Exhibit 10.1
EXECUTION VERSION
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of March 31, 2010
among
BORDERS GROUP, INC.
BORDERS, INC.
as Borrowers
THE GUARANTORS PARTY HERETO
THE LENDERS PARTY HERETO
and
BANK OF AMERICA, N.A.
as Administrative Agent
BANK OF AMERICA, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION
as Co-Collateral Agents
WELLS FARGO RETAIL FINANCE, LLC and
GENERAL ELECTRIC CAPITAL CORPORATION
as Co-Syndication Agents
JPMORGAN CHASE BANK, N.A.
as Documentation Agent
with
BANC OF AMERICA SECURITIES LLC
WELLS FARGO RETAIL FINANCE, LLC
J.P. MORGAN SECURITIES INC. and
GE CAPITAL MARKETS, INC.
as Joint Lead Arrangers and Joint Bookrunners

 

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

 

TABLE OF CONTENTS

                                      Page
 
                    1.   DEFINITIONS, RULES OF INTERPRETATION, ETC     2  
 
                   
 
    1.1.     Definitions     2  
 
    1.2.     Rules of Interpretation     37  
 
    1.3.     Accounting Principles     38  
 
                    2.   THE CREDIT FACILITIES     39  
 
                   
 
    2.1.     Revolving Credit Loans     39  
 
          2.1.1. Commitment to Lend under Revolving Credit Facility     39  
 
          2.1.2. [Reserved]     39  
 
          2.1.3. Requests for Loans     39  
 
    2.2.     Fees     40  
 
          2.2.1. Existing Commitment Fee     40  
 
          2.2.2. Extended Commitment Fee     40  
 
    2.3.     Changes in Total Commitment     40  
 
          2.3.1. Reduction of Total Commitment     40  
 
          2.3.2. Termination of Existing Tranche     41  
 
          2.3.3. Increase in Commitment Applicable to Extended Tranche     41  
 
    2.4.     Hedging Agreements and Cash Management Services     42  
 
    2.5.     The Swingline     42  
 
          2.5.1. The Swingline Loans     42  
 
          2.5.2. Request for Swingline Loans     43  
 
          2.5.3. Borrowings to Repay Swingline Loans     44  
 
          2.5.4. Repayment of Participations     45  
 
          2.5.5. Voluntary Reduction of Swingline Sublimit     45  
 
    2.6.     Evidence of Loan Obligations     45  
 
          2.6.1. Loan Accounts     45  
 
          2.6.2. The Revolving Notes     46  
 
          2.6.3. [Reserved]     46  
 
          2.6.4. [Reserved]     46  
 
          2.6.5. [Reserved]     46  
 
          2.6.6. The Swingline Note     46  
 
          2.6.7. Participating Interests of Lenders     47  
 
    2.7.     Interest on Loans     47  
 
    2.8.     Conversion Options     47  
 
          2.8.1. Conversion to Different Type of Loan     47  
 
          2.8.2. Continuation of Type of Loan     48  
 
          2.8.3. Eurocurrency Rate Loans     48  
 
    2.9.     Funds for Loans     48  
 
          2.9.1. Funding Procedures     48  
 
          2.9.2. Advances by Administrative Agent     49  
 
    2.10.     [Reserved]     49  
 
    2.11.     [Reserved]     49  
 
    2.12.     Change in Aggregate Borrowing Base     49  
 
    2.13.     Overadvances     50  
 
    2.14.     Cash Collateral     50  
 
    2.15.     Treatment of Delinquent Lenders     51  

i

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

 

TABLE OF CONTENTS
(continued)

                                      Page 3.   REPAYMENT OF THE LOANS     53  
 
                   
 
    3.1.     Maturity     53  
 
    3.2.     Mandatory Repayments of the Loans     53  
 
    3.3.     Optional Repayments of Loans     53  
 
                    4.   LETTERS OF CREDIT     54  
 
                   
 
    4.1.     Letter of Credit Commitments     54  
 
          4.1.1. Commitment to Issue Letters of Credit     54  
 
          4.1.2. Letter of Credit Applications; Issuance of Letters of Credit  
  55  
 
          4.1.3. Terms of Letters of Credit     56  
 
          4.1.4. Reimbursement Obligations of Lenders     57  
 
          4.1.5. Participations of Lenders     57  
 
          4.1.6. Auto-Extension Letters of Credit     57  
 
    4.2.     Reimbursement Obligation of the Borrowers     57  
 
    4.3.     Letter of Credit Payments     58  
 
    4.4.     Obligations Absolute     60  
 
    4.5.     Role of Issuing Bank     61  
 
    4.6.     Letter of Credit Fee     62  
 
    4.7.     Transitional Letters of Credit     62  
 
    4.8.     Letter of Credit Amounts     62  
 
                    5.   CERTAIN GENERAL PROVISIONS     63  
 
                   
 
    5.1.     Closing and Administrative Agent’s Fees     63  
 
    5.2.     BGI as Agent for other Borrowers     63  
 
    5.3.     Funds for Payments     63  
 
          5.3.1. Payments to Administrative Agent     63  
 
          5.3.2. No Offset, etc.     63  
 
    5.4.     Computations     64  
 
    5.5.     Inability to Determine Eurocurrency Rate     64  
 
    5.6.     Illegality     64  
 
    5.7.     Additional Costs, etc.     65  
 
    5.8.     Capital Adequacy     66  
 
    5.9.     Certificate     66  
 
    5.10.     Indemnity     66  
 
    5.11.     Interest After Default     67  
 
    5.12.     Replacement of Lenders     67  
 
    5.13.     [Reserved]     67  
 
    5.14.     [Reserved]     67  
 
    5.15.     Concerning Joint and Several Liability of the Borrowers     67  
 
    5.16.     Additional Borrowers     70  
 
    5.17.     Taxes     70  
 
                    6.   GUARANTY AND COLLATERAL SECURITY     74  
 
                   
 
    6.1.     Guaranty of Payment and Performance     74  

ii

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

 

TABLE OF CONTENTS
(continued)

                                      Page
 
    6.2.     Guaranty Absolute     74  
 
    6.3.     Effectiveness, Enforcement     76  
 
    6.4.     Waiver     76  
 
    6.5.     Subordination; Subrogation     76  
 
    6.6.     Payments     77  
 
    6.7.     Setoff     77  
 
    6.8.     Further Assurances     77  
 
    6.9.     Successors and Assigns     77  
 
    6.10.     Contribution     78  
 
    6.11.     [Reserved]     78  
 
    6.12.     Security of Borrowers     78  
 
    6.13.     Limitation on Guaranty Obligations     78  
 
                    7.   REPRESENTATIONS AND WARRANTIES     78  
 
                   
 
    7.1.     Corporate Authority     78  
 
          7.1.1. Incorporation; Good Standing     78  
 
          7.1.2. Authorization     79  
 
          7.1.3. Enforceability     79  
 
    7.2.     Governmental Approvals     79  
 
    7.3.     Title to Properties; Leases     79  
 
    7.4.     Fiscal Year; Financial Statements and Projections     79  
 
          7.4.1. Fiscal Year     79  
 
          7.4.2. Financial Statements     79  
 
          7.4.3. Projections     80  
 
    7.5.     No Material Adverse Effect, etc     80  
 
    7.6.     Franchises, Patents, Copyrights, etc     80  
 
    7.7.     Litigation     80  
 
    7.8.     [Reserved.]     80  
 
    7.9.     Compliance with Other Instruments, Laws, etc     80  
 
    7.10.     Tax Status     80  
 
    7.11.     No Event of Default     81  
 
    7.12.     Holding Company and Investment Company Acts     81  
 
    7.13.     [Reserved.]     81  
 
    7.14.     Certain Transactions     81  
 
    7.15.     ERISA Compliance     81  
 
    7.16.     Use of Proceeds     82  
 
          7.16.1. General     82  
 
          7.16.2. Regulations U and X     82  
 
    7.17.     Environmental Compliance     82  
 
    7.18.     Subsidiaries     83  
 
    7.19.     Disclosure     84  
 
    7.20.     Senior Debt Status     84  
 
    7.21.     Solvency     84  
 
    7.22.     Updates to Schedules     84  
 
    7.23.     Insurance     85  
 
    7.24.     Bank Accounts     85  

iii

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

 

TABLE OF CONTENTS
(continued)

                                      Page
 
    7.25.     Perfection of Security Interest     85  
 
    7.26.     [Reserved.]     85  
 
    7.27.     Foreign Assets Control Regulations, Etc     85  
 
    7.28.     Taxpayer Identification Number     85  
 
    7.29.     Excluded Subsidiaries     85  
 
    7.30.     Kobo     85  
 
                    8.   AFFIRMATIVE COVENANTS     85  
 
                   
 
    8.1.     Punctual Payment     86  
 
    8.2.     Maintenance of Office     86  
 
    8.3.     Records and Accounts     86  
 
    8.4.     Financial Statements, Certificates and Information     86  
 
    8.5.     Notices     89  
 
          8.5.1.  Defaults     89  
 
          8.5.2.  Environmental Events     89  
 
          8.5.3.  Notice of Litigation, Judgments and Claims Against Assets    
89  
 
          8.5.4.  Notice Regarding Certain Events     89  
 
          8.5.5.  Notices Concerning Inventory Collateral     89  
 
          8.5.6.  [Reserved]     90  
 
          8.5.7.  Notice of Default under the Second Lien Loan Documents     90
 
 
          8.5.8.  [Reserved]     90  
 
          8.5.9.  Notices under the Pershing Square Warrant Transaction     90  
 
    8.6.     Legal Existence; Maintenance of Properties     90  
 
    8.7.     Insurance     91  
 
    8.8.     Taxes     91  
 
    8.9.     Inspection of Properties     91  
 
          8.9.1.  Generally     91  
 
          8.9.2.  Collateral Reports     92  
 
          8.9.3.  Appraisals     92  
 
    8.10.     Compliance with Laws, Contracts, Licenses, and Permits     93  
 
    8.11.     Employee Benefit Plans     93  
 
    8.12.     Use of Proceeds     93  
 
    8.13.     Stock Collateral     93  
 
    8.14.     Future Subsidiaries     94  
 
    8.15.     Bank Accounts, Credit Cards and Purchase Cards     94  
 
          8.15.1.  General     94  
 
          8.15.2.  Acknowledgment of Application     96  
 
          8.15.3.  Purchase Cards     96  
 
    8.16.     Landlord and Mortgagee Agreements     96  
 
    8.17.     Further Assurances     96  
 
    8.18.     Permitted Restructuring Transactions     96  
 
    8.19.     Intellectual Property     96  
 
                    9.   CERTAIN NEGATIVE COVENANTS     96  
 
                   
 
    9.1.     Restrictions on Indebtedness     96  
 
    9.2.     Restrictions on Liens     98  

iv

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

 

TABLE OF CONTENTS
(continued)

                                      Page
 
    9.3.     Restrictions on Investments     100  
 
    9.4.     Restricted Payments     101  
 
    9.5.     Merger, Consolidation, Disposition of Assets and Sale Leaseback
Transactions     102  
 
          9.5.1.  Mergers and Consolidations     102  
 
          9.5.2.  Disposition of Assets     102  
 
    9.6.     Acquisitions     103  
 
    9.7.     Compliance with Environmental Laws     104  
 
    9.8.     [Reserved.]     104  
 
    9.9.     Employee Benefit Plans     104  
 
    9.10.     Business Activities     105  
 
    9.11.     Fiscal Year     105  
 
    9.12.     Transactions with Affiliates     105  
 
    9.13.     Changes in Governing Documents     105  
 
    9.14.     Inconsistent Agreements     105  
 
    9.15.     Payments of Other Indebtedness     105  
 
    9.16.     Amendments to Second Lien Loan Documents     106  
 
    9.17.     Permitted Restructuring Transactions     106  
 
    9.18.     Certain Terms of the Pershing Square Transactions     106  
 
    9.19.     Inactive Subsidiaries     106  
 
    9.20.     Maximum Cash and Cash Equivalents     106  
 
                    10.   FINANCIAL COVENANTS     107  
 
                   
 
    10.1.     Minimum Excess Availability     107  
 
                    11.   CLOSING CONDITIONS     107  
 
                   
 
    11.1.     Loan Documents     107  
 
    11.2.     Certified Copies of Governing Documents     107  
 
    11.3.     Corporate or Other Action     107  
 
    11.4.     Incumbency Certificate     107  
 
    11.5.     UCC and Intellectual Property Search Results     107  
 
    11.6.     Certificates of Insurance     108  
 
    11.7.     Solvency Certificate     108  
 
    11.8.     Opinion of Counsel     108  
 
    11.9.     Payment of Fees     108  
 
    11.10.     Additional Indebtedness     108  
 
    11.11.     Existing Credit Agreement     108  
 
    11.12.     Disbursement Instructions     108  
 
    11.13.     Excess Availability     108  
 
    11.14.     Validity of Liens     109  
 
    11.15.     Consents and Approvals     109  
 
    11.16.     Financial Condition, etc     109  
 
    11.17.     Minimum Commitments Under Extended Tranche     109  
 
    11.18.     Borrowing Base Report     109  
 
    11.19.     Inventory Summary     109  
 
    11.20.     Agency Account Agreements; Accounts     109  
 
    11.21.     Landlord and Mortgagee Agreements     109  

v

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

 

TABLE OF CONTENTS
(continued)

                                      Page
 
    11.22.     Credit Card Notifications     109  
 
    11.23.     Payoff of Pershing Square Term Loan Facility     110  
 
    11.24.     Second Lien Loan Documents     110  
 
    11.25.     Financial Statements     110  
 
                    12.   CONDITIONS TO ALL BORROWINGS     110  
 
                   
 
    12.1.     Representations True; No Event of Default     110  
 
    12.2.     No Legal Impediment     110  
 
    12.3.     Proceedings and Documents     111  
 
    12.4.     Governmental Regulation     111  
 
    12.5.     Revolving Credit Facility Borrowings     111  
 
    12.6.     Excess Availability     111  
 
    12.7.     Seasonal Availability Requirement     111  
 
                    13.   EVENTS OF DEFAULT; ACCELERATION; ETC     111  
 
                   
 
    13.1.     Events of Default and Acceleration     111  
 
    13.2.     Termination of Commitments     114  
 
    13.3.     Remedies     114  
 
    13.4.     Judgment Currency     115  
 
    13.5.     Distribution of Proceeds     115  
 
    13.6.     Cash Management Services and Hedge Agreements Subordinate     116
 
 
                    14.   THE AGENTS     117  
 
                   
 
    14.1.     Appointment and Authority     117  
 
    14.2.     Rights as a Lender     118  
 
    14.3.     Exculpatory Provisions     118  
 
    14.4.     Reliance by Administrative Agent and the Co-Collateral Agents    
119  
 
    14.5.     Delegation of Duties     119  
 
    14.6.     Resignation of Administrative Agent, Co-Collateral Agent     119  
 
    14.7.     Non-Reliance on Administrative Agent, Co-Collateral Agents and
Other Lenders     120  
 
    14.8.     No Other Duties, Etc     121  
 
    14.9.     Administrative Agent May File Proofs of Claim     121  
 
    14.10.     Duties in the Case of Enforcement     122  
 
    14.11.     Release of Collateral and Guarantors     122  
 
    14.12.     Intercreditor Agreement     123  
 
    14.13.     Indemnity     123  
 
                    15.   SUCCESSORS AND ASSIGNS     123  
 
                   
 
    15.1.     General Conditions     123  
 
    15.2.     Assignments     124  
 
    15.3.     Register     126  
 
    15.4.     Participations     126  
 
    15.5.     Payments to Participants     126  
 
    15.6.     Miscellaneous Assignment Provisions     127  

vi

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

 

TABLE OF CONTENTS
(continued)

                                      Page
 
    15.7.     [Reserved.]     127  
 
    15.8.     New Notes     127  
 
    15.9.     Assignment to Special Purpose Funding Vehicle     127  
 
    15.10.     Resignation as Issuing Bank or Swingline Lender     128  
 
                    16.   PROVISIONS OF GENERAL APPLICATION     128  
 
                   
 
    16.1.     Setoff     128  
 
    16.2.     Costs and Expenses     130  
 
    16.3.     Indemnification; Damage Waiver     131  
 
    16.3A.     Payments Set Aside     132  
 
    16.4.     Treatment of Certain Confidential Information     133  
 
          16.4.1.  Confidentiality     133  
 
          16.4.2.  Prior Notification     133  
 
          16.4.3.  Other     134  
 
    16.5.     Survival of Covenants, Etc     134  
 
    16.6.     Notices     134  
 
    16.7.     Governing Law     135  
 
    16.8.     Headings     135  
 
    16.9.     Counterparts     135  
 
    16.10.     Entire Agreement, Etc     136  
 
    16.11.     Waiver of Jury Trial     136  
 
    16.12.     Consents, Amendments, Waivers, Etc     136  
 
    16.13.     Severability     138  
 
                    17.   USA PATRIOT ACT NOTICE     138  
 
                    18.   TRANSITIONAL ARRANGEMENTS     138  
 
                   
 
    18.1.     Prior Credit Agreement Superseded     138  
 
    18.2.     Interest and Fees under Superseded Agreement     138  
 
                    19.   INTERCREDITOR AGREEMENT     138  

vii

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

 

Exhibits

     
Exhibit A-1
  Form of Revolving Note
Exhibit A-2
  Form of Swingline Note
Exhibit B
  Form of Revolving Loan Request
Exhibit C
  Form of Swingline Loan Request
Exhibit D
  Form of Compliance Certificate
Exhibit E
  Assignment and Acceptance
Exhibit F
  Form of Joinder Agreement (Borrower/Guarantor)
Exhibit G
  Form of Borrowing Base Report
Exhibit H
  Co-Collateral Agent Rights Agreement

Schedules

     
Schedule 1
  Lenders and Commitments
Schedule 1.01A
  Permitted Restructuring Transactions
Schedule 4.7
  Transitional Letters of Credit
Schedule 7.3
  Title to Properties; Leases
Schedule 7.5
  Restricted Payments
Schedule 7.7
  Litigation
Schedule 7.10
  Taxes
Schedule 7.14
  Transactions with Affiliates
Schedule 7.15(d)
  Pension Plans
Schedule 7.17
  Environmental Compliance
Schedule 7.18
  Subsidiaries, Etc.
Schedule 7.23
  Insurance
Schedule 7.24
  Bank Accounts
Schedule 7.28
  Tax Identification Number
Schedule 9.1
  Existing Indebtedness
Schedule 9.2
  Existing Liens
Schedule 9.3
  Existing Investments
Schedule 9.14
  Inconsistent Agreements
Schedule 11.21
  Distribution Centers

-i-

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

 

THIRD AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT
     This THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
March 31, 2010, by and among (a) BORDERS GROUP, INC. (“BGI”), a Michigan
corporation, and BORDERS, INC., a Colorado corporation (“Borders”), (b) any
other Subsidiary of BGI which becomes a Borrower hereunder pursuant to §5.16
(together with BGI and Borders, the “Borrowers”), (c) the Guarantors from time
to time party hereto (the “Guarantors”), (d) the financial institutions from
time to time party hereto (the “Lenders”), (e) BANK OF AMERICA, N.A., as
administrative agent for itself and the Lenders (in such capacity, the
“Administrative Agent”), (f) BANK OF AMERICA, N.A. and GENERAL ELECTRIC CAPITAL
CORPORATION, each as a collateral agent for itself and the Lenders
(collectively, the “Co-Collateral Agents”), (g) WELLS FARGO RETAIL FINANCE, LLC
and GENERAL ELECTRIC CAPITAL CORPORATION, each as a syndication agent for itself
and the Lenders (collectively, the “Co-Syndication Agents”), (h) JPMORGAN CHASE
BANK, N.A., as a documentation agent for itself and the Lenders (the
“Documentation Agent”), and (i) BANK OF AMERICA, N.A., as an Issuing Bank
hereunder.
     WHEREAS, BGI, Borders and BGP (UK) Limited, as borrowers (the “Existing
Borrowers”), the lenders party thereto (the “Existing Lenders”), Bank of America
in its capacity as administrative agent for such lenders from time to time
parties thereto, JPMorgan Chase Bank, N.A. and Wells Fargo Retail Finance, LLC
in their respective capacity as co-syndication agents thereunder, and LaSalle
Retail Finance, a division of LaSalle Business Credit, LLC and General Electric
Capital Corporation, in their respective capacity as co-documentation agents
thereunder are parties to that certain Second Amended and Restated Multicurrency
Revolving Credit Agreement dated as of July 31, 2006 (as amended prior to the
date hereof, the “Existing Credit Agreement”), pursuant to which the Existing
Lenders have made loans and other extensions of credit to the Existing
Borrowers;
     WHEREAS, the Lenders are willing to amend and restate the Existing Credit
Agreement, and the Lenders are willing to make loans and other extensions of
credit to the Borrowers, and the Borrowers are willing to continue, and grant,
liens on the Collateral (as hereinafter defined) in favor of the Administrative
Agent (as hereinafter defined), all on the terms and conditions set forth
herein;
     WHEREAS, pursuant to such amendment and restatement of the Existing Credit
Agreement, among other things, (a) each Existing Lender has been invited to
extend the tenor of its Commitment (as defined in the Existing Credit Agreement)
to lend Revolving Credit Loans through the fourth anniversary of the Effective
Date (as defined below) in exchange for an increase in pricing and, unless
otherwise agreed by such Existing Lender, a reduction in the principal amount of
its Commitment to extend Revolving Credit Loans; (b) each Existing Lender shall
either terminate its Last Out Revolving Commitment (as defined in the Existing
Credit Agreement) or incorporate such commitments into its Commitment under the
Extended Tranche (as defined below); (c) each Existing Lender which has declined
to extend the tenor of its Commitment (as defined in the Existing Credit
Agreement) to lend Revolving Credit Loans shall retain such Commitment at its
existing principal amount, tenor and pricing and such loans will be included in
the Existing Tranche (as defined below); and (d) the Borrowers will be the
initial borrowers under the amended and restated credit agreement and there
shall be no foreign borrowers as of the Effective Date and the Loans (as defined
below) under this Credit Agreement (as defined below) shall be denominated in
Dollars;
     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged (these recitals being an integral part of this Credit Agreement),
the Borrowers, the Administrative Agent, the Co-Collateral

 

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

 

Agents, and the Lenders hereby agree that, as of the Effective Date (as defined
below), the Existing Credit Agreement shall be amended and restated in its
entirety and shall remain in full force and effect as set forth herein:
1. DEFINITIONS, RULES OF INTERPRETATION, ETC.
     1.1. Definitions. The following terms shall have the meanings set forth in
this §1 or elsewhere in the provisions of this Credit Agreement referred to
below:
     ABL Priority Collateral. Has the meaning given to such term in the
Intercreditor Agreement.
     Accounts Receivable. All rights of BGI or any of its Subsidiaries to
payment for goods sold, leased or otherwise marketed in the ordinary course of
business and all rights of BGI or any of its Subsidiaries to payment for
services rendered in the ordinary course of business and all sums of money or
other proceeds due thereon pursuant to transactions with account debtors, except
for that portion of the sum of money or other proceeds due thereon that relate
to sales, use or property taxes in conjunction with such transactions, recorded
on books of account in accordance with GAAP.
     Acquisition. Any transaction, or any series of related transactions,
consummated on or after the Closing Date, by which BGI or any of its
Subsidiaries (a) acquires any ongoing business or all or substantially all of
the assets of any Person or division thereof, whether through a purchase of
assets, merger or otherwise, or (b) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) a
majority of the securities of a corporation, which securities have ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) or a majority (by
percentage and voting power) of the outstanding partnership interests of a
partnership or membership interests of a limited liability company.
     Adjusted Excess Availability. At any time of determination, the then Excess
Availability, minus, if applicable, the Incremental Seasonal Amount if the
Seasonal Availability Period is in effect at such time; provided, however, that
Adjusted Excess Availability shall not apply at any time after the payment in
full of the Indebtedness under the Second Lien Loan Facility.
     Adjustment Date. The first Business Day of the month immediately following
the end of each Fiscal Quarter; provided that, with respect to the Existing
Tranche, no Adjustment Date shall occur on the Effective Date and the first
Adjustment Date following the Effective Date shall mean the first Business Day
of May, 2010.
     Administrative Agent. Bank of America, acting as administrative agent for
the Lenders, and each other Person appointed as the successor Administrative
Agent in accordance with §14.6.
     Administrative Agent’s Office. The Administrative Agent’s office located at
100 Federal Street, Boston, Massachusetts 02110 or at such other location as the
Administrative Agent may designate from time to time.
     Administrative Agent’s Special Counsel. Bingham McCutchen LLP or such other
counsel as may be approved by the Administrative Agent.
     Administrative Questionnaire. An Administrative Questionnaire in a form
supplied by the Administrative Agent.

- 2 -

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

 

     Affiliate. Any Person which, directly or indirectly, controls, is
controlled by or is under common control with any Person. “Control” of a Person
means the power, directly or indirectly, (a) to vote five percent (5%) or more
of the Capital Stock (on a fully diluted basis) of such Person having ordinary
voting power for the election of directors, managing members or general partners
(as applicable); or (b) to direct or cause the direction of the management and
policies of such Person (whether by contract or otherwise).
     Agency Account Agreements. See §8.15.1.
     Agents. Collectively, the Administrative Agent, the Co-Collateral Agents,
the Co-Syndication Agents and the Documentation Agent.
     Aggregate Borrowing Base. At the relevant time of reference thereto, an
amount determined by the Administrative Agent by reference to the most recent
Borrowing Base Report, as adjusted pursuant to the provisions below, which is
equal to the sum of:
     (a) 90% of Eligible Credit Card Receivables of the Borrowers and the
Guarantors; plus
     (b) 90% of the most recently appraised net orderly liquidation value
(stated as a percentage of cost and as performed by an appraiser, and in a
manner, acceptable to the Administrative Agent) of the Eligible Inventory owned
by the Borrowers and the Guarantors net of Inventory Reserves and the Shrink
Reserve; provided, however, that if the Increased Advance Rate Conditions have
not occurred on or prior to December 31, 2010, such percentage shall be reduced
to 87.5% effective as of such date; provided, further, however, that, if the
Increased Advance Rate Conditions have occurred and been satisfied on or prior
to June 30, 2011, such percentage shall be increased to 90% commencing on the
date on which such conditions have been satisfied (but in no event shall such
increase occur after June 30, 2011 if the Increased Advance Rate Conditions have
not been satisfied by that date); plus
     (c) at the request of the Borrowers and in the sole discretion of the
Administrative Agent and the Second Lien Agent after the completion of due
diligence with respect to Eligible Corporate Sales Receivables, an advance rate
agreed to by the Administrative Agent and the Second Lien Agent, but not
exceeding 85% of Eligible Corporate Sales Receivables; minus
     (d) Landlord Lien Reserve; minus
     (e) Hedge Reserve; provided, however, that such reserve shall not apply at
any time after the payment in full of the Indebtedness under the Second Lien
Loan Facility; minus
     (f) Net Debt Reserve; provided, however, that such reserve shall not apply
at any time after the payment in full of the Indebtedness under the Second Lien
Loan Facility; minus
     (g) Purchase Card Reserve; provided, however, that such reserve shall not
apply at any time after the payment in full of the Indebtedness under the Second
Lien Loan Facility; minus

- 3 -

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

 

     (h) Term Borrowing Base Reserve; provided, however, that such reserve shall
not apply at any time after the payment in full of the Indebtedness under the
Second Lien Loan Facility; minus
     (i) Equity Reserve (if then applicable); provided, however, that such
reserve shall not apply at any time after the payment in full of the
Indebtedness under the Second Lien Loan Facility; minus
     (j) Other Reserves including, without limitation, a Customer Deposit
Reserve, a Customer Credit Liability Reserve and a reserve for ad valorem and
other taxes which may have priority over the security interest of the
Administrative Agent or the Second Lien Agent.
     Anything to the contrary in this Credit Agreement notwithstanding but
subject to the Intercreditor Agreement, the Administrative Agent reserves the
right, in consultation with the Borrowers (but without their consent) and
immediately upon notice (which shall contain a brief explanation for such
changes) to the Borrowers, without declaring an Event of Default, to change
eligibility criteria contained in the definitions of Eligible Credit Card
Receivables, Eligible Corporate Sales Receivables and Eligible Inventory, to
change and/or establish reserves taken in respect of Eligible Inventory,
Eligible Credit Card Receivables and Eligible Corporate Sales Receivables from
time to time and/or to reduce the advance rates against the Aggregate Borrowing
Base or any components thereof in such amounts, and with respect to such
matters, as the Administrative Agent in its reasonable discretion shall deem
necessary or appropriate, from time to time; provided that any such change in
eligibility criteria, or any such change and/or establishment of reserves taken
in respect of Eligible Inventory, Eligible Credit Card Receivables and Eligible
Corporate Sales Receivables and/or any such reduction in the advance rates made
pursuant to this paragraph shall not result in more credit being available, and
shall not be more favorable to the Borrowers than as set forth in this Credit
Agreement on the Effective Date without the written consent of the Required
Lenders and in accordance with the Intercreditor Agreement.
     Annual Net Debt Amount. The greatest amount of Net Debt of Paperchase on
any Business Day during the first five Business Days of each calendar year. Once
determined, the Annual Net Debt Amount shall remain unchanged until the
calculation thereof in the subsequent calendar year.
     Applicable Margin. For each period commencing on an Adjustment Date through
the date immediately preceding the next Adjustment Date (each a “Rate Adjustment
Period”), the Applicable Margin with regard to each of the Existing Tranche and
the Extended Tranche shall be the applicable margin set forth below with respect
to the arithmetic mean of the daily Excess Availability as determined for the
Fiscal Quarter of BGI and its Subsidiaries ended immediately prior to the
applicable Rate Adjustment Period.
Applicable Margin — Existing Tranche

                                                              Standby  
Documentary                 Eurocurrency   Letter of   Letter of                
Rate   Credit   Credit Level   Excess Availability   Base Rate Loans   Loans  
Fees   Fees I  
Greater than or equal to $350,000,000
    0.25 %     2.00 %     2.00 %     1.00 %

- 4 -

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

 

                                                              Standby  
Documentary                 Eurocurrency   Letter of   Letter of                
Rate   Credit   Credit Level   Excess Availability   Base Rate Loans   Loans  
Fees   Fees II  
Greater than or equal to $150,000,000 but less than $350,000,000
    0.50 %     2.25 %     2.25 %     1.125 %    
 
                                III  
Less than $150,000,000
    0.75 %     2.50 %     2.50 %     1.25 %

Applicable Margin — Extended Tranche

                                                              Standby  
Documentary                 Eurocurrency   Letter of   Letter of                
Rate   Credit   Credit Level   Excess Availability   Base Rate Loans   Loans  
Fees   Fees I  
Greater than or equal to $250,000,000
    2.75 %     3.75 %     3.75 %     1.875 %    
 
                                II  
Greater than or equal to $100,000,000 but less than $250,000,000
    3.00 %     4.00 %     4.00 %     2.00 %    
 
                                III  
Less than $100,000,000
    3.25 %     4.25 %     4.25 %     2.125 %

     Notwithstanding the foregoing, if the Borrowers fail to deliver any
Compliance Certificate pursuant to §8.4(c) hereof then, for the period
commencing on the next Adjustment Date to occur subsequent to such failure
through the date immediately following the date on which such Compliance
Certificate is delivered, the Applicable Margin shall be the Applicable Margin
set forth in Level III above for the Existing Tranche or the Extended Tranche,
as applicable. For the avoidance of doubt, for the period from the Effective
Date to the date immediately preceding the next Adjustment Date that occurs at
least three months after the Effective Date, the Applicable Margin shall be set
at no less than Level II above.
     Notwithstanding anything to the contrary in the foregoing, in the event
either the Borrowers or the Administrative Agent determines, in good faith, that
the calculation of Excess Availability on which the Applicable Margin for any
particular period was determined is inaccurate and, as a consequence thereof,
the Applicable Margin with respect to any Tranche was lower or higher than it
would have been, (i) the Borrowers shall promptly (but in any event within ten
(10) Business Days) deliver (after the Borrowers discover such inaccuracy or the
Borrowers are notified by the Administrative Agent of such inaccuracy, as the
case may be) to the Administrative Agent correct financial and borrowing base
information for such period, (ii) the Administrative Agent shall determine and
notify the Borrowers of the amount of interest that would have been due in
respect of any of the outstanding Obligations, if any, during such period had
the Applicable Margin been calculated based on the correct Excess Availability
and (iii) if the Applicable Margin was lower than it would have been, the
Borrowers shall promptly pay to the Administrative Agent the difference, between
that amount and the amount actually paid in respect of such period. The
foregoing shall in no way limit the rights of the Administrative Agent or the
Lenders to exercise their rights to impose the rate of interest applicable
during an Event of Default as provided herein.

- 5 -

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

 

     Applicable Pension Legislation. At any time, any pension or retirement
benefits legislation (be it national, federal, provincial, territorial or
otherwise) then applicable to any Borrower or any of its Subsidiaries.
     Approved Fund. Any Fund 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.
     Assignment and Acceptance. An assignment and acceptance entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by §15.2), and accepted by the Administrative Agent, in substantially
the form of Exhibit E or any other form approved by the Administrative Agent.
     Authorized Officers. The President, Vice President and Chief Financial
Officer, Vice President and Controller, Associate Director, Treasury or
Treasurer of any Borrower and with respect to any Foreign Subsidiary, a director
of such Foreign Subsidiary or, in any case, any Person designated in writing to
the Administrative Agent by any of the foregoing.
     Auto-Extension Letter of Credit. See §4.1.6.
     Balance Sheet Date. January 31, 2009.
     Bank of America. Bank of America, N.A., a national banking association, in
its individual capacity.
     Base Rate. The highest of (a) the variable annual rate of interest so
designated from time to time by Bank of America as its “prime rate”, such rate
being a reference rate and not necessarily representing the lowest or best rate
being charged to any customer, (b) one-half of one percent (0.50%) above the
Federal Funds Effective Rate and (c) the Eurocurrency Rate for a one-month
Interest Period in effect for such day plus one percent (1.0%). “Federal Funds
Effective Rate” shall mean for any day, the rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers on such day, as
published for the Business Day next succeeding such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any next succeeding
Business Day, Federal Funds Effective Rate for any such day shall be the average
rate per annum (rounded upward, if necessary, to a whole multiple of 1/100 of
1%) charged to Bank of America on such day on such transactions as reasonably
determined by the Administrative Agent. Changes in the Base Rate resulting from
any changes in Bank of America’s “prime rate” shall take place immediately
without notice or demand of any kind.
     Base Rate Loans. Revolving Credit Loans bearing interest calculated by
reference to the Base Rate.
     BGI. As defined in the preamble hereto.
     BGP (UK). BGP (UK) Limited, a company with limited liability incorporated
under the laws of England and Wales.
     Borders. As defined in the preamble hereto.
     Borders Direct. Borders Direct, LLC, a Virginia limited liability company.

- 6 -

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

 

     Borders Superstores. Borders Superstores (UK) Limited, a company with
limited liability incorporated under the laws of England and Wales.
     Borrower(s). As defined in the preamble hereto and such term shall include
any new Borrower that becomes party hereto by executing a Joinder Agreement and
satisfying the requirements of §5.16.
     Borrower Note Record. A Record with respect to a Revolving Note.
     Borrower Obligations. All indebtedness, obligations and liabilities of the
Borrowers and their Subsidiaries to any of the Lenders, any Affiliate of any
Lender, any of the Agents, any Issuing Bank and the Swingline Lender
individually or collectively, existing on the Effective Date or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement, any of the Notes, or any of the other Loan Documents or any
Hedging Agreement or any Cash Management Services or in respect of any of the
Revolving Credit Loans made or Reimbursement Obligations incurred in respect of
Letters of Credit issued for the account of any of the Borrowers or any of the
Revolving Notes, Letter of Credit Applications, Letters of Credit or other
instruments at any time evidencing any thereof and including interest, fees,
costs, expenses and indemnities that accrue after the commencement by or against
any Borrower or any of its Subsidiaries of any Insolvency Proceeding, regardless
of whether such interest, fees costs, expenses and indemnities are allowed
claims in such Insolvency Proceeding.
     Borrowing Base Report. A Borrowing Base Report signed by an Authorized
Officer of the Borrowers and in substantially the form of Exhibit G hereto and
in such detail as shall be reasonably satisfactory to the Administrative Agent.
All calculations of the Aggregate Borrowing Base in connection with the
preparation of any Borrowing Base Report shall originally be made by the
Borrowers and certified to the Administrative Agent; provided that the
Administrative Agent shall have the right to review and adjust, in the exercise
of its reasonable credit judgment, any such calculation to the extent that such
calculation is not in accordance with this Credit Agreement.
     Business Day. Any day on which banking institutions in Boston,
Massachusetts and New York, New York are open for the transaction of banking
business and, in addition, with respect to any Eurocurrency Rate Loan, (a) a
London Banking Day and (b) a day on which Dollar settlements of such dealings
may be effected in New York, New York and London, England.
     Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with GAAP.
     Capital Expenditures. Amounts paid or Indebtedness incurred by BGI or any
of its Subsidiaries in connection with the purchase or lease by BGI or any of
its Subsidiaries of Capital Assets that would be required to be capitalized and
shown on the balance sheet of such Person in accordance with GAAP, provided that
Capital Expenditures shall not include any expenditures made to effect any
Acquisition.
     Capital Stock. Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

- 7 -

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

 

     Capitalized Leases. Leases under which BGI or any of its Subsidiaries is
the lessee or obligor, the discounted future rental payment obligations under
which are required to be capitalized on the balance sheet of the lessee or
obligor in accordance with GAAP.
     Cash Collateralize. To pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Administrative Agent, the Issuing
Bank or Swingline Lender (as applicable) and the Lenders, as collateral for the
LC Exposure, Obligations in respect of Swingline Loans, or obligations of
Lenders to fund participations in respect of either thereof (as the context my
require), cash or deposit account balances or, if the Issuing Bank or Swingline
Lender benefitting from such collateral shall agree in its sole discretion,
other credit support, in each case pursuant to documentation in form and
substance satisfactory to (a) the Administrative Agent and (b) the Issuing Bank
or the Swingline Lender (as applicable). “Cash Collateral” shall have a meaning
correlative to the foregoing and shall include the proceeds of such cash
collateral and other credit support.
     Cash Dominion Cure Event. With respect to any Cash Dominion Event arising
from an Event of Default, (a) such Event of Default is waived by the Lenders or
otherwise remedied by the Borrowers in accordance with this Credit Agreement and
(b) no Event of Default occurs at any time during a period of sixty
(60) consecutive days following the date on which such Event of Default is so
waived or otherwise remedied. With respect to any other Cash Dominion Event, the
Excess Availability (or, if in effect, Adjusted Excess Availability) is greater
than the greater of (i) fifteen percent (15%) of the lesser of (A) the Aggregate
Borrowing Base and (B) the Total Commitment and (ii) $65,000,000 for a period of
sixty (60) consecutive days. Notwithstanding the foregoing, if a Cash Dominion
Event occurs more than two times during any twelve (12) month period, no Cash
Dominion Cure Event shall occur until twelve (12) months have elapsed from the
date the first such Cash Dominion Event commenced.
     Cash Dominion Event. Any time either (a) an Event of Default shall have
occurred or (b) the Excess Availability (or, if in effect, Adjusted Excess
Availability) is less than the greater of (i) fifteen percent (15%) of the
lesser of (A) the Aggregate Borrowing Base and (B) the Total Commitment and (ii)
$65,000,000.
     Cash Management Services. Any cash management services (including, without
limitation, ACH and similar transactions, credit card processing services, the
maintenance of operating or deposit accounts and the provision of checking or
overdraft facilities or purchase card products) from time to time made available
to the Borrowers or any of their Subsidiaries by any of the Lenders, the
Administrative Agent, or any Issuing Bank, individually or collectively, or any
of their Affiliates.
     CERCLA. See §7.17(a).
     Change in Law. The occurrence, after the Effective Date, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or
treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.
     Change of Control. (a) An event or series of events by which any “person”
or “group” of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934) (other than (i) Pershing Square and (ii) and any other
“person” or “group” that the Administrative Agent and the Co-Syndication Agents
shall have approved in writing in their sole discretion) shall have acquired
“beneficial ownership” (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act, except that a person or group
shall be deemed to have “beneficial ownership” of all securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after

- 8 -

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

 

the passage of time or the satisfaction of other conditions and irrespective of
the financial and other terms upon which such right may be exercised (such
right, an “option right”)), directly or indirectly, of thirty-seven and a half
percent (37.5%) or more of the Capital Stock of BGI that is entitled (or would
be entitled upon exercise) to vote for members of the board of directors or
equivalent governing body of BGI (and taking into account all such securities
that such “person” or “group” and all other “persons” or “groups” have the right
to acquire pursuant to any option right); or (b) during any period of twelve
consecutive calendar months, individuals who were directors of BGI on the first
day of such period (together with any new directors whose election by the Board
of Directors of BGI was approved by a vote of sixty-six and two-thirds percent
(66 2/3%) of the directors then still in office who were either directors at the
beginning of such period or whose election was previously so approved) shall
cease to constitute a majority of the board of directors of BGI; (c) BGI fails
to own 100% of the Capital Stock of all other Borrowers and all Guarantors,
except as a result of a transaction permitted hereunder; or (d) any “change of
control” or similar event as defined in any Second Lien Loan Document.
     Closing Date. July 31, 2006.
     Closing Fee. See §5.1.
     Co-Collateral Agents. As defined in the preamble hereto.
     Co-Collateral Agent Rights Agreement. That certain letter agreement dated
as of the date hereof by and among the Administrative Agent, the Co-Collateral
Agents, the Borrowers and the Guarantors, a copy of which is attached hereto as
Exhibit H.
     Code. The Internal Revenue Code of 1986, as amended.
     Collateral. All of the property, rights and interests of the Borrowers and
the Guarantors that are or are intended to be subject to the Liens created by
the Security Documents. Collateral shall include the Intellectual Property of
the Borrowers and Guarantors; it being understood that, subject to §8.19, the
Second Lien Agent, for the benefit of itself and the Second Lien Secured
Parties, shall have a first priority security interest in the Intellectual
Property, certain of the Capital Stock of Paperchase and Borders Superstores,
the Capital Stock of Borders Direct and the Capital Stock of Kobo owned by any
Borrower or any Guarantor, and all furniture, fixtures and equipment and the
Administrative Agent, for the benefit of the Secured Parties, shall have a
second priority security interest in the Intellectual Property, certain of the
Capital Stock of Paperchase and Borders Superstores, the Capital Stock of
Borders Direct and the Capital Stock of Kobo owned by any Borrower or any
Guarantor, and all furniture, fixtures and equipment. For the avoidance of
doubt, the term “Collateral” includes both the ABL Priority Collateral and the
Second Lien Priority Collateral.
     Commitment. With respect to each Lender, the amount set forth on Schedule 1
hereto as the amount of such Lender’s commitment to make Revolving Credit Loans
under the Extended Tranche or the Existing Tranche, as the case may be, to, and
to participate in Swingline Loans and the issuance, extension and renewal of
Letters of Credit for the account of, the Borrowers, as the same may be reduced
from time to time in accordance with this Credit Agreement; or if such
commitment is terminated pursuant to this Credit Agreement, zero.
     Commitment Fee. The Existing Commitment Fee and/or the Extended Commitment
Fee, as the context requires.
     Commitment Percentage. Subject to adjustment as provided in §2.15, the
percentage set forth on Schedule 1 hereto as such Lender’s percentage of the
Total Commitment, as in effect from time to time.

- 9 -

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

 

     Commitment Termination Date. The Existing Tranche Termination Date or the
Extended Tranche Termination Date, as the context requires.
     Compliance Certificate. See §8.4(c).
     Concentration Account. See §8.15.1.
     Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of BGI and its Subsidiaries,
consolidated in accordance with GAAP.
     Consolidated EBITDA. With respect to any period, an amount equal to the sum
of (a) Consolidated Net Income of BGI and its Subsidiaries for such period
(excluding (i) all extraordinary nonrecurring items of income, but not losses
(except to the extent (x) such extraordinary cash losses are offset by
extraordinary cash income or (y) such extraordinary non-cash losses are offset
by extraordinary non-cash income) and (ii) income or loss of any Joint Venture
to which BGI or any of its Subsidiaries is a party to the extent such income or
loss would otherwise have been included in Consolidated Net Income), plus (b) in
each case to the extent deducted in the calculation of such Person’s
Consolidated Net Income and without duplication, (i) depreciation and
amortization for such period, plus (ii) income tax expense for such period, plus
(iii) Consolidated Total Interest Expense paid or accrued during such period,
all as determined in accordance with GAAP, provided, however, that there shall
be excluded in calculating Consolidated Net Income for purposes of this
definition any losses attributable to the use of a fair value methodology for
recognition and measurement of impairment of goodwill not identified with
impaired assets in accordance with Accounting Principles Board Opinion No. 142.
     Consolidated Fixed Charges. With respect to BGI and its Subsidiaries and
for any period, the sum, without duplication, of (a) Consolidated Total Interest
Expense for such period, plus (b) any and all scheduled repayments of principal
during such period in respect of Indebtedness that becomes due and payable or
that are to become due and payable during such period pursuant to any agreement
or instrument to which any Borrower or any of its Subsidiaries is a party
relating to (i) the borrowing of money or the obtaining of credit, including the
issuance of notes or bonds, (ii) the deferred purchase price of assets (other
than trade payables incurred in the ordinary course of business), (iii) in
respect of any Capitalized Leases, and (iv) Indebtedness of the type referred to
above of another Person guaranteed by BGI or any of its Subsidiaries, plus
(c) dividends paid by BGI on or in respect of any shares of any class of Capital
Stock of BGI during such period, plus (d) the purchase, redemption, defeasance,
retirement or other acquisition of any shares of any class of Capital Stock of
BGI or any of its Subsidiaries, directly or indirectly through a Subsidiary or
otherwise (including the setting apart of assets for a sinking or other
analogous fund to be used for such purpose), plus (e) payment in cash or other
property (other than common shares or additional warrants or rights to acquire
common shares or other equity securities or stock appreciation rights of BGI)
arising or resulting from the settlement, exercise, purchase, redemption,
defeasance, retirement, payment, acquisition or otherwise of the Pershing Square
Warrants or any debt or equity instruments (including interest and fees thereon)
issued as a result of or in connection with the deferral of any payment in
respect of the Pershing Square Warrants or any settlement, exercise, purchase,
redemption, defeasance, retirement, payment, acquisition or otherwise thereof;
provided, however, that payments made to Pershing Square pursuant to the
Pershing Square Term Loan Documents and payments made with respect to the FIFO
Loans in accordance with Section 3.2(d) of the Second Lien Loan Agreement shall
not be taken into account in making the foregoing calculation. Demand
obligations shall be deemed to be due and payable during any fiscal period
during which such obligations are outstanding.
     Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of BGI and its Subsidiaries, after deduction of all expenses, taxes,
and other proper charges, determined in accordance with GAAP.

