to increase the cost to such Lender or such
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or such
Issuing Bank hereunder, whether of principal, interest or otherwise, then the
Borrower will pay to such Lender or such Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or such Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
          (b) If any Lender or any Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s or such Issuing Bank’s capital as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a
level below that which such Lender could have achieved but for such Change in
Law (taking into consideration such Lender’s or such Issuing Bank’s policies
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender or such Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or such Issuing Bank for any such
reduction suffered.
          (c) A certificate of a Lender or an Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or such Issuing Bank, as
the case may be, as specified in paragraph (a) or (b) of this Section,
containing a reasonably detailed explanation of the basis on which such amount
or amounts were calculated and explaining the Change in Law

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by reason of which it has become entitled to be so compensated, shall be
delivered to the Borrower and shall be conclusive absent manifest error. No
Lender or Issuing Bank shall be entitled to the benefits of this Section 2.15
unless such Lender or Issuing Bank shall have complied with the requirements of
this Section 2.15. The Borrower shall pay such Lender or such Issuing Bank, as
the case may be, the amount shown as due on any such certificate within ten (10)
days after receipt thereof.
          (d) Failure or delay on the part of any Lender or any Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s or such Issuing Bank’s right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or an Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or such Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or such Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof. Notwithstanding any other provision of this Section
2.15, no Lender shall demand compensation for any increased costs or reduction
referred to above in this Section if it shall not then be the general policy of
such Lender to demand such compensation in similar circumstances from comparable
borrowers under comparable provisions of other credit agreements, if any (it
being understood, for the avoidance of doubt, that a waiver by any Lender in any
given case of its right to demand such compensation from any given borrower
shall not, in and of itself, be deemed to constitute a change in the general
policy of such Lender).
          (e) Notwithstanding any other provision to the contrary, this
Section 2.15 shall have no application with respect to any Indemnified Taxes,
Other Taxes or any Excluded Taxes, which matters, for the avoidance of doubt,
shall be dealt with exclusively under Section 2.17.
          SECTION 2.16. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.11(b) and is revoked in accordance therewith) or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest

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rate which such Lender would bid were it to bid, at the commencement of such
period, for deposits in Dollars of a comparable amount and period from other
banks in the eurodollar market. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.
          SECTION 2.17. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
the relevant Issuing Bank (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
          (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
          (c) The Borrower shall indemnify the Administrative Agent, each Lender
and any Issuing Bank, as promptly as possible but in any event within thirty
(30) days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent, such Lender or such
Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrower hereunder (including Indemnified Taxes
or Other Taxes imposed on or attributable to amounts payable under this Section)
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 by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or any Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or any Issuing Bank, shall be conclusive
absent manifest error.
          (d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
          (e) Each Foreign Lender (including each Issuing Bank that is a Foreign
Lender) shall deliver to the Borrower (with a copy to the Administrative Agent),
at the time it becomes a Lender (or, in the case of any Participant, on or
before the date such Participant purchases the related participation) and at all
times prescribed by applicable law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate of withholding. No Person shall be
deemed to be a

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Lender or Participant as defined herein unless it shall have complied with the
requirements of the first sentence of this paragraph (if such requirements are
applicable to it).
          In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by
applicable law or reasonably requested by the Borrower or the Administrative
Agent as will enable the Borrower or the Administrative 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
the Borrower is resident for tax purposes in the United States of America, any
Foreign Lender shall deliver to the Borrower and the Administrative 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 Borrower or the
Administrative Agent, but only if such Foreign Lender is legally entitled to do
so), whichever of the following is applicable:
     (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 of
America 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 Borrower 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 applicable law as a basis for claiming
exemption from or a reduction in United States Federal withholding tax duly
completed together with such supplementary documentation as may be prescribed by
applicable law to permit the Borrower to determine the withholding or deduction
required to be made.
          (f) If the Administrative Agent, a Lender or an Issuing Bank
determines that it has received a refund which, in the good faith judgment of
the Administrative Agent, such Lender or such Issuing Bank, as the case may be,
is allocable to any Indemnified Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.17, it shall promptly pay over
such refund to the Borrower (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrower under this Section 2.17 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties,

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interest or other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to the Borrower or any other Person.
          SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.
          (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 12:00 noon, Chicago time on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to an Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in Dollars. At all times that full cash dominion is in
effect pursuant to Section 7.2 of the Security Agreement, solely for purposes of
determining the amount of Loans available for borrowing purposes, checks (in
addition to immediately available funds applied pursuant to Section 2.10(b))
from collections of items of payment and proceeds of any Collateral shall be
applied in whole or in part against the Obligations, on the Business Day after
receipt, subject to actual collection.
          (b) Any proceeds of Collateral received by the Administrative Agent
(i) not constituting either (A) a specific payment of principal, interest, fees
or other sum payable under the Loan Documents (which shall be applied as
specified by the Borrower), (B) a mandatory prepayment (which shall be applied
in accordance with Section 2.11) or (C) amounts to be applied from the
Concentration Account when full cash dominion is in effect (which shall be
applied in accordance with Section 2.10(b)) or (ii) after an Event of Default
has occurred and is continuing and the Administrative Agent so elects or the
Required Lenders so direct, such funds shall be applied ratably first, to pay
any fees, indemnities, or expense reimbursements including amounts then due to
the Administrative Agent and the Issuing Banks from the Borrower (other than in
connection with Banking Services or Swap Obligations), second, to pay any fees
or expense reimbursements then due to the Lenders from the Borrower (other than
in connection with Banking Services or Swap Obligations), third, to pay interest
due in respect of the Overadvances, fourth, to pay the principal of the
Overadvances, fifth, to pay interest then due and payable on the Loans (other
than the Overadvances) ratably, sixth, to prepay principal on the Loans (other
than the Overadvances) and unreimbursed LC Disbursements ratably, seventh, to
pay an amount to the Administrative Agent equal to 103% of the aggregate undrawn
face amount of all outstanding Letters of Credit and the aggregate amount of any
unpaid LC Disbursements,

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to be held as cash collateral for such Obligations, eighth, to payment of any
amounts owing with respect to Banking Services and Swap Obligations owing to the
Lenders and their respective Affiliates, ninth, to the payment of any other
Secured Obligation due to the Administrative Agent or any Lender by the Borrower
and, tenth, the balance, if any, to the Loan Parties or as otherwise required by
law. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the Borrower, or unless an Event of Default has occurred
and is continuing, neither the Administrative Agent nor any Lender shall apply
any payment which it receives to any Eurodollar Loan of a Class, except (a) on
the expiration date of the Interest Period applicable to any such Eurodollar
Loan or (b) in the event, and only to the extent, that there are no outstanding
ABR Loans of the same Class and, in any such event, the Borrower shall pay the
break funding payment required in accordance with Section 2.16. The
Administrative Agent and the Lenders shall have the continuing and exclusive
right to apply and reverse and reapply any and all such proceeds and payments to
any portion of the Secured Obligations.
          (c) At the election of the Administrative Agent, all payments of
principal, interest, LC Disbursements, fees, premiums, reimbursable expenses
(including, without limitation, all reimbursement for fees and expenses pursuant
to Section 9.03), and other sums payable under the Loan Documents, may be paid
from the proceeds of Borrowings made hereunder whether made following a request
by the Borrower pursuant to Section 2.03 or a deemed request as provided in this
Section or may be deducted from any deposit account of the Borrower maintained
with the Administrative Agent. The Borrower hereby irrevocably authorizes
(i) the Administrative Agent to make a Borrowing for the purpose of paying each
payment of principal, interest and fees as it becomes due hereunder or any other
amount due under the Loan Documents and agrees that all such amounts charged
shall constitute Loans (including Swingline Loans and Overadvances) and that all
such Borrowings shall be deemed to have been requested pursuant to Sections 2.03
or 2.05, as applicable and (ii) the Administrative Agent to charge any deposit
account of the Borrower maintained with the Administrative Agent for each
payment of principal, interest and fees as it becomes due hereunder or any other
amount due under the Loan Documents.
          (d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements,
Swingline Loans or Overadvances resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Revolving Loans and
participations in LC Disbursements, Swingline Loans and Overadvances and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans and participations in LC Disbursements,
Swingline Loans and Overadvances of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements,
Swingline Loans and Overadvances; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or

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participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
          (e) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Banks hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing
Banks, as the case may be, the amount due. In such event, if the Borrower has
not in fact made such payment, then each of the Lenders or each Issuing Bank, as
the case may be, severally agrees to repay to the Administrative Agent forthwith
on demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
          (f) If any Lender shall fail to make any payment required to be made
by it pursuant to Sections 2.05(c), 2.05(e), 2.06(d), 2.06(e), 2.07(b), 2.18(e)
or 9.03(c), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied
obligations are fully paid.
          SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
          (b) If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its

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interests, rights and obligations under this Agreement to an assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower shall have received the
prior written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
to be made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply. No such assignment shall be
deemed to be a waiver of any rights which the Borrower, the Administrative Agent
or any other Lender shall have against the replaced Lender. Each reference to
any Lender in this Section 2.19 shall also refer to any Issuing Bank.
          SECTION 2.20. Expansion Option. The Borrower may from time to time
elect to request that the Commitments be increased in a minimum amount of
$5,000,000 so long as, after giving effect thereto, the aggregate amount of the
Commitments does not exceed $225,000,000. The Borrower may arrange for any such
increase to be provided by one or more Lenders (each Lender so agreeing to an
increase in its Commitment, an “Increasing Lender”), or by one or more new
banks, financial institutions or other entities (each such new bank, financial
institution or other entity, an “Augmenting Lender”), to increase their existing
Commitments, or extend Commitments, as the case may be, provided that (i) each
Augmenting Lender, shall be reasonably acceptable to the Borrower, (ii) each
Augmenting Lender shall be acceptable to the Administrative Agent, in its
Permitted Discretion, (iii) (x) in the case of an Increasing Lender, the
Borrower and such Increasing Lender execute an agreement substantially in the
form of Exhibit C hereto, and (y) in the case of an Augmenting Lender, the
Borrower and such Augmenting Lender execute an agreement substantially in the
form of Exhibit D hereto and (iv) any Lender approached to so increase its
Commitment may elect or decline, in its sole discretion, to provide any such
increase. Increases and new Commitments created pursuant to this Section 2.20
shall become effective on the date agreed by the Borrower, the Administrative
Agent and the relevant Increasing Lenders or Augmenting Lenders and the
Administrative Agent shall notify each Lender thereof. Notwithstanding the
foregoing, no increase in the Commitments (or in the Commitment of any Lender),
shall become effective under this paragraph unless, (i) on the proposed date of
the effectiveness of such increase, the conditions set forth in paragraphs (a),
(b) and (c) of Section 4.02 shall be satisfied or waived by the Required Lenders
and the Administrative Agent shall have received a certificate to that effect
dated such date and executed by a Responsible Officer of the Borrower, (ii) the
Administrative Agent shall have received documents consistent with those
delivered on the Effective Date as to the corporate power and authority of the
Borrower to borrow hereunder after giving effect to such increase and (iii) the
Administrative Agent shall have received a written opinion addressed to the
Administrative Agent and the Lenders and dated the effective date of such
increase of counsel to the Loan Parties in form and substance reasonably
satisfactory to the Administrative Agent in its Permitted Discretion. On the
effective date of any increase in the Commitments, (i) each relevant Increasing
Lender and Augmenting Lender

