Exhibit 10.1
EXECUTION COPY
SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION
CREDIT AGREEMENT
Dated as of February 16, 2011
by and among
BORDERS GROUP, INC. and BORDERS, INC.,
as the Borrowers,
THE OTHER PERSONS PARTY HERETO THAT ARE
DESIGNATED AS CREDIT PARTIES,
GENERAL ELECTRIC CAPITAL CORPORATION,
for itself, as a Revolving Lender, FILO Lender and Swingline Lender
and as Working Capital Agent for all Lenders,
GA CAPITAL, LLC
as Term B Agent for all Term B Lenders
and as Sole Lead Arranger and Bookrunner on the Term B Facility
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders
****************************************
GE CAPITAL MARKETS, INC.,
as Sole Lead Arranger and Bookrunner on the Working Capital Facility
and
THE CIT GROUP/BUSINESS CREDIT, INC.
as Syndication Agent

 

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TABLE OF CONTENTS

         
ARTICLE I. THE CREDITS
    2  
1.1 Amounts and Terms of Commitments
    2  
1.2 Notes
    10  
1.3 Interest
    11  
1.4 Loan Accounts
    12  
1.5 Procedure for Revolving Credit Borrowing
    13  
1.6 Conversion and Continuation Elections
    14  
1.7 Reductions in Revolving Commitments
    15  
1.8 Mandatory Prepayments of Loans and Commitment Reductions
    16  
1.9 Fees
    18  
1.10 Payments by the Borrowers
    19  
1.11 Payments by the Revolving Lenders to Working Capital Agent; Settlement
    23  
1.12 Borrower Representative
    27  
1.13 Super Priority Nature of Obligations and Lenders’ Liens
    28  
1.14 Payment of Obligations
    29  
1.15 No Discharge; Survival of Claims
    29  
1.16 Release
    29  
1.17 Waiver of any Priming Rights
    30  
1.18 Adequate Protection Superpriority Claims
    30  
ARTICLE II. CONDITIONS PRECEDENT
    30  
2.1 Conditions of Initial Loans
    30  
2.2 Conditions to All Borrowings
    32  
ARTICLE III. REPRESENTATIONS AND WARRANTIES
    33  
3.1 Corporate Existence and Power
    33  
3.2 Corporate Authorization; No Contravention
    33  
3.3 Governmental Authorization
    34  
3.4 Binding Effect
    34  
3.5 Litigation
    34  
3.6 No Default
    35  
3.7 ERISA Compliance
    35  
3.8 Use of Proceeds; Margin Regulations
    35  

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3.9 Ownership of Property; Liens
    36  
3.10 Taxes
    36  
3.11 Financial Condition and Approved Budget
    37  
3.12 Environmental Matters
    38  
3.13 Regulated Entities
    39  
3.14 Intentionally Omitted
    39  
3.15 Labor Relations
    39  
3.16 Intellectual Property
    40  
3.17 Brokers’ Fees; Transaction Fees
    40  
3.18 Insurance
    40  
3.19 Ventures, Subsidiaries and Affiliates; Outstanding Stock
    40  
3.20 Jurisdiction of Organization; Chief Executive Office
    41  
3.21 Locations of Inventory, Equipment and Books and Records
    41  
3.22 Deposit Accounts and Other Accounts
    41  
3.23 Government Contracts
    41  
3.24 Intentionally Omitted
    41  
3.25 Intentionally Omitted
    41  
3.26 Subordinated Debt
    41  
3.27 Full Disclosure
    41  
3.28 Foreign Assets Control Regulations and Anti-Money Laundering
    42  
3.29 Patriot Act
    42  
3.30 Reorganization Matters
    42  
3.31 Excluded Subsidiaries
    43  
ARTICLE IV. AFFIRMATIVE COVENANTS
    43  
4.1 Financial Statements
    44  
4.2 Appraisals; Certificates; Other Information
    44  
4.3 Notices
    47  
4.4 Preservation of Corporate Existence, Etc
    49  
4.5 Maintenance of Property
    50  
4.6 Insurance
    50  
4.7 Payment of Obligations
    51  
4.8 Compliance with Laws
    52  
4.9 Inspection of Property and Books and Records
    52  

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4.10 Use of Proceeds
    53  
4.11 Cash Management Systems
    53  
4.12 Lien Waivers
    54  
4.13 Further Assurances
    55  
4.14 Environmental Matters
    56  
4.15 Restructuring Advisers
    57  
4.16 Approved Budget
    57  
4.17 Status of Permitted Store Closings
    58  
4.18 Leases
    59  
ARTICLE V. NEGATIVE COVENANTS
    59  
5.1 Limitation on Liens
    59  
5.2 Disposition of Assets
    61  
5.3 Consolidations and Mergers
    62  
5.4 Acquisitions; Loans and Investments
    62  
5.5 Limitation on Indebtedness
    64  
5.6 Employee Loans and Transactions with Affiliates
    65  
5.7 Compensation
    65  
5.8 Margin Stock; Use of Proceeds
    65  
5.9 Contingent Obligations
    65  
5.10 Compliance with ERISA
    66  
5.11 Restricted Payments
    67  
5.12 Change in Business
    67  
5.13 Change in Structure
    67  
5.14 Changes in Accounting, Name or Jurisdiction of Organization
    67  
5.15 Amendments to Subordinated Indebtedness
    68  
5.16 No Negative Pledges
    68  
5.17 OFAC; Patriot Act
    68  
5.18 Sale-Leasebacks
    68  
5.19 Hazardous Materials
    68  
5.20 Prepayments of Other Indebtedness
    68  
5.21 Budget and Availability Compliance Covenants
    68  
5.22 Repayment of Indebtedness
    69  
5.23 Reclamation Claims
    69  

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5.24 Chapter 11 Claims
    69  
5.25 Bankruptcy Actions
    69  
ARTICLE VI. [INTENTIONALLY OMITTED]
    69  
ARTICLE VII. EVENTS OF DEFAULT
    69  
7.1 Events of Default
    69  
7.2 Working Capital Termination Declaration
    75  
7.3 Term B Termination Declaration
    75  
7.4 Use Rights
    76  
7.5 Restrictions on Remedies
    77  
7.6 Borrowers’ Assistance, Intellectual Property Access
    77  
7.7 Rights Not Exclusive
    77  
7.8 Cash Collateral for Letters of Credit
    77  
7.9 Sale Process Default
    78  
ARTICLE VIII. THE AGENT
    78  
8.1 Appointment and Duties
    78  
8.2 Binding Effect
    80  
8.3 Use of Discretion
    80  
8.4 Delegation of Rights and Duties
    81  
8.5 Reliance and Liability
    82  
8.6 Agents Individually
    84  
8.7 Lender Credit Decision
    84  
8.8 Expenses; Indemnities; Withholding
    85  
8.9 Resignation of Agent or L/C Issuer
    86  
8.10 Release of Collateral or Guarantors
    87  
8.11 Additional Secured Parties
    88  
8.12 Documentation Agent and Syndication Agent
    88  
ARTICLE IX. MISCELLANEOUS
    89  
9.1 Amendments and Waivers
    89  
9.2 Notices
    91  
9.3 Electronic Transmissions
    92  
9.4 No Waiver; Cumulative Remedies
    93  
9.5 Costs and Expenses
    94  
9.6 Indemnity
    95  

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9.7 Marshaling; Payments Set Aside
    97  
9.8 Intentionally Omitted
    97  
9.9 Assignments and Participations; Binding Effect
    97  
9.10 Non-Public Information; Confidentiality
    100  
9.11 Set-off; Sharing of Payments
    102  
9.12 Counterparts; Facsimile Signature
    103  
9.13 Severability
    103  
9.14 Captions
    104  
9.15 Independence of Provisions
    104  
9.16 Interpretation
    104  
9.17 No Third Parties Benefited
    104  
9.18 GOVERNING LAW
    104  
9.19 WAIVER OF JURY TRIAL
    105  
9.20 Entire Agreement; Release; Survival
    105  
9.21 Patriot Act
    106  
9.22 Replacement of Lender
    106  
9.23 Joint and Several
    107  
9.24 Creditor-Debtor Relationship
    108  
9.25 Actions in Concert
    109  
ARTICLE X. TAXES, YIELD PROTECTION AND ILLEGALITY
    109  
10.1 Taxes
    109  
10.2 Illegality
    112  
10.3 Increased Costs and Reduction of Return
    113  
10.4 Funding Losses
    114  
10.5 Inability to Determine Rates
    115  
10.6 Reserves on LIBOR Rate Loans
    115  
10.7 Certificates of Lenders
    115  
10.8 Parties Including Trustees; Bankruptcy Court Proceedings
    115  
10.9 Intercreditor Agreement Superseded
    116  
ARTICLE XI. DEFINITIONS
    116  
11.1 Defined Terms
    116  
11.2 Other Interpretive Provisions
    156  
11.3 Accounting Terms and Principles
    157  
11.4 Payments
    157  

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SCHEDULES

     
Schedule 1.1(a)(i)
  FILO Commitments
Schedule 1.1(a)(ii)
  Term B Commitments
Schedule 1.1(b)
  Revolving Commitments
Schedule 2.1(l)
  First Day Orders
Schedule 3.5
  Litigation
Schedule 3.7
  ERISA
Schedule 3.9
  Ownership of Property; Liens
Schedule 3.10
  Tax Matters
Schedule 3.11(a)
  Historical Financial Statements
Schedule 3.12
  Environmental
Schedule 3.15
  Labor Relations
Schedule 3.16
  Intellectual Property
Schedule 3.18
  Insurance
Schedule 3.19
  Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.20
  Jurisdiction of Organization; Chief Executive Office
Schedule 3.21
  Locations of Inventory, Equipment and Books and Records
Schedule 3.22
  Deposit Accounts and Other Accounts
Schedule 3.23
  Government Contracts
Schedule 4.18
  Store Leases
Schedule 5.1
  Liens
Schedule 5.4
  Investments
Schedule 5.5
  Indebtedness
Schedule 5.6
  Transactions with Affiliates
Schedule 5.9
  Contingent Obligations
Schedule 11.1
  Permitted Store Closings

EXHIBITS

     
Exhibit 1.1(c)
  Form of L/C Request
Exhibit 1.1(d)
  Form of Swingline Request
Exhibit 1.6
  Form of Notice of Conversion/Continuation
Exhibit 2.1
  Closing Checklist
Exhibit 4.2(m)
  Form of Compliance Certificate
Exhibit 11.1(a)
  Form of Assignment
Exhibit 11.1(b)
  Form of Borrowing Base Certificate
Exhibit 11.1(c)
  Form of FILO Note
Exhibit 11.1(d)
  Form of Notice of Borrowing
Exhibit 11.1(e)
  Form of Revolving Note
Exhibit 11.1(f)
  Form of Swingline Note
Exhibit 11.1(g)
  Form of Term B Note
Exhibit A
  Form of Interim Order

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CREDIT AGREEMENT
     This SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT
(including all exhibits and schedules hereto, as the same may be amended,
modified and/or restated from time to time, this “Agreement”) is entered into as
of February 16, 2011, by and among (i) BORDERS GROUP, INC. a Michigan
corporation, as a debtor-in-possession (“BGI”), (ii) BORDERS, INC., a Colorado
corporation, as a debtor-in-possession (“Borders” and collectively with BGI, the
“Borrowers” and each individually a “Borrower”), each other Persons from time to
time party hereto as a “Credit Party” (each as a debtor-in-possession), (iii)
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual
capacity, “GE Capital”), as Working Capital Agent for the Lenders (as defined
herein) and for itself as a Revolving Lender (including as Swingline Lender) and
as L/C Issuer with respect to the Cash Management Letter of Credit (as defined
below), (iv) GA CAPITAL, LLC, a Delaware limited liability company, as Term B
Agent for the Term B Lenders and (v) the Lenders party hereto.
W I T N E S S E T H:
     WHEREAS, on February 16, 2011 (the “Petition Date”), each of the Credit
Parties commenced a case under Chapter 11 of the Bankruptcy Code Chapter 11, 11
U.S.C. 101 et seq. (the “Bankruptcy Code”), Case No. 11-10614 (MG) (the
“Chapter 11 Cases”) by filing a voluntary petition for relief under Chapter 11,
with the United States Bankruptcy Court for the Southern District of New York
(the “Bankruptcy Court”). The Credit Parties continue to operate their
businesses and manage their properties as debtors and debtors-in-possession
pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code;
     WHEREAS, the Borrowers have requested, and upon terms and conditions set
forth in this Agreement, (i) the Revolving Lenders have agreed to make available
to the Borrowers, a senior secured, super-priority revolving credit facility
(including a Seventy-Five Million Dollar ($75,000,000) letter of credit
subfacility) in an amount up to Four Hundred and Ten Million Dollars
($410,000,000) (the “Revolving Facility”), (ii) the FILO Lenders have agreed to
make available to the Borrowers, a senior secured, super-priority “first in last
out” term loan in an amount up to Twenty Million Dollars ($20,000,000) (the
“FILO Facility”), (iii) the Term B Lenders have agreed to make available to the
Borrowers, a senior secured, super-priority term loan in an amount up to
Fifty-Five Million Dollars ($55,000,000) (the “Term B Facility”), in each
instance of clauses (i), (ii) and (iii) in order to (a) repay the Pre-Petition
Facilities on the Closing Date, (b) fund the Chapter 11 Cases in accordance with
the Approved Budget, (c) make certain other payments on the Closing Date as more
fully provided in this Agreement and (d) provide for working capital and other
general corporate purposes of the Credit Parties during the pendency of the
Chapter 11 Cases, and (iv) Working Capital Agent as an L/C Issuer has agreed to
make available to the Borrowers an additional letter of credit facility in an
amount up to Twenty Million Dollars ($20,000,000) in support of the Actual Cash

 

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Management Exposure (the “Cash Management L/C Facility”, and collectively with
the Revolving Facility and the FILO Facility, the “Working Capital Facility”);
     WHEREAS, the Agents, Lenders and Credit Parties desire to secure the
Obligations under the Loan Documents by granting to Working Capital Agent, for
the benefit of the Secured Parties, a security interest in and lien upon
substantially all of their Property, as more fully set forth in the Loan
Documents and in the Interim Order (or Final Order when applicable);
     NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I.
THE CREDITS
     1.1 Amounts and Terms of Commitments.
               (a) The FILO Loan and the Term B Loan.
               (i) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Credit Parties contained
herein, each FILO Lender severally and not jointly agrees to lend, on the
Closing Date, to the Borrowers the amount set forth opposite such FILO Lender’s
name in Schedule 1.1(a)(i) under the heading “FILO Commitments” (such amount
being referred to herein as such FILO Lender’s “FILO Commitment”). Amounts
borrowed under this Section 1.1(a)(i) are referred to as the “FILO Loan.”).
               (ii) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Credit Parties contained
herein, each Term B Lender severally and not jointly agrees to lend, on the
Closing Date, to the Borrowers the amount set forth opposite such Term B
Lender’s name in Schedule 1.1(a)(ii) under the heading “Term B Loans
Commitments” (such amount being referred to herein as such Term B Lender’s “Term
B Commitment”); provided that each of 1903 Offshore Loans SPV Limited and Stone
Tower Credit Funding I Ltd. will fund their Term B Commitment hereunder by
tendering all or a portion of its current holding under the Pre-Petition Term
Facility for an equal amount of principal under the Term B Facility. For the
avoidance of doubt, the Term B Commitment shall terminate on the Closing Date.
Amounts borrowed under this Section 1.1(a)(ii) are referred to as the “Term B
Loans.”)
               (iii) Amounts borrowed as a FILO Loan or a Term B Loans which are
repaid or prepaid may not be reborrowed.
               (b) The Revolving Credit.
               (i) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Credit Parties contained
herein, each Revolving Lender severally and not jointly agrees to make Loans to
the Borrowers

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(each such Loan, a “Revolving Loan”) from time to time on any Business Day
during the period from the Closing Date through the Final Availability Date, in
an aggregate amount not to exceed at any time outstanding the amount set forth
opposite such Revolving Lender’s name in Schedule 1.1(b) under the heading
“Revolving Commitment” (such amount as the same may be reduced or increased from
time to time in accordance with this Agreement, being referred to herein as such
Revolving Lender’s “Revolving Commitment”); provided, however, that, after
giving effect to any Borrowing of Revolving Loans, (x) the Aggregate Exposure
shall not exceed the Maximum Borrowing Availability and (y) the Aggregate
Revolving Exposure shall not exceed the Maximum Revolving Borrowing Availability
and (z) the Revolving Exposure of any Revolving Lender shall not exceed such
Revolving Lender’s Revolving Commitment. Subject to the other terms and
conditions hereof, amounts borrowed under this Section 1.1(b) may be repaid and
reborrowed from time to time.
               (ii) Notwithstanding anything to the contrary contained in this
Agreement, after the occurrence of an Event of Default, Working Capital Agent
may, in its sole discretion, elect to make, or permit to remain outstanding
Revolving Loans that, when aggregated with the outstanding Swing Loans, FILO
Loans and Letter of Credit Obligations (other than with respect to the Cash
Management Letter of Credit), would cause the Aggregate Exposure to exceed the
Borrowing Base, less the Mandatory Reserves (any such excess Revolving Loan is
herein referred to as an “Overadvance”); provided, however, that (A) Working
Capital Agent may not cause Revolving Lenders to make, or permit to remain
outstanding, (1) aggregate Revolving Loans in excess of the Aggregate Revolving
Commitment less the Aggregate Exposure or (2) any Overadvance that does not
constitute a Permitted Overadvance. The Working Capital Agent’s ability to elect
to make, or permit to remain outstanding any Overadvance pursuant to the
previous sentence is in addition to any Inadvertent Overadvance that may exist
at such time. If an Overadvance is made, or permitted to remain outstanding,
then all Revolving Lenders shall be bound to make, or permit to remain
outstanding, such Overadvance based upon their Revolving Commitment Percentage
of the Aggregate Revolving Commitment in accordance with the terms of this
Agreement, regardless of whether the conditions to lending set forth in
Section 2.2 have been met. All Overadvances shall constitute Base Rate Loans,
shall bear interest at the Base Rate plus the Revolving Applicable Margin and
the default rate for Revolving Loans under Section 1.3(c), and shall be due and
payable upon demand of Working Capital Agent.
               (c) Letters of Credit and the Cash Management Letter of Credit.
               (i) Conditions for Letters of Credit. On the terms and subject to
the conditions contained herein, Borrower Representative may request that one or
more L/C Issuers Issue, in accordance with such L/C Issuers’ usual and customary
business practices and for the account of the Credit Parties, Letters of Credit
(denominated in Dollars) from time to time on any Business Day during the period
from the Closing Date through the earlier of (x) the Final Availability Date and
(y) seven (7) days prior to the date specified in clause (a) of the definition
of Termination Date;

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provided, however, that no L/C Issuer shall Issue any Letter of Credit upon the
occurrence of any of the following or, if after giving effect to such Issuance:
     (A) (i) the Aggregate Exposure shall exceed the Maximum Borrowing
Availability or (y) the Aggregate Revolving Exposure shall exceed the Maximum
Revolving Borrowing Availability, or (ii) the Letter of Credit Obligations for
all Letters of Credit (other than the Cash Management Letter of Credit) would
exceed $75,000,000;
     (B) the expiration date of such Letter of Credit (i) is not a Business Day,
(ii) is more than one year after the date of issuance thereof or (iii) is later
than seven (7) days prior to the date specified in clause (a) of the definition
of Termination Date; provided, however, that any Letter of Credit with a term
not exceeding one year may provide for its renewal for additional periods not
exceeding one year as long as (x) each Borrower and such L/C Issuer have the
option to prevent such renewal before the expiration of such term or any such
period and (y) neither such L/C Issuer nor any Borrower shall permit any such
renewal to extend such expiration date beyond the date set forth in clause (iii)
above; or
     (C) (i) any fee due in connection with, and on or prior to, such Issuance
has not been paid, (ii) such Letter of Credit is requested to be issued in a
form that is not reasonably acceptable to such L/C Issuer or (iii) such L/C
Issuer shall not have received, each in form and substance reasonably acceptable
to it and duly executed by the Borrowers (or a Credit Party, as applicable) or
the Borrower Representative on their behalf, the documents that such L/C Issuer
generally uses in the Ordinary Course of Business for the Issuance of letters of
credit of the type of such Letter of Credit (collectively, the “L/C
Reimbursement Agreement”).
               (ii) Conditions for Cash Management Letter of Credit. On the
terms and subject to the conditions contained herein, Borrower Representative
may request that one or more L/C Issuers Issue, on a one time basis in
accordance with such L/C Issuers’ usual and customary business practices and for
the account of the Credit Parties, the Cash Management Letter of Credit
(denominated in Dollars) on any Business Day during the period from the Closing
Date through the earlier of (y) the Final Availability Date and (z) seven
(7) days prior to the date specified in clause (a) of the definition of
Termination Date; provided, however, that no L/C Issuer shall Issue the Cash
Management Letter of Credit upon the occurrence of any of the following or, if
after giving effect to such Issuance:
     (A) the Letter of Credit Obligations for the Cash Management Letter of
Credit would exceed $20,000,000;
     (B) the expiration date of the Cash Management Letter of Credit (i) is not
a Business Day, (ii) is more than one year after the date of issuance thereof or
(iii) is later than seven (7) days prior to the date specified in clause (a) of
the

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definition of Termination Date; provided, however, that any Cash Management
Letter of Credit with a term not exceeding one year may provide for its renewal
for additional periods not exceeding one year as long as (x) each Borrower and
such L/C Issuer have the option to prevent such renewal before the expiration of
such term or any such period and (y) neither such L/C Issuer nor any Borrower
shall permit any such renewal to extend such expiration date beyond the date set
forth in clause (iii) above; or
     (C) (i) any fee due in connection with, and on or prior to, such Issuance
has not been paid, (ii) the Cash Management Letter of Credit is requested to be
issued in a form that is not acceptable to such L/C Issuer or (iii) such L/C
Issuer shall not have received an L/C Reimbursement Agreement with respect to
such Cash Management Letter of Credit.
In addition, the Cash Management Letter of Credit shall provide that the maximum
face amount thereof shall automatically be reduced by any draws under such Cash
Management Letter of Credit on a dollar for dollar basis.
Furthermore, GE Capital as an L/C Issuer may elect only to issue Letters of
Credit in its own name and may only issue Letters of Credit to the extent
permitted by Requirements of Law, and such Letters of Credit may not be accepted
by certain beneficiaries such as insurance companies. For each Issuance, the
applicable L/C Issuer may, but shall not be required to, determine that, or take
notice whether, the conditions precedent set forth in Section 2.2 have been
satisfied or waived in connection with the Issuance of any Letter of Credit;
provided, however, that no Letter of Credit shall be Issued during the period
starting on the first Business Day after the receipt by such L/C Issuer of
notice from Working Capital Agent or the Required Lenders that any condition
precedent contained in Section 2.2 is not satisfied and ending on the date all
such conditions are satisfied or duly waived.
Notwithstanding anything else to the contrary herein, if any Revolving Lender is
a Non-Funding Lender or Impacted Lender, no L/C Issuer shall be obligated to
Issue any Letter of Credit unless (w) the Non-Funding Lender or Impacted Lender
has been replaced in accordance with Section 9.9 or 9.22, (x) the Letter of
Credit Obligations of such Non-Funding Lender or Impacted Lender have been cash
collateralized, or (y) the Revolving Commitments of the other Revolving Lenders
have been increased by an amount sufficient to satisfy Working Capital Agent
that all future Letter of Credit Obligations will be covered by all Revolving
Lenders that are not Non-Funding Lenders or Impacted Lenders, or (z) the Letter
of Credit Obligations of such Non-Funding Lender or Impacted Lender have been
reallocated to other Revolving Lenders in a manner consistent with
Section 1.11(e)(ii).
               (iii) Notice of Issuance. The Borrower Representative shall give
the relevant L/C Issuer and Working Capital Agent a notice of any requested
Issuance of any Letter of Credit, which shall be effective only if received by
such L/C Issuer and Working Capital Agent not later than 2:00 p.m. (New York
time) on the third Business Day prior to the date of such requested Issuance.
Such notice shall be made in a