- 10 -

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

 

     Consolidated Operating Cash Flow. For any period, an amount equal to the
sum of (a) Consolidated EBITDA minus (b) Capital Expenditures minus (c) cash
taxes paid, in each case of BGI and its Subsidiaries for such period determined
in accordance with GAAP.
     Consolidated Total Interest Expense. For any period, the aggregate amount
of interest required to be paid or accrued by BGI and its Subsidiaries during
such period on all Indebtedness of BGI and its Subsidiaries outstanding during
all or any part of such period, whether such interest was or is required to be
reflected as an item of expense or capitalized (including, without limitation,
paid-in-kind interest), including payments consisting of interest in respect of
any Capitalized Lease or any Synthetic Lease, and including commitment fees,
agency fees, facility fees, balance deficiency fees and similar fees or expenses
in connection with the borrowing of money.
     Conversion Request. A notice given by the Borrowers to the Administrative
Agent of the Borrowers’ election to convert or continue a Revolving Credit Loan
in accordance with §2.8.
     Copyright Security Agreement. Each Memorandum of Grant of Security Interest
in Copyrights that may be entered into after the Effective Date by any Borrower,
any Guarantor, any of such Borrower’s or such Guarantor’s Subsidiaries and the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent, each as amended, supplemented or otherwise modified from time to time.
     Co-Syndication Agents. As defined in the preamble hereto.
     Credit Agreement or Agreement. This Third Amended and Restated Revolving
Credit Agreement, including the Schedules and Exhibits hereto.
     Credit Card Notifications. See §11.22.
     Customer Credit Liability Reserve. At any time, an amount equal to 50% of
the aggregate remaining value at such time of (a) outstanding gift certificates
and gift cards of the Borrowers entitling the holder thereof to use all or a
portion of the certificate or gift card to pay all or a portion of the purchase
price for any Inventory, and (b) outstanding merchandise credits of the
Borrowers.
     Customer Deposit Reserves. A reserve in an amount equal to 100% of the
customer deposits made to any Borrower or any Guarantor.
     Debtor Relief Laws. The Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
     Deed. That certain Composite Security Deed executed and delivered on the
Effective Date, among BGI, BGP (UK) and the Administrative Agent, in form and
substance satisfactory to the Administrative Agent, as amended, supplemented or
otherwise modified from time to time.
     Default. See §13.1.
     Delinquent Lender. See §2.15(a).
     Deteriorating Lender. Any Delinquent Lender or any other Lender as to which
(a) the Administrative Agent and either of the Issuing Bank or the Swingline
Lender has reasonably determined that such Lender has defaulted in fulfilling
its obligations under one or more other syndicated credit

- 11 -

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

 

facilities, or (b) such Lender or a direct or indirect parent company of such
Lender has been deemed insolvent in the reasonable judgment of the
Administrative Agent or become the subject of any Debtor Relief Law.
     Distribution. The declaration or payment of any dividend on or in respect
of any shares of any class of Capital Stock of a Person, other than dividends
payable solely in shares of common stock of such Person; the purchase,
redemption, defeasance, retirement or other acquisition of any shares of any
class of Capital Stock of a Person, directly or indirectly through a Subsidiary
of such Person or otherwise (including the setting apart of assets for a sinking
or other analogous fund to be used for such purpose); the return of capital by a
Person to its shareholders as such; or any other distribution on or in respect
of any shares of any class of Capital Stock of such Person.
     Documentation Agent. As defined in the preamble hereto.
     Dollars or $. Dollars in lawful currency of the United States of America.
     Domestic Borrowing Base. As defined in the Existing Credit Agreement.
     Domestic Lending Office. Initially, the office of each Lender designated as
such in Schedule 1 hereto; thereafter, such other office of such Lender, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
     Domestic Subsidiary. Any Subsidiary of BGI organized under the laws of the
United States of America, any state or territory thereof or the District of
Columbia.
     Drawdown Date. The date on which any Loan is made or is to be made, and the
date on which any Loan is converted or continued in accordance with §2.8.
     Effective Date. The first date on which the conditions set forth in §11
have been satisfied and any Loans are to be made or converted or any Letter of
Credit is to be issued hereunder.
     Eligible Assignee. Any Person that meets the requirements to be an assignee
under §§15.2(c) and (f) (subject to such consents, if any, as may be required
under §15.2(c)).
     Eligible Corporate Sales Receivables. As of the date of determination
thereof, Accounts Receivable due to a Borrower or a Guarantor arising from
corporate sales of such Borrower or such Guarantor, the value of which shall be
determined by taking into consideration, among other factors, their book value
determined in accordance with GAAP; provided, however, that none of the
following classes of Accounts Receivable shall be deemed to be Eligible
Corporate Sales Receivables:
     (a) Accounts Receivable that do not arise out of sales of goods or
rendering of services in the ordinary course of such Borrower’s or such
Guarantor’s business;
     (b) Accounts Receivable payable other than in Dollars or that are otherwise
on terms other than those normal or customary in such Borrower’s or such
Guarantor’s business;
     (c) Accounts Receivable owing from any Person that is an Affiliate of a
Borrower or a Guarantor;

- 12 -

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

 

     (d) Accounts Receivable more than 60 days past original invoice date or
more than 30 days past the date due;
     (e) Accounts Receivable owing from any Person from which an aggregate
amount of more than 20% of the Accounts Receivable owing therefrom is more than
30 days past the date due;
     (f) Accounts Receivable owing from any Person that (i) has disputed
liability for any Account Receivable owing from such Person or (ii) has
otherwise asserted any claim, demand or liability against any Borrower or any of
its Subsidiaries, whether by action, suit, counterclaim or otherwise;
     (g) Accounts Receivable owing from any Person that shall take or be the
subject of any action or proceeding of a type described in §13.1(g);
     (h) Accounts Receivable (i) owing from any Person that is also a supplier
to or creditor of any Borrower or any of its Subsidiaries or (ii) representing
any manufacturer’s or supplier’s credits, discounts, incentive plans or similar
arrangements entitling any Borrower or any of its Subsidiaries to discounts on
future purchase therefrom;
     (i) Accounts Receivable arising out of sales to account debtors outside the
United States;
     (j) Accounts Receivable arising out of sales on a bill-and-hold, guaranteed
sale, sale-or-return, sale on approval or consignment basis or subject to any
right of return, setoff or charge back;
     (k) Accounts Receivable owing from an account debtor that is an agency,
department or instrumentality of the United States or any state thereof;
     (l) Accounts Receivable in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have then been
made, if any, does not or has ceased to create a valid and perfected first
priority lien or security interest in favor of the Administrative Agent, on
behalf of the Secured Parties, securing the Obligations; and
     (m) Accounts Receivable which do not conform to the eligibility
requirements set forth in the proviso of the definition of Eligible Credit Card
Receivables.
     Eligible Credit Card Receivables. As of the date of determination thereof,
Accounts Receivable due to a Borrower or a Guarantor on a non-recourse basis
(net of standard chargebacks and standard fees due to the credit card issuer or
processor and without reference to any rights of customers to return goods) from
(i) Visa, MasterCard, American Express Co., or Discover to the extent processed
by a major credit card processor, and (ii) other major credit card issuers
and/or processors reasonably acceptable to the Administrative Agent as arise in
the ordinary course of business for the purchase of merchandise or services
which have been earned by performance; provided that none of the following shall
be deemed to be Eligible Credit Card Receivables:
     (a) Accounts Receivable that are past due or Accounts Receivable that have
been outstanding for more than five days from the date of sale;

- 13 -

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

 

     (b) Accounts Receivable with respect to which a Borrower or a Guarantor
does not have good, valid and marketable title thereto, free and clear of any
Lien (other than Liens granted to the Administrative Agent, for the benefit of
the Agents and the Secured Parties, pursuant to the Security Documents);
     (c) Accounts Receivable that are not subject to a first priority security
interest in favor of the Administrative Agent (or are subject to other Liens
other than Permitted Liens), for the benefit of the Agents and the Secured
Parties (it being the intent that standard fees due by a Borrower and standard
chargebacks in the ordinary course by such credit card issuers and/or processors
shall not be deemed violative of this clause);
     (d) Accounts Receivable which are disputed, are with recourse, or with
respect to which a claim, counterclaim, offset or chargeback has been asserted
(to the extent of such claim, counterclaim, offset or chargeback);
     (e) Accounts Receivable which the Administrative Agent determines in its
reasonable commercial judgment to be unlikely to be collected (including,
without limitation, Accounts Receivable with respect to which the account debtor
is deemed not creditworthy or the value of such Account Receivable is otherwise
impaired, in each case in the Administrative Agent’s reasonable discretion
exercised in a commercially reasonable manner);
     (f) Accounts Receivable which (i) are not genuine and in all respects what
it purports to be, or (ii) are evidenced by a judgment;
     (g) Accounts Receivable which do not arise out of a completed, bona fide
sale and delivery of goods or rendition of services by a Borrower or a Guarantor
in the ordinary course of its business and in accordance with the terms and
conditions of all purchase orders, contracts or other documents relating thereto
and forming a part of the contract between such Borrower or such Guarantor and
the account debtor, and, in the case of goods, title to the goods have not
passed from such Borrower or such Guarantor to the account debtor; and
     (h) Accounts Receivable which are not for a specified amount maturing as
stated in the duplicate invoice covering such sale or rendition of services, or
for which a copy of which has not been furnished or made available to the
Administrative Agent.
     Eligible Inventory. As of the date of determination thereof, items of
inventory of the Borrowers and/or the Guarantors that are finished goods,
merchantable and readily saleable to the public in the ordinary course deemed by
the Administrative Agent in accordance with its customary credit and collateral
considerations and policies to be eligible for inclusion in the calculation of
the Aggregate Borrowing Base. Without limiting the foregoing, unless otherwise
approved in writing by the Administrative Agent, none of the following shall be
deemed to be Eligible Inventory:
     (a) inventory that is not owned solely by the Borrowers or the Guarantors,
or is leased or on consignment or such Borrowers or Guarantors do not have good
and valid title thereto;
     (b) inventory that is not located at a warehouse facility or store that is
owned or leased by a Borrower or a Guarantor and subject to a landlord waiver
unless it is in-

- 14 -

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

 

transit between warehouse facilities and/or stores leased or owned by a Borrower
or a Guarantor and such inventory is subject to a Freight Forwarder Agreement;
     (c) inventory that represents (i) goods damaged, defective or otherwise
unmerchantable, except in the case of each of the foregoing to the extent that
the Administrative Agent has determined a recoverable value based on an
appraisal of such inventory and (ii) goods that do not conform in all material
respects to the representations and warranties contained in this Credit
Agreement or any of the Security Documents;
     (d) inventory that is not located in the United States of America or Puerto
Rico (but excluding any other territories or possessions of the United States),
or any other jurisdiction acceptable to the Administrative Agent in its
reasonable discretion (and subject to such inventory otherwise being “Eligible
Inventory” hereunder), in each case unless such inventory is in-transit between
warehouse facilities and/or stores leased or owned by a Borrower or a Guarantor
in any such locations and such inventory is subject to a Freight Forwarder
Agreement;
     (e) inventory that is not subject to a perfected first-priority security
interest in favor of the Administrative Agent (or are subject to other Liens
other than Permitted Liens) for the benefit of the Secured Parties and the
Agents;
     (f) inventory which consists of samples, labels, bags, packaging, and other
similar non-merchandise categories;
     (g) inventory as to which insurance in compliance with the provisions of
§8.7 hereof is not in effect;
     (h) inventory which has been sold but not yet delivered or as to which any
Borrower has accepted a deposit;
     (i) inventory acquired in permitted acquisitions in compliance with the
provisions of §9.6, unless and until the Administrative Agent shall have
received (i) the results of appraisals of the inventory acquired in such
acquisition and (ii) such other due diligence related to such inventory by the
Administrative Agent that the Administrative Agent may require; provided that to
the extent such inventory is of the same type as that owned by the Borrowers as
of the Effective Date, such reasonable due diligence shall be of the type
conducted by the Administrative Agent and the Lenders in connection with this
Credit Agreement, all of the results of the foregoing to be reasonably
satisfactory to the Administrative Agent; and
     (j) inventory of a Subsidiary that becomes a Borrower or Guarantor
hereunder in compliance with the provisions of §5.16 unless and until the
Administrative Agent shall have received (i) the results of appraisals of the
inventory of such Subsidiary and (ii) such other reasonable due diligence
related to such inventory by the Administrative Agent that the Administrative
Agent may require, all of the result of the foregoing to be reasonably
satisfactory to the Administrative Agent;
provided that “Eligible Inventory” shall include any inventory (a) not yet
delivered to a Borrower, (b) the purchase of which is supported by a documentary
Letter of Credit issued under this Credit Agreement having an expiry of sixty
(60) days or less, (c) for which the document of title reflects a Borrower as
consignee (along with delivery to such Borrower of the documents of title with
respect thereto), (d) as to

- 15 -

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

 

which, if so required by the Administrative Agent in its discretion, the
Administrative Agent has control over the documents of title which evidence
ownership of the subject inventory (such as by the delivery of a customs broker
agency agreement, satisfactory to the Administrative Agent), (e) which is
insured to the reasonable satisfaction of the Administrative Agent, and
(f) which otherwise would constitute Eligible Inventory. General criteria for
Eligible Inventory may be established and revised from time to time by the
Administrative Agent in its reasonable discretion.
     Environmental Laws. See §7.17(a).
     EPA. See §7.17(b).
     Equity Reserve. A reserve in an amount equal to the difference between
$10,000,000 and the amount of all principal payments made on account of the FIFO
Loans at the time of calculation; provided that the Equity Reserve shall be
imposed only if, on or before May 15, 2010, BGI fails to receive Net Cash
Proceeds in the sum of at least $25,000,000 (such sum being referred to herein
as the “New Equity Amount”) (and the receipt of the New Equity Amount being
referred to herein as the “New Equity Raise”); provided, further, that (i) the
Equity Reserve shall be removed at such time as the New Equity Raise occurs; or
(ii) if BGI receives Net Cash Proceeds from the sale of its Capital Stock on or
before May 15, 2010, but such amount is less than the New Equity Amount, the
Equity Reserve shall be reduced to an amount equal to the New Equity Amount less
the amount of the Net Cash Proceeds actually received, so long as such amount is
a positive number; or (iii) if BGI receives Net Cash Proceeds from the sale of
its Capital Stock on or before May 15, 2010 but such amount, less the amount of
any Distributions necessary to effectuate the New Equity Raise (to the extent
such Distributions are permitted to be made pursuant to §9.4(c)(ii) of the
Second Lien Loan Agreement), is less than the New Equity Amount, the Equity
Reserve shall be reduced to an amount equal to the New Equity Amount less the
amount of the Net Cash Proceeds actually received, less the amount of such
Distributions.
     ERISA. The Employee Retirement Income Security Act of 1974, as amended.
     ERISA Affiliate. Any trade or business (whether or not incorporated) under
common control with any Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to the Pension Funding Rules).
     ERISA Event. (a) A Reportable Event with respect to a Pension Plan; (b) the
withdrawal of any Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which such entity was a “substantial
employer” (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by any Borrower or any ERISA Affiliate from
a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization or insolvent under Title IV of ERISA or in endangered or critical
status under the Pension Funding Rules; (d) the filing of a notice of intent to
terminate, the treatment of a Pension Plan amendment as a termination under
Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings
to terminate a Pension Plan; (f) any event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (g) the determination that any
Pension Plan is considered an at-risk plan within the meaning of the Pension
Funding Rules; or (h) the imposition of any liability under Title IV of ERISA,
other than for PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon any Borrower or any ERISA Affiliate.
     Eurocurrency Base Rate. See the definition of “Eurocurrency Rate”.

- 16 -

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

 

     Eurocurrency Lending Office. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of such
Lender, if any, that shall be making or maintaining Eurocurrency Rate Loans.
     Eurocurrency Rate. For any Interest Period with respect to a Eurocurrency
Rate Loan, a rate per annum determined by the Administrative Agent pursuant to
the following formula:

         
Eurocurrency Rate
  =   Eurocurrency Base Rate
 
     
1.00 – Eurocurrency Reserve Percentage

     Where,
     Eurocurrency Base Rate means, for such Interest Period, the rate per annum
equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published
by Reuters (or other commercially available source providing quotations of BBA
LIBOR as designated by the Administrative Agent from time to time) at
approximately 11:00 a.m., London time, two London Banking Days prior to the
commencement of such Interest Period, for deposits in Dollars (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the
“Eurocurrency Base Rate” for such Interest Period shall be the rate per annum
determined by the Administrative Agent to be the rate at which deposits in U.S.
Dollars for delivery on the first day of such Interest Period in immediately
available funds in the approximate amount of the Eurocurrency Rate Loan being
made, continued or converted by Bank of America and with a term equivalent to
such Interest Period would be offered by Bank of America’s London Branch (or
other Bank of America branch or Affiliate) to major banks in the London or other
offshore interbank market for U.S. Dollars at their request at approximately
11:00 a.m. (London time) two London Banking Days prior to the commencement of
such Interest Period.
     Eurocurrency Reserve Percentage means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, carried out to five
decimal places) in effect on such day, whether or not applicable to any Lender,
under regulations issued from time to time by the FRB for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities”). The Eurocurrency Rate for each
outstanding Eurocurrency Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurocurrency Reserve Percentage.
     Eurocurrency Rate Loans. Loans bearing interest calculated by reference to
the Eurocurrency Rate.
     Event of Default. See §13.1.
     Excess Availability. At any time of determination, (a) the lesser of
(i) the Aggregate Borrowing Base at such time, and (ii) the Total Commitment at
such time, minus (b) the Total Facility Usage at such time.
     Exchange Rate. With respect to any currency other than Dollars, at any date
of determination thereof, the Spot Rate of exchange for the conversion of such
currency into Dollars and with respect to Dollars, at any date of determination
thereof, the Spot Rate of exchange for the conversion of Dollars into the
applicable currency.

- 17 -

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

 

     Excluded Subsidiaries. Each of (a) BB Holdings, Inc., a Michigan
corporation, (b) WB Holdings, Inc., a Michigan corporation, (c) BINC Acquisition
Company, a Michigan corporation, (d) Walden Acquisition Company, a Michigan
corporation, (e) Borders/JGE Joint Venture LLC, a Michigan limited liability
company, (f) Borders Online, Inc., a Colorado corporation, (g) Walden Online,
Inc., a Colorado corporation, (h) Borders Fulfillment, Inc., a Delaware
corporation, (i) Borders Online, LLC, a Delaware limited liability company,
(j) BGI Franchise PTY Ltd., a limited company organized under the laws of
Australia, (k) Borders Bookstore (M) SDN BHD, a limited liability company
organized under the laws of Malaysia, (l) BGI (UK), Ltd., a company with limited
liability incorporated under the laws of England and Wales, (m) Books Etc.
Properties, Ltd., a company with limited liability incorporated under the laws
of England and Wales, (n) Charing Cross Properties, Ltd., a company with limited
liability incorporated under the laws of England and Wales, and (o) Evermatch,
Ltd., a company with limited liability incorporated under the laws of England
and Wales.
     Excluded Taxes. With respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrowers hereunder, (a) taxes imposed on or measured
by its overall net income (however denominated), and franchise taxes imposed on
it (in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the Laws of which such recipient is organized or
considered to be present or, in the case of any Lender, in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United
States or any similar tax imposed by any other jurisdiction in which any
Borrower is considered to be located, (c) any backup withholding tax that is
required by the Code to be withheld from amounts payable to a Lender that has
failed to comply with clause (A) of §5.17(e)(ii), and (d) in the case of a
Foreign Lender (other than an assignee pursuant to a request by any Borrower
under §5.12), any United States withholding tax that (i) is required to be
imposed on amounts payable to such Foreign Lender pursuant to the Laws in force
at the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office) or (ii) is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to deliver documentation
in accordance with clause (B) of §5.17(e)(ii), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrowers with respect to such withholding tax pursuant to
§5.17(a)(ii) or (c).
     Existing Borrowers. As defined in the recitals hereto.
     Existing Commitment Fee. See §2.2.1.
     Existing Credit Agreement. As defined in the recitals hereto.
     Existing Lenders. As defined in the recitals hereto.
     Existing Letters of Credit. See §4.7.
     Existing Tranche. That portion of the Revolving Credit Facility not
constituting the Extended Tranche. On the Effective Date, the Commitments under
the Existing Tranche aggregate $270,500,000.
     Existing Tranche Termination Date. With respect to the Existing Tranche,
the earlier of (a) the Maturity Date and (b) the date on which the Existing
Tranche is terminated and all Revolving Credit Loans under such Tranche are paid
in full in cash, as permitted or required under the terms and provisions of this
Credit Agreement.
     Extended Commitment Fee. See §2.2.2.

- 18 -

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

 

     Extended Tranche. That portion of the Revolving Credit Facility as to which
the Lenders have agreed to extend their Commitments and the maturity of the
Loans thereunder to the fourth anniversary of the Effective Date. On the
Effective Date, the Commitments under the Extended Tranche aggregate
$700,000,000.
     Extending Revolving Lender. Each Lender with a Commitment under the
Extended Tranche.
     Extended Tranche Termination Date. With respect to the Extended Tranche,
the earlier of (a) the Maturity Date and (b) the date on which the Extended
Tranche is terminated and all Revolving Credit Loans under such Tranche are paid
in full in cash, as permitted or required under the terms and provisions of this
Credit Agreement.
     FASB ASC. The Accounting Standards Codification of the Financial Accounting
Standards Board.
     Federal Funds Effective Rate. See the definition of “Base Rate”.
     Fee Letter. That certain fee letter among BGI, Bank of America and Banc of
America Securities LLC, as co-arranger dated as of February 3, 2010.
     Fees. Collectively, all fees in favor of any Lender, any Agent or any other
Secured Party, referred to herein or in any other Loan Document.
     FIFO Loans. Loans made by Bank of America in accordance with the provisions
of Section 2.1.1 of the Second Lien Loan Agreement. As of the effective date of
the Second Lien Loan Facility, the FIFO Loans aggregate $10,000,000.
     FILO Loans. Loans made by the Second Lien Lenders (other than Bank of
America) in accordance with the provisions of Section 2.1.1 of the Second Lien
Loan Agreement. As of the effective date of the Second Lien Loan Facility, the
FILO Loans aggregate $80,000,000.
     Financial Affiliate. A Subsidiary of the bank holding company controlling
any Lender, which Subsidiary is engaging in any of the activities permitted by
§4(e) of the Bank Holding Company Act of 1956 (12 U.S.C. §1843).
     Fiscal Quarter. Subject to §7.4.1, for the first three Fiscal Quarters of
each year, the 13 week period commencing on the day after the last day of the
preceding Fiscal Quarter and for the fourth Fiscal Quarter of each year, the
period commencing on the day after the last day of the third Fiscal Quarter and
ending on the Saturday closest to January 31 of each year. As used herein, “FQ1
2xxx” refers to the first Fiscal Quarter of the 2xxx Fiscal Year, “FQ2 2xxx”
refers to the second Fiscal Quarter of the 2xxx Fiscal Year and so on.
     Fiscal Year. Subject to §7.4.1, the 52/53 week period commencing on the day
after the last day of the preceding Fiscal Year and ending on the Saturday
closest to January 31 of each year. By way of illustration, BGI’s 2009 Fiscal
Year ended January 30, 2010.
     Fixed Charge Coverage Ratio. As of any date of determination, the ratio of
(a) Consolidated Operating Cash Flow for the Reference Period most recently
ended to (b) Consolidated Fixed Charges for such Reference Period.

- 19 -

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

 

     Foreign Lender. Any Lender that is organized under the laws of a
jurisdiction other than that in which a Borrower is resident for tax purposes
(including such a Lender when acting in the capacity of Issuing Bank). For
purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
     Foreign Subsidiary. Any Subsidiary of BGI (other than BGP (UK)) organized
under the laws of any jurisdiction other than the United States of America, any
state or territory thereof or the District of Columbia.
     FRB. The Board of Governors of the Federal Reserve System of the United
States.
     Freight Forwarder Agreement. Each freight forwarder agreement required by
the Administrative Agent, in all cases such agreement to be in form, scope and
substance satisfactory to the Administrative Agent.
     Fronting Exposure. At any time there is a Delinquent Lender, (a) with
respect to the Issuing Bank, such Delinquent Lender’s Commitment Percentage of
the outstanding LC Obligations other than LC Obligations as to which such
Delinquent Lender’s participation obligation has been Cash Collateralized in
accordance with the terms hereof, and (b) with respect to the Swingline Lender,
such Delinquent Lender’s Commitment Percentage of Swingline Loans other than
Swingline Loans as to which such Delinquent Lender’s participation obligation
has been Cash Collateralized in accordance with the terms hereof.
     Fund. Any Person (other than a natural person) that is (or will be) engaged
in making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of its business.
     GAAP or generally accepted accounting principles. (a) When used in §10
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the Fiscal Year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
BGI reflected in its financial statements for the year ended on the Balance
Sheet Date (unless otherwise agreed to by the parties hereto as contemplated by
§1.3), and (b) when used in general, other than as provided above, means
principles that are (i) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (ii) consistently applied with past financial statements of
BGI adopting the same principles, provided that in each case referred to in this
definition of “GAAP” a certified public accountant would, insofar as the use of
such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in GAAP) as to
financial statements in which such principles have been properly applied.
     Governing Documents. With respect to any Person, its certificate or
articles of incorporation or organization, its by-laws, or, as the case may be,
its certificate of formation, limited partnership certificate, operating
agreement, limited partnership agreement or other constitutive documents and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of its Capital Stock.
     Governmental Authority. Any foreign, federal, state, regional, local,
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.
     Guaranteed Obligations. See §6.1.

- 20 -

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

 

     Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of §3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
     Guarantors. Each Borrower, each Subsidiary party hereto for purposes of §6
hereof, any Person that becomes party to the Second Lien Credit Agreement as a
guarantor thereunder, and any Subsidiary of BGI which executes a Joinder
Agreement as a Borrower or a Guarantor of all of the Obligations pursuant to the
provisions of this Credit Agreement after the Effective Date.
     Guaranty. The Guaranty set forth in §6 of this Credit Agreement, made by
each Guarantor in favor of the Secured Parties pursuant to which each Guarantor
guarantees to the Secured Parties the payment and performance of the
Obligations.
     Hazardous Substances. See §7.17(b).
     Hedge Reserves. At any time of calculation, reserves equal to 100% of the
Swap Termination Value with respect to any services of facilities provided to
any Borrower or any Guarantor by the Administrative Agent, any Secured Party or
any of their respective Affiliates on account of Hedging Agreements then
provided or outstanding.
     Hedging Agreement. (a) Any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc. and any International
Foreign Exchange Master Agreement (any such master agreement, together with any
related schedules, a “Master Agreement”), including any such obligations or
liabilities under any Master Agreement.
     Hedging Obligations. All indebtedness, obligations and liabilities of the
Borrowers to any of the Secured Parties individually or collectively, existing
on the date of this Credit Agreement or arising thereafter, direct or indirect,
joint or several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under any Hedging Agreement.
     Increased Advance Rate Conditions. At any time of determination, the
satisfaction of each of the following: (a) no Default or Event of Default shall
then exist and be continuing or result from any increase in the advance rate
against Eligible Inventory, (b) the principal balance of the loans under the
Second Lien Loan Facility shall not exceed $50,000,000, and (c) the
Administrative Agent shall have a first priority security interest in the
Intellectual Property subject only to Permitted Liens having priority by
operation of applicable Law.
     Incremental Seasonal Amount. So long as it is a positive number, the sum of
$35,000,000 minus any prepayments made with respect to the FILO Loans.

- 21 -

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

 

     Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
     (a) every obligation of such Person for money borrowed,
     (b) every obligation of such Person evidenced by bonds, debentures, notes
or other similar instruments, including obligations incurred in connection with
the acquisition of property, assets or businesses,
     (c) every reimbursement obligation of such Person with respect to letters
of credit, bankers’ acceptances or similar facilities issued for the account of
such Person,
     (d) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith),
     (e) every obligation of such Person under any Capitalized Lease,
     (f) every obligation of such Person under any Synthetic Lease,
     (g) all sales by such Person of (i) accounts or general intangibles for
money due or to become due, (ii) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (iii) other receivables
(collectively “receivables”), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together with
any obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith,
     (h) every obligation of such Person (an “equity related purchase
obligation”) to purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock issued by such Person or any rights measured by the
value of such Capital Stock, but only to the extent such equity related purchase
obligations provide that the purchase, redemption, retirement or other
acquisition is required to occur prior to the Maturity Date with respect to the
Extended Tranche,
     (i) every obligation of such Person under any forward contract, futures
contract, swap, option or other financing agreement or arrangement (including,
without limitation, caps, floors, collars and similar agreements), the value of
which is dependent upon interest rates, currency exchange rates, commodities or
other indices (a “derivative contract”),
     (j) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent that 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 that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable Law,

- 22 -

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

 

     (k) every obligation, contingent or otherwise, of such Person guaranteeing,
or having the economic effect of guaranteeing or otherwise acting as surety for,
any obligation of a type described in any of clauses (a) through (j) (the
“primary obligation”) of another Person (the “primary obligor”), in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase of) any security for the payment of such primary obligation,
(ii) to purchase property, securities or services for the purpose of assuring
the payment of such primary obligation, or (iii) to maintain working capital,
equity capital or other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such primary
obligation.
     The “amount” or “principal amount” of any Indebtedness at any time of
determination represented by (t) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with GAAP, (u) any
Capitalized Lease shall be the principal component of the aggregate of the
rentals obligation under such Capitalized Lease payable over the term thereof
that is not subject to termination by the lessee, (v) any sale of receivables
shall be the amount of unrecovered capital or principal investment of the
purchaser (other than BGI or any of its Wholly-owned Subsidiaries) thereof,
excluding amounts representative of yield or Interest earned on such investment,
(w) any Synthetic Lease shall be the stipulated loss value, termination value or
other equivalent amount, (x) any derivative contract shall be the maximum amount
of any termination or loss payment required to be paid by such Person if such
derivative contract were, at the time of determination, to be terminated by
reason of any event of default or early termination event thereunder, whether or
not such event of default or early termination event has in fact occurred,
(y) any equity related purchase obligation shall be the maximum fixed redemption
or purchase price thereof inclusive of any accrued and unpaid dividends to be
comprised in such redemption or purchase price and (z) any guaranty or other
contingent liability referred to in clause (k) shall be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
guaranty or other contingent obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
     Notwithstanding anything to the contrary in this definition of
Indebtedness, the obligations (whether for cash, common shares of BGI or
otherwise) of BGI and its Subsidiaries to settle the Pershing Square Warrants,
any stock appreciation rights issued in lieu thereof or any debt or equity
instruments (including interest and fees thereon) issued as a result of or in
connection with the deferral of any payment in respect of the Pershing Square
Warrants or any settlement, exercise, purchase, redemption, defeasance,
retirement, payment, acquisition or otherwise thereof shall not constitute
Indebtedness hereunder.
     Indemnified Taxes. Taxes other than Excluded Taxes.
     Insolvency Proceeding. As to any Person, any of the following: (i) any case
or proceeding, whether voluntary or involuntary, with respect to such Person
under any Debtor Relief Law or any other or similar proceedings seeking any
stay, reorganization, arrangement, composition or readjustment of the
obligations and indebtedness of such Person, (ii) any proceeding seeking the
appointment of any trustee, receiver, liquidator, custodian, administrator or
other insolvency official with similar powers with respect to such Person or any
of its assets, (iii) any proceeding for liquidation, dissolution or other
winding up of the business of such Person, or (iv) any assignment for the
benefit of creditors or any marshalling of assets of such Person.
     Intellectual Property. As defined in the Security Agreement.

- 23 -

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

 

     Intellectual Property Security Agreement. Collectively, (i) the Trademark
Security Agreement, (ii) the Patent Security Agreement, (iii) the Copyright
Security Agreement, and (iv) any other intellectual property security agreements
or joinder or supplement thereto in respect of any Intellectual Property that
may be entered into after the Effective Date with respect to any Subsidiary of a
Borrower or a Guarantor formed or acquired after the Effective Date, in each
case, in form and substance satisfactory to the Administrative Agent and as
amended and in effect from time to time.
     Intercreditor Agreement. That certain Intercreditor Agreement, dated as of
March 31, 2010, among the Administrative Agent, the Second Lien Agent, the
Borrowers, the Guarantors and the other parties thereto (if any), in form and
substance satisfactory to the Administrative Agent.
     Interest Payment Date. (a) As to any Base Rate Loan, the first day of each
April, July, October, and January for the immediately preceding three-month
period with respect to interest accrued during such three-month period,
including, without limitation, the three-month period which includes the
Drawdown Date of such Base Rate Loan; (b) as to any Eurocurrency Rate Loan in
respect of which the Interest Period is (i) 3 months or less, the last day of
such Interest Period and (ii) more than 3 months, the date that is 3 months from
the first day of such Interest Period and, in addition, the last day of such
Interest Period, and (c) as to any Swingline Loan, the first day of the calendar
quarter for the immediately preceding calendar quarter with respect to interest
accrued during such calendar quarter and on the Swingline Expiry Date.
     Interest Period. With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrowers in a Loan Request
or as otherwise required by the terms of this Credit Agreement (i) for any Base
Rate Loan, the last day of the calendar quarter; and (ii) for any Eurocurrency
Rate Loan, 7 days, 14 days, 1, 2, 3 or 6 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrowers in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:
     (A) if any Interest Period with respect to a Eurocurrency Rate Loan would
otherwise end on a day that is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding Business Day;
     (B) if any Interest Period with respect to a Base Rate Loan would end on a
day that is not a Business Day, that Interest Period shall end on the next
succeeding Business Day;
     (C) if the Borrowers shall fail to give notice as provided in §2.8 with
respect to the Loans, the Borrowers shall be deemed to have requested a
conversion of the affected Eurocurrency Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day of the
then current Interest Period with respect thereto;
     (D) any Interest Period relating to any Eurocurrency Rate Loan that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
     (E) any Interest Period that would otherwise extend beyond the applicable
Maturity Date for any Revolving Credit Loan shall end on the applicable Maturity
Date.

- 24 -

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

 

     Interim Concentration Accounts. See §8.15.1.
     Inventory Reserves. Such reserves as may be established from time to time
by the Administrative Agent in its sole discretion with respect to the
determination of the saleability, at retail, of the Eligible Inventory or which
reflect such other factors that affect the market value of the Eligible
Inventory. Inventory Reserves shall at all times include a reserve equal to 100%
of the cost of news stand (unless such news stand Inventory is otherwise
captured in the most recently completed appraisal) and café Inventory. Inventory
Reserves shall also include, without duplication of the other reserves contained
in this definition, a mark down reserve as agreed by the Administrative Agent
and the Second Lien Agent until such time as such mark downs are included in the
appraised net orderly liquidation value of Eligible Inventory.
     Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) by a Person (i) for the acquisition of Capital Stock
of any other Person, (ii) for the acquisition of any Indebtedness of any other
Person, (iii) for the making of any loan, advance, capital contribution or
transfer of property to another Person, or (iv) in respect of any guaranties (or
other commitments as described under Indebtedness), or obligations of, any
Person. In determining the aggregate amount of Investments outstanding at any
particular time: (a) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and still outstanding; (b) there shall be deducted in respect of each
such Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (c) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise; (d) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof; and (e) the
amount of any Investment made by a transfer of property shall be valued at the
fair market value of such transferred property at the time of such transfer.
     IP Subordination Conditions. (a) No Default or Event of Default shall exist
at the time of and after giving effect to the subordination of the Lien and
security interest of the Second Lien Agent in the Intellectual Property to the
Lien and security interest of the Administrative Agent in the Intellectual
Property, (b) the Second Lien Agent shall be reasonably satisfied that it
continues to hold a valid perfected Lien and security interest in the
Intellectual Property, subject only to the Lien of the Administrative Agent and
to Permitted Liens having priority over the Lien of the Second Lien Agent by
operation of applicable Law, and (c) the principal balance of the loans in
respect of the Second Lien Loan Facility shall have been reduced to $50,000,000
or less.
     Issuer Documents. With respect to any Letter of Credit, the Letter of
Credit Application, and any other document, agreement and instrument entered
into by the Issuing Bank and any Borrower or in favor of the Issuing Bank and
relating to such Letter of Credit.
     Issuing Bank. Bank of America, in its capacity as issuer of Letters of
Credit pursuant to §4, or, in the event that Bank of America is unable to issue
a Letter of Credit, any other Lender selected by the Administrative Agent and
the Borrowers to issue such Letter of Credit with the consent of such Lender.
     Joinder Agreements. Joinder agreements in substantially the form of
Exhibit F hereto pursuant to which Subsidiaries of BGI become parties to and
agree to be bound by the provisions of this Credit Agreement as a Borrower or a
Guarantor.
     Joint Venture. Any corporation, partnership, limited liability company,
joint venture or other entity in which BGI and its Subsidiaries own not more
than 50% of the capital stock, partnership interests,

- 25 -

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

 

membership interests or other ownership interests and which does not meet the
definition of “Subsidiary” herein.
     Kobo. Kobo Inc., a corporation incorporated under the laws of Ontario,
Canada.
     Landlord Lien Reserve. Two month’s base rent for each of the Borrowers’
facilities located in the States of Washington, Pennsylvania and Virginia at
which inventory is stored, calculated monthly on a two month rolling basis and
such other amounts as the Administrative Agent may from time to time establish
and revise, in the Administrative Agent’s reasonable discretion, in respect of
any landlord lien rights in any other jurisdiction in which inventory is stored.
     Last Out Borrowing Base. As defined in the Existing Credit Agreement.
     Last Out Commitment Fee. As defined in the Existing Credit Agreement. For
the avoidance of doubt, the Last Out Commitment Fee has been paid in full on or
prior to the Effective Date.
     Last Out Revolving Commitment. As defined in the Existing Credit Agreement.
For the avoidance of doubt, the Last Out Revolving Commitment has been
terminated and all obligations with respect thereto have been paid in full prior
to the Effective Date.
     Last Out Revolving Lender. Each Existing Lender with a Last Out Revolving
Commitment.
     Laws. Means, collectively, all international, foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.
     LC Borrowing. An extension of credit resulting from a drawing under any
Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Revolving Credit Loan.
     LC Credit Extension. With respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the increase of the stated
amount thereof.
     LC Exposure. At any time, the sum of (a) the Maximum Drawing Amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all
Unpaid Reimbursement Obligations at such time. The LC Exposure of any Lender at
any time shall be its Commitment Percentage of the total LC Exposure at such
time.
     LC Obligations. As at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate
of all Unpaid Reimbursement Obligations, including all LC Borrowings. For
purposes of computing the amount available to be drawn under any Letter of
Credit, the amount of such Letter of Credit shall be determined in accordance
with §4.8. For all purposes of this Agreement, if on any date of determination a
Letter of Credit has expired by its terms but any amount may still be drawn
thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of
Credit shall be deemed to be “outstanding” in the amount so remaining available
to be drawn.
     Lender Affiliate. With respect to any Lender, (a) an Affiliate of such
Lender or (b) any Approved Fund.

- 26 -

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

 

     Lenders. Bank of America and the other lending institutions listed on
Schedule 1 hereto and any other Person who becomes an assignee of any rights and
obligations of a Lender pursuant to §15. Unless the context otherwise requires,
the term “Lenders” includes the Swingline Lender and any Issuing Bank. For the
avoidance of doubt, the term “Lenders” includes the Revolving Lenders and the
Extending Revolving Lenders.
     Letter of Credit. See §4.1.1.
     Letter of Credit Application. See §4.1.1.
     Letter of Credit Expiration Date. See §4.1.3.
     Letter of Credit Fee. See §4.6.
     Letter of Credit Participation. See §4.1.4.
     Letter of Credit Sublimit. See §4.1.1.
     Lien. Any mortgage, deed of trust, security interest, charge, pledge,
hypothecation, assignment, attachment, deposit arrangement, encumbrance, lien
(statutory, judgment or otherwise, but excluding any right of set off arising by
operation of law or pursuant to agreements entered into in the ordinary course
of business), or other security agreement or preferential arrangement of any
kind or nature whatsoever (including any conditional sale or other title
retention agreement, any Capitalized Lease, any Synthetic Lease, any financing
lease involving substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of the foregoing).
     Loan Documents or Finance Documents. This Credit Agreement, the Notes, the
Fee Letter, the Letter of Credit Applications, the Letters of Credit, the
Security Documents, the Joinder Agreements, the Co-Collateral Agent Rights
Agreement, the Intercreditor Agreement, any agreement creating or perfecting
rights in Cash Collateral pursuant to the provisions of §2.14 of this Agreement,
and any other instruments, certificates or documents (including, without
limitation, all Borrowing Base Reports and all Compliance Certificates)
delivered or contemplated to be delivered hereunder or thereunder or in
connection herewith or therewith (excluding Hedging Agreements).
     Loan Request. A Revolving Loan Request or a Swingline Loan Request, as
applicable.
     Loans. The Revolving Credit Loans and the Swingline Loans.
     Local Accounts. See §8.15.1.
     London Banking Day. Any day on which dealings in Dollar deposits are
conducted by and between banks in the London interbank eurodollar market.
     Material Adverse Effect. With respect to any event or occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding):
          (a) a material adverse effect on the business, properties, prospects,
condition (financial or otherwise), assets, operations or income of any of the
Borrowers, individually, or the Borrowers and their Subsidiaries, taken as a
whole;

- 27 -

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

 

     (b) a material adverse effect on the ability of any of the Borrowers,
individually, or the Borrowers and their Subsidiaries, taken as a whole, to
perform any of their respective Obligations under any of the Loan Documents to
which it is a party; or
     (c) any impairment of the validity, binding effect or enforceability of
this Credit Agreement or any of the other Loan Documents or any impairment of
the rights or remedies available to any Agent, any Issuing Bank, any other
Secured Party under any Loan Document.
     Maturity Date. With respect to (a) the Existing Tranche, July 31, 2011 and
(b) the Extended Tranche, March 31, 2014.
     Maximum Drawing Amount. The maximum aggregate amount in Dollars that the
beneficiaries under outstanding Letters of Credit may at any time draw under
such Letters of Credit, as such aggregate amount may be reduced from time to
time pursuant to the terms of such Letters of Credit.
     Multiemployer Plan. Any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate makes
or is obligated to make contributions, or during the preceding five plan years,
has made or been obligated to make contributions.
     Multiple Employer Plan. A Plan which has two or more contributing sponsors
(including any Borrower or any ERISA Affiliate) at least two of whom are not
under common control, as such a plan is described in Section 4064 of ERISA.
     Net Book Value. At any relevant time of reference thereto, the then net
book value of Eligible Inventory determined on the retail method at lower of
cost or market.
     Net Cash Proceeds. With respect to any sale, transfer or other disposition
by any Borrower or any Guarantor or any proceeds of a casualty, condemnation or
eminent domain, the excess, if any, of (i) the sum of cash and cash equivalents
received in connection with such transaction (including any cash or cash
equivalents received by way of deferred payment pursuant to, or by monetization
of, a note receivable or otherwise, but only as and when so received) over
(ii) the sum of (A) reasonable and customary out-of-pocket expenses incurred by
such Person in connection with such transaction (including, without limitation,
appraisals, and brokerage, legal, title and recording or transfer tax expenses
and commissions) paid by any Borrower or Guarantor to third parties (other than
Affiliates)), plus (B) taxes actually paid in connection with any such sale or
disposition and reserves for non-delinquent taxes in connection with the
business sold for periods prior to such sale.
     With respect to the issuance of any Capital Stock by any Borrower or any
Guarantor, the excess of (i) the sum of the cash and cash equivalents received
in connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the sum of
(A) underwriting discounts and commissions, and other reasonable out-of-pocket
expenses, incurred by the Borrowers and Guarantors in connection therewith, plus
(B) the amount of any Indebtedness of any of the Borrowers and Guarantors that
is repaid in connection with such transaction.
     Net Debt. Prior to the Paperchase Sale and solely with respect to
Paperchase, at any time of calculation, the difference between the total
Indebtedness of Paperchase then outstanding and the cash and cash equivalents of
Paperchase at such time (but in no event less than zero).

- 28 -

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

 

     Net Debt Reserve. Prior to the Paperchase Sale, a reserve in an amount
equal to the sum of (a) 75% of Net Debt as of the last day of each fiscal month
of Paperchase, provided that if that portion of Consolidated EBITDA attributable
to Paperchase is equal to or greater than the Dollar equivalent of 4,000,000
pounds sterling in any Fiscal Year, the Net Debt Reserve shall be in an amount
equal to 50% of Net Debt as of the last day of each fiscal month of Paperchase
for the immediately subsequent Fiscal Year, plus (b) the Annual Net Debt Amount.
     Non-Extension Notice Date. See §4.1.6.
     Note Record. The Borrower Note Records and the Swingline Note Record.
     Notes. The Revolving Notes and the Swingline Note.
     Obligations. Singly, any of, and collectively, all of, the Borrower
Obligations and all of the Guaranteed Obligations.
     Online. Borders Online, LLC, a Delaware limited liability company.
     Other Reserves. As determined by the Administrative Agent in its reasonable
discretion, such amounts as the Administrative Agent may from time to time,
immediately upon notice (which shall contain a brief explanation for such
changes) to the Borrowers, establish and revise (a) to reflect events,
conditions, contingencies, risks or any other circumstances which do, or which
the Administrative Agent believes may, (i) adversely affect either (A) any
Collateral, the rights of the Administrative Agent or any of the Secured Parties
in any Collateral, or its value, (B) the security interest and other rights of
the Administrative Agent or any of the Secured Parties in the Collateral
(including the enforceability, perfection and priority thereof) or (C) any other
rights of the Administrative Agent or any of the Secured Parties, or
(ii) adversely affect the business or financial condition of any of the
Borrowers or any of their Subsidiaries individually or the Borrowers and their
Subsidiaries taken as a whole, (b) to reflect the belief of the Administrative
Agent that any Borrowing Base Report or other collateral report or financial
information furnished (or not furnished) by or on behalf of the Borrowers to the
Administrative Agent or any of the Secured Parties is or may have been
incomplete, inaccurate or misleading, (c) to reflect any obligations (other than
the Loans and Letters of Credit) secured by the Collateral (including, without
limitation, Hedging Obligations and/or obligations in respect of Cash Management
Services) or (d) with respect to such other matters (including, without
limitation, reserves which Administrative Agent may establish from time to time,
in its reasonable discretion, as being appropriate to reflect impediments to
Administrative Agent’s ability to realize the full value of the Collateral in a
liquidation or Insolvency Proceeding of any of the Borrowers or their
Subsidiaries) as Administrative Agent in its reasonable discretion may elect to
impose from time to time.
     Other Taxes. All present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment
made hereunder or under any other Loan Document or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.
     outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
     Outstanding Amount. (i) With respect to Revolving Credit Loans and
Swingline Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any borrowings and prepayments or repayments of Revolving
Credit Loans and Swingline Loans, as the case may be, occurring on such date;
and (ii) with respect to any LC Obligations on any date, the amount of such LC

- 29 -

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

 

Obligations on such date after giving effect to any LC Credit Extension
occurring on such date and any other changes in the aggregate amount of the LC
Obligations as of such date, including as a result of any reimbursements by the
Borrowers of Unpaid Reimbursement Obligations.
     Overadvance. At any time of calculation, the amount, if any, by which the
Total Facility Usage exceeds the Aggregate Borrowing Base.
     Overnight Rate. For any day, the greater of (i) the Federal Funds Effective
Rate and (ii) an overnight rate determined by the Administrative Agent, the
applicable Issuing Bank, or the Swingline Lender, as the case may be, in
accordance with banking industry rules on interbank compensation.
     Paperchase. Paperchase Products Limited, a company with limited liability
incorporated under the laws of England and Wales, and its Subsidiaries.
     Paperchase Sale. The proposed sale of Paperchase by BGI (or its relevant
Subsidiary) to a third party purchaser to the extent expressly permitted by, and
subject to the terms of, §9.5.2(d)(ii).
     Participant. See §15.4.
     Patent Security Agreement. That certain Patent Collateral Assignment and
Security Agreement, executed and delivered on the Effective Date, among the
Borrowers, the Guarantors, each of their respective Subsidiaries and the
Administrative Agent, in form and substance satisfactory to the Administrative
Agent and any other patent security agreement or joinder or supplement thereto
that may be entered into after the Effective Date with respect to a Subsidiary
of a Borrower or a Guarantor formed or acquired after the Effective Date, each
as amended, supplemented or otherwise modified from time to time.
     PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA
and any successor entity or entities having similar responsibilities.
     Pension Act. The Pension Protection Act of 2006, as amended.
     Pension Funding Rules. The rules of the Code and ERISA regarding minimum
required contributions (including any installment payment thereof) to Pension
Plans or Multiemployer Plans and set forth in, with respect to plan years ending
prior to the effective date of the Pension Act, Section 412 of the Code and
Section 302 of ERISA, each as in effect prior to the Pension Act and,
thereafter, Section 412 and 430 through 436 of the Code and Sections 302 through
305 of ERISA.
     Pension Plan. Any employee pension benefit plan (including a Multiple
Employer Plan or a Multiemployer Plan) maintained or contributed to by any
Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or
is subject to the minimum funding standards under Section 412 of the Code.
     Permitted Liens. Liens permitted by §9.2.
     Permitted Restructuring Transactions and Permitted Restructuring
Transaction. Any one or more of the transactions described on Schedule 1.01A
hereto so long as any such transaction is consummated in accordance with such
Schedule 1.01A.
     Permitted Second Lien Loan Payments. Collectively, (a) interest and fees
payable on the Second Lien Loan Facility in accordance with the Second Lien Loan
Documents and (b) scheduled payments and

- 30 -

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

 

mandatory prepayments of principal as required by, and in accordance with, the
Second Lien Loan Agreement, in each case, subject to the terms, provisions and
conditions of the Intercreditor Agreement.
     Pershing Square. Pershing Square Capital Management, L.P. and/or its
Affiliates (including their respective managed funds but excluding BGI and its
Subsidiaries).
     Pershing Square Term Loan Documents. The term loan agreement dated as of
April 9, 2008, and with a maturity date of April 1, 2010, among BGI, Pershing
Square as the term loan agent, the lenders party thereto and the other parties
thereto, together with all agreements, documents, instruments and certificates
relating to the transactions contemplated thereby.
     Pershing Square Term Loan Facility. That certain term loan facility in an
aggregate principal amount up to $42,500,000 provided to BGI by Pershing Square
and the other lenders under such facility, pursuant to the Pershing Square Term
Loan Documents.
     Pershing Square Warrants. The warrants to purchase common stock issued by
BGI to Pershing Square on April 9, 2008 under the Pershing Square Warrant
Transaction, and including any stock appreciation rights and/or derivatives
issued in lieu of all or a portion thereof under the Pershing Square Warrant
Transaction.
     Pershing Square Warrant Transaction. The issuance by BGI to Pershing Square
on April 9, 2008 of warrants to purchase BGI common stock pursuant to the
Warrant and Registration Rights Agreement, dated as of April 9, 2008, between
BGI and Computershare Trust Company N.A., as Warrant Agent.
     Person. Any individual, corporation, limited liability company,
partnership, limited liability partnership, trust, other unincorporated
association, business, or other legal entity, and any Governmental Authority.
     Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA
(including a Pension Plan but excluding a Multiemployer Plan), maintained for
employees of any Borrower or any ERISA Affiliate or any such Plan to which any
Borrower or any ERISA Affiliate is required to contribute on behalf of any of
its employees.
     Property. Any and all property, whether real, personal, tangible,
intangible or mixed, both owned and leased pursuant to Capitalized Leases, of
any Person.
     Purchase Card Reserve. An amount equal to the then liabilities and
obligations of the Borrowers and/or Guarantors as reported to the Administrative
Agent in accordance with the provisions of §8.4(j) hereof with respect to
purchase cards then provided or outstanding (including, without limitation, the
purchase card presently provided by JPMorgan Chase Bank, N.A. or any of its
Affiliates); provided that a Purchase Card Reserve shall not be required to be
established until the earliest of (a) such time as Adjusted Excess Availability
is less than or equal to $105,000,000; (b) the commencement of an Insolvency
Proceeding involving any Borrower or any Guarantor; or (c) a sale of all or
substantially all of the retail operations or inventory by any Borrower or any
Guarantor through store closing, going-out of business or similar sales;
provided, further that a Purchase Card Reserve shall not be required to be
maintained if (x) Adjusted Excess Availability is greater than $105,000,000 and
(y) no Insolvency Proceeding has been commenced against any Borrower or any
Guarantor.
     RCRA. See §7.17(a).

- 31 -

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

 

     Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by BGI or any of its Subsidiaries.
     Record. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Lender
with respect to any Loan referred to in such Note.
     Reference Period. As of any date of determination, the period of twelve
(12) consecutive fiscal months of BGI and its Subsidiaries ending on such date,
or if such date is not a fiscal month end date, the period of twelve
(12) consecutive fiscal months most recently ended (in each case treated as a
single accounting period).
     Register. See §15.3.
     Reimbursement Obligation. The Borrowers’ obligation to reimburse the
Administrative Agent, any Issuing Bank and the Lenders on account of any drawing
under any Letter of Credit as provided in §4.2.
     Related Parties. 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.
     Replacement Lender. See §5.12.
     Reportable Event. Any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived.
     Required Revolving Lenders. As of any date, the Revolving Lenders having
Revolving Credit Exposures and unused Commitments representing at least
fifty-one (51%) of the sum of the total Revolving Credit Exposures and unused
Commitments at such time.
     Required Lenders. As of any date, the Lenders having Revolving Credit
Exposures and/or unused Commitments representing at least fifty-one percent
(51%) of the sum of the total Revolving Credit Exposures and unused Commitments
at such time; provided that if, at the time Required Lenders is being
determined, the Commitments shall have terminated in full, then the outstanding
Loans of the Lenders shall be included in their respective Revolving Credit
Exposures in determining the Required Lenders. After the Existing Tranche
Termination Date, Required Lenders shall be the Lenders under the Extended
Tranche having Revolving Credit Exposures and unused Commitments representing at
least fifty-one (51%) percent of the sum of the total Revolving Credit Exposures
and unused Commitments at such time.
     Restricted Payments. In relation to BGI and its Subsidiaries, any
(a) Distribution, (b) payment in cash or other property (other than common
shares or additional warrants or rights to acquire common shares or other equity
securities or stock appreciation rights of BGI) arising or resulting from the
settlement, exercise, purchase, redemption, defeasance, retirement, payment,
acquisition or otherwise of the Pershing Square Warrants or any debt or equity
instruments (including interest and fees thereon) issued as a result of or in
connection with the deferral of any payment in respect of the Pershing Square
Warrants or any settlement, exercise, purchase, redemption, defeasance,
retirement, payment, acquisition or otherwise thereof or (c) derivatives or
other transactions with any financial institution, fund, commodities or stock
exchange, clearinghouse or other Person (a “Derivatives Counterparty”)
obligating BGI or any of its Subsidiaries to make payments to such Derivatives
Counterparty as a result of any change in market value of any Capital Stock of
BGI or such Subsidiary.