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shall make available to the Administrative Agent such amounts in immediately
available funds as the Administrative Agent shall determine, for the benefit of
the other Lenders, as being required in order to cause, after giving effect to
such increase and the use of such amounts to make payments to such other
Lenders, each Lender’s portion of the outstanding Revolving Loans of all the
Lenders to equal its Applicable Percentage of such outstanding Revolving Loans,
and (ii) the Borrower shall be deemed to have repaid and reborrowed all
outstanding Revolving Loans as of the date of any increase in the Commitments
(with such reborrowing to consist of the Types of Revolving Loans, with related
Interest Periods if applicable, specified in a notice delivered by the Borrower
in accordance with the requirements of Section 2.03). The deemed payments made
pursuant to clause (ii) of the immediately preceding sentence shall be
accompanied by payment of all accrued interest on the amount prepaid and, in
respect of each Eurodollar Loan, shall be subject to indemnification by the
Borrower pursuant to the provisions of Section 2.16 if the deemed payment occurs
other than on the last day of the related Interest Periods.
ARTICLE III
Representations and Warranties
          The Borrower represents and warrants to the Lenders that:
          SECTION 3.01. Organization; Powers; Subsidiaries. Each of the Borrower
and each of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required. Schedule 3.01 hereto (as supplemented from time to
time) identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Borrower and the other Subsidiaries and, if such percentage is not 100%
(excluding directors’ qualifying shares as required by law), a description of
each class issued and outstanding.
          SECTION 3.02. Authorization; Enforceability. The Transactions are
within each Loan Party’s organizational powers and have been duly authorized by
all necessary organizational actions and, if required, actions by such Loan
Party’s equity holders. The Loan Documents to which each Loan Party is a party
have been duly executed and delivered by such Loan Party and constitute a legal,
valid and binding obligation of such Loan Party, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
          SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except (i) such as have been
obtained or made and are (in each case) in full force and effect, (ii) filings
required by applicable securities laws, rules or regulations or stock exchange
rules and (iii) filings necessary to perfect Liens created pursuant to the Loan

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Documents, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of the Borrower or any of its
Subsidiaries or any order of any Governmental Authority binding on the Borrower
or any Subsidiary, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries other than any
violation or default that could not reasonably be expected to result in a
Material Adverse Effect, and (d) will not result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries (other than
Liens permitted under Section 6.02).
          SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The
Borrower has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows as of and for the
fiscal year ended February 2, 2008 reported on by Deloitte & Touche LLP,
independent public accountants. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of the Borrower and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP.
          (b) Since February 2, 2008, there has been no material adverse change
in the business, assets, operations or condition, financial or otherwise, of the
Borrower and its Subsidiaries, taken as a whole.
          SECTION 3.05. Properties. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes or
such other defects as, in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, free of all Liens other than those
permitted by Section 6.02.
          (b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business as currently conducted, and the use thereof by
the Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
          SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions. There are no
labor controversies pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries
(i) which could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters), or
(ii) that involve this Agreement or the Transactions.

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          (b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any of
its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
          (c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in a Material Adverse Effect.
          SECTION 3.07. Compliance with Laws and Agreements. Each of the
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
          SECTION 3.08. Investment Company Status. Neither the Borrower nor any
of its Subsidiaries is an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940.
          SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it (and no tax liens have been filed and no claims are being asserted
with respect to any such taxes), in each case, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower or
such Subsidiary, as applicable, has set aside on its books adequate reserves or
(b) to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
          SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $10,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $10,000,000 the fair
market value of the assets of all such underfunded Plans.
          SECTION 3.11. Disclosure. The Information Memorandum together with any
of the other reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower to the Administrative Agent or any
Lender in connection with the negotiation of this Agreement or hereafter
delivered hereunder or reports filed pursuant to the Securities Exchange Act of
1934 (as modified or supplemented by other information so

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furnished prior to the date on which this representation or warranty is made or
deemed made) do not contain any material misstatement of fact or omit 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 Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time, provided further that the Borrower makes no
representation or warranty whatsoever concerning the information contained in
the Information Memorandum under the heading “Industry Overview” or any
financial information delivered pursuant to the definition of “Permitted
Acquisition”.
          SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of
any Loan have been used or will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X.
          SECTION 3.13. No Default. No Default or Event of Default has occurred
and is continuing.
          SECTION 3.14. [Intentionally Omitted]
          SECTION 3.15. Solvency. Immediately after the consummation of the
Transactions to occur on the Effective Date, (i) the fair value of the assets of
the Loan Parties, on a consolidated basis, at a fair valuation, will exceed
their debts and liabilities, subordinated, contingent or otherwise; (ii) the
present fair saleable value of the property of the Loan Parties, on a
consolidated basis, will be greater than the amount that will be required to pay
the probable liability of their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (iii) the Loan Parties, on a consolidated basis, will be able to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (iv) the Loan Parties, on
a consolidated basis, will not have unreasonably small capital with which to
conduct the business in which they are engaged as such business is now conducted
and is proposed to be conducted after the Effective Date. For purposes of this
Section 3.15, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
          SECTION 3.16. Insurance. Schedule 3.16 sets forth in all material
respects a description of all insurance maintained by or on behalf of the Loan
Parties and the Subsidiaries as of the Effective Date. As of the Effective Date,
all material premiums in respect of such insurance that are due have been paid.
          SECTION 3.17. Security Interest in Collateral. The provisions of the
Collateral Documents create legal and valid Liens on all the Collateral in favor
of the Administrative Agent, for the benefit of the Administrative Agent and the
Lenders, and such Liens constitute perfected and continuing Liens on the
Collateral, securing the Secured Obligations, enforceable against the applicable
Loan Party, and having priority over all other Liens on the Collateral except in
the case of (a) Permitted Encumbrances and other Liens permitted by
Section 6.02(h), to the extent any such Permitted Encumbrances and such other
Liens would have priority over

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the Liens in favor of the Administrative Agent pursuant to any applicable law or
otherwise and (b) Liens perfected by possession or control (including possession
of any certificate of title) to the extent the Administrative Agent has not
obtained or does not maintain possession of, or control over, such Collateral.
          SECTION 3.18. Credit Card Processors. As of the Effective Date, and
after giving effect to the Transactions on the Effective Date, Schedule 3.18
lists all Credit Card Processors that provide any Loan Party with credit card or
debit card processing services, and such Schedule correctly identifies the name
and address of each Credit Card Processor, and the name in which such services
are provided. True and complete copies of each agreement listed on Schedule 3.18
have been delivered to the Administrative Agent, together with all amendments,
waivers and other modifications thereto. All such agreements are valid,
subsisting, in full force and effect, are currently binding and will continue to
be binding upon each Loan Party that is a party thereto and, to the best
knowledge of the Borrower, binding upon the other parties thereto in accordance
with their terms. The Loan Parties are not in default under any such agreements,
other than any such default which could not reasonably be expected to have a
Material Adverse Effect.
ARTICLE IV
Conditions
          SECTION 4.01. Effective Date. The obligations of the Lenders to make
Loans and of any Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
          (a) The Administrative Agent (or its counsel) shall have received
(i) from each party hereto either (A) a counterpart of this Agreement signed on
behalf of such party or (B) written evidence reasonably satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement and (ii) duly executed copies of the Loan Documents, including
any promissory notes requested by a Lender pursuant to Section 2.10 payable to
the order of each such requesting Lender.
          (b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Effective Date) of O’Melveny & Myers LLP, counsel for the Loan Parties,
substantially in the form of Exhibit B. The Borrower hereby requests such
counsel to deliver such opinion.
          (c) The Lenders shall have received (i) reasonably satisfactory
audited consolidated financial statements of the Borrower for the two most
recent fiscal years ended prior to the Effective Date as to which such financial
statements are available, (ii) reasonably satisfactory unaudited interim
consolidated financial statements of the Borrower for each quarterly period
ended subsequent to the date of the latest financial statements delivered
pursuant

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to clause (i) of this paragraph as to which such financial statements are
available and (iii) reasonably satisfactory financial statement projections
through and including the Borrower’s 2011 fiscal year, together with such
information as the Administrative Agent and the Lenders shall reasonably request
(including, without limitation, a reasonably detailed description of the
assumptions used in preparing such projections).
          (d) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Borrower, the
authorization of the Transactions and any other legal matters relating to the
Loan Parties, the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel and as further
described in the list of closing documents attached as Exhibit E.
          (e) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02.
          (f) Concurrently with the funding of the initial Loans hereunder, the
Borrower shall have caused to be repaid in full all outstanding Indebtedness
under the Existing Credit Agreement.
          (g) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date (including the
reasonable fees and expenses of legal counsel), including, to the extent
invoiced, reimbursement or payment of all reasonable out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
          (h) The Administrative Agent shall have received the results of a
recent lien search in each of the jurisdictions where assets of the Loan Parties
are located, and such search shall reveal no liens on any of the assets of the
Loan Parties except for liens permitted by Section 6.02 or discharged on or
prior to the Effective Date pursuant to a pay-off letter or other documentation
satisfactory to the Administrative Agent.
          (i) The Administrative Agent shall have received a notice setting
forth the deposit account(s) of the Borrower (the “Funding Accounts”) to which
the Administrative Agent is authorized by the Borrower to transfer the proceeds
of any Borrowings requested or authorized pursuant to this Agreement.
          (j) The Administrative Agent shall have received each Control
Agreement set forth on Part A of Annex C of the Security Agreement.
          (k) The Administrative Agent shall have received a Borrowing Base
Certificate which calculates the Borrowing Base as of April 5, 2008 (it being
understood that for purposes of computing the Borrowing Base as of April 5,
2008, the Liens created pursuant to the Security Agreement, Control Agreements
and Processor Control Agreements/Letters in effect on the Effective Date shall
be deemed to have been in effect on April 5, 2008).

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          (l) After giving effect to all Borrowings to be made on the Effective
Date and the issuance of any Letters of Credit on the Effective Date and payment
of all fees and expenses due hereunder, and with all of the Loan Parties’
indebtedness, liabilities, and obligations current, Availability shall not be
less than $75,000,000.
          (m) The Administrative Agent shall have received evidence of insurance
coverage in form, scope, and substance reasonably satisfactory to the
Administrative Agent and otherwise in compliance with the terms of Section 5.09
and Section 4.8 of the Security Agreement.
          (n) The Administrative Agent shall have received a properly completed
letter of credit application (or, to the extent that the Borrower has
theretofore executed and delivered a letter of credit application covering such
Letter of Credit to the applicable Issuing Bank, a properly completed letter of
credit request), if the issuance of a Letter of Credit will be required on the
Effective Date.
          (o) The Loan Parties shall have delivered to the Administrative Agent
a Processor Control Agreement/Letter with respect to each Credit Card Processor
listed on Part A of Schedule 3.18 attached hereto.
          The Administrative Agent shall notify the Borrower and the Lenders of
the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Banks to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., Chicago time, on the
Effective Date (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
          SECTION 4.02. Each Credit Event. The obligation of each Lender to make
a Loan on the occasion of any Borrowing, and of any Issuing Bank to issue,
increase, renew or extend any Letter of Credit, is subject to the satisfaction
of the following conditions:
          (a) The representations and warranties of the Borrower set forth in
this Agreement shall be true and correct in all material respects on and as of
the date of such Borrowing or the date of issuance, increase, renewal or
extension of such Letter of Credit, as applicable (other than such
representations as are made as of a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date).
          (b) At the time of and immediately after giving effect to such
Borrowing or the issuance, increase, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
          (c) After giving effect to any Borrowing or the issuance of any Letter
of Credit, Availability is not less than zero (provided that the Administrative
Agent may, in its sole discretion, make Overadvances from time to time in
accordance with Section 2.05(d)).