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writing or Electronic Transmission substantially in the form of Exhibit 1.1(c)
duly completed or in a writing in any other form acceptable to such L/C Issuer
(an “L/C Request”).
               (iv) Reporting Obligations of L/C Issuers. Each L/C Issuer agrees
to provide Working Capital Agent, in form and substance satisfactory to Working
Capital Agent, each of the following on the following dates: (A) (i) on or prior
to any Issuance of any Letter of Credit by such L/C Issuer, (ii) immediately
after any drawing under any such Letter of Credit or (iii) immediately after any
payment (or failure to pay when due) by the Borrowers of any related L/C
Reimbursement Obligation, notice thereof, which shall contain a reasonably
detailed description of such Issuance, drawing or payment, and Working Capital
Agent shall provide copies of such notices to each Revolving Lender reasonably
promptly after receipt thereof; (B) upon the request of Working Capital Agent
(or any Revolving Lender through Working Capital Agent), copies of any Letter of
Credit Issued by such L/C Issuer and any related L/C Reimbursement Agreement and
such other documents and information as may reasonably be requested by Working
Capital Agent; and (C) on the first Business Day of each calendar week, a
schedule of the Letters of Credit Issued by such L/C Issuer, in form and
substance reasonably satisfactory to Working Capital Agent, setting forth the
Letter of Credit Obligations for such Letters of Credit outstanding on the last
Business Day of the previous calendar week.
               (v) Acquisition of Participations. Subject to
Section 1.1(c)(viii) hereof with respect to the Cash Management Letter of
Credit, upon any Issuance of a Letter of Credit in accordance with the terms of
this Agreement resulting in any increase in the Letter of Credit Obligations,
each Revolving Lender shall be deemed to have acquired, without recourse or
warranty, an undivided interest and participation in such Letter of Credit and
the related Letter of Credit Obligations in an amount equal to its Commitment
Percentage of such Letter of Credit Obligations.
               (vi) Reimbursement Obligations of the Borrowers. The Borrowers
agree to pay to the L/C Issuer of any Letter of Credit, or to Working Capital
Agent for the benefit of such L/C Issuer, each L/C Reimbursement Obligation
owing with respect to such Letter of Credit no later than the first Business Day
after the Borrowers or the Borrower Representative receive notice from such L/C
Issuer or from Working Capital Agent that payment has been made under such
Letter of Credit or that such L/C Reimbursement Obligation is otherwise due (the
“L/C Reimbursement Date”) with interest thereon computed as set forth in clause
(A) below. In the event that any L/C Reimbursement Obligation is not repaid by
the Borrowers as provided in this clause (vi) (or any such payment by the
Borrowers is rescinded or set aside for any reason), such L/C Issuer shall
promptly notify Working Capital Agent of such failure (and, upon receipt of such
notice, Working Capital Agent shall notify each Revolving Lender) and,
irrespective of whether such notice is given, such L/C Reimbursement Obligation
shall be payable on demand by the Borrowers with interest thereon computed
(A) from the date on which such L/C Reimbursement Obligation arose to the L/C
Reimbursement Date, at the interest rate applicable during such period to
Revolving Loans that are Base Rate

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Loans and (B) thereafter until payment in full, at the interest rate applicable
during such period to past due Revolving Loans that are Base Rate Loans.
               (vii) Reimbursement Obligations of the Revolving Lenders.
                    (1) Subject to Section 1.1(c)(viii) hereof with respect to
the Cash Management Letter of Credit, upon receipt of the notice described in
clause (vi) above from Working Capital Agent, each Revolving Lender shall pay to
Working Capital Agent for the account of such L/C Issuer its Commitment
Percentage of such Letter of Credit Obligations (as such amount may be increased
pursuant to Section 1.11(e)(ii)).
                    (2) Subject to Section 1.1(c)(viii) hereof with respect to
the Cash Management Letter of Credit, by making any payments described in clause
(1) above, such Revolving Lender shall be deemed to have made a Revolving Loan
to the Borrowers, which, upon receipt thereof by Working Capital Agent for the
benefit of such L/C Issuer, the Borrowers shall be deemed to have used in whole
to repay such L/C Reimbursement Obligation. Subject to Section 1.1(c)(viii)
hereof with respect to the Cash Management Letter of Credit, any such payment
that is not deemed a Revolving Loan shall be deemed a funding by such Revolving
Lender of its participation in the applicable Letter of Credit and the Letter of
Credit Obligation in respect of the related L/C Reimbursement Obligations. Such
participation shall not otherwise be required to be funded. Following receipt by
any L/C Issuer of any payment from any Revolving Lender pursuant to this clause
(vii) with respect to any portion of any L/C Reimbursement Obligation, such L/C
Issuer shall promptly pay to Working Capital Agent, for the benefit of such
Revolving Lender, all amounts received by such L/C Issuer (or to the extent such
amounts shall have been received by Working Capital Agent for the benefit of
such L/C Issuer, Working Capital Agent shall promptly pay to such Revolving
Lender all amounts received by Working Capital Agent for the benefit of such L/C
Issuer) with respect to such portion.
               (viii) Cash Management Letter of Credit During Event of Default.
If the Cash Management Letter of Credit is drawn at any time upon or during the
continuance of an Event of Default, (i) the Working Capital Agent (as Issuer of
such Cash Management Letter of Credit) shall be deemed to have acquired, without
recourse or warranty, an undivided interest and participation in such Cash
Management Letter of Credit and the related Letter of Credit Obligations in an
amount equal to the face amount of such Cash Management Letter of Credit and
(ii) no Working Capital Lender shall be required to reimburse Working Capital
Agent (as Issuer of such Cash Management Letter of Credit) on account of the
Letter of Credit Obligations relating to such Cash Management Letter of Credit
nor shall any Working Capital Lender be deemed to have incurred an obligation to
participate in the Cash Management Letter of Credit or the Letter of Credit
Obligations relating thereto nor shall any Revolving Loans be made or deemed
made to repay the Letter of Credit Obligations with respect to the Cash
Management Letter of Credit. Following the occurrence and the continuance of an
Event of Default, all Letter of Credit fees payable on account of the Cash
Management Letter of Credit shall be for the account of the Working Capital
Facility Agent in its individual

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capacity and any L/C Reimbursement Obligations relating thereto including
interest or default interest thereon shall be for the account of the Working
Capital Agent in its individual capacity.
               (ix) Obligations Absolute. The obligations of the Borrowers and
the Revolving Lenders pursuant to clauses (iv) through (viii) above shall be
absolute, unconditional and irrevocable and performed strictly in accordance
with the terms of this Agreement irrespective of (A) (i) the invalidity or
unenforceability of any term or provision in any Letter of Credit, any document
transferring or purporting to transfer a Letter of Credit, any Loan Document
(including the sufficiency of any such instrument), or any modification to any
provision of any of the foregoing, (ii) any document presented under a Letter of
Credit being forged, fraudulent, invalid, insufficient or inaccurate in any
respect or failing to comply with the terms of such Letter of Credit or
(iii) any loss or delay, including in the transmission of any document, (B) the
existence of any setoff, claim, abatement, recoupment, defense or other right
that any Person (including any Credit Party) may have against the beneficiary of
any Letter of Credit or any other Person, whether in connection with any Loan
Document or any other Contractual Obligation or transaction, or the existence of
any other withholding, abatement or reduction, (C) in the case of the
obligations of any Revolving Lender, (i) the failure of any condition precedent
set forth in Section 2.2 to be satisfied (each of which conditions precedent the
Revolving Lenders hereby irrevocably waive) or (ii) any adverse change in the
condition (financial or otherwise) of any Credit Party and (D) any other act or
omission to act or delay of any kind of Working Capital Agent, any Revolving
Lender or any other Person or any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might, but for the
provisions of this clause (ix), constitute a legal or equitable discharge of any
obligation of the Borrowers or any Revolving Lender hereunder. No provision
hereof shall be deemed to waive or limit the Borrowers’ right to seek repayment
of any payment of any L/C Reimbursement Obligations from the L/C Issuer under
the terms of the applicable L/C Reimbursement Agreement or applicable law.
               (d) Swing Loans.
               (i) Availability. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the Credit
Parties contained herein, the Swingline Lender may, in its sole discretion, make
Loans (each a “Swing Loan”) available to the Borrowers under the Revolving
Commitments from time to time on any Business Day during the period from the
Closing Date through the Final Availability Date in an aggregate principal
amount at any time outstanding not to exceed its Swingline Commitment; provided,
however, that the Swingline Lender may not make any Swing Loan (x) to the extent
that after giving effect to such Swing Loan, the Aggregate Exposure would exceed
the Maximum Borrowing Availability, (y) the Aggregate Revolving Exposure would
exceed the Maximum Revolving Borrowing Availability and (z) the Revolving
Exposure of any Revolving Lender would exceed such Revolving Lender’s Revolving
Commitment and (z) during the period commencing on the first Business Day after
it receives notice from Working Capital Agent or the Required Working Capital
Lenders that one or more of the conditions precedent

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contained in Section 2.2 are not satisfied and ending when such conditions are
satisfied or duly waived. In connection with the making of any Swing Loan, the
Swingline Lender may but shall not be required to determine that, or take notice
whether, the conditions precedent set forth in Section 2.2 have been satisfied
or waived. Each Swing Loan shall be a Base Rate Loan and must be repaid as
provided herein, but in any event must be repaid in full on the Termination
Date. Within the limits set forth in the first sentence of this clause (i),
amounts of Swing Loans repaid may be reborrowed under this clause (i).
               (ii) Borrowing Procedures. In order to request a Swing Loan, the
Borrower Representative shall give to Working Capital Agent a notice to be
received not later than 2:00 p.m. (New York time) on the day of the proposed
Borrowing, which shall be made in a writing or in an Electronic Transmission
substantially in the form of Exhibit 1.1(d) or in a writing in any other form
acceptable to Working Capital Agent duly completed (a “Swingline Request”). In
addition, if any Notice of Borrowing of Revolving Loans requests a Borrowing of
Base Rate Loans, the Swingline Lender may, notwithstanding anything else to the
contrary herein, make a Swing Loan to the Borrowers in an aggregate amount not
to exceed such proposed Borrowing, and the aggregate amount of the corresponding
proposed Borrowing shall be reduced accordingly by the principal amount of such
Swing Loan. Working Capital Agent shall promptly notify the Swingline Lender of
the details of the requested Swing Loan. Upon receipt of such notice and subject
to the terms of this Agreement, the Swingline Lender may make a Swing Loan
available to the Borrowers by making the proceeds thereof available to Working
Capital Agent and, in turn, Working Capital Agent shall make such proceeds
available to the Borrowers on the date set forth in the relevant Swingline
Request or Notice of Borrowing.
               (iii) Refinancing Swing Loans. If no Revolving Lender is a
Non-Funding Lender, the Swingline Lender may at any time (and shall, no less
frequently than once each week) forward a demand to Working Capital Agent (which
Working Capital Agent shall, upon receipt, forward to each Revolving Lender)
that each Revolving Lender pay to Working Capital Agent, for the account of the
Swingline Lender, such Revolving Lender’s Revolving Commitment Percentage of the
outstanding Swing Loans. If any Revolving Lender is a Non-Funding Lender, that
Non-Funding Lender’s reimbursement obligations with respect to the Swing Loans
shall be reallocated to and assumed by the other Revolving Lenders pro rata in
accordance with their Revolving Commitment Percentages of the Revolving Loans
(calculated as if the Non-Funding Lender’s Revolving Commitment Percentage was
reduced to zero and each other Revolving Lender’s Revolving Commitment
Percentage had been increased proportionately). If any Revolving Lender is a
Non-Funding Lender, upon receipt of the demand described above, each Revolving
Lender that is not a Non-Funding Lender will be obligated to pay to Working
Capital Agent for the account of the Swingline Lender its pro rata share of the
outstanding Swing Loans (increased as described above); provided that no
Revolving Lender shall be required to fund any amount which would result in its
Revolving Exposure to exceed its Revolving Commitment. Each Revolving Lender
shall pay the amount owing by it to Working Capital Agent for the account of the
Swingline Lender on the Business Day following receipt of the notice or demand
therefor. Payments received by Working Capital Agent after 1:00 p.m. (New York
time) may, in

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Working Capital Agent’s discretion, be deemed to be received on the next
Business Day. Upon receipt by Working Capital Agent of such payment, such
Revolving Lender shall be deemed to have made a Revolving Loan to the Borrowers,
which, upon receipt of such payment by the Swingline Lender from Working Capital
Agent, the Borrowers shall be deemed to have used in whole to refinance such
Swing Loan. If any payment made by any Revolving Lender as a result of any such
demand is not deemed a Revolving Loan, each Revolving Lender shall be deemed to
have acquired, without recourse or warranty, an undivided interest and
participation in each Swing Loan in an amount equal to such Revolving Lender’s
Revolving Commitment Percentage of such Swing Loan and such payment shall be
deemed a funding by such Revolving Lender of such participation. Such
participation shall not be otherwise required to be funded. Upon receipt by the
Swingline Lender of any payment from any Revolving Lender pursuant to this
clause (iii) with respect to any portion of any Swing Loan, the Swingline Lender
shall promptly pay over to such Revolving Lender all payments of principal (to
the extent received after such payment by such Revolving Lender) and interest
(to the extent accrued with respect to periods after such payment) on account of
such Swing Loan received by the Swingline Lender with respect to such portion.
               (iv) Obligation to Fund Absolute. Each Revolving Lender’s
obligations pursuant to clause (iii) above shall be absolute, unconditional and
irrevocable and shall be performed strictly in accordance with the terms of this
Agreement under any and all circumstances whatsoever, including (A) the
existence of any setoff, claim, abatement, recoupment, defense or other right
that such Revolving Lender, any Affiliate thereof or any other Person may have
against the Swingline Lender, Working Capital Agent, any other Revolving Lender,
L/C Issuer or any other Person, (B) the failure of any condition precedent set
forth in Section 2.2 to be satisfied or the failure of the Borrower
Representative to deliver a Notice of Borrowing (each of which requirements the
Revolving Lenders hereby irrevocably waive) and (C) any adverse change in the
condition (financial or otherwise) of any Credit Party.
     1.2 Notes.
          (a) The FILO Loan made by each FILO Lender shall be evidenced by this
Agreement and, if requested by such FILO Lender, a FILO Note payable to such
FILO Lender in an amount equal to the unpaid principal balance of the FILO Loan
held by such FILO Lender.
          (b) The Term B Loans made by each Term B Lender shall be evidenced by
this Agreement and, if requested by such Term B Lender, a Term B Note payable to
such Term B Lender in an amount equal to the unpaid principal balance of the
Term B Loans held by such Term B Lender.
          (c) The Revolving Loans made by each Revolving Lender shall be
evidenced by this Agreement and, if requested by such Revolving Lender, a
Revolving Note payable to the order of such Revolving Lender in an amount equal
to such Revolving Lender’s Revolving Commitment.

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          (d) Swing Loans made by the Swingline Lender shall be evidenced by
this Agreement and, if requested by such Swingline Lender, a Swingline Note in
an amount equal to the Swingline Commitment.
     1.3 Interest.
          (a) Subject to Sections 1.3(c) and 1.3(d), (i) each Revolving Loan and
Swing Loan shall bear interest on the outstanding principal amount thereof from
the date when made at a rate per annum equal to the LIBOR or the Base Rate, as
the case may be, plus the Revolving Applicable Margin; provided Swing Loans may
not be LIBOR Rate Loans, (ii) the FILO Loan shall bear interest on the
outstanding principal amount thereof from the Closing Date at a rate per annum
equal to the LIBOR or the Base Rate, as the case may be, plus the FILO
Applicable Margin and (iii) the Term B Loans shall bear interest on the
outstanding principal amount thereof from the Closing Date at a rate per annum
equal to LIBOR or the Base Rate, as the case may be, plus the Term B Applicable
Margin. Each determination of an interest rate by Agents shall be conclusive and
binding on each Borrower and the Lenders in the absence of manifest error. All
computations of fees and interest payable under this Agreement for LIBOR Rate
Loans and Term B Loans shall be made on the basis of a 360-day year and actual
days elapsed. All computations of interest payable under this Agreement for Base
Rate Loans (other than Term B Loans) shall be made on the basis of a 365/366 day
year and actual days elapsed. Interest and fees shall accrue during each period
during which interest or such fees are computed from the first day thereof to
the last day thereof.
          (b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any payment or
prepayment of the Loans.
          (c) Upon the occurrence and during the continuance of an Event of
Default, without further notice, motion or application to, hearing before, or
order from the Bankruptcy Court, the Borrowers shall pay interest (after as well
as before entry of judgment thereon to the extent permitted by law) on all
Obligations hereunder and under the Loan Documents from and after the date of
occurrence of such Event of Default, at a rate per annum which is determined by
adding two percent (2.00%) per annum to the rate of interest or fees applicable
thereto (or, if no rate of interest or fees is then applicable thereto, the rate
applicable to Revolving Loans at the Base Rate). All such interest shall be
payable on demand of the applicable Agent or the Required Working Capital
Lenders or the Required Term B Lenders (as applicable).
          (d) Anything herein to the contrary notwithstanding, the obligations
of the Borrowers hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by the respective Lender would be contrary to the

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provisions of any law applicable to such Lender limiting the highest rate of
interest which may be lawfully contracted for, charged or received by such
Lender, and in such event the Borrowers shall pay such Lender interest at the
highest rate permitted by applicable law (“Maximum Lawful Rate”); provided,
however, that if at any time thereafter the rate of interest payable hereunder
is less than the Maximum Lawful Rate, the Borrowers shall continue to pay
interest hereunder at the Maximum Lawful Rate until such time as the total
interest received by the Agents, on behalf of Lenders, is equal to the total
interest that would have been received had the interest payable hereunder been
(but for the operation of this paragraph) the interest rate payable since the
Closing Date as otherwise provided in this Agreement.
     1.4 Loan Accounts.
          (a) Agents, on behalf of the Lenders, shall record on their respective
books and records the amount of each Loan made, the interest rate applicable,
all payments of principal and interest thereon and the principal balance thereof
from time to time outstanding. Agents shall deliver to the Borrower
Representative on a monthly basis a loan statement setting forth such record for
the immediately preceding calendar month. Such record shall, absent manifest
error, be conclusive evidence of the amount of the Loans made by the applicable
Lenders to the Borrowers and the interest and payments thereon. Any failure to
so record or any error in doing so, or any failure to deliver such loan
statement shall not, however, limit or otherwise affect the obligation of the
Borrowers hereunder (and under any Note) to pay any amount owing with respect to
the Loans or provide the basis for any claim against Agents.
          (b) Agents, acting as non-fiduciary agents of the Borrowers solely for
tax purposes and solely with respect to the actions described in this
Section 1.4(b), shall establish and maintain at their respective address
referred to in Section 9.2 (or at such other address as the applicable Agent may
notify the Borrower Representative) (A) a record of ownership (each a
“Register”) in which Agents agree to register by book entry the interests
(including any rights to receive payment hereunder) of Agents, each Lender and
each L/C Issuer in the FILO Loan, Term B Loans, Revolving Loans, Swing Loans,
L/C Reimbursement Obligations, Letter of Credit Obligations, each of their
obligations under this Agreement to participate in each Loan, Letter of Credit,
Letter of Credit Obligations, L/C Reimbursement Obligations and any assignment
of any such interest, obligation or right and (B) accounts in the Registers in
accordance with its usual practice in which they shall record (as applicable)
(1) the names and addresses of the Lenders and the L/C Issuers (and each change
thereto pursuant to Sections 9.9 and 9.22), (2) the Revolving Commitments of
each Revolving Lender, (3) the FILO Commitments of each FILO Lender, (4) the
Term B Commitments of each Term B Lender, (5) the amount of each Loan and each
funding of any participation described in clause (A) above, and for LIBOR Rate
Loans, the Interest Period applicable thereto, (6) the amount of any principal
or interest due and payable or paid, (7) the amount of the L/C Reimbursement

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Obligations due and payable or paid in respect of Letters of Credit and (8) any
other payment received by Agents from a Borrower and its application to the
Obligations.
          (c) Notwithstanding anything to the contrary contained in this
Agreement, the Loans (including any Notes evidencing such Loans and, in the case
of Revolving Loans, the corresponding obligations to participate in Letter of
Credit Obligations and Swing Loans) and the L/C Reimbursement Obligations are
registered obligations, the right, title and interest of the Lenders, the L/C
Issuers and their assignees in and to such Loans or L/C Reimbursement
Obligations, as the case may be, shall be transferable only upon notation of
such transfer in the Registers and no assignment thereof shall be effective
until recorded therein. This Section 1.4 and Section 9.9 shall be construed so
that the Loans and L/C Reimbursement Obligations are at all times maintained in
“registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2)
of the Code.
          (d) The Credit Parties, Agents, the Lenders and the L/C Issuers shall
treat each Person whose name is recorded in the Registers as a Lender or L/C
Issuer, as applicable, for all purposes of this Agreement. Information contained
in the Registers with respect to any Lender or any L/C Issuer shall be available
for access by the Borrowers, the Borrower Representative, Agents, such Lender or
such L/C Issuer during normal business hours and from time to time upon at least
one Business Day’s prior notice. No Lender or L/C Issuer shall, in such
capacity, have access to or be otherwise permitted to review any information in
the Registers other than information with respect to such Lender or L/C Issuer
unless otherwise agreed by the applicable Agent.
     1.5 Procedure for Revolving Credit Borrowing.
          (a) Each Borrowing of a Revolving Loan shall be made upon the Borrower
Representative’s irrevocable (subject to Section 10.5) written notice delivered
to Working Capital Agent substantially in the form of a Notice of Borrowing or
in a writing in any other form acceptable to Working Capital Agent, which notice
must be received by Working Capital Agent prior to 2:00 p.m. (New York time)
(i) on the date which is one (1) Business Day prior to the requested Borrowing
date of each Base Rate Loan equal to or less than $50,000,000, (ii) on the date
which is three (3) Business Days prior to the requested Borrowing date of each
Base Rate Loan in excess of $50,000,000 and (iii) on the day which is three
(3) Business Days prior to the requested Borrowing date in the case of each
LIBOR Rate Loan. Such Notice of Borrowing shall specify:
               (i) the amount of the Borrowing (which shall be in an aggregate
minimum principal amount of $100,000);
               (ii) the requested Borrowing date, which shall be a Business Day;

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               (iii) whether the Borrowing is to be comprised of LIBOR Rate
Loans or Base Rate Loans; and
               (iv) if the Borrowing is to be LIBOR Rate Loans, the Interest
Period applicable to such Loans.
          (b) Upon receipt of a Notice of Borrowing, Working Capital Agent will
promptly notify each Revolving Lender of such Notice of Borrowing and of the
amount of such Revolving Lender’s Revolving Commitment Percentage of the
Borrowing.
          (c) Unless Working Capital Agent is otherwise directed in writing by
the Borrower Representative, the proceeds of each requested Borrowing after the
Closing Date will be made available to the Borrowers by Working Capital Agent by
wire transfer of such amount to the Borrowers pursuant to the wire transfer
instructions specified on the signature page hereto, or such other instructions
specified from time to time in writing by the Borrowers.
     1.6 Conversion and Continuation Elections.
          (a) The Borrowers shall have the option to (i) request that any
Revolving Loan be made as a LIBOR Rate Loan, (ii) convert at any time all or any
part of outstanding Revolving Loans (other than Swing Loans) from Base Rate
Loans to LIBOR Rate Loans, (iii) convert any LIBOR Rate Loan to a Base Rate
Loan, subject to Section 10.4 if such conversion is made prior to the expiration
of the Interest Period applicable thereto, or (iv) continue all or any portion
of any Loan as a LIBOR Rate Loan upon the expiration of the applicable Interest
Period. Any Loan or group of Loans having the same proposed Interest Period to
be made or continued as, or converted into, a LIBOR Rate Loan must be in a
minimum amount of $5,000,000. Any such election must be made by Borrower
Representative to the applicable Agent by 2:00 p.m. (New York time) on the 3rd
Business Day prior to (1) the date of any proposed Revolving Loan which is to
bear interest at LIBOR, (2) the end of each Interest Period with respect to any
LIBOR Rate Loans to be continued as such, or (3) the date on which the Borrowers
wish to convert any Base Rate Loan to a LIBOR Rate Loan for an Interest Period
designated by Borrower Representative in such election. If no election is
received with respect to a LIBOR Rate Loan by 2:00 p.m. (New York time) on the
3rd Business Day prior to the end of the Interest Period with respect thereto,
that LIBOR Rate Loan shall be converted to a Base Rate Loan at the end of its
Interest Period. Borrower Representative must make such election by notice to
the applicable Agent in writing, including by Electronic Transmission. In the
case of any conversion or continuation, such election must be made pursuant to a
written notice (a “Notice of Conversion/Continuation”) substantially in the form
of Exhibit 1.6 or in a writing in any other form acceptable to the applicable
Agent. No Loan shall be made, converted into or continued as a LIBOR Rate Loan,
if the conditions to Loans and Letters of Credit in Section 2.2 are not met at
the time of such proposed conversion or continuation and the applicable Agent or
Required