- 32 -

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

 

     Revolving Credit Exposure. With respect to any Lender at any time, the sum
of the outstanding principal amount of such Lender’s Revolving Credit Loans and
its LC Exposure and Swingline Exposure at such time.
     Revolving Credit Facility. The revolving credit facility provided to the
Borrowers under the Credit Agreement.
     Revolving Credit Loans. Revolving credit loans made or to be made by the
Lenders to the Borrowers pursuant to §2.1.1.
     Revolving Lender. Each Lender with a Commitment.
     Revolving Loan Request. See §2.1.3.
     Revolving Notes. See §2.6.2.
     SARA. See §7.17(a).
     Seasonal Availability Period. See §12.7.
     Second Lien Agent. GA Capital, LLC, or any other financial institution or
fund (and, if a fund, acceptable to the Administrative Agent in its reasonable
discretion) in its capacity as second lien administrative agent and collateral
agent under the Second Lien Loan Documents.
     Second Lien Lenders. Collectively, the lenders under the Second Lien Loan
Documents.
     Second Lien Loan Agreement. The Term Loan Agreement dated on or about the
Effective Date, among BGI, the Second Lien Loan Agent, the Second Lien Lenders
and the other parties thereto, in form and substance satisfactory to the
Administrative Agent, and as amended from time to time in accordance with the
terms of the Intercreditor Agreement.
     Second Lien Loan Closing Date. The first date on which the conditions to
effectiveness set forth in the Second Lien Loan Agreement and the other Second
Lien Loan Documents have been satisfied and the Second Lien Loan Facility is
made available to BGI and Borders.
     Second Lien Loan Documents. Collectively, the Second Lien Loan Agreement
and each of the other “Loan Documents” referred to therein, in each case, in
form and substance satisfactory to the Administrative Agent, and each as amended
from time to time in accordance with the terms of the Intercreditor Agreement.
     Second Lien Loan Facility. That certain term loan facility not to exceed
$90,000,000 plus paid-in-kind interest to be provided to BGI by the Second Lien
Agent and the Second Lien Lenders pursuant to the Second Lien Loan Documents and
having a maturity date not earlier than the fourth anniversary of the Second
Lien Loan Closing Date.
     Second Lien Priority Account. A non-interest bearing account in the name of
the Second Lien Agent established with a financial institution as the Second
Lien Agent may request, into which solely proceeds of the Second Lien Priority
Collateral shall be deposited.
     Second Lien Priority Collateral. Has the meaning given to the term “Term
Priority Collateral” in the Intercreditor Agreement. For the avoidance of doubt,
upon the incurrence of Indebtedness by the

- 33 -

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

 

Borrowers and the Guarantors under the Second Lien Loan Facility, the Borrowers
and the Guarantors shall grant a second priority security interest to the
Administrative Agent in such Second Lien Priority Collateral.
     Second Lien Secured Parties. Collectively, the “Secured Parties” under and
as defined in the Second Lien Loan Agreement.
     Secured Parties. Collectively, the Agents, the Lenders, the Issuing Banks,
each co-agent or sub-agent appointed by the Administrative Agent from time to
time pursuant to terms hereof, and the other Persons (including, without
limitation, any Affiliate of any Lender) the Obligations owing to which are or
are purported to be secured by the Collateral under the terms of the Security
Documents.
     Securities Pledge Agreement. Collectively, (a) that certain Securities
Pledge Agreement, executed and delivered on the Effective Date, among the
Borrowers, the Guarantors and the Administrative Agent, (b) any other securities
pledge agreement or joinder or supplement thereto that may be entered into after
the Effective Date with respect to a Subsidiary of any Borrower or any Guarantor
formed or acquired after the Effective Date and required to join such securities
pledge agreement hereunder, in each case, in form and substance reasonably
acceptable to the Administrative Agent and as amended and in effect from time to
time, and (c) all other instruments, agreements and documents executed or
delivered pursuant to or in connection with such securities pledge agreement
(including, without limitation, any certificates representing pledged Capital
Stock or transfer powers delivered in connection therewith).
     Security Agreement. Collectively, (a) the Second Amended and Restated
Security Agreement, dated as of the Effective Date, among BGI, the other
Borrowers, the Guarantors, any other parties thereto and the Administrative
Agent and in form and substance satisfactory to the Lenders and the
Administrative Agent (as the same may be further amended from time to time), (b)
and any other security agreement or joinder or supplement thereto that may be
entered into after the Effective Date with respect to a Subsidiary of a Borrower
or a Guarantor formed or acquired after the Effective Date and required to join
such security agreement hereunder, in each case, in form and substance
reasonably acceptable to the Administrative Agent and as amended and in effect
from time to time, and (c) all other instruments, agreements and documents
executed or delivered pursuant to or in connection with such security agreement
(including, without limitation, any perfection certificates or collateral
certificates delivered in connection therewith).
     Security Documents. Collectively, the Security Agreement, the Deed, the
Intellectual Property Security Agreement, the Securities Pledge Agreement, the
Agency Account Agreements, the Credit Card Notifications, the Freight Forwarder
Agreements and all other instruments and documents, including without limitation
Uniform Commercial Code financing statements (or the foreign equivalent, if
applicable), required to be executed or delivered pursuant to any Security
Document, and each of the other agreements, instruments or documents that
creates or purports to create a Lien in favor of the Administrative Agent for
the benefit of the Secured Parties.
     Shrink. Inventory which has been lost, misplaced, stolen, or is otherwise
unaccounted for.
     Shrink Reserve. From time to time and to the extent that Shrink was not
deducted in determining Net Book Value, the Borrowers’ then current general
ledger reserve for Shrink; provided that the determination of such current
general ledger reserve is consistent with the methodologies used in the
Borrowers’ most recent physical inventory summary results delivered to the
Co-Collateral Agents on or about September 2009.

- 34 -

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

 

     Small Format Stores. The stores owned by any Borrower or any of its
Subsidiaries that consist of Waldenbooks stores, Borders airport stores,
“Borders Express” stores and “Borders Outlet” stores.
     Solvent. With respect to any Person on a particular date, that on such date
(a) the fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent liabilities, of
such Person, (b) the present fair saleable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such Person is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course
of business, (d) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person’s ability to pay as such
debts and liabilities mature, and (e) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person’s property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount which,
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.
     Spot Rate. For a currency, the rate determined by the Administrative Agent
to be the rate quoted by the Person acting in such capacity as the spot rate for
the purchase by such Person of such currency with another currency through its
principal foreign exchange trading office at approximately 11:00 a.m. on the
date two Business Days prior to the date as of which the foreign exchange
computation is made; provided that the Administrative Agent may obtain such spot
rate from another financial institution designated by the Administrative Agent
if the Person acting in such capacity does not have as of the date of
determination a spot buying rate for any such currency.
     Subordinated Debt. Indebtedness of a Borrower or Guarantor that is
subordinate in right of payment to any or all of the Obligations on terms and
conditions reasonably satisfactory to the Administrative Agent and which
provides, without limitation, (a) for a maturity after the Maturity Date with
respect to the Extended Tranche, (b) that such Indebtedness is unsecured, (c)
that no principal payments shall be required to be made until after the Maturity
Date with respect to the Extended Tranche, and (d) interest shall accrue and be
payable in kind and/or in cash (subject to the right of the Administrative Agent
to impose a payment blockage period upon the occurrence and during the
continuance of any Default or Event of Default) at a rate of interest reasonably
acceptable to the Administrative Agent.
     Subsidiary. 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.
     Swap Termination Value. In respect of any one or more Hedging Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Hedging Agreements, (a) for any date on or after the
date such Hedging Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Hedging

- 35 -

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

 

Agreements, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Hedging
Agreements (which may include a Lender or any Affiliate of a Lender).
     Swingline Lender. Bank of America in its capacity as lender of Swingline
Loans hereunder.
     Swingline Expiry Date. The date which is five (5) Business Days prior to
the Maturity Date.
     Swingline Exposure. 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 Commitment Percentage of the total Swingline Exposure
at such time.
     Swingline Loan. Any loan made by the Swingline Lender to the Borrowers
pursuant to §2.5.1 hereof.
     Swingline Loan Request. See §2.5.2.
     Swingline Note. See §2.6.6.
     Swingline Note Record. A record attached to the Swingline Note.
     Swingline Sublimit. $50,000,000.
     Synthetic Lease. Any lease of goods or other property, whether real or
personal, which is treated as an operating lease under GAAP and as a loan or
financing for U.S. income tax purposes.
     Taxes. All present or future taxes, including all levies, imposts, duties,
deductions, withholdings (including backup withholding), assessments, fees or
other similar charges relating to such amounts imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.
     Term Borrowing Base Reserve. A reserve against the Aggregate Borrowing Base
to be included in the calculation of the Aggregate Borrowing Base at any time
the outstanding principal amount of the loans under the Second Lien Loan
Facility exceed the Term Loan Facility Borrowing Base (as defined in the Second
Lien Loan Agreement), the amount of which shall equal the difference between
such outstanding principal amount of such loans and the Term Loan Facility
Borrowing Base at such time, until the delivery of a subsequent Borrowing Base
Report reflecting that such excess is eliminated.
     Total Commitment. The sum of the Commitments of the Lenders, as in effect
from time to time. On the Effective Date, the Total Commitment shall be
$970,500,000.
     Total Facility Usage. At any time, the sum of the Revolving Credit Loans
outstanding, the LC Exposure and the Swingline Loans outstanding.
     Total Facility Usage Ratio. The ratio, expressed as a percentage, of
(i) the Total Facility Usage at such time to (ii) the lesser of (A) the Total
Commitment at such time or (B) the Aggregate Borrowing Base at such time.
     Trademarks. As defined in the Security Agreement.
     Trademark Security Agreement. That certain Trademark Collateral and
Security Pledge Agreement, executed and delivered on the Effective Date, among
the Borrowers, the Guarantors, each of

- 36 -

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

 

their respective Subsidiaries and the Administrative Agent, in form and
substance satisfactory to the Administrative Agent and any other trademark
security agreement or joinder or supplement thereto that may be entered into
after the Effective Date with respect to a Subsidiary of a Borrower or a
Guarantor formed or acquired after the Effective Date and required to join such
trademark security agreement hereunder, each as amended, supplemented or
otherwise modified from time to time.
     Tranche. Collectively, the Extended Tranche and the Existing Tranche, and
individually either the Extended Tranche or the Existing Tranche, in each case,
of the Revolving Credit Facility.
     Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
Eurocurrency Rate Loan.
     Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the
Borrowers do not reimburse the Administrative Agent, any Issuing Bank and the
Lenders on the date specified in, and in accordance with, §4.2.
     Wholly-owned Subsidiary. Any Subsidiary of BGI of which all of the
outstanding shares of capital stock or other equity interests are owned by BGI
(whether directly or through one or more Wholly-owned Subsidiaries of BGI)
except for (a) directors’ qualifying shares in jurisdictions where such
qualifying shares are required, and (b) non-voting stock issued pursuant to
employee stock or stock option plans; provided that (i) in respect of
Paperchase, such stock shall be in lieu of cash compensation that the applicable
employees would otherwise have received in the ordinary course of business, as
reasonably determined by the board of directors or other governing body of
Paperchase, and (ii) in respect of any other Subsidiary, the aggregate amount of
such stock shall not exceed 1% of such Subsidiary’s outstanding stock.
     1.2. Rules of Interpretation.
     (a) A reference to any document or agreement shall include such document or
agreement as amended, modified or supplemented from time to time in accordance
with its terms and the terms of this Credit Agreement; provided that any terms
used herein which are defined by reference to the Second Lien Loan Agreement
shall mean such terms as defined in the Second Lien Loan Agreement as of the
Effective Date, without giving effect to any modifications or amendments thereto
except as in accordance with the Intercreditor Agreement.
     (b) The singular includes the plural and the plural includes the singular.
     (c) A reference to any law includes any amendment or modification to such
law.
     (d) A reference to any Person includes its permitted successors and
permitted assigns.
     (e) Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting entity
to which they refer.
     (f) The words “include”, “includes” and “including” are not limiting.

- 37 -

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

 

     (g) All terms not specifically defined herein or by GAAP, which terms are
defined in the Uniform Commercial Code as in effect in the State of New York,
have the meanings assigned to them therein, with the term “instrument” being
that defined under Article 9 of the Uniform Commercial Code.
     (h) Reference to a particular “§” refers to that section of this Credit
Agreement unless otherwise indicated.
     (i) The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Credit Agreement as a whole and not to any particular
section or subdivision of this Credit Agreement.
     (j) Unless otherwise expressly indicated, in the computation of periods of
time from a specified date to a later specified date, the word “from” means
“from and including,” the words “to” and “until” each mean “to but excluding,”
and the word “through” means “to and including.”
     (k) This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are, however, cumulative
and are to be performed in accordance with the terms thereof.
     (l) This Credit Agreement and the other Loan Documents are the result of
negotiation among, and have been reviewed by counsel to, among others, the
Administrative Agent and the Borrowers and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the other
Loan Documents are not intended to be construed against any Agent or any of the
Lenders merely on account of any Agent’s or any Lender’s involvement in the
preparation of such documents.
     1.3. Accounting Principles. Except as otherwise provided in this Credit
Agreement, all computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to this Credit
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate); provided, however, that if any
change in GAAP or the application thereof occurs hereafter, or if BGI adopts a
change to its accounting principles or methods with the agreement of its
independent certified public accountants, and such change results in a change in
the calculation of any financial covenant or restriction set forth herein, then
the parties hereto agree to enter into and diligently pursue negotiations in
order to amend such financial covenant or restriction so as to equitably reflect
such change, with the desired result that the criteria for evaluating the
financial condition and results of operations of BGI and its Subsidiaries shall
be the same after such change as if such change had not been made. Pending the
resolution of any such negotiations, the Borrowers agree to provide to each of
the Lenders such unaudited financial information and pro forma statements using
the accounting methods and principles used in the preparation of the audited
financial statements for the Fiscal Year ended as of the Balance Sheet Date, as
are necessary to enable the Lenders to test the financial covenants contained
herein. Notwithstanding the foregoing, for purposes of determining compliance
with any covenant contained herein, Indebtedness of the Borrowers and their
Subsidiaries shall be deemed to be carried at 100% of the outstanding principal
amount thereof, and the effects of FASB ASC 825 on financial liabilities shall
be disregarded.

- 38 -

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

 

2. THE CREDIT FACILITIES.
     2.1. Revolving Credit Loans.
     2.1.1. Commitment to Lend under Revolving Credit Facility. Subject to the
terms and conditions set forth in this Credit Agreement, each of the Revolving
Lenders severally agrees to lend to the Borrowers and the Borrowers may borrow,
repay (subject to §3.3), and reborrow from time to time from the Effective Date
up to but not including the relevant Commitment Termination Date upon notice by
the Borrowers to the Administrative Agent given in accordance with §2.1.3, such
sums in Dollars as are requested by the Borrowers up to a maximum aggregate
amount outstanding (after giving effect to all amounts requested) at any one
time equal to such Lender’s Commitment in effect at such time, as such
Commitment has been deemed to be reduced by such Lender’s Commitment Percentage
of the outstanding Swingline Loans and such Lender’s LC Exposure, provided that
(in each case, after giving effect to all amounts requested) (a) the Total
Facility Usage shall not exceed the lesser of (i) the Total Commitment or
(ii) the Aggregate Borrowing Base as then in effect and (b) no Lender shall be
required to advance Revolving Credit Loans, which, when added to such Lender’s
Commitment Percentage of outstanding Swingline Loans and LC Exposure, would be
in excess of its Commitment Percentage as then in effect.
     Notwithstanding the foregoing, the Borrowers shall not request, and the
Lenders shall not advance, any Loans (other than (x) Revolving Credit Loans used
to reimburse Swingline Loans as provided in §2.5.3 and (y) Revolving Credit
Loans used to reimburse a draw on a Letter of Credit as provided in §4.3) at any
time when, after giving effect to all amounts requested, Excess Availability is
less than the greater of (a) ten percent (10%) of the lesser of (i) the
Aggregate Borrowing Base and (ii) the Total Commitment and (b) $50,000,000.
     The Revolving Credit Loans shall be made pro rata between the respective
Tranches, to the extent applicable, of the Revolving Credit Facility in
accordance with each Revolving Lender’s Commitment Percentage applicable at such
time. Each request for a Revolving Credit Loan hereunder shall constitute a
representation and warranty by the applicable Borrower or, as the case may be,
Borrowers that the conditions set forth above and in (A) §11 and §12, in the
case of the initial Revolving Credit Loans to be made on the Effective Date, and
(B) §12, in the case of all other Revolving Credit Loans, have been satisfied on
the date of such request, and shall be deemed to constitute a request for Loans
under the Existing Tranche and Extended Tranche, to the extent applicable, of
the Revolving Credit Facility, pro rata.
     2.1.2. [Reserved].
     2.1.3. Requests for Loans. The applicable Borrower or, as the case may be,
Borrowers shall give to the Administrative Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed in a writing in the form of
Exhibit B hereto) of each Revolving Credit Loan requested hereunder (in any
case, a “RevolvingLoanRequest”) no later than (a) 1:00 p.m. (Eastern time) one
(1) Business Day prior to the proposed Drawdown Date of any Base Rate Loan and
(b) 10:00 a.m. (Eastern time) three (3) Business Days prior to the proposed
Drawdown Date of any Eurocurrency Rate Loan. Each such notice shall specify
(i) the principal amount of the Revolving Credit Loan requested, (ii) the
proposed Drawdown Date of such Loan(s), (iii) the Interest Period for such
Loan(s) and (iv) the Type of such Loan(s). Promptly upon receipt of any such
notice, the Administrative Agent shall notify each of the Lenders thereof. Each

- 39 -

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

 

Revolving Loan Request shall be irrevocable and binding on the applicable
Borrower or, as the case may be, Borrowers and shall obligate the applicable
Borrower or, as the case may be, Borrowers to accept the Loan requested from the
applicable Lenders on the proposed Drawdown Date. Each Revolving Loan Request
shall be in a minimum aggregate amount of $2,000,000 or a multiple of $1,000,000
in excess thereof.
     2.2. Fees.
     2.2.1. Existing Commitment Fee. The Borrowers agree to pay to the
Administrative Agent for the accounts of the Lenders having Commitments under
the Existing Tranche, in accordance with their Commitment Percentages, a
commitment fee (the “Existing Commitment Fee”) in Dollars equal to 0.25% per
annum times the average daily amount by which the Total Commitment exceeds the
result of (x) the Total Facility Usage minus (y) the Swingline Loans
outstanding. The Existing Commitment Fee shall accrue at all times from the
Effective Date up to but not including the Maturity Date, including at any time
during which one or more of the conditions in §12 is not met, and shall be due
and payable quarterly in arrears on the first Business Day of each April, July,
October and January, commencing with the first such date to occur after the
Effective Date, and on the Maturity Date. The Existing Commitment Fee shall be
calculated quarterly in arrears.
     2.2.2. Extended Commitment Fee. The Borrowers agree to pay to the
Administrative Agent for the accounts of the Lenders having Commitments under
the Extended Tranche, in accordance with their respective Commitment
Percentages, a commitment fee (the “Extended Commitment Fee”) in Dollars equal
to (i) in the event that the arithmetic mean of the Total Facility Usage Ratio
for a quarterly computation period is less than fifty percent (50%) of the
lesser of (A) the Total Commitment or (B) the Aggregate Borrowing Base, 0.75%
per annum times the average daily amount by which the Total Commitment exceeds
the result of (x) the Total Facility Usage minus (y) the Swingline Loans
outstanding and (ii) in the event that the arithmetic mean of the Total Facility
Usage Ratio for a quarterly computation period is equal to or greater than fifty
percent (50%) of the lesser of (1) the Total Commitment or (2) the Aggregate
Borrowing Base, 0.50% per annum times the average daily amount by which the
Total Commitment exceeds the result of (x) the Total Facility Usage minus
(y) the Swingline Loans outstanding. The Extended Commitment Fee shall accrue at
all times from the Effective Date up to but not including the Maturity Date,
including at any time during which one or more of the conditions in §12 is not
met, and shall be due and payable quarterly in arrears on the first Business Day
of each April, July, October and January, based on the arithmetic mean of the
Total Facility Usage Ratio for the immediately preceding three-month period,
commencing with the first such date to occur after the Effective Date, and on
the Maturity Date. The Extended Commitment Fee shall be calculated quarterly in
arrears.
     2.3. Changes in Total Commitment.
     2.3.1. Reduction of Total Commitment. The Borrowers shall have the right at
any time and from time to time upon five (5) Business Days prior written notice
to the Administrative Agent to reduce by $10,000,000 or increments of $5,000,000
in excess thereof or to terminate entirely the Total Commitment, whereupon the
Commitments of the Lenders shall be reduced pro rata between the Extended
Tranche and the Existing Tranche of the Revolving Credit Facility in accordance
with their respective

- 40 -

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

 

Commitment Percentages of the amount specified in such notice or, as the case
may be, terminated. Promptly after receiving any notice of the Borrowers
delivered pursuant to this §2.3.1, the Administrative Agent will notify the
Lenders of the substance thereof. Upon the effective date of any such reduction
or termination, the Borrowers shall pay to the Administrative Agent for the
respective accounts of the Lenders the full amount of any Commitment Fee, if
any, then accrued on the amount of the reduction. No reduction or termination of
the Commitments may be reinstated.
     2.3.2. Termination of Existing Tranche. Subject to the conditions in this
§2.3.2, upon thirty (30) days prior notice, on the ninetieth (90th) day
following the Effective Date, the Borrowers shall have the right to terminate
entirely the Commitments of the Lenders under the Existing Tranche, whereupon
all of the Commitments of the Lenders under the Existing Tranche shall be
terminated; provided that (a) no Default or Event of Default has occurred and is
continuing or would result therefrom, (b) the Borrowers may not terminate the
Commitments under the Existing Tranche under this §2.3.2 unless there exists a
minimum Excess Availability of $80,000,000 under the Extended Tranche (i) at all
times during the period of thirty (30) consecutive days immediately prior to the
termination of the Commitments under the Existing Tranche and the repayment of
all Loans under the Existing Tranche, and (ii) on a pro forma basis
(x) immediately after giving effect to any such termination of the Commitments
under the Existing Tranche and repayment of all Loans thereunder and (y) at all
times during each of the successive six (6) months after giving effect to any
such termination and repayment of the Existing Tranche, in each case based upon
projections provided by the Borrowers within thirty (30) days before the date of
the proposed termination and repayment of the Existing Tranche. Promptly after
receiving any notice of the Borrowers delivered pursuant to this §2.3.2, the
Administrative Agent will notify the Revolving Lenders of the substance thereof.
Upon the effective date of any such termination, the Borrowers shall pay to the
Administrative Agent for the respective accounts of the Lenders under the
Existing Tranche the full amount of any Existing Commitment Fee, if any, then
accrued. No termination of the Commitments under the Existing Tranche may be
reinstated.
     2.3.3. Increase in Commitment Applicable to Extended Tranche. Following the
Effective Date, so long as no Default or Event of Default has occurred and is
then continuing or would result therefrom, the Borrowers may from time to time
request that the Total Commitment applicable to the Extended Tranche be
increased and, upon such request, the Administrative Agent shall have the right
to solicit additional financial institutions to become Extending Revolving
Lenders for purposes of this Credit Agreement, or to encourage any Lender to
increase its Commitment under the Extended Tranche, provided that (a) any such
request for an increase shall be in a minimum amount of $50,000,000; (b) the
Borrowers may make a maximum of three such requests over the term of this Credit
Agreement; (c) each Extending Revolving Lender which is a party to this Credit
Agreement prior to such increase shall have the first option, and may elect, to
fund its pro rata share of the amount of the increase in the Total Commitment
(or any such greater amount in the event that one or more Extending Revolving
Lenders does not elect to fund its respective pro rata share of the amount of
the increase in the Total Commitment), thereby increasing its Commitment under
the Extended Tranche hereunder, but no Lender shall have any obligation to do
so; (d) in the event that it becomes necessary to include a new financial
institution to fund the amount of the increase in the Total Commitment, each
such financial institution shall be reasonably acceptable to the Administrative
Agent and each such financial institution shall become

- 41 -

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

 

an Extending Revolving Lender hereunder and agree to become party to, and shall
assume and agree to be bound by, this Credit Agreement, subject to all terms and
conditions hereof; (e) none of the Administrative Agent or the other Agents
shall have any obligation to the Borrowers or to any Lender to solicit
additional financial institutions or any increase in the Commitment of any
Extending Revolving Lender pursuant to this §2.3.3; (f) no Extending Revolving
Lender shall have an obligation to the Borrowers, the Agents or any other Lender
to increase its Commitment or its Commitment Percentage; and (g) in no event
shall the addition of any Extending Revolving Lender or the increase in the
Commitment of any Extending Revolving Lender under this §2.3.3 increase the
Total Commitment by an amount greater than $175,000,000 in the aggregate. Upon
the addition of any Extending Revolving Lender, or the increase in the
Commitment of any Extending Revolving Lender, Schedule 1 shall be amended by the
Administrative Agent and the Borrowers to reflect such addition or such
increase, and the Administrative Agent shall deliver to the Lenders, the Agents,
the Issuing Bank(s) and BGI copies of such Schedule 1. If, at any time that the
Commitments are increased pursuant to this §2.3.3, there are Revolving Credit
Loans then outstanding or any LC Exposure then existing, each new Extending
Revolving Lender, and each existing Extending Revolving Lender that has
increased its Commitment, shall purchase Loans under the Extended Tranche and LC
Exposure from each other Extending Revolving Lender in an amount such that,
after such purchase or purchases, the amount of outstanding Loans and LC
Exposure from each Extending Revolving Lender shall equal such Extending
Revolving Lender’s respective Commitment Percentage, as modified to give effect
to such increase, multiplied by the aggregate amount of Loans outstanding and LC
Exposure from all Lenders. To the extent that any outstanding Loans under the
Extended Tranche bear interest at the Eurocurrency Rate, the Borrowers shall pay
any additional costs described in §5.10 incurred by any Extending Revolving
Lender.
     2.4. Hedging Agreements and Cash Management Services. Each Person providing
Cash Management Services for, or having Hedging Agreements with, any Borrower or
any Guarantor shall deliver to the Administrative Agent promptly on or before
the Effective Date notice setting forth the aggregate amount of all obligations
of any Borrower or any Guarantor on account of such Cash Management Services
and/or Hedging Agreements (whether matured or unmatured, absolute or contingent)
as of the Effective Date. Following the end of each calendar month, each Person
providing Cash Management Services for, or having Hedging Agreements with, any
Borrower or any Guarantor shall deliver to the Administrative Agent promptly
notice setting forth any new Cash Management Services or Hedging Agreement, if
applicable, or any change, if applicable, in the aggregate amount of all
obligations of any Borrower or any Guarantor on account of such Cash Management
Services and/or Hedging Agreements (whether matured or unmatured, absolute or
contingent) as of the end of such month. The obligations due with respect to
Cash Management Services and/or Hedging Agreements provided by any Person who
fails to timely furnish the Administrative Agent with such notice shall be
subordinated to the Liens securing Indebtedness pursuant to the Loan Documents
and Liens securing Indebtedness with respect to the Second Lien Loan Facility.
     2.5. The Swingline.
     2.5.1. The Swingline Loans. From the date hereof through but not including
the Swingline Expiry Date, and subject to the terms and conditions hereinafter
set forth, upon notice by the Borrowers made to the Swingline Lender in
accordance with §2.5.2 hereof, and in reliance upon the agreements of the other
Lenders set forth in this §2.5, the Swingline Lender may in its sole discretion
make Swingline Loans to the Borrowers from

- 42 -

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

 

time to time in Dollars on any Business Day in an aggregate principal amount not
to exceed the Swingline Sublimit. Each Swingline Loan shall be in a minimum
amount equal to $250,000 or a multiple of $100,000 in excess thereof.
Notwithstanding any other provisions of this Credit Agreement and in addition to
the limit set forth above, at no time shall the Total Facility Usage (after
giving effect to all amounts requested) exceed the lesser of (i) the Total
Commitment or (ii) the Aggregate Borrowing Base as then in effect. The Swingline
Loans are being made available for the administrative convenience of the
Borrowers, the Swingline Lender and the Lenders. Notwithstanding any other
provisions of this Credit Agreement, the Swingline Lender shall not advance any
Swingline Loans if a Default or Event of Default has occurred until such Default
or Event of Default has been cured or waived in accordance with the provisions
of this Credit Agreement. The Swingline Lender shall not be obligated to make
any Swingline Loans at any time when any Lender is a Delinquent Lender unless
the Swingline Lender has entered into arrangements satisfactory to it to
eliminate the Swingline Lender’s risk of full reimbursement with respect to such
Delinquent Lender, including by Cash Collateralizing such Delinquent Lender’s
Commitment Percentage of the outstanding Swingline Loans and any such additional
Swingline Loans to be made as set forth in this Agreement. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Swingline Loans. Each request for a Swingline
Loan hereunder shall constitute a representation and warranty by the Borrowers
that the conditions set forth above and in §11 and §12, in the case of any
Swingline Loans to be made on the Effective Date, and §12, in the case of all
other Swingline Loans, have been satisfied on the date of such request.
     2.5.2. Request for Swingline Loans. To request a Swingline Loan, the
Borrowers shall send to the Swingline Lender and the Administrative Agent
written notice in the form of Exhibit C hereto of each Swingline Loan requested
hereunder (a “Swingline Loan Request”) not later than 12:00 Noon (Eastern time)
on the proposed Drawdown Date of any Swingline Loan, which shall be a Business
Day. Each such Swingline Loan Request shall set forth the principal amount of
the proposed Swingline Loan and the Drawdown Date of such Swingline Loan.
Notwithstanding the foregoing, each of the Swingline Lender and the
Administrative Agent may, in its sole discretion, accept an oral or written
request made on behalf of the Borrowers by an Authorized Officer by telephone,
telex, facsimile or some other form of written electronic communication, in
which case the Swingline Lender and the Administrative Agent shall be entitled
to rely on any such oral or written request received by the Swingline Lender and
the Administrative Agent in good faith from anyone reasonably believed by the
Swingline Lender or the Administrative Agent to be an Authorized Officer. The
Borrowers shall promptly confirm any such communication by delivery of a
Swingline Loan Request upon request of the Swingline Lender or the
Administrative Agent. Each Swingline Loan Request shall be irrevocable and
binding on the Borrowers and shall obligate the Borrowers to borrow the
Swingline Loan from the Swingline Lender on the proposed Drawdown Date thereof.
Unless the Swingline Lender has received notice (by telephone or in writing)
from the Administrative Agent (including at the request of any Lender) prior to
2:00 p.m. (Eastern time) on the date of the proposed Swingline Loan
(A) directing the Swingline Lender not to make such Swingline Loan as a result
of the limitations set forth in the third sentence of §2.5.1, or (B) that one or
more of the applicable conditions specified in §12 is not then satisfied, then,
upon satisfaction of the applicable conditions set forth in this Credit
Agreement, on the proposed Drawdown Date the Swingline Lender shall make the
Swingline Loan available to the Borrowers no later than 3:00 p.m. (Eastern time)
on the proposed Drawdown Date by crediting the amount

- 43 -

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

 

of the Swingline Loan to the general deposit account of the Borrowers maintained
with the Swingline Lender.
     2.5.3. Borrowings to Repay Swingline Loans. The Borrowers jointly and
severally, absolutely, irrevocably and unconditionally promise to pay on the
Swingline Expiry Date the outstanding principal balance of all Swingline Loans.
The Borrowers may prepay the Swingline Loans at any time without penalty or
premium. In addition, the Swingline Lender may, on any Business Day, in its sole
discretion, demand repayment of the Swingline Loans and the Administrative Agent
shall give notice to the Lenders that the outstanding Swingline Loans shall be
funded with a borrowing of Loans prior to the Commitment Termination Date
(provided that each such notice shall be deemed to have been automatically given
upon the occurrence of a Default or Event of Default under §13.1(g) or (h) or
upon the exercise of remedies provided in the last paragraph of §13.1), in which
case each of the Lenders shall make Loans constituting Base Rate Loans to the
Borrowers, on the next succeeding Business Day following such notice, in an
amount equal to such Revolving Lender’s Commitment Percentage of the aggregate
amount of all Swingline Loans outstanding to the Borrowers. The proceeds thereof
shall be applied directly to the Swingline Lender to repay the Swingline Lender
for such outstanding Swingline Loans. Each Lender hereby absolutely,
unconditionally and irrevocably agrees to make such Loans upon one Business
Day’s notice as set forth above, notwithstanding (a) that the amount of such
Loan may not comply with the applicable minimums otherwise required hereunder,
(b) the failure of the Borrowers to meet the conditions set forth in §§11 or 12
hereof, (c) the occurrence or continuance of a Default or an Event of Default
hereunder, (d) the date of such Loan, (e) the amount of, or termination of, the
Total Commitment at such time, (f) any setoff, counterclaim, recoupment, defense
or other right which such Lender may have against the Administrative Agent, the
Borrowers or any other Person for any reason whatsoever or (g) any other
occurrence, event or condition, whether or not similar to any of the foregoing.
In the event that it is impracticable for such Loan to be made for any reason on
the date otherwise required above (including as a result of the commencement of
a proceeding under the federal Bankruptcy Code in respect of any of the
Borrowers), then each Lender hereby agrees that it shall forthwith purchase (as
of the date such Loan would have been made, but adjusted for any payments
received from the Borrowers on or after such date and prior to such purchase)
from the Swingline Lender, and the Swingline Lender shall sell to each Lender,
such participations in the Swingline Loans (including all accrued and unpaid
interest thereon) outstanding as shall be necessary to cause the Lenders to
share in such Swingline Loans pro rata based on their respective Commitment
Percentages (without regard to any termination of the Total Commitment
hereunder) by making available to the Swingline Lender an amount equal to such
Lender’s participation in the Swingline Loans. No such funding of risk
participations shall relieve or otherwise impair the obligation of the Borrowers
to repay Swingline Loans, together with interest as provided herein.
Notwithstanding anything in the foregoing to the contrary, following the
termination of the Commitments under the Existing Tranche (so long as no Default
or Event of Default has occurred and is continuing at the time of such
termination), the Extending Revolving Lenders shall be responsible for funding
any Loans or participations hereunder in accordance with their respective
Commitment Percentages after giving effect to such termination.
     Until each Lender funds its applicable Loan or risk participation pursuant
to this §2.5.3 to refinance such Lender’s Commitment Percentage of any Swingline
Loan, interest in respect of such pro rata share shall be solely for the account
of the Swingline

- 44 -

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

 

Lender. The Swingline Lender shall be responsible for invoicing the Borrowers
for interest on the Swingline Loans. The Borrowers shall make all payments of
principal and interest in respect of the Swingline Loans directly to the
Swingline Lender.
     If any Lender fails to make available to the Swingline Lender for the
account of the Swingline Lender any amount required to be paid by such Lender
pursuant to the foregoing provisions of this §2.5.3, the Swingline Lender shall
be entitled to recover from such Lender, on demand, such amount with interest
thereon for the period from the date such payment is required to the date on
which such payment is immediately available to the Swingline Lender at a rate
per annum equal to the Overnight Rate from time to time in effect, plus any
administrative, processing or similar fees customarily charged by the Swingline
Lender in connection with the foregoing. If such Lender pays such amount (with
interest and fees as aforesaid), the amount so paid shall constitute such
Lender’s Base Rate Loan included in the relevant Base Rate borrowing or funded
participation in the relevant Swingline Loan, as the case may be. A certificate
of the Swingline Lender submitted to any Lender with respect to any amounts
owing under this §2.5.3 shall be conclusive absent manifest error.
     2.5.4. Repayment of Participations.
     (a) At any time after any Lender has purchased and funded a risk
participation in a Swingline Loan, if the Swingline Lender receives any payment
on account of such Swingline Loan, the Swingline Lender will distribute to such
Lender its pro rata share thereof based on such Lender’s Commitment Percentage,
in the same funds as those received by the Swingline Lender.
     (b) If any payment received by the Swingline Lender in respect of principal
or interest on any Swingline Loan is required to be returned by the Swingline
Lender under any of the circumstances described in §16.3A (including pursuant to
any settlement entered into by the Swingline Lender in its discretion), each
Lender shall pay to the Swingline Lender its pro rata share thereof based on
such Lender’s Commitment Percentage, on demand of the Swingline Lender, plus
interest thereon from the date of such demand to the date such amount is
returned, at a rate per annum equal to the applicable Overnight Rate. The
obligations of the Lenders under this clause shall survive the payment in full
of the Obligations and the termination of this Credit Agreement.
     2.5.5. Voluntary Reduction of Swingline Sublimit. The Borrowers shall have
the right, at any time and from time to time, to terminate in whole or
permanently reduce in part, without premium or penalty, the Swingline Sublimit.
The Borrowers shall give not less than five (5) Business Days’ prior written
notice to the Swingline Lender designating the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial reduction of
the Swingline Sublimit. Such termination or partial reduction of the Swingline
Sublimit shall be effective on the date specified in the Borrowers’ notice and
shall be permanent. Any such partial reduction of the Swingline Sublimit shall
be in a minimum amount of $1,000,000.
     2.6. Evidence of Loan Obligations.
     2.6.1. Loan Accounts. The Loans made by each Lender and each Lender’s
obligations in respect of any Letters of Credit shall be evidenced by one or
more accounts or records maintained by such Lender and by the Administrative
Agent in the ordinary

- 45 -

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

 

course of business. The accounts or records maintained by the Administrative
Agent and each Lender shall be conclusive absent manifest error of the amount of
the Loans made by the Lenders and such Lender’s obligations in respect of
Letters of Credit and the interest and payments thereon. Any failure to so
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Borrowers hereunder to pay any amount owing with respect
to the Obligations. In the event of any conflict between the accounts and
records maintained by any Lender and the accounts and records of the
Administrative Agent in respect of such matters, the accounts and records of the
Administrative Agent shall control in the absence of manifest error. Upon the
request of any Lender to a Borrower made through the Administrative Agent, such
Borrower shall execute and deliver to such Lender (through the Administrative
Agent) a Note as set forth in §§2.6.2 through 2.6.6, as applicable, which shall
evidence such Lender’s Loans to such Borrower in addition to such accounts or
records. Each Lender may attach schedules to a Note and endorse thereon the
date, type, amount, currency, and maturity of its Loans and payments with
respect thereto.
     2.6.2. The Revolving Notes. Upon the request of any Lender to the
Borrowers, such Lender’s Revolving Credit Loans shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit A-1
hereto (each a “Revolving Note”) in each case dated as of the Effective Date (or
such other date on which a Lender may become a party hereto in accordance with
§15 hereof) and completed with appropriate insertions. One Revolving Note shall
be payable to the order of each such requesting Lender in a principal amount
equal to such Lender’s Commitment or, if less, the outstanding amount of all
Revolving Credit Loans made by such Lender, plus interest accrued thereon, as
set forth below. Each of the Borrowers irrevocably authorizes each Lender to
make or cause to be made, at or about the time of the Drawdown Date of any Loan
or at the time of receipt of any payment of principal on such Lender’s
applicable Revolving Note, an appropriate notation on such Lender’s Borrower
Note Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment.
     2.6.3. [Reserved].
     2.6.4. [Reserved].
     2.6.5. [Reserved].
     2.6.6. The Swingline Note. Upon the request of the Swingline Lender to the
Borrowers, the Swingline Loans shall be evidenced by a promissory note of the
Borrowers in substantially the form of Exhibit A-2 hereto (the “Swingline
Note”), dated as of the Effective Date with appropriate insertions. The
Swingline Note shall be payable to the order of the Swingline Lender in a
principal amount equal to the Swingline Sublimit and representing the obligation
of the Borrowers to pay to the Swingline Lender the aggregate unpaid principal
amount of all Swingline Loans made by the Swingline Lender hereunder plus
interest accrued thereon as set forth below. The Borrowers hereby irrevocably
authorize the Swingline Lender to make or cause to be made, at or about the time
of each Swingline Loan to the Borrowers made by the Swingline Lender and at the
time of receipt of any payment of principal on the Swingline Note of the
Swingline Lender, an appropriate notation on the Swingline Lender’s Swingline
Note Record or the Swingline Lender’s electronic data processing equipment
reflecting the making of such Swingline Loan or (as the case may be) the receipt
of such payment.

- 46 -

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

 

     2.6.7. Participating Interests of Lenders. In addition to the accounts and
records referred to in §2.6.1, each Lender and the Administrative Agent shall
maintain in accordance with its usual practice accounts or records evidencing
the purchases and sales by such Lender of participations in Letters of Credit
and Swingline Loans. In the event of any conflict between the accounts and
records maintained by the Administrative Agent and the accounts and records of
any Lender in respect of such matters, the accounts and records of the
Administrative Agent shall control in the absence of manifest error.
     2.7. Interest on Loans. Except as otherwise provided in §5.11:
     (a) each Revolving Credit Loan which is a Base Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and ending on
the last day of the Interest Period with respect thereto at the rate per annum
equal to the Base Rate plus the Applicable Margin with respect to Base Rate
Loans as in effect from time to time.
     (b) each Revolving Credit Loan which is a Eurocurrency Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and ending on
the last day of the Interest Period with respect thereto at the rate per annum
equal to the Eurocurrency Rate determined for such Interest Period plus the
Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time
to time.
     (c) each Swingline Loan shall bear interest from the Drawdown Date thereof
until repaid in full at the rate per annum equal to the Base Rate plus the
Applicable Margin with respect to Base Rate Loans as in effect from time to
time. Swingline Loans may not be converted into Eurocurrency Rate Loans.
     (d) each Borrower promises to pay interest on each Loan made to it (and the
Borrowers jointly and severally promise to pay interest on all the Loans) in
arrears on each Interest Payment Date with respect thereto and at such other
times as may be specified herein. Interest on the Loans shall be payable in
Dollars. Interest hereunder shall be due and payable in accordance with the
terms hereof before and after judgment, and before and after the commencement of
any proceeding under any Debtor Relief Laws.
     2.8. Conversion Options.
     2.8.1. Conversion to Different Type of Loan. The applicable Borrower or, as
the case may be, Borrowers may elect from time to time to convert any
outstanding Loan (other than a Swingline Loan) to a Loan of another Type,
provided that (a) with respect to any such conversion of a Eurocurrency Rate
Loan to a Base Rate Loan, the applicable Borrower or, as the case may be,
Borrowers shall give the Administrative Agent at least three (3) Business Days
prior written notice of such election; (b) with respect to any such conversion
of a Base Rate Loan to a Eurocurrency Rate Loan, the applicable Borrower or, as
the case may be, Borrowers shall give the Administrative Agent at least four
(4) Business Days prior written notice of such election; (c) with respect to any
such conversion of a Eurocurrency Rate Loan into a Base Rate Loan, such
conversion shall only be made on the last day of the Interest Period with
respect thereto and (d) no such Loan may be converted into a Eurocurrency Rate
Loan when any Default or Event of Default has occurred and is continuing. On the
date on which such conversion is being made each Lender shall take such action
as is necessary to transfer its Commitment

- 47 -

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

 

Percentage of such Loans to its Domestic Lending Office or its Eurocurrency
Lending Office, as the case may be. All or any part of outstanding Loans (other
than Swingline Loans) of any Type may be converted into a Loan of another Type
as provided herein, provided that any partial conversion shall be in an
aggregate principal amount of $5,000,000 or a multiple of $1,000,000 in excess
thereof. Each Conversion Request relating to the conversion of a Loan (other
than a Swingline Loan) to a Eurocurrency Rate Loan shall be irrevocable by the
Borrowers.
     2.8.2. Continuation of Type of Loan. Any Loan (other than a Swingline Loan)
of any Type may be continued as a Loan of the same Type upon the expiration of
an Interest Period with respect thereto by compliance by the applicable Borrower
or, as the case may be, Borrowers with the notice provisions contained in
§2.8.1; provided that no Eurocurrency Rate Loan may be continued as such when
any Default or Event of Default has occurred and is continuing, but shall be
automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto ending during the continuance of any Default or
Event of Default of which officers of the Administrative Agent active upon the
Borrowers’ account have actual knowledge. In the event that the applicable
Borrower or, as the case may be, Borrowers fail to provide any such notice with
respect to the continuation of any Eurocurrency Rate Loan as such, then as to
Eurocurrency Rate Loans such Eurocurrency Rate Loan shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto. The Administrative Agent shall notify the Lenders promptly
when any such automatic conversion contemplated by this §2.8 is scheduled to
occur.
     2.8.3. Eurocurrency Rate Loans. Any conversion to or from Eurocurrency Rate
Loans shall be in such amounts and be made pursuant to such elections so that,
after giving effect thereto, the aggregate principal amount of all Eurocurrency
Rate Loans having the same Interest Period shall not be less than the equivalent
of $2,000,000 or a whole multiple of $1,000,000 in excess thereof. No more than
eight (8) Eurocurrency Rate Loans having different Interest Periods may be
outstanding at any time and no more than three of such Eurocurrency Rate Loans
outstanding at any time may have an Interest Period of 7 days or 14 days. Any
Eurocurrency Rate Loan having an Interest Period of 7 or 14 days may be
continued as such on no more than one occasion.
     2.9. Funds for Loans.
     2.9.1. Funding Procedures. Not later than 2:00 p.m. (Eastern time) on the
proposed Drawdown Date of any Revolving Credit Loans, each of the applicable
Lenders will make available to the Administrative Agent, at the Administrative
Agent’s Office, in immediately available funds, the amount of such Lender’s
Commitment Percentage of the amount of the requested Loans. Upon receipt from
each Lender of such amount, and upon receipt of the documents required by §§11
and 12 and the satisfaction of the other conditions set forth therein, to the
extent applicable, the Administrative Agent will make available to the
applicable Borrower or, as the case may be, Borrowers the aggregate amount of
such Loans made available to the Administrative Agent by the applicable Lenders.
The failure or refusal of any Lender to make available to the Administrative
Agent at the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Loans shall not relieve any other Lender
from its several obligation hereunder to make available to the Administrative
Agent the amount of such other Lender’s Commitment Percentage of any requested
Loans.