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          Each Borrowing and each issuance, increase, renewal or extension of a
Letter of Credit shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a),
(b) and (c) of this Section.
ARTICLE V
Affirmative Covenants
          Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees, expenses and other amounts
payable hereunder shall have been paid in full and all Letters of Credit shall
have expired or terminated and all LC Disbursements shall have been reimbursed,
the Borrower covenants and agrees with the Lenders that:
          SECTION 5.01. Financial Statements; Borrowing Base and Other
Information. The Borrower will furnish to the Lenders through the Administrative
Agent:
          (a) within ninety (90) days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Deloitte & Touche LLP or other
independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied; provided, however, that, so long as the Borrower is required to file
reports under Section 13 of the Securities and Exchange Act of 1934, the
requirements of this paragraph shall be deemed satisfied by the delivery of, the
Annual Report of the Borrower on Form 10-K for such fiscal year, signed by the
duly authorized officer or officers of the Borrower;
          (b) within forty-five (45) days after the end of each of the first
three fiscal quarters of each fiscal year of the Borrower, its consolidated
balance sheet and related statements of operations, stockholders’ equity and
cash flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by one
of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes; provided, however, that, so long as the Borrower is
required to file reports under Section 13 of the Securities and Exchange Act of
1934, the requirements of this paragraph shall be deemed satisfied by the
delivery of the Quarterly Report of the Borrower on Form 10-Q for the relevant
fiscal quarter, signed by the duly authorized officer or officers of the
Borrower;
          (c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the Borrower
(x) stating that he or she has

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obtained no knowledge that a Default has occurred (other than as set forth in
such certificate) and, if a Default has occurred, specifying the details thereof
and any action taken or proposed to be taken with respect thereto, (y) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 3.04 which has
had an effect on such financial statements and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate, and (z) if a Financial Covenant Period is then in effect,
setting forth reasonably detailed calculations demonstrating compliance with
Section 6.12; provided, that if a Fixed Charge Coverage Ratio Triggering Event
shall occur after the delivery of financial statements under clause (a) or
(b) above, which Fixed Charge Coverage Ratio Triggering Event shall trigger a
Financial Covenant Period that includes the fiscal quarter most recently ended
for which financial statements have already been delivered pursuant to clause
(a) or (b) above, then, as soon as available but in any event within ten
(10) Business Days of the occurrence of such Fixed Charge Coverage Ratio
Triggering Event, the Borrower will furnish to the Administrative Agent a
supplemental certificate setting forth reasonably detailed calculations
demonstrating compliance with Section 6.12 as of the last day of such fiscal
quarter;
          (d) as soon as available, but in any event not later than the end of
each fiscal year of the Borrower, a copy of the plan and forecast (including a
projected consolidated balance sheet, income statement and funds flow statement)
of the Borrower and its Subsidiaries, on a consolidated basis, for each fiscal
quarter of the upcoming fiscal year (the “Projections”) in form reasonably
satisfactory to the Administrative Agent;
          (e) as soon as available but in any event within twenty (20) days of
the end of each fiscal quarter (or, if during any calendar month, any Loans have
been outstanding hereunder, then within twenty (20) days of the end of such
calendar month), as of the period then ended, a Borrowing Base Certificate, and
supporting information in connection therewith, together with any additional
reports with respect to the Borrowing Base as the Administrative Agent may
reasonably request; provided that (i) if there shall occur and be continuing an
Event of Default or if at any time Availability shall fall below the greater of
(A) $20,000,000 or (B) 13.33% of the total Commitments in effect at such time,
the Borrower shall deliver Borrowing Base Certificates with such greater
frequency as the Administrative Agent may require (but in any event not more
frequently than weekly), and (ii) if, at the time the Lenders make any Loan to
the Borrower hereunder, the Borrower shall not have delivered a Borrowing Base
Certificate within the preceding thirty (30) days, the Borrower shall deliver a
Borrowing Base Certificate to the Administrative Agent as soon as available but
in any event within ten (10) Business Days of the funding of such Loan, which
Borrowing Base Certificate shall set forth the Borrowing Base as of the last day
of the calendar month most recently ended;
          (f) as soon as available but in any event within twenty (20) days of
the end of each fiscal quarter (or, if during any calendar month, any Loans have
been outstanding hereunder, then within twenty (20) days of the end of such
calendar month), as of the period then ended, all delivered electronically in a
text formatted file acceptable to the Administrative Agent:
               (i) a schedule detailing the Loan Parties’ Eligible Credit Card
Accounts, in form reasonably satisfactory to the Administrative Agent;

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               (ii) an Inventory Cost & Retail by Store report, in form
reasonably satisfactory to the Administrative Agent, including schedules
detailing the Loan Parties’ Inventory, in form satisfactory to the
Administrative Agent, (1) by location (showing Eligible Inventory, Eligible LC
Inventory, Inventory in transit, any Inventory located with a third party under
any consignment, bailee arrangement, or warehouse agreement), by class (raw
material, work-in-process and finished goods), by product type, and by volume on
hand, which Inventory shall be valued at the lower of cost (determined on a
first-in, first-out basis) or market and adjusted for Reserves as the
Administrative Agent has previously indicated to the Borrower are deemed by the
Administrative Agent to be appropriate, (2) including a report of any variances
or other results of Inventory counts performed by the Borrower since the last
Inventory schedule (including information regarding sales or other reductions,
additions, returns, credits issued by any Loan Party and complaints and claims
made against any Loan Party), and (3) reconciled to the Borrowing Base
Certificate delivered as of such date;
               (iii) a worksheet of calculations prepared by the Borrower in
form reasonably satisfactory to the Administrative Agent to determine Eligible
Credit Card Accounts, Eligible Inventory and Eligible LC Inventory, such
worksheets detailing the Accounts and Inventory excluded from Eligible Credit
Card Accounts, Eligible Inventory and Eligible LC Inventory and the reason for
such exclusion;
               (iv) a roll forward report (which report shall include beginning
inventory for the fiscal month plus purchases/receivings during such month less
returns to vendors, cost adjustments and cost of goods for such month to arrive
at ending inventory) in form reasonably satisfactory to the Administrative
Agent;
               (v) a gift card liability report in form reasonably satisfactory
to the Administrative Agent; and
               (vi) a report showing retail sales for the month, in form
reasonably satisfactory to the Administrative Agent;
provided that if there shall occur and be continuing an Event of Default or if
at any time Availability shall fall below the greater of (x) $20,000,000 or
(y) 13.33% of the total Commitments in effect at such time, the Borrower shall
deliver the information set forth in clauses (i) through (v) above with such
greater frequency as the Administrative Agent may require (but not more
frequently than weekly);
          (g) as soon as available but in any event within twenty (20) days of
the end of each fiscal quarter (or, if during any calendar month, any Loans have
been outstanding hereunder, then within twenty (20) days of the end of such
calendar month), as of the period then ended (i) a copy of the Loan Parties’
outstanding checks list for each such period ending prior to such time as
schedules and agings of the Loan Parties’ accounts payable are available, and
(ii) a schedule and aging of the Loan Parties’ accounts payable (which may be
delivered electronically in a text formatted file acceptable to the
Administrative Agent) for each such period ending from and after such time as
schedules and agings of the Loan Parties’ accounts payable are available;
provided that if there shall occur and be continuing an Event of Default or if
at any time Availability shall fall below the greater of (A) $20,000,000 or
(B) 13.33% of the total

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Commitments in effect at such time, the Borrower shall deliver (x) such
information described in clause (i) above with such greater frequency as the
Administrative Agent may require (but not more frequently than weekly) and
(y) such information described in clause (ii) above, after such time as
schedules and agings of the Loan Parties’ accounts payable are available, with
such greater frequency as the Administrative Agent may require (but not more
frequently than weekly);
          (h) as soon as available but in any event within twenty (20) days of
the end of each fiscal quarter (or, if during any calendar month, any Loans have
been outstanding hereunder, then within twenty (20) days of the end of such
calendar month), copies of all bank statements with respect to deposit accounts
where Eligible Cash is held (and, if weekly reporting is in effect, weekly
screen prints of balances in such accounts); provided that if there shall occur
and be continuing an Event of Default or if at any time Availability shall fall
below the greater of (A) $20,000,000 or (B) 13.33% of the total Commitments in
effect at such time, the Borrower shall deliver such information with such
greater frequency as the Administrative Agent may require (but not more
frequently than weekly);
          (i) promptly after the same become publicly available, copies of all
other periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; provided, however,
that, so long as the Borrower files any such material with the Securities
Exchange Commission pursuant to the requirements of the Securities and Exchange
Act of 1934, the requirements of this paragraph shall be deemed satisfied by
such filings;
          (j) with respect to any Permitted Acquisition involving the payment of
consideration and/or the assumption of Indebtedness by the Borrower and its
Subsidiaries in an aggregate amount in excess of $10,000,000, the Loan Parties
shall deliver or cause to be delivered to the Administrative Agent within ten
(10) days following the date of consummation of such acquisition (A) copies of
all material acquisition documents and (B) in the case of the acquisition of a
Person, the historical audited financial statements of the Person so acquired
for the three prior fiscal years (or, if such historical audited financial
statements shall not be available, such financial information regarding the
Person so acquired as reasonably requested by the Administrative Agent in its
Permitted Discretion, it being understood to the extent that the Administrative
Agent requests such financial information after the consummation of such
acquisition, the Loan Parties shall deliver or cause to be delivered to the
Administrative Agent such financial information within ten (10) days following
such request); and
          (k) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of this Agreement, as
the Administrative Agent or any Lender may reasonably request.
          SECTION 5.02. Notices of Material Events. The Borrower will furnish to
the Lenders through the Administrative Agent prompt written notice of the
following:

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          (a) the occurrence of any Default upon obtaining knowledge thereof;
          (b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that could reasonably be expected to result in
a Material Adverse Effect;
          (c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$5,000,000; and
          (d) any Lien securing an amount in excess of $1,000,000 (other than
Permitted Encumbrances or Liens permitted under Section 6.02(h)) or claim made
or asserted against any portion of the Collateral having a value in excess of
$1,000,000;
          (e) any loss, damage, or destruction to the Collateral in the amount
of $5,000,000 or more, whether or not covered by insurance;
          (f) any and all default notices received under or with respect to any
public warehouse or Leased Distribution Center where Collateral is located;
          (g) all material amendments to any lease relating to a Leased
Distribution Center, together with a copy of each such amendment; and
          (h) any other development that results in, or would reasonably be
expected to result in, a Material Adverse Effect.
          Each notice delivered under this Section shall be accompanied by a
statement of a Financial Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
          SECTION 5.03. Existence; Conduct of Business. The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business except, in each case (other than the case of the
foregoing requirements insofar as they relate to the legal existence of the
Borrower and the Subsidiary Guarantors), to the extent that failure to do so
could not reasonably be expected to result in a Material Adverse Effect;
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.04.
          SECTION 5.04. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to pay its obligations (including Tax
liabilities), that, if not paid, could reasonably be expected to result in a
Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