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Lenders have determined not to make or continue any Loan as a LIBOR Rate Loan as
a result thereof. No Revolving Loan or FILO Loan may be made as or converted
into a LIBOR Rate Loan until fifteen (15) days after the Closing Date.
          (b) Upon receipt of a Notice of Conversion/Continuation, the
applicable Agent will promptly notify each applicable Lender thereof. In
addition, the applicable Agent will, with reasonable promptness, notify the
Borrower Representative and the applicable Lenders of each determination of
LIBOR; provided that any failure to do so shall not relieve any Borrower of any
liability hereunder or provide the basis for any claim against Agents. All
conversions and continuations shall be made pro rata according to the respective
outstanding principal amounts of the Loans held by each Revolving Lender, FILO
Lender or Term B Lender, as applicable, with respect to which the notice was
given.
          (c) Notwithstanding any other provision contained in this Agreement,
after giving effect to any Borrowing, or to any continuation or conversion of
any Loans, there shall not be more than eight (8) different Interest Periods in
effect and no more than three (3) of such Interest Periods shall relate to 7 day
Interest Periods. No more than one (1) LIBOR Interest Period shall be in effect
with respect to the FILO Loans.
     1.7 Reductions in Revolving Commitments.
          (a) Reductions in Revolving Commitments. Borrowers may, at any time
upon at least five (5) Business Days’ (or such shorter period as is acceptable
to Working Capital Agent) prior notice by Borrower Representative to Working
Capital Agent, permanently reduce (but not terminate) the Aggregate Revolving
Commitment; provided that (A) such reductions shall be in a minimum amount equal
to $5,000,000 and in increments of $500,000 in excess thereof, (B) the Aggregate
Revolving Commitment shall not be reduced to an amount less than the aggregate
outstanding principal balance of Loans. In addition, Borrowers may, at any time
on at least ten (10) days’ prior written notice by Borrower Representative to
Working Capital Agent, terminate the Aggregate Revolving Commitment; provided
that upon such termination, all Obligations shall be immediately due and payable
in full. Optional reductions or terminations of the Revolving Commitment shall
be without premium or penalty except as provided in Section 10.4. All reductions
of the Aggregate Revolving Commitment shall be allocated pro rata in accordance
with their Revolving Commitment Percentages among all Revolving Lenders.
          (b) The notice of any reduction shall not thereafter be revocable by
the Borrowers or Borrower Representative and Working Capital Agent will promptly
notify each Revolving Lender, as applicable, of such Revolving Lender’s
Revolving Commitment Percentage of such prepayment. The payment amount specified
in such notice shall be due and payable on the date

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specified therein. Together with each prepayment under this Section 1.7, the
Borrowers shall pay any amounts required pursuant to Sections 1.9 and 10.4.
     1.8 Mandatory Prepayments of Loans and Commitment Reductions.
          (a) Advances in Excess of Maximum Borrowing Availability. If at any
time the then Aggregate Exposure exceeds the Maximum Borrowing Availability or
the Aggregate Revolving Exposure exceeds the Maximum Revolving Borrowing
Availability (in each case, other than as a result of an Overadvance permitted
pursuant to Section 1.1(b)(ii)), then the Borrowers shall immediately prepay
outstanding Revolving Loans or cash collateralize (in accordance herewith and in
a manner satisfactory to the L/C Issuers) outstanding Letters of Credit in an
amount sufficient to eliminate such excess.
          (b) FILO Loans. Subject to Section 1.10(c), the Borrowers shall repay
to the FILO Lenders in full on the date specified in clause (a) of the
definition of “Termination Date”, all Obligations with respect to the FILO Loan
outstanding on the Termination Date. Notwithstanding anything herein to the
contrary, except as expressly provided in Section 1.10(c), the Borrowers may not
make any principal payments on account of the FILO Loans until Borrowers’
Obligations to the Revolving Lenders have been paid in full (which may include
the provision of cash collateral for unmatured L/C Reimbursement Obligations)
and the Revolving Commitments have been terminated.
          (c) Term B Loans. Subject to Sections 1.8(e), 1.8(f) and 1.10(c), the
Borrowers shall repay to the Term B Lenders in full on the date specified in
clause (a) of the definition of “Termination Date”, all Obligations with respect
to the Term B Loans outstanding on the Termination Date. Notwithstanding
anything herein to the contrary, except as expressly provided in
Sections 1.8(e), 1.8(f) and 1.10(c), the Borrowers may not make any principal
payments on account of the Term B Loans until (i) Borrowers’ Obligations to the
Revolving Lenders have been paid in full (which may include the provision of
cash collateral for unmatured L/C Reimbursement Obligations) and the Revolving
Commitments have been terminated and (ii) Borrower’s Obligations to the FILO
Lenders have been paid in full.
          (d) Revolving Loans. The Borrowers shall repay to the Revolving
Lenders in full on the date specified in clause (a) of the definition of
“Termination Date”, all Obligations with respect to the Revolving Loans and
Swing Loans outstanding on the Termination Date.
          (e) Revolving Priority Collateral Asset Dispositions. If a Credit
Party or any Subsidiaries of a Credit Party shall at any time or from time to
time:

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               (i) make or agree to make a Disposition of Revolving Priority
Collateral (other than Dispositions permitted pursuant to Sections 5.2(a), (c)
and (d)) in excess of $100,000 in the aggregate; or
               (ii) suffer an Event of Loss in excess of $100,000 in the
aggregate for all such losses with respect to Revolving Priority Collateral;
then (A) the Borrower Representative shall promptly notify Agents of such
proposed Disposition or Event of Loss (including the amount of the estimated Net
Proceeds to be received by a Credit Party and/or such Subsidiary in respect
thereof), (B) promptly upon receipt by a Credit Party and/or such Subsidiary of
the Net Proceeds of such Disposition (including, without limitation, proceeds
from sales of Revolver Priority Collateral made in connection with any Permitted
Store Closings) or Event of Loss, the Credit Parties shall deliver, or cause to
be delivered, such Net Proceeds of Revolver Priority Collateral to Working
Capital Agent for distribution to the Lenders as a prepayment of the Loans,
which prepayment shall be applied in accordance with Section 1.10(c)(i) or
Section 1.10(c)(ii), as the case may be; provided, however, that in connection
with the Permitted Store Closings, so long as no Event of Default has occurred
and is continuing or would result therefrom and so long as aggregate proceeds
therefrom exceed $5,000,000, a one time payment of $5,000,000 of Net Proceeds
constituting Revolving Priority Collateral from the Permitted Store Closings
shall be paid to the Term B Agent for distribution to the Term B Lenders as a
prepayment and permanent reduction of the Term B Loans.
          (f) Term Priority Collateral Dispositions. If a Credit Party or any
Subsidiaries of a Credit Party shall at any time or from time to time:
               (i) make or agree to make a Disposition of Term Priority
Collateral (other than Dispositions permitted pursuant to Sections 5.2(a), (c)
and (d)); or
               (ii) suffer an Event of Loss in excess of $100,000 in the
aggregate for all such losses with respect to Term Priority Collateral;
then (A) the Borrower Representative shall promptly notify Agents of such
proposed Disposition or Event of Loss (including the amount of the estimated Net
Term B Proceeds to be received by a Credit Party and/or such Subsidiary in
respect thereof), (B) promptly upon receipt by a Credit Party and/or such
Subsidiary of the Net Term B Proceeds of such Disposition (including, without
limitation, proceeds from sales of Term Priority Collateral made in connection
with any Permitted Store Closings) or Event of Loss, the Credit Parties shall
deliver, or cause to be delivered, such Net Term B Proceeds of Term Priority
Collateral to Term B Agent for distribution to the Term B Lenders as a
prepayment of the Term B Loans, which prepayment shall be applied in accordance
with Section 1.10(c)(iii).
          (g) No Implied Consent. Provisions contained in this Section 1.8 for
the application of proceeds of certain transactions shall not be deemed to
constitute consent of the Lenders to transactions that are not otherwise
permitted by the terms hereof or the other Loan Documents.

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     1.9 Fees.
          (a) Fees. The Borrowers shall pay to Agents, for Agents’ own account,
fees in the amounts and at the times set forth in certain fee letter(s) among
Borrowers and/or one or more Agents and or one or more Lenders, in each case
dated on or about the date hereof (as such letter(s) may be amended from time to
time, collectively, as applicable the “Fee Letter”).
          (b) Unused Commitment Fee. The Borrowers shall pay to Working Capital
Agent a fee (the “Unused Commitment Fee”) in an amount equal to:
               (i) the average daily balance of the Aggregate Revolving
Commitment during the preceding calendar month, less
               (ii) the sum of (x) the average daily balance of all Revolving
Loans outstanding plus (y) the average daily amount of Letter of Credit
Obligations (other than with respect to the Cash Management Letter of Credit)
plus (z) in the case of the Swing Line Lender, the average daily balance of all
outstanding Swing Loans held by such Swing Line Lender, in each case, during the
preceding calendar month,
multiplied by the Unused Commitment Fee Rate per annum. Such fee shall be
payable monthly in arrears on the first day of the calendar month following the
date hereof and the first day of each calendar month thereafter. All
computations of such fee shall be made on the basis of a 360-day year and actual
days elapsed. The Unused Commitment Fee provided in this Section 1.9(b) shall
accrue at all times from and after the Closing Date. Following receipt of the
Unused Commitment Fee, Working Capital Agent shall pay to each Revolving Lender
from, and to the extent of, the Unused Commitment Fee an amount equal to its pro
rata share thereof.
          (c) Letter of Credit Fee. The Borrowers agree to pay to Working
Capital Agent for the ratable benefit of the Revolving Lenders (subject to
Section 1.1(c)(viii) hereof with respect to the Cash Management Letter of
Credit), as compensation to such Revolving Lenders for Letter of Credit
Obligations incurred hereunder, (i) without duplication of costs and expenses
otherwise payable to Working Capital Agent or Revolving Lenders hereunder or
fees otherwise paid by the Borrowers, all reasonable costs and expenses incurred
by Working Capital Agent or any Revolving Lender on account of such Letter of
Credit Obligations, and (ii) for each calendar month during which any Letter of
Credit Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”)
in an amount equal to the product of the average daily undrawn face amount of
all Letters of Credit issued, guaranteed or supported by risk participation
agreements multiplied by a per annum rate equal to the Revolving Applicable
Margin with respect to Revolving Loans which are LIBOR Rate Loans; provided,
however, upon the occurrence and during the continuance of an Event of Default,
such rate shall be subject to increase in accordance with Section 1.3(c) hereof.
Such fee shall be paid to Working Capital Agent for the benefit of the Revolving
Lenders

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(subject to Section 1.1(c)(viii) hereof with respect to the Cash Management
Letter of Credit) in arrears, on the first day of each calendar month and on the
date on which all Letter of Credit Obligations have been discharged. In
addition, the Borrowers shall pay to any L/C Issuer, on demand, its customary
fees at then prevailing rates, without duplication of fees otherwise payable
hereunder (including all per annum fees (including any fronting fees agreed to
by the Borrowers and the applicable L/C Issuer)), charges and expenses of such
L/C Issuer in respect of the issuance, negotiation, acceptance, amendment,
transfer and payment of such Letter of Credit or otherwise payable pursuant to
the application and related documentation under which such Letter of Credit is
issued.
     1.10 Payments by the Borrowers.
          (a) All payments (including prepayments) to be made by each Credit
Party on account of principal, interest, fees and other amounts required
hereunder shall be made without set-off, recoupment, counterclaim or deduction
of any kind, shall, except as otherwise expressly provided herein, be made to
Working Capital Agent (for the ratable account of the Persons entitled thereto)
at the address for payment specified in the signature page hereof in relation to
Working Capital Agent (or such other address as Working Capital Agent may from
time to time specify in accordance with Section 9.2), including payments
utilizing the ACH system, and shall be made in Dollars and by wire transfer or
ACH transfer in immediately available funds (which shall be the exclusive means
of payment hereunder), no later than 1:00 p.m. (New York time) on the date due;
provided, however that all payments to be made by each Credit Party with respect
to the Term B Loans shall be made to the Term B Agent (for the ratable account
of the Persons entitled thereto). Any payment which is received by Agents later
than 1:00 p.m. (New York time) may in the applicable Agent’s discretion be
deemed to have been received on the immediately succeeding Business Day and any
applicable interest or fee shall continue to accrue. Each Borrower and each
other Credit Party hereby irrevocably waives the right to direct the application
during the continuance of an Event of Default of any and all payments in respect
of any Obligation and any proceeds of Collateral. Each Borrower hereby
authorizes Working Capital Agent and each Revolving Lender to make a Revolving
Loan (which shall be a Base Rate Loan and which may be a Swing Loan) to pay
interest, principal (including Swing Loans) with respect to the Revolving Loans
and the FILO Loans, L/C Reimbursement Obligations, agent fees, Unused Commitment
Fees, Letter of Credit fees, and other fees, costs and expenses payable by a
Borrower or any of its Subsidiaries hereunder or under the other Loan Documents
to the Working Capital Lenders, in each instance, on the date due. Agents are
hereby authorized by the Borrowers to, and in their sole election may, charge to
the applicable Loan balance on behalf of each Borrower and cause to be paid all
fees, expenses, charges, costs and interest and principal, other than principal
of the Loans, owing by the Borrowers and the Credit Parties under this Agreement
or any of the other Loan Documents if and to the extent the Credit Parties fail
to pay promptly any such amounts as and when due, even if the amount of such
charges would exceed the Maximum Revolving Borrowing

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Availability at such time. At the applicable Agent’s option and to the extent
permitted by law, any charges so made shall constitute part of the Loans
hereunder.
          (b) Subject to the provisions set forth in the definition of “Interest
Period” herein, if any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be and to the extent
applicable.
          (c) (i) So long as no Event of Default has occurred and is continuing,
(a) all payments received by Working Capital Agent in respect of any Obligation
and all funds transferred and credited to the Working Capital Collection Account
(other than from proceeds of Term Priority Collateral) and (b) all Net Proceeds
from any Disposition of Revolving Priority Collateral (subject to the provisions
at the end of Section 1.8(e)), each shall be applied to the Obligations as
follows:
     first, to payment of fees, costs and expenses (including Attorney Costs)
then due and payable by the Credit Parties under this Agreement and the other
Loan Documents;
     second, to payment of interest with respect to the Revolving Loans and the
Swing Loans;
     third, to payment of all Swing Loans;
     fourth, to payment of all Revolving Loans that are Base Rate Loans;
     fifth, to payment of all Revolving Loans that are LIBOR Rate Loans;
     sixth, to the payment of interest with respect to the FILO Loans; and
     seventh, to the Borrower Representative’s operating account.
               In carrying out the foregoing, (A) amounts received shall be
applied in the numerical order provided until exhausted prior to the application
to the next succeeding category and (B) each of the Lenders or other Persons
entitled to payment shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant to clauses second, fourth, fifth and
sixth.
               (ii) During the continuance of an Event of Default, Working
Capital Agent shall apply any and all payments proceeds of Revolving Priority
Collateral as follows:
     first, to funding the Carve-Out up to the Carve-Out Amount;

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     second, to the payment of any Permitted Overadvance funded by Working
Capital Agent and fees, costs and expenses, including Attorney Costs, of Working
Capital Agent payable or reimbursable by the Credit Parties under the Loan
Documents;
     third, to payment of Attorney Costs of Agents and Lenders payable or
reimbursable by the Borrowers under this Agreement;
     fourth, with respect to the Swing Loans and the Revolving Loans owed to
Working Capital Agent, the Revolving Lenders and L/C Issuers, to payment of all
accrued unpaid interest on the Obligations and fees;
     fifth, to payment of principal of the Obligations relating to the Revolving
Loans then due and payable including, without limitation, L/C Reimbursement
Obligations (other than with respect to the Cash Management Letter of Credit)
then due and payable and cash collateralization in an amount equal to 104% of
unmatured L/C Reimbursement Obligations (other than with respect to the Cash
Management Letter of Credit) to the extent not then due and payable;
     sixth, with respect to the FILO Loans owed to the FILO Lenders, to payment
of all principal and accrued but unpaid interest on the Obligations and fees;
     seventh, to payment of L/C Reimbursement Obligations with respect to the
Cash Management Letter of Credit and cash collateralization in an amount equal
to 104% of unmatured L/C Reimbursement Obligations with respect to the Cash
Management Letter of Credit to the extent not then due and payable;
     eighth, to fund the DIP Indemnity Account;
     ninth, to payment of all other Obligations (excluding Bank Products not
subject to a Reserve, Obligations with respect to Secured Rate Contracts and
Overadvances that are not Permitted Overadvances) with respect to all Loans
other than the Term B Loans;
     tenth, to payment of all Obligations in respect of the Term B Loans;
     eleventh, to payment of all other Obligations relating to Bank Products
subject to a Reserve;
     twelfth, to payment of all other Obligations, including Overadvances other
than Permitted Overadvances; and
     thirteenth, any remainder shall be for the account of and paid to whoever
may be lawfully entitled thereto.
               In carrying out the foregoing, (A) amounts received shall be
applied in the numerical order provided until exhausted prior to the application
to the

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next succeeding category and (B) each of the Lenders or other Persons entitled
to payment shall receive an amount equal to its pro rata share of amounts
available to be applied pursuant to clauses fourth (other than with respect to
Swing Loans which shall be for the account of the Swingline Lender), fifth,
sixth, ninth, and tenth above.
               (iii) Whether or not an Event of Default has occurred and is
continuing, all Net Term B Proceeds from any Disposition of Term Priority
Collateral shall be applied to the Obligations as follows:
     first, to payment of fees, costs and expenses, including Attorney Costs, of
Term B Agent and Term B Lenders payable or reimbursable by the Credit Parties
under the Loan Documents;
     second, to the Working Capital Agent for repayment of the Swing Loans (if
any) and then Revolving Loans, to the extent the Term B Lenders shall have
received proceeds from Revolving Priority Collateral pursuant to Section 1.8(e),
in the event the guaranteed amount (after all adjustments, set-offs and
claw-backs) paid by the Approved Liquidator in connection with the initial
Permitted Store Closings is less than $100,000,000, an amount equal to the
amount by which such payment is less than $100,000,000, but no greater than
$5,000,000 in the aggregate;
     third, to payment of all accrued unpaid interest and fees and payment of
principal of the Obligations relating to the Term B Loans;
     fourth, to fund the DIP Term Indemnity Account;
     fifth, to the payment of any Overadvance funded by Working Capital Agent
and fees, costs and expenses, including Attorney Costs, of Working Capital Agent
payable or reimbursable by the Credit Parties under the Loan Documents;
     sixth, to payment of Attorney Costs of Working Capital Facility Lenders
payable or reimbursable by the Borrowers under this Agreement;
     seventh, with respect to the Swing Loans and the Revolving Loans owed to
Working Capital Agent, the Revolving Lenders and L/C Issuers, to payment of all
accrued unpaid interest on the Obligations and fees;
     eighth, to payment of principal of the Obligations relating to the
Revolving Loans then due and payable including, without limitation, L/C
Reimbursement Obligations (other than with respect to the Cash Management Letter
of Credit) then due and payable and cash collateralization in an amount equal to
104% of unmatured L/C Reimbursement Obligations (other than with respect to the
Cash Management Letter of Credit) to the extent not then due and payable;

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     ninth, with respect to the FILO Loans owed to the FILO Lenders, to payment
of all principal and accrued but unpaid interest on the Obligations and fees;
     tenth, to payment of L/C Reimbursement Obligations with respect to the Cash
Management Letter of Credit and cash collateralization in an amount equal to
104% of unmatured L/C Reimbursement Obligations with respect to the Cash
Management Letter of Credit to the extent not then due and payable;
     eleventh, to fund the DIP Indemnity Account;
     twelfth, to the payment of any other Obligations; and
     thirteenth, any remainder shall be for the account of and paid to whoever
may be lawfully entitled thereto.
               In carrying out the foregoing, (A) amounts received shall be
applied in the numerical order provided until exhausted prior to the application
to the next succeeding category and (B) each of the Lenders or other Persons
entitled to payment shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant to clauses second, third, seventh
(other than in respect of Swing Loans which shall be for the account of the
Swingline Lender), eighth, ninth and twelfth above.
     1.11 Payments by the Revolving Lenders to Working Capital Agent;
Settlement.
          (a) Working Capital Agent may, on behalf of Lenders, disburse funds to
the Borrowers for Loans requested. Each Lender in accordance with its Commitment
Percentage shall reimburse Working Capital Agent on demand for all funds
disbursed on its behalf by Working Capital Agent, or if Working Capital Agent so
requests, each Lender will remit to Working Capital Agent its Commitment
Percentage of any Loan before Working Capital Agent disburses same to the
Borrowers. If Working Capital Agent elects to require that each Lender make
funds available to Working Capital Agent prior to disbursement by Working
Capital Agent to the Borrowers, Working Capital Agent shall advise each Lender
by telephone or fax of the amount of such Lender’s Commitment Percentage of any
Loan requested by the Borrower Representative no later than the Business Day
prior to the scheduled Borrowing date applicable thereto, and each such Lender
shall pay Working Capital Agent such Lender’s Commitment Percentage of such Loan
in same day funds, by wire transfer to Working Capital Agent’s account, as set
forth on Working Capital Agent’s signature page hereto, no later than 1:00 p.m.
(New York time) on such scheduled Borrowing date. Nothing in this
Section 1.11(a) or elsewhere in this Agreement or the other Loan Documents,
including the remaining provisions of this Section 1.11, shall be deemed to
require Working Capital Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Working Capital Agent, any Lender or

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the Borrowers may have against any Lender as a result of any default by such
Lender hereunder.
          (b) At least once each calendar week or more frequently at the
applicable Agent’s election (each, a “Settlement Date”), such Agent shall advise
each applicable Lender by telephone or fax of the amount of such Lender’s
Commitment Percentage of principal, interest and Fees paid for the benefit of
such Lenders with respect to each applicable Loan. Provided that each such
Lender has funded all payments required to be made by it and funded all
purchases of participations required to be funded by it under this Agreement and
the other Loan Documents as of such Settlement Date, the applicable Agent shall
pay to each such Lender such Lender’s Commitment Percentage of principal,
interest and fees paid by the Borrowers since the previous Settlement Date for
the benefit of such Lender on the Loans held by it. Such payments shall be made
by wire transfer to such Lender not later than 2:00 p.m. on the next Business
Day following each Settlement Date. Working Capital Agent shall be entitled to
set off the funding shortfall against any Non-Funding Lender’s Commitment
Percentage of all payments received from the Borrowers and hold, in a
non-interest bearing account, all payments received by Working Capital Agent for
the benefit of any Non-Funding Lender pursuant to this Agreement as cash
collateral for any unfunded reimbursement obligations of such Non-Funding Lender
until the Obligations are paid in full in cash, all Letter of Credit Obligations
have been discharged or cash collateralized in a manner acceptable to the
relevant L/C Issuer and all Commitments have been terminated, and upon such
unfunded obligations owing by a Non-Funding Lender becoming due and payable,
Working Capital Agent shall be authorized to use such cash collateral to make
such payment on behalf of such Non-Funding Lender. Any amounts owing by a
Non-Funding Lender to Working Capital Agent which are not paid when due shall
accrue interest at the interest rate applicable during such period to Loans that
are Base Rate Loans.
          (c) Availability of Lender’s Commitment Percentage. Working Capital
Agent may assume that each Revolving Lender will make its Commitment Percentage
of each Loan available to Working Capital Agent on each Borrowing date. If such
Commitment Percentage is not, in fact, paid to Working Capital Agent by such
Revolving Lender when due, Working Capital Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim or
deduction of any kind. If any Revolving Lender fails to pay the amount of its
Commitment Percentage forthwith upon Working Capital Agent’s demand, Working
Capital Agent shall promptly notify the Borrower Representative and the
Borrowers shall immediately repay such amount to Working Capital Agent. Nothing
in this Section 1.11(c) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Working Capital Agent to advance funds on
behalf of any Lender or to prejudice any rights that the Borrowers may have
against any Lender as a result of any default by such Lender hereunder. Nothing
in this Section 1.11(c) shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments

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hereunder. Without limiting the provisions of Section 1.11(b), to the extent
that Working Capital Agent advances funds to the Borrowers on behalf of any
Lender and is not reimbursed therefor on the same Business Day as such advance
is made, Working Capital Agent shall be entitled to retain for its account all
interest accrued on such advance from the date such advance was made until
reimbursed by the applicable Lender.
          (d) Return of Payments.
               (i) If either Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by such Agent from the Borrowers and such related payment is not
received by such Agent, then such Agent will be entitled to recover such amount
from such Lender on demand without setoff, counterclaim or deduction of any
kind.
               (ii) If either Agent determines at any time that any amount
received by such Agent under this Agreement or any other Loan Document must be
returned to any Credit Party or paid to any other Person pursuant to any
insolvency law or otherwise, then, notwithstanding any other term or condition
of this Agreement or any other Loan Document, such Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to such Agent on demand any portion of such amount that such Agent has
distributed to such Lender, together with interest at such rate, if any, as such
Agent is required to pay to any Credit Party or such other Person, without
setoff, counterclaim or deduction of any kind, and such Agent will be entitled
to set-off against future distributions to such Lender any such amounts (with
interest) that are not repaid on demand.
               (e) Non-Funding Lenders; Procedures.
               (i) Responsibility. The failure of any Non-Funding Lender to make
any Loan, Letter of Credit Obligation or any payment required by it hereunder,
or to fund any purchase of any participation required to be made or funded by it
on the date specified therefor shall not relieve any other Lender (each such
other Lender, an “Other Lender”) of its obligations to make such loan or fund
the purchase of any such participation on such date, but neither Working Capital
Agent, Term B Agent or, other than as expressly set forth herein, any Other
Lender shall be responsible for the failure of any Non-Funding Lender to make a
loan, fund the purchase of a participation or make any other payment required
hereunder.
               (ii) Reallocation. If any Revolving Lender is a Non-Funding
Lender, all or a portion of such Non-Funding Lender’s Letter of Credit
Obligations (unless such Revolving Lender is the L/C Issuer that issued such
Letter of Credit) shall, at Working Capital Agent’s election at any time or upon
any L/C Issuer’s written request delivered to Working Capital Agent (whether
before or after the occurrence of any Default or Event of Default), be
reallocated to and assumed by the Revolving Lenders that are not Non-Funding
Lenders or Impacted Lenders pro rata in accordance with their Revolving
Commitment Percentages of the Aggregate Revolving Commitment

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(calculated as if the Non-Funding Lender’s Revolving Commitment Percentage was
reduced to zero and each other Revolving Lender’s Revolving Commitment
Percentage had been increased proportionately), provided that no Revolving
Lender shall be reallocated any such amounts or be required to fund any amounts
that would cause the sum of its outstanding Revolving Loans, outstanding Letter
of Credit Obligations, amounts of its participations in Swing Loans and its pro
rata share of unparticipated amounts in Swing Loans to exceed its Revolving Loan
Commitment.
               (iii) Voting Rights. Notwithstanding anything set forth herein to
the contrary and without any further action by, or consent of, any Credit Party,
a Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a “Lender” (or be, or have its Loans
and Commitments, included in the determination of “Required Lenders”, “Required
Working Capital Lenders” or “Lenders directly affected” pursuant to Section 9.1)
for any voting or consent rights under or with respect to any Loan Document.
Moreover, for the purposes of determining Required Lenders or all affected
Lenders (other than for the purposes of Section 9.1(a)(i) — (iii)), the Loans
and Commitments held by Non-Funding Lenders shall be excluded from the total
Loans and Commitments outstanding.
               (iv) Borrower Payments to a Non-Funding Lender. Working Capital
Agent shall be authorized to use all payments received by Working Capital Agent
for the benefit of any Non-Funding Lender pursuant to this Agreement to pay in
full the Aggregate Excess Funding Amount to the appropriate Secured Parties.
Following such payment in full of the Aggregate Excess Funding Amount, Working
Capital Agent shall be entitled to hold such funds as cash collateral in a
non-interest bearing account up to an amount equal to such Non-Funding Lender’s
unfunded Revolving Commitment and to use such amount to pay such Non-Funding
Lender’s funding obligations hereunder until the Obligations are paid in full in
cash, all Letter of Credit Obligations have been discharged or cash
collateralized and all Commitments have been terminated. Upon any such unfunded
obligations owing by a Non-Funding Lender becoming due and payable, Working
Capital Agent shall be authorized to use such cash collateral to make such
payment on behalf of such Non-Funding Lender. With respect to such Non-Funding
Lender’s failure to fund Revolving Loans or purchase participations in Letters
of Credit or Letter of Credit Obligations, any amounts applied by Working
Capital Agent to satisfy such funding shortfalls shall be deemed to constitute a
Revolving Loan or amount of the participation required to be funded and, if
necessary to effectuate the foregoing, the other Revolving Lenders shall be
deemed to have sold, and such Non-Funding Lender shall be deemed to have
purchased, Revolving Loans or Letter of Credit participation interests from the
other Revolving Lenders until such time as the aggregate amount of the Revolving
Loans and participations in Letters of Credit and Letter of Credit Obligations
are held by the Revolving Lenders in accordance with their Revolving Commitment
Percentages of the Aggregate Revolving Commitment. Any amounts owing by a
Non-Funding Lender to Working Capital Agent which are not paid when due shall
accrue interest at the interest rate applicable during such period to Revolving
Loans that are Base Rate Loans. In the event that Working Capital Agent is
holding cash collateral of a Non-Funding Lender that cures pursuant to clause
(v) below or ceases to be a Non-Funding Lender pursuant to the definition of
Non-Funding Lender, Working Capital Agent shall

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return the unused portion of such cash collateral to such Lender. The “Aggregate
Excess Funding Amount” of a Non-Funding Lender shall be the aggregate amount of
(A) all unpaid obligations owing by such Lender to Working Capital Agent, L/C
Issuers, Swing Line Lender, and other Lenders under the Loan Documents,
including such Lender’s pro rata share of all Revolving Loans, FILO Loans, Term
B Loans, Letter of Credit Obligations, Swing Line Loans, plus, without
duplication, (B) all amounts of such Non-Funding Lender’s Commitment reallocated
to other Lenders pursuant to subsection 1.11(e)(ii).
               (v) Cure. A Lender may cure its status as a Non-Funding Lender
under clause (a) of the definition of Non-Funding Lender if such Lender
(A) fully pays to Working Capital Agent, on behalf of the applicable Secured
Parties, the Aggregate Excess Funding Amount, plus all interest due thereon and
(B) timely funds the next Revolving Loan required to be funded by such Lender
(if such Lender is a Revolving Lender) or makes the next reimbursement required
to be made by such Lender. Any such cure shall not relieve any Lender from
liability for breaching its contractual obligations hereunder.
               (vi) Fees. A Lender that is a Non-Funding Lender pursuant to
clause (a) of the definition of Non-Funding Lender shall not earn and shall not
be entitled to receive, and the Borrowers shall not be required to pay, such
Lender’s portion of the Unused Commitment Fee during the time such Lender is a
Non-Funding Lender pursuant to clause (a) thereof. In the event that any
reallocation of Letter of Credit Obligations occurs pursuant to subsection
1.11(e)(ii), during the period of time that such reallocation remains in effect,
the Letter of Credit Fee payable with respect to such reallocated portion shall
be payable to (A) all Revolving Lenders based on their pro rata share of such
reallocation or (B) to the L/C Issuer for any remaining portion not reallocated
to any other Revolving Lenders.
          (f) Procedures. Agents are hereby authorized by each Credit Party and
each other Secured Party to establish procedures (and to amend such procedures
from time to time) to facilitate administration and servicing of the Loans and
other matters incidental thereto. Without limiting the generality of the
foregoing, Agents are hereby authorized, subject to the terms set forth in
Section 9.2, to establish procedures to make available or deliver, or to accept,
notices, documents and similar items on, by posting to or submitting and/or
completion on, E-Systems.
     1.12 Borrower Representative. Each Credit Party hereby designates and
appoints Borders, Inc. as its representative and agent on its behalf (the
“Borrower Representative”) for the purposes of issuing Notices of Borrowings,
Notices of Conversion/Continuation, L/C Requests and Swingline Requests,
delivering certificates including Borrowing Base Certificates, giving
instructions with respect to the disbursement of the proceeds of the Loans,
selecting interest rate options, executing Loan Documents on behalf of such
Credit Party, giving and receiving all other notices and consents hereunder or
under any of the other Loan Documents and taking all other actions (including in
respect of compliance with covenants) on behalf of any Credit Party

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or the Credit Parties under the Loan Documents. Borrower Representative hereby
accepts such appointment. Agents and each Lender may regard any notice or other
communication pursuant to any Loan Document from Borrower Representative as a
notice or communication from all Credit Parties. Each warranty, covenant,
agreement and undertaking made on behalf of a Credit Party by Borrower
Representative shall be deemed for all purposes to have been made by such Credit
Party and shall be binding upon and enforceable against such Credit Party to the
same extent as if the same had been made directly by such Credit Party.
     1.13 Super Priority Nature of Obligations and Lenders’ Liens.
          (a) The priority of Lenders’ and Agents’ Liens on the Collateral owned
by the Credit Parties shall be set forth in the Interim Order and the Final
Order.
          (b) All Obligations shall constitute administrative expenses of the
Credit Parties in the Chapter 11 Cases, with administrative priority and senior
secured status under Sections 364(c) and 364(d) of the Bankruptcy Code. Subject
only to the Carve-Out up to the Carve-Out Amount, the Adequate Protection
Superpriority Claims and Indebtedness secured by Pre-Petition Perfected Liens,
such administrative claim shall have priority over any and all administrative
expense claims, unsecured claims and costs and expenses against the Credit
Parties or their respective estates in the Chapter 11 Cases (or any subsequent
proceedings or cases under the Bankruptcy Code), at any time existing or
arising, of any kind or nature whatsoever, including, without limitation,
administrative expenses of the kinds specified in or ordered pursuant to
Bankruptcy Code Sections 105, 326, 328, 330, 331, 365, 503(a), 503(b), 506(c),
507(a), 507(b), 546(c), 546(d), 726 (to the extent permitted by law), 1113, 1114
or any other provision of the Bankruptcy Code or otherwise and shall at all
times be senior to the rights of the Credit Parties, the Credit Parties’
respective estates and any successor trustee or estate representative in the
Chapter 11 Cases or any subsequent proceedings or cases under the Bankruptcy
Code subject to the priorities set forth in the Interim Order or Final Order (as
applicable). The Liens granted to Agents and Lenders on the Collateral owned by
the Credit Parties, and the priorities accorded to the Obligations shall have
the priority and senior secured status afforded by Sections 364(c) and 364(d) of
the Bankruptcy Code (all as more fully set forth in the Interim Order and Final
Order) senior to all claims and interests other than the Carve-Out up to the
Carve-Out Amount, the Adequate Protection Superpriority Claims and the
Pre-Petition Perfected Liens.
          (c) The Working Capital Agent’s Liens on the Collateral and Working
Capital Agent’s and other Secured Parties’ respective administrative claims
under Sections 364(c)(l) of the Bankruptcy Code afforded the Obligations shall
also have priority over any claims arising under Section 506(c) of the
Bankruptcy Code subject and subordinate only to the Carve-Out up to the
Carve-Out Amount and as otherwise set forth in the Interim Order (or the Final
Order, when applicable). No other Lien having a priority superior to or pari
passu with

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that granted to Working Capital Agent and Lenders shall be granted or approved
while any Obligations under this Agreement remain outstanding.
          (d) Except for the Carve-Out up to the Carve-Out Amount and the
Adequate Protection Superpriority Claims, as set forth in the Interim Order and
the Final Order, no costs or expenses of administration shall be imposed against
Agents, the Lenders or any of the Collateral under Sections 105, 506(c) or 552
of the Bankruptcy Code, or otherwise, and the Borrower hereby waives for itself
and on behalf of its estate in bankruptcy, any and all rights under
Sections 105, 506(c) or 552 of the Bankruptcy Code, or otherwise, to assert or
impose or seek to assert or impose, any such costs or expenses of administration
against Agents or the Lenders.
     1.14 Payment of Obligations. Upon the maturity (whether by acceleration or
otherwise) of any of the Obligations under this Agreement or any of the other
Loan Documents, Agents and Lenders shall be entitled to immediate payment of
such Obligations without further application to or order of the Bankruptcy
Court.
     1.15 No Discharge; Survival of Claims. Credit Parties agree that (i) the
Obligations hereunder shall not be discharged by the entry of an order
confirming a plan of reorganization in the Chapter 11 Cases (and Credit Parties
pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waive any such
discharge) and (ii) the superpriority administrative claim granted to Working
Capital Agent, Term B Agent and Lenders pursuant to the Interim Order and Final
Order and described in Section 1.13 and the Liens granted to Working Capital
Agent pursuant to the Interim Order and Final Order and described in
Section 1.13 shall not be affected in any manner by the entry of an order
confirming a plan of reorganization in the Chapter 11 Cases.
     1.16 Release. Credit Parties hereby acknowledge effective upon entry of the
Final Order, that no Credit Party has any defense, counterclaim, offset,
recoupment, cross-complaint, claim or demand of any kind or nature whatsoever
that can be asserted to reduce or eliminate all of any part of the Credit
Parties’ liability to repay Agents or any Lender as provided in this Agreement
or to seek affirmative relief or damages of any kind or nature from Agents or
any Lender. Each Credit Party, on behalf of itself and its bankruptcy estate,
and on behalf of all its successors, assigns, Subsidiaries and any Affiliates
and any Person acting for and on behalf of, or claiming through them,
(collectively, the “Releasing Parties”), hereby fully, finally and forever
release and discharge Agents and Lenders and all of Agents’ and Lenders’ past
and present officers, directors, servants, agents, attorneys, assigns, heirs,
parents, subsidiaries, and each Person acting for or on behalf of any of them
(collectively, the “Released Parties”) of and from any and all past, present and
future actions, causes of action, demands, suits, claims, liabilities, Liens,
lawsuits, adverse consequences, amounts paid in settlement, costs, damages,
debts, deficiencies, diminution in value, disbursements, expenses, losses and
other obligations of any kind or nature whatsoever, whether in law, equity or
otherwise (including, without limitation, those arising under Sections 541
through 550 of the Bankruptcy Code and interest or other carrying costs,
penalties, legal, accounting and other professional fees and expenses, and
incidental, consequential and punitive damages

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payable to third parties), whether known or unknown, fixed or contingent,
direct, indirect, or derivative, asserted or unasserted, foreseen or unforeseen,
suspected or unsuspected, now existing, heretofore existing or which may
heretofore accrue against any of the Released Parties, whether held in a
personal or representative capacity, and which are based on any act, fact, event
or omission or other matter, cause or thing occurring at or from any time prior
to and including the date hereof in any way, directly or indirectly arising out
of, connected with or relating to this Agreement, the Interim Order, the Final
Order and the transactions contemplated hereby, and all other agreements,
certificates, instruments and other documents and statements (whether written or
oral) related to any of the foregoing.
     1.17 Waiver of any Priming Rights. Upon the Closing Date, and on behalf of
itself and its estate, and for so long as any Obligations shall be outstanding,
each Credit Party hereby irrevocably waives any right, pursuant to Sections
364(c) or 364(d) of the Bankruptcy Code or otherwise, to grant any Lien of equal
or greater priority than the Liens securing the Obligations, or to approve a
claim of equal or greater priority than the Obligations (other than the
Carve-Out up to the Carve-Out Amount and the Adequate Protection Superpriority
Claims).
     1.18 Adequate Protection Superpriorty Claims. Notwithstanding anything
herein to the contrary, the Liens and claims of the Secured Parties under this
Agreement and the other Loan Documents shall be subject to the Adequate
Protection Superpriority Claims but only to the extent set forth in the Interim
Order (or Final Order, as applicable).
ARTICLE II.
CONDITIONS PRECEDENT
     2.1 Conditions of Initial Loans. The obligation of each Lender to make its
initial Loans and of each L/C Issuer to Issue, or cause to be Issued, the
initial Letters of Credit hereunder is subject to satisfaction of the following
conditions in a manner satisfactory to Agents:
          (a) Loan Documents, Etc. Agents shall have received on or before the
Closing Date all of the agreements, documents, instruments, legal opinions and
other items set forth on the closing checklist attached hereto as Exhibit 2.1,
each in form and substance reasonably satisfactory to Agents;
          (b) Minimum Availability. The Borrowers shall have Availability in the
aggregate on the Closing Date of $85,000,000, after taking into account all
accounts payable due and owing as of such date;
          (c) Repayment of Prior Indebtedness. Agents shall have received
evidence satisfactory to Agents that the obligations under the Pre-Petition
Facilities shall have been repaid in full (or, in the case of letters of credit
issued or guaranteed thereunder, if any, cash collateralized in a manner
acceptable to Agents), all commitments thereunder shall be terminated and such
repayment shall otherwise be in accordance with the Interim Order;

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          (d) Approvals. Agents shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, in connection with
(A) the filing of the Chapter 11 Cases and (B) the execution, delivery and
performance of this Agreement and the other Loan Documents and the consummation
of the other transactions contemplated hereby or (ii) an officer’s certificate
in form and substance reasonably satisfactory to Agents affirming that no such
consents or approvals are required;
          (e) Payment of Fees. The Borrowers shall have paid the fees required
to be paid on the Closing Date in the respective amounts specified in
Section 1.9 (including the fees specified in the Fee Letter), and shall have
reimbursed Agents for all fees, costs and expenses of closing presented as of
the Closing Date;
          (f) Intentionally Omitted.
          (g) Funds Flow Memorandum. Agents shall have received a funds-flow
memorandum from the Borrowers setting forth the sources and uses of the proceeds
of any Loans to be borrowed or any Letters of Credit to be Issued on the Closing
Date, which funds-flow memorandum shall be in form and substance reasonably
satisfactory to Agents (the “Funds Flow Memorandum”) and shall contain a
description of the Credit Parties’ sources and uses of funds on the Closing
Date, the details of how funds from each source are to be transferred to
particular uses (including the application of proceeds as set forth in
Section 3.8(b) above) and the wire transfer instructions for the particular uses
of such funds;
          (h) Intentionally Omitted;
          (i) Cash Management System. Credit Parties shall have established the
cash management system described in Section 4.11 (the “Cash Management System”)
and shall have obtained appropriate court orders approving such system;
          (j) Insurance. The Credit Parties shall have furnished Agents with (i)
binders evidencing of all existing insurance coverage, (ii) evidence acceptable
to Agents that the insurance policies required by Section 4.6 have been obtained
and are in full force and effect, and (iii) certificates of insurance with
respect to all existing insurance coverage which certificates shall name Working
Capital Agent as loss payee (property long form endorsement/casualty policies)
and as additional insured (liability policies);
          (k) Entry of Interim Order. Entry by the Bankruptcy Court of the
Interim Order, by no later than 5 days after the Petition Date in form and
substance satisfactory to Agents and Lenders, among other things, (i) approving
the transactions contemplated hereby, (ii) granting a first priority perfected
security interest in the Collateral (subject, as to priority only, to the
Carve-Out up

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to the Carve-Out Amount, the Adequate Protection Superpriority Claims and the
Pre-Petition Perfected Liens), and (iii) modifying the automatic stay to permit
the creation and perfection of Working Capital Agent’s, Term B Agent’s and
Lenders’ Liens and automatically vacating the automatic stay to permit
enforcement of Working Capital Agent’s, Term B Agent’s and Lenders’
default-related rights and remedies under this Agreement, the other Loan
Documents and applicable law;
          (l) First Day Orders. The “first day” orders described on Schedule
2.1(l) in form and substance satisfactory to Agents shall have been entered in
the Chapter 11 Cases; and
          (m) Approved Budget. Agents and Term B Lenders shall have received the
initial Approved Budget.
     2.2 Conditions to All Borrowings. Except as otherwise expressly provided
herein, no Lender or L/C Issuer shall be obligated to fund any Loan or incur any
Letter of Credit Obligation, if, as of the date thereof:
          (a) the Advance requested would cause the aggregate outstanding amount
of the Loans and/or Letter of Credit Obligations to exceed the amount then
authorized by the Interim Order or the Final Order, as the case may be, or any
order modifying, reversing, staying or vacating such order shall have been
entered, or any appeal of such order shall have been timely filed;
          (b) any representation or warranty by any Credit Party contained
herein or in any other Loan Document is untrue or incorrect in any respect as of
such date, except to the extent that such representation or warranty expressly
relates to an earlier date (in which event such representations and warranties
were untrue or incorrect in any respect as of such earlier date), and Working
Capital Agent shall have determined not to make any Protective Overadvance as a
result of the fact that such warranty or representation is untrue or incorrect;
          (c) any Default or Event of Default has occurred and is continuing or
would result after giving effect to any Loan (or the incurrence of any Letter of
Credit Obligations), and Working Capital Agent shall have determined not to make
any Protective Overadvance as a result of that Default or Event of Default;
          (d) after giving effect to any Loan (or the incurrence of any Letter
of Credit Obligations), the Aggregate Exposure would exceed the Maximum
Borrowing Availability or the Aggregate Revolving Exposure would exceed the
Maximum Revolving Borrowing Availability (except as provided in
Section 1.1(b)(ii)).
The request by Borrower Representative and acceptance by the Borrowers of the
proceeds of any Loan or the incurrence of any Letter of Credit Obligations shall
be

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deemed to constitute, as of the date thereof, (i) a representation and warranty
by the Borrowers that the conditions in this Section 2.2 have been satisfied and
(ii) a reaffirmation by each Credit Party of the granting and continuance of
Working Capital Agent’s Liens, on behalf of itself and the Secured Parties,
pursuant to the Collateral Documents.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
     The Credit Parties, jointly and severally, represent and warrant to Agents
and each Lender that the following are true, correct and complete:
     3.1 Corporate Existence and Power. Each Credit Party and each of their
respective Subsidiaries:
          (a) is a corporation, limited liability company, limited partnership
or general partnership, as applicable, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation,
organization or formation, as applicable;
          (b) subject to the entry of the Interim Order (or the Final Order,
when applicable) by the Bankruptcy Court, has the power and authority and all
governmental licenses, authorizations, Permits, consents and approvals to
execute, deliver, and perform its obligations under, the Loan Documents to which
it is a party;
          (c) is duly qualified as a foreign corporation, limited liability
company or limited partnership, as applicable, and licensed and in good
standing, under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification
or license; and
          (d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent that
the failure to do so would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
     3.2 Corporate Authorization; No Contravention. Upon the entry by the
Bankruptcy Court of the Interim Order (or the Final Order, when applicable), the
execution, delivery and performance by each of the Credit Parties of this
Agreement, and by each Credit Party and each of their respective Subsidiaries of
any other Loan Document to which such Person is party, have been duly authorized
by all necessary action, and do not and will not:
               (i) contravene the terms of any of that Person’s Organization
Documents;