- 48 -

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

 

     2.9.2. Advances by Administrative Agent. (a) The Administrative Agent may,
unless notified to the contrary by any Lender prior to a Drawdown Date, assume
that such Lender has made available to the Administrative Agent on such Drawdown
Date the amount of such Lender’s Commitment Percentage of the Loans to be made
on such Drawdown Date, and the Administrative Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the applicable
Borrower or, as the case may be, Borrowers a corresponding amount. If any Lender
makes available to the Administrative Agent such amount on a date after such
Drawdown Date, such Lender shall pay to the Administrative Agent on demand an
amount equal to the product of (a) the average computed for the period referred
to in clause (c) below, of the Overnight Rate for each day included in such
period times (b) the amount of such Lender’s Commitment Percentage of such
Loans, times (c) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the amount of
such Lender’s Commitment Percentage of such Loans shall become immediately
available to the Administrative Agent, and the denominator of which is 360. A
statement of the Administrative Agent submitted to such Lender with respect to
any amounts owing under this paragraph shall be prima facie evidence of the
amount due and owing to the Administrative Agent by such Lender. If the amount
of such Lender’s Commitment Percentage of such Loans is not made available to
the Administrative Agent by such Lender within three (3) Business Days following
such Drawdown Date, the Administrative Agent shall be entitled to recover such
amount from the applicable Borrower or, as the case may be, Borrowers on demand,
with interest thereon at the rate per annum applicable to such Loans made on
such Drawdown Date.
     (b) Unless the applicable Borrower(s) has or have notified the
Administrative Agent prior to the date any payment is required to be made by it
to the Administrative Agent hereunder, that such Borrower(s) will not make such
payment, the Administrative Agent may assume that such Borrower has timely made
such payment and may (but shall not be so required to), in reliance thereon,
make available a corresponding amount to such Lender. If and to the extent that
such payment was not in fact made to the Administrative Agent by the applicable
Borrower in immediately available funds, then each Lender shall forthwith on
demand repay to the Administrative Agent the portion of such assumed payment
that was made available to such Lender in immediately available funds, together
with interest thereon in respect of each day from and including the date such
amount was made available by the Administrative Agent to such Lender to the date
such amount is repaid to the Administrative Agent in immediately available funds
at the Overnight Rate from time to time in effect.
     (c) A notice of the Administrative Agent to any Lender or any Borrower with
respect to any amount owing under §§2.9.2(a) and (b) shall be conclusive, absent
manifest error.
     2.10. [Reserved].
     2.11. [Reserved].
     2.12. Change in Aggregate Borrowing Base. The Aggregate Borrowing Base
shall be determined monthly (or at such other interval as may be specified
pursuant to §8.4(e)) by the Administrative Agent by reference to the Borrowing
Base Report, commercial finance examinations and collateral audit reports, and
the appraisals of Eligible Inventory delivered to the Lenders and the
Administrative Agent pursuant to §§8.9.2 and 8.9.3 and other information
obtained by or provided to the

- 49 -

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

 

Administrative Agent. The Administrative Agent shall give to the Borrowers
notice of any change in the Aggregate Borrowing Base determined by the
Administrative Agent. Notwithstanding anything to the contrary contained herein,
in the event that the Administrative Agent receives or obtains updates or
additional information with respect to the Eligible Inventory, Eligible Credit
Card Receivables, Eligible Corporate Sales Receivables (if then included in the
Aggregate Borrowing Base), Borrowing Base Report, Other Reserves, Inventory
Reserves, Shrink Reserve, Landlord Lien Reserve, Hedge Reserve, Net Debt
Reserve, Purchase Card Reserve, Term Borrowing Base Reserve, Equity Reserve,
Customer Deposit Reserve, Customer Credit Liability Reserve, commercial finance
examinations and collateral audit reports, and the appraisals of Eligible
Inventory and other information obtained by or provided to the Administrative
Agent, the Administrative Agent may revise the Aggregate Borrowing Base pursuant
to such update or additional information and the Administrative Agent shall give
to the Borrowers written notice of any changes in the Aggregate Borrowing Base
determined by the Administrative Agent as a result thereof; provided that any
revisions to the Aggregate Borrowing Base pursuant to such update or additional
information shall not result in more credit being available, and shall not be
more favorable to the Borrowers, than as set forth in this Credit Agreement on
the Effective Date without the written consent of the Required Lenders and in
accordance with the Intercreditor Agreement.
     2.13. Overadvances. Notwithstanding anything to the contrary contained
elsewhere in this Credit Agreement, if an Event of Default exists at the time
(unless otherwise objected to by the Required Lenders in writing), the
Administrative Agent may in its discretion in order to preserve and protect the
Collateral or to preserve and protect the business of the Borrowers, require all
Revolving Lenders to honor requests or deemed requests by the Borrowers for
Revolving Credit Loans at a time when an Overadvance exists or which would
result in an Overadvance and each Lender shall be obligated to continue to fund
its Commitment Percentage of such Revolving Credit Loans not to exceed a maximum
amount outstanding equal to its Commitment so long as (i) such Overadvance is
not known by the Administrative Agent to exceed five percent (5%) of the then
Aggregate Borrowing Base, in the aggregate outstanding at any time, and
(ii) such Overadvance is not outstanding for more than forty-five
(45) consecutive days (unless the Required Lenders otherwise agree); provided
that the foregoing shall not (1) modify or abrogate any of the provisions of
§4.3 regarding the Lenders’ obligations with respect to any Unpaid Reimbursement
Obligations, or (2) result in any claim or liability against the Administrative
Agent (regardless of the amount of any Overadvance) for “inadvertent
Overadvances” (i.e., where an Overadvance results from changed circumstances
beyond the control of the Administrative Agent (such as a reduction in the
collateral value)). Any Overadvance that remains outstanding for more than
forty-five (45) consecutive days shall constitute an Event of Default hereunder
(unless the Required Lenders otherwise agree). The making of any Overadvance is
for the benefit of the Borrowers; such Overadvances constitute Loans and
Obligations hereunder. The making of any Overadvance on any one occasion shall
not obligate the Administrative Agent or the Lenders to make other Overadvances
on any other occasion or to permit any such Overadvance to remain outstanding.
In no event shall the Total Facility Usage (including any Overadvance and after
giving effect to all amounts requested) exceed the Total Commitment.
     2.14. Cash Collateral.
     (a) Certain Credit Support Events. Upon the request of the Administrative
Agent or the Issuing Bank (i) if the Issuing Bank has honored any full or
partial drawing request under any Letter of Credit and such drawing has resulted
in an LC Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any
LC Obligation for any reason remains outstanding, the Borrowers shall, in each
case, immediately Cash Collateralize the then Outstanding Amount of all LC
Obligations in an amount equal to 103% of such Outstanding Amount. At any time
that there shall exist a Delinquent Lender, immediately upon the request of the
Administrative Agent, the Issuing Bank or

- 50 -

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

 

the Swingline Lender, the Borrowers shall deliver to the Administrative Agent
Cash Collateral in an amount sufficient to cover all Fronting Exposure (after
giving effect to §2.15(a) and any Cash Collateral provided by the Delinquent
Lender).
     (b) Grant of Security Interest. All Cash Collateral (other than credit
support not constituting funds subject to deposit) shall be maintained in
blocked, non-interest bearing deposit accounts with the Administrative Agent.
The Borrowers hereby grant to (and subject to the control of) the Administrative
Agent, for the benefit of the Administrative Agent, the Issuing Bank and the
Lenders (including the Swingline Lender), and agrees to maintain, a first
priority security interest in all such cash, deposit accounts and all balances
therein, and all other property so provided as collateral pursuant hereto, and
in all proceeds of the foregoing, all as security for the obligations to which
such Cash Collateral may be applied pursuant to §2.14(c). If at any time the
Administrative Agent determines that Cash Collateral is subject to any right or
claim of any Person other than the Administrative Agent as herein provided, or
that the total amount of such Cash Collateral is less than the amount required
hereunder, the Borrowers or the relevant Delinquent Lender will, promptly upon
demand by the Administrative Agent, pay or provide to the Administrative Agent
additional Cash Collateral in an amount sufficient to eliminate such deficiency.
     (c) Application. Notwithstanding anything to the contrary contained in this
Agreement, Cash Collateral provided under any of this §2.14 or §§2.5, 2.18, 3,
4, or 13.3 in respect of Letters of Credit or Swingline Loans shall be held and
applied to the satisfaction of the specific LC Obligations, Swingline Loans,
obligations to fund participations therein (including, as to Cash Collateral
provided by a Delinquent Lender, any interest accrued on such obligation) and
other obligations for which the Cash Collateral was so provided, prior to any
other application of such property as may be provided for herein.
     (d) Release. Cash Collateral (or the appropriate portion thereof) provided
to reduce Fronting Exposure or other obligations shall be released promptly
following (i) the elimination of the applicable Fronting Exposure or other
obligations giving rise thereto (including by the termination of Delinquent
Lender status of the applicable Lender (or, as appropriate, its assignee
following compliance with §15.2(g))) or (ii) the Administrative Agent’s good
faith determination that there exists excess Cash Collateral; provided, however,
(x) that Cash Collateral furnished by or on behalf of a Borrower or Guarantor
shall not be released during the continuance of a Default or Event of Default
(and following application as provided in this §2.14, may be otherwise applied
in accordance with §13.5), and (y) the Person providing Cash Collateral and the
Issuing Bank or Swingline Lender, as applicable, may agree that Cash Collateral
shall not be released but instead held to support future anticipated Fronting
Exposure or other obligations.
     2.15. Treatment of Delinquent Lenders.
     (a) Delinquent Lenders. If for any reason any Lender (i) shall fail or
refuse to abide by its obligations under this Agreement, including without
limitation its obligation to make available to Administrative Agent its
Commitment Percentage of any Revolving Credit Loans, expenses or setoff or
purchase its Commitment Percentage of a participation interest in the Swingline
Loans or Letters of Credit and such failure is not cured within one (1) Business
Day of receipt from the Administrative Agent of written

- 51 -

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

 

notice thereof, (ii) shall fail, within three (3) Business Days after request by
the Administrative Agent, to confirm that it will comply with the terms of this
Agreement relating to its Commitments or (iii) has been deemed insolvent in the
reasonable judgment of the Administrative Agent or become the subject of a
bankruptcy or insolvency proceeding (each, a “Delinquent Lender”), then, in
addition to the rights and remedies that may be available to the other Lenders,
the Agents, the Swingline Lender, the Issuing Bank, the Borrowers or any other
Person at law or in equity, and not in limitation thereof, (A) such Delinquent
Lender’s right to participate in the administration of, or decision-making
rights related to, the Revolving Credit Loans, this Agreement or the other Loan
Documents shall be suspended during the pendency of such failure or refusal;
provided, however, that the Commitment of a Delinquent Lender may not be
increased or extended without the consent of such Delinquent Lender, (B) such
Delinquent Lender shall be deemed to have assigned any and all payments due to
it from the Borrowers and/or the Guarantors, whether on account of outstanding
Revolving Credit Loans, interest, fees or otherwise, to the remaining
non-Delinquent Lenders for application to, and reduction of, their proportionate
shares of all outstanding Obligations until, as a result of application of such
assigned payments the Lenders’ respective Commitment Percentages of all
outstanding Obligations shall have returned to those in effect immediately prior
to such delinquency and without giving effect to the nonpayment causing such
delinquency, and (C) at the option of the Administrative Agent, any amounts
payable to such Delinquent Lender hereunder (whether on account of principal,
interest, fees or otherwise) shall, in lieu of being distributed to such
Delinquent Lender, be retained by the Administrative Agent as Cash Collateral
and may be utilized for future funding obligations of the Delinquent Lender in
respect of any Revolving Credit Loan or existing or future participating
interest in any Swingline Loan or Letter of Credit. The Delinquent Lender’s
decision-making and participation rights and rights to payments as set forth in
clauses (A) and (B) hereinabove shall be restored only upon the payment by the
Delinquent Lender of its Commitment Percentage of any Obligations, any
participation obligation, or expenses as to which it is delinquent, together
with interest thereon at a rate per annum equal to the rate of interest
applicable to overdue principal pursuant to §5.11.1 from the date when
originally due until the date upon which any such amounts are actually paid.
     (b) Rights of Non-Delinquent Lenders. The non-Delinquent Lenders shall also
have the right, but not the obligation, in their respective, sole and absolute
discretion, to cause the termination and assignment (at par) without any further
action by the Delinquent Lender for no cash consideration (pro rata, based on
the respective Commitments of those Lenders electing to exercise such right),
the Delinquent Lender’s Commitment to fund future Loans or purchase its
Commitment Percentage of participation interests in the Swingline Loans and
Letters of Credit. Upon any such purchase of the Commitment Percentage of any
Delinquent Lender, the Delinquent Lender’s share in future Loans and its rights
under the Loan Documents with respect thereto shall terminate on the date of
purchase, and the Delinquent Lender shall promptly execute all documents
reasonably requested to surrender and transfer such interest, including, if so
requested, an Assignment and Acceptance. The Borrowers may, on ten (10) days’
prior written notice to the Administrative Agent and such Delinquent Lender,
replace such Delinquent Lender (in its capacity as a Lender) by causing such
Delinquent Lender to (and such Delinquent Lender shall be obligated to) assign
(with the assignment fee to be paid by the Borrowers in such instance) all of
its rights and obligations under this Agreement to one or more Eligible
Assignees.

- 52 -

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

 

     (c) Indemnification by Delinquent Lenders. Each Delinquent Lender shall
indemnify the Administrative Agent and each non-Delinquent Lender from and
against any and all loss, damage or expenses, including but not limited to
reasonable attorneys’ fees and funds advanced by the Administrative Agent or by
any non-Delinquent Lender, on account of a Delinquent Lender’s failure to timely
fund its Commitment Percentage of a Revolving Credit Loan, or its participation
in Swingline Loans and Letters of Credit or to otherwise perform its obligations
hereunder and under the other Loan Documents.
3. REPAYMENT OF THE LOANS.
     3.1. Maturity. The Borrowers jointly and severally promise to pay on the
Maturity Date with regard to the Existing Tranche, and there shall become
absolutely due and payable on the Maturity Date with regard to the Existing
Tranche, all of the Revolving Credit Loans outstanding under the Existing
Tranche on such date, together with any and all accrued and unpaid interest
thereon. The Borrowers jointly and severally promise to pay on the Maturity Date
with regard to the Extended Tranche, and there shall become absolutely due and
payable on the Maturity Date with regard to the Extended Tranche, all of the
Revolving Credit Loans outstanding under the Extended Tranche on such date,
together with any and all accrued and unpaid interest thereon.
     3.2. Mandatory Repayments of the Loans. If at any time the Total Facility
Usage exceeds the lesser of (i) the Total Commitment or (ii) the Aggregate
Borrowing Base as then in effect, then the Borrowers shall immediately pay the
amount of such excess to the Administrative Agent for the respective accounts of
the Revolving Lenders for application: first, to any Unpaid Reimbursement
Obligations owing to such Revolving Lenders; second, to the Swingline Loans
owing to such Revolving Lenders; third, to the Revolving Credit Loans and
fourth, to provide to the Administrative Agent Cash Collateral for Reimbursement
Obligations owing to such Revolving Lenders as contemplated by §4.2(ii) and
(iii).
     Each payment of any Unpaid Reimbursement Obligations or prepayment of
Revolving Credit Loans shall be allocated among the applicable Lenders, in
proportion, as nearly as practicable, to each Reimbursement Obligation or (as
the case may be) the respective unpaid principal amount of each applicable
Lender’s relevant Loans, with adjustments to the extent practicable to equalize
any prior payments or repayments not exactly in proportion.
     3.3. Optional Repayments of Loans. The Borrowers shall have the right, at
their election, to repay the outstanding amount of the Revolving Credit Loans,
as a whole or in part, at any time without penalty or premium, provided that any
full or partial prepayment of the outstanding amount of any Eurocurrency Rate
Loans pursuant to this §3.3 made other than on the last day of the Interest
Period relating thereto shall be subject to the payment of any additional costs
described in §5.10 incurred by any applicable Lender. The Borrowers shall give
the Administrative Agent, no later than 10:00 a.m. (Eastern time), at least one
(1) Business Day prior written notice of any proposed prepayment pursuant to
this §3.3 of Base Rate Loans or Eurocurrency Rate Loans, in each case specifying
the proposed date of prepayment of applicable Loans and the principal amount to
be prepaid. Each such partial prepayment of the applicable Loans shall be in the
amount of $2,000,000 or a multiple of $1,000,000 in excess thereof, shall be
accompanied by the payment of accrued interest on the principal prepaid to the
date of prepayment and shall be applied, in the absence of instruction by the
Borrowers, first to the principal of the Loans to be repaid which are Base Rate
Loans and then to the principal of the Loans to be repaid which are Eurocurrency
Rate Loans. Each partial prepayment shall be allocated among the applicable
Lenders, in proportion, as nearly as practicable, to the respective unpaid
principal amount of each Lender’s applicable

- 53 -

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

 

Note(s), with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion.
4. LETTERS OF CREDIT.
     4.1. Letter of Credit Commitments.
     4.1.1. Commitment to Issue Letters of Credit. (a) Subject to the terms and
conditions hereof and the execution and delivery by the Borrowers of a letter of
credit application on the applicable Issuing Bank’s customary form (a “Letter of
Credit Application”), such Issuing Bank on behalf of the Lenders and in reliance
upon the agreement of the Lenders set forth in §4.1.4 and upon the
representations and warranties of the Borrowers contained herein, agrees, in its
individual capacity, to issue, extend and renew for the account of the Borrowers
one or more standby or documentary letters of credit, including without
limitation, any bankers’ acceptance issued on account of any such standby or
documentary letter of credit (individually, a “Letter of Credit”), in such form
as may be requested from time to time by the applicable Borrower or, as the case
may be, Borrowers and agreed to by the applicable Issuing Bank; provided,
however, that, after giving effect to such request, (a) the sum of the Maximum
Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed
$75,000,000 (the “Letter of Credit Sublimit”) at any one time, and (b) the Total
Facility Usage shall not exceed the lesser of (i) the Total Commitment at such
time or (ii) the Aggregate Borrowing Base as then in effect. Each request by any
Borrower for an LC Credit Extension shall be deemed to be a representation by
such Borrower that the LC Credit Extension so requested complies with the
conditions set forth in the proviso to the preceding sentence. Within the
foregoing limits, and subject to the terms and conditions hereof, the Borrowers’
ability to obtain Letters of Credit shall be fully revolving, and accordingly
the Borrowers may, during the foregoing period, obtain Letters of Credit to
replace Letters of Credit that have expired or that have been drawn upon and
reimbursed. Each Issuing Bank shall provide the Administrative Agent, on a
monthly basis, a report on the Maximum Drawing Amount of outstanding Letters of
Credit. The Administrative Agent shall provide the Lenders, on a quarterly
basis, a report on the Maximum Drawing Amount of outstanding Letters of Credit.
     (b) The Issuing Bank shall not issue any Letter of Credit, if:
     (i) subject to §4.16, the expiry date of such requested Letter of Credit
would occur more than twelve months after the date of issuance or last
extension, unless the Required Lenders have approved such expiry date; or
     (ii) the expiry date of such requested Letter of Credit would occur after
the Maturity Date of the Extended Tranche.
     (c) The Issuing Bank shall not be under any obligation to issue any Letter
of Credit if:
     (i) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank
from issuing such Letter of Credit, or any laws applicable to such Issuing Bank
or any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over such Issuing Bank shall prohibit,

- 54 -

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

 

or request that such Issuing Bank refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular or shall impose upon
such Issuing Bank with respect to such Letter of Credit any restriction, reserve
or capital requirement (for which such Issuing Bank is not otherwise compensated
hereunder) not in effect on the Effective Date, or shall impose upon such
Issuing Bank any unreimbursed loss, cost or expense which was not applicable on
the Effective Date and which such Issuing Bank in good faith deems material to
it;
     (ii) the issuance of such Letter of Credit would violate one or more
policies of the Issuing Bank applicable to letters of credit generally;
     (iii) such Letter of Credit is to be denominated in a currency other than
Dollars;
     (iv) any Lender is at that time a Delinquent Lender, unless the Issuing
Bank has entered into arrangements, including the delivery of Cash Collateral in
an amount equal to the actual or potential Fronting Exposure, satisfactory to
the Issuing Bank (in its sole discretion) with the Borrowers or such Lender to
eliminate the Issuing Bank’s actual or potential Fronting Exposure with respect
to the Delinquent Lender arising from either the Letter of Credit then proposed
to be issued or that Letter of Credit and all other LC Obligations as to which
the Issuing Bank has actual or potential Fronting Exposure, as it may elect in
its sole discretion.
     (d) The Issuing Bank shall not amend any Letter of Credit if the Issuing
Bank would not be permitted at such time to issue such Letter of Credit in its
amended form under the terms hereof.
     (e) The Issuing Bank shall be under no obligation to amend any Letter of
Credit if (i) the Issuing Bank would have no obligation at such time to issue
such Letter of Credit in its amended form under the terms hereof, or (ii) the
beneficiary of such Letter of Credit does not accept the proposed amendment to
such Letter of Credit.
     (f) The Issuing Bank shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith, and the
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Administrative Agent in §14 with respect to any acts taken or omissions suffered
by the Issuing Bank in connection with Letters of Credit issued by it or
proposed to be issued by it and Issuer Documents pertaining to such Letters of
Credit as fully as if the term “Administrative Agent” as used in §14 included
the Issuing Bank with respect to such acts or omissions, and (ii) as
additionally provided herein with respect to the Issuing Bank.
     4.1.2. Letter of Credit Applications; Issuance of Letters of Credit.
(a) Each Letter of Credit Application shall be completed to the satisfaction of
the applicable Issuing Bank and signed by an Authorized Officer of the
applicable Borrower(s). In the event that any provision of any Letter of Credit
Application shall be inconsistent with any provision of this Credit Agreement,
then the provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern. Such Letter of Credit Application must be received by the
applicable Issuing Bank and the Administrative Agent not later than 11:00 a.m.
at least two Business Days prior to the proposed issuance date or date of
amendment, as the case may be, of any Letter of Credit; or in each case such
later date

- 55 -

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

 

and time as the Administrative Agent and the applicable Issuing Bank may agree
in a particular instance in their sole discretion. In the case of a request for
an initial issuance of a Letter of Credit, such Letter of Credit Application
shall specify in form and detail satisfactory to the applicable Issuing Bank:
(i) the proposed issuance date of the requested Letter of Credit (which shall be
a Business Day); (ii) the amount thereof; (iii) the expiry date thereof;
(iv) the name and address of the beneficiary thereof; (v) the documents to be
presented by such beneficiary in case of any drawing thereunder; (vi) the full
text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (vii) such other matters as the applicable Issuing Bank
may require. In the case of a request for an amendment of any outstanding Letter
of Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to the applicable Issuing Bank (A) the Letter of Credit to be
amended; (B) the proposed date of amendment thereof (which shall be a Business
Day); (C) the nature of the proposed amendment; and (D) such other matters as
the applicable Issuing Bank may require. Additionally, the applicable
Borrower(s) shall furnish to the applicable Issuing Bank and the Administrative
Agent such other documents and information pertaining to such requested Letter
of Credit issuance or amendment, including any documents related thereto, as the
applicable Issuing Bank or the Administrative Agent may require.
     (b) Promptly after receipt of any Letter of Credit Application, the
applicable Issuing Bank will confirm with the Administrative Agent (by telephone
or in writing) that the Administrative Agent has received a copy of such Letter
of Credit Application from the applicable Borrower(s) and, if not, such Issuing
Bank will provide the Administrative Agent with a copy thereof. Unless the
applicable Issuing Bank has received written notice from any Lender, the
Administrative Agent or any Borrower or any Guarantor, at least one Business Day
prior to the requested date of issuance or amendment of the applicable Letter of
Credit, that one or more applicable conditions contained in §12 shall not then
be satisfied, then, subject to the terms and conditions hereof, the applicable
Issuing Bank shall, on the requested date, issue a Letter of Credit for the
account of the applicable Borrower or enter into the applicable amendment, as
the case may be, in each case in accordance with such Issuing Bank’s usual and
customary business practices. Immediately upon the issuance of each Letter of
Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a risk participation
in such Letter of Credit in an amount equal to the product of such Lender’s
Commitment Percentage times the amount of such Letter of Credit. Such risk
participations shall be purchased by all Lenders on a pro rata basis. For the
avoidance of doubt, following the termination of the Existing Tranche (so long
as no Default or Event of Default has occurred and is continuing or would result
therefrom), the Extending Revolving Lenders shall purchase such risk
participations on a pro rata basis in accordance with their Commitment
Percentage after giving effect to such termination.
     4.1.3. Terms of Letters of Credit. Each Letter of Credit issued, extended
or renewed hereunder shall, among other things, (a) have an expiry date no later
than the date which is five (5) days (or, if the Letter of Credit is confirmed
by a confirmer or otherwise provides for one or more nominated persons,
forty-five (45) days) prior to the Maturity Date of the Extended Tranche (in
each case, the “Letter of Credit Expiration Date”) and (b) subject to §4.1.6,
have an expiry date no later than twelve months after the date of issuance or
last extension or renewal. Each Letter of Credit so issued, extended or renewed
shall be subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 or any
successor version thereto adopted by the applicable Issuing Bank in the ordinary
course

- 56 -

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

 

of its business as a letter of credit issuer and in effect at the time of
issuance of such Letter of Credit (the “Uniform Customs”) or, in the case of a
standby Letter of Credit, either the Uniform Customs or the International
Standby Practices (ISP98), International Chamber of Commerce Publication
No. 590, or any successor code of standby letter of credit practices among banks
adopted by the applicable Issuing Bank in the ordinary course of its business as
a standby letter of credit issuer and in effect at the time of issuance of such
Letter of Credit.
     4.1.4. Reimbursement Obligations of Lenders. Each Lender severally agrees
that it shall be absolutely and unconditionally liable, without regard to the
occurrence of any Default or Event of Default or any other condition precedent
or circumstance whatsoever, to the extent of such Lender’s Commitment Percentage
to reimburse any Issuing Bank on demand for the amount of each draft paid by
such Issuing Bank under each Letter of Credit to the extent that such amount is
not reimbursed by the Borrowers pursuant to §4.2 (such agreement for a Lender
being called herein the “Letter of Credit Participation” of such Lender).
     4.1.5. Participations of Lenders. Each such payment made by a Lender shall
be treated as the purchase by such Lender of a participating interest in the
Borrowers’ Reimbursement Obligation under §4.2 in an amount equal to such
payment. Each Lender shall share in accordance with its participating interest
in any interest which accrues pursuant to §4.2.
     4.1.6. Auto-Extension Letters of Credit. If the applicable Borrower or, as
the case may be, Borrowers so requests in any applicable Letter of Credit
Application, the applicable Issuing Bank may, in its sole and absolute
discretion, agree to issue a Letter of Credit that has automatic extension
provisions (each, an “Auto-Extension Letter of Credit”); provided that any such
Auto-Extension Letter of Credit must permit the Issuing Bank to prevent any such
extension at least once in each twelve-month period (commencing with the date of
issuance of such Letter of Credit) by giving prior notice to the beneficiary
thereof not later than a day (the “Non-Extension Notice Date”) in each such
twelve-month period to be agreed upon at the time such Letter of Credit is
issued. Unless otherwise directed by the Issuing Bank, the applicable Borrower
or, as the case may be, Borrowers shall not be required to make a specific
request to the Issuing Bank for any such extension. Once an Auto-Extension
Letter of Credit has been issued, the Lenders shall be deemed to have authorized
(but may not require) the Issuing Bank to permit the extension of such Letter of
Credit at any time to an expiry date not later than the Letter of Credit
Expiration Date; provided, however, that the Issuing Bank shall not permit any
such extension if (i) the Issuing Bank has determined that it would not be
permitted, or would have no obligation, at such time to issue such Letter of
Credit in its revised form (as extended) under the terms hereof, or (ii) it has
received notice (which may be by telephone or in writing) on or before the day
that is five Business Days before the Non-Extension Notice Date (A) from the
Administrative Agent that the Required Lenders have elected not to permit such
extension or (B) from the Administrative Agent, any Lender or any Borrower that
one or more of the applicable conditions specified in §12 is not then satisfied,
and in each such case directing the Issuing Bank not to permit such extension.
     4.2. Reimbursement Obligation of the Borrowers. In order to induce each
Issuing Bank to issue, extend and renew each Letter of Credit and the Lenders to
participate therein, the Borrowers hereby jointly and severally agree to
reimburse or pay to the Administrative Agent, for the account of the

- 57 -

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

 

applicable Issuing Bank or (as the case may be) the Lenders, with respect to
each Letter of Credit issued, extended or renewed by the Issuing Bank hereunder
at the request of any Borrower:
     (i) except as otherwise expressly provided in §4.2(ii) and (iii) or §4.3,
on the Business Day next following the date that any draft presented under such
Letter of Credit is honored by the applicable Issuing Bank, or the applicable
Issuing Bank otherwise makes a payment with respect thereto, (A) the amount paid
by such Issuing Bank under or with respect to such Letter of Credit,
(B) interest thereon at a rate per annum equal to the Base Rate plus the
Applicable Margin with respect to Base Rate Loans as in effect from time to
time, and (C) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the applicable Issuing Bank or any Lender in connection
with any payment made by the Issuing Bank or any Lender under, or with respect
to, such Letter of Credit,
     (ii) upon the reduction (but not termination) of the lesser of (x) the
Total Commitment or (y) the Aggregate Borrowing Base to an amount less than the
Maximum Drawing Amount, the amount equal to 103% of such difference, which
amount shall be held by the Administrative Agent for the benefit of the Lenders
and Issuing Banks as Cash Collateral for all Reimbursement Obligations, and
     (iii) upon the termination of the Total Commitment, or the acceleration of
the Reimbursement Obligations with respect to all Letters of Credit in
accordance with §13, an amount equal to 103% of the then Maximum Drawing Amount
on all Letters of Credit, which amount shall be held by the Administrative Agent
for the benefit of the Lenders and Issuing Banks entitled to such amounts as
Cash Collateral for all Reimbursement Obligations.
     Each such payment shall be made by the applicable Borrower(s) to the
Administrative Agent at the Administrative Agent’s Office in immediately
available funds. Except as otherwise provided in §4.3 with respect to Unpaid
Reimbursement Obligations which are converted to Revolving Credit Loans,
interest on any and all amounts remaining unpaid by the Borrowers under this
§4.2 at any time from the date such amounts become due and payable (whether as
stated in this §4.2, by acceleration or otherwise) until payment in full
(whether before or after judgment) shall be payable to the Administrative Agent
on demand at the rate specified in §5.11 for overdue principal on the Loans.
     4.3. Letter of Credit Payments. (a) If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the
applicable Issuing Bank shall notify the Borrowers of the date and amount of the
draft presented or demand for payment and of the date and time when it expects
to pay such draft or honor such demand for payment. If the applicable Borrower
or, as the case may be, Borrowers fail to reimburse the applicable Issuing Bank
as provided in §4.2 on or before the date that such draft is paid or other
payment is made by such Issuing Bank, such Issuing Bank may at any time
thereafter notify the Administrative Agent who will promptly notify the Lenders
of the amount of any such Unpaid Reimbursement Obligation. If no Default or
Event of Default is then continuing, the applicable Borrower or, as the case may
be, Borrowers shall be deemed to have requested a Revolving Credit Loan, in the
case of a Borrower, in all respects bearing interest at the Base Rate with a
Drawdown Date as of the date on which the applicable Issuing Bank paid the draft
presented for honor or otherwise made such payment, in an amount equal to the
amount of such draft or other payment and the notice from the applicable Issuing
Bank to the Lenders shall be deemed to be a notice of a Revolving Loan Request
made by the Administrative Agent. No later than 1:00 p.m. (Eastern time) on the
Business Day next

- 58 -

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

 

following the receipt of such notice, each Lender shall make available to the
Administrative Agent, at the Administrative Agent’s Office, in immediately
available funds, such Lender’s Commitment Percentage of such Unpaid
Reimbursement Obligation, together with an amount equal to the product of
(a) the average, computed for the period referred to in clause (c) below, of the
Overnight Rate for each day included in such period, times (b) the amount equal
to such Lender’s Commitment Percentage of such Unpaid Reimbursement Obligation,
times (c) a fraction, the numerator of which is the number of days that elapse
from and including the date the Issuing Bank paid the draft presented for honor
or otherwise made payment to the date on which such Lender’s Commitment
Percentage of such Unpaid Reimbursement Obligation shall become immediately
available to the Administrative Agent, and the denominator of which is 360. If
no Default or Event of Default is continuing at the time the Administrative
Agent notified the Lenders of the amount of such Unpaid Reimbursement
Obligation, the amounts made available to the Administrative Agent by the
Lenders hereunder shall be treated as a Revolving Credit Loan, in the case of a
Borrower, in all respects bearing interest at the Base Rate with a Drawdown Date
as of the date on which the applicable Issuing Bank paid the draft presented for
honor or otherwise made such payment.
     (b) With respect to any Unpaid Reimbursement Obligation that is not fully
refinanced by a Revolving Credit Loan, in all respects bearing interest at the
Base Rate as set forth above because a Default or Event of Default is then
continuing, the conditions set forth in §12 cannot be satisfied or for any other
reason, the applicable Borrower(s) shall be deemed to have incurred from the
applicable Issuing Bank an extension of credit resulting from and in the amount
of the Unpaid Reimbursement Obligation that is not so refinanced, which
extension of credit shall be due and payable on demand (together with interest)
and shall bear interest at the default rate set forth in §5.11 and shall
constitute an Obligation as defined herein and for the purposes of the Loan
Documents. In such event, each Lender’s payment to the Administrative Agent for
the account of the applicable Issuing Bank pursuant to this §4.3 shall be deemed
payment in respect of its participation in such extension of credit and shall
constitute a funding of such Lender’s participation in such extension of credit
in satisfaction of its participation obligation under this §4. No such funding
of such Lender’s participation in such extension of credit shall relieve or
otherwise impair the obligation of the applicable Borrower(s) to reimburse the
applicable Issuing Bank for the amount of any payment made by the applicable
Issuing Bank under any Letter of Credit, together with interest as provided
herein.
     (c) Until each Lender funds its Commitment Percentage of the Loans or
participations as set forth in this §4.3 to reimburse the applicable Issuing
Bank for any amount drawn under any Letter of Credit, interest in respect of
such Lender’s Commitment Percentage of such amount shall be solely for the
account of the applicable Issuing Bank.
     (d) Each Lender’s obligation to make Loans or advances to reimburse the
Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this
§4.3, shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right which such Lender may have against the Issuing Bank, the Borrowers,
any Subsidiary or any other Person for any reason whatsoever; (B) the occurrence
or continuance of a Default or an Event of Default, or (C) any other occurrence,
event or condition, whether or not similar to any of the foregoing; provided,
however, that each Lender’s obligation to make Loans pursuant to this §4.3 is
subject to the conditions set forth in §12 (other than delivery by the Borrowers
of a Revolving Loan Request). No such making of an advance shall relieve or
otherwise impair the obligation of the Borrowers to reimburse the Issuing Bank

- 59 -

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

 

for the amount of any payment made by the Issuing Bank under any Letter of
Credit, together with interest as provided herein.
     (e) If any Lender fails to make available to the Administrative Agent for
the account of the applicable Issuing Bank any amount required to be paid by
such Lender pursuant to the foregoing provisions of this §4.3 by the time
specified in §4.3, the applicable Issuing Bank shall be entitled to recover from
such Lender (acting through the Administrative Agent), on demand, such amount
with interest thereon for the period from the date such payment is required to
the date on which such payment is immediately available to the applicable
Issuing Bank at a rate per annum equal to the applicable Overnight Rate from
time to time in effect, plus any administrative, processing or similar fees
customarily charged by the Issuing Bank in connection with the foregoing. If
such Lender pays such amount (with interest and fees as aforesaid), the amount
so paid shall constitute such Lender’s Loan included in the relevant credit
extension or advance under this §4.3, as the case may be. A certificate of the
applicable Issuing Bank submitted to any Lender (through the Administrative
Agent) with respect to any amounts owing under this clause (e) shall be
conclusive absent manifest error.
     (f) At any time after the applicable Issuing Bank has made a payment under
any Letter of Credit and has received from any Lender such Lender’s
participation in respect of such payment in accordance with this §4.3, if the
Administrative Agent receives for the account of the applicable Issuing Bank any
payment in respect of the related Unpaid Reimbursement Obligation or interest
thereon (whether directly from the applicable Borrower(s) or otherwise,
including proceeds of Cash Collateral applied thereto by the Administrative
Agent), the Administrative Agent will distribute to such Lender its Commitment
Percentage thereof (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender’s participation was
outstanding). If any payment received by the Administrative Agent for the
account of the applicable Issuing Bank pursuant to §4.3 is required to be
returned in connection with any bankruptcy or insolvency proceeding or otherwise
(including pursuant to any settlement entered into by the applicable Issuing
Bank in its discretion), each Lender shall pay to the Administrative Agent for
the account of the applicable Issuing Bank its Commitment Percentage thereof on
demand of the Administrative Agent, plus interest thereon from the date of such
demand to the date such amount is returned by such Lender, at a rate per annum
equal to the applicable Overnight Rate from time to time in effect. The
obligations of the Lenders under the immediately preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Credit Agreement.
     4.4. Obligations Absolute. The Borrowers’ obligations under this §4 shall
be absolute, unconditional and irrevocable under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrowers may have or have had against any Agent, any Issuing Bank,
any Lender or any beneficiary or transferee of a Letter of Credit, whether in
connection with this Agreement, the transactions contemplated hereby or by such
Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction. Each of the Borrowers further agrees with the
Administrative Agent, each Issuing Bank and the Lenders that, except for
liability resulting from the Administrative Agent’s, such Issuing Bank’s or such
Lender’s gross negligence or willful misconduct as determined by a final and
nonappealable judgment of a court of competent jurisdiction, the Administrative
Agent, each Issuing Bank and the Lenders shall not be responsible for, and the
Borrowers’ Reimbursement Obligations under §4.2 shall not be affected by, among
other things, (a) any lack of validity or

- 60 -

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

 

enforceability of such Letter of Credit, this Agreement, or any other Loan
Document; or (b) the existence of any claim, counterclaim, setoff, defense or
other right that any Borrower or any Subsidiary may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the Issuing Bank or
any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction; or (c) any draft, demand,
certificate or other document presented under such Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under such Letter of Credit; or (d) any payment by the Issuing Bank under such
Letter of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of such Letter of Credit; or any payment made by
the Issuing Bank under such Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of such Letter of Credit, including any arising in
connection with any proceeding under any Debtor Relief Law; or (e) any dispute
between or among any Borrower, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of any Borrower against the
beneficiary of any Letter of Credit or any such transferee; or (f) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Borrower or any Subsidiary. None of
the Administrative Agent, any Issuing Bank nor any Lenders shall be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit unless resulting from its gross negligence or willful misconduct as
determined by a final and nonappealable judgment of a court of competent
jurisdiction. Each of the Borrowers agrees that any action taken or omitted by
the Administrative Agent, any Issuing Bank or any Lender under or in connection
with each Letter of Credit and the related drafts and documents, if done in good
faith, shall be binding upon each Borrower and shall not result in any liability
on the part of any Issuing Bank, the Administrative Agent or any Lender to any
Borrower.
     Each applicable Borrower shall promptly examine a copy of each Letter of
Credit and each amendment thereto that is delivered to it and, in the event of
any claim of noncompliance with such Borrower’s instructions or other
irregularity, such Borrower will immediately notify the Issuing Bank. Such
Borrower shall be conclusively deemed to have waived any such claim against the
Issuing Bank and its correspondents unless such notice is given as aforesaid.
     4.5. Role of Issuing Bank. Each Lender and each Borrower agrees that, in
paying any drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the Issuing Bank,
the Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the Issuing Bank shall be liable to
any Lender for (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Issuer Document. Each Borrower hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude any Borrower’s pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. None
of the Issuing Bank, the Administrative Agent, any of their respective Related
Parties nor any correspondent, participant or assignee of the Issuing Bank shall
be liable or responsible for any of the matters described in clauses (a)

- 61 -

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

 

through (f) of §4.4; provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the Issuing
Bank, and the Issuing Bank may be liable to the Borrowers, to the extent, but
only to the extent, of any direct, as opposed to consequential or exemplary,
damages suffered by the Borrowers which the Borrowers prove were caused by the
Issuing Bank’s willful misconduct or gross negligence as determined by a final
and nonappealable judgment of a court of competent jurisdiction or the Issuing
Bank’s willful failure to pay under any Letter of Credit after the presentation
to it by the beneficiary of a sight draft and certificate(s) strictly complying
with the terms and conditions of a Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and the Issuing Bank
shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
     4.6. Letter of Credit Fee. The Borrowers shall, on the first Business Day
of each April, July, October and January, commencing with the first such Date to
occur after the Effective Date, and on the Maturity Date, pay a fee (in each
case, a “Letter of Credit Fee”) to the Administrative Agent (a) in respect of
each standby Letter of Credit issued, extended or renewed during such Fiscal
Quarter, an amount equal to the Applicable Margin applicable to each Lender
purchasing a participation therein per annum with respect to standby Letter of
Credit Fees of the face amount of such standby Letter of Credit, which Letter of
Credit Fee shall, subject to §2.15, be for the accounts of the Lenders in
accordance with their respective Commitment Percentage and (b) in respect of
each documentary Letter of Credit an amount equal to the Applicable Margin
applicable to each Lender purchasing a participation therein per annum with
respect to documentary Letter of Credit Fees on the face amount of such
documentary Letter of Credit, which Letter of Credit Fee shall, subject to
§2.15, be for the accounts of the Lenders in accordance with their respective
Commitment Percentage. Such Letter of Credit Fees shall be payable quarterly in
arrears. In respect of each Letter of Credit, the Borrowers shall also pay to
each Issuing Bank for such Issuing Bank’s own account, at the times and in the
amounts set forth in the Fee Letter, a fronting fee agreed by such Issuing Bank
and the Borrowers and, at such other time or times as such charges are
customarily made by such Issuing Bank, such Issuing Bank’s customary issuance,
amendment, negotiation or document examination and other administrative fees as
in effect from time to time.
     4.7. Transitional Letters of Credit. Schedule 4.7 contains a list of
certain letters of credit issued prior to the Effective Date for the account of
the Borrowers by Bank of America in its capacity as the issuing bank under the
Existing Credit Agreement (the “Existing Letters of Credit”). On the Effective
Date, (a) the Existing Letters of Credit shall be deemed to be Letters of Credit
issued pursuant to this §4 and shall be subject to all of the provisions
applicable to Letters of Credit under this Credit Agreement, including, without
limitation, such provisions as relate to the Letter of Credit Participations of
the Lenders, and (b) all liabilities of any Borrower with respect to the
Existing Letters of Credit shall constitute Obligations of such Borrower with
respect to Letters of Credit in accordance with this Credit Agreement and the
Loan Documents as though such Borrower had executed a Letter of Credit
Application with respect thereto under this Credit Agreement. On the Effective
Date, the letter of credit fees owing with respect to the Existing Letters of
Credit under §4.6 of the Existing Credit Agreement shall be calculated and paid
in full to Bank of America as administrative agent under the Existing Credit
Agreement. From and after the Effective Date, the Borrowers shall pay Letter of
Credit Fees and such other fees as provided in §4.6, in each case when due
pursuant to §4.6, with respect to each of the Existing Letters of Credit.
     4.8. Letter of Credit Amounts. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean
the maximum face amount of such

- 62 -

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

 

Letter of Credit after giving effect to all increases thereof contemplated by
such Letter of Credit or the documents related thereto, whether or not such
maximum face amount is in effect at such time.
5. CERTAIN GENERAL PROVISIONS.
     5.1. Closing and Administrative Agent’s Fees. The Borrowers jointly and
severally agree to pay (a) to the Administrative Agent for the accounts of the
Extending Revolving Lenders on the Effective Date an upfront fee (the “Closing
Fee”) as set forth in the Fee Letter and (b) to the Administrative Agent and its
Affiliates, at the times and in the manner set forth in the Fee Letter, the fees
described in the Fee Letter for the accounts of the Persons named therein.
     5.2. BGI as Agent for other Borrowers. Each of the Borrowers, by its
execution of this Credit Agreement, irrevocably authorizes BGI to give and
receive all notices and instructions, to take all actions and make such
agreements expressed to be capable of being given, received or taken by BGI or
any other Borrower under this Credit Agreement and the other Loan Documents,
including, without limitation, the making of any Loan Request on behalf of such
other Borrower, and notwithstanding that such notice, instruction, action or
agreement may affect such other Borrower, and each Borrower shall, as regards
the Agents, the Issuing Banks and the other Lenders, be bound thereby as though
each Borrower, as applicable, itself had given or received such notice or
instruction, taken such action or made such agreement.
     5.3. Funds for Payments.
     5.3.1. Payments to Administrative Agent. All payments of principal and
interest on Loans, Reimbursement Obligations, Fees and any other amounts due
hereunder or under any of the other Loan Documents shall be made on the due date
thereof to the Administrative Agent in Dollars, for the respective accounts of
the applicable Lenders, the Swingline Lender, any Agent or any Issuing Bank, as
the case may be, at the Administrative Agent’s Office or at such other place
that the Administrative Agent may from time to time designate, in each case at
or about 11:00 a.m. (Eastern time or other local time at the place of payment)
and in immediately available funds.
     5.3.2. No Offset, etc. All payments by the Borrowers hereunder and under
any of the other Loan Documents shall be made without recoupment, setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrowers are compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the Borrowers
with respect to any amount payable by them hereunder or under any of the other
Loan Documents, the Borrowers will pay to the Administrative Agent, for the
account of the applicable Lenders, the Swingline Lender, the applicable Agent or
(as the case may be) the applicable Issuing Bank, on the date on which such
amount is due and payable hereunder or under such other Loan Document, such
additional amount in Dollars as shall be necessary to enable such Lenders, the
Swingline Lender, such Agent or such Issuing Bank to receive the same net amount
which such Lenders, the Swingline Lender, such Agent or such Issuing Bank would
have received on such due date had no such obligation been imposed upon the
Borrowers. The Borrowers will deliver promptly to the Administrative Agent
certificates or other valid vouchers for all taxes or other

- 63 -

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

 

charges deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document.
     5.4. Computations. All computations of interest on the Loans (other than
Base Rate Loans) and of Fees shall, unless otherwise expressly provided herein,
be based on a 360-day year and paid for the actual number of days elapsed. All
computations of interest on the Base Rate Loans shall be based on a 365/366-day
year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term “Interest Period” with respect to
Eurocurrency Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Loans as
reflected on the Note Records and accounts relating to such Loans from time to
time shall be considered correct and binding on the Borrowers absent manifest
error or unless within five (5) Business Days after receipt of any notice by the
Administrative Agent or any of the Lenders of such outstanding amount, the
Administrative Agent or such Lender shall notify the Borrowers to the contrary.
     5.5. Inability to Determine Eurocurrency Rate. In the event, prior to the
commencement of any Interest Period relating to any Eurocurrency Rate Loan, the
Administrative Agent shall determine or be notified by the Required Lenders that
(a) adequate and reasonable methods do not exist for ascertaining the
Eurocurrency Rate that would otherwise determine the rate of interest to be
applicable to any Eurocurrency Rate Loan during any Interest Period with respect
to a proposed Eurocurrency Rate Loan or in connection with an existing or
proposed Base Rate Loan utilizing the Eurocurrency Rate component in determining
the Base Rate, or (b) the Eurocurrency Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to the
Lenders of making or maintaining their Eurocurrency Rate Loans during such
period, the Administrative Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrowers and the
Lenders) to the Borrowers and the applicable Lenders. In such event (i) any Loan
Request or Conversion Request with respect to Eurocurrency Rate Loans shall be
automatically withdrawn and shall be deemed a request for Base Rate Loans
(without reference to the Eurocurrency Rate component of the Base Rate),
(ii) each Eurocurrency Rate Loan will automatically, on the last day of the then
current Interest Period relating thereto, become a Base Rate Loan and (iii) the
obligations of the Lenders to make Eurocurrency Rate Loans or the obligation of
the Lenders to make a Base Rate Loan utilizing the Eurocurrency Rate component
in determining the Base Rate shall be suspended, in each case, until the
Administrative Agent or the Required Lenders determine that the circumstances
giving rise to such suspension no longer exist, whereupon the Administrative
Agent or, as the case may be, the Administrative Agent upon the instruction of
the Required Lenders shall so notify the Borrowers and the Lenders.
     5.6. Illegality. If any Lender determines that any Law has made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make, maintain or fund Loans
whose interest is determined by reference to the Eurocurrency Rate, or to
determine or charge interest rates based upon the Eurocurrency Rate, or any
Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Borrowers
through the Administrative Agent, (i) any obligation of such Lender to make or
continue Eurocurrency Rate Loans or to convert Base Rate Loans to Eurocurrency
Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of
such Lender making or maintaining Base Rate Loans the interest rate on which is
determined by reference to the Eurocurrency Rate component of the Base Rate, the
interest rate on which Base Rate Loans of such Lender shall, if necessary to
avoid such illegality, be determined by the Administrative Agent without
reference to the Eurocurrency Rate component of the Base Rate, in each case
until such Lender notifies the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist. Upon receipt of
such notice, (x) the Borrowers shall,

- 64 -

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

 

upon demand from such Lender (with a copy to the Administrative Agent), prepay
or, if applicable, convert all Eurocurrency Rate Loans of such Lender to Base
Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if
necessary to avoid such illegality, be determined by the Administrative Agent
without reference to the Eurocurrency Rate component of the Base Rate), either
on the last day of the Interest Period therefor, if such Lender may lawfully
continue to maintain such Eurocurrency Rate Loans to such day, or immediately,
if such Lender may not lawfully continue to maintain such Eurocurrency Rate
Loans and (y) if such notice asserts the illegality of such Lender determining
or charging interest rates based upon the Eurocurrency Rate, the Administrative
Agent shall during the period of such suspension compute the Base Rate
applicable to such Lender without reference to the Eurocurrency Rate component
thereof until the Administrative Agent is advised in writing by such Lender that
it is no longer illegal for such Lender to determine or charge interest rates
based upon the Eurocurrency Rate. Upon any such prepayment or conversion, the
Borrowers shall also pay accrued interest on the amount so prepaid or converted.
     5.7. Additional Costs, etc. If any Change in Law shall:
     (a) subject any Lender, Agent or Issuing Bank to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such Lender’s
Commitment or the Loans (other than taxes based upon or measured by the income
or profits of such Lender, Agent or Issuing Bank), or
     (b) materially change the basis of taxation (except for changes in taxes on
income or profits) of payments to any Lender of the principal of or the interest
on any Loans or any other amounts payable to any Lender, Agent or Issuing Bank
under this Credit Agreement or any of the other Loan Documents, or
     (c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit issued by,
or commitments of an office of any Lender or Issuing Bank, or
     (d) impose on any Lender, Agent or Issuing Bank any other conditions or
requirements with respect to this Credit Agreement, the other Loan Documents,
any Letters of Credit, the Loans, such Lender’s Commitment or any class of
loans, letters of credit or commitments of which any of the Loans or such
Lender’s Commitment forms a part, and the result of any of the foregoing clauses
(a) through (d) is:
     (i) to increase the cost to any Lender or Issuing Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such Lender’s
Commitment or any Letter of Credit, or
     (ii) to reduce the amount of principal, interest, Reimbursement Obligation
or other amount payable to such Lender, Agent or Issuing Bank hereunder on
account of such Lender’s Commitment, any Letter of Credit or any of the Loans,
or
     (iii) to require such Lender, Agent or Issuing Bank to make any payment or
to forego any interest or Reimbursement Obligation or other sum

- 65 -

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

 

payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to the gross
amount of any sum receivable or deemed received by such Lender, Agent or Issuing
Bank from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Lender
or (as the case may be) any Agent or Issuing Bank at any time and from time to
time and as often as the occasion therefor may arise, and receipt by the
Borrowers of a certificate meeting the requirements of §5.9, pay to such Lender,
Agent or Issuing Bank such additional amounts as will be sufficient to
compensate such Lender, Agent or Issuing Bank for such additional cost,
reduction, payment or foregone interest or Reimbursement Obligation or other
sum.
     5.8. Capital Adequacy. If after the date hereof any Lender, Agent or
Issuing Bank determines that (a) the adoption of or change in any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) regarding capital requirements for banks or bank
holding companies or any change in the interpretation or application thereof by
a Governmental Authority with appropriate jurisdiction, or (b) compliance by
such Lender, Agent or Issuing Bank or any corporation controlling such Lender,
Agent or Issuing Bank with any law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) of any such
entity regarding capital adequacy, has the effect of reducing the return on such
Lender’s, Agent’s or Issuing Bank’s commitment with respect to any Loans to a
level below that which such Lender, Agent or Issuing Bank could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender’s, Agent’s or Issuing Bank’s then existing policies with respect to
capital adequacy and assuming full utilization of such entity’s capital) by any
amount deemed by such Lender or (as the case may be) Agent or Issuing Bank to be
material, then such Lender, Agent or Issuing Bank may notify the Borrowers of
such fact. To the extent that the amount of such reduction in the return on
capital is not reflected in the Base Rate, the Borrowers jointly and severally
agree to pay such Lender or (as the case may be) Agent or Issuing Bank for the
amount of such reduction in the return on capital as and when such reduction is
determined upon presentation by such Lender or (as the case may be) such Agent
or Issuing Bank of a certificate in accordance with §5.9 hereof. Each Lender
shall allocate such cost increases among its customers in good faith and on an
equitable basis.
     5.9. Certificate. A certificate setting forth any additional amounts
payable pursuant to §§5.7 or 5.8 and a brief explanation of such amounts which
are due, submitted and signed by any Lender, Agent or Issuing Bank to the
Borrowers, shall be conclusive, absent manifest error, that such amounts are due
and owing.
     5.10. Indemnity. The Borrowers jointly and severally agree to indemnify
each Lender and to hold each Lender harmless from and against any loss, cost or
expense (including loss of anticipated profits, any foreign exchange losses and
any loss or expense arising from the liquidation or redeployment of funds
obtained by it to maintain any Loans, from fees payable to terminate the
deposits from which such funds were obtained or from the performance of any
foreign exchange contract) that such Lender may sustain or incur as a
consequence of (a) default by a Borrower in payment of the principal amount of
or any interest on any Eurocurrency Rate Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Lender to banks of funds obtained by it in order to maintain its Eurocurrency
Rate Loans, (b) default by a Borrower in making a borrowing or conversion after
such Borrower has given (or is deemed to have given) a Loan Request or a
Conversion Request relating thereto in accordance with §§2.1.3, 2.5.2, 2.8 or
2.9 or (c) the making of any payment of a Eurocurrency Rate Loan or the making
of any conversion of any such Loan to a Base Rate Loan on a day that is not the
last day of the applicable Interest Period with respect thereto, including
interest or fees payable by such Lender to lenders of funds obtained by it in
order to maintain any such Loans.