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          SECTION 5.05. Maintenance of Properties. Except where the failure to
do so could not reasonably be expected to result in a Material Adverse Effect,
the Borrower will, and will cause each of its Subsidiaries to, maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
          SECTION 5.06. Books and Records; Inspection Rights. The Borrower will,
and will cause each of its Subsidiaries to (i) keep proper books of record and
account in which entries in conformity in all material respects with all
applicable laws, rules and regulations of any Governmental Authority are made of
all dealings and transactions in relation to its business and activities and
(ii) permit any representatives designated by the Administrative Agent or any
Lender (including employees of the Administrative Agent, any Lender or any
consultants, accountants, lawyers and appraisers retained by the Administrative
Agent), upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all during reasonable business hours and as often as reasonably requested;
provided, however, that, so long as no Event of Default has occurred and is
continuing, the Borrower shall not be obligated to reimburse the Administrative
Agent or any Lender for the costs and expenses of more than one such inspection
under this Section 5.06 in the aggregate during each period of twelve
consecutive months. The Borrower, on behalf of itself and the other Loan
Parties, acknowledges that the Administrative Agent, after exercising its rights
of inspection, may prepare and distribute to the Lenders certain Reports
pertaining to the Loan Parties’ assets for internal use by the Administrative
Agent and the Lenders.
          SECTION 5.07. Compliance with Laws. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including
without limitation Environmental Laws), except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
          SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of
the Loans will be used only to refinance the Indebtedness under the Existing
Credit Agreement and to finance the working capital needs, capital expenditures,
acquisitions (including Permitted Acquisitions), Restricted Payments and other
payments permitted by Section 6.09, and for general corporate purposes of, the
Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations T, U and X. Standby
letters of credit will be issued only to support insurance, utilities, workers’
compensation and lease obligations, in each case incurred in the ordinary course
of business by the Borrower or any Subsidiary.
          SECTION 5.09. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable carriers having a
financial strength rating of at least A- by A.M. Best Company (a) insurance in
such amounts and against such risks and such other hazards, as is customarily
maintained by companies of established repute engaged in the same or similar
businesses operating in the same or similar locations and (b) all insurance
required pursuant to the Collateral Documents; provided that, if the financial
strength rating of any carrier that provides insurance to the Borrower or any
Subsidiary shall fall below A- by

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A.M. Best Company at any time after the commencement of the binding of such
insurance by such carrier, the Borrower shall promptly notify the Administrative
Agent and, if so requested by the Administrative Agent in its Permitted
Discretion, within sixty (60) days of such notice the Borrower shall obtain
insurance from a carrier with a financial strength rating of at least A- by A.M.
Best Company to replace the insurance provided by the carrier whose financial
strength rating fell below A-. The Borrower will, and will cause each Subsidiary
to, furnish to the Lenders, upon request of the Administrative Agent,
information in reasonable detail as to the insurance so maintained.
          SECTION 5.10. Casualty and Condemnation. The Borrower (a) will furnish
to the Administrative Agent and the Lenders prompt written notice of any
casualty or other insured damage to any of the Collateral in an amount exceeding
$1,000,000 per occurrence or the commencement of any action or proceeding for
the taking of any of the Collateral or interest therein in an amount exceeding
$1,000,000 per occurrence under power of eminent domain or by condemnation or
similar proceeding and (b) will ensure that the Net Proceeds of any such event
(whether in the form of insurance proceeds, condemnation awards or otherwise)
are, subject to the Kansas IRB Documents, collected and applied in accordance
with Section 2.18(b) of this Agreement and Section 7.3 of the Security
Agreement, as applicable; provided, however, that, so long as no Event of
Default shall have occurred and be continuing, the Borrower may, or may cause
one or more of its Subsidiaries to, apply any such Net Proceeds to pay or
reimburse the costs of repairing, restoring or replacing the assets in respect
of which such Net Proceeds were received or, to the extent not so applied, to be
applied in a manner that is not prohibited by this Agreement and the Collateral
Documents. Notwithstanding anything to the contrary provided herein, the
requirements set forth in this Section 5.10 do not apply to any Net Proceeds
received in respect of any loss or damage to Collateral equal to or less than
$1,000,000 per occurrence.
          SECTION 5.11. Field Examinations and Appraisals. (a) The Borrower
will, and will cause each of its Subsidiaries to, permit the Administrative
Agent to conduct field audit examinations of the Borrower’s and such
Subsidiary’s assets, liabilities, books and records once during each period of
twelve consecutive months; provided that, after the occurrence and during the
continuance of an Event of Default, the Borrower will, and will cause each of
its Subsidiaries to, permit the Administrative Agent to conduct such field audit
examinations at such times and with such greater frequency as the Administrative
Agent may reasonably require.
          (b) In the event that the Administrative Agent so requests in its
Permitted Discretion, the Borrower will, and will cause each of its Subsidiaries
to, provide the Administrative Agent with an appraisal or update thereof of its
Inventory once during each period of twelve consecutive months, such appraisals
and updates to be from an appraiser selected and engaged by the Administrative
Agent, prepared on a basis satisfactory to the Administrative Agent and to
include, without limitation, information required by applicable law and
regulations; provided, however, that, after the occurrence and during the
continuance of an Event of Default, the Borrower will, and will cause each of
its Subsidiaries to, provide the Administrative Agent with such appraisals and
updates at such times and with such greater frequency as the Administrative
Agent may reasonably require. All appraisals and updates provided pursuant to
this Section 5.11(b) shall be at the sole expense of the Borrower.

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          SECTION 5.12. Depository Banks; Control Agreements.
          (a) The Borrower will, and will cause each of its Subsidiaries to
maintain Chase, Bank of America, N.A., one or more of the other Lenders and/or
one or more of their respective Affiliates as its principal depository bank,
including for the maintenance of operating, administrative, cash management,
collection activity, and other deposit accounts for the conduct of its business.
          (b) The Borrower will, and will cause each Subsidiary that is a Loan
Party to, cause each depository bank or other institution at which any Deposit
Account or Securities Account is maintained as of the Effective Date (other than
Excluded Accounts, those accounts listed on Part A of Annex C to the Security
Agreement for which Control Agreements were obtained as of the Effective Date,
and the Specified Chase Accounts) to enter into a Control Agreement with respect
to such Deposit Account or Securities Account within 90 days after the Effective
Date; provided that, in the event that the Borrower or such Subsidiary is unable
to obtain a Control Agreement with respect to any such Deposit Account or
Securities Account within such 90 day period, then, unless waived by the
Administrative Agent, within 30 days after the expiration of such 90 day period,
the Borrower shall, or shall cause such Subsidiary to, close each such Deposit
Account or Securities Account (other than an Excluded Account and any Specified
Chase Account) for which a Control Agreement was not obtained, and to transfer
cash or securities (or proceeds thereof) maintained in such accounts to new
Deposit Accounts or Securities Accounts maintained with a depository bank,
securities broker, securities intermediary or other financial institution that
is a party to a Control Agreement.
          (c) The Borrower will, and will cause each Subsidiary that is a Loan
Party to, (i) provide prompt written notice to the Administrative Agent of the
establishment of any Deposit Account or Securities Account after the Effective
Date (other than an Excluded Account) and (ii) contemporaneous with the
establishment of such Deposit Account or Securities Account (other than an
Excluded Account and any Specified Chase Account), obtain a Control Agreement
with respect to such Deposit Account or Securities Account.
          SECTION 5.13. Credit Card Processors. The Borrower will, and will
cause each of its Subsidiaries that is a Loan Party to (a) comply in all
material respects with all obligations of the Borrower or such Subsidiary under
each credit or debit card processing agreement to which the Borrower or such
Subsidiary is a party, (b) maintain each credit or debit card processing
agreement set forth on Schedule 3.18 and each credit or debit card processing
agreement entered into after the Effective Date in full force and effect and
take or cause to be taken all actions necessary to maintain, preserve and
protect the rights and interests of the Administrative Agent in all material
respects with respect to all such agreements; provided that the Borrower or any
Subsidiary that is a Loan Party may at any time terminate or amend any credit or
debit card processing agreement, including any such agreement with Alliance Data
Systems or World Financial Network Bank, if the Borrower or such Subsidiary
deems such termination or amendment appropriate and provides prompt written
notice of such termination or amendment to the Administrative Agent, (c) use
commercially reasonable efforts to obtain a Processor Control Agreement/Letter
with respect to each Credit Card Processor providing any credit card or debit
card processing services for or on behalf of the Borrower or such Subsidiary and
listed on Schedule 3.18 (other than those obtained as of the Effective Date and
listed on

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Part A of such Schedule) within 90 days after the Effective Date (provided that
in the event that the Borrower or such Subsidiary is unable to obtain any
Processor Control Agreement/Letter described in this clause (c) within such
90 day period, then, unless waived by the Administrative Agent, the Borrower or
such Subsidiary shall terminate the applicable credit card processing agreement
within 30 days after the expiration of such 90 day period) and (d) promptly
notify the Administrative Agent of the entry by the Borrower or such Subsidiary
into any credit or debit card processing agreement with any Credit Card
Processor after the Effective Date and (subject to Section 5.14(d) with respect
to any credit card processing agreement acquired by the Borrower or such
Subsidiary in connection with the consummation of a Permitted Acquisition)
obtain a Processor Control Agreement/Letter with respect to each such Credit
Card Processor contemporaneously with the entry by the Borrower or such
Subsidiary into such credit or debit card processing agreement.
          SECTION 5.14. Additional Collateral; Further Assurances. (a) Subject
to applicable law, the Borrower will, and will cause each Subsidiary that is a
Loan Party to, cause each of its domestic Subsidiaries formed or acquired after
the date of this Agreement in accordance with the terms of this Agreement to
become a Loan Party by executing the Joinder Agreement in the form of Exhibit A
to the Subsidiary Guaranty and the Joinder Agreement in the form of Annex F to
the Security Agreement (collectively, the “Joinder Agreements” and each a
“Joinder Agreement”) within 30 days of such formation or acquisition. Upon
execution and delivery thereof, each such Person (i) shall automatically become
a Subsidiary Guarantor under the Subsidiary Guaranty and thereupon shall have
all of the rights, benefits, duties, and obligations in such capacity under the
Loan Documents to which it is a party and (ii) shall automatically become a
Grantor under the Security Agreement and shall grant Liens to the Administrative
Agent, for the benefit of the Administrative Agent and the Lenders, in any
property of such Loan Party which constitutes Collateral.
          (b) Without limiting the foregoing, the Borrower will, and will cause
each Subsidiary that is a Loan Party to, execute and deliver, or cause to be
executed and delivered, to the Administrative Agent such documents, agreements,
opinions and instruments, and will take or cause to be taken such further
actions (including the filing and recording of financing statements and other
documents and such other actions or deliveries of the type required by
Section 4.01, as applicable), which may be required by law or which the
Administrative Agent may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement and the other Loan Documents and to
ensure perfection and priority of the Liens created or intended to be created by
the Collateral Documents, all at the expense of the Loan Parties.
          (c) If the Borrower or any Subsidiary that is a Loan Party acquires
any Deposit Account or Securities Account (other than an Excluded Account and
any Specified Chase Account) in connection with the consummation of a Permitted
Acquisition, the Borrower shall, or shall cause such Subsidiary to (i) provide
prompt written notice to the Administrative Agent of the acquisition of such
Deposit Account or Securities Account, and (ii) obtain a Control Agreement with
respect to such Deposit Account or Securities Account within 90 days following
the consummation of such Permitted Acquisition. In the event that the Borrower
or such Subsidiary is unable to obtain a Control Agreement with respect to any
Deposit Account or Securities Account (other than an Excluded Account and any
Specified Chase Account) acquired