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               (ii) conflict with or result in any breach or contravention of,
or result in the creation of any Lien under, any document evidencing any
material Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such Person or
its Property is subject except for violations, defaults or the creation of such
rights that could not reasonably be expected to result in a Material Adverse
Effect; or
               (iii) violate any Requirement of Law, except for violations,
defaults or the creation of such rights that could not reasonably be expected to
result in a Material Adverse Effect.
     3.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Credit Party
or any Subsidiary of any Credit Party of this Agreement or any other Loan
Document except for (a) those obtained or made on or prior to the Closing Date,
including by the Bankruptcy Court in connection with the Chapter 11 Cases or
(b) recordings and filings in connection with the Liens granted to Working
Capital Agent under the Collateral Documents.
     3.4 Binding Effect. Upon the entry by the Bankruptcy Court of the Interim
Order (or the Final Order, when applicable), this Agreement and each other Loan
Document to which any Credit Party or any Subsidiary of any Credit Party is a
party constitute the legal, valid and binding obligations of each such Person
which is a party thereto, enforceable against such Person in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’
rights generally or by equitable principles relating to enforceability.
     3.5 Litigation. Except as specifically disclosed in Schedule 3.5 and the
filing of the Chapter 11 Cases, there are no actions, suits, proceedings, claims
or disputes pending, or to the best knowledge of each Credit Party, threatened
or contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against any Credit Party, any Subsidiary of any Credit Party or any
of their respective Properties which:
          (a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
          (b) would reasonably be expected to result in a Material Adverse
Effect.
Other than with respect to the Chapter 11 Cases but subject to the Interim Order
(or Final Order, as applicable), no injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of this Agreement or any other Loan Document, or directing that
the transactions provided for herein or therein not be consummated as herein or
therein provided. As of the Closing Date, other than tax audits

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by the IRS or other taxing authorities, to each Credit Party’s knowledge, no
Credit Party or any Subsidiary of any Credit Party is the subject of an audit,
any review or investigation by any Governmental Authority concerning the
violation or possible violation of any Requirement of Law.
     3.6 No Default. Post-Petition, no Default or Event of Default exists or
would result from the incurring of any Obligations by any Credit Party or the
grant or perfection of Working Capital Agent’s Liens on the Collateral. No
Credit Party and no Subsidiary of any Credit Party is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, would reasonably be expected to have a Material
Adverse Effect (other than with respect to the commencement of the Chapter 11
Cases).
     3.7 ERISA Compliance. Credit Parties have no Multiemployer Plan or Title IV
Plans.
     3.8 Use of Proceeds; Margin Regulations.
          (a) No Credit Party and no Subsidiary of any Credit Party is engaged
in the business of purchasing or selling Margin Stock or extending credit for
and no Loan will be used for the purpose of purchasing or carrying Margin Stock.
          (b) Borrowers shall utilize the proceeds of the Loans and the proceeds
of Collateral (i) on the Closing Date, subject to the limitations set forth
herein, to repay the Pre-Petition Facilities and pay the Transaction Expenses
and (ii) to fund the Chapter 11 Cases in accordance with the Approved Budget and
for the financing of Borrowers’ ordinary working capital, letter of credit and
other general corporate needs including certain fees and expenses of
professionals retained by the Credit Parties, subject to the Carve-Out Amount,
the Adequate Protection Superpriority Claims and for certain other pre-petition
expenses that are approved by the Bankruptcy Court and consented to by Agents,
all in accordance with the Approved Budget. Credit Parties shall not be
permitted to use the proceeds of the Loans: (I) for the payment of interest and
principal with respect to Subordinated Indebtedness or any other Pre-Petition
Indebtedness of Borrower or any other Credit Party (except for: (1) Pre-Petition
employee wages, benefits and related employee taxes as of the Petition Date;
(2) Pre-Petition sales, use and real property taxes; and (3) amounts approved in
accordance with other “first day” orders reasonably satisfactory to Agents,
(II) subject to the Interim Order (or the Final Order, when applicable), to
finance in any way any action, suit, arbitration, proceeding, application,
motion or other litigation of any type adverse to the interests of Agents and
Lenders or their rights and remedies under this Agreement, the other Loan
Documents, the Interim Order or the Final Order, including, without limitation,
for the payment of any services rendered by the professionals retained by the
Borrower or the Committee in connection with the assertion of or joinder in any
claim, counterclaim, action, proceeding, application, motion, objection, defense
or other contested matter, the purpose of which is to

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seek, or the result of which would be to obtain, any order, judgment
determination, declaration or similar relief (x) invalidating, setting aside,
avoiding or subordinating, in whole or in part, the Obligations or the Liens
securing same, (y) for monetary, injunctive or other affirmative relief against
any Lender or Agents or their respective collateral, or (z) preventing,
hindering or otherwise delaying the exercise by any Lender or Agents of any
rights and remedies under the Interim Order or Final Order, the Loan Documents
or applicable law, or the enforcement or realization (whether by foreclosure,
credit bid, further order of the court or otherwise) by any or all of the
Lenders, Working Capital Agent and Term B Agent upon any of their Collateral;
(III) to make any distribution under a plan of reorganization in the Chapter 11
Cases; (IV) to make any payment in settlement of any claim, action or
proceeding, before any court, arbitrator or other governmental body without the
prior written consent of Agents; or (V) to pay any fees or similar amounts to
any Person who has proposed or may propose to purchase interests in Borrowers or
any other Credit Party (including so-called “Topping Fees,” “Exit Fees,” and
similar amounts) without the prior written consent of Agents and the Required
Lenders, which consent shall not be unreasonably withheld.
          (c) The Funds Flow Memorandum contains a description of the Credit
Parties’ sources and uses of funds on the Closing Date, including, without
limitation, how funds from each source are to be transferred to particular uses
(all in accordance with the terms of the Loan Documents).
     3.9 Ownership of Property; Liens. As of the Closing Date, the Real Estate
listed in Schedule 3.9 constitutes all of the Real Estate of each Credit Party
and each of their respective Subsidiaries. Each of the Credit Parties and each
of their respective Subsidiaries has good record and marketable title in fee
simple to, or valid leasehold interests in, all Real Estate, and good and valid
title to all owned personal property and valid leasehold interests in all leased
personal property, in each instance, necessary or used in the ordinary conduct
of their respective businesses. As of the Closing Date, none of the Real Estate
owned by any Credit Party or any Subsidiary of any Credit Party is subject to
any Liens other than Permitted Liens. As of the Closing Date, Schedule 3.9 also
describes any purchase options, rights of first refusal or other similar
contractual rights created by, through or under any Credit Party and pertaining
to any Real Estate. As of the Closing Date, all material permits required to be
obtained by any Credit Party have been issued or appropriate to enable the Real
Estate to be lawfully occupied and used for all of the purposes for which it is
currently occupied and used have been lawfully issued and are in full force and
effect, except where the failure to obtain such permits would cause a Material
Adverse Effect.
     3.10 Taxes. All federal, state and material local and foreign income and
franchise and other material tax returns, reports and statements (collectively,
the “Tax Returns”) required to be filed by any Tax Affiliate have been filed
with the appropriate Governmental Authorities, all such Tax Returns are true and
correct in all material respects, and all taxes, assessments and other
governmental charges and impositions reflected therein or otherwise due and
payable have been paid prior to the date on which

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any Liability may be added thereto for non-payment thereof except for those
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves are maintained on the books of the appropriate Tax
Affiliate in accordance with GAAP. As of the Closing Date, no Tax Return is
under audit or examination by any Governmental Authority, and no notice of any
audit or examination or any assertion of any claim for Taxes has been given or
made by any Governmental Authority. Proper and accurate amounts have been
withheld by each Tax Affiliate from their respective employees for all periods
in full and complete compliance with the tax, social security and unemployment
withholding provisions of applicable Requirements of Law and such withholdings
have been timely paid to the respective Governmental Authorities. No Tax
Affiliate has participated in a “listed transaction” or a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b) or
has been a member of an affiliated, combined or unitary group other than the
group of which a Tax Affiliate is the common parent. Post-Petition, there are no
Liens for taxes, fees, assessments or other governmental charges, other than for
taxes, fees, assessments or other governmental charges not yet due. Ad valorem
Taxes and charges that were payable and unpaid as of the Petition Date and the
jurisdictions to which such ad valorem Taxes and charges are due are set forth
on Schedule 3.10.
     3.11 Financial Condition and Approved Budget.
          (a) Each of (i) the audited consolidated balance sheet of the
Borrowers and their Subsidiaries dated January 30, 2010, and the related audited
consolidated statements of income or operations and cash flows for the Fiscal
Year ended on that date and (ii) the unaudited interim consolidated balance
sheet of the Borrowers and their Subsidiaries dated October 30, 2010 and the
related unaudited consolidated statements of income and cash flows for the
twelve Fiscal Months then ended, in each case, as attached hereto as Schedule
3.11(a):
               (i) were prepared in accordance with GAAP consistently applied
throughout the respective periods covered thereby, except as otherwise expressly
noted therein, subject to, in the case of the unaudited interim financial
statements, normal year-end adjustments and the lack of footnote disclosures;
and
               (ii) present fairly in all material respects the consolidated
financial condition of the Borrowers and their Subsidiaries as of the dates
thereof and results of operations for the periods covered thereby.
          (b) Intentionally Omitted.
          (c) The Credit Parties and their Subsidiaries have no Indebtedness
other than Indebtedness permitted pursuant to Section 5.5 and have no Contingent
Obligations other than Contingent Obligations permitted pursuant to Section 5.9.
          (d) Approved Budget. The Borrowers have heretofore furnished to Agents
the Approved Budget, and such Approved Budget was

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prepared in good faith based upon assumptions which Borrowers believe to be
reasonable assumptions at the time made. Borrowers shall thereafter deliver to
Agents updates to the Approved Budget in the manner set forth in Section 4.16.
     3.12 Environmental Matters. 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 Credit Parties nor any of 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 Credit Parties 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 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
Materials 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 Credit Party 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 Materials;
          (c) except as set forth on Schedule 3.12 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing, storage
or disposal of Hazardous Materials except in accordance with applicable
Environmental Laws; and no underground tank or other underground storage
receptacle for Hazardous Materials 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 Credit Parties, their Subsidiaries or operators
of its properties, no Hazardous Materials 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,

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pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Materials on, upon,
into or from the properties of the Credit Parties 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 Credit
Parties’ 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 Materials 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 Credit Parties nor any of their Subsidiaries, or any
of the Real Estate is subject to any applicable Environmental Law requiring the
performance of Hazardous Materials site assessments, or the removal or
remediation of Hazardous Materials, 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.
     3.13 Regulated Entities. None of any Credit Party, any Person controlling
any Credit Party, or any Subsidiary of any Credit Party, is (a) an “investment
company” within the meaning of the Investment Company Act of 1940 or (b) subject
to regulation under the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute, rule or
regulation limiting its ability to incur Indebtedness, pledge its assets or
perform its Obligations under the Loan Documents.
     3.14 Intentionally Omitted.
     3.15 Labor Relations. There are no strikes, work stoppages, slowdowns or
lockouts existing, pending (or, to the knowledge of any Credit Party,
threatened) against or involving any Credit Party or any Subsidiary of any
Credit Party, except for those that would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth in
Schedule 3.15, as of the Closing Date, (a) there is no collective bargaining or
similar agreement with any union, labor organization, works council or similar
representative covering any employee of any Credit Party or any Subsidiary of
any Credit Party, (b) no petition for certification or election of any such
representative is existing or pending with respect to any employee of any Credit
Party or any Subsidiary of any Credit Party and (c) no such representative has
sought certification or recognition with respect to any employee of any Credit
Party or any Subsidiary of any Credit Party.

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     3.16 Intellectual Property. Schedule 3.16 sets forth a true and complete
list of the following Intellectual Property each Credit Party owns, licenses or
otherwise has the right to use: (i) Intellectual Property that is registered or
subject to applications for registration, (ii) Internet Domain Names and
(iii) material Intellectual Property, separately identifying that owned and
licensed to such Credit Party and including for each of the foregoing items
(1) the owner, (2) the title, (3) the jurisdiction in which such item has been
registered or otherwise arises or in which an application for registration has
been filed, (4) as applicable, the registration or application number and
registration or application date and (5) any IP Licenses or other rights
(including franchises) granted by such Credit Party with respect thereto. Each
Credit Party and each Subsidiary of each Credit Party owns, or is licensed to
use, all Intellectual Property necessary to conduct its business as currently
conducted except for such Intellectual Property the failure of which to own or
license would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. To the best knowledge of each Credit
Party, (a) the conduct and operations of the businesses of each Credit Party and
each Subsidiary of each Credit Party does not infringe, misappropriate, dilute,
violate or otherwise impair any Intellectual Property owned by any other Person
and (b) no other Person has contested any right, title or interest of any Credit
Party or any Subsidiary of any Credit Party in, or relating to, any Intellectual
Property, other than, in each case, as cannot reasonably be expected to affect
the Loan Documents and the transactions contemplated therein and would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
     3.17 Brokers’ Fees; Transaction Fees. Except for fees payable to Agents and
Lenders, none of the Credit Parties or any of their respective Subsidiaries has
any obligation to any Person in respect of any finder’s, broker’s or investment
banker’s fee in connection with the transactions contemplated hereby.
     3.18 Insurance. Schedule 3.18 lists all insurance policies of any nature
maintained, as of the Closing Date, for current occurrences by each Credit
Party, including issuers, coverages and deductibles. Each of the Credit Parties
and each of their respective Subsidiaries and their respective Properties are
insured with financially sound and reputable insurance companies which are not
Affiliates of the Credit Parties, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar Properties in localities where such Person
operates.
     3.19 Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except as
set forth in Schedule 3.19, as of the Closing Date, no Credit Party and no
Subsidiary of any Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All issued and outstanding Stock and Stock Equivalents of each of the
Credit Parties and each of their respective Subsidiaries are duly authorized and
validly issued, fully paid, non-assessable. All issued and outstanding Stock and
Stock Equivalents of each Credit Party are free and clear of all Liens (other
than as permitted by Section 5.1(r)) other than those in favor of Working
Capital Agent, for the benefit of the Secured Parties. All such securities were
issued in compliance with all applicable state and federal laws concerning the
issuance of

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securities. All of the issued and outstanding Stock of each Credit Party and
each Subsidiary of each Credit Party is owned by each of the Persons and in the
amounts set forth in Schedule 3.19 (which Schedule 3.19 shall be updated
concurrently by the Credit Parties with the delivery of each Borrowing Base
Certificate pursuant to Section 4.2(c) to reflect any transactions expressly
permitted pursuant to this Agreement). Except as set forth in Schedule 3.19,
there are no pre-emptive or other outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which any Credit Party may
be required to issue, sell, repurchase or redeem any of its Stock or Stock
Equivalents or any Stock or Stock Equivalents of its Subsidiaries. Set forth in
Schedule 3.19 is a true and complete organizational chart of the Borrowers and
all of their Subsidiaries on the Closing Date.
     3.20 Jurisdiction of Organization; Chief Executive Office. Schedule 3.20
lists each Credit Party’s jurisdiction of organization, legal name, federal
employee identification numbers and organizational identification number, if
any, and the location of such Credit Party’s chief executive office or sole
place of business, in each case as of the date hereof, and such Schedule 3.20
also lists all jurisdictions of organization and legal names of such Credit
Party for the five years preceding the Closing Date.
     3.21 Locations of Inventory, Equipment and Books and Records. Each Credit
Party’s Inventory and equipment (other than Inventory or equipment in transit)
and books and records concerning the Collateral are kept at the locations listed
in Schedule 3.21 (which Schedule 3.21 shall be promptly updated quarterly by the
Credit Parties).
     3.22 Deposit Accounts and Other Accounts. Schedule 3.22 lists all banks and
other financial institutions at which any Credit Party maintains deposit or
other accounts (including, without limitation, all Control Accounts) and credit
card processors as of the Closing Date, and such Schedule correctly identifies
the name of each depository, securities intermediary or commodities
intermediary, as applicable, the name in which the account is held, a
description of the purpose of the account, and the complete account number
therefor. The Credit Parties may, from time to time, amend Schedule 3.22 to add
or replace any account in accordance with the requirements of Section 4.11(d).
     3.23 Intentionally Omitted.
     3.24 Intentionally Omitted.
     3.25 Intentionally Omitted.
     3.26 Subordinated Debt. As of the Closing Date, the Borrowers have
delivered to Agents a complete and correct copy of all documents governing
Subordinated Indebtedness (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith).
     3.27 Full Disclosure. No information contained in this Agreement, any of
the other Loan Documents or Collateral Documents or other written reports from
time to time prepared by any Credit Party and delivered hereunder or any written
statement

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prepared by any Credit Party and furnished by or on behalf of any Credit Party
to Agents or any Lender pursuant to the terms of this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. The Liens
granted to Working Capital Agent, on behalf of itself and the Secured Parties,
pursuant to the Collateral Documents will at all times be fully perfected first
priority Liens in and to the Collateral described therein, subject to the
Carve-Out Amount, the Adequate Protection Superpriority Claims and the
Pre-Petition Perfected Liens, in each case to the extent relating to the
Collateral.
     3.28 Foreign Assets Control Regulations and Anti-Money Laundering. Each
Credit Party and each Subsidiary of Credit Party is and will remain in
compliance in all material respects with all U.S. economic sanctions laws,
Executive Orders and implementing regulations as promulgated by the U.S.
Treasury Department’s Office of Foreign Assets Control (“OFAC”), and all
applicable anti-money laundering and counter-terrorism financing provisions of
the Bank Secrecy Act and all regulations issued pursuant to it. No Credit Party
and no Subsidiary or Affiliate of a Credit Party (i) is a Person designated by
the U.S. government on the list of the Specially Designated Nationals and
Blocked Persons (the “SDN List”) with which a U.S. Person cannot deal with or
otherwise engage in business transactions, (ii) is a Person who is otherwise the
target of U.S. economic sanctions laws such that a U.S. Person cannot deal or
otherwise engage in business transactions with such Person or (iii) is
controlled by (including without limitation by virtue of such Person being a
director or owning voting shares or interests), or acts, directly or indirectly,
for or on behalf of, any Person or entity on the SDN List or a foreign
government that is the target of U.S. economic sanctions prohibitions such that
the entry into, or performance under, this Agreement or any other Loan Document
would be prohibited under U.S. law.
     3.29 Patriot Act. The Credit Parties, each of their Subsidiaries and each
of their Affiliates are in compliance with (a) the Trading with the Enemy Act,
and each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, (b) the Patriot Act and
(c) other federal or state laws relating to “know your customer” and anti-money
laundering rules and regulations. No part of the proceeds of any Loan will be
used directly or indirectly for any payments to any government official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.
     3.30 Reorganization Matters.
          (a) The Chapter 11 Cases were commenced on the Petition Date in
accordance with applicable law and proper notice thereof and the proper notice
for (i) the motion seeking approval of the Loan Documents and the Interim Order
and Final Order, (ii) the hearing for the entry of the Interim Order, and
(iii) the hearing for the entry of the Final Order has been or will be given.
Credit

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Parties shall give, on a timely basis as specified in the Interim Order or the
Final Order, as applicable, all notices required to be given to all parties
specified in the Interim Order or Final Order, as applicable.
          (b) After the entry of the Interim Order, and pursuant to and to the
extent permitted in the Interim Order and the Final Order, the Obligations will
constitute allowed administrative expense claims in the Chapter 11 Cases having
priority over all administrative expense claims and unsecured claims against the
Credit Parties now existing or hereafter arising, of any kind whatsoever,
including, without limitation, all administrative expense claims of the kind
specified in Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b),
546(c), 726, 1114 or any other provision of the Bankruptcy Code or otherwise, as
provided under Section 364(c)(l) of the Bankruptcy Code, subject to the
priorities set forth in the Interim Order or Final Order (as applicable).
          (c) After the entry of the Interim Order and pursuant to and to the
extent provided in the Interim Order and the Final Order, the Obligations will
be secured by a valid and perfected first priority Lien on all of the Collateral
subject, as to priority only to the Carve-Out up to the Carve-Out Amount, the
Adequate Protection Superpriority Claims and the Pre-Petition Perfected Liens.
          (d) The Interim Order (with respect to the period on and after entry
of the Interim Order and prior to entry of the Final Order) or the Final Order
(with respect to the period on and after entry of the Final Order), as the case
may be, is in full force and effect and has not been reversed, stayed (whether
by statutory stay or otherwise), modified or amended.
          (e) Notwithstanding the provisions of Section 362 of the Bankruptcy
Code, and subject to the applicable provisions of the Interim Order or Final
Order, as the case may be, upon the maturity (whether by acceleration or
otherwise) of any of the Obligations, Agents and Lenders shall be entitled to
immediate payment of such Obligations and to enforce the remedies provided for
hereunder or under applicable law, without further application to or order by
the Bankruptcy Court.
     3.31 Excluded Subsidiaries. The Excluded Subsidiaries do no engage in any
business activities or own any Property other than activities and contractual
rights incidental to maintenance of their respective corporate existence.
ARTICLE IV.
AFFIRMATIVE COVENANTS
     Each Credit Party covenants and agrees that, so long as any Lender shall
have any Revolving Commitment hereunder, or any Loan or other Obligation (other
than contingent indemnification Obligations to the extent no claim giving rise
thereto has been asserted) shall remain unpaid or unsatisfied:

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     4.1 Financial Statements. Each Credit Party shall maintain, and shall cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit the
preparation of financial statements in conformity with GAAP (provided that
monthly financial statements shall not be required to have footnote disclosures
and are subject to normal year-end adjustments). The Borrowers shall deliver to
Agents and each Lender by Electronic Transmission and in detail reasonably
satisfactory to Agents and the Required Lenders:
          (a) as soon as available, but not later than ninety (90) days after
the end of each Fiscal Year, a copy of the audited consolidated balance sheets
of the Borrowers and each of their Subsidiaries as at the end of such year and
the related consolidated statements of income or operations and cash flows for
such Fiscal Year, setting forth in each case in comparative form the figures for
the previous Fiscal Year, and accompanied by the report of any “Big Four” or
other nationally-recognized independent public accounting firm reasonably
acceptable to Agents which report shall contain an unqualified opinion, stating
that such consolidated financial statements present fairly in all material
respects the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years;
          (b) as soon as available, but not later than forty-five (45) days
after the end of each of the first three Fiscal Quarters of each Fiscal Year, a
copy of the unaudited consolidated balance sheets of the Borrowers and each of
their Subsidiaries, and the related consolidated statements of income and cash
flows as of the end of such Fiscal Quarter and for the portion of the Fiscal
Year then ended, all certified on behalf of the Borrowers by an appropriate
Responsible Officer of the Borrower Representative as being complete and correct
and fairly presenting, in all material respects, in accordance with GAAP, the
financial position and the results of operations of the Borrowers and their
Subsidiaries, subject to normal year-end adjustments and absence of footnote
disclosures; and
          (c) as soon as available, but not later than thirty (30) days after
the end of each Fiscal Month of each Fiscal Year, a copy of the unaudited
consolidated balance sheets of the Borrowers and each of their Subsidiaries, and
the related consolidated of income and cash flows as of the end of such Fiscal
Month and for the portion of the Fiscal Year then ended, all certified on behalf
of the Borrowers by an appropriate Responsible Officer of the Borrower
Representative as being complete and correct and fairly presenting, in all
material respects, in accordance with GAAP, the financial position and the
results of operations of the Borrowers and their Subsidiaries, subject to normal
year-end adjustments and absence of footnote disclosures.
     4.2 Appraisals; Certificates; Other Information. The Borrowers shall
furnish to Agents and each Lender by Electronic Transmission:
          (a) upon the request of either Agent, and in any event no more
frequently than once per each Fiscal Month of the Borrowers, (i) a management

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discussion and analysis report, in reasonable detail, signed by the chief
financial officer of the Borrower Representative, describing the operations and
financial condition of the Credit Parties and their Subsidiaries for the Fiscal
Month and the portion of the Fiscal Year then ended (or for the Fiscal Year then
ended in the case of annual financial statements), and (ii) a report setting
forth in comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year and the corresponding figures from the most
recent projections for the current Fiscal Year delivered pursuant to
Section 4.2(i) and discussing the reasons for any significant variations;
          (b) promptly after the same are sent, copies of all financial
statements and reports which any Credit Party sends to its shareholders or other
equity holders, as applicable, generally and promptly after the same are filed,
copies of all financial statements and regular, periodic or special reports
which such Person may make to, or file with, the Securities and Exchange
Commission or any successor or similar Governmental Authority;
          (c) as soon as available and in any event by 12:00 noon on Wednesday
of each calendar week, and at such other times as either Agent may reasonably
require, a Borrowing Base Certificate, certified on behalf of the Borrowers by a
Responsible Officer of the Borrower Representative, setting forth the Borrowing
Base of each Borrower as at the last day of the immediately preceding week,
provided, however, that, if an Event of Default has occurred and is continuing,
a Borrowing Base Certificate shall be delivered to Agents at any time and for
any period as may be requested by either Agent;
          (d) as soon as available and in any event no later than ten
(10) Business Days after the last day of each Fiscal Month of the Borrowers, a
summary of Inventory as of the prior month by location and type, accompanied by
such supporting detail and documentation as shall be requested by either Agent
in its reasonable discretion;
          (e) as soon as available and in any event no later than five
(5) Business Days after the last day of each Fiscal Month of the Borrowers, a
monthly receivables trial balance showing Accounts outstanding aged from invoice
date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more,
accompanied by such supporting detail and documentation as shall be requested by
either Agent in its reasonable discretion;
          (f) as soon as available and in any event no later than ten
(10) Business Days after the last day of each Fiscal Month of the Borrowers or
at such more frequent intervals as either Agent may request from time to time
(together with a copy of all or any part of such delivery requested by any
Lender in writing after the Closing Date), collateral reports for the prior
month, including all additions and reductions (cash and non-cash) with respect
to Credit Card Receivables of the Credit Parties in each case accompanied by
such supporting detail and documentation as shall be requested by either Agent
in its reasonable