- 66 -

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

 

     5.11. Interest After Default. Upon the occurrence and during the
continuance of a Default or an Event of Default, all amounts payable hereunder
or under any of the other Loan Documents (including, without limitation, overdue
principal and (to the extent permitted by applicable Law) interest on the Loans,
all other overdue amounts payable hereunder or under any of the other Loan
Documents, and the principal of the Loans not overdue) shall bear interest
compounded monthly and payable, without notice, demand or presentment, at a rate
per annum equal to two percent (2%) above the rate of interest then applicable
thereto (or, if no rate of interest is then applicable thereto, the Base Rate)
until such Default or Event of Default has been cured or remedied or such
Default or Event of Default has been waived in accordance with the terms hereof
(after as well as before judgment and after as well as before the commencement
of any proceeding under any Debtor Relief Law).
     5.12. Replacement of Lenders. If any Lender (an “Affected Lender”)
(a) makes demand upon the Borrowers for (or if the Borrowers are otherwise
required to pay) amounts pursuant to §§5.7 or 5.8, (b) is unable to make or
maintain Eurocurrency Rate Loans as a result of a condition described in §5.6 or
(c) defaults in its obligation to make Loans in accordance with the terms of
this Credit Agreement or purchase any Letter of Credit Participation or
participate in any Swingline Loan, the Borrowers may, so long as no Default or
Event of Default has occurred and is then continuing, within ninety (90) days of
receipt of such demand, notice (or the occurrence of such other event causing
the Borrowers to be required to pay such compensation or causing §5.6 to be
applicable), or default referred to in clauses (a), (b) or (c), as the case may
be, by notice (a “Replacement Notice”) in writing to the Administrative Agent
and such Affected Lender (i) request the Affected Lender to cooperate with the
Borrowers in obtaining a replacement Lender satisfactory to the Administrative
Agent and the Borrowers (the “Replacement Lender”); (ii) request the
non-Affected Lenders to acquire and assume all of the Affected Lender’s Loans
and Commitment as provided herein, but none of such Lenders shall be under an
obligation to do so; or (iii) designate a Replacement Lender approved by the
Administrative Agent, such approval not to be unreasonably withheld or delayed.
If any satisfactory Replacement Lender shall be obtained, and/or if any one or
more of the non-Affected Lenders shall agree to acquire and assume all of the
Affected Lender’s Loans and Commitment, then such Affected Lender shall assign,
in accordance with §15, all of its Commitment, Loans, Letter of Credit
Participations, Notes and other rights and obligations under this Credit
Agreement and all other Loan Documents to such Replacement Lender or
non-Affected Lenders, as the case may be, in exchange for payment of the
principal amount so assigned and all interest and fees accrued on the amount so
assigned, plus all other Obligations then due and payable to the Affected
Lender; provided, however, that (A) such assignment shall be without recourse,
representation or warranty and shall be on terms and conditions reasonably
satisfactory to such Affected Lender and such Replacement Lender and/or
non-Affected Lenders, as the case may be, and (B) prior to any such assignment,
the Borrowers shall have paid to such Affected Lender all amounts properly
demanded and unreimbursed under §§5.7 and 5.8. Upon the effective date of such
assignment, the Borrowers shall issue replacement Notes to such Replacement
Lender and/or non-Affected Lenders, as the case may be, and such institution
shall become a “Lender” for all purposes under this Credit Agreement and the
other Loan Documents.
     5.13. [Reserved].
     5.14. [Reserved].
     5.15. Concerning Joint and Several Liability of the Borrowers.
     (a) Each of the Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Lenders, any Issuing Bank and the Agents
under this Credit Agreement, for the mutual benefit, directly and indirectly, of
each of the Borrowers and

- 67 -

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

 

in consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations.
     (b) Each of the Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this §5.15), it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
each of the Borrowers without preferences or distinction among them.
     (c) If and to the extent that any of the Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrowers will make such payment with respect to, or perform, such
Obligation.
     (d) The Obligations of each of the Borrowers under the provisions of this
§5.15 constitute the full recourse Obligations of each of the Borrowers
enforceable against each such Person to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Credit Agreement or the other Loan Documents or any other circumstance
whatsoever as to any other Borrower.
     (e) Except as otherwise expressly provided herein, each Borrower hereby
waives promptness, diligence, presentment, demand, protest, notice of acceptance
of its joint and several liability, notice of any and all advances of the Loans
made under this Credit Agreement and the Notes, notice of occurrence of any
Default or Event of Default (except to the extent notice is expressly required
to be given pursuant to the terms of this Credit Agreement or any of the other
Loan Documents), or of any demand for any payment under this Credit Agreement,
notice of any action at any time taken or omitted by any Agent, any Issuing Bank
or the Lenders under or in respect of any of the Obligations hereunder, any
requirement of diligence and, generally, all demands, notices and other
formalities of every kind in connection with this Credit Agreement and the other
Loan Documents. Each Borrower hereby waives all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshaling of assets of the
Borrowers and any other entity or Person primarily or secondarily liable with
respect to any of the Obligations, and all suretyship defenses generally. Each
Borrower hereby assents to, and waives notice of, any extension or postponement
of the time for the payment, or place or manner for payment, compromise,
refinancing, consolidation or renewals of any of the Obligations hereunder, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by the Agents, any Issuing Bank and the Lenders at any time or
times in respect of any default by any Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Credit
Agreement and the other Loan Documents, any and all other indulgences whatsoever
by the Agents, any Issuing Bank and the Lenders in respect of any of the
Obligations hereunder, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of such
Obligations or the addition, substitution or release, in whole or in part, of
any Borrowers or any other entity or Person primarily or secondarily liable for
any Obligation. Such Borrower further agrees that its Obligations shall not be
released or discharged, in whole or in part, or otherwise affected by the
adequacy of any rights which any Agent, any Issuing Bank or any Lender may have
against any collateral security or

- 68 -

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

 

other means of obtaining repayment of any of the Obligations, the impairment of
any collateral security securing the Obligations, including, without limitation,
the failure to protect or preserve any rights which any Agent, any Issuing Bank
or any Lender may have in such collateral security or the substitution,
exchange, surrender, release, loss or destruction of any such collateral
security, any other act or omission which might in any manner or to any extent
vary the risk of such Borrower, or otherwise operate as a release or discharge
of such Borrower, all of which may be done without notice to such Borrower. If
for any reason any of the other Borrowers has no legal existence or is under no
legal obligation to discharge any of the Obligations, or if any of the
Obligations have become irrecoverable from any of the other Borrowers by reason
of such other Borrower’s insolvency, bankruptcy or reorganization or by other
operation of law or for any reason, this Credit Agreement and the other Loan
Documents to which it is a party shall nevertheless be binding on such Borrower
to the same extent as if such Borrower at all times had been the sole obligor on
such Obligations. Without limiting the generality of the foregoing, each
Borrower assents to any other action or delay in acting or failure to act on the
part of the Agents, any Issuing Bank and the Lenders, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable Laws or regulations thereunder
which might, but for the provisions of this §5.15, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this §5.15, it being the intention of each Borrower
that, so long as any of the Obligations hereunder remain unsatisfied, the
obligations of such Borrower under this §5.15 shall not be discharged except by
performance and then only to the extent of such performance. The Obligations of
each Borrower under this §5.15 shall not be diminished or rendered unenforceable
by any winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to any reconstruction or similar proceeding with
respect to any other Borrower, or any of the Lenders. The joint and several
liability of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, ownership, membership, constitution or place of
formation of any Borrower or the Lenders. Each of the Borrowers acknowledges and
confirms that it has itself established its own adequate means of obtaining from
each of the other Borrowers on a continuing basis all information desired by
such Borrower concerning the financial condition of each of the other Borrowers
and that each such Borrower will look to each of the other Borrowers and not to
any Agent, any Issuing Bank or any Lender in order for such Borrower to keep
adequately informed of changes in each of the other Borrowers’ respective
financial conditions.
     (f) The provisions of this §5.15 are made for the benefit of the Lenders,
the Agents and each Issuing Bank and their respective permitted successors and
assigns, and may be enforced by it or them from time to time against any or all
of the Borrowers as often as occasion therefor may arise and without requirement
on the part of the Lenders, the Agents or any Issuing Bank or such successor or
assign first to marshal any of its or their claims or to exercise any of its or
their rights against any of the other Borrowers or to exhaust any remedies
available to it or them against any of the other Borrowers or to resort to any
other source or means of obtaining payment of any of the Obligations hereunder
or to elect any other remedy. The provisions of this §5.15 shall remain in
effect until all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any of the Obligations, is rescinded or must otherwise be restored or
returned by any Lender, any Agent or any Issuing Bank upon the insolvency,
bankruptcy or reorganization of any of

- 69 -

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

 

the Borrowers, or otherwise, the provisions of this §5.15 will forthwith be
reinstated in effect, as though such payment had not been made.
     (g) Each of the Borrowers hereby agrees that it will not enforce any of its
rights of reimbursement, contribution, subrogation or the like against the other
Borrowers with respect to any liability incurred by it hereunder or under any of
the other Loan Documents, any payments made by it to any of the Lenders, any
Agent or any Issuing Bank with respect to any of the Obligations or any
collateral security therefor until such time as all of the Obligations have been
irrevocably paid in full in cash. Any claim which any Borrower may have against
any other Borrower with respect to any payments to the Lenders, the Agents or
any Issuing Bank hereunder or under any other Loan Documents are hereby
expressly made subordinate and junior in right of payment, without limitation as
to any increases in the Obligations arising hereunder or thereunder, to the
prior payment in full of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made to any other
Borrower therefor.
     (h) Each of the Borrowers hereby agrees that the payment of any amounts due
with respect to the indebtedness owing by any Borrower to any other Borrower is
hereby subordinated to the prior payment in full in cash of the Obligations.
Each Borrower hereby agrees that after the occurrence and during the continuance
of any Default or Event of Default, such Borrower will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Borrower owing to
such Borrower until the Obligations shall have been paid in full in cash. If,
notwithstanding the foregoing sentence, such Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Borrower as trustee for the
Administrative Agent and be paid over to the Administrative Agent for the pro
rata accounts of the Lenders to be applied to repay the Obligations.
     5.16. Additional Borrowers. BGI may, upon not less than ten (10) Business
Days’ notice to the Administrative Agent, cause additional Subsidiaries of BGI
to become Borrowers hereunder by causing such Subsidiary or Subsidiaries to
agree to be bound by the provisions of this Credit Agreement and the Notes, to
execute and deliver a Joinder Agreement to the Administrative Agent and to
deliver such legal opinions and other documents and instruments as the
Administrative Agent may request, including allonges to the Notes. Upon the
Administrative Agent’s receipt of such notice, the Administrative Agent shall
notify the Lenders at least five (5) days prior to such joinder of a new
Borrower. BGI shall not cause any Foreign Subsidiary of BGI to become a Borrower
hereunder.
     5.17. Taxes.
     (a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes. (i) Any and all payments by or on account of any obligation of the
Borrowers hereunder or under any other Loan Document shall to the extent
permitted by applicable Laws be made free and clear of and without reduction or
withholding for any Taxes. If, however, applicable Laws require the Borrowers or
the Administrative Agent to withhold or deduct any Tax, such Tax shall be
withheld or deducted in accordance with such Laws as determined by the Borrowers
or the Administrative Agent, as the case

- 70 -

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

 

may be, upon the basis of the information and documentation to be delivered
pursuant to subsection (e) below.
     (ii) If the Borrowers or the Administrative Agent, as the case may be,
shall be required by the Code to withhold or deduct any Taxes, including both
United States Federal backup withholding and withholding taxes, from any
payment, then (A) the Borrowers or the Administrative Agent, as the case may be,
shall withhold or make such deductions as are determined by the Borrowers or the
Administrative Agent, as the case may be, to be required based upon the
information and documentation it has received pursuant to subsection (e) below,
(B) the Borrowers or the Administrative Agent, as the case may be, shall timely
pay the full amount withheld or deducted to the relevant Governmental Authority
in accordance with the Code, and (C) to the extent that the withholding or
deduction is made on account of Indemnified Taxes or Other Taxes, the sum
payable by the Borrowers shall be increased as necessary so that after any
required withholding or the making of all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent, Lender or Issuing Bank, as the case may be, receives an
amount equal to the sum it would have received had no such withholding or
deduction been made.
     (b) Payment of Other Taxes by the Borrowers. Without limiting the
provisions of subsection (a) above, the Borrowers shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable Laws.
     (c) Tax Indemnifications. (i) Without limiting the provisions of subsection
(a) or (b) above, the Borrowers shall, and do hereby, indemnify the
Administrative Agent, each Lender and the Issuing Bank, and shall make payment
in respect thereof within ten (10) days after demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) withheld or deducted by the Borrowers or the Administrative Agent or
paid by the Administrative Agent, such Lender or the Issuing Bank, as the case
may be, and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
The Borrowers shall also, and do hereby, indemnify the Administrative Agent, and
shall make payment in respect thereof within ten (10) days after demand
therefor, for any amount which a Lender or the Issuing Bank for any reason fails
to pay indefeasibly to the Administrative Agent as required by clause (ii) of
this subsection. A certificate as to the amount of any such payment or liability
delivered to the Borrowers by a Lender or the Issuing Bank (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest
error.
     (ii) Without limiting the provisions of subsection (a) or (b) above, each
Lender and the Issuing Bank shall, and does hereby, indemnify the Borrowers and
the Administrative Agent, and shall make payment in respect thereof within ten
(10) days after demand therefor, against any and all Taxes and any and all
related losses, claims, liabilities, penalties, interest and expenses (including
the fees, charges and disbursements of any counsel for the Borrowers or the
Administrative Agent) incurred by or asserted against the Borrowers or the

- 71 -

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

 

Administrative Agent by any Governmental Authority as a result of the failure by
such Lender or the Issuing Bank, as the case may be, to deliver, or as a result
of the inaccuracy, inadequacy or deficiency of, any documentation required to be
delivered by such Lender or the Issuing Bank, as the case may be, to the
Borrower or the Administrative Agent pursuant to subsection (e). Each Lender and
the Issuing Bank hereby authorizes the Administrative Agent to set off and apply
any and all amounts at any time owing to such Lender or the Issuing Bank, as the
case may be, under this Agreement or any other Loan Document against any amount
due to the Administrative Agent under this clause (ii). The agreements in this
clause (ii) shall survive the resignation and/or replacement of the
Administrative Agent, any assignment of rights by, or the replacement of, a
Lender or the Issuing Bank, the termination of the Total Commitment and the
repayment, satisfaction or discharge of all other Obligations.
     (d) Evidence of Payments. Upon request by the Borrowers or the
Administrative Agent, as the case may be, after any payment of Taxes by the
Borrowers or by the Administrative Agent to a Governmental Authority as provided
in this §5.17, the Borrowers shall deliver to the Administrative Agent, or the
Administrative Agent shall deliver to the Borrowers, as the case may be, the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of any return required by Laws to report such
payment or other evidence of such payment reasonably satisfactory to the
Borrowers or the Administrative Agent, as the case may be.
     (e) Status of Lenders; Tax Documentation. (i) Each Lender shall deliver to
the Borrowers and to the Administrative Agent, at the time or times prescribed
by applicable Laws or when reasonably requested by the Borrowers or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable Laws or by the taxing authorities of any jurisdiction
and such other reasonably requested information as will permit the Borrowers or
the Administrative Agent, as the case may be, to determine (A) whether or not
payments made hereunder or under any other Loan Document are subject to Taxes,
(B) if applicable, the required rate of withholding or deduction, and (C) such
Lender’s entitlement to any available exemption from, or reduction of,
applicable Taxes in respect of all payments to be made to such Lender by the
Borrowers pursuant to this Agreement or otherwise to establish such Lender’s
status for withholding tax purposes in the applicable jurisdiction.
     (ii) Without limiting the generality of the foregoing, if a Borrower is
resident for tax purposes in the United States,
     (A) any Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to such Borrower and the
Administrative Agent executed originals of Internal Revenue Service Form W-9 or
such other documentation or information prescribed by applicable Laws or
reasonably requested by such Borrower or the Administrative Agent as will enable
such Borrower or the Administrative Agent, as the case may be, to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements; and
     (B) each Foreign Lender that is entitled under the Code or any applicable
treaty to an exemption from or reduction of withholding

- 72 -

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

 

tax with respect to payments hereunder or under any other Loan Document shall
deliver to such 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 such Borrower or the Administrative Agent, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:
     (a) executed originals of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party,
     (b) executed originals of Internal Revenue Service Form W-8ECI,
     (c) executed originals of Internal Revenue Service Form W-8IMY and all
required supporting documentation,
     (d) 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 such
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) executed originals of Internal Revenue Service Form W-8BEN, or
     (e) executed originals of any other form prescribed by applicable Laws as a
basis for claiming exemption from or a reduction in United States Federal
withholding tax together with such supplementary documentation as may be
prescribed by applicable Laws to permit such Borrower or the Administrative
Agent to determine the withholding or deduction required to be made.
     (iii) Each Lender shall promptly (A) notify the Borrowers and the
Administrative Agent of any change in circumstances which would modify or render
invalid any claimed exemption or reduction, and (B) take such steps as shall not
be materially disadvantageous to it, in the reasonable judgment of such Lender,
and as may be reasonably necessary (including the re-designation of its Domestic
Lending Office or its Eurocurrency Lending Office) to avoid any requirement of
applicable Laws of any jurisdiction that any Borrower or the Administrative
Agent make any withholding or deduction for taxes from amounts payable to such
Lender.
     (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender
or the Issuing Bank determines, in its reasonable discretion, that it is
entitled to receive a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which the Borrowers have paid
additional amounts pursuant to this Section, it shall submit a claim for such
refund at the Borrowers’ expense; provided that no claim of refund will be
submitted if such refund will have an adverse

-73-

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

 

effect on the Administrative Agent, such Lender or the Issuing Bank. If the
Administrative Agent, any Lender or the Issuing Bank receives a refund, it shall
pay to the applicable Borrower(s) an amount equal to such refund (but only to
the extent of indemnity payments made, or additional amounts paid, by such
Borrower under this Section with respect to the Taxes or Other Taxes giving rise
to such refund), net of all out-of-pocket expenses incurred by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that the Borrowers, upon the
request of the Administrative Agent, such Lender or the Issuing Bank, agree to
repay the amount paid over to the Borrowers (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the
Administrative Agent, such Lender or the Issuing Bank in the event the
Administrative Agent, such Lender or the Issuing Bank is required to repay such
refund to such Governmental Authority. This subsection shall not be construed to
require the Administrative Agent, any Lender or the Issuing Bank to make
available its tax returns (or any other information relating to its taxes that
it deems confidential) to the Borrowers or any other Person.
6. GUARANTY AND COLLATERAL SECURITY.
     6.1. Guaranty of Payment and Performance. For value received and hereby
acknowledged and as an inducement to the Lenders to make Loans to the Borrowers
and the Issuing Banks to issue Letters of Credit for the account of the
Borrowers, each Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to the Agents, the Issuing Banks and the Lenders, the full and
punctual payment when due (whether at stated maturity, by required pre-payment,
by acceleration or otherwise), as well as the performance, of all of the
Obligations including all such which would become due but for the operation of
the automatic stay pursuant to §362(a) of the Federal Bankruptcy Code and the
operation of §§502(b) and 506(b) of the Federal Bankruptcy Code (such
obligations collectively being the “Guaranteed Obligations”). This §6 is in no
way conditioned upon any requirement that any Agent, any Issuing Bank or any
Lender first attempt to collect any of the Obligations from the applicable
Borrower or, as the case may be, Borrowers or resort to any collateral security
or other means of obtaining payment. Should any Borrower default in the payment
or performance of any of its Obligations, the obligations of each Guarantor
hereunder with respect to the Guaranteed Obligations shall become immediately
due and payable to the Administrative Agent, for the benefit of the Lenders, the
Issuing Banks and the Agents, without demand or notice of any nature, all of
which are expressly waived by each Guarantor.
     Notwithstanding anything to the contrary contained in this §6, the parties
hereto agree that Paperchase shall not be required to be a guarantor of any of
the Obligations hereunder.
     The guarantee by each of the Borrowers pursuant to this §6.1 is without
prejudice to its liability as a principal debtor under this Agreement.
     6.2. Guaranty Absolute. Each of the Guarantors guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms
hereof, regardless of any law, regulation, order, decree or directive (whether
or not having the force of law) or any interpretation thereof, now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of any
Agent, any Issuing Bank or any Lender with respect thereto, including, without
limitation, any law, regulation, order, decree or directive or interpretation
thereof that purports to require or permit the satisfaction of any Guaranteed
Obligation, other than strictly in accordance with the terms of this Credit
Agreement. The liability of each Guarantor under this Guaranty with regard to
the Guaranteed Obligations of each Borrower shall be absolute and unconditional
irrespective of:

- 74 -

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

 

     (a) any lack of authorization, execution, validity or enforceability or any
illegality of such Borrower to become a Borrower hereunder, this Credit
Agreement and any amendment hereof (with regard to such Guaranteed Obligations),
or any other obligation, agreement or instrument relating thereto (it being
agreed by each Guarantor that the Guaranteed Obligations shall not be discharged
prior to the final and complete satisfaction of all of the Obligations of the
Borrowers) or any failure to obtain any necessary governmental consent or
approvals or necessary third party consents or approvals;
     (b) any Agent’s, any Issuing Bank’s or any Lender’s exercise or enforcement
of, or failure or delay in exercising or enforcing, legal proceedings to collect
the Obligations or the Guaranteed Obligations, as the case may be, or any power,
right or remedy with respect to any of the Obligations or the Guaranteed
Obligations, as the case may be, including (i) any suspension of any Agent’s,
any Issuing Bank’s or any Lender’s right to enforce against any other Borrower
of the Guaranteed Obligations, or (ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of the Guaranteed Obligations
of such Borrower or any other amendment or waiver of or any consent to departure
from this Credit Agreement or the other Loan Documents (with regard to such
Guaranteed Obligations) or any other agreement or instrument governing or
evidencing any of the Guaranteed Obligations;
     (c) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations of such Borrower;
     (d) any change in ownership of such Borrower;
     (e) any acceptance of any partial payment(s) from such Borrower;
     (f) any insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition, assignment for the benefit of creditors, appointment of a receiver,
examiner or trustee for all or any part of any Borrower’s assets;
     (g) any assignment, participation or other transfer, in whole or in part,
of any Agent’s, any Issuing Bank’s or any Lender’s interest in and rights under
this Credit Agreement or any other Loan Document, or of any Agent’s, any Issuing
Bank’s or any Lender’s interest in the Obligations or the Guaranteed
Obligations, as the case may be;
     (h) any cancellation, renunciation or surrender of any pledge, guaranty or
any debt instrument evidencing the Obligations or the Guaranteed Obligations, as
the case may be;
     (i) any Agent’s, any Issuing Bank’s or any Lender’s vote, claim,
distribution, election, acceptance, action or inaction in any bankruptcy or
reorganization case related to the Obligations or the Guaranteed Obligations, as
the case may be; or
     (j) any other action or circumstance, other than payment, which might
otherwise constitute a defense available to, or a discharge of, such Borrower in
respect of its Obligations or the Guaranteed Obligations, as the case may be.

- 75 -

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

 

     This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Agent, any Issuing Bank or any
Lender upon the insolvency, bankruptcy or reorganization, examination of any
Borrower or otherwise, all as though such payment had not been made.
     6.3. Effectiveness, Enforcement. The Guaranty herein of each Guarantor
shall be effective and shall be deemed to be made with respect to each Loan made
or Letter of Credit issued to a Borrower as of the time it is made. No
invalidity, irregularity or unenforceability by reason of any bankruptcy or
similar law, or any law or order of any government or agency thereof purporting
to reduce, amend or otherwise affect any liability of a Borrower, and no defect
in or insufficiency or want of powers of any Borrower or irregular or improperly
recorded exercise thereof, shall impair, affect, be a defense to or claim
against such Guaranty. This Guaranty is a continuing guaranty and shall
(a) survive any termination of this Credit Agreement and (b) remain in full
force and effect until payment in full in cash and performance of all Guaranteed
Obligations and all other amounts payable under this Guaranty. This Guaranty is
made for the benefit of each Agent, each Issuing Bank and each of the Lenders
and their respective successors and assigns, and may be enforced from time to
time as often as occasion therefor may arise and without requirement on the part
of any Agent, any Issuing Bank or any Lender first to exercise any rights
against any Borrower or to exhaust any remedies available to it against any
Borrower or to resort to any other source or means of obtaining payment of any
of the Guaranteed Obligations or to elect any other remedy. In the event that
acceleration of the time for payment (or the giving of notice of such
acceleration) of the Guaranteed Obligations of any Borrower is stayed upon the
insolvency, bankruptcy, examination or reorganization, of such Borrower or for
any other reason, all such amounts otherwise subject to acceleration under the
terms of this Credit Agreement shall be immediately due and payable by each
Guarantor under the Guaranty herein provided.
     6.4. Waiver. Each of the Guarantors hereby waives promptness, diligence,
protest, notice of protest, all suretyship defenses, notice of acceptance and
any other notice with respect to any of the Guaranteed Obligations, and this
Guaranty and any requirement that any Agent, any Issuing Bank or any Lender
secure, perfect or protect any security interest or lien or any property subject
thereto or exhaust any right or take any action against any Borrower or any
other Person or any collateral. Each of the Guarantors also irrevocably waives,
to the fullest extent permitted by law, all defenses which at any time may be
available to it in respect of the Guaranteed Obligations by virtue of any
statute of limitations, valuation, stay, moratorium law or other similar law now
or hereafter in effect.
     6.5. Subordination; Subrogation. Until the termination of the Commitments
and final payment and performance in full in cash of all of the Obligations,
none of the Guarantors shall exercise and each hereby waives any rights against
any Borrower as a result of payment by any Guarantor hereunder, by way of
subrogation, reimbursement, restitution, contribution or otherwise, and no
Guarantor will prove any claim in competition with any Agent, any Issuing Bank
or any Lender in respect of any payment hereunder in bankruptcy, insolvency or
reorganization proceedings of any nature; no Guarantor will claim any set-off,
recoupment or counterclaim against any Borrower in respect of any liability of
such Guarantor to such Borrower; and each Guarantor waives any benefit of and
any right to participate in any collateral which may be held by any Agent, any
Issuing Bank and any Lender. The payment of any amounts due with respect to any
Indebtedness of any Borrower now or hereafter held by any Guarantor is hereby
subordinated to the prior payment in full of the Guaranteed Obligations. Each
Guarantor agrees that after the occurrence of any default in the payment or
performance of the Guaranteed Obligations, such Guarantor will not demand, sue
for, or otherwise attempt to collect any such Indebtedness of any of the
Borrowers to such Guarantor until the Guaranteed Obligations then due shall have
been paid in full in cash. If, notwithstanding the foregoing sentence, any
Guarantor shall collect or receive any amounts in respect of such indebtedness,
such amounts shall be collected and

- 76 -

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

 

received by such Guarantor as trustee for the Agents, any Issuing Bank and the
Lenders and be paid over to the Administrative Agent for the respective accounts
of the Agents, the Issuing Banks and the Lenders on account of the Guaranteed
Obligations without affecting in any manner the liability of any Guarantor under
the other provisions of this §6. The provisions of this section shall survive
the expiration or termination of the Credit Agreement and the other Loan
Documents and the provisions of this section shall be supplemental to and not in
derogation of any rights and remedies of any Agent, any Issuing Bank or any
Lender under any separate subordination agreement which any Agent, any Issuing
Bank or any Lender may at any time and from time to time entered into with any
Guarantor for the benefit of any Agent, any Issuing Bank or any Lender.
     6.6. Payments. Payments by each Guarantor hereunder may be required by the
Administrative Agent on any number of occasions. All payments made by each
Guarantor under this §6 shall be made to the Administrative Agent, in the manner
and at the place of payment specified therefor in §5.3.1 hereof, for the account
of the Lenders, the Issuing Banks and the Agents and in the same currency in
which such Obligation was made, unless otherwise agreed to in writing by the
Agents, the Issuing Banks or the Lenders.
     6.7. Setoff. Each Guarantor grants to the Agents, the Issuing Banks and the
Lenders, as security for the full and punctual payment and performance of all of
such Guarantor’s obligations under this §6, a continuing lien on, security
interest and right of setoff in all securities or other property belonging to
such Guarantor now or hereafter held by any Agent, any Issuing Bank or such
Lender and in all deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from any Agent, any Issuing Bank or
such Lender to such Guarantor or subject to withdrawal by such Guarantor.
Regardless of the adequacy of any collateral security or other means of
obtaining payment of any of the Guaranteed Obligations, each of the Agents, each
Issuing Bank and the Lenders is hereby authorized at any time and from time to
time during the continuance of any Event of Default, without notice to any
Guarantor (any such notice being expressly waived by the Guarantors) and to the
fullest extent permitted by law, to set off and apply such deposits and other
sums against the obligations of such Guarantor under this §6, whether or not
such Agent, such Issuing Bank or such Lender shall have made any demand under
this §6 and although such obligations may be contingent or unmatured.
     6.8. Further Assurances. Each Guarantor agrees that it will from time to
time, at the request of the Administrative Agent, do all such things and execute
all such documents as the Administrative Agent may reasonably consider necessary
or desirable to give full effect to this §6 and to perfect and preserve the
rights and powers of the Lenders, the Issuing Banks and the Agents hereunder.
Each Guarantor acknowledges and confirms that it has established its own
adequate means of obtaining from the Borrowers on a continuing basis all
information desired by it concerning the financial condition of the Borrowers
and that it will look to the Borrowers and not to any Agent, any Issuing Bank or
any Lender in order for it to keep adequately informed of changes of the
financial condition of any Borrower.
     6.9. Successors and Assigns. This §6 shall be binding upon each Guarantor,
its successors and assigns, and shall inure to the benefit of the Agents, the
Issuing Banks and the Lenders and their respective successors, and permitted
transferees and assigns. Without limiting the generality of the foregoing
sentence, each Lender may, in accordance with the provisions of §15 and subject
to the limitations set forth therein, assign or otherwise transfer this Credit
Agreement, the other Loan Documents or any other agreement or note held by it
evidencing, securing or otherwise executed in connection with the Obligations,
or sell participations in any interest therein, to another Person, and such
other Person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer or participation, with all the
rights in respect thereof granted to such Lender herein. None of the Guarantors
may assign any of its obligations hereunder. BGI may cause additional
Subsidiaries of BGI to become Guarantors hereunder by causing such Subsidiary or
Subsidiaries to agree

- 77 -

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

 

to be bound by the provisions of this §6, to execute and deliver a Joinder
Agreement to the Administrative Agent and to deliver such legal opinions and
other documents and instruments as the Administrative Agent may request.
     6.10. Contribution. To the extent any of the Guarantors makes a payment
hereunder in excess of the aggregate amount of the benefit received by such
Person in respect of the extensions of credit under the Credit Agreement (the
“Benefit Amount”), then such Person, after the payment in full in cash of all of
the Guaranteed Obligations shall be entitled to recover from each such Person
such excess payment, pro rata in accordance with the ratio of the Benefit Amount
received by such other Person to the total Benefit Amounts received by each of
the Guarantors, and the right to such recovery shall be deemed to be in asset
and property of such Person so funding; provided that all such rights to
recovery shall be subordinate and junior in right of payment to the final and
indefeasible repayment in full in cash of all of the Obligations.
     6.11. [Reserved].
     6.12. Security of Borrowers. The Borrower Obligations shall be secured by a
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable Law) in all of the ABL Priority
Collateral, pursuant to the terms of the Security Documents to which any
Borrower or any Guarantor is a party and otherwise on terms and conditions and
pursuant to documentation satisfactory to the Administrative Agent. The Borrower
Obligations shall be secured by a perfected second priority security interest in
the Second Lien Priority Collateral pursuant to the terms of the Security
Documents to which any Borrower or any Guarantor is a party and otherwise on
terms and conditions and pursuant to documentation satisfactory to the
Administrative Agent.
     6.13. Limitation on Guaranty Obligations. In any action or proceeding with
respect to any Guarantor involving any state corporate law, or any state or
federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of such Guarantor under §6.1 hereof
would otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under said §6.1, then, notwithstanding any other provision hereof
to the contrary, the amount of such liability shall, without any further action
by such Guarantor, Administrative Agent, Lenders, or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
7. REPRESENTATIONS AND WARRANTIES.
     Each of the Borrowers jointly and severally represents and warrants to the
Lenders, the Agents and the Issuing Banks as follows:
     7.1. Corporate Authority.
     7.1.1. Incorporation; Good Standing. Each of BGI and its Subsidiaries
(a) is a corporation (or similar business entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation, (b) has all requisite corporate (or the equivalent
company) power to own its property and conduct its business as now conducted and
as presently contemplated, and (c) is in good standing as a foreign corporation
(or similar business entity) and is duly authorized to do business in each
jurisdiction where such qualification is necessary except where a failure to be
so qualified would not have a Material Adverse Effect.

- 78 -

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

 

     7.1.2. Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which any of the Borrowers or
any of their Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate (or the equivalent
company) authority of such Person, (b) have been duly authorized by all
necessary corporate (or the equivalent company) proceedings, (c) do not and will
not conflict with or result in any breach or contravention of any provision of
law, statute, rule or regulation to which any of the Borrowers or any of their
Subsidiaries is subject or any judgment, order, writ, injunction, license or
permit applicable to any of the Borrowers or any of their Subsidiaries and
(d) do not conflict with any provision of the Governing Documents of, or any
agreement or other instrument binding upon, any of the Borrowers or any of their
Subsidiaries.
     7.1.3. Enforceability. The execution and delivery of this Credit Agreement
and the other Loan Documents to which any of the Borrowers or any of their
Subsidiaries is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as enforceability is
limited by Debtor Relief Laws and except to the extent that availability of the
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding therefor may be brought.
     7.2. Governmental Approvals. The execution, delivery and performance by any
of the Borrowers and any of their Subsidiaries of this Credit Agreement and the
other Loan Documents to which any of the Borrowers or any of their Subsidiaries
is or is to become a party and the transactions contemplated hereby and thereby
do not require the approval or consent of, or filing with, any Governmental
Authority other than those already obtained.
     7.3. Title to Properties; Leases. Except as indicated on Schedule 7.3
hereto, the Borrowers and their Subsidiaries own all of the assets reflected in
the consolidated balance sheet of the Borrowers and their Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no Liens except Permitted Liens.
     7.4. Fiscal Year; Financial Statements and Projections.
     7.4.1. Fiscal Year. Each of the Borrowers and each of their Subsidiaries
has a Fiscal Year which is the 52/53 week period ending on the Saturday closest
to the last day in January; provided that the Borrowers and their Subsidiaries
may change any Fiscal Year end date to a date not more than seven (7) days
before or after the then scheduled end date of such Fiscal Year with written
notice to the Administrative Agent not less than thirty (30) days prior to the
commencement of such Fiscal Year. The Fiscal Quarters and Fiscal Year of the
Borrowers and their Subsidiaries are accurately described in §1.1 hereof (except
as otherwise noticed to the Administrative Agent pursuant to the proviso of the
preceding sentence).
     7.4.2. Financial Statements. There has been furnished to each of the
Lenders (a) a consolidated balance sheet of BGI and its Subsidiaries as at the
Balance Sheet Date and consolidated statements of income and cash flow of the
Borrowers and their Subsidiaries as at the Balance Sheet Date, certified by
Ernst & Young LLP, and (b) a consolidated balance sheet and consolidated
statements of income and cash flow of the Borrowers and their Subsidiaries for
the FQ3 2009. Such balance sheet and statements of

- 79 -

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

 

income and cash flow have been prepared in accordance with GAAP and fairly
present the financial condition of BGI and its Subsidiaries as at the close of
business on the date thereof and the results of operations for the fiscal year
then ended. There are no contingent liabilities of any Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the officers
of BGI, which were not disclosed in such balance sheet and the notes related
thereto.
     7.4.3. Projections. The projections of the annual operating budgets of BGI
and its Subsidiaries on a consolidated basis, balance sheets, income statements,
cash flow statements and availability reports for the monthly periods from
February 2010 through April 2011 and for the annual periods from Fiscal Year
2011 through Fiscal Year 2014, copies of which have been delivered to each
Lender, disclose all assumptions made with respect to general economic,
financial and market conditions used in formulating such projections. To the
knowledge of each of the Borrowers and each of their Subsidiaries, no facts
exist that (individually or in the aggregate) would result in any material
change in any of such projections. The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the assumptions
stated therein and reflect the reasonable estimates of BGI and its Subsidiaries
of the results of operations and other information projected therein.
     7.5. No Material Adverse Effect, etc. Since the Balance Sheet Date there
has been no event or occurrence which has had a Material Adverse Effect. Since
the Balance Sheet Date, the Borrowers have not made any Restricted Payment
except as set forth in Schedule 7.5 hereto.
     7.6. Franchises, Patents, Copyrights, etc. BGI and each of its Subsidiaries
possesses all franchises, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted without known conflict with any
rights of others.
     7.7. Litigation. Except as set forth in Schedule 7.7 or Schedule 7.10
hereto, there are no actions, suits, proceedings or investigations of any kind
pending or threatened against BGI or any of its Subsidiaries before any
Governmental Authority, that, (a) might reasonably be expected to, either in any
case or in the aggregate, (i) have a Material Adverse Effect or (ii) materially
impair the right of BGI and its Subsidiaries, considered as a whole, to carry on
business substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of BGI and its
Subsidiaries, or (b) which question the validity of this Credit Agreement or any
of the other Loan Documents, or any action taken or to be taken pursuant hereto
or thereto.
     7.8. [Reserved.]
     7.9. Compliance with Other Instruments, Laws, etc. Neither BGI nor any of
its Subsidiaries is in violation of any provision of its Governing Documents, or
any agreement or instrument to which it may be subject or by which it or any of
its properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could result
in the imposition of substantial penalties or have a Material Adverse Effect.
     7.10. Tax Status. Except as set forth in Schedule 7.10 hereto, each of BGI
and its Subsidiaries (a) has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject where, in the cases of state or foreign tax returns,
failure to make such filing could have a Material Adverse Effect, (b) has paid
all taxes and other

- 80 -

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

 

governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings and (c) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except as set
forth in Schedule 7.10, there are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and none of the officers
of any Borrower know of any basis for any such claim.
     7.11. No Event of Default. No Default or Event of Default has occurred and
is continuing.
     7.12. Holding Company and Investment Company Acts. None of the Borrowers
nor any of their Subsidiaries is a “holding company”, or a “subsidiary company”
of a “holding company”, or an “affiliate” of a “holding company”, as such terms
are defined in the Public Utility Holding Company Act of 2005; nor is it is
subject to regulation as a “public utility” under the Federal Power Act, as
amended; nor is it an “investment company”, or an “affiliated company” or a
“principal underwriter” of an “investment company”, as such terms are defined in
the Investment Company Act of 1940.
     7.13. [Reserved.]
     7.14. Certain Transactions. Except as set forth on Schedule 7.14, none of
the officers, directors, or employees of BGI or any of its Subsidiaries is
presently a party to any transaction involving payments in excess of $500,000
with BGI or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Borrowers, any
corporation, partnership, trust or other entity in which any officer or any such
employee has a substantial interest or is an officer, trustee or partner.
     7.15. ERISA Compliance.
     (a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state laws. Each Pension Plan
that is intended to be a qualified plan under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service to
the effect that the form of such Plan is qualified under Section 401(a) of the
Code, or an application for such a letter is currently being processed by the
Internal Revenue Service. To the best knowledge of the Borrowers, nothing has
occurred that would prevent or cause the loss of such tax-qualified status.
     (b) There are no pending or, to the best knowledge of the Borrowers,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could reasonably be expected to have a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect.
     (c) (i) No ERISA Event has occurred, and neither the Borrowers nor any
ERISA Affiliate is aware of any fact, event or circumstance that could
reasonably be expected to constitute or result in an ERISA Event; (ii) the
Borrowers and each ERISA Affiliate has met all applicable requirements under the
Pension Funding Rules in respect of each Pension Plan, and no waiver of the
minimum funding standards under the Pension Funding Rules has been applied for
or obtained; (iii) as of the most recent

- 81 -

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

 

valuation date for any Pension Plan, the funding target attainment percentage
(as defined in Section 430(d)(2) of the Code) is 60% or higher and neither the
Borrowers nor any ERISA Affiliate knows of any facts or circumstances that could
reasonably be expected to cause the funding target attainment percentage for any
such plan to drop below 60% as of the most recent valuation date; (iv) neither
the Borrowers nor any ERISA Affiliate has incurred any liability to the PBGC
other than for the payment of premiums, and there are no premium payments which
have become due that are unpaid; (v) neither the Borrowers nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated by the
plan administrator thereof nor by the PBGC, and no event or circumstance has
occurred or exists that could reasonably be expected to cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Pension Plan.
     (d) Neither the Borrowers nor any ERISA Affiliate maintains or contributes
to, or has any unsatisfied obligation to contribute to, or liability under, any
active or terminated Pension Plan other than (A) on the Effective Date, those
listed on Schedule 7.15(d) hereto and (B) thereafter, Pension Plans not
otherwise prohibited by this Agreement.
     7.16. Use of Proceeds.
     7.16.1. General. The proceeds of the Loans shall be used for refinancing
certain existing Indebtedness (including Indebtedness under the Pershing Square
Term Loan Facility), working capital and general corporate purposes and
Acquisitions and Investments as permitted by this Credit Agreement. The
Borrowers will obtain Letters of Credit solely for working capital and general
corporate purposes.
     7.16.2. Regulations U and X. No portion of any Loan is to be used, and no
portion of any Letter of Credit is to be obtained, for the purpose of purchasing
or carrying any “margin security” or “margin stock” as such terms are used in
Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. Parts 221 and 224.
     7.17. Environmental Compliance. The Borrowers have taken all appropriate
inquiry into the previous ownership of the Real Estate consistent with good
commercial or customary practice and, based upon such diligent investigation,
has determined that, to the best of the Borrowers’ knowledge:
     (a) none of the Borrowers, their Subsidiaries or any operator of the Real
Estate or any operations thereon is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including, without limitation, those arising under the
Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the
Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
state, local or foreign law, statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter “Environmental
Laws”), which violation would have a material adverse effect on the environment
or a Material Adverse Effect;
     (b) none of the Borrowers nor any of their Subsidiaries has received notice
from any third party including, without limitation, any Governmental Authority,
(i) that any one of them has been identified by the United States Environmental
Protection

- 82 -

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

 

Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B;
(ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any hazardous
substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as
defined by 42 U.S.C. §9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
(“Hazardous Substances”) which any one of them has generated, transported or
disposed of has been found at any site at which a Governmental Authority has
conducted or has ordered that any Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or administrative proceeding (in
each case, contingent or otherwise) arising out of any third party’s incurrence
of costs, expenses, losses or damages of any kind whatsoever in connection with
the release of Hazardous Substances;
     (c) except as set forth on Schedule 7.17 attached hereto: (i) no portion of
the Real Estate has been used for the handling, processing, storage or disposal
of Hazardous Substances except in accordance with applicable Environmental Laws;
and no underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate except in accordance
with applicable Environmental Laws; (ii) in the course of any activities
conducted by the Borrowers, their Subsidiaries or operators of its properties,
no Hazardous Substances have been generated or are being used on the Real Estate
except in accordance with applicable Environmental Laws; (iii) there have been
no releases (i.e., any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or from
the properties of the Borrowers or their Subsidiaries, which releases would have
a material adverse effect on the value of any of the Real Estate or adjacent
properties or the environment; (iv) to the best of the Borrowers’ knowledge,
there have been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would have a material
adverse effect on the value of, the Real Estate; and (v) in addition, any
Hazardous Substances that have been generated on any of the Real Estate have
been transported offsite only by carriers having an identification number issued
by the EPA (or the equivalent thereof in any foreign jurisdiction), treated or
disposed of only by treatment or disposal facilities maintaining valid permits
as required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Borrowers’ knowledge, operating
in compliance with such permits and applicable Environmental Laws; and
     (d) none of the Borrowers nor any of their Subsidiaries, or any of the Real
Estate is subject to any applicable Environmental Law requiring the performance
of Hazardous Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any Governmental Authority or
the recording or delivery to other Persons of an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby, or to the effectiveness of any other transactions
contemplated hereby.
     7.18. Subsidiaries. Schedule 7.18, as the same may be updated pursuant to
§7.22 hereof, states the name of each of BGI’s Subsidiaries and Joint Ventures
and, in each case, such entity’s jurisdiction of organization, the outstanding
shares (referred to herein as the “Subsidiary Shares”) and the owners thereof if
it is a corporation, such entity’s outstanding partnership interests (the
“Partnership

- 83 -

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

 

Interests”) if it is a partnership and such entity’s outstanding membership
interests (the “Membership Interests”) if it is a limited liability company. BGI
and each of its Subsidiaries has good and marketable title to all of the
Subsidiary Shares, Partnership Interests, and Membership Interests it purports
to own, free and clear in each case of any Lien. All Subsidiary Shares,
Partnership Interests and Membership Interests have been validly issued and all
Subsidiary Shares are fully paid and nonassessable. All capital contributions
and other consideration required to be made or paid in connection with the
issuance of the Partnership Interests have been made or paid, as the case may
be. There are no options, warrants or other rights outstanding to purchase any
such Subsidiary Shares, Partnership Interests or Membership Interests except as
indicated on Schedule 7.18. Neither Paperchase nor Borders Superstores presently
has, or in the future will have, any non-voting Capital Stock other than
non-voting Capital Stock issued by Paperchase pursuant to an employee stock or
stock option plan; provided that such stock shall only be issued in lieu of cash
compensation that the applicable employees would otherwise have received in the
ordinary course of business as reasonably determined by the board of directors
or other governing body of Paperchase.
     7.19. Disclosure. None of this Credit Agreement or any of the other Loan
Documents contains any untrue statement of a material fact or omits to state a
material fact (known to any of the Borrowers or any of their Subsidiaries in the
case of any document or information not furnished by it or any of their
Subsidiaries) necessary in order to make the statements herein or therein not
misleading. There is no fact known to any of the Borrowers or any of their
Subsidiaries which has a Material Adverse Effect, or which is reasonably likely
in the future to have a Material Adverse Effect, exclusive of effects resulting
from changes in general economic conditions, legal standards or regulatory
conditions.
     7.20. Senior Debt Status. The Obligations of each Borrower and each
Guarantor under this Agreement and each of the other Loan Documents to which it
is a party do rank and will rank at least pari passu in priority of payment with
all other Indebtedness of such Borrower and Guarantor, as applicable. The
Obligations of each Borrower and each Guarantor under this Credit Agreement and
each of the other Loan Documents to which it is a party and the Liens in favor
of the Administrative Agent securing such Obligations do rank and will rank
senior in lien status, with all other Indebtedness and Liens of such Borrower or
such Guarantor, as applicable, except (a) Indebtedness of such Borrower or such
Guarantor to the extent secured by Permitted Liens having priority over the
Liens of the Administrative Agent by operation of applicable Law and (b) Liens
on the Second Lien Priority Collateral securing Indebtedness with respect to the
Second Lien Loan Facility. There is no Lien upon or with respect to any of the
properties or income of any Borrower, any Guarantor or any of their respective
Subsidiaries which secures Indebtedness or other obligations of any Person
except for Permitted Liens. Prior to the effectiveness of this Agreement, the
Borrowers shall have repaid the Pershing Square Term Loan Facility in full in
cash and the Pershing Square Term Loan Documents will have been terminated
therewith.
     7.21. Solvency. After giving effect to each incurrence of Indebtedness
hereunder, and the payment of all Fees, costs and expenses payable by each of
the Borrowers hereunder, each of the Borrowers is Solvent.
     7.22. Updates to Schedules. Should any of the information or disclosures
provided on any of the Schedules attached hereto become outdated or incorrect in
any material respect, BGI shall promptly provide the Administrative Agent in
writing with such revisions or updates to such Schedule as may be necessary or
appropriate to update or correct same; provided that, except for the amendment
of Schedule 1, as contemplated by §§2.3.3 and 15 and the amendment of
Schedule 7.18 in connection with any new Subsidiary of BGI as permitted herein,
no Schedule shall be deemed to have been amended, modified or superseded by any
such correction or update, nor shall any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule be deemed
to have been cured thereby, unless and until the Administrative Agent (which may
require the consent of the Required Lenders) shall have accepted in writing such
revisions or updates to such Schedule.