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in connection with a Permitted Acquisition within such 90 day period, the
Borrower shall, or shall cause such Subsidiary to, unless waived by the
Administrative Agent, within 30 days after the expiration of such 90 day period,
close such Deposit Account or Securities Account and transfer the cash or
securities (or proceeds thereof) maintained in such accounts to new Deposit
Accounts or Securities Accounts maintained with a depository bank, securities
broker, securities intermediary or other financial institution that is a party
to a Control Agreement or to any Specified Chase Account.
          (d) The Borrower will, and will cause each Subsidiary that is a Loan
Party to, use commercially reasonable efforts to obtain a Processor Control
Agreement/Letter with respect to each Credit Card Processor party to a credit
card processing agreement acquired by the Borrower or such Subsidiary in
connection with the consummation of any Permitted Acquisition, within 90 days
after the consummation of such Permitted Acquisition; provided that in the event
that the Borrower or such Subsidiary is unable to obtain any such Processor
Control Agreement/Letter within such 90 day period, then, unless waived by the
Administrative Agent, the Borrower or such Subsidiary shall terminate the
applicable credit card processing agreement within 30 days after the expiration
of such 90 day period).
ARTICLE VI
Negative Covenants
          Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees, expenses and other amounts payable
hereunder have been paid in full and all Letters of Credit have expired or
terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that:
          SECTION 6.01. Indebtedness. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
          (a) Indebtedness created under the Loan Documents;
          (b) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness
with Indebtedness of a similar type that does not increase the outstanding
principal amount thereof;
          (c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary, provided that
(i) Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or
any Subsidiary Guarantor shall be subject to Sections 6.05 and 6.10 and
(ii) Indebtedness of the Borrower to any Subsidiary and Indebtedness of any
Subsidiary Guarantor to any Subsidiary that is not a Loan Party shall be
subordinated to the Secured Obligations on terms reasonably satisfactory to the
Administrative Agent;
          (d) Guarantees by (i) the Borrower of (A) Indebtedness of any
Subsidiary or (B) any lease obligations of any Subsidiary and (ii) by any
Subsidiary of (A) Indebtedness of the Borrower or any other Subsidiary or
(B) lease obligations of the Borrower or any other Subsidiary, provided that
(x) the Indebtedness so Guaranteed is permitted by this Section 6.01,
(y) Guarantees by the Borrower or any Subsidiary Guarantor of Indebtedness or
lease obligations

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of any Subsidiary that is not a Loan Party shall be subject to Sections 6.05 and
6.10 and (z) Guarantees permitted under this clause (d) shall be contractually
subordinated to the Secured Obligations of the applicable Subsidiary on the same
terms as the Indebtedness so Guaranteed is contractually subordinated to the
Secured Obligations;
          (e) Indebtedness of the Borrower or any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or within one
hundred eighty (180) days after such acquisition or the completion of such
construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (e) shall not exceed $25,000,000 at any
time outstanding;
          (f) Indebtedness of the Borrower or any Subsidiary as an account party
in respect of letters of credit;
          (g) Indebtedness of any Person that becomes a Subsidiary or merges
into an existing Subsidiary after the date hereof or Indebtedness assumed by the
Borrower or any Subsidiary in connection with an asset acquisition (and any
extension, renewal, refinancing, replacement or refunding thereof); provided
that (i) such Indebtedness (other than such extension, renewal, refinancing,
replacement or refunding thereof) exists at the time such Person becomes a
Subsidiary or at the time of such asset acquisition and is not created in
contemplation of or in connection with such Person becoming a Subsidiary or in
connection with such asset acquisition and (ii) the aggregate principal amount
of Indebtedness permitted by this clause (g) shall not exceed $50,000,000 at any
one time outstanding;
          (h) Guarantees by the Borrower and any Subsidiary of sublessees of any
subleases entered into by the Borrower or any Subsidiary as sublessors;
          (i) Indebtedness of Pacific Sunwear Stores Corp. and other Loan
Parties arising under the Kansas IRB Financing, including any Capital Lease
Obligations arising thereunder;
          (j) Indebtedness of the Borrower or any Subsidiary arising under any
documentation entered into in connection with any sale and leaseback transaction
permitted by Section 6.07, including any Capital Lease Obligations arising
thereunder;
          (k) Indebtedness of the Borrower or any of its Subsidiaries not
otherwise permitted by this Section 6.01, in an aggregate principal amount at
any time outstanding not exceeding $150,000,000; provided that (i) such
Indebtedness may not be secured by any Collateral or any other assets of the
Borrower or any Subsidiary (other than real property and the assets affixed
thereto or integral to the operation thereof), (ii) the aggregate principal
amount of Indebtedness permitted by this clause (k) to the extent constituting
(x) Indebtedness of the Borrower or any Subsidiary secured by a Lien on any
asset of the Borrower or any Subsidiary permitted by the foregoing clause (i) of
this proviso or (y) Indebtedness of any Subsidiary which

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is not a Subsidiary Guarantor shall not in the aggregate exceed $40,000,000 at
any time outstanding, and (iii) if any such Indebtedness shall be secured by a
Lien on any real property on which Collateral is or may in the future be
located, the holder of such Lien shall have executed and delivered to the
Administrative Agent a Collateral Access Agreement with respect to the real
property subject to such Lien;
          (l) Indebtedness (i) under any Swap Agreements or (ii) for bank
overdrafts in the ordinary course of business that are promptly repaid;
          (m) Indebtedness arising from other agreements of the Borrower or any
Subsidiary providing for indemnification, adjustment of purchase price or
similar customary obligations, in each case incurred or assumed in connection
with the acquisition or disposition or sale and leaseback of any business or
assets of the Borrower or any Subsidiary permitted by the Loan Documents; and
          (n) Indebtedness which may be deemed to exist pursuant to any worker’s
compensation claims, self insurance obligations, performance, surety, statutory,
appeal, custom bonds or similar obligations incurred in the ordinary course of
business.
For purposes of this subsection 6.01, any Person becoming a Subsidiary of the
Borrower after the date of this Agreement shall be deemed to have incurred all
of its then outstanding Indebtedness at the time it becomes a Subsidiary, and
any Indebtedness assumed by the Borrower or any of its Subsidiaries shall be
deemed to have been incurred on the date of assumption.
          SECTION 6.02. Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset (other than any real property and the assets affixed thereto or
integral to the operation thereof) now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
          (a) Liens created pursuant to the Loan Documents;
          (b) Permitted Encumbrances;
          (c) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02, provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or Subsidiary and (ii) such Lien shall secure only those obligations
which it secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;
          (d) any Lien existing on any property or asset (other than Collateral)
prior to the acquisition thereof by the Borrower or any Subsidiary or existing
on any property or asset (other than Collateral) of any Person that becomes a
Subsidiary after the date hereof prior to the time such Person becomes a
Subsidiary; provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition or such Person becoming a Subsidiary, as the
case may be, (ii) such Lien shall not apply to any other property or assets of
the Borrower or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such
Person becomes a Subsidiary, as the case may be and

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extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
          (e) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by Section 6.01(e), (ii) such security interests
and the Indebtedness secured thereby are incurred prior to or within one hundred
eighty (180) days after such acquisition or the completion of such construction
or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of
the cost of acquiring, constructing or improving such fixed or capital assets
and (iv) such security interests shall not apply to any other property or assets
of the Borrower or any Subsidiary;
          (f) Liens arising from precautionary Uniform Commercial Code financing
statement filings with respect to leases entered into by the Borrower or any of
its Subsidiaries in the ordinary course;
          (g) Liens granted by the Borrower or any of its Subsidiaries in
connection with the Kansas IRB Financing or any other sale and leaseback
transactions permitted by Section 6.07;
          (h) Liens solely on any cash earnest money deposits made by the
Borrower or any of its Subsidiaries in connection with any purchase agreements
or letters of intent permitted hereunder; and
          (i) Liens securing Indebtedness permitted under Section 6.01(k).
          Notwithstanding the foregoing, none of the Liens permitted pursuant to
this Section 6.02 may at any time attach to any Loan Party’s (1) Credit Card
Accounts, other than Permitted Encumbrances and those permitted under clause
(a) above, (2) Inventory, other than Permitted Encumbrances and those permitted
under clause (a) above and (3) cash, cash equivalents and Deposit Accounts other
than Permitted Encumbrances and those permitted under clauses (a) and (h) above.
          SECTION 6.03. [Intentionally Omitted].
          SECTION 6.04. Fundamental Changes. (a) The Borrower will not, and will
not permit any Subsidiary to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any Person
may merge into the Borrower in a transaction in which the Borrower is the
surviving corporation, (ii) any Person/Loan Party (other than the Borrower) may
merge into any Loan Party in a transaction in which the surviving entity is a
Loan Party or in which the surviving entity is a Person that will become a Loan
Party upon the effectiveness of such merger, (iii) any merger effected for the
sole purpose of reincorporating the Borrower in Delaware (other than through the
formation of a holding company that will own any portion of the Equity Interest
of the Borrower following such merger) and (iv) any Subsidiary may liquidate or
dissolve if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is not materially
disadvantageous to the

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Lenders and except that the Borrower or any Subsidiary may effect any
acquisition permitted by Section 6.05 by means of a merger of the Person that is
the subject of such acquisition with the Borrower or any of its Subsidiaries
(provided that, in the case of a merger with the Borrower, the Borrower is the
survivor).
          (b) The Borrower will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than a Related Line of
Business.
          SECTION 6.05. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except
          (a) Permitted Investments;
          (b) Permitted Acquisitions;
          (c) investments by the Borrower and its Subsidiaries in their
respective Subsidiaries or in the capital stock of their respective
Subsidiaries, provided that at the time of and after giving effect to the
funding of any investment by any Loan Party in any Subsidiary that is not a Loan
Party, Availability shall be not less than the greater of (A) $22,500,000 or
(B) 15% of the aggregate Commitments of all of Lenders in effect at such time;
          (d) loans or advances made by the Borrower to, and Guarantees by the
Borrower of obligations of, any Subsidiary, and loans or advances made by any
Subsidiary to, and Guarantees by any Subsidiary of obligations of, the Borrower
or any other Subsidiary, provided that, at the time of and after giving effect
to the funding of any such loan or advance by any Loan Party to any Subsidiary
that is not a Loan Party or any such Guarantee by any Loan Party of the
obligations of any Subsidiary that is not a Loan Party, Availability shall not
be less than the greater of (A) $22,500,000 or (B) 15% of the aggregate
Commitments of all of Lenders in effect at such time;
          (e) Guarantees constituting Indebtedness permitted by Section 6.01;
          (f) advances or loans made in the ordinary course of business to
non-executive officers and employees of the Borrower and its Subsidiaries;
          (g) Investments existing on the date hereof not otherwise permitted
under this Agreement and described in Schedule 6.05 hereto;
          (h) Investments received in connection with the bona fide settlement
of any defaulted Indebtedness or other liability owed to the Borrower or any
Subsidiary;