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discretion each of which shall be prepared by the Borrower Representative as of
the last day of the immediately preceding week or the date 2 days prior to the
date of any request;
          (g) as soon as available and in any event no later than concurrently
with the delivery of the financial statement required pursuant to
Section 4.1(c);
     (i) a reconciliation of the most recent Borrowing Base, general ledger of
each Borrower to such Borrower’s general ledger and monthly financial statements
delivered pursuant to Section 4.1(c), in each case accompanied by such
supporting detail and documentation as shall be requested by either Agent in its
reasonable discretion;
     (ii) a reconciliation of (A) the inventory and accounts receivable aging to
each Borrower’s most recent Borrowing Base Certificate, general ledger and most
recent Financial Statements delivered pursuant to Section 4.1(c) and (B) the
accounts payable aging to each Borrower’s general ledger and most recent
Financial Statements delivered pursuant to Section 4.1(c), in each case
accompanied by such supporting detail and documentation as shall be requested by
either Agent in its reasonable discretion; and
     (iii) a reconciliation of the outstanding Loans as set forth in the monthly
loan account statement provided by Agents to each Borrower’s general ledger and
monthly Financial Statements delivered pursuant to Section 4.1(c), in each case
accompanied by such supporting detail and documentation as shall be requested by
either Agent in its reasonable discretion;
          (h) at the time of delivery of each of the quarterly financial
statements delivered pursuant to Section 4.1(b), a list of any applications for
the registration of any Patent, Trademark or Copyright filed by any Credit Party
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in each case entered into or filed in the
prior Fiscal Quarter;
          (i) Intentionally Omitted;
          (j) promptly upon receipt thereof, copies of any reports submitted by
the certified public accountants in connection with each annual, interim or
special audit or review of any type of the financial statements or internal
control systems of any Credit Party made by such accountants, including any
comment letters submitted by such accountants to management of any Credit Party
in connection with their services;
          (k) upon either Agent’s request from time to time, the Credit Parties
shall permit and enable (and Term B Agent shall have the ability to cause)

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Working Capital Agent to obtain appraisals (with copies to be sent to the Term B
Agent) in form and substance and from appraisers reasonably satisfactory to
Agents stating the then Net Orderly Liquidation Value, or such other value as
determined by Agents, of all or any portion of the Inventory of any Credit Party
or any Subsidiary of any Credit Party; provided, that notwithstanding any
provision herein to the contrary, the Credit Parties shall only be obligated to
reimburse Working Capital Agent for the expenses of such appraisals occurring
(A) four (4) times in any twelve consecutive month period; provided that if
Availability in the aggregate is less than $40,000,000, Working Capital Agent
may in its Permitted Discretion, at Borrower’s cost and expense, require “desk
top” appraisals to be conducted in any month in which a quarterly appraisal
pursuant to clause (A) is being conducted and (B) any time an Event of Default
has occurred and is continuing;
          (l) as soon as available and in any event no later than five
(5) Business Days after the last day of each Fiscal Quarter of the Borrowers, a
report, in form and substance reasonably satisfactory to Agents setting forth a
summary of all litigation, investigations, proceedings or suspensions arising
after the Closing Date which may exist at any time between any Credit Party or
any Subsidiary of any Credit Party and any Governmental Authority that is
reasonably likely to result in payments by any Credit Party in excess of
$1,000,000;
          (m) together with each delivery of financial statements pursuant to
Section 4.1(a), 4.1(b) and 4.1(c), a compliance certificate in the form attached
hereto as Exhibit (4.2)(m).
          (n) promptly, such additional business, financial, corporate affairs,
perfection certificates and other information as either Agent may from time to
time reasonably request.
     4.3 Notices. The Borrowers shall notify promptly Agents and each Lender of
each of the following (and in no event later than three (3) Business Days after
a Responsible Officer becoming aware thereof):
          (a) the occurrence or existence of any Default or Event of Default;
          (b) except as is permitted pursuant to Section 4.18 or otherwise
approved by the Bankruptcy Court, any breach or non-performance of, or any
default under, any Contractual Obligation of any Credit Party or any Subsidiary
of any Credit Party, or any violation of, or non-compliance with, any
Requirement of Law, which would reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect, including a
description of such breach, non-performance, default, violation or
non-compliance and the steps, if any, such Person has taken, is taking or
proposes to take in respect thereof;

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          (c) any dispute, litigation, investigation, proceeding or suspension
which may exist at any time between any Credit Party or any Subsidiary of any
Credit Party and any Governmental Authority which would reasonably be expected
to result, either individually or in the aggregate, in Liabilities in excess of
$1,000,000;
          (d) after the Petition Date, the commencement of, or any material
development in, any litigation or proceeding affecting any Credit Party or any
Subsidiary of any Credit Party (i) in which the amount of damages claimed is
$1,000,000 (or its equivalent in another currency or currencies) or more,
(ii) in which injunctive or similar relief is sought and which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect, or
(iii) in which the relief sought is an injunction or other stay of the
performance of this Agreement or any other Loan Document;
          (e) (i) the receipt by any Credit Party of any notice of violation of
or potential liability or similar notice under Environmental Law, (ii) upon
becoming aware of (A) unlawful Releases, (B) the existence of any condition that
could reasonably be expected to result in violations of or Liabilities under,
any Environmental Law or (C) the commencement of, or any material change to, any
action, investigation, suit, proceeding, audit, claim, demand, dispute alleging
a violation of or Liability under any Environmental Law which in the case of
clauses (A), (B) or (C) would reasonably be expected to result in Material
Environmental Liabilities, (iii) the receipt by any Credit Party of notification
that any property of any Credit Party is subject to any Lien in favor of any
Governmental Authority securing, in whole or in part, Environmental Liabilities
and (iv) any proposed acquisition or lease of Real Estate, if such acquisition
or lease would have a reasonable likelihood of resulting in Material
Environmental Liabilities;
          (f) (i) on or prior to any filing by any ERISA Affiliate of any notice
of any reportable event under Section 4043 of ERISA, or intent to terminate any
Title IV Plan, a copy of such notice (ii) promptly, and in any event within ten
(10) days, after any officer of any ERISA Affiliate knows or has reason to know
that a request for a minimum funding waiver under Section 412 of the Code has
been filed with respect to any Title IV Plan or Multiemployer Plan, a notice
describing such waiver request and any action that any ERISA Affiliate proposes
to take with respect thereto, together with a copy of any notice filed with the
PBGC or the IRS pertaining thereto, and (iii) promptly, and in any event within
ten (10) days after any officer of any ERISA Affiliate knows or has reason to
know that an ERISA Event will or has occurred, a notice describing such ERISA
Event, and any action that any ERISA Affiliate proposes to take with respect
thereto, together with a copy of any notices received from or filed with the
PBGC, IRS, Multiemployer Plan or other Benefit Plan pertaining thereto;
          (g) any Material Adverse Effect subsequent to the date of the Petition
Date;

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          (h) any material change in accounting policies or financial reporting
practices by any Credit Party or any Subsidiary of any Credit Party;
          (i) any labor controversy resulting in or threatening to result in any
strike, work stoppage, boycott, shutdown or other labor disruption against or
involving any Credit Party or any Subsidiary of any Credit Party if the same
would reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect;
          (j) the creation, establishment or acquisition of any Subsidiary or
the issuance by or to any Credit Party of any Stock or Stock Equivalent;
          (k) (i) the creation, or filing with the IRS or any other Governmental
Authority, of any Contractual Obligation or other document extending, or having
the effect of extending, the period for assessment or collection of any income
or franchise or other material taxes with respect to any Tax Affiliate and
(ii) the creation of any Contractual Obligation of any Tax Affiliate, or the
receipt of any request directed to any Tax Affiliate, to make any material
adjustment under Section 481(a) of the Code, by reason of a change in accounting
method or otherwise; and
          (l) any notice of default (in respect of a default which has not been
cured prior to the receipt of such notice) under any Real Estate lease or any
lease guaranteed by any Credit Party, including the Real Estate affected
thereby, other than any notice of default with respect to a Real Estate lease
that will be the subject of a Permitted Store Closing.
Each notice pursuant to this Section 4.3 shall be in electronic form accompanied
by a statement by a Responsible Officer of the Borrower Representative, on
behalf of the Borrowers, setting forth details of the occurrence referred to
therein, and stating what action the Borrowers or other Person proposes to take
with respect thereto and at what time.
     4.4 Preservation of Corporate Existence, Etc. Except as occasioned by the
Chapter 11 Cases, each Credit Party shall, and shall cause each of its
Subsidiaries to:
          (a) preserve and maintain in full force and effect its organizational
existence and good standing under the laws of its jurisdiction of incorporation,
organization or formation, as applicable, except, with respect to the Borrowers’
Subsidiaries, in connection with transactions permitted by Section 5.3;
          (b) preserve and maintain in full force and effect all rights,
privileges, qualifications, permits, licenses and franchises necessary in the
normal conduct of its business except in connection with transactions permitted
by Section 5.3 and sales of assets permitted by Section 5.2 and except as would
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect;

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          (c) preserve or renew all of its registered trademarks, trade names
and service marks, the non-preservation of which would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect; and
          (d) conduct its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect and shall comply in all material respects with the terms of its IP
Licenses.
          Notwithstanding the foregoing, any Subsidiary of BGI may be
liquidated, wound up, struck off or dissolved, or all or any part of its
business, property, or assets may be conveyed, sold, leased, transferred,
contributed or otherwise disposed of, in one transaction or a series of
transactions, to a Borrower or other Credit Party and any Excluded Subsidiary
may be merged with or amalgamated into any other Foreign Subsidiary or be
liquidated.
     4.5 Maintenance of Property. Except as occasioned by the Chapter 11 Cases,
each Credit Party shall maintain, and shall cause each of its Subsidiaries to
maintain, and preserve all its Property which is used or useful in its business
in good working order and condition, ordinary wear and tear excepted and shall
make all necessary repairs thereto and renewals and replacements thereof except
where the failure to do so would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
     4.6 Insurance.
          (a) Each Credit Party shall, and shall cause each of its Subsidiaries
to, (i) maintain or cause to be maintained in full force and effect all policies
of insurance of any kind with respect to the property and businesses of the
Credit Parties and such Subsidiaries (including policies of life, fire, theft,
product liability, public liability, Flood Insurance, property damage, other
casualty, employee fidelity, workers’ compensation, business interruption and
employee health and welfare insurance) with financially sound and reputable
insurance companies or associations (in each case that are not Affiliates of the
Borrowers) of a nature and providing such coverage as is sufficient and as is
customarily carried by businesses of the size and character of the business of
the Credit Parties and (ii) cause all such insurance relating to any property or
business of any Credit Party to name Working Capital Agent as additional insured
or loss payee, as appropriate. All policies of insurance on real and personal
property of the Credit Parties will contain an endorsement, in form and
substance acceptable to Agents, showing loss payable to Working Capital Agent
(Form CP 1218 or equivalent) and extra expense and business interruption
endorsements. Such endorsement shall provide that no act or default of the
Credit Parties or any other Person shall affect the right of Working Capital
Agent to recover under such policy or policies of insurance in case of loss or
damage. The Credit Parties will give Agents at least 45 days’ prior written
notice before any such policy or policies of insurance shall be altered or
canceled. Each Credit Party shall direct

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all present and future insurers under its “All Risk” policies of property
insurance to pay all proceeds payable thereunder directly to Working Capital
Agent (such proceeds to be subject to the provisions in Section 1.8(e) and (f)).
If any insurance proceeds are paid by check, draft or other instrument payable
to any Credit Party and Working Capital Agent jointly, Working Capital Agent may
endorse such Credit Party’s name thereon and do such other things as Working
Capital Agent may deem advisable to reduce the same to cash. Agents reserve the
right at any time, upon review of each Credit Party’s risk profile, to require
additional forms and limits of insurance. Notwithstanding the requirement in
clause (i) above, Federal Flood Insurance shall not be required for (x) Real
Estate not located in a Special Flood Hazard Area, or (y) Real Estate located in
a Special Flood Hazard Area in a community that does not participate in the
National Flood Insurance Program.
          (b) Unless the Credit Parties provide Agents with evidence of the
insurance coverage required by this Agreement, Working Capital Agent may
purchase insurance at the Credit Parties’ expense to protect Agents’ and
Lenders’ interests in the Credit Parties’ and their Subsidiaries’ properties.
This insurance may, but need not, protect the Credit Parties’ and their
Subsidiaries’ interests. The coverage that Working Capital Agent purchases may
not pay any claim that any Credit Party or any Subsidiary of any Credit Party
makes or any claim that is made against such Credit Party or any Subsidiary in
connection with said Property. The Credit Parties may later cancel any insurance
purchased by Working Capital Agent, but only after providing Agents with
evidence that there has been obtained insurance as required by this Agreement.
If Working Capital Agent purchases insurance, the Credit Parties will be
responsible for the costs of that insurance, including any charges, fees and
expenses incurred by Working Capital Agent in connection with the placement of
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance shall be added to the Obligations and
shall bear interest at the Base Rate plus the Revolving Applicable Margin and
the default rate for Revolving Loans under Section 1.3(c), and shall be due and
payable upon demand of Working Capital Agent. The costs of the insurance may be
more than the cost of insurance the Credit Parties may be able to obtain on
their own.
     4.7 Payment of Obligations. Except as occasioned by the Chapter 11 Cases,
each Credit Party shall, and shall cause each of its Subsidiaries to, pay,
discharge and perform as the same shall become due and payable or required to be
performed, all their respective obligations and liabilities, including:
          (a) all tax liabilities, assessments and governmental charges or
levies upon it or its Property, unless (i) the same are being contested in good
faith by appropriate proceedings diligently prosecuted which stay the filing or
enforcement of any Lien and for which adequate reserves in accordance with GAAP
are being maintained by such Person; and (ii) the aggregate Liabilities secured
by such Lien do not exceed $2,500,000.

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          (b) all lawful claims which, if unpaid, would by law become a Lien
upon its Property unless the same are being contested in good faith by
appropriate proceedings diligently prosecuted which stay the imposition or
enforcement of any Lien and for which adequate reserves in accordance with GAAP
are being maintained by such Person;
          (c) except as permitted pursuant to Section 4.18 or otherwise approved
by the Bankruptcy Court, the performance of all obligations under any
Contractual Obligation to such Credit Party or any of its Subsidiaries is bound,
or to which it or any of its Property is subject, except where the failure to
perform would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; and
          (d) payments to the extent necessary to avoid the imposition of a Lien
with respect to, or the involuntary termination of any underfunded Benefit Plan.
     4.8 Compliance with Laws. Each Credit Party shall, and shall cause each of
its Subsidiaries to, comply with all Requirements of Law of any Governmental
Authority having jurisdiction over it or its business, except where the failure
to comply would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
     4.9 Inspection of Property and Books and Records. (a) Each Credit Party
shall maintain and shall cause each of its Subsidiaries to maintain proper books
of record and account, in which full, true and correct entries in conformity
with GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of such Person. Each Credit Party
shall, and shall cause each of its Subsidiaries to, with respect to each owned,
leased, or controlled property, during normal business hours and upon reasonable
advance notice (unless an Event of Default shall have occurred and be
continuing, in which event no notice shall be required and Agents shall have
access at any and all times during the continuance thereof): (a) provide access
to such property to Agents and any of its Related Persons, as frequently as
either Agent determines to be appropriate; and (b) permit Working Capital Agent
and any of its Related Persons to conduct field examinations, audit, inspect and
make extracts and copies (or take originals if reasonably necessary) from all of
such Credit Party’s books and records (and Term B Agent shall be entitled to a
copy, at Borrowers’ expense, of all such books and records), and evaluate and
make physical verifications of the Inventory and other Collateral in any manner
and through any medium that Working Capital Agent considers advisable, in each
instance, at the Credit Parties’ expense; provided the Credit Parties shall only
be obligated to reimburse Working Capital Agent for the expenses for (A) four
(4) such field examinations, audits and inspections in any twelve consecutive
month period, in the event that no Event of Default has occurred and is
continuing and (B) all field examinations, audits and inspections conducted
during the occurrence and continuance of an Event of Default. Any Lender or Term
B Agent may cause Working Capital Agent to (and Working Capital Agent shall)
exercise its rights under this Section

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4.9. Any Lender and Term B Agent may accompany Working Capital Agent or its
Related Persons in connection with any inspection at Borrowers’ expense.
(b) Each Credit Party shall permit any Agent and any of its Related Persons from
time to time, subject (except when a Default or Event of Default exists) to
reasonable notice, to discuss with officers, senior management, its independent
accountants, financial advisors, restructuring advisors, sales consultants,
investment bankers and other consultants such Person’s business, financial
condition, assets (including Inventory and Credit Card Receivables programs),
prospects and results of operations, and each such Person is hereby authorized
and instructed to discuss and cooperate with such Agent or such Related Person
regarding the same.
     4.10 Use of Proceeds. The Borrowers shall use the proceeds of the Loans
solely as follows: (a) on the Closing Date, to repay the Pre-Petition Facilities
and to pay all Transaction Expenses in the manner specified in Section 2.1(c)
and (ii) after the Closing Date, as contemplated by Section 3.8(b)(ii).
     4.11 Cash Management Systems.
          (a) The Interim Order (or the Final Order, when applicable) shall
grant Working Capital Agent (on behalf of Secured Parties) a validly perfected
first priority Lien on each deposit account and each Control Account. Each
Credit Party shall enter into, and cause each depository, securities
intermediary or commodities intermediary to enter into, Control Agreements
providing for “full” cash dominion with respect to each Control Account,
securities, commodity or similar account (including, without limitation, any
lockbox or similar arrangements) maintained by such Person as of or after the
Closing Date. The Cash Management Order shall direct each Credit Party to and
each Credit Party shall (a) cause all payments (including, without limitation,
all cash, checks, drafts or other similar items of payment) received by such
Credit Party each day to be deposited into a Control Account or Local Deposit
Account (as defined below) within three (3) Business Day following receipt,
(b) cause all funds in local store deposit accounts which do not constitute
Control Accounts (“Local Deposit Accounts”) to be transferred within 48 hours to
a Control Account (other than the Concentration Account) that is subject to a
Control Agreement or to the Concentration Account, (c) cause all funds in the
Control Accounts (other than the Concentration Account) to be transferred on a
daily basis to the Concentration Account; and (d) from and after the Closing
Date, all amounts received in the Concentration Account shall be swept daily
into the Working Capital Collection Account. The Credit Parties shall not
maintain cash on deposit in disbursement accounts in excess of outstanding
checks and wire transfers payable from such accounts and amounts necessary to
meet minimum balance requirements.
          (b) Each Control Agreement shall provide, among other things, that the
depository, securities intermediary or commodities intermediary

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executing such agreement has no rights of setoff or recoupment or any other
claim against such account, other than for payment of its service fees and other
charges directly related to the administration of such account and for returned
checks or other items of payment (except as Agents may otherwise agree in
writing).
          (c) All amounts deposited in the Working Capital Collection Account
shall be deemed received by the Working Capital Agent in accordance with
Section 1.10(a) and shall be applied (and allocated) by such Agent in accordance
with Section 1.10(c)(i), or Section 1.10(c)(ii), as the case may be. In no event
shall any amount be so applied unless and until such amount shall have been
credited in immediately available funds to the Working Capital Collection
Account. The Credit Parties shall deposit Net Term B Proceeds into the Term B
Collection Account.
          (d) Credit Parties may amend Schedule 3.22 to add or replace any
deposit account or other account; provided, that (i) Agents shall have consented
in writing in advance to the opening of such account with the relevant
depository, securities intermediary or commodities intermediary and (ii) with
respect to any additional or replacement Control Account, securities account, or
commodities account, except as Agents may otherwise agree in writing, prior to
the time of the opening of such account, the applicable Credit Party and the
applicable depository, securities intermediary or commodities intermediary shall
have executed and delivered to Working Capital Agent a Control Agreement.
          (e) Credit Parties shall close any of their respective accounts (and
establish replacement accounts in accordance with clause (d) hereof) promptly
and in any event within thirty (30) days following notice from Agents that the
creditworthiness of any bank holding an account is no longer acceptable in
Agents’ reasonable judgment, or as promptly as practicable and in any event
within sixty (60) days following notice from Agents that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts of the depository, securities intermediary or commodities
intermediary holding such accounts or Working Capital Agent’s liability under
any Control Agreement with such depository, securities intermediary or
commodities intermediary is no longer acceptable in Agents; reasonable judgment.
     4.12 Lien Waivers. As reasonably requested by either Agent and to the
extent not otherwise addressed to such Agent’s reasonable satisfaction in the
Final Order, each Credit Party shall use commercially reasonable efforts to
obtain a Lien Waiver from (i) the lessor of each leased property located in a
Landlord Lien State or constituting a Large Inventory Location, (ii) bailee in
possession of any Collateral or (iii) mortgagee of any Real Estate owned by a
Borrower with respect to each location where any Collateral is stored or
located. Each Credit Party shall timely and fully pay and perform its
obligations in all material respects under all leases and other agreements with
respect to each leased location or public warehouse where any Collateral is or
may be located.