- 84 -

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

 

     7.23. Insurance. The Borrowers and each of their Subsidiaries maintain with
financially sound and reputable insurers insurance with respect to its
properties and businesses against such casualties and contingencies as are set
forth on Schedule 7.23 hereto, and such insurance is in accordance with sound
business practices in accordance with industry standards and the terms of the
Security Documents.
     7.24. Bank Accounts. Schedule 7.24 (as updated by the most recent Borrowing
Base Report delivered pursuant to §8.4(e)) sets forth the account numbers and
location of all Local Accounts, Interim Concentration Accounts and other bank
accounts of the Borrowers or any of their Subsidiaries.
     7.25. Perfection of Security Interest. All filings, assignments, pledges
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable Law, to
establish and perfect the Administrative Agent’s security interest in the
Collateral. The Administrative Agent’s rights with respect to the Collateral are
subject to the Intercreditor Agreement but are not subject to any other setoff,
claims, withholdings or other defenses. The Borrowers and all Subsidiaries of
the Borrowers party to one of the Security Documents are the owners of the
Collateral free from any Lien, except for Permitted Liens.
     7.26. [Reserved.]
     7.27. Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans, the requesting or issuance, extension or renewal of any
Letters of Credit or the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 U.S.C. §1 et seq., as amended) (the “Trading With
the Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the
“Foreign Assets Control Regulations”) or any enabling legislation or executive
order relating thereto (which for the avoidance of doubt shall include, but
shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”)
and (b) the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).
Furthermore, neither the Borrowers nor any of their Subsidiaries or other
Affiliates (a) is or will become a “blocked person” as described in the
Executive Order, the Trading With the Enemy Act or the Foreign Assets Control
Regulations or (b) engages or will engage in any dealings or transactions, or be
otherwise associated, with any such “blocked person”.
     7.28. Taxpayer Identification Number. Each Borrower’s and Guarantor’s true
and correct U.S. taxpayer identification number is set forth on Schedule 7.28.
     7.29. Excluded Subsidiaries. None of the Excluded Subsidiaries engage in
any trade or business or own any assets or have incurred any Indebtedness
except, after the Effective Date, to the extent the Required Lenders have
specifically consented in writing to such activities.
     7.30. Kobo. Except as set forth in the first sentence of §7.18, neither the
Borrowers nor the Guarantors make any representation or warranty whatsoever
regarding Kobo, its assets, any Collateral comprised of ownership interests in
Kobo or otherwise.
8. AFFIRMATIVE COVENANTS.
     Each of the Borrowers, jointly and severally, covenants and agrees that, so
long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any

- 85 -

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

 

obligation to make any Loans or any Issuing Bank has any obligation to issue,
extend or renew any Letters of Credit:
     8.1. Punctual Payment. The Borrowers will duly and punctually pay or cause
to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the Fees and all other amounts provided
for in this Credit Agreement and the other Loan Documents to which BGI or any of
its Subsidiaries is a party, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.
     8.2. Maintenance of Office. Each of the Borrowers will maintain its chief
executive office at 100 Phoenix Drive, Ann Arbor, Michigan or at such other
place in the United States of America as such Borrower shall designate upon
written notice to the Administrative Agent, where notices, presentations and
demands to or upon such Borrower in respect of the Loan Documents to which such
Borrower is a party may be given or made.
     8.3. Records and Accounts. Each of the Borrowers will (a) keep, and cause
each of its Subsidiaries to keep, true and accurate records and books of account
in which full, true and correct entries will be made in accordance with GAAP,
(b) maintain adequate accounts and reserves for all taxes (including income
taxes), depreciation, depletion, obsolescence and amortization of its properties
and the properties of its Subsidiaries, contingencies, and other reserves, and
(c) at all times engage Ernst & Young LLP or other independent certified public
accountants satisfactory to the Administrative Agent as the independent
certified public accountants of the Borrowers and their Subsidiaries and will
not permit more than thirty (30) days to elapse between the cessation of such
firm’s (or any successor firm’s) engagement as the independent certified public
accountants of the Borrowers and their Subsidiaries and the appointment in such
capacity of a successor firm as shall be satisfactory to the Administrative
Agent.
     8.4. Financial Statements, Certificates and Information. The Borrowers will
deliver to each of the Lenders:
          (a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each Fiscal Year of the Borrowers, the consolidated
balance sheet of BGI and its Subsidiaries as at the end of such year, and the
related consolidated statement of income and consolidated statement of cash flow
for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in reasonable
detail, prepared in accordance with GAAP, and certified, without qualification
and without an expression of uncertainty as to the ability of BGI or any of its
Subsidiaries to continue as going concerns, by Ernst & Young LLP or by other
independent certified public accountants satisfactory to the Administrative
Agent;
          (b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three fiscal quarters of the
Borrowers, copies of the unaudited consolidated balance sheet of BGI and its
Subsidiaries as at the end of such quarter, and the related consolidated
statement of income and consolidated statement of cash flow for the portion of
the Borrowers’ fiscal year then elapsed, all in reasonable detail and prepared
in accordance with GAAP, together with a certification by the principal
financial or accounting officer of BGI that the information contained in such
financial statements fairly presents the financial position of BGI and its
Subsidiaries on the date thereof (subject to year-end adjustments);
          (c) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above and (i) below, and promptly on or
before the occurrence of

- 86 -

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

 

a Cash Dominion Event, a statement certified by the principal financial or
accounting officer of BGI, on behalf of the Borrowers, in substantially the form
of Exhibit D hereto (a “Compliance Certificate”) and setting forth in reasonable
detail computations evidencing compliance with the covenant contained in §10,
the calculation of the Fixed Charge Coverage Ratio, the calculation of
Consolidated EBITDA for the most recently ended period of four (4) consecutive
Fiscal Quarters of BGI and its Subsidiaries (if applicable), reconciliations to
reflect changes in GAAP since the Balance Sheet Date and setting forth the
projections and other information required pursuant to §8.4(g);
          (d) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of any of the Borrowers;
          (e) within fifteen (15) calendar days after the end of each fiscal
month or at such earlier time as the Administrative Agent may reasonably
request, a Borrowing Base Report setting forth the Aggregate Borrowing Base, the
Excess Availability (and, if different, Adjusted Excess Availability), the
computation of the Excess Availability covenant in §10.1, and, to the extent
applicable, an updated Schedule 7.24 as at the end of such fiscal month or other
date so requested by the Administrative Agent or any Co-Collateral Agent;
provided that if at any time (i) a Cash Dominion Event has occurred and is
continuing (unless and until a Cash Dominion Cure Event shall have occurred),
then within five (5) days after the end of each calendar week, a Borrowing Base
Report setting forth the Aggregate Borrowing Base, the Excess Availability (and,
if different, Adjusted Excess Availability) and the computation of the Excess
Availability covenant in §10.1, as at the end of such calendar week and, with
respect to such Borrowing Base Report delivered at the end of each fiscal month,
an updated Schedule 7.24 (if applicable) and (ii) a Default or an Event of
Default has occurred and is continuing and until such Default or Event of
Default is cured or waived pursuant to the terms and conditions of this
Agreement as determined by the Administrative Agent, then within five (5) days
after the end of each calendar week or more frequently as the Administrative
Agent or any Co-Collateral Agent may request, a Borrowing Base Report setting
forth the Aggregate Borrowing Base, the Excess Availability (and, if different,
Adjusted Excess Availability) and the computation of the Excess Availability
covenant in §10.1, as at the end of such calendar week and, with respect to such
Borrowing Base Report delivered at the end of each fiscal month, an updated
Schedule 7.24 (if applicable), in all cases, together with such other
information relating to the Collateral as the Administrative Agent or any
Co-Collateral Agent shall reasonably request, and accompanied by all supporting
detail, reports and documentation as the Administrative Agent or such
Co-Collateral Agent shall reasonably request;
          (f) contemporaneously with any delivery made in connection with clause
(e) of this §8.4, (i) an Accounts Receivable report broken down by each credit
card processor (or other account debtor if Eligible Corporate Sales Receivables
are then included in the Aggregate Borrowing Base) and (ii) an inventory stock
ledger report with respect to any Accounts Receivable and inventory included in
the Aggregate Borrowing Base;
          (g) within thirty (30) days after the end of each Fiscal Year, and
from time to time upon request of the Administrative Agent, monthly projections
consisting of balance sheets, income statements, cash flow statements and
availability reports for the upcoming Fiscal Year of BGI and its Subsidiaries in
substantially the same form as, and updating, those projections delivered to the
Lenders and referred to in §7.4.3 or, if applicable,

- 87 -

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

 

updating any later such projections delivered in response to a request pursuant
to this §8.4(g);
          (h) on or before each anniversary of the Effective Date, each Borrower
or Guarantor shall deliver to the Co-Collateral Agents a certificate, in
substantially the form attached to the Security Agreement as Exhibit A, executed
by an Authorized Officer of such Person (A) certifying that there has been no
change in any information provided in the perfection certificate delivered in
connection with the Security Agreement since the date on which such perfection
certificate was signed by such Person (or most recent updated pursuant to this
§8.4(h)) or (B) attaching an updated perfection certificate for such Person
certified to be true and correct as of the date thereof;
          (i) as soon as practicable, but in any event not later than thirty
(30) days after the end of each fiscal month of the Borrowers, copies of the
unaudited consolidated balance sheet of BGI and its Subsidiaries as at the end
of such month, and the related consolidated statement of income and consolidated
statement of cash flow for the portion of the Borrowers’ fiscal year then
elapsed, all in reasonable detail and prepared in accordance with GAAP, together
with a certification by the principal financial or accounting officer of BGI
that the information contained in such financial statements fairly presents the
financial position of BGI and its Subsidiaries on the date thereof (subject to
year-end adjustments);
          (j) from time to time such other financial data and information
(including accountants, management letters) as the Administrative Agent or any
Lender may reasonably request; and
          (k) as and when required, all information set forth in §5.1 of each
applicable Intellectual Property Security Agreement.
Documents required to be delivered pursuant to this §8.4 (to the extent any such
documents are included in materials otherwise filed with the United States
Securities and Exchange Commission) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (i) on which the
Borrowers post such documents or delivers such documents to the Administrative
Agent for posting to the Lenders, or provides a link thereto on the Borrowers’
website on the Internet at the website address listed in §16.6; or (ii) on which
such documents are posted on the Borrowers’ behalf on an Internet or intranet
website, if any, to which each Lender, each Issuing Bank and each Agent has
access (whether a commercial, third-party website or whether sponsored by the
Administrative Agent); provided that: (i) the Borrowers shall deliver paper
copies of such documents to the Administrative Agent, any Issuing Bank or any
Lender that requests the Borrowers to deliver such paper copies until a written
request to cease delivering paper copies is given by the Administrative Agent,
such Issuing Bank or such Lender and (ii) the Borrowers shall notify the
Administrative Agent, the Issuing Banks and each Lender (by telecopier or
electronic mail) of the posting of any such documents and provide to the
Administrative Agent by electronic mail electronic versions (i.e., soft copies)
of such documents. Notwithstanding anything contained herein, in every instance
the Borrowers shall be required to provide paper copies of the Compliance
Certificates required by §8.4(c) to the Administrative Agent. Except for such
Compliance Certificates, the Administrative Agent shall have no obligation to
request the delivery or to maintain copies of the documents referred to above,
and in any event shall have no responsibility to monitor compliance by the
Borrowers with any such request for delivery, and each Lender and Issuing Bank
shall be solely responsible for requesting delivery to it or maintaining its
copies of such documents.

- 88 -

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

 

     8.5. Notices.
          8.5.1. Defaults. The Borrowers will promptly notify the Administrative
Agent in writing of the occurrence of any Default or Event of Default, together
with a reasonably detailed description thereof, and the actions the Borrowers
propose to take with respect thereto. If any Person shall give any notice or
take any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other note,
evidence of indebtedness, indenture or other obligation to which or with respect
to which BGI or any of its Subsidiaries is a party or obligor, whether as
principal, guarantor, surety or otherwise, the Borrowers shall forthwith give
written notice thereof to the Administrative Agent describing the notice or
action and the nature of the claimed default.
          8.5.2. Environmental Events. The Borrowers will promptly give notice
to the Administrative Agent and each of the Lenders (a) of any violation of any
Environmental Law that any of the Borrowers or any of their Subsidiaries reports
in writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any Governmental Authority
and (b) upon becoming aware thereof, of any inquiry, proceeding, investigation,
or other action, including a notice from any agency of potential environmental
liability, of any Governmental Authority that could have a Material Adverse
Effect.
          8.5.3. Notice of Litigation, Judgments and Claims Against Assets. Each
of the Borrowers will, and will cause each of its Subsidiaries to, promptly give
notice to the Administrative Agent and each of the Lenders in writing, and in
any event within fifteen (15) days, of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and proceedings
affecting any of the Borrowers or any of their Subsidiaries or to which any of
the Borrowers or any of their Subsidiaries is or becomes a party involving an
uninsured claim against any of the Borrower or any of their Subsidiaries that
could reasonably be expected to have a Material Adverse Effect on any of the
Borrowers or any of their Subsidiaries and stating the nature and status of such
litigation or proceedings. The Borrowers will, and will cause each of its
Subsidiaries to, give notice to the Administrative Agent and each of the
Lenders, in writing, in form and detail satisfactory to the Administrative
Agent, within five (5) days of any judgment not covered by insurance, final or
otherwise, against the Borrowers or any of their Subsidiaries in an amount in
excess of $5,000,000. The Borrowers will, and will cause each of their
Subsidiaries to, promptly upon becoming aware thereof, notify the Administrative
Agent in writing of any setoff, claims, or other defenses to which any
Collateral or the Administrative Agent’s rights with respect to any Collateral
are subject if any such setoff, claim, or other defense would reasonably be
expected to have a Material Adverse Effect or result in a material impact on the
on the Aggregate Borrowing Base.
          8.5.4. Notice Regarding Certain Events. The Borrowers will furnish or
cause to be furnished to the Administrative Agent and the Lenders written notice
of (a) promptly after the adoption thereof, any amendment to the organizational
documents of any Borrower; and (b) promptly, the enactment or adoption of any
law which could reasonably be expected to have a Material Adverse Effect.
          8.5.5. Notices Concerning Inventory Collateral. The Borrowers shall
provide to the Administrative Agent prompt notice of (a) any physical count of
any

- 89 -

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

 

Borrower’s or any of its Subsidiaries’ inventory, together with a copy of the
summary results thereof (and such other supporting information relating thereto
as the Administrative Agent may reasonably request) certified by such Borrower
or such Subsidiary, (b) any determination by any Borrower or any of its
Subsidiaries that the inventory levels of such Borrower or such Subsidiary are
not adequate to meet the sales projections of such Borrower or such Subsidiary,
(c) details of all credit card arrangements to which any Borrower or any of it
Subsidiaries is from time to time a party, including details relating to such
Borrower’s or such Subsidiary’s compliance with the terms of payment to the
Concentration Account (as required pursuant to §8.15) of the proceeds of all
credit card charges for sales by such Borrower or such Subsidiary, and (d) any
failure of any Borrower or any of its Subsidiaries to pay rent at any location,
which failure continues for more than three days following the day on which such
rent is due and payable by such Borrower or such Subsidiary (other than any
rental payment being contested in good faith and by appropriate proceedings or
any rental payment which otherwise, by itself or in the aggregate with all other
such rental payments, would not have a Material Adverse Effect).
          8.5.6. [Reserved].
          8.5.7. Notice of Default under the Second Lien Loan Documents. The
Borrowers shall, and shall cause each of their Subsidiaries to, deliver to the
Lenders notice of the occurrence of any “Default” or “Event of Default” under
and as defined in the Second Lien Loan Documents, such delivery to be made
promptly after becoming aware of such “Default” or “Event of Default” or after
such notice or other communication is received by any such Borrower or any such
Subsidiary.
          8.5.8. [Reserved].
          8.5.9. Notices under the Pershing Square Warrant Transaction. The
Borrowers shall, and shall cause each of their Subsidiaries to, deliver to the
Lenders any notice of election to exercise or otherwise settle any of the
Pershing Square Warrants, such delivery to be made promptly after becoming aware
of any such notice.
     8.6. Legal Existence; Maintenance of Properties. Each of the Borrowers will
do or cause to be done all things necessary to preserve and keep in full force
and effect its legal existence, rights and franchises and those of its
Subsidiaries (other than Excluded Subsidiaries). It (a) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of such Borrower
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, (c) will maintain in full
force and effect all patents, trademarks, trade names, copyrights, licenses,
permits and other Intellectual Property and authorizations necessary for the
ownership and operation of its properties and business, and (d) will, and will
cause each of its Subsidiaries to, continue to engage primarily in the
businesses now conducted by them and in related businesses; provided that
nothing in this §8.6 shall prevent any of the Borrowers from discontinuing the
operation and maintenance of any of its properties or any of those of its
Subsidiaries, including any Intellectual Property, or the existence of any
Subsidiary of BGI or the conversions of any Subsidiary of BGI to a limited
liability company or limited liability partnership, if such discontinuance or
conversion is, in the judgment of such Borrower, desirable in the conduct of its
or their business and that do not in the aggregate have a Material Adverse
Effect and, with respect to the conversions of a Borrower or a Guarantor to a
limited liability company or limited liability

- 90 -

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

 

partnership, simultaneously with such conversion, such Borrower or Guarantor
shall have executed and delivered to the Administrative Agent all documentation
which the Administrative Agent reasonably determines is necessary to continue
such Borrower’s or such Guarantor’s obligations in respect of this Credit
Agreement and the Administrative Agent’s Liens in respect of the Collateral.
     8.7. Insurance. Each of the Borrowers will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent, including self-insurance to the extent customary, all as
reasonably determined by the Administrative Agent. At the request of the
Administrative Agent, BGI shall deliver from time to time a summary schedule
indicating all insurance then in force with respect to each of the Borrowers and
the Guarantors. The Borrowers shall deliver to the Administrative Agent
endorsements (x) to all “All Risk” physical damage insurance policies on all of
the Borrowers’ and Guarantors’ tangible personal property and assets and
business interruption insurance policies naming the Administrative Agent lender
loss payee, as its interest may appear and (y) to all general liability and
other liability policies naming the Administrative Agent an additional insured.
In the event the Borrowers or any of their Subsidiaries at any time or times
hereafter shall fail to obtain or maintain any of the policies or insurance
required herein or to pay any premium in whole or in part relating thereto, then
the Administrative Agent, without waiving or releasing any obligations or
resulting Default or Event of Default hereunder, may at any time or times
thereafter (but shall be under no obligation to do so) obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which the Administrative Agent deems advisable. All sums so
disbursed by the Administrative Agent shall constitute part of the Obligations,
payable as provided in this Agreement.
     8.8. Taxes. Each of the Borrowers will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its owned Real Estate, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a Lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if such Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and provided further that each of the
Borrowers and each of their Subsidiaries will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any Lien that may have attached as security therefor.
     8.9. Inspection of Properties.
          8.9.1. Generally. Each of the Borrowers shall permit the Lenders,
through the Administrative Agent or any of the Lender’s or the Administrative
Agent’s other designated representatives, to visit and inspect any of the
properties of such Borrower or any of its Subsidiaries, to examine the books of
account of such Borrower and its Subsidiaries (and to make copies thereof and
extracts therefrom), and to discuss the affairs, finances and accounts of such
Borrower and its Subsidiaries with, and to be advised as to the same by, its and
their officers, and to conduct examinations and verifications (whether by
internal commercial finance examiners, independent auditors, financial advisors
or consultants) of all components included in the Aggregate Borrowing Base, and
to provide advice and reporting for the benefit of the Administrative Agent and
the Lenders, all at such reasonable times and intervals as the Administrative
Agent or any

- 91 -

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

 

Lender may reasonably request. At least one time in each Fiscal Year, and more
frequently upon the request of the Administrative Agent if an Event of Default
has occurred and is continuing, the Borrowers will obtain and deliver to the
Administrative Agent a physical count of the inventory included in the
Collateral (it being understood that the Borrowers may not perform a physical
count of the inventory included in the Collateral at any store that has been
opened for less than one (1) year), in form and substance satisfactory to the
Administrative Agent. Such physical counts of the inventory included in the
Collateral shall be conducted at the Borrowers’ expense. The Administrative
Agent may, at the Borrowers’ expense, participate in or observe any physical
count of inventory included in the Collateral. The Borrowers shall provide the
Administrative Agent with copies of any summary reports or other documents
produced by the Borrowers or their agents in connection with any physical counts
of the inventory included in the Collateral.
          8.9.2. Collateral Reports. The Borrowers will cooperate with the
Administrative Agent in the Administrative Agent’s obtaining, a report of an
independent collateral auditor satisfactory to the Administrative Agent (which
may be affiliated with one of the Lenders) with respect to the Accounts
Receivable and inventory components included in the Aggregate Borrowing Base,
which report shall indicate whether or not the information set forth in the
Borrowing Base Report most recently delivered is accurate and complete in all
material respects based upon a review by such auditors of such Accounts
Receivable (including verification with respect to the amount, aging, identity
and credit of the respective account debtors and the billing practices of the
Borrowers or its applicable Subsidiary) and inventory (including verification as
to the value, location and respective types). Such collateral value reports
shall be conducted at the Borrowers’ expense no more frequently than two
(2) times during each Fiscal Year (or up to three (3) times in each Fiscal Year
in the event that at any time during such Fiscal Year Excess Availability (or,
if in effect, Adjusted Excess Availability) is less than the greater of
(i) twenty-five percent (25%) of the lesser of (A) the Aggregate Borrowing Base
and (B) the Total Commitment and (ii) $90,000,000), unless an Event of Default
has occurred and is continuing, in which event additional collateral value
reports requested by the Administrative Agent shall also be conducted and made
at the expense of the Borrowers. In addition to the collateral value reports
required to be obtained at the Borrowers’ expense under this §8.9.2, at times
when no Event of Default has occurred and is continuing, if the Administrative
Agent so elects to obtain one or more such additional reports, the Borrowers
will cooperate with the Administrative Agent in the Administrative Agent’s
obtaining such reports of an independent collateral auditor under this §8.9.2
and such additional reports shall be conducted at the Administrative Agent’s
expense.
          8.9.3. Appraisals. The Borrowers will obtain and deliver to the
Administrative Agent and the Co-Collateral Agents appraisal reports in form and
substance and from appraisers satisfactory to the Administrative Agent, stating
the then current fair market, orderly liquidation and forced liquidation values
of all or any portion of the inventory owned by the Borrowers and their
Subsidiaries. Such appraisals shall be conducted at the Borrowers’ expense no
less frequently than three (3) times during each Fiscal Year; provided that at
any time after the payment in full of the Indebtedness under the Second Lien
Loan Facility, such appraisals shall be conducted at the Borrowers’ expense no
more frequently than two (2) times during each Fiscal Year (or up to three
(3) times in each Fiscal Year in the event that Excess Availability is less than
the greater of (i) twenty-five percent (25%) of the lesser of (A) the Aggregate
Borrowing Base and (B) the Total

- 92 -

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

 

Commitment and (ii) $90,000,000), unless, in either case, an Event of Default
has occurred and is continuing, in which event additional appraisals requested
by the Administrative Agent and/or any Co-Collateral Agent shall also be
conducted and made at the expense of the Borrowers. In addition to the appraisal
reports required to be obtained at the Borrowers’ expense under this §8.9.3, at
times when no Event of Default has occurred and is continuing, if the
Administrative Agent so elects to obtain one or more such additional reports,
the Borrowers will cooperate with the Administrative Agent in the Administrative
Agent’s obtaining such reports of an appraiser under this §8.9.3 and such
additional reports shall be conducted at the Administrative Agent’s expense.
     8.10. Compliance with Laws, Contracts, Licenses, and Permits. Each of the
Borrowers will, and will cause each of its Subsidiaries to, comply with (a) the
applicable Laws and regulations wherever its business is conducted, including
all Environmental Laws, (b) the provisions of its Governing Documents, (c) all
agreements and instruments by which it or any of its properties may be bound and
(d) all applicable decrees, orders, and judgments, where, with respect to
clauses (a), (c) and (d) only, failure to so comply could have a Material
Adverse Effect. If any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become necessary
or required in order that any of the Borrowers or any of their Subsidiaries may
fulfill any of its obligations hereunder or any of the other Loan Documents to
which such Borrower or such Subsidiary is a party, such Borrower will, or (as
the case may be) will cause such Subsidiary to, immediately take or cause to be
taken all reasonable steps within the power of such Borrower or such Subsidiary
to obtain such authorization, consent, approval, permit or license and furnish
the Administrative Agent and the Lenders with evidence thereof.
     8.11. Employee Benefit Plans. The Borrowers will (a) promptly upon filing
the same with the Department of Labor or Internal Revenue Service upon request
of the Administrative Agent, furnish to the Administrative Agent a copy of the
most recent actuarial statement required to be submitted under §103(d) of ERISA
and Annual Report, Form 5500, with all required attachments, in respect of each
Guaranteed Pension Plan, (b) promptly upon receipt or dispatch, furnish to the
Administrative Agent any notice, report or demand sent or received in respect of
a Guaranteed Pension Plan under §§302, 4041, 4042, 4043, 4063, 4065, 4066 and
4068 of ERISA, or in respect of a Multiemployer Plan, under §§4041A, 4202, 4219,
4242, or 4245 of ERISA and (c) promptly furnish to the Administrative Agent a
copy of all actuarial statements required to be submitted under all Applicable
Pension Legislation.
     8.12. Use of Proceeds. The Borrowers will use the proceeds of the Loans and
obtain Letters of Credit solely for the purposes set forth in §7.16.1.
     8.13. Stock Collateral.
          (a) BGP (UK) will cause (i) 14,742 shares of the Capital Stock which
it holds in Paperchase (which constitutes 14.742% of the issued and outstanding
voting Capital Stock of Paperchase) and (ii) 44,980,000 shares of the Capital
Stock which it holds in Borders Superstores (which constitutes 65% of the issued
and outstanding voting Capital Stock of Borders Superstores) (or, in each case,
such greater percentage that, due to a Change in Law, (1) could not reasonably
be expected to cause the undistributed earnings of such Foreign Subsidiary as
determined for U.S. federal income tax purposes to be treated as a deemed
dividend to such Foreign Subsidiary’s U.S. parent and (2) could not reasonably
be expected to cause any materially adverse tax consequences), and BGI will
cause all shares of Capital Stock it or its Subsidiaries own in Borders Direct
and Kobo to be subject at all times to (x) a first priority, perfected Lien in
favor of the Second Lien Agent for the benefit of the Second Lien Secured
Parties, and (y) a second priority,

- 93 -

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

 

perfected Lien in favor of the Administrative Agent for the benefit of the
Secured Parties, in each case pursuant to the terms and conditions of the Loan
Documents and the Second Lien Loan Documents, as applicable, or other security
documents, subject to the Intercreditor Agreement, as the Administrative Agent
shall reasonably request.
          (b) Each Borrower and Guarantor will cause (i) 100% of the issued and
outstanding Capital Stock of each of its Domestic Subsidiaries (other than any
Excluded Subsidiaries), (ii) all Capital Stock owned by any Borrower or any
Guarantor in Kobo and (iii) 65% (or such greater percentage that, due to a
Change in Law, (1) could not reasonably be expected to cause the undistributed
earnings of such Foreign Subsidiary as determined for U.S. federal income tax
purposes to be treated as a deemed dividend to such Foreign Subsidiary’s U.S.
parent and (2) could not reasonably be expected to cause any materially adverse
tax consequences) in the aggregate of the issued and outstanding voting Capital
Stock of its Foreign Subsidiaries (other than any Excluded Subsidiaries), to be
subject at all times to (A) a first priority (except as provided in §8.13(a)
above), perfected Lien in favor of the Administrative Agent for the benefit of
the Secured Parties, and (B) a second priority (except as provided in §8.13(a)
above), perfected Lien in favor of the Second Lien Agent for the benefit of the
Second Lien Secured Parties, in each case pursuant to the terms and conditions
of the Loan Documents and the Second Lien Loan Documents, as applicable, or
other security documents, subject to the Intercreditor Agreement, as the
Administrative Agent shall reasonably request.
     8.14. Future Subsidiaries. At the time that any Borrower or any Guarantor
forms any direct or indirect Subsidiary or acquires any direct or indirect
Subsidiary after the Effective Date, such Borrower or such Guarantor shall
promptly, but in any event within 30 days after the formation or acquisition of
such Subsidiary: (a) notify the Administrative Agent of such formation or
acquisition, (b) cause any such new Subsidiary (other than a Foreign Subsidiary
if the joinder of such Foreign Subsidiary could reasonably be expected to cause
the undistributed earnings of such Foreign Subsidiary as determined for U.S.
federal income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary’s U.S. parent and (2) could reasonably be expected to cause any
materially adverse tax consequences) to provide to the Administrative Agent a
Joinder Agreement, joinder agreements to the Security Documents (provided that
the Capital Stock of such Subsidiary shall be pledged to the extent required by
the terms of §8.13 as if such Subsidiary had existed on the Effective Date) and
a joinder agreement to the Intercreditor Agreement, together with such other
documents, certificates, and instruments as the Administrative Agent may
request, including appropriate financing statements, all in form and substance
satisfactory to the Administrative Agent (including being sufficient to grant
the Administrative Agent a first priority Lien, or second priority Lien, as the
case may be (in each case subject to Permitted Liens) in and to the assets of
such newly formed or acquired Subsidiary), and (c) provide to the Administrative
Agent all other documentation, including one or more opinions of counsel
satisfactory to the Administrative Agent, which in its opinion is appropriate
with respect to the execution and delivery of the applicable documentation
referred to above. Any document, agreement, or instrument executed or issued
pursuant to this §8.14 shall constitute a Loan Document.
     8.15. Bank Accounts, Credit Cards and Purchase Cards.
          8.15.1. General. (a) On or prior to the Effective Date, each of the
Borrowers will, and will cause each of the Guarantors to, establish a depository
account (the “Concentration Account”) under the control of the Administrative
Agent for the benefit of the Secured Parties and the Agents, in the name of the
applicable Borrower or Guarantor, as the case may be, (b) at all times after the
Effective Date, cause all cash proceeds of the Collateral (except for Second
Lien Priority Collateral (which shall be

- 94 -

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

 

deposited directly into the Second Lien Priority Account to the extent it has
been established)) to be deposited only into local depository accounts (“Local
Accounts”), or concentration depository accounts with financial institutions
which have entered into agency account agreements and, if applicable, lock box
agreements (collectively, as the same may be amended from time to time, the
“Agency Account Agreements”), in form and substance satisfactory to the
Administrative Agent (such concentration depository accounts being referred to
collectively as “Interim Concentration Accounts”) or the Concentration Account,
(c) on or prior to the Effective Date, each of the Borrowers will, and will
cause each of the Guarantors to, provide the Administrative Agent with executed
and undated notices to all depository institutions with Local Accounts directing
such depository institutions to cause all funds (other than those amounts paid
to the Borrowers’ operating account or Local Accounts referred to in this
§8.15.1, clause (b)) held in each such Local Account to be transferred no less
frequently than once each day to, and only to, an Interim Concentration Account
or the Concentration Account, it being understood that the Administrative Agent
will not deliver any such notices to such depository institutions until a Cash
Dominion Event has occurred and is continuing (unless and until a Cash Dominion
Cure Event shall have occurred) and only then to the extent permitted by the
Intercreditor Agreement, (d) on or prior to the Effective Date, each of the
Borrowers will, and will cause each of the Guarantors to, provide the
Administrative Agent with executed and undated notices to all depository
institutions with Interim Concentration Accounts directing such depository
institutions to cause all funds of the Borrowers and the Guarantors held in such
Interim Concentration Accounts to be transferred daily to, and only to, the
Concentration Account, it being understood that the Administrative Agent will
not deliver any such notices to such depository institutions until a Cash
Dominion Event has occurred and is continuing (unless and until a Cash Dominion
Cure Event shall have occurred) and only then to the extent permitted by the
Intercreditor Agreement, and (e) at all times after the Effective Date ensure
that immediately upon any Borrower’s or any of its Subsidiaries’ receipt of any
funds constituting cash proceeds of any Collateral (other than Second Lien
Priority Collateral (which shall be deposited directly into the Second Lien
Priority Account to the extent it has been established)), all such amounts shall
have been deposited in a Local Account, an Interim Concentration Account or the
Concentration Account. The Borrowers shall not enter into any agreement with any
credit card processors unless contemporaneously therewith, a Credit Card
Notification, in form and substance satisfactory to the Administrative Agent, is
executed and delivered to the Administrative Agent. The Borrowers shall each
cause each of their credit card processors to remit all proceeds of all credit
card charges to a Concentration Account. The Administrative Agent agrees to
deliver such documents and to take such steps, at the Borrowers’ sole cost and
expense, as are reasonably requested by the Borrowers to evidence the occurrence
of any Cash Dominion Cure Event. The Borrowers shall not, and shall not permit
any of their Subsidiaries to, enter into any Agency Account Agreement (including
any deposit or securities account control agreements) in favor of the Second
Lien Agent and/or the Second Lien Secured Parties without such Agency Account
Agreement also being granted jointly in favor the Administrative Agent and/or
the Secured Parties; provided, however, in the event that a financial
institution will not permit both the Administrative Agent and the Second Lien
Agent to obtain control of the Second Lien Priority Account, the Second Lien
Priority Account shall be established under the sole control of the Second Lien
Agent acting for the benefit of (x) the Second Lien Secured Parties and (y) the
Administrative Agent, for the benefit of the Secured Parties, for purposes of
perfecting the Administrative Agent’s and the Secured Parties’ security
interests in the Second Lien Priority Account.

- 95 -

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

 

          8.15.2. Acknowledgment of Application. If at any time a Cash Dominion
Event has occurred and is continuing (unless and until a Cash Dominion Cure
Event shall have occurred), each Borrower hereby agrees that all amounts
received in the Concentration Account will be the sole and exclusive property of
the Administrative Agent and the Second Lien Agent, to be applied in accordance
with the Intercreditor Agreement, this Credit Agreement and the Second Lien Loan
Agreement, as applicable.
          8.15.3. Purchase Cards. The Borrowers and the Guarantors shall not
permit their outstanding liabilities and obligations on account of any purchase
cards to exceed $12,000,000 at any time.
     8.16. Landlord and Mortgagee Agreements. If, after the Effective Date, the
Borrowers or any of the Guarantors acquires or leases any distribution centers
used as a warehouse facility containing any Collateral, the Borrowers shall, or
shall cause such Guarantor to, use commercially reasonably efforts to deliver to
the Administrative Agent a landlord or mortgagee waiver and access agreement
executed by the landlord or mortgagee, as applicable, of any such distribution
center, in each case in form and substance satisfactory to the Administrative
Agent. Each Borrower shall continue to use its commercially reasonable efforts
to provide to the Administrative Agent a landlord or mortgagee waiver and access
agreement executed by the landlord or mortgagee of any distribution center
listed on Schedule 11.21, in each case in form and substance satisfactory to the
Administrative Agent, which have not been provided to the Administrative Agent
pursuant to §11.21; provided that, with respect to any distribution center for
which such a landlord or mortgagee waiver and access agreement has not been so
delivered, the Administrative Agent may, in its reasonable commercial judgment,
implement a reserve against the Aggregate Borrowing Base.
     8.17. Further Assurances. Each of the Borrowers will, and will cause each
of its Subsidiaries to, cooperate with the Lenders and the Administrative Agent
and execute such further instruments and documents as the Lenders or the
Administrative Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Credit Agreement and the other Loan
Documents.
     8.18. Permitted Restructuring Transactions. Notwithstanding the foregoing
Article VIII, the provisions of this Article VIII shall not restrict the ability
of the Borrowers and their Subsidiaries from consummating any Permitted
Restructuring Transaction made in accordance with Schedule 1.01A and permitted
under §9.5.2(d)(ii).
     8.19. Intellectual Property. Upon the satisfaction of the IP Subordination
Conditions, the Borrowers and the Guarantors shall promptly cause (a) the Second
Lien Agent and the Second Lien Secured Parties to subordinate their first
priority security interest in the Intellectual Property to the Administrative
Agent and (b) the Administrative Agent to have a first priority security
interest in the Intellectual Property subject to Permitted Liens having priority
by operation of applicable Law.
9. CERTAIN NEGATIVE COVENANTS.
     Each of the Borrowers jointly and severally covenants and agrees that, so
long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any obligation to make any Loans or any Issuing
Bank has any obligations to issue, extend or renew any Letters of Credit:
     9.1. Restrictions on Indebtedness. None of the Borrowers will, nor will
permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:

- 96 -

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

 

          (a) Indebtedness to the Lenders, the Agents and the Issuing Banks
arising under any of the Loan Documents;
          (b) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
          (c) Indebtedness incurred in connection with the acquisition after the
Closing Date of any Property, other than Intellectual Property (and in any event
not more than ninety (90) days from the date of such acquisition), by such
Borrower or such Subsidiary as contemplated by §9.2(x);
          (d) obligations under or guaranties of Capitalized Leases;
          (e) Indebtedness in respect of Hedging Agreements entered into for
hedging purposes only and not for speculation; provided that nothing in this
§9.1(e) shall be deemed to prohibit equity hedging arrangements that constitute
Restricted Payments permitted pursuant to §9.4;
          (f) Indebtedness existing on the Effective Date and listed and
described on Schedule 9.1 hereto including any extensions or refinancings
thereof on substantially similar terms as the Indebtedness being refinanced and
provided there is no increase in the amount thereof;
          (g) unsecured Indebtedness of any of BGI’s Subsidiaries to, or in
respect of Obligations of, BGI or another Subsidiary of BGI consisting of
intercompany loans and, if no Default or Event of Default shall have occurred
and be continuing at the time such Indebtedness is incurred, any other
Investments;
          (h) unsecured Indebtedness of BGI to, or in respect of obligations of,
a Subsidiary of BGI consisting of intercompany loans and, if no Default or Event
of Default shall have occurred and be continuing at the time such Indebtedness
is incurred, any other Investments;
          (i) Indebtedness in an aggregate principal amount not to exceed
$5,000,000 at any time extended by insurance or financing companies (or their
agents or brokers) solely for the purpose of financing insurance premiums owing
to such parties;
          (j) Indebtedness which may be deemed to exist pursuant to any
performance, surety, statutory, appeal or similar obligations incurred in the
ordinary course of business;
          (k) Indebtedness of BGI and Borders pursuant to the Second Lien Loan
Facility, in an aggregate principal amount not to exceed $90,000,000 at any time
(excluding any interest that has been capitalized and added to such principal
amount), including any extensions or refinancings thereof on substantially
similar terms as the Indebtedness being refinanced (and as otherwise permitted
hereunder, including, without limitation, pursuant to §9.16) as long as there is
no increase in the amount thereof (other than any interest that has been
capitalized and added to such amount); provided that such Indebtedness is, at
all times and in all respects, subject to the Intercreditor Agreement; and

- 97 -

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

 

          (l) other Indebtedness of BGI in an aggregate principal amount not to
exceed $160,000,000; provided that (i) at the time of incurrence of such
Indebtedness, no Default or Event of Default has occurred and is continuing or
would result therefrom, (ii) to the extent such Indebtedness is secured, the
Administrative Agent shall have a first priority (or, in the case of the Second
Lien Priority Collateral, second priority, subject only to the Second Lien
Agent’s and Second Lien Secured Parties’ first priority security interest in the
Second Lien Priority Collateral) security interest on the assets securing such
Indebtedness and (iii) such Indebtedness is, at all times and in all respects,
subject to an intercreditor agreement (A) in form and substance substantially
similar to, and on terms no less favorable to the Lenders than as set forth in,
the Intercreditor Agreement, and otherwise satisfactory to the Administrative
Agent or (B) in form and substance satisfactory to the Administrative Agent and
the Required Lenders; provided, however, that any such Indebtedness incurred by
Paperchase shall not exceed an amount equal to the dollar equivalent of
9,000,000 pounds sterling in the aggregate at any time.
     9.2. Restrictions on Liens. None of the Borrowers will, nor will permit any
of its Subsidiaries to, (a) create or incur or suffer to be created or incurred
or to exist any Lien upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits therefrom;
(b) transfer any of such property or assets or the income or profits therefrom
for the purpose of subjecting the same to the payment of Indebtedness or
performance of any other obligation in priority to payment of its general
creditors; (c) acquire, or agree to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (d) suffer to exist for a period of more than thirty
(30) days after the same shall have been incurred any Indebtedness or claim or
demand against it that if unpaid might by law or upon bankruptcy or insolvency,
or otherwise, be given any priority whatsoever over its general creditors; or
(e) sell, assign, pledge or otherwise transfer any “receivables” as defined in
clause (g) of the definition of the term “Indebtedness,” with or without
recourse; provided that any Borrower or any of its Subsidiaries may create or
incur or suffer to be created or incurred or to exist:
               (i) Liens on the Collateral in favor of the Administrative Agent
securing the Obligations;
               (ii) Liens in favor of such Borrower on all or part of the assets
of Subsidiaries of such Borrower securing Indebtedness owing by Subsidiaries of
such Borrower to such Borrower;
               (iii) Liens to secure taxes, assessments and other government
charges in respect of obligations and Liens to secure claims for labor, material
or supplies, in each cash in respect of obligations not overdue or which are
being contested in good faith and by appropriate proceedings and for which such
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto;
               (iv) deposits or pledges made in connection with, or to secure
payment of, workmen’s compensation, general liability, unemployment or other
insurance, old age pensions or other social security obligations;
               (v) Liens on properties in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which such Borrower
or such Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings

- 98 -

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

 

for review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
               (vi) Liens of carriers, warehousemen, mechanics and materialmen,
and other like Liens, securing obligations incurred in the ordinary course of
business, in respect of obligations not overdue or which in the aggregate do not
have a Material Adverse Effect;
               (vii) encumbrances on Real Estate consisting of easements, rights
of way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord’s or lessor’s liens
and other minor Liens, provided that none of such Liens (A) interferes
materially with the use of the property affected in the ordinary conduct of the
business of the Borrowers and their Subsidiaries, and (B) individually or in the
aggregate have a Material Adverse Effect;
               (viii) pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than for the
repayment of Indebtedness) or leases, not in excess of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course of business;
               (ix) Liens existing on the Effective Date and listed on Schedule
9.2 hereto, provided that the principal amount secured thereby is not thereafter
increased and no additional assets become subject to such Lien;
               (x) purchase money security interests in or purchase money
mortgages on Property (other than Inventory and Intellectual Property) acquired
after the Closing Date to secure purchase money Indebtedness of the type and
amount permitted by §9.1(c), incurred in connection with the acquisition of such
Property and in any event not more than ninety (90) days from the date of such
acquisition, which security interests or mortgages cover only the Property so
acquired;
               (xi) Liens in respect of the interests of lessors under
Capitalized Leases permitted under this Credit Agreement securing obligations of
BGI or its Subsidiaries to the lessor under such Capitalized Leases;
               (xii) Liens granted to the Agents, the Lenders and the Issuing
Banks pursuant to §16.1 hereof;
               (xiii) Liens (x) in favor of credit card issuers and/or
processors securing standard fees due by a Borrower or its Subsidiaries in the
ordinary course, which fees are within the general parameters customary in the
credit card processing industry and (y) in favor of banking institutions
securing standard fees due by a Borrower or its Subsidiaries in the ordinary
course in connection with deposit and other bank accounts held at such banking
institution, which fees are within the general parameters customary in the
banking industry;
               (xiv) Liens on assets of BGI and its Subsidiaries (other than
Collateral) not otherwise permitted by clauses (i) through (xiii) above, so long
as

- 99 -

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

 

any Indebtedness secured thereby is permitted under the terms of §9.1 and the
aggregate fair market value of all property secured by such Liens does not at
any time exceed $5,000,000;
               (xv) Liens securing Indebtedness permitted under, and subject to,
§9.1(k); and
               (xvi) Liens securing Indebtedness permitted under §9.1(l) and
granted in accordance with, and subject to, §9.1(l).
     9.3. Restrictions on Investments. None of the Borrowers will, nor will
permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in or by:
          (a) cash equivalents or short-term marketable securities;
          (b) intercompany Indebtedness permitted by §9.1(g);
          (c) Investments existing on the Effective Date and listed on Schedule
9.3 hereto;
          (d) Investments consisting of (1) loans and advances to employees
(i) for moving, entertainment, travel and other similar expenses in the ordinary
course of business, (ii) for any other purpose, with such Investments under this
clause (ii) not to exceed (x) $3,000,000 in the aggregate principal amount at
any time outstanding and (y) $1,000,000 in the aggregate principal amount at any
time outstanding to any single employee and (2) amounts held in accounts under
deferred compensation plans of the Borrowers where investments are directed by
employees;
          (e) trade credit extended on usual and customary terms in the ordinary
course of business;
          (f) (i) Investments by any Borrower or any other Guarantor in any
other Borrower or other Guarantor or any Subsidiary of BGI in BGI and (ii) to
the extent not otherwise permitted by clause (i) hereof, Investments by BGI or
any Borrower or any Guarantor in any Subsidiary of BGI which is not a Borrower
or a Guarantor or by any Subsidiary of BGI which is not a Borrower or Guarantor
in another Subsidiary of BGI which is not a Borrower or Guarantor; provided that
(A) no Default or Event of Default has occurred and is continuing or would
result therefrom, and (B) such Investments or series of related Investments
shall not exceed $3,000,000 in the aggregate;
          (g) Acquisitions; provided that (i) no Default or Event of Default has
occurred and is continuing or would result therefrom, and (ii) such Acquisition
is permitted under §9.6;
          (h) guarantees of any obligations of landlords of a Borrower to the
extent that the obligations relate to funds arranged by a Borrower and used to
finance or refinance any stores of a Borrower and such funds are intended to be
repaid through lease payments of a Borrower;

- 100 -

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

 

          (i) Investments in respect of Hedging Agreements entered into for
hedging purposes only and not for speculation; provided that nothing in this
§9.3(i) shall be deemed to prohibit equity hedging arrangements that constitute
Restricted Payments permitted pursuant to §9.4;
          (j) Investments constituting guarantees by BGI and its Subsidiaries
under the Second Lien Loan Facility;
          (k) other Investments not exceeding $2,000,000 in the aggregate during
the term of this Agreement; provided that no Default or Event of Default has
occurred and is continuing or would result therefrom;
          (l) guaranties permitted by §9.1; and
          (m) Investments (other than those Investments set forth in clauses
(a) through (l) above); provided that (i) no Default or Event of Default has
occurred and is continuing or would result therefrom, (ii) BGI delivers to the
Lenders at least three (3) Business Days before the date on which it or any of
its Subsidiaries agrees to or consummates such Investment a certificate of the
principal financial or accounting officer of the Borrowers certifying as
accurate and complete the monthly pro forma financial projections attached
thereto and demonstrating (x) immediately before and after giving effect to such
Investment and on a projected basis for the twelve (12) months after giving
effect to such Investment, Excess Availability would be greater than twenty-five
percent (25%) of the lesser of (A) the Aggregate Borrowing Base and (B) the
Total Commitment and (y) the pro forma Fixed Charge Coverage Ratio for the
twelve (12) month period then ended is greater than 1.20:1.00, in form and
substance satisfactory to the Administrative Agent, based on reasonable
projections of the financial performance of the Borrowers and (iii) BGI shall
deliver a certificate of an Authorized Officer of the Borrowers dated as of the
date of such Investment as to the solvency of BGI and its Subsidiaries on a
consolidated basis following the consummation of such Investment and in form and
substance satisfactory to the Administrative Agent.
     9.4. Restricted Payments. None of the Borrowers will, nor will permit any
of its Subsidiaries to, make any Restricted Payments except that:
          (a) BGI may engage in stock splits (including reverse stock splits);
          (b) Subsidiaries may make Distributions to (i) BGI, (ii) a
Wholly-owned Subsidiary of BGI or (iii) employees of a Wholly-owned Subsidiary
in respect of such Wholly-owned Subsidiary’s non-voting stock owned by such
employees; and
          (c) BGI or any of its Subsidiaries may make other Restricted Payments;
provided that (i) no Default or Event of Default has occurred and is continuing
or would result therefrom, (ii) BGI shall deliver to the Lenders on or before
the date such Restricted Payment is to be made a certificate of the principal
financial or accounting officer of BGI, on behalf of the Borrowers, certifying
as accurate and complete the monthly pro forma financial projections attached
thereto and demonstrating after giving effect to such Restricted Payment
(x) immediately before and after giving effect to such Restricted Payment and on
a projected basis for the twelve (12) months after giving effect to such
Restricted Payment, Excess Availability (or, if in effect, Adjusted Excess
Availability) would be greater than twenty-five percent (25%) of the lesser of
(i) the

- 101 -

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

 

Aggregate Borrowing Base and (ii) the Total Commitment and (y) the pro forma
Fixed Charge Coverage Ratio for the twelve (12) month period then ended is
greater than 1.20:1.00, in form and substance satisfactory to the Administrative
Agent, based on reasonable projections of the financial performance of the
Borrowers; and (iii) BGI shall deliver a certificate of an Authorized Officer of
the Borrowers dated as of the date of such certificate as to the solvency of the
Borrowers and their Subsidiaries following the payment of all such Restricted
Payments for such Fiscal Quarter and in form and substance satisfactory to the
Administrative Agent.
     9.5. Merger, Consolidation, Disposition of Assets and Sale Leaseback
Transactions.
          9.5.1. Mergers and Consolidations. Subject to §9.13, none of the
Borrowers will, nor will permit any of its Subsidiaries to, become a party to
any merger, demerger, amalgamation, consolidation or other corporate
reconstruction, except, so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom,
          (a) any Borrower (other than BGI) may merge or consolidate into
another Borrower;
          (b) any Subsidiary of BGI may consolidate or merge into any Borrower,
a Guarantor or any Wholly-owned Subsidiary of a Borrower, provided a Borrower, a
Guarantor or the Wholly-owned Subsidiary is the surviving corporation of such
consolidation or merger;
          (c) any Subsidiary of BGI (other than a Borrower or Guarantor) may
consolidate or merge into any other Subsidiary of BGI (other than a Borrower or
Guarantor); and
          (d) any Borrower (other than BGI) or Subsidiary of BGI may merge or
consolidate into another Person in connection with any Acquisition permitted
under, and subject to the requirements of (both before and after giving pro
forma effect to such Acquisition), §9.6; provided that (i) no Default or Event
of Default has occurred and is continuing or would result therefrom and
(ii) such Borrower or Subsidiary shall be the surviving entity of such merger or
consolidation.
          9.5.2. Disposition of Assets. None of the Borrowers will, nor will
permit any of its Subsidiaries to, become a party to or agree to or effect any
disposition of assets, other than:
          (a) the sale of inventory, the licensing of Intellectual Property in
accordance with the terms of the Intellectual Property Security Agreements and
the disposition of obsolete or excess assets, in each case in the ordinary
course of business consistent with past practices;
          (b) any sale, transfer, assignment or lease of Property (excluding any
portion of Second Lien Priority Collateral not constituting furniture, fixtures
and equipment), including without limitation any store closures, in the ordinary
course of business which are no longer necessary or required in the conduct of
such Borrower’s or Subsidiary’s business; provided that, except as provided in
§9.5.2(g) and other than store closures as a result of a lease termination in
the ordinary course with respect to such store, the

- 102 -

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

 