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          (i) joint ventures, loans to contractors, loans in connection with
retail development, deposits to landlords and other Investments, provided that
the aggregate amount of such investments shall not exceed $50,000,000 at any
time;
          (j) Investments in any industrial revenue bonds or any other
instruments issued in connection with the Kansas IRB Financing or any other sale
and leaseback transactions of the Borrower or any of its Subsidiaries permitted
by Section 6.07; and
          (k) purchases by the Loan Parties from Alliance Data Systems and/or
its Affiliates of Accounts (such Accounts so purchased shall be collectively
referred to herein as the “Purchased Private Label Accounts”) in connection with
any termination of the credit card processing agreement with Alliance Data
Systems and/or its Affiliates, provided, that the Loan Parties shall deliver to
the Administrative Agent written notice of such purchase at least two
(2) Business Days prior to such purchase.
          SECTION 6.06. Asset Sales. The Borrower will not, nor will it permit
any Subsidiary to, sell, transfer, lease or otherwise dispose of any asset,
including any Equity Interest owned by it, nor will the Borrower permit any
Subsidiary to issue any additional Equity Interest in such Subsidiary (other
than to the Borrower or another Subsidiary in compliance with Section 6.04),
except:
          (a) sales, transfers and dispositions of (i) Inventory in the ordinary
course of business and (ii) used, obsolete, worn out or surplus equipment or
property in the ordinary course of business;
          (b) sales, transfers and dispositions to the Borrower or any
Subsidiary, provided that any such sales, transfers or dispositions involving a
Subsidiary that is not a Loan Party shall be made in compliance with
Section 6.10;
          (c) sale and leaseback transactions permitted by Section 6.07;
          (d) dispositions resulting from any casualty or other insured damage
to, or any taking under power of eminent domain or by condemnation or similar
proceeding of, any property or asset of any Borrower or any Subsidiary; and
          (e) sale or other disposition of any interest in real property (and
assets affixed thereon or integral to the operation thereof), including by lease
or in connection with any sale leaseback transaction permitted hereunder;
          (f) sale or disposition of any d.e.m.o. or One Thousand Steps stores
(or groups of stores) or the discontinuation of any operations related thereto
or the sale or disposition of any assets related thereto;
          (g) sales, transfers and other dispositions of assets (other than
Equity Interests in a Subsidiary unless all Equity Interests in such Subsidiary
are sold) that are not permitted by any other paragraph of this Section,
provided that the aggregate fair market value of all assets sold, transferred or
otherwise disposed of in reliance upon this paragraph (e) shall not exceed
$50,000,000 during any fiscal year of the Borrower; and

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          (h) sales, transfers and other dispositions of Purchased Private Label
Accounts; provided that if Availability at the time of any such sale, transfer
or other disposition is less than $75,000,000, such sale, transfer or other
disposition shall be on terms and pursuant to documentation reasonably
satisfactory to the Administrative Agent in its Permitted Discretion.
          SECTION 6.07. Sale and Leaseback Transactions. The Borrower will not,
nor will it permit any Subsidiary to, enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property that it intends to use
for substantially the same purpose or purposes as the property sold or
transferred, except for (a) any such sale of any fixed or capital assets by any
Borrower or any Subsidiary that is made for cash consideration in an amount not
less than the fair value of such fixed or capital asset and is consummated
within 180 days after such Borrower or such Subsidiary acquires or completes the
construction of such fixed or capital asset, (b) the Kansas IRB Financing and
(c) any other sale leaseback transaction of real property of the Borrower or any
Subsidiary (and any other assets affixed thereto or integral to the operation
thereof); provided that in connection with any sale leaseback of real property
(other than the Kansas IRB Financing) on which any Collateral is or may in the
future be located, the Person acquiring title to such real property shall have
executed and delivered to the Administrative Agent a Collateral Access Agreement
with respect to such real property.
          SECTION 6.08. Swap Agreements. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any Swap Agreement, except
(a) Swap Agreements entered into to hedge or mitigate risks to which the
Borrower or any Subsidiary has actual exposure (other than those in respect of
Equity Interests of the Borrower or any of its Subsidiaries), and (b) Swap
Agreements entered into in order to effectively cap, collar or exchange interest
rates (from fixed to floating rates, from one floating rate to another floating
rate or otherwise) with respect to any interest-bearing liability or investment
of the Borrower or any Subsidiary.
          SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness.
(a) The Borrower will not, nor will it permit any Subsidiary to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
or incur any obligation (contingent or otherwise) to do so, except (i) the
Borrower may declare and pay dividends or distributions with respect to its
common stock payable solely in additional shares of its common stock, and, with
respect to its preferred stock, payable solely in additional shares of such
preferred stock or in shares of its common stock, (ii) Subsidiaries may declare
and pay dividends and distributions ratably with respect to their Equity
Interests, (iii) the Borrower may make additional Restricted Payments, not
exceeding $10,000,000 during any fiscal year, pursuant to and in accordance with
stock option plans or other benefit plans for future, present or former
management, directors, consultants or employees of the Borrower and its
Subsidiaries and (iv) the Borrower may make other Restricted Payments so long as
(A) no Event of Default has occurred and is continuing or would result after
giving effect to such payment and (B) the Borrower shall have Availability of
not less than the greater of (A) $22,500,000 or (B) 15% of the aggregate
Commitments of all of Lenders in effect at such time, after giving effect to
such Restricted Payment.

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          (b) The Borrower will not, nor will it permit any Subsidiary to, make
or agree to pay or make, directly or indirectly, any payment (whether in cash,
securities or other property) of or in respect of principal of or interest on
any Indebtedness, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any Indebtedness, except:
               (i) payment of Indebtedness created under the Loan Documents;
               (ii) payment of regularly scheduled interest and principal
payments as and when due in respect of any Indebtedness, other than payments in
respect of the Subordinated Indebtedness prohibited by the subordination
provisions thereof;
               (iii) refinancings of Indebtedness to the extent permitted by
Section 6.01;
               (iv) payment of secured Indebtedness that becomes due as a result
of the voluntary sale or transfer of the property or assets securing such
Indebtedness;
               (v) the Kansas IRB Unwind Transaction; and
               (vi) payments of Indebtedness not otherwise permitted under this
Section 6.09(b) or any payment on account of the purchase, redemption,
retirement, acquisition, cancellation or termination of any Indebtedness not
otherwise permitted under this Section 6.09(b), in each case, so long as (A) no
Event of Default has occurred and is continuing or would result after giving
effect to such payment and (B) the Borrower shall have Availability of not less
than the greater of (A) $22,500,000 or (B) 15% of the aggregate Commitments of
all of Lenders in effect at such time, after giving effect to such payment.
Notwithstanding any other provisions to the contrary, the consummation of the
Kansas IRB Unwind Transaction shall be permitted under this Agreement.
          SECTION 6.10. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Borrower and Subsidiary Guarantors
(including between and among Subsidiary Guarantors) not involving any other
Affiliate, (c) payments and other transactions permitted under Sections 6.04,
6.05 or 6.09, (d) any employment or other compensation, incentive and benefit
arrangement entered into by the Borrower or any of its Subsidiaries in the
ordinary course of business and the payment of compensation, incentives and
benefits and the reimbursement of expenses pursuant thereto, (e) payment of
reasonable fees and expenses to directors, and (f) indemnification of officers
and directors of the Borrower and its Subsidiaries pursuant to customary
indemnification provisions.

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          SECTION 6.11. Restrictive Agreements. The Borrower will not, nor will
it permit any Subsidiary to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement (other than the Loan Documents and
the Kansas IRB Documents) that prohibits, restricts or imposes any condition
upon (a) the ability of the Borrower or any of its Subsidiaries to create, incur
or permit to exist any Lien in favor of the Administrative Agent upon any of its
property or assets, or (b) the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by any Loan Document, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.11 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary or any assets of the Borrower or any Subsidiary
pending such sale, provided such restrictions and conditions apply only to the
Subsidiary or assets that are to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness, (v) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any documents governing any sale
leaseback transaction permitted by Section 6.07 if such restrictions or
conditions apply only to the real property (or assets affixed thereon or
integral to the operation thereof) which is the subject to such sale leaseback
transaction, (vi) clause (a) of the foregoing shall not apply to customary
provisions in leases restricting the assignment thereof, (vii) the foregoing
shall not apply to customary provisions in joint venture agreements and other
similar arrangements relating solely to the securities, assets and revenues of
such joint venture, and (viii) the foregoing shall not apply to restrictions in
agreements evidencing Indebtedness permitted by Section 6.01(g) that impose
restrictions on the property so acquired.
          SECTION 6.12. Minimum Fixed Charge Coverage Ratio. If a Fixed Charge
Coverage Ratio Triggering Event shall occur, then, as of the last day of each
fiscal quarter during the period (the “Financial Covenant Period”) commencing on
the last day of the fiscal quarter ended immediately prior to the occurrence of
such Fixed Charge Coverage Ratio Triggering Event and ending on the completion
of the Fixed Charge Coverage Restoration Period related to such Fixed Charge
Coverage Ratio Triggering Event, the Borrower will not permit the Fixed Charge
Coverage Ratio, to be less than 1.00 to 1.00.
ARTICLE VII
Events of Default
          If any of the following events (“Events of Default”) shall occur:
          (a) the Borrower shall fail to pay (i) any principal of any Loan when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise, or (ii) any reimbursement
obligation in respect of any LC

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Disbursement when and as the same shall become due and payable, and such failure
to pay such reimbursement obligation shall continue unremedied for a period of
two (2) Business Days;
          (b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of two
(2) Business Days;
          (c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Agreement or any
other Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Agreement or any other Loan
Document or any amendment or modification thereof or waiver thereunder, shall
prove to have been incorrect in any material respect when made or deemed made;
          (d) (i) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.02(a), 5.03 (with respect to the
Borrower’s existence) or 5.08 or in Article VI or (ii) any Loan Document shall
for any reason not be or shall cease to be in full force and effect or is
declared to be null and void, or the Borrower or any Subsidiary takes any action
for the purpose of terminating, repudiating or rescinding any Loan Document or
any of its obligations thereunder;
          (e) the Borrower or any Subsidiary Guarantor, as applicable, shall
fail to observe or perform any covenant, condition or agreement contained in
this Agreement (other than those specified in clause (a), (b) or (d) of this
Article) or any other Loan Document, and such failure shall continue unremedied
for a period of (i) five (5) days after the earlier of the Borrower or any
Subsidiary Guarantor’s knowledge of such breach or notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) if such breach relates to terms or provisions of Section 5.01,
5.02 (other than Section 5.02(a), 5.03 through 5.07 or 5.09 through 5.14 of this
Agreement or (ii) thirty (30) days after the earlier of the Borrower or any
Subsidiary Guarantor’s knowledge of such breach or notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) if such breach relates to any other terms or provisions of any
Loan Document;
          (f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable beyond
the period (without giving effect to any extensions, waivers, amendments or
other modifications of or to such period) of grace, if any, provided in the
instrument or agreement under which such Material Indebtedness was created;
          (g) any event or condition occurs (after giving effect to any
applicable grace periods and after giving effect to any extensions, waivers,
amendments or other modifications of any applicable provision or agreement) that
results in any Material Indebtedness becoming due prior to its scheduled
maturity or that enables or permits the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause, with the
giving of an acceleration or similar notice if required, any Material
Indebtedness to become due, or to require