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     4.13 Further Assurances.
          (a) Each Credit Party shall ensure that all written information,
exhibits and reports furnished to Agents or the Lenders do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to Agents and the Lenders and correct any defect or error that
may be discovered therein or in any Loan Document or in the execution,
acknowledgement or recordation thereof.
          (b) Promptly upon request by either Agent (and subject to the approval
of the Bankruptcy Court, if required), the Credit Parties shall (and, subject to
the limitations hereinafter set forth, shall cause each of their Subsidiaries
to) take such additional actions and execute such documents as such Agent may
reasonably require from time to time in order (i) to carry out more effectively
the purposes of this Agreement or any other Loan Document, (ii) to subject to
the Liens created by any of the Collateral Documents any of the Properties,
rights or interests covered by any of the Collateral Documents, (iii) to perfect
and maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (iv) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Secured Parties the rights granted or now or hereafter intended to be granted to
the Secured Parties under any Loan Document (including, without limitation, by
conducting such searches under the Uniform Commercial Code in any jurisdiction,
at such times (including periodic intervals), as either Agent may reasonably
require or request). Without limiting the generality of the foregoing and except
as otherwise approved in writing by Required Lenders, the Credit Parties shall
cause each of their Domestic Subsidiaries (other than Domestic Subsidiaries
owned indirectly through a Foreign Subsidiary) and, to the extent no 956 Impact
exists, Foreign Subsidiaries, and Domestic Subsidiaries owned indirectly through
a Foreign Subsidiary, to guaranty the Obligations and to cause each such
Subsidiary to grant to Working Capital Agent, for the benefit of the Secured
Parties, a security interest in, subject to the limitations hereinafter set
forth, all of such Subsidiary’s Property to secure such guaranty and to join
this Agreement and the Guaranty and Security Agreement pursuant to the form of
joinder agreement attached to the Guaranty and Security Agreement. Furthermore
and except as otherwise approved in writing by Required Lenders, each Credit
Party shall, and shall cause each of its Domestic Subsidiaries (other than
Domestic Subsidiaries owned indirectly through a Foreign Subsidiary) to, pledge
all of the Stock and Stock Equivalents of each of its Domestic Subsidiaries
(other than Domestic Subsidiaries owned indirectly through a Foreign Subsidiary)
and First Tier Foreign Subsidiaries (provided that with respect to any First
Tier Foreign Subsidiary, if a 956 Impact exists such pledge shall be limited to
sixty-five percent (65%) of such Foreign Subsidiary’s outstanding voting Stock
and Stock Equivalents and one hundred percent (100%) of such Foreign
Subsidiary’s outstanding non-voting Stock and Stock Equivalents) and to the
extent no 956

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Impact exists, each of its Foreign Subsidiaries to pledge all of the Stock and
Stock Equivalent of each of its Subsidiaries, in each instance, to Working
Capital Agent, for the benefit of the Secured Parties, to secure the
Obligations. In connection with each pledge of Stock and Stock Equivalents, the
Credit Parties shall deliver, or cause to be delivered, to Working Capital
Agent, irrevocable proxies and stock powers and/or assignments, as applicable,
duly executed in blank. In the event any Credit Party or any Domestic Subsidiary
(other than Domestic Subsidiaries owned indirectly through a Foreign Subsidiary)
and, to the extent no 956 Impact exists, any Foreign Subsidiary, and any
Domestic Subsidiaries owned indirectly through a Foreign Subsidiary, of any
Credit Party acquires any Real Estate, simultaneously with such acquisition,
such Person shall execute and/or deliver, or cause to be executed and/or
delivered, to Agents, (v) an appraisal complying with FIRREA, (w) within
forty-five days of receipt of notice from any Agent that Real Estate is located
in a Special Flood Hazard Area, Federal Flood Insurance as required by
Section 4.6(a), (x) a fully executed Mortgage, in form and substance reasonably
satisfactory to Agents together with an A.L.T.A. lender’s title insurance policy
issued by a title insurer reasonably satisfactory to Agents, in form and
substance and in an amount reasonably satisfactory to Agents insuring that the
Mortgage is a valid and enforceable first priority Lien on the respective
property, free and clear of all defects, encumbrances and Liens, (y) then
current A.L.T.A. surveys, certified to Working Capital Agent by a licensed
surveyor sufficient to allow the issuer of the lender’s title insurance policy
to issue such policy without a survey exception and (z) an environmental site
assessment prepared by a qualified firm reasonably acceptable to Working Capital
Agent and Term B Agent, in form and substance satisfactory to Working Capital
Agent and Term B Agent. A “956 Impact” will be deemed to exist to the extent the
issuance of a guaranty by, grant of a Lien by, or pledge of greater than
two-thirds of the voting Stock and Stock Equivalents of, a Foreign Subsidiary,
would result in material incremental income tax liability as a result of the
application of Section 956 of the Code, taking into account actual anticipated
repatriation of funds, foreign tax credits and other relevant factors. In
addition to the obligations set forth in Sections 4.6(a) and 4.13(b)(w), within
forty-five days after written notice from Working Capital Agent to Credit
Parties that any Real Estate is located in a Special Flood Hazard Area, Credit
Parties shall satisfy the Federal Flood Insurance requirements of
Section 4.6(a). Notwithstanding the foregoing, in no event shall the Credit
Parties be obligated to execute or deliver any Mortgage in respect of Real
Estate that is leased but not owned by a Credit Party.
     4.14 Environmental Matters. Without limiting the generality of the
foregoing, each Credit Party shall, and shall cause each of its Subsidiaries to,
comply with, and maintain its Real Estate, whether owned, leased, subleased or
otherwise operated or occupied, in compliance with, all applicable Environmental
Laws (including by implementing any Remedial Action necessary to achieve such
compliance or that is required by orders and directives of any Governmental
Authority except where the failure to comply would not reasonably be expected
to, individually or in the aggregate, result in a Material Environmental
Liability. Without limiting the foregoing, if an Event of Default is continuing
or if either Agent at any time has a reasonable basis to believe that

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there exist violations of Environmental Laws by any Credit Party or any
Subsidiary of any Credit Party or that there exist any Environmental
Liabilities, then each Credit Party shall, promptly upon receipt of request from
either Agent, cause the performance of, and allow either Agent and its Related
Persons access to such Real Estate for the purpose of conducting, such
environmental audits and assessments, including subsurface sampling of soil and
groundwater, and cause the preparation of such reports, in each case as either
Agent may from time to time reasonably request, and in each case, if permitted
by the Credit Parties’ leases and other Contractual Obligations. Such audits,
assessments and reports, to the extent not conducted by either Agent or any of
their Related Persons, shall be conducted and prepared by reputable
environmental consulting firms reasonably acceptable to such Agent and shall be
in form and substance reasonably acceptable to such Agent.
     4.15 Restructuring Advisers. Credit Parties shall continue to retain
AlixPartners as restructuring advisers or retain such other advisor acceptable
to Agents and on terms and conditions satisfactory to Agents until Credit
Parties have substantially consummated a plan of reorganization. Each Agent
shall retain the right to engage its own restructuring advisers or consultants
at Borrowers’ cost and expense pursuant to Section 9.5 hereof. Subject to
Section 4.9, the Credit Parties and their representatives will fully cooperate
with any such advisers and consultants and grant them full and complete access
to the books and records of the Credit Parties.
     4.16 Approved Budget.
          (a) The use of Loans by the Credit Parties under this Agreement and
the other Loan Documents shall be limited in accordance with the Approved
Budget. The initial Approved Budget shall depict, on a weekly basis, cash
revenues, receipts, expenses and disbursements and other information for the
first 16 week period from the Closing Date and such initial Approved Budget
shall be approved by, and in form and substance satisfactory to, Agents and Term
B Lenders in their discretion. The Approved Budget shall be updated, modified or
supplemented (with the consent and/or at the request of either Agent) from time
to time, but in any event not less than on a monthly basis (with the delivery to
Agents on or before the 10th day of each calendar month), and each such updated,
modified or supplemented budget shall be approved by, and in form and substance
satisfactory to, Agents and Term B Lenders in their discretion and no such
updated, modified or supplemented budget shall be effective until so approved
and once so approved shall be deemed an Approved Budget; provided, however that
in the event that Agents and Term B Lenders, on the one hand, and the Credit
Parties, on the other hand, cannot agree as to an updated, modified or
supplemented budget, such disagreement shall give rise to an Event of Default
hereunder once the period covered by the most recent Approved Budget has
terminated. Each Approved Budget delivered to Agents shall be accompanied by
such supporting documentation as reasonably requested by Agents. Each Approved
Budget shall be prepared in good faith based upon assumptions which the Credit
Parties believe to be reasonable and satisfactory to Agents.

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          (b) The Borrower Representative shall deliver to Agents on or before
12:00 p.m. (New York time) on Wednesday of each week (unless such day is not a
Business Day, in which event the next succeeding Business Day) a compliance
certificate, in the form attached hereto as Exhibit 4.2(m), and such compliance
certificate shall be in substance satisfactory to Agents, signed by a financial
officer of the Borrower Representative certifying that (i) the Credit Parties
are in compliance with the covenants contained in Section 5.21 and (ii) no
Default or Event of Default has occurred or, if such a Default or Event of
Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto, together
with (A) comparison for the Prior Week of the Actual Sales Receipts and Actual
Disbursement Amounts for such Prior Week to the Budgeted Sales Receipts and
Budgeted Disbursement Amounts for such Prior Week, (B) a cumulative comparison
for the Cumulative Four Week Period of the Actual Sales Receipts and Actual
Disbursement Amounts for such Cumulative Four Week Period to the Budgeted Sales
Receipts and Budgeted Disbursement Amounts for such Cumulative Four Week Period,
(C) a cumulative comparison for the Cumulative Period of the Actual Sales
Receipts and Actual Disbursement Amounts for such Cumulative Period to the
Budgeted Sales Receipts and Budgeted Disbursement Amounts for such Cumulative
Period, and (D) an Approved Budget Variance Report, each of which shall be
prepared by the Borrower Representative as of the last day of the Prior Week,
the Cumulative Four Week Period or the Cumulative Period, as applicable, and
shall be in form and substance satisfactory to Agents.
          (c) Agents and Lenders (i) may assume that the Credit Parties will
comply with the Approved Budget, (ii) shall have no duty to monitor such
compliance and (iii) shall not be obligated to pay (directly or indirectly from
the Collateral) any unpaid expenses incurred or authorized to be incurred
pursuant to any Approved Budget. The line items in the Approved Budget for
payment of interest, expenses and other amounts to Agents and the Lenders are
estimates only, and the Credit Parties remain obligated to pay any and all
Obligations in accordance with the terms of the Loan Documents and the Interim
Order and Final Order. Nothing in any Approved Budget (including any estimates
of a loan balance in excess of borrowing base restrictions) shall constitute an
amendment or other modification of any Loan Document or any of the borrowing
base restrictions or other lending limits set forth therein.
     4.17 Status of Permitted Store Closings. Promptly upon any such information
becoming available to Credit Parties, each Credit Party shall provide Agents
copies of any informational packages provided to potential bidders, draft agency
agreements, the deadlines established as to receipt of bids and, upon request of
Agents, a status report and updated information relating to the Permitted Store
Closings and copies of any such bids and any updates, modifications or
supplements to such information and materials.

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     4.18 Leases.
          (a) The Credit Parties shall pay all Post-Petition obligations under
the Store Leases listed on Schedule 4.18 and Licenses of Intellectual Property,
if any, as required by the Bankruptcy Code or the Bankruptcy Court, except to
the extent (i) the Credit Parties are contesting any such obligations in good
faith by appropriate proceedings, (ii) the Credit Parties have established
proper reserves as required under GAAP, and (iii) the nonpayment of which does
not result in the imposition of a Lien (other than a Permitted Encumbrance).
          (b) Other than with respect to leases relating to a Permitted Store
Closing, the Credit Parties may assume or reject any of their Real Estate
leases, only upon written consent of Agents (such consent not to be unreasonably
withheld or delayed), and in a manner consistent with a maximization of the
value of the assets of the Credit Parties.
ARTICLE V.
NEGATIVE COVENANTS
     Each Credit Party covenants and agrees that, so long as any Revolving
Lender shall have any Revolving Commitment hereunder, or any Loan or other
Obligation (other than contingent indemnification Obligations to the extent no
claim giving rise thereto has been asserted) shall remain unpaid or unsatisfied:
     5.1 Limitation on Liens. No Credit Party shall, and no Credit Party shall
suffer or permit any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether now owned or hereafter acquired, other than the
following (“Permitted Liens”):
          (a) any Lien existing on the Property of a Credit Party or a
Subsidiary of a Credit Party on the Closing Date and set forth in Schedule 5.1
securing Indebtedness outstanding on such date and permitted by Section 5.5(c),
including replacement Liens on the Property currently subject to such Liens
securing Indebtedness permitted by Section 5.5(c);
          (b) any Lien created under any Loan Document;
          (c) Liens for taxes, fees, assessments or other governmental charges
(i) which are not past due or remain payable without penalty, or (ii) the
non-payment of which is permitted by Section 4.7;
          (d) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s,
repairmen’s or other similar Liens arising in the Ordinary Course of Business
under operation of law which are not past due or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings
diligently prosecuted, which proceedings have the effect of preventing the
forfeiture or sale of the Property subject thereto and for which adequate
reserves in accordance with GAAP are being maintained;

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          (e) Liens (other than any Lien imposed by ERISA or otherwise in
respect of a Benefit Plan) consisting of pledges or deposits required in the
Ordinary Course of Business in connection with workers’ compensation,
unemployment insurance and other social security legislation or to secure the
performance of tenders, statutory obligations, surety, stay, customs and appeals
bonds, bids, leases, governmental contract, trade contracts, performance and
return of money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money) or to secure liability to insurance carriers;
          (f) Liens consisting of judgment or judicial attachment liens 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 Credit
Party shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect or which a stay of execution shall have been obtained
pending such appeal or review;
          (g) easements, rights-of-way, zoning and other restrictions, minor
defects or other irregularities in title, and other similar encumbrances
incurred in the Ordinary Course of Business which, either individually or in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the Property subject thereto or interfere
in any material respect with the ordinary conduct of the businesses of any
Credit Party or any Subsidiary of any Credit Party;
          (h) Liens on any Property acquired or held by any Credit Party or any
Subsidiary of any Credit Party securing Indebtedness incurred or assumed for the
purpose of financing (or refinancing) all or any part of the cost of acquiring
such Property and permitted under Section 5.5(f); provided that (i) any such
Lien attaches to such Property concurrently with or within thirty (30) days
after the acquisition thereof, (ii) such Lien attaches solely to the Property so
acquired in such transaction and the proceeds thereof, and (iii) the principal
amount of the debt secured thereby does not exceed 100% of the cost of such
Property;
          (i) Liens securing Capital Lease Obligations permitted under
Section 5.5(d);
          (j) any interest or title of a lessor or sublessor under any lease
permitted by this Agreement;
          (k) (i) exclusive licenses and sublicenses listed on Schedule 5.1(k)
and (ii) non-exclusive licenses and sublicenses and granted by a Credit Party
and leases or subleases (by a Credit Party as lessor or sublessor) to third
parties in the Ordinary Course of Business not interfering with the business of
the Credit Parties or any of their Subsidiaries;

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          (l) Liens in favor of collecting banks arising by operation of law
under Section 4-210 of the Uniform Commercial Code or, with respect to
collecting banks located in the State of New York, under 4-208 of the Uniform
Commercial Code;
          (m) Liens (including the right of set-off) in favor of a bank or other
depository institution arising as a matter of law encumbering deposits;
          (n) Liens in favor of customs and revenue authorities arising as a
matter of law which secure payment of customs duties in connection with the
importation of goods in the Ordinary Course of Business;
          (o) purported Liens evidenced by the filing of precautionary UCC
financing statements (x) relating solely to operating leases entered into in the
Ordinary Course of Business of a Credit Party, provided that such Liens do not
extend to any assets other than those that are the subject of such operating
lease or (y) arising out of consignment for sale by the Credit parties of
personal property through third parties in the Ordinary Course of Business;
          (p) Liens (x) in favor of credit card issuers and/or processors
securing standard fees due by a Credit Party in the Ordinary Course of Business,
which fees are within the general parameters customary in the credit card
processing industry and (y) in favor of bank or other depository institutions
arising as a matter of law encumbering deposits and that constitute contractual
rights of setoff entered into in the Ordinary Course of Business;
          (q) Liens in favor of the Approved Liquidator pursuant to the Approved
Liquidation Agreement;
          (r) until the entry of the Interim Order and the funding of the Loans
hereunder, the Liens securing the Pre-Petition Facilities; and
          (s) Other Liens securing obligations in an aggregate amount not
exceeding at any time $250,000.
Notwithstanding the foregoing, Permitted Liens under Section 5.1 shall at all
times be junior and subordinate to the Liens under the Loan Documents and the
Interim Order and Final Order, other than the Carve-Out up to the Carve-Out
Amount, the Adequate Protection Superpriority Claims and the Pre-Petition
Perfected Liens. The prohibition provided for in this Section 5.1 specifically
includes, without limitation, any effort by Borrower, any Committee, or any
other party-in-interest in the Chapter 11 Cases to prime or create pari passu to
any claims, Liens or interests of Working Capital Agent, Term B Agent and
Lenders any Lien (other than the Carve-Out up to the Carve-Out Amount, the
Adequate Protection Superpriority Claims and the Pre-Petition Perfected Liens)
irrespective of whether such claims, Liens or interests may be “adequately
protected”.
     5.2 Disposition of Assets. No Credit Party shall, and no Credit Party shall
suffer or permit any of its Subsidiaries to, directly or indirectly, sell,
assign, lease,

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convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any Property (including the Stock of any Subsidiary of any Credit
Party, whether in a public or a private offering or otherwise, and accounts and
notes receivable, with or without recourse) or enter into any agreement to do
any of the foregoing, except:
          (a) dispositions to any Person other than an Affiliate of a Credit
Party pursuant to the terms set forth in Section 5.6, of (x) Inventory in the
Ordinary Course of Business or (y) worn out or excess equipment having a book
value not exceeding $250,000 in the aggregate in any Fiscal Year, in the
Ordinary Course of Business;
          (b) dispositions in connection with any Permitted Store Closings and
so long as the Net Proceeds (or Net Term B Proceeds, as applicable) thereof are
paid in accordance with Section 1.8(e) and (f) hereof (as applicable);
          (c) transactions permitted under Section 5.1(k); and
          (d) any disposition or lease of Property by any Credit Party to any
other Credit Party.
     5.3 Consolidations and Mergers. No Credit Party shall, and no Credit Party
shall suffer or permit any of its Subsidiaries to, and no Credit Party shall
agree to do any of the foregoing: to merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except upon not less
than five (5) Business Days prior written notice to Agents, (a) any Subsidiary
of a Borrower may merge with, or dissolve or liquidate into, a Borrower or a
Wholly-Owned Subsidiary of a Borrower which is a Domestic Subsidiary, provided
that such Borrower or such Wholly-Owned Subsidiary which is a Domestic
Subsidiary shall be the continuing or surviving entity and all actions required
to maintain perfected Liens on the Stock of the surviving entity and other
Collateral in favor of Working Capital Agent shall have been completed, (b) any
Foreign Subsidiary may merge with or dissolve or liquidate into another Foreign
Subsidiary provided if a First Tier Foreign Subsidiary is a constituent entity
in such merger, dissolution or liquidation, such First Tier Foreign Subsidiary
shall be the continuing or surviving entity, and (c) any Credit Party (other
than BGI) may merge or consolidate into another Credit Party.
     5.4 Acquisitions; Loans and Investments. No Credit Party shall and no
Credit Party shall suffer or permit any of its Subsidiaries to (i) purchase or
acquire, or make any commitment to purchase or acquire any Stock or Stock
Equivalents, or any obligations or other securities of, or any interest in, any
Person, including the establishment or creation of a Subsidiary, or (ii) make or
commit to make any Acquisitions, or any other acquisition of all or
substantially all of the assets of another Person, or of any business or
division of any Person, including without limitation, by way of merger,
consolidation or other combination or (iii) make or purchase, or commit to make
or purchase, any advance, loan, extension of credit or capital contribution to
or any other investment in, any Person including a Borrower, any Affiliate of a
Borrower or any Subsidiary of a

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Borrower (the items described in clauses (i), (ii) and (iii) are referred to as
“Investments”), except for:
          (a) Investments in cash and Cash Equivalents subject to compliance
with Section 4.11;
          (b) extensions of credit by any Borrower to any other Credit Party;
provided, that: (i) if any Credit Party executes and delivers to any Borrower a
note (collectively, the “Intercompany Notes”) to evidence any such intercompany
Indebtedness owing by such Credit Party to that Borrower, that Intercompany Note
shall be pledged and delivered to Working Capital Agent pursuant to the Guaranty
and Security Agreement as additional collateral security for the Obligations;
(ii) each Borrower shall accurately record all intercompany transactions on its
books and records; and (iii) at the time any such intercompany loan or advance
is made by any Borrower to any other Credit Party and after giving effect
thereto, each such Borrower shall be Solvent;
          (c) Investments acquired in connection with the settlement of
delinquent Accounts in the Ordinary Course of Business or in connection with the
bankruptcy or reorganization of suppliers or customers; and
          (d) 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, in each instance for clause (i) and (ii) with such loans and
advances not to exceed $1,000,000 in the aggregate principal amount at any time
outstanding;
          (e) amounts held in accounts under deferred compensation plans of the
Borrowers where investments are directed by employees;
          (f) trade credit extended on usual and customary terms in the Ordinary
Course of Business;
          (g) Investments by any Credit Party in any Subsidiary of BGI which is
not a Credit Party or by any Subsidiary of BGI which is not a Credit Party in
another Subsidiary of BGI which is not a Credit Party; provided that (i) no
Default or Event of Default has occurred and is continuing or would result
therefrom, and (ii) such Investments or series of related Investments shall not
exceed $100,000 in the aggregate;
          (h) [Intentionally Omitted];
          (i) Investments deposits, prepayments and other credits to suppliers
or vendors in the Ordinary Course of Business consistent with the past practices
of the Borrowers;
          (j) Subject to compliance with Section 4.11, Investments in deposit
accounts or securities accounts opened in the Ordinary Course of Business

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provided such deposit accounts (or the concentration account into which the
deposits are swept) or securities accounts are subject to a Control Agreement in
form and substance satisfactory to the Agents;
          (k) To the extent not permitted above, Investments existing on the
Closing Date and set forth in Schedule 5.4; and
          (l) Other Investments in an amount not to exceed $100,000 in the
aggregate any time outstanding; provided that not Default or Event of Default
has occurred and is continuing or would result therefrom.
     5.5 Limitation on Indebtedness. No Credit Party shall, and no Credit Party
shall suffer or permit any of its Subsidiaries to, create, incur, assume, permit
to exist, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
          (a) the Obligations;
          (b) Indebtedness consisting of Contingent Obligations described in
clause (a) of the definition thereof and permitted pursuant to Section 5.9;
          (c) Indebtedness existing on the Closing Date and set forth in
Schedule 5.5;
          (d) Indebtedness not to exceed $5,000,000 in the aggregate at any time
outstanding, consisting of Capital Lease Obligations;
          (e) unsecured intercompany Indebtedness permitted pursuant to
Section 5.4(b) and approved by the Bankruptcy Court;
          (f) 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 thirty (30) days from the date of such acquisition), by such
Credit Party or such Subsidiary as contemplated by Section 5.1(h);
          (g) 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;
          (h) Indebtedness which may be deemed to exist pursuant to any
performance, surety, statutory, appeal or similar obligations incurred in the
Ordinary Course of Business and consistent with past practice;
          (i) other unsecured Indebtedness not exceeding $3,000,000 in the
aggregate at any time outstanding owing to Persons that are not Affiliates of
the Credit Parties.

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Notwithstanding the foregoing, and except for the Carve-Out up to the Carve-Out
Amount, the Adequate Protection Superpriority Claims and Indebtedness secured by
Pre-Petition Perfected Liens, no indebtedness under Sections 5.5(a) through (i)
shall be permitted to have an administrative expense claim status under the
Bankruptcy Code senior to or pari passu with the superpriority administrative
expense claims of Agents and the Lenders as set forth herein and in the Interim
Order and Final Order.
     5.6 Employee Loans and Transactions with Affiliates. No Credit Party shall,
and no Credit Party shall suffer or permit any of its Subsidiaries to, enter
into any transaction with any Affiliate of a Borrower or of any such Subsidiary,
except:
          (a) as expressly permitted by this Agreement; or
          (b) in the Ordinary Course of Business and pursuant to the reasonable
requirements of the business of such Credit Party or such Subsidiary upon fair
and reasonable terms no less favorable to such Credit Party or such Subsidiary
than would be obtained in a comparable arm’s length transaction with a Person
not an Affiliate of a Borrower or such Subsidiary and which are disclosed in
writing to Agents.
All such transactions existing as of the Closing Date are described in
Schedule 5.6.
     5.7 Compensation. No Credit Party shall, and no Credit Party shall permit
any of its Subsidiaries to, pay any management, consulting or similar fees to
any Affiliate of any Credit Party.
     5.8 Margin Stock; Use of Proceeds. No Credit Party shall, and no Credit
Party shall suffer or permit any of its Subsidiaries to, use any portion of the
Loan proceeds, directly or indirectly, to purchase or carry Margin Stock or
repay or otherwise refinance Indebtedness of any Credit Party or others incurred
to purchase or carry Margin Stock, or otherwise in any manner which is in
contravention of any Requirement of Law or in violation of this Agreement.
     5.9 Contingent Obligations. No Credit Party shall, and no Credit Party
shall suffer or permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Contingent Obligations except in respect of the Obligations
and except:
          (a) endorsements for collection, deposit or negotiation and warranties
of products or services in the Ordinary Course of Business;
          (b) Rate Contracts entered into in the Ordinary Course of Business for
bona fide hedging purposes and not for speculation with Agents’ prior written
consent;
          (c) Contingent Obligations of the Credit Parties and their
Subsidiaries existing as of the Closing Date and listed in Schedule 5.9,
including extension and renewals thereof which do not increase the amount of
such Contingent Obligations or impose materially more restrictive or adverse
terms on

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the Credit Parties or their Subsidiaries as compared to the terms of the
Contingent Obligation being renewed or extended;
          (d) Contingent Obligations arising under indemnity agreements to title
insurers to cause such title insurers to issue to Working Capital Agent title
insurance policies;
          (e) guarantees of any obligations of landlords of a Credit Party to
the extent that the obligations relate to funds arranged by a Credit Party and
used to finance or refinance any stores of a Credit Party and such funds are
intended to be repaid through lease payments of a Credit Party;
          (f) Contingent Obligations arising with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions entered into prior to the date hereof;
          (g) Contingent Obligations arising under guarantees made in the
Ordinary Course of Business of obligations of any Credit Party, which
obligations are otherwise permitted hereunder; provided that if such obligation
is subordinated to the Obligations, such guarantee shall be subordinated to the
same extent;
          (h) other Contingent Obligations not exceeding $3,000,000 in the
aggregate at any time outstanding;
          (i) Contingent Obligations arising with respect to customary
indemnification obligations in respect of chargebacks in favor of any credit
card issuer or processor under any Credit Card Agreements; and
          (j) Contingent Obligations arising under Letters of Credit.
Notwithstanding the foregoing, and except for the Carve-Out up to the Carve-Out
Amount, the Adequate Protection Superpriority Claims and Contingent Obligations
secured by Pre-Petition Perfected Liens, no Contingent Obligations under
Section 5.9 shall be permitted to have an administrative expense claim status
under the Bankruptcy Code senior to or pari passu with the superpriority
administrative expense claims of Agents and the Lenders as set forth herein and
in the Interim Order and Final Order.
     5.10 Compliance with ERISA. No ERISA Affiliate shall cause or suffer to
exist (a) any event that could result in the imposition of a Lien on any asset
of a Credit Party or a Subsidiary of a Credit Party with respect to any Title IV
Plan or Multiemployer Plan or (b) any other ERISA Event, that would, in the
aggregate, result in Liabilities in excess of $500,000. No Credit Party shall
cause or suffer to exist any event that could result in the imposition of a Lien
with respect to any ERISA Plan.