Borrowers and their Subsidiaries shall not close more than (i) ten percent (10%)
of the number of stores existing as of the Effective Date in any Fiscal Year and
(ii) twenty-five percent (25%) of the number of stores existing as of the
Effective Date during the term of this Agreement; provided further that the
Borrowers and their Subsidiaries shall engage a national liquidator reasonably
acceptable to the Administrative Agent to conduct such store closures (x) upon
the Administrative Agent’s reasonable request and (y) at all other times in the
event that the Required Lenders have consented to store closures in excess of
the thresholds set forth in clauses (i) and (ii) above;
          (c) any sale or transfer of any Property (excluding Second Lien
Priority Collateral) owned by any Borrower or any Subsidiary of a Borrower in
order then or thereafter to lease such Property or lease other Property that any
Borrower or any Subsidiary of a Borrower intends to use for substantially the
same purpose as the property being sold or transferred (a “sale-leaseback
transaction”) in the ordinary course of business and provided that no Default or
Event of Default shall have occurred and is continuing or would result
therefrom;
          (d) (i) any sale, transfer or lease of Property by any Borrower or any
Guarantor to any other Borrower or other Guarantor (other than Borders Direct)
and (ii) to the extent not otherwise permitted by clause (i) hereof, any
Permitted Restructuring Transaction so long as no Default or Event of Default
has occurred and is continuing or would result therefrom;
          (e) any sale, transfer or lease of Property in the ordinary course of
business which is replaced by substitute Property;
          (f) any disposition of Borders Direct pursuant to §14.11(b);
          (g) any disposition of the Small Format Stores; provided that to the
extent the Borrowers and their Subsidiaries close all the Waldenbook stores and
“Borders Express” stores, they shall engage a national liquidator reasonably
acceptable to the First Lien Agent to conduct such closures; and
          (h) other dispositions of assets that do not constitute ABL Priority
Collateral or Intellectual Property; provided that (A) the aggregate proceeds
received in respect of such dispositions during the term of this Agreement shall
not exceed $5,000,000, (B) such assets are sold or otherwise disposed of in an
arm’s length transaction for fair market value (after giving effect to all tax
benefits, if any, associated with such sale or other disposition), (C) no
Default or Event of Default exists or would result from such disposition and
(D) the proceeds of such dispositions shall be used to repay the Loans or
otherwise applied in accordance with the Intercreditor Agreement.
     9.6. Acquisitions. None of the Borrowers will, nor will permit any of its
Subsidiaries to, enter into any stock or asset acquisitions (other than the
acquisition of assets in the ordinary course of such Person’s business), or
become or agree to become a general or limited partner, joint venturer or member
in any partnership, joint venture or limited liability company, as the case may
be, other than Acquisitions which satisfy the following criteria: (i) no Default
or Event of Default has occurred and is continuing or would result therefrom,
(ii) such Acquisition shall be in substantially the same or a similar type of
business as BGI and its Subsidiaries, (iii) the Board of Directors and (if
required by applicable law) the shareholders of any Person to be acquired has
approved the terms of the Acquisition, (iv) BGI delivers to the Lenders on or
before the date on which it or any of its Subsidiaries agrees to or

- 103 -

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

 

consummates such Acquisition a certificate of the principal financial or
accounting officer of the Borrowers certifying as accurate and complete the
monthly pro forma financial projections attached thereto and demonstrating
(x) immediately before and after giving effect to such Acquisition and on a
projected basis for the twelve (12) months after giving effect to such
Acquisition, Excess Availability (or, if in effect, Adjusted Excess
Availability) would be greater than twenty percent (20%) of the lesser of
(i) the Aggregate Borrowing Base and (ii) the Total Commitment and (y) the pro
forma Fixed Charge Coverage Ratio for the twelve (12) month period then ended is
greater than 1.00:1.00, in form and substance satisfactory to the Administrative
Agent, based on reasonable projections of the financial performance of the
Borrowers, (v) the Borrowers are in compliance, both before and after giving
effect thereto, with §8.14, and (vi) BGI shall deliver a certificate of an
Authorized Officer of the Borrowers dated as of the date of such Acquisition as
to the solvency of the Borrowers and their Subsidiaries following the
consummation of such Acquisition and in form and substance satisfactory to the
Administrative Agent.
     9.7. Compliance with Environmental Laws. None of the Borrowers will, nor
will permit any of its Subsidiaries to, (a) use any of the Real Estate or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate,
(d) conduct any activity at any Real Estate or use any Real Estate in any manner
so as to cause a release (i.e., releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Hazardous Substances on, upon or into the Real
Estate or (e) otherwise conduct any activity at any Real Estate or use any Real
Estate in any manner that would violate any Environmental Law or bring such Real
Estate in violation of any Environmental Law.
     9.8. [Reserved.]
     9.9. Employee Benefit Plans. None of the Borrowers nor any ERISA Affiliate
will:
          (a) engage in any “prohibited transaction” within the meaning of §406
of ERISA or §4975 of the Code which could result in a material liability for any
of the Borrowers or any of its Subsidiaries; or
          (b) fail to make the minimum required contributions to any Guaranteed
Pension Plan under the Pension Funding Rules, whether or not such contributions
are or may be waived; or
          (c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of any of the Borrowers
or any of its Subsidiaries pursuant to the Pension Funding Rules or §4068 of
ERISA; or
          (d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to the Pension Funding Rules; or
          (e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of §4001 of ERISA) of all Guaranteed
Pension Plans exceeding the value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities and assets of any such
Plan with assets in excess of benefit liabilities; or

- 104 -

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

 

          (f) permit or take any action which would contravene any Applicable
Pension Legislation.
     9.10. Business Activities. None of the Borrowers will, nor will permit any
of its Subsidiaries to, engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business other than (a) with respect
to the Borrowers, the businesses conducted by them on the Effective Date,
substantially as conducted and operated by such Person as of such date and (b)
with respect to any Subsidiary of a Borrower, substantially as conducted and
operated by a Borrower on the Effective Date or in businesses reasonably
incidental and complementary thereto; provided that the BGI and its Subsidiaries
shall be permitted to engage in any businesses permitted to be acquired in
accordance with §9.6.
     9.11. Fiscal Year. Except as provided in §7.4.1, none of the Borrowers
will, nor will permit any of it Subsidiaries to, change its Fiscal Quarter or
change its Fiscal Year.
     9.12. Transactions with Affiliates. None of the Borrowers will, nor will
permit any of its Subsidiaries to, enter into any transaction of any kind with
any Affiliate of such Borrower or such Subsidiary, whether or not in the
ordinary course of business, other than on fair and reasonable terms no less
favorable to such Borrower or such Subsidiary as would be obtainable by such
Borrower or such Subsidiary at the time in a comparable arm’s length transaction
with a Person other than an Affiliate; provided that (a) transactions between or
among any Borrower and any Guarantor not otherwise prohibited hereunder shall be
permitted, (b) transactions with Affiliates for such Affiliates’ services as
employees, officers and directors shall be permitted, and (c) transactions with
respect to which the consideration to be paid or received by the Borrowers or
any of their Subsidiaries would be less than $3,000,000 shall be permitted with
the prior written consent of the Administrative Agent.
     9.13. Changes in Governing Documents. None of the Borrowers will, nor will
permit any of its Subsidiaries to, amend in any respect its Governing Documents
in the event such change would be adverse to the Lenders; provided that any
Borrower or any Guarantor shall be permitted to change its respective
jurisdiction of organization or formation so long as such Borrower or such
Guarantor provides the Administrative Agent with written notice not less than
thirty (30) days prior to such change; provided further that BGI may amend or
modify its Governing Documents from time to time to the extent necessary to
permit the Pershing Square Warrant Transaction and the performance of its
obligations thereunder as long as no Default or Event of Default then exists or
would arise therefrom.
     9.14. Inconsistent Agreements. None of the Borrowers will, nor will permit
any of its Subsidiaries to, enter into or permit to exist any contractual
obligation (other than this Agreement, any other Loan Document or any of the
Second Lien Loan Documents) that limits the ability (i) of any Subsidiary to
make Restricted Payments to any Borrower or any Guarantor or to otherwise
transfer property to or invest in any Borrower or any Guarantor, except for any
agreement in effect (A) on the date hereof and set forth on Schedule 9.14 or
(B) at the time any Subsidiary becomes a Subsidiary of a Borrower, so long as
such agreement was not entered into solely in contemplation of such Person
becoming a Subsidiary of such Borrower, (ii) of any Subsidiary to guarantee the
Obligations of the Borrowers under the Loan Documents or (iii) of any Borrower
or any Subsidiary to create, incur, assume or suffer to exist Liens on property
of such Person securing the Obligations under the Loan Documents; provided,
however, that this clause (iii) shall not prohibit any negative pledge incurred
or provided in favor of any holder of Indebtedness permitted under §9.1(c)
solely to the extent any such negative pledge relates to the property financed
by or the subject of such Indebtedness.
     9.15. Payments of Other Indebtedness. The Borrowers may not, and may not
permit any of their Subsidiaries to, make (a) any payment (including
prepayment), redemption or repurchase of principal (whether mandatory,
voluntary, upon conversion or otherwise) in respect of the Second Lien

- 105 -

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

 

Loan Facility other than, (i) Permitted Second Lien Loan Payments, or
(ii) unless (A) no Default or Event of Default has occurred and is continuing or
would result therefrom and (B) BGI delivers to the Lenders on or before the date
on which any Borrower makes such prepayment a certificate of the principal
financial or accounting officer of the Borrowers certifying as accurate and
complete the monthly pro forma financial projections attached thereto and
demonstrating (x) immediately before and after giving effect to such prepayment
and on a projected basis for the twelve (12) months after giving effect to such
prepayment, Excess Availability (or, if in effect, Adjusted Excess Availability)
would be greater than twenty-five percent (25%) of the lesser of (1) the
Aggregate Borrowing Base and (2) the Total Commitment and (y) the pro forma
Fixed Charge Coverage Ratio for the twelve (12) month period then ended is
greater than 1.10:1.00, in form and substance satisfactory to the Administrative
Agent, based on reasonable projections of the financial performance of the
Borrowers; provided that BGI shall not be required to satisfy the conditions set
forth in this clause (B) in the event that (I) the aggregate amount of such
prepayments does not exceed $20,000,000 and such prepayments are made with the
proceeds of any Borrower’s or any Subsidiary’s incurrence of additional
Indebtedness permitted pursuant to §9.1(l) in an aggregate amount in excess of
$20,000,000, or (II) such prepayment is made with the proceeds from the
Paperchase Sale; (b) any optional or voluntary prepayment, redemption or
repurchase of any Indebtedness ranking pari passu in right of payment with the
Obligations; or (c) any prepayment, redemption, purchase, defeasance or other
satisfaction prior to the scheduled maturity thereof in any manner, or make any
payment in violation of any subordination terms of, any Indebtedness permitted
pursuant to §9.1(l) that is contractually subordinated to the Loans.
     9.16. Amendments to Second Lien Loan Documents. The Borrowers will not, and
will not permit any of their Subsidiaries to, permit or otherwise allow any of
the terms and conditions of the Second Lien Loan Documents to be amended,
revised or waived except to the extent expressly permitted under the terms of
the Intercreditor Agreement.
     9.17. Permitted Restructuring Transactions. Notwithstanding the foregoing
Article IX, the provisions of this Article IX (other than §9.5.2(d)(ii)) shall
not restrict the ability of the Borrowers and their Subsidiaries from
consummating any Permitted Restructuring Transaction made in accordance with
Schedule 1.01A and permitted under §9.5.2(d)(ii).
     9.18. Certain Terms of the Pershing Square Transactions. Without the
written consent of the Required Lenders, the Borrowers will not, and will not
permit any of their Subsidiaries to, amend, supplement or otherwise modify any
of the Pershing Square Warrants or any documents relating thereto (as
contemplated under the Pershing Square Warrant Transaction) in any manner that
would result in a Change of Control (whether upon the exercise of the Pershing
Square Warrants or otherwise).
     9.19. Inactive Subsidiaries. BGI will not permit any of the Excluded
Subsidiaries to engage in any trade or business or own any assets or incur any
Indebtedness (other than, to the extent in existence on the Effective Date,
Indebtedness of the type described in §9.1(g)) except with the prior written
consent of the Required Lenders and on such terms as the Required Lenders shall
specify, including, but not limited to, compliance by such Persons with the
requirements set forth in §8.14.
     9.20. Maximum Cash and Cash Equivalents. So long as any Loans are
outstanding, prior to the occurrence of a Cash Dominion Event, the Borrowers
shall not permit cash or cash equivalents of the Borrowers and the Guarantors in
an aggregate amount in excess of $100,000,000 (other than (a) “store” cash, cash
held in local, non-concentration deposit accounts, cash in transit between
stores and deposit accounts and cash receipts from sales in the process of
inter-account transfers, in each case as a result of the ordinary course
operations of the Borrowers and the Guarantors, and (b) to the extent necessary
for the Borrowers and the Guarantors to satisfy in the ordinary course of their
business, the current liabilities incurred by them in the ordinary course of
their business and without acceleration of the satisfaction of

- 106 -

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

 

such current liabilities) to accumulate and be maintained in deposit accounts or
investment accounts of the Borrowers and the Guarantors. After the occurrence
and during the continuance of a Cash Dominion Event, the Borrowers shall comply
with the provisions of §8.15 hereof and maintain only such amounts, if any, in
deposit accounts or investment accounts as may be expressly permitted under said
§8.15.
10. FINANCIAL COVENANTS.
     Each of the Borrowers, jointly and severally, covenants and agrees that, so
long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any obligation to make any Loans or any Issuing
Bank has any obligation to issue, extend or renew any Letters of Credit:
     10.1. Minimum Excess Availability. At all times, the Borrowers will
maintain Excess Availability of not less than the greater of (a) ten percent
(10%) of the lesser of (i) the Aggregate Borrowing Base and (ii) the Total
Commitment and (b) $50,000,000.
11. CLOSING CONDITIONS.
     The obligations of the Lenders to make the initial Loans and of the Issuing
Banks to issue any initial Letters of Credit shall be subject to the
satisfaction of the following conditions precedent:
     11.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the
Lenders. Each Lender and the Administrative Agent shall have received a fully
executed copy of each such document.
     11.2. Certified Copies of Governing Documents. Each of the Lenders shall
have received from each of the Borrowers and the Guarantors a copy certified by
the appropriate authority of the state of formation or organization of such
Person, certified by a duly authorized officer of such Person to be true,
correct and complete on the Effective Date, of each of its Governing Documents
as in effect on such date of certification.
     11.3. Corporate or Other Action. All corporate (or other) action (including
certified copies of the board minutes and/or resolutions authorizing the
execution of the Loan Documents to which such Person is a party) necessary for
the valid execution, delivery and performance by each of the Borrowers and the
Guarantors of this Credit Agreement and the other Loan Documents to which it is
or is to become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Lenders shall have been provided to each of the
Lenders.
     11.4. Incumbency Certificate. Each of the Lenders and the Administrative
Agent shall have received from each of the Borrowers and the Guarantors an
incumbency certificate, dated as of the Effective Date, signed by a duly
authorized officer of such Borrower or such Guarantor, and giving the name and
bearing a specimen signature of each individual who shall be authorized: (a) to
sign, in the name and on behalf of such Borrower and such Guarantor, each of the
Loan Documents to which such Borrower or such Guarantor is or is to become a
party; (b) in the case of the Borrowers, to make Loan Requests and Conversion
Requests and to apply for Letters of Credit; and (c) to give notices and to take
other action on its behalf under the Loan Documents.
     11.5. UCC and Intellectual Property Search Results. The Administrative
Agent shall have received the results of Uniform Commercial Code and
Intellectual Property searches (and the equivalent

- 107 -

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

 

thereof in all applicable foreign jurisdictions), indicating no Liens other than
Permitted Liens and otherwise in form and substance satisfactory to the
Administrative Agent.
     11.6. Certificates of Insurance. The Administrative Agent shall have
received (a) a certificate of insurance and corresponding endorsements from an
independent insurance broker dated as of the Effective Date, identifying
insurers, types of insurance, insurance limits, and policy terms, and otherwise
describing the insurance and naming the Administrative Agent as an additional
insured and a loss payee and (b) certified copies of all policies evidencing
such insurance (or certificates therefore signed by the insurer or an agent
authorized to bind the insurer).
     11.7. Solvency Certificate. Each of the Lenders and the Administrative
Agent shall have received an officer’s certificate of the Borrowers dated as of
the Effective Date as to the solvency of BGI and its Subsidiaries, on a
consolidated basis, following the consummation of the transactions contemplated
herein and in form and substance satisfactory to the Lenders.
     11.8. Opinion of Counsel. Each of the Lenders, the Agents and the Issuing
Banks shall have received a favorable legal opinion addressed to the Lenders,
the Agents, and the Issuing Banks dated as of the Effective Date, in form and
substance satisfactory to the Lenders, Agents and the Issuing Banks, from:
          (a) Baker & McKenzie, counsel to the Borrowers and their Subsidiaries;
          (b) Baker & McKenzie, counsel to BGP (UK);
          (c) Thomas Carney, Esq., General Counsel to the Borrowers and their
Subsidiaries; and
          (d) local counsel to the Borrowers and their Subsidiaries, as
applicable.
     11.9. Payment of Fees. The Borrowers shall have paid to the Lenders or the
Administrative Agent, as appropriate, the Fees pursuant to §§4.6 and 5.1 and the
fees and expenses of the Administrative Agent’s Special Counsel.
     11.10. Additional Indebtedness. The Borrowers shall have received a minimum
aggregate principal amount of $75,000,000 in Indebtedness that is subject to and
permitted by §9.1(k) of this Agreement.
     11.11. Existing Credit Agreement. All amounts outstanding under the
Existing Credit Agreement shall have been reallocated, to the extent applicable,
in accordance with Schedule 1, all commitments thereunder of the Last Out
Revolving Lenders who are not parties to this Agreement shall have been
terminated and all commitments thereunder of the Existing Lenders party to this
Agreement as Revolving Lenders shall continue and be evidenced only by, and as
set forth in, this Agreement.
     11.12. Disbursement Instructions. The Administrative Agent shall have
received an initial Revolving Loan Request and disbursement instructions from
the Borrowers, indicating how the proceeds of the Loans are to be disbursed.
     11.13. Excess Availability. Each of the Lenders and the Administrative
Agent shall have received evidence that on the Effective Date, after giving
effect to the transactions contemplated hereby (including, without limitation,
after giving effect to all borrowings under the Credit Agreement and all credit
exposure), the Excess Availability shall be equal to or greater than
$125,000,000.

- 108 -

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

 

     11.14. Validity of Liens. The Security Documents shall be effective to
create in favor of the Administrative Agent a legal, valid and enforceable first
priority security interest in and Lien upon the ABL Priority Collateral (except
for Permitted Liens entitled to priority under applicable Law) and a second
priority security interest in and Lien upon the Second Lien Priority Collateral.
All filings, recordings, deliveries of instruments and other actions necessary
or desirable in the opinion of the Administrative Agent to protect and preserve
such security interests shall have been duly effected or provided for. The
Administrative Agent shall have received evidence thereof in form and substance
satisfactory to the Administrative Agent.
     11.15. Consents and Approvals. Each of the Lenders and the Administrative
Agent shall have received evidence that all consents and approvals necessary to
complete all transactions contemplated hereby have been obtained.
     11.16. Financial Condition, etc. No Material Adverse Effect, in the
judgment of the Required Lenders, shall have occurred since October 31, 2009.
     11.17. Minimum Commitments Under Extended Tranche. Lenders with a minimum
of $700,000,000 in Commitments (as defined in the Existing Credit Agreement)
have converted such Commitments into Commitments under the Extended Tranche
which mature on the Maturity Date of the Extended Tranche.
     11.18. Borrowing Base Report. Each of the Lenders shall have received from
the Borrowers the initial Borrowing Base Report (based on information relating
to the most recently ended fiscal month of the Borrowers for which such
information is available) dated as of the Effective Date.
     11.19. Inventory Summary. Each of the Lenders, the Administrative Agent and
the Co-Collateral Agents shall have received from the Borrowers the most recent
inventory summary with respect to any inventory included in the Aggregate
Borrowing Base (based on information relating to the most recently ended fiscal
month of the Borrowers for which such information is available), and the
Borrowers shall have notified the Administrative Agent in writing on the
Effective Date of any material deviation from such inventory values reflected in
such inventory summary and shall have provided the Administrative Agent with
such supplementary documentation as the Administrative Agent may reasonably
request.
     11.20. Agency Account Agreements; Accounts. The Borrowers shall have
established the Concentration Account with Bank of America, and the
Administrative Agent shall have received (a) an Agency Account Agreement
executed or agreed to in form by Bank of America, each depository institution
with an Interim Concentration Account and (b) the notices referred to in clauses
(c) and (d) of §8.15.1.
     11.21. Landlord and Mortgagee Agreements. The Borrowers shall have used
their best efforts to provide to the Administrative Agent a landlord or
mortgagee waiver and access agreement executed by the landlord or mortgagee of
any distribution center listed on Schedule 11.21, in each case in form and
substance satisfactory to the Administrative Agent.
     11.22. Credit Card Notifications. The Borrowers shall deliver to the
Administrative Agent notifications (the “Credit Card Notifications”) executed on
behalf of the Borrowers and the Guarantors to each of their credit card
processors instructing such credit card processors to remit all proceeds of all
credit card charges to a Concentration Account, which Credit Card Notifications
shall be in form and substance satisfactory to the Administrative Agent.

- 109 -

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

 

     11.23. Payoff of Pershing Square Term Loan Facility. The Administrative
Agent shall have received (a) evidence, in form and substance reasonably
satisfactory to the Administrative Agent, that the Pershing Square Term Loan
Facility has been (or concurrently with the Effective Date is being) repaid in
full in cash and the Pershing Square Term Loan Documents have been (or
concurrently with the Effective Date are being) terminated and (b) all Liens
upon any property of the Borrowers and their Subsidiaries in favor of the
lenders under the Pershing Square Term Facility shall be terminated by such
lenders immediately upon such repayment.
     11.24. Second Lien Loan Documents. The Administrative Agent shall have
received a certificate from an Authorized Officer of BGI, in form and substance
satisfactory to the Administrative Agent, attaching true, correct and complete
copies of each of the Second Lien Loan Documents.
     11.25. Financial Statements. The Administrative Agent shall have received
forecasts prepared by management of BGI of consolidated balance sheets and
statements of income or operations, cash flow statements and availability
reports of BGI and its Subsidiaries on a monthly basis for the first year
following the Effective Date, and such forecasts shall be in form and substance
satisfactory to the Administrative Agent.
     Without limiting the generality of the provisions of the last paragraph of
§14.3, for purposes of determining compliance with the conditions specified in
this §11, each Lender that has signed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Effective Date specifying its
objection thereto.
12. CONDITIONS TO ALL BORROWINGS.
     The obligations of the Lenders to make any Loan and of any Issuing Bank to
issue, extend or renew any Letter of Credit, in each case whether on or after
the Effective Date, shall also be subject to the satisfaction of the following
conditions precedent:
     12.1. Representations True; No Event of Default. Each of the
representations and warranties of each of the Borrowers and each of their
Subsidiaries contained in this Credit Agreement, the other Loan Documents or in
any document or instrument delivered pursuant to or in connection with this
Credit Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The
Administrative Agent shall have received a certificate of the Borrowers signed
by an authorized officer of the Borrowers to such effect.
     12.2. No Legal Impediment. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Lender would make it illegal for such Lender to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of each Issuing Bank would make it illegal for such
Issuing Bank to issue, extend or renew such Letter of Credit.

- 110 -

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

 

     12.3. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Lenders, the Issuing Banks and to the Administrative Agent and their
counsel, and the Lenders, the Issuing Banks, the Administrative Agent and such
counsel shall have received all information and such counterpart originals or
certified or other copies of such documents as the Administrative Agent may
reasonably request.
     12.4. Governmental Regulation. Each Lender shall have received such
statements in substance and form reasonably satisfactory to such Lender as such
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
     12.5. Revolving Credit Facility Borrowings. The following shall be true and
correct (after giving effect to all amounts requested): the Total Facility Usage
does not exceed the lesser of (i) the Total Commitment at such time or (ii) the
Aggregate Borrowing Base as then in effect.
     12.6. Excess Availability. After giving effect to all amounts requested,
Excess Availability shall not be less than the greater of (a) ten percent (10%)
of the lesser of (i) the Aggregate Borrowing Base and (ii) the Total Commitment
and (b) $50,000,000.
     12.7. Seasonal Availability Requirement. If such Loan or issuance,
extension or renewal of a Letter of Credit is to be made during the period
commencing on December 1 of each year and ending on the later of (i) January 31
of the following year and (ii) the date on which the Borrowers deliver the
financial statements calculating Consolidated EBITDA for the period ending
December 31 of such year (such period being referred to herein as the “Seasonal
Availability Period”), the Administrative Agent shall have received evidence in
form and substance satisfactory to the Administrative Agent that Excess
Availability, after giving effect to such Loan or issuance, extension or renewal
of such Letter of Credit, is not less than the sum of (x) the Incremental
Seasonal Amount plus (y) the greater of (A) ten percent (10%) of the lesser of
(A) the Aggregate Borrowing Base and (2) the Total Commitment and (B)
$50,000,000. Notwithstanding the foregoing, this §12.7 shall not apply at any
time after the payment in full of the Indebtedness under the Second Lien Loan
Facility.
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
     13.1. Events of Default and Acceleration. If any of the following events
(“Events of Default” or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, “Defaults”) shall occur:
     (a) the Borrowers shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at
the stated date of maturity or any accelerated date of maturity or at any other
date fixed for payment;
     (b) the Borrowers or any of their Subsidiaries shall fail to pay any
interest on the Loans, any Fees, or other sums due hereunder or under any of the
other Loan Documents, within three (3) days following the date upon which the
same shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
     (c) any of the Borrowers shall fail to comply with any of its covenants
contained in §§8.1, 8.4, 8.5.1, the first sentence of 8.6, 8.7, 8.12, 8.13,
8.14, 8.15, 8.17, 9

- 111 -

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

 

(other than 9.7 and 9.9) or 10 or any of the Borrowers shall fail to comply with
any of its covenants contained in §8.9 within three (3) days following notice
from either the Administrative Agent or the Second Lien Agent of its request
that a Borrower so comply;
     (d) any of the Borrowers or any of their Subsidiaries shall fail to perform
any term, covenant or agreement contained herein or in any of the other Loan
Documents (other than those specified elsewhere in this §13.1) for thirty
(30) days after written notice of such failure has been given to the Borrowers
by the Administrative Agent (such grace period to be applicable only in the
event such Default can be remedied by corrective action of the Borrowers as
determined by the Administrative Agent in its sole discretion);
     (e) any representation or warranty of any Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement (including, without limitation, any Borrowing Base Report)
shall prove to have been false in any material respect upon the date when made
or deemed to have been made or repeated;
     (f) any Borrower or any of its Subsidiaries shall fail to pay at maturity,
or within any applicable period of grace, any obligation in respect of the
Second Lien Loan Facility or any other obligation for Indebtedness with an
aggregate outstanding principal amount in excess of $10,000,000, or fail to
observe or perform any material term, covenant or agreement contained in any
agreement by which it is bound evidencing or securing the Second Lien Loan
Facility or other Indebtedness with an aggregate outstanding principal amount in
excess of $10,000,000 for such period of time as would permit (assuming the
giving of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof, or any
such holder or holders shall rescind or shall have a right to rescind the
purchase of any such obligations;
     (g) any Borrower or any of its Subsidiaries shall make an assignment for
the benefit of creditors, or admit in writing its inability to pay or generally
fail to pay its debts as they mature or become due, or shall petition or apply
for the appointment of a trustee or other custodian, liquidator, receiver or
administrator of such Borrower or any of its Subsidiaries or of any substantial
part of the assets of such Borrower or any of its Subsidiaries or shall commence
any case, application or other proceeding relating to such Borrower or any of
its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against such Borrower or any of its Subsidiaries and such Borrower or
any of its Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within forty-five (45) days following the filing thereof;
     (h) a decree or order is entered appointing any such trustee, custodian,
liquidator, receiver or administrator or adjudicating any Borrower or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of any
Borrower or any

- 112 -

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

 

Subsidiary of any Borrower in an involuntary case under federal bankruptcy laws
as now or hereafter constituted;
     (i) there shall remain in force, undischarged, unsatisfied and unstayed,
for more than sixty days, whether or not consecutive, any final judgment against
any Borrower or any of its Subsidiaries that, with other outstanding final
judgments, undischarged, against any Borrower or any of its Subsidiaries exceeds
in the aggregate $10,000,000;
     (j) if any of the Loan Documents shall be cancelled, terminated, revoked or
rescinded, in each case otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Lenders, or
any action at law, suit or in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents or contest the Administrative Agent’s
security interests and liens in any portion of the Collateral or the priority of
the Administrative Agent’s security interests and liens in any portion of the
Collateral contemplated by the Security Documents, shall be commenced by or on
behalf of any Borrower or any of its Subsidiaries party thereto or any of their
respective stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or issue a judgment, order, decree or ruling to the effect that, any one or more
of the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
     (k) any Borrower or any ERISA Affiliate incurs any liability to the PBGC or
a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount
exceeding $10,000,000, or any Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $10,000,000, or any of the
following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Event,
or a failure to make a required installment or other payment (under the Pension
Funding Rules), provided that the Administrative Agent determines in its
reasonable discretion that such event (A) could be expected to result in
liability of any Borrower or any of its Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $10,000,000 and
(B) could constitute grounds for the termination of such Guaranteed Pension Plan
by the PBGC, for the appointment by the appropriate United States District Court
of a trustee to administer such Guaranteed Pension Plan or for the imposition of
a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a
United States District Court of a trustee to administer such Guaranteed Pension
Plan; or (iii) the institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
     (l) any Borrower or any of its Subsidiaries shall be enjoined, restrained
or in any way prevented by the order of any Governmental Authority from
conducting any material part of its business and such order shall continue in
effect for more than thirty (30) days and such restraint or enjoinment or
similar restriction by any Governmental Authority would have a Material Adverse
Effect;
     (m) there shall occur the loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by any Borrower or
any of its Subsidiaries if such loss, suspension, revocation or failure to renew
would have a Material Adverse Effect;
     (n) a Change of Control shall occur;

- 113 -

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

 

     (o) if, Excess Availability shall fail to be greater than or equal to
$80,000,000 (i) at all times for a period of 30 consecutive days prior to the
termination and repayment of the Existing Tranche on the Maturity Date
applicable to the Existing Tranche, (ii) on a pro forma basis immediately after
giving effect to such termination and repayment of the Existing Tranche, or
(iii) on a projected pro forma basis based on projections provided by the
Borrowers for each of the following six months after giving effect to the
termination and repayment of the Existing Tranche; or
     (p) any Borrower or any Guarantor shall, directly or indirectly, disavow or
contest in any manner (i) the effectiveness, validity or enforceability of the
Intercreditor Agreement, (ii) that the Intercreditor Agreement exists for the
benefit of the Administrative Agent, the Lenders, the Agents, the Swingline
Lender and the Issuing Bank or (iii) that all payments of principal of or
premium and interest on the Indebtedness in respect of the Second Lien Loan
Facility, or realized from the liquidation of any property of any Borrower or
any Guarantor, shall be subject to the Intercreditor Agreement;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice in writing to the Borrowers declare all amounts owing with respect to
this Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by each of the Borrowers;
provided that in the event of any Event of Default specified in §§13.1(g) or
(h), all such amounts shall become immediately due and payable automatically and
without any requirement of notice from the Administrative Agent or any Lender.
Upon written demand by the Required Lenders after the occurrence of any Event of
Default, and automatically without the necessity of demand in the event of any
Event of Default specified in §13.1(g) or §13.1(h), the applicable Borrower(s)
shall immediately provide to the Administrative Agent cash in an amount equal to
103% of the aggregate LC Exposure to be held by the Administrative Agent as Cash
Collateral in respect of such LC Exposure.
     13.2. Termination of Commitments. If any one or more of the Events of
Default specified in §13.1(g) or §13.1(h) shall occur, any unused portion of the
credit hereunder shall forthwith terminate and each of the Lenders shall be
relieved of all further obligations to make Loans to the Borrowers and the
Issuing Banks shall be relieved of all further obligations to issue, extend or
renew Letters of Credit. If any other Event of Default shall have occurred and
be continuing, or if on any Drawdown Date or other date for issuing, extending
or renewing any Letter of Credit the conditions precedent to the making of the
Loans to be made on such Drawdown Date or (as the case may be) to issuing,
extending or renewing such Letter of Credit on such other date are not
satisfied, the Administrative Agent may and, upon the request of the Required
Lenders, shall, by notice to the Borrowers, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the Lenders shall be
relieved of all further obligations to make Loans and the Issuing Banks shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of the credit hereunder shall relieve any of the Borrowers or any
of its Subsidiaries of any of the Obligations.
     13.3. Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Administrative Agent or the
Lenders shall have accelerated the maturity of the Loans pursuant to §13.1,
(a) the Administrative Agent may, and shall, upon the request of the Required
Lenders, proceed to protect and enforce, on behalf of itself and the Lenders,
the Agents, the Swingline Lender, each Issuing Bank and the other Secured
Parties, all rights and remedies available to it,

- 114 -

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

 

the Lenders, the Agents, the Swingline Lender, each Issuing Bank and the other
Secured Parties, by suit in equity, action at law or other appropriate
proceeding, and (b) each Lender and each Issuing Bank, if owed any amount with
respect to the Loans or the Reimbursement Obligations, may, with the consent of
the Administrative Agent and the Required Lenders but not otherwise, proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding, in each case whether for the specific performance of any
covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Lender are
evidenced, including as permitted by applicable Law the obtaining of the ex
parte appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Lender. No remedy herein conferred upon any
Lender or any Agent or the holder of any Note or purchaser of any Letter of
Credit Participation is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
     13.4. Judgment Currency. If, for the purpose of obtaining judgment in any
court or obtaining an order enforcing a judgment, it becomes necessary to
convert any amount due under this Credit Agreement in Dollars (hereinafter in
this §13.4 called the “first currency”) into any other currency (hereinafter in
this §13.4 called the “second currency”), then the conversion shall be made at
the Exchange Rate at the Administrative Agent’s close of business on the
Business Day next preceding the day on which the judgment is given or (as the
case may be) the order is made. Any payment made to any Agent, any Issuing Bank
or any Lender pursuant to this Credit Agreement in the second currency shall
constitute a discharge of the obligations of the Borrowers to pay to the Agents,
the Issuing Banks and the Lenders any amount originally due to the Agents, the
Issuing Banks and the Lenders in the first currency under this Credit Agreement
only to the extent of the amount of the first currency which the Agents, the
Issuing Banks and each of the Lenders is able, on the date of the receipt by it
of such payment in any second currency, to purchase, in accordance with such
Agent’s, such Issuing Bank’s and such Lender’s normal banking procedures, with
the amount of such second currency so received. If the amount of the first
currency falls short of the amount originally due to the Agents, the Issuing
Banks and the Lenders in the first currency under this Credit Agreement, the
Borrowers hereby jointly and severally agree that they will indemnify each of
the Agents, the Issuing Banks and each of the Lenders against and save each of
the Agents, the Issuing Banks and each of the Lenders harmless from any
shortfall so arising. This indemnity shall constitute a joint and several
obligation of the Borrowers separate and independent from the other obligations
contained in this Credit Agreement, shall give rise to a separate and
independent cause of action and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum or sums in respect of
amounts due to any Agent, any Issuing Bank or any Lender under this Credit
Agreement or under any such judgment or order. Any such shortfall shall be
deemed to constitute a loss suffered by each such Agent, such Issuing Bank and
each such Lender, as the case may be, and the Borrowers shall not be entitled to
require any proof or evidence of any actual loss. The covenant contained in this
§13.4 shall survive the payment in full of all of the other obligations of the
Borrowers under this Credit Agreement.
     13.5. Distribution of Proceeds. In the event that, following the occurrence
or during the continuance of any Default or Event of Default, the Administrative
Agent or any Lender, as the case may be, receives any monies in connection with
the enforcement of its rights hereunder or under any of the other Loan
Documents, such monies shall, subject to the provisions of §§2.14 and 2.15
hereof and the Intercreditor Agreement, be distributed for application as
follows:
     (a) First, to the payment of, or (as the case may be) the reimbursement of
the Administrative Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Administrative Agent in

- 115 -

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

 

connection with the collection of such monies by the Administrative Agent, for
the exercise, protection or enforcement by the Administrative Agent of all or
any of the rights, remedies, powers and privileges of the Administrative Agent
under this Credit Agreement or any of the other Loan Documents in support of any
provision of adequate indemnity to the Administrative Agent against any taxes or
liens which by law shall have, or may have, priority over the rights of the
Administrative Agent to such monies;
     (b) Second, to pay any fees, indemnities or expense reimbursements then due
to the Administrative Agent from the Borrowers or any Guarantor pursuant to the
terms of any Loan Document (other than fees or expenses relating to Cash
Management Services or in respect of Hedging Agreements);
     (c) Third, to pay interest due in respect of all Loans, including Swingline
Loans;
     (d) Fourth, to pay or prepay principal of Swingline Loans;
     (e) Fifth, to pay or prepay principal of the Loans (other than Swingline
Loans) and Unpaid Reimbursement Obligations;
     (f) Sixth, to pay an amount to the Administrative Agent, for the ratable
benefit of the Issuing Banks, equal to 103% of all outstanding undrawn Letter of
Credit obligations to be held as Cash Collateral for such Obligations (and to
the extent not otherwise Cash Collateralized by the Borrowers pursuant to §§2.14
and 4);
     (g) Seventh, to the payment of any other Obligation due to the
Administrative Agent or any Lender by the Borrower or any Guarantor (other than
amounts relating to Cash Management Services or Hedging Agreements);
     (h) Eighth, to pay any amounts relating to (i) Cash Management Services
then due to the Lenders or their Affiliates and (ii) Hedging Agreements then due
to the Lenders or their Affiliates in respect of Hedging Agreements; provided
that such amounts relating to Hedging Agreements shall be calculated based on
the Swap Termination Value with respect to such Hedging Agreements at such time;
     (i) Ninth, upon payment and satisfaction in full or other provisions for
payment in full satisfactory to the Lenders and the Administrative Agent of all
of the Obligations, to the payment of any obligations required to be paid
pursuant to §9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the
State of New York; and
     (j) Tenth, the excess, if any, shall be returned to the Borrowers or to
such other Persons as are entitled thereto pursuant to the terms and provisions
of the Intercreditor Agreement.
     13.6. Cash Management Services and Hedge Agreements Subordinate. Each of
the Borrowers, each Guarantor, the Administrative Agent and each Lender hereby
acknowledges and agrees that (i) the Administrative Agent’s and Lenders’ claims
relating to any obligations in respect of Cash Management Services or Hedging
Obligations against any Borrower or any Guarantor in respect of the Collateral
constitute junior claims separate and apart (and of a different class) from the
senior claims of the Administrative Agent and the Lenders against such Borrower
or such Guarantor with respect to any

- 116 -

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

 

other Obligations (other than Cash Management Services and Hedging Obligations)
in respect of the Collateral and (ii) the Obligations (other than Cash
Management Services and Hedging Obligations) include (a) all interest that
accrues after the commencement of any Insolvency Proceeding involving any
Borrower or any Guarantor at the rate provided for in this Agreement governing
the same, whether or not a claim for post-petition interest is allowed in any
such Insolvency Proceeding and (b) all indemnities, fees and expenses that
accrue after the commencement of any Insolvency Proceeding involving any
Borrower or any Guarantor as provided for in this Credit Agreement, whether or
not a claim for post-petition indemnities, fees or expenses is allowed in any
such Insolvency Proceeding. To further effectuate the intent of the parties as
provided in the immediately preceding sentence, if it is held that the claims
against the Borrowers in respect of the Collateral constitute only one secured
claim (rather than separate classes of senior and junior claims), then each of
the Administrative Agent and each Lender hereby acknowledges and agrees that all
distributions shall be made as if there were separate classes of senior and
junior secured claims against any Borrower or any Guarantor in respect of the
Collateral (with the effect being that, to the extent that the aggregate value
of the Collateral is sufficient (for this purpose ignoring all claims held by
the Administrative Agent and Lenders in respect of Cash Management Services and
Hedging Agreements)), the Administrative Agent and the Lenders shall be entitled
to receive, in addition to amounts distributed to them in respect of principal,
pre-petition interest and other claims, all amounts owing in respect of
post-petition interest at the relevant contract rate together with all
post-petition indemnities, fees and expenses (even though such claims may or may
not be allowed in whole or in part in the respective Insolvency Proceeding)
before any distribution is made in respect of the claims held by the
Administrative Agent and Lenders in respect of Cash Management Services and
Hedging Obligations, with each of the Administrative Agent and each Lender
hereby acknowledging and agreeing to turn over to the holders of the Obligations
(other than Cash Management Services and Hedging Obligations) all amounts
otherwise received or receivable by them to the extent needed to effectuate the
intent of this sentence even if such turnover of amounts has the effect of
reducing the amount of the claim of the Administrative Agent and Lenders in
respect of Cash Management Services or Hedging Obligations. Regardless of
whether any such claim is allowed, and without limiting the generality of the
other provisions of this Credit Agreement, this Credit Agreement expressly is
intended to include and does include the “rule of explicitness” in that this
Credit Agreement expressly entitles the Administrative Agent and Lenders to
receive payment from the Collateral of any post-petition interest, indemnities,
fees or expenses through distributions made pursuant to the provisions of this
Credit Agreement even though such interest, indemnities, fees or expenses are
not allowed or allowable against the bankruptcy estate of any Borrower or any
Guarantor under any applicable Debtor Relief Laws.
14. THE AGENTS.
     14.1. Appointment and Authority. Each of the Lenders, the Co-Collateral
Agents and each Issuing Bank hereby irrevocably appoints Bank of America to act
on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto. Each of the Lenders, the Administrative Agent and
each Issuing Bank hereby irrevocably appoints Bank of America and General
Electric Capital Corporation to act on its behalf, individually, as a
Co-Collateral Agent, and collectively, as the Co-Collateral Agents hereunder and
under the other Loan Documents, and authorizes the Co-Collateral Agents to take
such actions on its behalf and to exercise such powers as are delegated to the
Co-Collateral Agents by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions of this §14 are
solely for the benefit of the Administrative Agent, the Co-Collateral Agents,
the other Agents, the Lenders and the Issuing Bank, and neither any Borrower nor
any Subsidiary shall have rights as a third party beneficiary of any of such
provisions. The Co-Collateral Agents’ rights and obligations are further set
forth in the Co-Collateral Agent Side Letter Agreement.

- 117 -

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

 

     14.2. Rights as a Lender. Any Person serving as the Administrative Agent or
a Co-Collateral 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 or a Co-Collateral Agent and the term “Lender”
or “Lenders” shall, unless otherwise expressly indicated or unless the context
otherwise requires, include each Person serving as the Administrative Agent or
Co-Collateral Agent hereunder in its individual capacity. Such Persons and their
Affiliates may accept deposits from, lend money to, act as the financial advisor
or in any other advisory capacity for and generally engage in any kind of
business with the Borrowers or any Subsidiary or other Affiliate thereof as if
such Persons were not the Administrative Agent or Co-Collateral Agent hereunder
and without any duty to account therefor to the Lenders.
     14.3. Exculpatory Provisions. Each of the Administrative Agent and the
Co-Collateral Agents shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents. Without limiting the
generality of the foregoing, neither the Administrative Agent nor any
Co-Collateral Agent:
     (a) shall be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing;
     (b) shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
or such Co-Collateral Agent is required to exercise as directed in writing by
the Required Lenders (or such other number or percentage of the Lenders as shall
be expressly provided for herein or in the other Loan Documents), provided that
neither the Administrative Agent nor any Co-Collateral Agent shall be required
to take any action that, in its opinion or the opinion of its counsel, may
expose the Administrative Agent or such Co-Collateral Agent to liability or that
is contrary to any Loan Document or applicable Law; and
     (c) shall, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall be liable for the failure to
disclose, any information relating to any of the Borrowers or any of their
respective Affiliates that is communicated to or obtained by any Person serving
as the Administrative Agent or a Co-Collateral Agent or any of its Affiliates in
any capacity.
Neither the Administrative Agent nor any Co-Collateral Agent shall be liable for
any action taken or not taken by it (i) with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary, or as the Administrative Agent or any Co-Collateral Agent shall
believe in good faith shall be necessary, under the circumstances as provided in
§§16.12 and 13.3) or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Administrative Agent nor any Co-Collateral Agent shall
be deemed to have knowledge of any Default unless and until notice describing
such Default is given to the Administrative Agent or such Co-Collateral Agent by
the Borrowers, a Lender or the Issuing Bank. Upon the Administrative Agent’s
receipt of a notice describing a Default, the Administrative Agent shall notify
the Lenders of the substance thereof.
Neither the Administrative Agent nor any Co-Collateral Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or
genuineness of this

- 118 -

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

 

Agreement, any other Loan Document or any other agreement, instrument or
document or (v) the satisfaction of any condition set forth in §§11 and 12 or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or such Co-Collateral Agent.
     14.4. Reliance by Administrative Agent and the Co-Collateral Agents. Each
of the Administrative Agent and each Co-Collateral Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person. Each of the Administrative Agent
and each Co-Collateral Agent also may rely upon any statement made to it orally
or by telephone and believed by it to have been made by the proper Person, and
shall not incur any liability for relying thereon. In determining compliance
with any condition hereunder to the making of a Loan, or the issuance of a
Letter of Credit, that by its terms must be fulfilled to the satisfaction of a
Lender or the Issuing Bank, the Administrative Agent may presume that such
condition is satisfactory to such Lender or the Issuing Bank unless the
Administrative Agent shall have received notice to the contrary from such Lender
or the Issuing Bank prior to the making of such Loan or the issuance of such
Letter of Credit. Each of the Administrative Agent and each Co-Collateral Agent
may consult with legal counsel (who may be counsel for the Borrowers),
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.
     14.5. Delegation of Duties. Each of the Administrative Agent and each
Co-Collateral Agent may perform any and all of its respective duties and
exercise its respective rights and powers hereunder or under any other Loan
Document by or through any one or more sub agents appointed by the
Administrative Agent or such Co-Collateral Agent. Each of the Administrative
Agent and each Co-Collateral Agent and any such sub agent may perform any and
all of its respective duties and exercise its respective rights and powers by or
through their respective Related Parties. The exculpatory provisions of this
Section shall apply to any such sub agent and to the Related Parties of the
Administrative Agent and each Co-Collateral Agent and of 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 or Co-Collateral Agent.
     14.6. Resignation of Administrative Agent, Co-Collateral Agent. The
Administrative Agent may at any time give notice of its resignation to the
Lenders, the Issuing Bank, the Co-Collateral Agents and the Borrowers. Upon
receipt of any such notice of resignation, the Required Lenders shall have the
right to appoint a successor, which shall be a Lender, a bank or other financial
institution with an office in the United States, or an Affiliate of any such
Lender, bank or other financial institution with an office in the United States.
If no such successor shall have been so appointed by the Required Lenders and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders and the Issuing Bank, appoint
a successor Administrative Agent meeting the qualifications set forth above;
provided that if the Administrative Agent shall notify the Borrowers and the
Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice
and (1) the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents (except that in the
case of any collateral security held by the Administrative Agent on behalf of
the Lenders or the Issuing Bank under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such
time as a successor Administrative Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the Issuing
Bank directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this Section. Upon the acceptance
of a

- 119 -

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

 

successor’s appointment as Administrative Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this Section). The fees payable by the Borrowers to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrowers and such successor.
After the retiring Administrative Agent’s resignation hereunder and under the
other Loan Documents, the provisions of this Section and §§16.1, 16.2, 16.3 and
16.3A 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 the retiring
Administrative Agent was acting as Administrative Agent.
     Any resignation by Bank of America as Administrative Agent pursuant to this
Section shall also constitute its resignation as Issuing Bank, Swingline Lender
and Co-Collateral Agent to the extent that Bank of America is acting in such
capacities at such time. Upon the acceptance of a successor’s appointment as
Administrative Agent hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
Issuing Bank and the Swingline Lender, (b) the retiring Issuing Bank and
Swingline Lender shall be discharged from all of their respective duties and
obligations hereunder or under the other Loan Documents, and (c) the successor
Issuing Bank shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other
arrangements satisfactory to the retiring Issuing Bank to effectively assume the
obligations of the retiring Issuing Bank with respect to such Letters of Credit.
     Any Co-Collateral Agent may at any time give notice of its resignation to
the Administrative Agent, the other Co-Collateral Agent, the Lenders, the
Issuing Bank and the Borrowers. Upon receipt of any such notice of resignation,
the Required Lenders shall have the right to appoint a successor, which shall be
a bank or other financial institution with an office in the United States, or an
Affiliate of any such bank or other financial institution with an office in the
United States. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 30 days after the
retiring Co-Collateral Agent gives notice of its resignation, then the retiring
Co-Collateral Agent may on behalf of the Lenders and the Issuing Bank, appoint a
successor Co-Collateral Agent meeting the qualifications set forth above;
provided that if the retiring Co-Collateral Agent shall notify the Borrowers and
the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice
and the retiring Co-Collateral Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents. Upon the acceptance of
a successor’s appointment as Co-Collateral Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Co-Collateral Agent, and the retiring
Co-Collateral Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this Section). After the retiring Co-Collateral Agent’s
resignation hereunder and under the other Loan Documents, the provisions of this
Section and §§16.1, 16.2, 16.3 and 16.3A shall continue in effect for the
benefit of such retiring Co-Collateral Agent, its sub agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Co-Collateral Agent was acting as a
Co-Collateral Agent.
     14.7. Non-Reliance on Administrative Agent, Co-Collateral Agents and Other
Lenders. Each Lender and the Issuing Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent, any
Co-Collateral Agent or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender and
the Issuing Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent, the Co-Collateral Agents or any other

- 120 -

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

 

Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.
     14.8. No Other Duties, Etc. Anything herein to the contrary
notwithstanding, none of the Co-Syndication Agents, Documentation Agent and
Joint Lead Arrangers listed on the cover page hereof shall have any powers,
duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as the Administrative Agent, a
Co-Collateral Agent, a Lender or the Issuing Bank hereunder (or, with respect to
the Co-Collateral Agents, under the Co-Collateral Agent Rights Agreement).
     14.9. Administrative Agent May File Proofs of Claim.
     (a) In case of the pendency of any proceeding under any Debtor Relief Law
or any other judicial, administrative or like proceeding or any assignment for
the benefit of creditors relative to any Borrower or any of its Subsidiaries,
the Administrative Agent (irrespective of whether the principal of any Loan,
Reimbursement Obligation or Unpaid Reimbursement Obligation shall then be due
and payable as herein expressed or by declaration or otherwise and irrespective
of whether the Administrative Agent shall have made any demand on such Borrower)
shall be entitled and empowered, by intervention in such proceeding, under any
such assignment or otherwise:
     (i) to file and prove a claim for the whole amount of the principal,
interest, fees and all other amounts owing (or which may become owing) and
unpaid in respect of the Loans, Reimbursement Obligations or Unpaid
Reimbursement Obligations and all other Obligations that are owing (or which may
become owing) and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under the terms of this Credit Agreement) allowed in such
proceeding or under any such assignment; and
     (ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
Any custodian, receiver, assignee, trustee, liquidator, administrator,
sequestrator or other similar official in any such proceeding or under any such
assignment is hereby authorized by each Lender and the Issuing Bank to make such
payments to the Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders and
the Issuing Bank, nevertheless to pay to the Administrative Agent any amount due
for the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under the terms of this Credit Agreement.
Nothing contained herein shall authorize the Administrative Agent to consent to
or accept or adopt on behalf of any Lender or the Issuing Bank any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
owed to such Lender or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding or under any such assignment.