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the prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity; provided that this clause (g) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of
the property or assets securing such Indebtedness;
          (h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for
sixty (60) days or an order or decree approving or ordering any of the foregoing
shall be entered;
          (i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
          (j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due;
          (k) one or more judgments for the payment of money in an aggregate
amount (not paid or covered by insurance) in excess of $10,000,000 shall be
rendered against the Borrower, any Subsidiary or any combination thereof and the
same shall remain undischarged for a period of thirty (30) consecutive days from
the entry thereof during which execution shall not be effectively stayed or
bonded, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Borrower or any Subsidiary to enforce any such
judgment;
          (l) an ERISA Event shall have occurred that, when taken together with
all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect;
          (m) a Change in Control shall occur;
          (n) the Subsidiary Guaranty shall fail in any material respect to
remain in full force or effect other than for expiration or release in
accordance with its terms or in accordance with the Loan Documents or any Loan
Party shall contest the enforceability thereof in writing, or any Subsidiary
Guarantor shall deny in writing that it has any further liability under the
Subsidiary Guaranty to which it is a party, or shall give notice to such effect;
or
          (o) any Collateral Document shall for any reason (other than the
failure on the part of the Administrative Agent to take actions necessary to
perfect such security interest) fail in

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any material respect to create a valid and perfected security interest in any
Collateral purported to be covered thereby, except as permitted by the terms of
any Loan Document, or any Collateral Document shall fail to remain in full force
or effect (other than due to expiration or release in accordance with its
respective terms or in accordance with the Loan Documents) or any action shall
be taken by any Loan Party to discontinue or to assert the invalidity or
unenforceability of any Collateral Document in any material respect;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder and under the other
Loan Documents, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower described in
clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder and
under the other Loan Documents, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower. Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, and at the
request of the Required Lenders shall, exercise any rights and remedies provided
to the Administrative Agent under the Loan Documents or at law or equity,
including all remedies provided under the UCC; provided that notwithstanding
anything to the contrary set forth in the Loan Documents, the Administrative
Agent shall not give any notices of full dominion, sole control or other similar
instructions unless a Cash Dominion Triggering Event shall have occurred (and
then only until the completion of the Cash Dominion Restoration Period related
thereto).
ARTICLE VIII
The Administrative Agent
          Each of the Lenders and the Issuing Banks hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf, including execution of the other Loan
Documents, and to exercise such powers as are delegated to the Administrative
Agent by the terms of the Loan Documents, together with such actions and powers
as are reasonably incidental thereto.
          The bank serving as the Administrative 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 it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

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          The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing as directed by
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02), and
(c) except as expressly set forth in the Loan Documents, the Administrative
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Borrower or any of its
Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative 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 any
Loan Document, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection with any Loan Document, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, (v) the creation, perfection or priority of Liens on the
Collateral or the existence of the 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 Administrative Agent.
          The Administrative 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 believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), 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.
          The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative 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 Administrative Agent.

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          Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Banks and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, subject
to, so long as no Event of Default has occurred and is continuing, the consent
of the Borrower (such consent not to be unreasonably withheld), to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within thirty (30) days after the
retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Banks,
appoint a successor Administrative Agent which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the Administrative Agent’s resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Administrative 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 it was acting as Administrative Agent.
          Each Lender (including each Issuing Bank) acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender 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 also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender 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, any related agreement or any document furnished
hereunder or thereunder.
          Each Lender hereby agrees that (a) it has requested a copy of each
Report prepared by or on behalf of the Administrative Agent; (b) the
Administrative Agent (i) makes no representation or warranty, express or
implied, as to the completeness or accuracy of any Report or any of the
information contained therein or any inaccuracy or omission contained in or
relating to a Report and (ii) shall not be liable for any information contained
in any Report; (c) the Reports are not comprehensive audits or examinations, and
that any Person performing any field 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 and that the Administrative Agent undertakes no obligation to update,
correct or supplement the Reports; (d) it will keep all Reports confidential and
strictly for its internal use, not share the Report with any Loan Party or any
other Person except as otherwise permitted pursuant to this Agreement; provided,
that the Administrative Agent may at any time (but shall have no obligation to)
share any final Reports with any Loan Party; and (e) without limiting the
generality of any other indemnification provision contained in this Agreement,
it will pay and protect, and indemnify, defend, and hold the Administrative
Agent and any such other Person preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including reasonable attorney fees) incurred by as the direct or

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indirect result of any third parties who might obtain all or part of any Report
through the indemnifying Lender.
          Neither the Syndication Agent, nor any Co-Documentation Agent shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such.
ARTICLE IX
Miscellaneous
          SECTION 9.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
and in the other Loan Documents shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
     (i) if to the Borrower, to it at 3450 E. Miraloma Avenue, Anaheim,
California 92806, Attention of Michael Henry, Senior Vice President and Chief
Financial Officer (Telecopy No. (714) 414-4251);
     (ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Mail
Code: NY1-K855, 270 Park Avenue, 44th Floor, New York, New York 10017, Attention
of Mark Cuccinello (Telecopy No. (212) 646-2274);
     (iii) if to an Issuing Bank, to it at (A) in the case of JPMorgan Chase
Bank, N.A., to it at JPMorgan Chase Bank, N.A., Mail Code: NY1-K855, 270 Park
Avenue, 44th Floor, New York, New York 10017, Attention of Mark Cuccinello
(Telecopy No. (212) 646-2274), (B) in the case of Bank of America, N.A., to it
at Bank of America, N.A., LC’s/Global Trade & Treasury, Mail Code:
NY1-503-04-06, 335 Madison Avenue, New York, New York 10017, Attention of Susan
T. Gilligan (Telecopy No. (212) 503-7897) and (C) in the case of any other
Issuing Bank, to it at the address and telecopy number specified from time to
time by such Issuing Bank to the Borrower and the Administrative Agent;
     (iv) if to the Swingline Lender, to it at JPMorgan Chase Bank, N.A., Mail
Code: NY1-K855, 270 Park Avenue, 44th Floor, New York, New York 10017, Attention
of Mark Cuccinello (Telecopy No. (212) 646-2274); and
     (v) if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.
All such notices and other communications (i) sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received or (ii) sent by facsimile shall be deemed to have been given
when sent, provided 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.

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          (b) Notices and other communications to the Lenders (including any
Issuing Bank) hereunder may be delivered or furnished to the Lenders through the
Administrative Agent by electronic communications (including e-mail and internet
or intranet websites) pursuant to procedures approved by the Administrative
Agent; provided that the foregoing shall not apply to notices pursuant to
Article II or to compliance and no Event of Default certificates delivered
pursuant to Section 5.01(c) unless otherwise agreed by the Administrative Agent
and the applicable Lender. The Administrative Agent or the Borrower (on behalf
of the Loan Parties) 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. All such notices and other
communications (i) 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 not given during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient, and (ii) 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 (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.
          (c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties hereto
(or, in the case of any Lender, by notice to the Administrative Agent and the
Borrower).
          SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, any Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Banks and the Lenders hereunder and under any other Loan Document are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of any Loan document or consent to any departure by
the Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or any
Issuing Bank may have had notice or knowledge of such Default at the time.
          (b) Neither this Agreement nor any other Loan Document nor provision
hereof or thereof may be waived, amended or modified except (i) in the case of
this Agreement, pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders or (ii) in the
case of any other Loan Document, pursuant to an agreement in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties that are
parties thereto with the consent of the Required Lenders; provided that no such
agreement shall

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(A) increase the Commitment of any Lender without the written consent of such
Lender, (B) reduce or forgive the principal amount of any Loan or LC
Disbursement or reduce or forgive the rate of interest thereon, or reduce or
forgive any fees payable hereunder, without the written consent of each Lender
affected thereby (provided that the decision to charge or not to charge or to
revoke notice of interest at the default rate pursuant to Section 2.13(d) shall
be made by the Required Lenders), (C) postpone the scheduled date of payment of
the principal amount of any Loan or LC Disbursement, or any interest thereon, or
any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender affected thereby, (D) change Section 2.18(b)
or (d) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (E) change any of the
provisions of this Section or the definitions of “Required Lenders” or
“Supermajority Revolving Lenders” or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, without the
written consent of each Lender, (F) increase the advance rates set forth in the
definition of Borrowing Base, add new categories of eligible assets or amend the
definitions of “Eligible Cash”, “Eligible Credit Card Accounts”, “Eligible
Inventory” or “Eligible LC Inventory”, in each case, if the effect of any such
amendment to any definition would be to increase the amount of credit available
to the Borrower hereunder, without the written consent of the Supermajority
Revolving Lenders, (G) release any Subsidiary Guarantor from its obligation
under its Subsidiary Guaranty (except as otherwise permitted herein or in the
other Loan Documents), without the written consent of each Lender or (H) except
as provided in subsection (c) of this Section 9.02 or in any Collateral
Document, release all or substantially all of the Collateral, without the
written consent of each Lender; provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, any Issuing Bank or the Swingline Lender hereunder without the prior
written consent of the Administrative Agent, such Issuing Bank or the Swingline
Lender, as the case may be.
          (c) The Lenders hereby irrevocably authorize the Administrative Agent,
at its option and in its sole discretion, to (i) release any Liens granted to
the Administrative Agent by the Loan Parties on any Collateral (A) upon the
termination of all Commitments, payment and satisfaction in full in cash of all
Secured Obligations (other than Unliquidated Obligations), and the cash
collateralization of all Unliquidated Obligations of a type referred to in
clause (i) of the definition thereof in a manner reasonably satisfactory to each
affected Lender, (B) constituting property being sold or disposed of if the Loan
Party disposing of such property certifies to the Administrative Agent that the
sale or disposition is made in compliance with the terms of this Agreement (and
the Administrative Agent may rely conclusively on any such certificate, without
further inquiry), (C) constituting property leased to a Loan Party under a lease
which has expired or been terminated in a transaction permitted under this
Agreement or (D) as required to effect any sale or other disposition of such
Collateral in connection with any exercise of remedies of the Administrative
Agent and the Lenders pursuant to Article VII and (ii) release any Subsidiary
Guarantor from its obligations (other than Unliquidated Obligations) under any
and all Loan Documents upon (A) the termination of all Commitments, payment and
satisfaction in full in cash of all Secured Obligations (other than Unliquidated
Obligations), and the cash collateralization of all Unliquidated Obligations of
a type referred to in clause (i) of the definition thereof in a manner
reasonably satisfactory to each affected Lender (B) the sale of all of the
Equity Interests of such Subsidiary Guarantor if the Loan Party disposing of
such Equity

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Interests certifies to the Administrative Agent that the sale or disposition is
made in compliance with the terms of this Agreement (and the Administrative
Agent may rely conclusively on any such certificate, without further inquiry) or
(C) as required to effect any sale or other disposition of such Equity Interests
in connection with any exercise of remedies of the Administrative Agent and the
Lenders pursuant to Article VII. Except as provided in the preceding sentence,
the Administrative Agent will not release any Liens on Collateral without the
prior written authorization of the Required Lenders; provided that, the
Administrative Agent may in its discretion, release its Liens on Collateral
valued in the aggregate not in excess of $10,000,000 during any calendar year
without the prior written authorization of the Required Lenders. Any such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
the Loan Parties in respect of) all interests retained by the Loan Parties,
including the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.
          SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of one counsel for the Administrative Agent, in connection
with the syndication of the credit facilities provided for herein, the
preparation and administration of the Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by any Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all out-of-pocket expenses incurred
by the Administrative Agent, any Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, any
Issuing Bank or any Lender, in connection with the enforcement, collection or
protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made or Letters of
Credit issued hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Loans or
Letters of Credit. Expenses being reimbursed by the Borrower under this Section
include, without limiting the generality of the foregoing, reasonable costs and
expenses incurred by the Administrative Agent in connection with:
               (i) appraisals and insurance reviews to the extent permitted
hereunder;
               (ii) field examinations to the extent permitted hereunder and the
preparation of Reports based on the reasonable fees charged by a third party
retained by the Administrative Agent or the internally allocated fees for each
Person employed by the Administrative Agent with respect to each field
examination;
               (iii) background checks regarding senior management and/or key
investors, as deemed necessary or appropriate in the sole discretion of the
Administrative Agent;
               (iv) taxes, fees and other charges for (A) lien searches and
(B) filing financing statements and continuations, and other actions to perfect,
protect, and continue the Administrative Agent’s Liens;

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               (v) sums paid or incurred to take any action required of any Loan
Party under the Loan Documents that such Loan Party fails to pay or take; and
               (vi) forwarding loan proceeds, collecting checks and other items
of payment, and establishing and maintaining the accounts and lock boxes, and
costs and expenses of preserving and protecting the Collateral.
     All of the foregoing costs and expenses may be charged to the Borrower as
Revolving Loans or to another deposit account, all as described in
Section 2.18(c).
          (b) The Borrower shall indemnify the Administrative Agent, each
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of the
Loan Documents or any agreement or instrument contemplated thereby, the
performance by the parties hereto of their respective obligations hereunder or
the consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by any Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned or operated by the Borrower or any of its Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
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.
          (c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent, any Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, any Issuing Bank or the Swingline Lender, as
the case may be, such Lender’s Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, any Issuing Bank or the Swingline
Lender in its capacity as such.
          (d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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          (e) All amounts due under this Section shall be payable promptly after
written demand therefor.
          SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of an Issuing Bank that issues any Letter of Credit), except that
(i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender (including any Issuing Bank) may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
          (b) (i) Subject to the conditions set forth in paragraph (b)(ii)
below, any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld, it being understood that
withholding of consent by the Borrower or the Administrative Agent with respect
to an assignment (including any assignment to a Lender, an Affiliate of a Lender
or an Approved Fund) because amounts that would become payable by the Borrower
under Section 2.15 or 2.17 (including amounts payable under Section 2.17 in
respect of withholding taxes) are in excess of those that would be payable under
such Section in respect of the amount assigned if such assignment were not made,
will not be considered to be unreasonable) of:
     (A) the Borrower, provided that no consent of the Borrower shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved
Fund or, if an Event of Default has occurred and is continuing, any other
assignee;
     (B) the Administrative Agent; and
     (C) the Issuing Banks.
          (ii) Assignments shall be subject to the following additional
conditions:
     (A) except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any Class, the amount of the Commitment or 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
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent;

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     (B) 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, provided that this clause shall not be construed to prohibit the
assignment of a proportionate part of all the assigning Lender’s rights and
obligations in respect of one Class of Commitments or Loans;
     (C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500 payable by the assignor or the assignee; and
     (D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire and any tax forms required
by Section 2.17(e).
          For the purposes of this Section 9.04(b), the term “Approved Fund” has
the following meaning:
          “Approved Fund” means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
     (iii) Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) of this Section, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto 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, in the
case of any Foreign Lender (including each Issuing Bank that is a Foreign
Lender), obligations under Section 2.17(e)), 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 2.15, 2.16, 2.17
and 9.03), provided, however, that no such assignment or transfer shall be
deemed to be a waiver of any rights which the Borrower, the Administrative Agent
or any other Lender shall have against such Lender. Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 9.04 shall be treated for purposes of this Agreement as a sale
by such Lender of a participation in such rights and obligations in accordance
with paragraph (c) of this Section.
     (iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices 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 Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the

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Administrative Agent, the Issuing Banks 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 Borrower, any
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
     (v) Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire and any required tax forms (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Assumption and record the information contained therein in the
Register; provided that if either the assigning Lender or the assignee shall
have failed to make any payment required to be made by it pursuant to Section
2.05, 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), the Administrative Agent
shall have no obligation to accept such Assignment and Assumption and record the
information therein in the Register unless and until such payment shall have
been made in full, together with all accrued interest thereon. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
          (c) (i) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Banks or the Swingline Lender, sell
participations to one or more banks or other entities (a “Participant”) in all
or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (A) such Lender’s obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrower, the
Administrative Agent, the Issuing Banks and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation 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, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.18(c) as though it were a Lender.
     (ii) A Participant shall not be entitled to the benefits of Section 2.15,
2.16 or 2.17 unless such Participant shall have complied with the requirements
of such Section; provided, that in any case in which a Participant is so
entitled, any such Participant shall not be entitled to receive any greater
payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have
been entitled to receive with respect to the participation

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sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.17 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.17(e) as though it were a Lender.
          (d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
          SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit
is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.15, 2.16, 2.17, 2.18 and 9.03 and Article VIII
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any provision hereof.
          SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Administrative Agent 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 Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
          SECTION 9.07. Severability. Any provision of this Agreement or any
other Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such

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jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof or thereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
          SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the Secured Obligations held by such Lender,
irrespective of whether or not such Lender shall have made any demand under the
Loan Documents and although such obligations may be unmatured. The applicable
Lender shall notify the Borrower and the Administrative Agent of such set-off or
application, provided that any failure to give or any delay in giving such
notice shall not affect the validity of any such set-off or application under
this Section. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) which such Lender
may have.
          SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
          (b) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to the Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby 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 or, to the extent permitted by law, in such
Federal court. Each of the 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 any other Loan Document shall affect any right that
any party hereto may otherwise have to bring any action or proceeding relating
to this Agreement or any other Loan Document against any other party hereto or
its properties in the courts of any jurisdiction.
          (c) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, 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
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) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan

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Document will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
          SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
          SECTION 9.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
          SECTION 9.12. Confidentiality. Each of the Administrative Agent, the
Issuing Banks and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (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, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Loan Parties and
their obligations, (g) with the consent of the Borrower or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent,
any Issuing Bank or any Lender on a nonconfidential basis from a source other
than the Borrower. For the purposes of this Section, “Information” means all
information received from the Borrower relating to the Borrower or its business,
other than any such information that is available to the Administrative Agent,
any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
the Borrower; provided that, in the case of information received from the
Borrower after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such

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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 LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THIS SECTION
9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC
INFORMATION CONCERNING THE BORROWER AND ITS AFFILIATES AND THEIR RELATED PARTIES
OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE
PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL
HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES
AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
          ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS,
FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE
COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION,
WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THE LOAN
PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY,
EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS
IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE
INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH
ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE
SECURITIES LAWS.
          SECTION 9.13. USA PATRIOT Act. Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies the Borrower that pursuant to
the requirements of the Act, it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.
          SECTION 9.14. Appointment for Perfection. Each Lender hereby appoints
each other Lender as its agent for the purpose of perfecting Liens, for the
benefit of the Administrative Agent and the Lenders, in assets which, in
accordance with Article 9 of the UCC or any other applicable law can be
perfected only by possession. Should any Lender (other than the Administrative
Agent) obtain possession of any such Collateral, such Lender shall notify the
Administrative Agent thereof, and, promptly upon the Administrative Agent’s
request therefor shall deliver such Collateral to the Administrative Agent or
otherwise deal with such Collateral in accordance with the Administrative
Agent’s instructions.
          SECTION 9.15. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender holding such

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Loan in accordance with applicable law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest and
Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or periods
shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.
          SECTION 9.16. Waiver of California Suretyship Laws. Without limiting
the generality of any waiver or other provisions set forth in this Agreement,
each Loan Party hereby absolutely, knowingly, unconditionally and expressly
waives any and all claim, defense or benefit arising directly or indirectly
under any one or more of Sections 2787 to 2855 inclusive of the California Civil
Code to the extent any one or more of such Sections are applicable to such Loan
Party.
[Signature Pages Follow]

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

            PACIFIC SUNWEAR OF CALIFORNIA, INC.
      By   /s/ Sally Frame Kasaks         Sally Frame Kasaks        Chief
Executive Officer     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            JPMORGAN CHASE BANK, N.A., individually as a
Lender, as the Swingline Lender, as an Issuing
Bank and as Administrative Agent
      By   /s/ Joseph A. Lisack         Joseph A. Lisack        Vice President 
   

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            BANK OF AMERICA, N.A., individually as
a Lender, as Syndication Agent and as an
Issuing Bank
      By   /s/ Stephen J. Garvin         Stephen J. Garvin        Managing
Director     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            BRANCH BANK AND TRUST COMPANY, individually as
a Lender and as a Co-Documentation Agent
      By   /s/ Roberts A. Bass         Roberts A. Bass        Senior Vice
President     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            U.S. BANK NATIONAL ASSOCIATION,
individually as a Lender and as a Co-Documentation Agent
      By   /s/ Conan Schleicher         Conan Schleicher        Vice President 
   

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            WELLS FARGO RETAIL FINANCE, LLC,
individually as a Lender and as a Co-Documentation Agent
      By   /s/ Matthew N. Williams         Matthew N. Williams        Vice
President     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            PNC BANK, N.A., individually as a Lender
      By   /s/ Steve Davey         Steve Davey        Vice President     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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            UPS CAPITAL CORPORATION, individually as a Lender
      By   /s/ John P. Holloway         John P. Holloway        Director,
Portfolio Management     

Signature Page to Credit Agreement
Pacific Sunwear of California, Inc.

 

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SCHEDULE 2.01
COMMITMENTS

          LENDER   COMMITMENT
JPMORGAN CHASE BANK, N.A.
  $ 35,000,000    
BANK OF AMERICA, N.A.
  $ 35,000,000    
BRANCH BANK AND TRUST COMPANY
  $ 20,000,000    
U.S. BANK NATIONAL ASSOCIATION
  $ 20,000,000    
WELLS FARGO RETAIL FINANCE, LLC
  $ 20,000,000    
PNC BANK
  $ 10,000,000    
UPS CAPITAL CORPORATION
  $ 10,000,000  
 
       
TOTAL COMMITMENTS
  $ 150,000,000