- 121 -

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

 

     14.10. Duties in the Case of Enforcement. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Administrative Agent may, and shall,
if (a) so requested by the Required Lenders and (b) the Lenders have provided to
the Administrative Agent such additional indemnities and assurances against
expenses and liabilities as the Administrative Agent may reasonably request,
proceed to enforce the provisions of the Security Documents authorizing the sale
or other disposition of all or any part of the Collateral and exercise all or
any such other legal and equitable and other rights or remedies as it may have
in respect of such Collateral. The Required Lenders may direct the
Administrative Agent in writing as to the method and the extent of any such sale
or other disposition, the Lenders hereby agreeing to indemnify and hold the
Administrative Agent harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Administrative Agent need not comply with any such direction to the extent that
the Administrative Agent reasonably believe the Administrative Agent’s
compliance with such direction to be unlawful or commercially unreasonable in
any applicable jurisdiction.
     14.11. Release of Collateral and Guarantors. (a) Release of Collateral. The
Lenders hereby authorize the Administrative Agent to enter into any agreement or
execute any document evidencing the release of any liens and security interests
in connection with any sale or other disposition of Collateral permitted
hereunder or to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
Property that is permitted by §9.2. The Lenders hereby authorize the
Administrative Agent to enter into any agreement or execute any document
evidencing the release of any Guarantor from its obligations under this Credit
Agreement and the other Loan Documents if such Person ceases to be a Subsidiary
as a result of a transaction permitted hereunder. Upon request by the
Administrative Agent at any time, the Required Lenders will confirm in writing
the Administrative Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Guaranty pursuant to this §14.13.
     (b) Release of Borders Direct or Capital Stock of Kobo. Upon notice to the
Administrative Agent and satisfaction of the following conditions, each of the
Lenders and the Administrative Agent hereby consent to (1) the release of
Borders Direct as a Guarantor under the Credit Agreement and the other Loan
Documents, and the Administrative Agent shall release its security interests in
all assets of Borders Direct and (2) the release of its security interest in the
Capital Stock of Kobo:
     (i) Borders Direct or BGI, as applicable, shall engage an independent
appraiser, reasonably acceptable to the Administrative Agent, the Administrative
Agent and the Co-Collateral Agents, to determine the fair market value of
Borders Direct, the Capital Stock of Kobo and/or their assets (the “Appraised
Value”);
     (ii) Borders Direct or BGI, as applicable, shall pay to the Borrowers
(a) from proceeds of equity or debt financing provided to Borders Direct from
one or more third parties or an amount in cash equal to the Appraised Value of
Borders Direct and (b) from the proceeds of the sale of the Capital Stock of
Kobo or any equity or debt financing provided to Kobo from one or more third
parties or an amount in cash equal to the Appraised Value of Kobo and, in each
case, the Borrowers shall use such proceeds to prepay the loans under the Second
Lien Loan Facility; and

- 122 -

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

 

     (iii) No Default or Event of Default shall have occurred and be continuing
or would result therefrom.
In connection with any release of Borders Direct, the Borrowers and Borders
Direct may enter into agreements to accomplish such release and to accommodate
the ongoing operations of Borders Direct, including entering into a
non-exclusive license agreement of a scope and term agreed by the Administrative
Agent, pursuant to which Borders Direct may continue to use the Borders name and
customer lists, so long as such agreements are on terms no less favorable to the
Borrowers than if such agreements were at arms’ length. Each of such agreements,
including the non-exclusive license agreement, shall be in form and substance
reasonably satisfactory to the Administrative Agent.
     14.12. Intercreditor Agreement. Each party hereto irrevocably agrees to be
bound by the provisions of the Intercreditor Agreement (including, without
limitation, provisions requiring the rescission of remedies taken in accordance
with §13.3 hereof). Each of the Lenders hereby appoints, designates and
authorizes the Administrative Agent to enter into the Intercreditor Agreement
and agrees that the Administrative Agent may bind such Lenders to the provisions
thereof, and of any other agreements, documents, filings and instruments to be
delivered in connection with this Agreement and the transactions contemplated
hereby, on its behalf. Each of the Lenders hereby agrees that the Administrative
Agent may exercise the Administrative Agent’s rights and comply with all of the
Administrative Agent’s obligations under the Intercreditor Agreement. Each of
the Lenders hereby agrees that the Required Lenders shall instruct the
Administrative Agent with respect to any notices, instructions or otherwise to
be provided by the Lenders or any of them to the Administrative Agent pursuant
to the terms of the Intercreditor Agreement. Each Lender further agrees that it
shall not provide any notice, instruction or otherwise to the Administrative
Agent other than through the Administrative Agent, acting on the instruction of
the Required Lenders hereunder.
     14.13. Indemnity. The Lenders ratably, in accordance with their Commitment
Percentages, agree hereby to indemnify and hold harmless each of the
Administrative Agent, the Co-Collateral Agents and their affiliates (including
any of the officers, directors, employees, agents and attorneys-in-fact of any
thereof) from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Administrative Agent, the Co-Collateral Agents or such
affiliate has not been reimbursed by the Borrowers or the Guarantors as required
by the terms hereof), and liabilities of every nature and character arising out
of or related to this Agreement, the Notes, or any of the other Loan Documents
or the transactions contemplated or evidenced hereby or thereby, or the
Administrative Agent’s or any Co-Collateral Agent’s actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Administrative Agent’s or such Co-Collateral Agent’s willful misconduct
or gross negligence.
15. SUCCESSORS AND ASSIGNS.
     15.1. General Conditions. The provisions of this Credit 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 any Issuing
Bank that issues any Letter of Credit), except that the neither the Borrowers
nor the Guarantors may assign or otherwise transfer any of their rights or
obligations hereunder without the prior written consent of each Lender and no
Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (a) to an assignee in accordance with the provisions of §15.2,
(b) by way of participation in accordance with the provisions of §15.4 or (c) by
way of pledge or assignment of a security interest subject to the restrictions
of §15.6 (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Credit 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 any Issuing Bank that

- 123 -

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

 

issues any Letter of Credit), Participants to the extent provided in §15.4 and,
to the extent expressly contemplated hereby, the Related Parties of each of the
Agents, the Issuing Banks and the Lenders) any legal or equitable right, remedy
or claim under or by reason of this Credit Agreement or any of the other Loan
Documents.
     15.2. Assignments. Any Lender may at any time assign to one or more
assignees all or a portion of its rights and obligations under this Credit
Agreement (including all or a portion of its Commitment and the Loans (including
for the purposes of this §15.2, participations in LC Obligations and in
Swingline Loans) at the time owing to it); provided that any such assignment
shall be subject to the following conditions:
     (a) Minimum Amounts.
     (i) in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the applicable Loans at the time owing to it
or, in the case of an assignment to a Lender or a Lender Affiliate, no minimum
amount need be assigned;
     (ii) in any case not described in subsection (a)(i) of this Section, the
aggregate amount of the Commitment (which for this purpose includes the
applicable Loans outstanding thereunder) or, if the applicable Commitment is not
then in effect, the principal outstanding balance of the applicable Loans of the
assigning Lender subject to each such assignment (determined as of the date on
which the Assignment and Acceptance with respect to such assignment is delivered
to the Administrative Agent) shall not be less than $5,000,000 unless the
Administrative Agent and, so long as no Default or Event of Default has occurred
and is continuing, BGI otherwise consent (each such consent not to be
unreasonably withheld or delayed).
     (b) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Credit Agreement with respect to the Loans or the
Commitment assigned;
     (c) Required Consents. No consent shall be required for any assignment
except to the extent required by subsection (a)(ii) of this Section and, in
addition:
     (i) the consent of BGI (such consent not to be unreasonably withheld) shall
be required unless (1) an Event of Default has occurred and is continuing at the
time of such assignment or (2) such assignment is to a Lender, an Affiliate of a
Lender or an Approved Fund; provided that BGI shall be deemed to have consented
to any such assignment unless it shall object thereto by written notice to the
Administrative Agent within five (5) Business Days after having received notice
thereof;
     (ii) the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required for assignments in respect
of any Commitment if such assignment is to a Person that is not a Lender;
     (iii) the consent of the Issuing Bank (such consent not to be unreasonably
withheld or delayed) shall be required for (A) assignments in respect of any
Commitment if such assignment is to a Person that is not a Lender

- 124 -

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

 

and (B) any assignment that increases the obligation of the assignee (other than
an existing Lender) to participate in exposure under one or more Letters of
Credit (whether or not then outstanding); and
     (iv) the consent of the Swingline Lender (such consent not to be
unreasonably withheld or delayed) shall be required for assignments in respect
of any Commitment if such assignment is to a Person that is not a Lender.
     (d) Retention of Characteristics. Any Loans and any Commitment assigned
under this §15.2 shall retain its respective characteristics (including its
characteristic as a Loan or Commitment under the Existing Tranche or the
Extended Tranche) immediately prior to such assignment upon the effectiveness of
such assignment; and
     (e) Assignment and Assumption. The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500; provided, however, that the
Administrative Agent may, in its sole discretion, elect to waive such processing
and recordation fee in the case of any assignment. The assignee, if it is not a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.
     (f) No Assignment to Certain Persons. No such assignment shall be made
(i) to the Borrowers or any of their Affiliates or Subsidiaries, or (ii) to any
Deteriorating Lender or any of its Subsidiaries, or any Person who, upon
becoming a Lender hereunder, would constitute any of the foregoing Persons
described in this clause (ii), or (iii) to a natural person.
     (g) Certain Additional Payments. In connection with any assignment of
rights and obligations of any Delinquent Lender hereunder, no such assignment
shall be effective unless and until, in addition to the other conditions thereto
set forth herein, the parties to the assignment shall make such additional
payments to the Administrative Agent in an aggregate amount sufficient, upon
distribution thereof as appropriate (which may be outright payment, purchases by
the assignee of participations or subparticipations, or other compensating
actions, including funding, with the consent of the Borrowers and the
Administrative Agent, the applicable pro rata share of Loans previously
requested but not funded by the Delinquent Lender, to each of which the
applicable assignee and assignor hereby irrevocably consent), to (x) pay and
satisfy in full all payment liabilities then owed by such Delinquent Lender to
the Administrative Agent or any Lender hereunder (and interest accrued thereon)
and (y) acquire (and fund as appropriate) its full pro rata share of all Loans
and participations in Letters of Credit and Swingline Loans in accordance with
its Commitment Percentage. Notwithstanding the foregoing, in the event that any
assignment of rights and obligations of any Delinquent Lender hereunder shall
become effective under applicable Law without compliance with the provisions of
this paragraph, then the assignee of such interest shall be deemed to be a
Delinquent Lender for all purposes of this Agreement until such compliance
occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to §15.3, from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party to this Credit Agreement
and, to the extent of the interest assigned by such Assignment and Acceptance
have the rights and obligations of a Lender under this Credit Agreement, and the
assigning

- 125 -

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

 

Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Credit
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender’s rights and obligations under this Credit Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of (i) §§5.3.2, 5.7, 5.8 and 5.10 and (ii) §16.3 notwithstanding
such assignment, with respect to facts and circumstances occurring prior to the
effective date of such assignment. Upon request, the Borrowers (at their
expense) shall execute and deliver a Note to the assignee Lender. Any assignment
or transfer by a Lender of rights or obligations under this Credit Agreement
that does not comply with this paragraph shall be treated for purposes of this
Credit Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with §15.4.
     15.3. Register. The Administrative Agent, acting solely for this purpose as
an agent of the Borrowers (and such agency being solely for tax purposes), shall
maintain at the Administrative Agent’s Office a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amounts of the
Loans and Reimbursement Obligations 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 Borrowers, the Agents, 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 Credit Agreement,
notwithstanding notice to the contrary. In addition, the Administrative Agent
shall maintain on the Register information regarding the designation, and
revocation of designation, of any Lender as a Delinquent Lender. The Register
shall be available for inspection by the Borrowers, the Issuing Banks and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
     15.4. Participations. Any Lender may at any time, without the consent of,
or notice to, the Borrowers, the Agents, the Issuing Banks or the Swingline
Lender sell participations to any Person (other than a natural person, a
Deteriorating Lender, or the Borrowers or any of the Borrowers’ Affiliates or
Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s
rights and/or obligations under this Credit Agreement (including all or a
portion of its Commitment and/or the Loans owing to it); provided that (a) such
Lender’s obligations under this Credit 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 Borrowers, the Agents, 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 Credit 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 Credit Agreement and to approve any amendment,
modification or waiver of any provision of this Credit 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 that
would reduce the principal of or the interest rate on any Loans, extend the term
or increase the amount of the Commitment of such Lender as it relates to such
Participant, reduce the amount of any Fees to which such Participant is entitled
or extend any regularly scheduled payment date for principal or interest.
Subject to §15.5, the Borrowers agree that each Participant shall be entitled to
the benefits of §§5.3.2, 5.7, 5.8 and 5.10 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to §15.2. To the
extent permitted by law, each Participant also shall be entitled to the benefits
of §16.1 as though it were a Lender, provided such Participant agrees to be
subject to §16.1 as though it were a Lender.
     15.5. Payments to Participants. A Participant shall not be entitled to
receive any greater payment under §§5.7, 5.8 and 5.17 than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is
made with the Borrowers’ prior written consent. A Participant that would not be
a U.S. Person as defined in section 7701(a)(30) of the Code for federal income
tax purposes if it were a Lender shall not be

- 126 -

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

 

entitled to the benefits of §5.17 unless the Borrowers are notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrowers, to comply with §5.17 as though it were a Lender.
     15.6. Miscellaneous Assignment Provisions. Any Lender may at any time grant
a security interest in all or any portion of its rights under this Credit
Agreement to secure obligations of such Lender, including without limitation
(a) any pledge or assignment to secure obligations to any of the twelve Federal
Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341 and
(b) with respect to any Lender that is a Fund, to any lender or any trustee for,
or any other representative of, holders of obligations owed or securities issued
by such Fund as security for such obligations or securities or any institutional
custodian for such Fund or for such lender; provided that no such grant shall
release such Lender from any of its obligations hereunder, provide any voting
rights hereunder to the secured party thereof, substitute any such secured party
for such Lender as a party hereto or affect any rights or obligations of the
Borrowers or Administrative Agent hereunder. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Law, including the Federal Electronic Signatures in Global and
National Commerce Act, or any other state laws based on the Uniform Electronic
Transactions Act.
     15.7. [Reserved.]
     15.8. New Notes. Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with each Note subject to such
assignment, the Administrative Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrowers and
the Lenders (other than the assigning Lender). Within five (5) Business Days
after receipt of such notice and upon the request of the Assignee, the
Borrowers, at their own expense, shall execute and deliver to the Administrative
Agent, in exchange for each surrendered Note, a new Note to the order of such
Assignee in an amount equal to the amount assumed by such Assignee pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained some
portion of its obligations hereunder, a new Note to the order of the assigning
Lender in an amount equal to the amount retained by it hereunder. Such new Notes
shall provide that they are replacements for the surrendered Notes, shall be in
an aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes. The surrendered Notes shall be cancelled and returned to the Borrowers.
     15.9. Assignment to Special Purpose Funding Vehicle. Notwithstanding
anything to the contrary contained in this §15, any Lender (a “Granting Lender”)
may grant to a special purpose funding vehicle (an “SPC”) of such Granting
Lender, identified as such in writing from time to time delivered by the
Granting Lender to the Administrative Agent and the Borrowers, the option to
provide to the Borrowers all or any part of any Loan that such Granting Lender
would otherwise be obligated to make to the Borrowers pursuant to this Credit
Agreement, provided that (a) nothing herein shall constitute a commitment to
make any Loan by any SPC, (b) the Granting Bank’s obligations under this Credit
Agreement shall remain unchanged, (c) the Granting Lender shall retain the sole
right to enforce this Credit Agreement and to approve any amendment,
modification or waiver of any provision of this Credit Agreement and (d) if an
SPC elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if,
such Loan were made by the Granting Lender. Each party hereto hereby agrees that
no SPC shall be liable for any expense reimbursement, indemnity or similar
payment obligation

- 127 -

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

 

under this Credit Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Credit Agreement)
that, prior to the date that is one year and one day after the later of (i) the
payment in full of all outstanding senior indebtedness of any SPC and (ii) the
Maturity Date, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the laws of
the United States of America or any State thereof. In addition, notwithstanding
anything to the contrary contained in this §15.9, any SPC may (A) with notice
to, but (except as specified below) without the prior written consent of, the
Borrowers or the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to its Granting
Lender or to any financial institutions (consented to by the Administrative
Agent and, so long as no Default or Event of Default has occurred and is
continuing, BGI, which consents shall not be unreasonably withheld or delayed)
providing liquidity and/or credit facilities to or for the account of such SPC
to fund the Loans made by such SPC or to support the securities (if any) issued
by such SPC to fund such Loans and (B) disclose on a confidential basis any
non-public information relating to its Loans (other than financial statements
referred to in §§7.4 or 8.4) to any rating agency, commercial paper dealer or
provider of a surety, guarantee or credit or liquidity enhancement to such SPC.
In no event shall the Borrowers be obligated to pay to an SPC that has made a
Loan any greater amount than the Borrowers would have been obligated to pay
under this Credit Agreement if the Granting Lender had made such Loan. An
amendment to this §15.9 without the written consent of an SPC shall be
ineffective insofar as it alters the rights and obligations of such SPC.
     15.10. Resignation as Issuing Bank or Swingline Lender. Notwithstanding
anything to the contrary contained herein, if at any time any Issuing Bank or
the Swingline Lender assigns all of its Commitments and Revolving Credit Loans
pursuant to this §15, such Issuing Bank or the Swingline Lender may, upon
45 days’ notice to the Borrowers and the Lenders, resign in its capacity as a
Issuing Bank or the Swingline Lender, as applicable. In the event of any such
resignation as an Issuing Bank, BGI, with the consent of the Administrative
Agent, shall be entitled to appoint from among the Lenders a successor Issuing
Bank hereunder; provided, however, that no failure by BGI to appoint any such
successor shall affect the resignation of such Issuing Bank. If the Issuing Bank
resigns in such capacity, it shall retain all the rights and obligations of the
Issuing Bank hereunder with respect to all Letters of Credit outstanding as of
the effective date of its resignation as Issuing Bank and all Reimbursement
Obligations with respect thereto (including the right to require the Lenders to
make Loans or fund risk participations in Unpaid Reimbursement Obligations
pursuant to §4). If any Person resigns as Swingline Lender, it shall retain all
the rights of the Swingline Lender provided for hereunder with respect to
Swingline Loans made by it and outstanding as of the effective date of such
resignation, including the right to require the Lenders to make Loans or fund
risk participations in outstanding Swingline Loans pursuant to §2.5.
16. PROVISIONS OF GENERAL APPLICATION.
     16.1. Setoff. The Borrowers and the Guarantors hereby grant to each Agent,
Issuing Bank and each of the Lenders a continuing lien, security interest and
right of setoff as security for all liabilities and obligations to each Agent,
Issuing Bank and each Lender, whether now existing or hereafter arising, upon
and against all deposits, credits, collateral and property, now or hereafter in
the possession, custody, safekeeping or control of such Agent, such Issuing Bank
or such Lender or any Lender Affiliate and their successors and assigns or in
transit to any of them. Regardless of the adequacy of any collateral, if any of
the Obligations are due and payable and have not been paid or any Event of
Default shall have occurred, any deposits or other sums credited by or due from
any of the Lenders to any Borrower or any Guarantor and any securities or other
property of any Borrower or any Guarantor in the possession of such Lender may
be applied to or set off by such Lender against the payment of Obligations and
any and all other

- 128 -

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

 

liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of any Borrower or any Guarantor to such
Lender. Each Borrower and each Guarantor hereby grants to the Issuing Banks a
security interest in all goods, documents, instruments and accounts which shall
come into the possession or control of the Issuing Banks, any of the Issuing
Banks’ correspondents, or any Borrower or any Guarantor, or in which any
Borrower or any Guarantor may acquire an interest and the proceeds thereof as
the result of opening or in connection with any transaction under any Letter of
Credit, as security for (a) all payments made or to be made by such Issuing Bank
or its correspondents under such Letter of Credit, (b) any interest, commission
or other customary charges in relation to such Letter of Credit and (c) any
other obligations of any Borrower or any Guarantor to the Issuing Banks under
this Credit Agreement. Upon any default by the Borrowers or the Guarantors in
any of the undertakings set forth in this Credit Agreement in respect of the
Letters of Credit, each Issuing Bank is authorized to sell any or all such goods
or documents at public or private sale and exercise any and all other rights as
a secured creditor under the provisions of the Uniform Commercial Code of the
State of New York or any similar statute. Any legal requirement that any Issuing
Bank must give the Borrowers and the Guarantors, as applicable, reasonable
notice of any proposed sale or disposition of the goods or documents shall be
met if such notice is given to the Borrowers and the Guarantors, as applicable,
at least five (5) days before the time of such sale or disposition. ANY AND ALL
RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF ANY
BORROWER OR ANY GUARANTOR ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED. Each of the Lenders agrees with each other Lender that (i) if an amount
to be set off is to be applied to Indebtedness of any Borrower or Guarantor to
such Lender, other than Indebtedness evidenced by the Notes held by such Lender
or constituting Reimbursement Obligations owed to such Lender, such amount shall
be applied ratably to such other Indebtedness and to the Indebtedness evidenced
by all such Notes held by such Lender or constituting Reimbursement Obligations
owed to such Lender, and (ii) if such Lender shall receive from any Borrower or
any Guarantor, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes held
by, or constituting Reimbursement Obligations owed to, such Lender by
proceedings against any Borrower or any Guarantor at law or in equity or by
proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Note or Notes held by, or Reimbursement Obligations owed to, such Lender any
amount in excess of its ratable portion of the payments received by all of the
Lenders with respect to the Notes held by, and Reimbursement Obligations owed
to, all of the Lenders, such Lender will make such disposition and arrangements
with the other Lenders with respect to such excess, either by way of
distribution, pro tanto assignment of claims, subrogation or otherwise as shall
result in each Lender receiving in respect of the Notes held by it or
Reimbursement Obligations owed it, its proportionate payment as contemplated by
this Credit Agreement; provided that if all or any part of such excess payment
is thereafter recovered from such Lender, such disposition and arrangements
shall be rescinded and the amount restored to the extent of such recovery, but
without interest; provided further that the provisions of this Section shall not
be construed to apply to (w) any payment made by or on behalf of any Borrower
pursuant to and in accordance with the express terms of this Agreement
(including the application of funds arising from the existence of a Delinquent
Lender), (x) the application of Cash Collateral provided for in §2.14, (y) any
payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or subparticipations in LC Obligations or
Swingline Loans to any assignee or participant, other than an assignment to any
Borrower or any Subsidiary thereof (as to which the provisions of this Section
shall apply), or (z) any payment made by or on behalf of any Borrower to Lenders
having Commitments under the Existing Tranche on the Existing Tranche
Termination Date. Notwithstanding anything to the contrary contained herein, in
the event that any Delinquent Lender shall exercise any such right of setoff,
(x) all amounts so set off shall be paid over immediately to the Administrative
Agent for further application in accordance with the provisions of

- 129 -

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

 

§2.15 and, pending such payment, shall be segregated by such Delinquent Lender
from its other funds and deemed held in trust for the benefit of the
Administrative Agent and the Lenders, and (y) the Delinquent Lender shall
provide promptly to the Administrative Agent a statement describing in
reasonable detail the Obligations owing to such Delinquent Lender as to which it
exercised such right of setoff.
     16.2. Costs and Expenses. (a) The Borrowers jointly and severally agree to
pay (i) the reasonable costs of producing and reproducing this Credit Agreement,
the other Loan Documents and the other agreements and instruments mentioned
herein, (ii) any taxes (including any interest and penalties in respect thereto)
payable by any Agent, any Issuing Bank or any of the Lenders (other than taxes
based upon any Agent’s, any Issuing Bank’s or any Lender’s net income) on or
with respect to the transactions contemplated by this Credit Agreement (the
Borrowers hereby jointly and severally agreeing to indemnify the Agents, the
Issuing Banks and each Lender with respect thereto), (iii) the reasonable fees,
expenses and disbursements of the Administrative Agent’s Special Counsel, the
Administrative Agent’s counsel or any local counsel to the Administrative Agent
incurred in connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, any amendments, modifications, approvals, consents or
waivers hereto or hereunder, or the cancellation of any Loan Document upon
payment in full in cash of all of the Obligations or pursuant to any terms of
such Loan Document for providing for such cancellation, (iv) the fees, expenses
and disbursements of the Administrative Agent or any of its affiliates, agents
or representatives incurred by the Administrative Agent or such affiliate, agent
or representative in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, including all title insurance premiums and surveyor,
engineering, appraisal, examination and reporting charges or expenses,
including, without limitation, fees and expenses incurred pursuant to §8.9,
(v) 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, (vi) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys’ fees and costs,
which attorneys may be employees of any Lender, the Issuing Bank or any Agent,
and reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Lender, the Issuing Bank or any
Agent in connection with (x) the enforcement of or preservation of rights under
any of the Loan Documents against any of the Borrowers or any of their
Subsidiaries or the administration thereof after the occurrence of a Default or
Event of Default (including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiation) and (y) any litigation, proceeding or
dispute whether arising hereunder or otherwise, in any way related to any
Lender’s, the Issuing Bank’s or any Agent’s relationship with any Borrower or
any of their Subsidiaries; provided that, for purposes of the clauses (x) and
(y) of this subsection (vi), to the extent such expenses consist of legal fees
and disbursements, such expenses shall be limited to the fees and disbursements
of (A) one external counsel for the Administrative Agent, (B) such local counsel
as the Administrative Agent deems appropriate and (C) one external counsel
representing the Lenders, and (vii) all reasonable fees, expenses and
disbursements of any Lender, any Issuing Bank or any Agent incurred in
connection with Uniform Commercial Code searches. The covenants contained in
this §16.2 shall survive payment or satisfaction in full of all other
obligations.
     (b) Reimbursement by Lenders. To the extent that any Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) of
this Section to be paid by it to the Administrative Agent (or any sub-agent
thereof), the Issuing Bank or any Related Party of any of the foregoing, each
Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), the Issuing Bank or such Related Party, as the case may be, such
Lender’s Commitment 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

- 130 -

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

 

Administrative Agent (or any such sub-agent) or the Issuing Bank in its capacity
as such, or against any Related Party of any of the foregoing acting for the
Administrative Agent (or any such sub-agent) or Issuing Bank in connection with
such capacity. The obligations of the Lenders under this subsection (b) are
several and not joint.
     (c) Payments. All amounts due under this Section shall be payable not later
than ten (10) Business days after demand therefor.
     (d) Survival. The agreements in this Section shall survive the resignation
of the Administrative Agent, the Issuing Bank and the Swingline Lender, the
replacement of any Lender, the termination of the Total Commitment and the
repayment, satisfaction or discharge of all the other Obligations.
     16.3. Indemnification; Damage Waiver.
     (a) Indemnification. The Borrowers jointly and severally agree to indemnify
and hold harmless each Agent, each Issuing Bank and each Lender and any of their
Affiliates (including any affiliates and/or the officers, directors, employees,
agents and attorneys-in-fact of any of the same) (each such Person being called
an “Indemnitee”) from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of this Credit
Agreement or any of the other Loan Documents or the transactions contemplated
hereby including, without limitation, (a) any actual or proposed use by any of
the Borrowers or any of their Subsidiaries of the proceeds of any of the Loans
or Letters of Credit, (b) the reversal or withdrawal of any provisional credits
granted by the Administrative Agent upon the transfer of funds from lock box,
bank agency, concentration accounts or otherwise under any cash management
arrangements with any of the Borrowers or any of their Subsidiaries or in
connection with the provisional honoring of funds transfers, checks or other
items, (c) any of the Borrowers or any of their Subsidiaries entering into or
performing this Credit Agreement or any of the other Loan Documents or (d) with
respect to any of the Borrowers and any of their Subsidiaries and their
respective properties and assets, the violation of any Environmental Law, the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor, each
Lender, each Issuing Bank, and each Agent and any of their affiliates shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrowers jointly and severally agree to pay promptly the
reasonable fees and expenses of such counsel. No Indemnitee shall be liable for
any damages arising from the use by others of any information or other materials
obtained through IntraLinks or other similar information transmission systems in
connection with this Credit Agreement. No Indemnitee shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby. If, and
to the extent that the obligations of any Borrower under this §16.3 are
unenforceable for any reason, the Borrowers hereby jointly and severally agree

- 131 -

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

 

to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable Law. The covenants contained
in this §16.3 shall survive payment or satisfaction in full of all other
Obligations.
     (b) Reimbursement by Lenders. To the extent that any Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) of
this Section to be paid by it to the Administrative Agent (or any sub-agent
thereof), the Issuing Bank or any Related Party of any of the foregoing, each
Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), the Issuing Bank or such Related Party, as the case may be, such
Lender’s Commitment 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 (or any such sub-agent) or the Issuing Bank in
its capacity as such, or against any Related Party of any of the foregoing
acting for the Administrative Agent (or any such sub-agent) or Issuing Bank in
connection with such capacity. The obligations of the Lenders under this
subsection (b) are several and not joint.
     (c) Waiver of Consequential Damages, Etc. To the fullest extent permitted
by applicable Law, no Borrower shall assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
exemplary, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the
use of the proceeds thereof. No Indemnitee referred to in subsection (a) above
shall be liable for any damages arising from the use by unintended recipients of
any information or other materials distributed to such unintended recipients by
such Indemnitee through telecommunications, electronic or other information
transmission systems in connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby other than for
direct or actual damages resulting from the gross negligence or willful
misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.
     (d) Payments. All amounts due under this Section shall be payable not later
than ten Business Days after demand therefor.
     (e) Survival. The agreements in this Section shall survive the resignation
of the Administrative Agent, the Issuing Bank and the Swingline Lender, the
replacement of any Lender, the termination of the Total Commitment and the
repayment, satisfaction or discharge of all the other Obligations.
     16.3A. Payments Set Aside. To the extent that any payment by or on behalf
of a Borrower is made to the Administrative Agent, the Issuing Bank, the
Swingline Lender or any Lender, or the Administrative Agent, the Issuing Bank,
the Swingline Lender or any Lender exercises its right of setoff, and such
payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent,
the Issuing Bank, the Swingline Lender or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of
such recovery, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been

- 132 -

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

 

\

made or such setoff had not occurred, and (b) each Lender, the Swingline Lender
and the Issuing Bank, as applicable, severally agrees to pay to the
Administrative Agent, the Swingline Lender and the Issuing Bank, as applicable,
upon demand its applicable share (without duplication) of any amount so
recovered from or repaid by the Administrative Agent, the Swingline Lender or
the Issuing Bank plus interest thereon from the date of such demand to the date
such payment is made at a rate per annum equal to the applicable Overnight Rate
from time to time in effect. The obligations of the Lenders, the Swingline
Lender and the Issuing Bank under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Credit Agreement.
     16.4. Treatment of Certain Confidential Information.
     16.4.1. Confidentiality. Each of the Lenders, the Agents, and the Issuing
Banks agrees, on behalf of itself and each of its affiliates, directors,
officers, employees and representatives, to use reasonable precautions to keep
confidential, in accordance with their respective customary procedures for
handling confidential information of the same nature and in accordance with safe
and sound banking practices, any non-public information supplied to it by any
Borrower or any of their Subsidiaries pursuant to this Credit Agreement that is
identified by such Person as being confidential at the time the same is
delivered to the Lenders, the Issuing Banks or the Agents, provided that nothing
herein shall limit the disclosure of any such information (a) after such
information shall have become public other than through a violation of this
§16.4, or becomes available to any of the Lenders, the Issuing Banks or the
Agents on a nonconfidential basis from a source other than the Borrowers, (b) to
the extent required by statute, rule, regulation or judicial process, (c) to
counsel for any of the Lenders, the Issuing Banks or the Agents, (d) to bank
examiners or any other regulatory authority having jurisdiction over any Lender
or any Agent, or to auditors or accountants, (e) to any Agent, any Lender, the
Issuing Banks or any Financial Affiliate, (f) in connection with any litigation
to which any one or more of the Lenders, the Issuing Banks, the Agents or any
Financial Affiliate is a party, or in connection with the enforcement of rights
or remedies hereunder or under any other Loan Document, (g) to a Lender
Affiliate or a Subsidiary or affiliate of any Agent or Issuing Banks, (h) to any
actual or prospective assignee or participant or any actual or prospective
counterparty (or its advisors) to any swap or derivative transactions referenced
to credit or other risks or events arising under this Credit Agreement or any
other Loan Document so long as such assignee, participant or counterparty, as
the case may be, agrees to be bound by the provisions of §16.4 or (i) with the
consent of the Borrowers. Moreover, each of the Agents, the Issuing Banks, the
Lenders and any Financial Affiliate is hereby expressly permitted by the
Borrowers to refer to any of the Borrowers and their Subsidiaries in connection
with any advertising, promotion or marketing undertaken by such Agent, such
Lender, the Issuing Banks or such Financial Affiliate and, for such purpose,
such Agent, the Issuing Banks, such Lender or such Financial Affiliate may
utilize any trade name, trademark, logo or other distinctive symbol associated
with the Borrowers or any of their Subsidiaries or any of their businesses.
     16.4.2. Prior Notification. Unless specifically prohibited by applicable
Law or court order, each of the Lenders, the Issuing Banks and the Agents shall,
prior to disclosure thereof, notify the Borrowers of any request for disclosure
of any such non-public information by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of such Lender by such governmental agency) or pursuant to
legal process.

- 133 -

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

 

     16.4.3. Other. In no event shall any Lender, any Issuing Bank or any Agent
be obligated or required to return any materials furnished to it or any
Financial Affiliate by any Borrower or any of their Subsidiaries. The
obligations of each Lender under this §16.4 shall supersede and replace the
obligations of such Lender under any confidentiality letter in respect of this
financing signed and delivered by such Lender to the Borrowers prior to the date
hereof and shall be binding upon any assignee of, or purchaser of any
participation in, any interest in any of the Loans or Reimbursement Obligations
from any Lender.
     16.5. Survival of Covenants, Etc. All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
any Borrower or any of their Subsidiaries pursuant hereto shall be deemed to
have been relied upon by the Lenders, the Agents, the Issuing Banks,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Lenders of any of the Loans and the
issuance, extension or renewal of any Letters of Credit, as herein contemplated,
and shall continue in full force and effect so long as any Letter of Credit or
any amount due under this Credit Agreement or the Notes or any of the other Loan
Documents remains outstanding or any Lender has any obligation to make any Loans
or any Issuing Bank has any obligation to issue, extend or renew any Letter of
Credit, and for such further time as may be otherwise expressly specified in
this Credit Agreement. All statements contained in any certificate or other
paper delivered to any Lender, any Agent or any Issuing Bank at any time by or
on behalf of any of the Borrowers or any of their Subsidiaries pursuant hereto
or in connection with the transactions contemplated hereby shall constitute
representations and warranties by such Borrower or such Subsidiary hereunder.
     16.6. Notices. Except as otherwise expressly provided in this Credit
Agreement, all notices and other communications made or required to be given
pursuant to this Credit Agreement or the Notes or any Letter of Credit
Applications shall be in writing (which includes by setting forth such notice or
other communication on a site on the World Wide Web (a “Website Posting”) if
notice of such Website Posting (including the information necessary to access
such site) has previously been delivered to the applicable parties hereto by
another means set forth in this §16.6) and shall be delivered in hand, mailed by
United States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
     (a) if to the Borrowers or the Guarantors, at 100 Phoenix Drive, Ann Arbor,
Michigan USA 48108, Attention: Mark Bierley, Senior Vice President and Chief
Financial Officer, or at such other address for notice as the Borrowers shall
last have furnished in writing to the Person giving the notice;
     (b) if to the Administrative Agent, the Issuing Bank or the Swingline
Lender, at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention:
Kathleen Dimock, Managing Director, or such other address for notice as the
Administrative Agent shall last have furnished in writing to the Person giving
the notice;
     (c) if to any other Agent or any Lender, at such Agent’s or such Lender’s
address set forth on Schedule 1 hereto, or such other address for notice as such
Agent or such Lender shall have last furnished in writing to the Person giving
the notice; and
     (d) the Borrowers’ website on the Internet is available at the website
address www.bordersgroupinc.com.

- 134 -

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

 

     Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile,
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof, (iii) if delivered by a
Website Posting, upon delivery of a notice or other communication of such
posting (including the information necessary to access such site) by another
means set forth in this §16.6 and (iv) notices and other communications sent to
an e-mail address shall be deemed received on the next Business Day following
the sending thereof (unless the sender receives a return email or otherwise
indicating that such notice or other communication has not been received by the
recipient at such email address, in which case the sender shall deliver such
notice or communication by an alternate means), provided that if such notice or
other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at the
opening of business on the next Business Day for the recipient. Any notice or
other communication to be made hereunder or under the Notes or any Letter of
Credit Applications, even if otherwise required to be in writing under other
provisions of this Credit Agreement, the Notes or any Letter of Credit
Applications, may alternatively be made in an electronic record transmitted
electronically under such authentication and other procedures as the parties
hereto may from time to time agree in writing (but not an electronic record),
and such electronic transmission shall be effective at the time set forth in
such procedures. Unless otherwise expressly provided in such procedures, such an
electronic record shall be equivalent to a writing under the other provisions of
this Credit Agreement, the Notes or any Letter of Credit Applications, and such
authentication, if made in compliance with the procedures so agreed by the
parties hereto in writing (but not an electronic record), shall be equivalent to
a signature under the other provisions of this Credit Agreement, the Notes or
any Letter of Credit Applications.
     16.7. Governing Law. THIS AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED THEREIN, THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW (OTHER THAN THE NEW YORK GENERAL
OBLIGATIONS LAW §5-1401)). EACH OF THE BORROWERS AND THE GUARANTORS AGREES THAT
ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS BY
MAIL AT THE ADDRESS SPECIFIED IN §16.6. EACH OF THE BORROWERS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
     16.8. Headings. The captions in this Credit Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
     16.9. Counterparts. This Credit Agreement and any amendment hereof may be
executed in several counterparts and by each party on a separate counterpart,
each of which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought. Delivery by facsimile or
other electronic transmission by any of the parties hereto of an executed
counterpart hereof or of any amendment or waiver hereto shall be as effective as
an original executed counterpart hereof or of such amendment or

- 135 -

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

 

waiver and shall be considered a representation that an original executed
counterpart hereof or such amendment or waiver, as the case may be, will be
delivered.
     16.10. Entire Agreement, Etc. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Credit Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in §16.12.
     16.11. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE
ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOANS
OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT WILL NOT SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. Each of the Borrowers and the Guarantors
(a) certifies that no representative, agent or attorney of any Lender, any
Issuing Bank or any Agent has represented, expressly or otherwise, that such
Lender, such Issuing Bank or such Agent would not, in the event of litigation,
seek to enforce the foregoing waivers or other waivers contained in this Credit
Agreement or the other Loan Documents or other waivers contained in this Credit
Agreement or the other Loan Documents and (b) acknowledges that each Agent, each
Issuing Bank and the Lenders have been induced to enter into this Credit
Agreement, the other Loan Documents to which it is a party by, among other
things, the waivers and certifications contained herein.
     16.12. Consents, Amendments, Waivers, Etc. Any consent or approval required
or permitted by this Credit Agreement to be given by the Lenders may be given,
and any term of this Credit Agreement, the other Loan Documents or any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by any of the Borrowers or any of their Subsidiaries
of any terms of this Credit Agreement, the other Loan Documents or such other
instrument or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrowers and the
written consent of the Required Lenders. Notwithstanding the foregoing, no
amendment, modification or waiver shall:
     (a) without the written consent of the Borrowers and each Lender directly
affected thereby:
     (i) reduce or forgive the principal amount of any Loans or Reimbursement
Obligations, or reduce the rate of interest on the Notes or the amount of the
Commitment Fee, the Last Out Commitment Fee or Letter of Credit Fees (other than
interest accruing pursuant to §5.11.2 following the effective date of any waiver
by the Required Lenders of the Default or Event of Default relating thereto);
     (ii) increase the amount of such Lender’s Commitment or Last Out Revolving
Commitment or extend the expiration date of such Lender’s Commitment or Last Out
Revolving Commitment;

- 136 -

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

 

     (iii) postpone or extend the Maturity Date or any other regularly scheduled
dates for payments of principal of, or interest on, the Loans or Reimbursement
Obligations or any Fees or other amounts payable to such Lender (it being
understood that (A) a waiver of the application of the default rate of interest
pursuant to §5.11.2, and (B) any vote to rescind any acceleration made pursuant
to §13.1 of amounts owing with respect to the Loans and other Obligations shall
require only the approval of the Required Lenders);
     (iv) other than pursuant to a transaction permitted by the terms of this
Credit Agreement, release all or substantially all of the Collateral or release
all or substantially all of the Guarantors from their guaranty obligations; and
     (v) increase the percentage of Eligible Credit Card Receivables or Eligible
Inventory (as applicable) in the calculation of the Domestic Borrowing Base,
Aggregate Borrowing Base or Last Out Borrowing Base, it being understood,
however, that: the foregoing shall not (A) limit the adjustment by the
Administrative Agent of any reserve in the Administrative Agent’s administration
of the Loans as otherwise permitted by this Agreement or (B) prevent the
Administrative Agent from restoring any component of the Domestic Borrowing
Base, the Aggregate Borrowing Base or the Last Out Borrowing Base, which had
been lowered by the Administrative Agent back to the value of such component, as
stated in this Credit Agreement or to an intermediate value;
     (b) without the written consent of all of the Lenders, amend or waive this
§16.12 or the definition of Required Lenders or Required Revolving Lenders (it
being understood that the addition of one or more additional credit facilities,
the allowance of the credit extensions, interest and fees thereunder to share
ratably or on a subordinated basis with the Loans, Letters of Credit, interest
and Fees in the benefits of the Loan Documents and the inclusion of the holders
of such facilities in the determination of Required Lenders shall require only
the approval of the Required Lenders);
     (c) without the written consent of the Administrative Agent, amend or waive
§14, the amount or time of payment of the Administrative Agent’s fee payable for
the Administrative Agent’s account or any other provision applicable to the
Administrative Agent;
     (d) without the written consent of the applicable Issuing Bank, amend or
waive, the amount or time of payment of any Letter of Credit Fees or other fees
payable for such Issuing Bank’s account or any other provision applicable to
such Issuing Bank; or
     (e) without the written consent of the Swingline Lender amend or waive any
provision applicable to the Swingline Lender.
     No waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon. No course of dealing or delay or omission
on the part of any Agent, any Issuing Bank or any Lender in exercising any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand upon the Borrowers shall entitle the Borrowers to other or further
notice or demand in similar or other circumstances.

- 137 -

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

 

     16.13. Severability. The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held illegal, invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction and the parties shall endeavor in good faith
negotiations to replace the illegal, invalid or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the illegal, invalid or unenforceable provisions. Without limiting the
foregoing provisions of this §16.13, if and to the extent that the
enforceability of any provisions in this Agreement relating to Deteriorating
Lenders shall be limited by Debtor Relief Laws, as determined in good faith by
the Administrative Agent, the Issuing Bank or the Swingline Lender, as
applicable, then such provisions shall be deemed to be in effect only to the
extent not so limited.
17. USA PATRIOT ACT NOTICE.
     Each Lender, each Issuing Bank and each Agent (for itself and not on behalf
of any Lender or any Issuing Bank) hereby notifies each of the Borrowers that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the “Act”), it is required to obtain,
verify and record information that identifies the Borrowers, which information
includes the name and address of the Borrowers and other information that will
allow such Lender, such Issuing Bank or such Agent, as applicable, to identify
the Borrowers in accordance with the Act.
18. TRANSITIONAL ARRANGEMENTS.
     18.1. Prior Credit Agreement Superseded. On the Effective Date, this Credit
Agreement shall supersede the Existing Credit Agreement in its entirety, except
as provided in this §18. On the Effective Date, (a) the rights and obligations
of the parties evidenced by the Existing Credit Agreement shall be evidenced by
this Credit Agreement and the other Loan Documents, (b) the “Loans” as defined
in the Existing Credit Agreement shall be converted to Loans as defined herein,
(c) the commitment percentages of the Lenders with respect to the “Loans” as
defined in the Existing Credit Agreement shall be reallocated in accordance with
Schedule 1 attached hereto, and (d) the Existing Letters of Credit issued by any
Issuing Bank for the account of the Borrowers prior to the Effective Date shall
be converted into Letters of Credit under this Credit Agreement. Without
limiting the generality of the foregoing and to the extent necessary, the
Lenders and the Administrative Agent reserve all of their rights under the
Existing Credit Agreement and each of the Guarantors hereby obligates itself
again in respect of all present and future Obligations under, inter alia, the
Existing Credit Agreement, as amended and restated by this Credit Agreement.
     18.2. Interest and Fees under Superseded Agreement. All interest and fees
and expenses, if any, owing or accruing under or in respect of the Existing
Credit Agreement through the Effective Date shall be calculated as of the
Effective Date (pro rated in the case of any fractional periods), and shall be
paid on the Effective Date. Commencing on the Effective Date, the Commitment
Fees hereunder shall be payable by the Borrowers to the Administrative Agent for
the account of the Lenders in accordance with §2.2.
19. INTERCREDITOR AGREEMENT.
     Notwithstanding anything herein to the contrary, the security interest
granted to the Administrative Agent, for the benefit of the Secured Parties,
pursuant to the Security Documents and the exercise of any right or remedy by
the Administrative Agent hereunder and thereunder are subject to the provisions
of the Intercreditor Agreement. In the event of any conflict between the terms
of the

- 138 -

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

 

Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern and control.
[Remainder of Page Intentionally Left Blank]

- 139 -

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

 

         

SCHEDULE 1.01A
PERMITTED RESTRUCTURING TRANSACTIONS
UNITED STATES

1.   Refinancing relating to the Torrance, California store, where Borders is
both the tenant and the lender to the landlord.   2.   Refinancing relating to
the Harrisburg, Pennsylvania warehouse, where Borders is both the tenant and the
lender to the landlord.   3.   Each of the preceding transactions may be
conducted independently of the other at any time and in any sequence and shall
be deemed to include all acts and steps necessary for the described action.   4.
  Each of the foregoing shall be in form and substance satisfactory to the
Administrative Agent in all material respects and shall not affect the security
interests of the Agents under the Loan Documents. The Borrowers shall provide
the Administrative Agent with all relevant documentation related to the
foregoing (in a reasonable time in advance of the consummation of foregoing
transactions) together with a certificate of a responsible officer of BGI
confirming the same.   5.   Each of the foregoing shall be accomplished in
compliance with the requirements of the Credit Agreement and the other Loan
Documents and, for the avoidance of doubt, each Domestic Subsidiary formed or
otherwise created in connection with any of the foregoing shall be a Guarantor
under the Loan Documents and become a party to the relevant Security Documents
prior to any such inclusion to the extent required by §8.13 of the Credit
Agreement.

PAPERCHASE

1.   Establish an employee stock plan, and issue Paperchase non-voting shares
and/or options in connection with such plan.   2.   BGI (or its relevant
Subsidiary) may consolidate the ownership of Paperchase into one wholly-owned
Subsidiary (other than Paperchase employee stock plan).   3.   BGI (or its
relevant Subsidiary) sells Paperchase to a third party purchaser.   4.   BGP
(UK) and Borders Superstores may loan the proceeds of the sales of Paperchase to
BGI.   5.   Borders Superstores and BGP (UK) may be restructured or liquidated
to allow them to distribute their assets to BGI; provided that any Capital Stock
of Paperchase shall continue to be subject to a first-priority perfected lien in
favor of the Administrative Agent.   6.   To the extent Paperchase receives a
payment from Borders, Inc. of its annual service fee (comprised of commission,
royalty and design fees), Paperchase may declare a dividend to its

 

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

 

    shareholders (BGP (UK) 14.742% and Borders Superstores 86.268%) in an amount
equal to the commission received. In turn, BGP (UK) and Borders Superstores will
loan or distribute the amount received from Paperchase to BGI. For the
year-ended January 30, 2010, the total service fee was approximately
$6.4 million. It is anticipated that this annual service fee will be
significantly reduced in this current fiscal year when the parties renegotiate
the terms of the service agreement.   7.   BGI may grant a perpetual license to
certain trademarks for use by Paperchase and a third party purchaser on terms to
be determined, but in any event on terms reasonably acceptable to the
Administrative Agent.   8.   Each of the preceding transactions may be conducted
independently of the other at any time and in any sequence and shall be deemed
to include all acts and steps necessary for the described action.   9.   To the
extent that it is lawful and would not cause materially adverse tax consequences
to the Borrowers, the proceeds of the foregoing transactions shall be applied to
repay the Obligations.   10.   The transactions described in paragraph 1 above
shall (i) be on arm’s length terms, (ii) be on terms and conditions (including
indemnity and expense reimbursement provisions) that are customary for
transactions of this type, (iii) be approved by the Board of Directors of BGI,
(iv) not result in any Borrower or Guarantor incurring any material liability or
retaining any material liability of Paperchase (or any other entity related to
the transaction), other than those retained liabilities relating to guarantees
of certain store leases as in effect prior to such disposition and so long as
such retained liabilities are treated under the Credit Agreement in a manner
acceptable to the Administrative Agent, and (v) be for cash consideration and
may include a retained minority equity component in the business so disposed
(or, in each case, in form and substance otherwise satisfactory to the
Administrative Agent).   11.   The Borrowers shall provide the Administrative
Agent with all relevant documentation related to the foregoing (in a reasonable
time in advance of the consummation of foregoing transactions) so that the
Administrative Agent can confirm that the foregoing conditions have been
satisfied together with a certificate of a responsible officer of BGI confirming
the same.