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     5.11 Restricted Payments.
          (a) Other than as contemplated in the Interim Order (or the Final
Order, applicable), no Credit Party shall, and no Credit Party shall suffer or
permit any of its Subsidiaries to, (i) declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any Stock or Stock Equivalent, (ii) purchase, redeem or
otherwise acquire for value any Stock or Stock Equivalent now or hereafter
outstanding or (iii) make any payment or prepayment of principal of, premium, if
any, interest, fees, redemption, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, Subordinated Indebtedness (the
items described in clauses (i), (ii) and (iii) above are referred to as
“Restricted Payments”); except dividends to (a) BGI from any wholly owned
Subsidiary of BGI or (b) a Borrower or another Credit Party.
          (b) In addition, Credit Parties shall not make any payment on account
of, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire
for value any Pre-Petition Indebtedness, other than prior to the occurrence and
during the continuance of an Event of Default and solely in accordance with the
Approved Budget, payment of (A) Pre-Petition employee wages, benefits and
related employee taxes as of the Petition Date, (B) Pre-Petition sales, use and
real property taxes, (C) amounts approved in accordance with other “First Day”
orders satisfactory to Agents and (D) the Pre-Petition Facilities.
     5.12 Change in Business. No Credit Party shall, and no Credit Party shall
permit any of its Subsidiaries to, engage in any line of business different from
those lines of business carried on by it on the date hereof. The Excluded
Subsidiaries shall not engage in any business activities or own any Property
other than activities and contractual rights incidental to maintenance of their
respective corporate existence.
     5.13 Change in Structure. Except as expressly permitted under Section 5.3,
no Credit Party shall, and no Credit Party shall permit any of its Subsidiaries
to, make any material changes in its equity capital structure, issue any Stock
or Stock Equivalents or amend any of its Organization Documents in any material
respect and, in each case, in any respect adverse to Agents or Lenders.
     5.14 Changes in Accounting, Name or Jurisdiction of Organization. No Credit
Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries
to, (i) make any significant change in accounting treatment or reporting
practices, except as required by GAAP, (ii) change the Fiscal Year or method for
determining Fiscal Quarters or Fiscal Months of any Credit Party or of any
consolidated Subsidiary of any Credit Party, (iii) change its name as it appears
in official filings in its jurisdiction of organization or (iv) change its
jurisdiction of organization, in the case of clauses (iii) and (iv), without at
least twenty (20) days’ prior written notice to Working Capital Agent (with a
copy to Term B Agent) and the acknowledgement of Working Capital Agent that all
actions required by Working Capital Agent, including those to continue the
perfection of its Liens, have been completed.

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     5.15 Amendments to Subordinated Indebtedness. No Credit Party shall, and no
Credit Party shall permit any of its Subsidiaries directly or indirectly to,
change or amend the terms of any Subordinated Indebtedness.
     5.16 No Negative Pledges.
          (a) No Credit Party shall, and no Credit Party shall permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual restriction or encumbrance of any kind
on the ability of any Credit Party or Subsidiary to pay dividends or make any
other distribution on any of such Credit Party’s or Subsidiary’s Stock or Stock
Equivalents or to pay fees, including management fees, or make other payments
and distributions to a Borrower or any Credit Party. No Credit Party shall, and
no Credit Party shall permit any of its Subsidiaries to, directly or indirectly,
enter into, assume or become subject to any Contractual Obligation prohibiting
or otherwise restricting the existence of any Lien upon any of its assets in
favor of Working Capital Agent, whether now owned or hereafter acquired except
in connection with any document or instrument governing Liens permitted pursuant
to Sections 5.1(h) or (i), provided that any such restriction contained therein
relates only to the asset or assets subject to such Permitted Liens.
          (b) No Credit Party shall issue any Stock or Stock Equivalents unless
such Stock and Stock Equivalents are pledged to Working Capital Agent, for the
benefit of the Secured Parties, as security for the Obligations pursuant to and
in accordance with the Guaranty and Security Agreement.
     5.17 OFAC; Patriot Act. No Credit Party shall, and no Credit Party shall
permit any of its Subsidiaries to fail to comply with any of the requirements
set forth in Section 3.28.
     5.18 Sale-Leasebacks. No Credit Party shall, and no Credit Party shall
permit any of its Subsidiaries to, engage in a sale leaseback, synthetic lease
or similar transaction involving any of its assets.
     5.19 Hazardous Materials. No Credit Party shall, and no Credit Party shall
permit any of its Subsidiaries to, cause or suffer to exist any Release of any
Hazardous Material at, to or from any Real Estate that would violate any
Environmental Law and cause a Material Environmental Liability.
     5.20 Prepayments of Other Indebtedness. No Credit Party shall, directly or
indirectly, voluntarily purchase, redeem, defease or prepay any principal of,
premium, if any, interest or other amount payable in respect of any Indebtedness
prior to its scheduled maturity, other than the Obligations.
     5.21 Budget and Availability Compliance Covenants. No Credit Party shall
allow (i) Actual Sales Receipts for any Cumulative Four Week Period to be less
than 90% of the Budgeted Sales Receipts for any such Cumulative Four Week
Period; (ii) Actual Disbursement Amounts for any Cumulative Four Week Period to
exceed 110% of

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the Budgeted Disbursement Amounts for any such Cumulative Four Week Period; or
(iii) Availability to be less than $25,000,000.
     5.22 Repayment of Indebtedness. Without limiting any other provision
hereof, except pursuant to the Approved Budget, Borrower shall not, without the
express prior written consent of Agents and Required Lenders and pursuant to an
order of the Bankruptcy Court after notice and hearing, make any payment or
transfer with respect to any Lien or Indebtedness incurred or arising prior to
the Petition Date that is subject to the automatic stay provisions of the
Bankruptcy Code whether by way of “adequate protection” under the Bankruptcy
Code or otherwise.
     5.23 Reclamation Claims. No Credit Party shall enter into any agreement to
return any of its Inventory to any of its creditors for application against any
Pre-Petition Indebtedness, Pre-Petition trade payables or other Pre-Petition
claims under Section 546(g) of the Bankruptcy Code or allow any creditor to take
any setoff or recoupment against any of its Pre-Petition Indebtedness,
Pre-Petition trade payables or other Pre-Petition claims based upon any such
return pursuant to Section 553(b)(l) of the Bankruptcy Code or otherwise if,
after giving effect to any such agreement, setoff or recoupment, the aggregate
amount applied to Pre-Petition Indebtedness, Pre-Petition trade payables and
other Pre-Petition claims subject to all such agreements, setoffs and
recoupments since the Petition Date would exceed $250,000.
     5.24 Chapter 11 Claims. No Credit Party shall incur, create, assume, suffer
to exist or permit any other superpriority administrative claim which is pari
passu with or senior to the claims of Agents and Lenders against the Credit
Parties, except as set forth in Section 1.13(b).
     5.25 Bankruptcy Actions. The Borrowers will not seek, consent to, or permit
to exist, without the prior written consent of Agents, any order granting
authority to take any action that is prohibited by the terms of this Agreement
or the other Loan Documents or refrain from taking any action that is required
to be taken by the terms of this Agreement or any of the other Loan Documents.
ARTICLE VI.
[INTENTIONALLY OMITTED]
ARTICLE VII.
EVENTS OF DEFAULT
     7.1 Events of Default. Notwithstanding the provisions of Section 362 of the
Bankruptcy Code and without notice, application or motion to, hearing before, or
order of the Bankruptcy Court or any notice to any Credit Party, and subject to
Section 7.2, any of the following shall constitute an “Event of Default”:
          (a) Non-Payment. Any Credit Party fails (i) to pay when and as
required to be paid herein, any amount of principal of any Loan, including after

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maturity of the Loans, or to pay any L/C Reimbursement Obligations, (ii) to pay
within one (1) Business Days after the same shall become due, any amount of
interest on any Loan, or (iii) to pay within three (3) Business Days after the
same shall become due, any fee or any other amount payable hereunder or pursuant
to any other Loan Document;
          (b) Representation or Warranty. (i) Any representation, warranty or
certification by or on behalf of any Credit Party or any of its Subsidiaries
made or deemed made herein, in any other Loan Document, or which is contained in
any certificate, document or financial or other written statement by any such
Person, or their respective Responsible Officers, furnished at any time under
this Agreement, or in or under any other Loan Document, shall prove to have been
incorrect in any material respect (without duplication of other materiality
qualifiers contained therein) on or as of the date made or deemed made or
(ii) any information contained in any Borrowing Base Certificate is untrue or
incorrect in any respect (other than (1) inadvertent, immaterial errors not
exceeding $300,000 in the aggregate in any Borrowing Base Certificate and
(2) errors understating the Borrowing Base);
          (c) Specific Defaults. Any Credit Party fails to perform or observe
any term, covenant or agreement contained in any of Sections 4.1, 4.2(c) through
(g) and (k), 4.3(a), 4.4(a), 4.6, 4.7, 4.9, 4.10, 4.11, 4.13, 4.15, 4.16, 4.17,
4.18, 9.10(d) or Article V or the Fee Letter;
          (d) Other Defaults. Any Credit Party or Subsidiary of any Credit Party
fails to perform or observe any other term, covenant or agreement contained in
this Agreement or any other Loan Document, and such default shall continue
unremedied for a period of fifteen (15) days after the earlier to occur of
(i) the date upon which a Responsible Officer of any Credit Party becomes aware
of such default and (ii) the date upon which written notice thereof is given to
the Borrower Representative by Agents or Required Lenders;
          (e) Cross-Default. Except for defaults occasioned by the filing of the
Chapter 11 Cases and defaults resulting from obligations with respect to which
the Bankruptcy Code prohibits any Credit Party from complying or permits any
Credit Party not to comply, a default or breach occurs under any other
agreement, document or instrument entered into either (x) Pre-Petition and which
is affirmed after the Petition Date or is not subject to the automatic stay
provisions of Section 362 of the Bankruptcy Code, or (y) Post-Petition, to which
any Credit Party is a party that is not cured within any applicable grace period
therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness or Guaranteed Indebtedness
(other than the Obligations) of any Credit Party in excess of $3,000,000 in the
aggregate (including (x) undrawn committed or available amounts and (y) amounts
owing to all creditors under any combined or syndicated credit arrangements), or
(ii) causes, or permits any holder of such Indebtedness or Guaranteed
Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a

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portion thereof in excess of $3,000,000 in the aggregate to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment, or
cash collateral in respect thereof to be demanded, in each case, regardless of
whether such rights are exercised by such holder or trustee;
          (f) Intentionally Omitted;
          (g) Intentionally Omitted;
          (h) Monetary Judgments. Other than proofs of claim filed in connection
with the Chapter 11 Cases, and orders pertaining thereto, one or more judgments,
non-interlocutory orders, decrees or arbitration awards shall be entered against
any one or more of the Credit Parties or any of their respective Subsidiaries
involving in the aggregate a liability of $1,000,000 or more (excluding amounts
covered by insurance to the extent the relevant independent third party insurer
has not denied coverage therefor), and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of thirty (30) days after the
entry thereof;
          (i) Non-Monetary Judgments. One or more non-monetary judgments, orders
or decrees shall be rendered against any one or more of the Credit Parties or
any of their respective Subsidiaries which has or would reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect, and
there shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
          (j) Collateral. Any material provision of any Loan Document shall for
any reason cease to be valid and binding on or enforceable against any Credit
Party or any Subsidiary of any Credit Party thereto or any Credit Party or any
Subsidiary of any Credit Party shall so state in writing or bring an action to
limit its obligations or liabilities thereunder; or any Collateral Document
shall for any reason (other than pursuant to the terms thereof) cease to create
a valid security interest in the Collateral purported to be covered thereby or
such security interest shall for any reason cease to be a perfected and first
priority security interest subject only to Permitted Liens;
          (k) Ownership. A Change in Control shall occur;
          (l) Invalidity of Subordination Provisions. The subordination
provisions of any agreement or instrument governing any Subordinated
Indebtedness shall for any reason be revoked or invalidated, or otherwise cease
to be in full force and effect, or any Person shall contest in any manner the
validity or enforceability thereof or deny that it has any further liability or
obligation thereunder, or the Obligations, for any reason shall not have the
priority contemplated by this Agreement or such subordination provisions; or

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          (m) The occurrence of any of the following in the Chapter 11 Cases:
          (i) on or before the date that is sixty (60) days after the Petition
Date, the Credit Parties have not obtained an order of the Bankruptcy Court
extending the time period of the Credit Parties to assume or reject leases to
not less than two hundred and ten (210) days from the Petition Date;
          (ii) on or before fifteen (15) weeks prior to the Lease Rejection
Date, the Credit Parties have not distributed bid packages to solicit bids (with
separate bids as to furniture, fixtures and equipment, which bids may be
included as part of any bid submitted for the Inventory and which may be on a
commission basis) from Approved Liquidators with respect to assets located on
the properties that are subject to leases to be rejected on the Lease Rejection
Date;
          (iii) on or before fourteen (14) weeks prior to the Lease Rejection
Date, the Credit Parties have not filed a motion or series of motions seeking
authority to establish bidding procedures and to engage an Approved Liquidator
to conduct the Affected Asset Sale as the so-called “stalking horse”, which
bidding procedures shall be reasonably acceptable to the Agents;
          (iv) on or before thirteen (13) weeks prior to the Lease Rejection
Date, the Credit Parties have not entered into a stalking horse bid with an
Approved Liquidator pursuant to an Approved Liquidation Agreement with respect
to the Affected Asset Sale;
          (v) on or before twelve (12) weeks prior to the Lease Rejection Date,
the Credit Parties have not (i) received Bankruptcy Court approval of the
Affected Asset Sale or (ii) commenced the Affected Asset Sale;
          (vi) the Credit Parties shall (i) fail to comply with the terms of the
stalking horse bid for the Permitted Store Closings and any of the documents or
agreements executed in connection therewith, including, without limitation the
Approved Liquidation Agreement in any manner which results in a decrease in
proceeds from the Permitted Store Closings of more than $500,000, (ii) fail to
consummate the Permitted Store Closings strictly in accordance with the terms of
such Approved Liquidation Agreement (in each case (i) and (ii) without any
waiver or amendment to the Approved Liquidation Agreement unless consented to by
Agents) or (iii) take any action to or an event has occurred which could
reasonably be expected to adversely affect the value of the stalking horse bid
or any Credit Party’s ability to comply with the terms of the Approved
Liquidation Agreement;

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          (vii) the bringing of a motion, taking of any action or the filing of
any plan of reorganization or disclosure statement attendant thereto by any of
the Credit Parties in the Chapter 11 Cases: (A) to obtain additional financing
under Section 364(c) or (d) of the Bankruptcy Code not otherwise permitted
pursuant to this Agreement; (B) to grant any Lien other than Permitted
Encumbrances upon or affecting any Collateral; (C) subject to this Section 7,
except as provided in the Interim Order or Final Order, as the case may be, to
use cash collateral of Working Capital Agent and the other Secured Parties under
Section 363(c) of the Bankruptcy Code without the prior written consent of
Agents and the Required Lenders; or (D) any other action or actions adverse to
Agents and the Lenders or their rights and remedies hereunder or their interest
in the Collateral;
          (viii) (A) the filing of any plan of reorganization or disclosure
statement attendant thereto, or any direct or indirect amendment to such plan or
disclosure statement, by a Credit Party or any other Person to which Agents and
the Required Lenders do not consent or otherwise agree to the treatment of their
claims, (B) the entry of any order terminating any Credit Party’s exclusive
right to file a plan of reorganization, or (C) the expiration of any Credit
Party’s exclusive right to file a plan of reorganization;
          (ix) the entry of an order in any of the Chapter 11 Cases confirming a
plan of reorganization that (A) is not acceptable to Agents in their sole
discretion or (B) does not contain a provision for termination of the
Commitments and repayment in full in cash of all of the Obligations under this
Agreement and the Prior Lender Obligations on or before the effective date of
such plan or plans;
          (x) the entry of an order amending, supplementing, staying, vacating
or otherwise modifying the Loan Documents or the Interim Order, the Final Order
or the Cash Management Order without the written consent of all of the Lenders
or the filing of a motion for reconsideration with respect to the Interim Order
of the Final Order or the Interim Order, the Final Order or the Cash Management
Order shall otherwise not be in full force and effect;
          (xi) the Final Order is not entered immediately following the
expiration of the Interim Order, and in any event within 45 days of the Petition
Date;
          (xii) the payment of, or application for authority to pay, any
Pre-Petition claim without Agents’ and Required Lenders’ prior written consent
unless otherwise permitted under this Agreement;

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          (xiii) the allowance of any claim or claims under Section 506(c) of
the Bankruptcy Code or otherwise against Agents, any Lender or any of the
Collateral;
          (xiv) the appointment of an interim or permanent trustee in the
Chapter 11 Cases or the appointment of a receiver or an examiner in the
Chapter 11 Cases with expanded powers to operate or manage the financial
affairs, the business, or reorganization of the Credit Parties; or the sale
without Agents’ and Lenders’ consent, of all or substantially all of the
Borrower’s assets either through a sale under Section 363 of the Bankruptcy
Code, through a confirmed plan of reorganization in the Chapter 11 Cases, or
otherwise that does not provide for payment in full in cash of the Obligations
and termination of Lenders’ commitment to make Loans;
          (xv) the dismissal of the Chapter 11 Cases, or the conversion of the
Chapter 11 Cases from Chapter 11 to Chapter 7 of the Bankruptcy Code or any
Credit Party shall file a motion or other pleading seeking the dismissal of the
Chapter 11 Cases under Section 1112 of the Bankruptcy Code or otherwise;
          (xvi) the entry of an order by the Court granting relief from or
modifying the automatic stay of Section 362 of the Bankruptcy Code (x) to allow
any creditor to execute upon or enforce a Lien on any Collateral, or (y) with
respect to any Lien of or the granting of any Lien on any Collateral to any
state or local environmental or regulatory agency or authority, which in either
case involves a claim of $500,000 or more;
          (xvii) the commencement of a suit or action against either Agent or
any Lender and, as to any suit or action brought by the Creditors’ Committee,
the continuation thereof without dismissal for thirty (30) days after service
thereof on such Agent or such Lender, whether or not on behalf of a Credit
Party;
          (xviii) the entry of an order in the Chapter 11 Cases avoiding or
permitting recovery of any portion of the payments made on account of the
Obligations owing under this Agreement or the other Loan Documents;
          (xix) the failure of Borrower to perform any of its obligations under
the Interim Order, the Final Order, the Cash Management Order or any other order
of the Bankruptcy Court; or
          (xx) the entry of an order in the Chapter 11 Cases granting any other
super priority administrative claim or Lien equal or superior to that granted to
Working Capital Agent, on behalf of itself and

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the Secured Parties, other than as expressly set forth in the Interim Order (or
the Final Order, when applicable).
     7.2 Working Capital Termination Declaration. Subject to Section 7.5,
notwithstanding the provisions of Section 362 of the Bankruptcy Code, without
any application, motion or notice to, hearing before, or order from, the
Bankruptcy Court, upon the occurrence and during the continuance of any Event of
Default, Working Capital Agent may, and shall at the request of the Required
Working Capital Lenders (the declaration of any of the foregoing a “Working
Capital Termination Declaration Date”):
          (a) declare all or any portion of the Revolving Commitment of each
Revolving Lender to make Loans or each L/C Issuer to issue Letters of Credit to
be suspended or terminated, whereupon such Revolving Commitments shall forthwith
be suspended or terminated;
          (b) declare all or any portion of the unpaid principal amount of all
outstanding Loans under the Working Capital Facility, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable; without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by each Credit Party; or
          (c) terminate, reduce or restrict any right or ability of the
Borrowers to use any cash collateral derived from the proceeds of Collateral
(other than as expressly set forth in the Interim Order or the Final Order, as
applicable, during the Remedies Notice Period).
With respect to the Revolving Priority Collateral, following the Termination
Declaration Date, subject to the Remedies Notice Period, the Working Capital
Agent may exercise on behalf of itself and the Working Capital Lenders all
rights and remedies available to it and the Lenders under the Loan Documents or
applicable law against the Revolving Priority Collateral. Subject to Section
7.9, without limiting the foregoing, the Working Capital Agent may subject to
the Remedies Notice Period (i) with respect to a Sales Process Default only,
direct any or all of the Credit Parties to comply with the sales procedures set
forth in Section 7.9, (ii) enter onto the premises of any Credit Party in
connection with an orderly liquidation of the Revolving Priority Collateral;
and/or (iii) exercise any rights and remedies provided to Working Capital Agent
under the Loan Documents or at law or equity, including all remedies provided
under the Code; and pursuant to the Interim Order and the Final Order. Following
the termination of the Remedy Standstill Period, subject at all times to
Section 1.10 (c)(ii), the Term B Agent may require the Credit Parties to conduct
the sale process described in Section 7.9.
     7.3 Term B Termination Declaration. Subject to Section 7.5, notwithstanding
the provisions of Section 362 of the Bankruptcy Code, without any application,
motion or notice to, hearing before, or order from, the Bankruptcy Court, upon
the occurrence and during the continuance of any Event of Default, Term B Agent
may, and shall at the

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request of the Required Term B Lenders (the declaration of any of the foregoing
a “Term B Termination Declaration Date”):
          (a) declare all or any portion of the unpaid principal amount of all
outstanding Loans under Term B Facility, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable; without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
each Credit Party; or
          (b) terminate, reduce or restrict any right or ability of the
Borrowers to use any cash collateral derived from the proceeds of Collateral
(other than the use of proceeds of Loans made in the form of Protective
Overadvances) (other than as expressly set forth in the Interim Order or the
Final Order, as applicable, during the Remedies Notice Period).
With respect to the Term B Priority Collateral, following the Termination
Declaration Date, subject to the Remedies Notice Period, the Term B Agent may
(and at the request of the Required Term B Lenders shall), on behalf of itself
and the Term B Lenders, direct the Working Capital Agent to take all rights and
remedies available to it and the Term B Lenders under the Loan Documents or
applicable law against the Term B Priority Collateral. Subject to Section 7.5,
without limiting the foregoing, upon such direction of the Term B Agent, the
Working Capital Agent shall subject to the Remedies Notice Period and the Use
Rights (i) with respect to a Sales Process Default only, direct any or all of
the Credit Parties to comply with the sales procedures set forth in Section 7.9,
(ii) enter onto the premises of any Credit Party in connection with an orderly
liquidation of the Term B Priority Collateral; and/or (iii) exercise any rights
and remedies provided to Working Capital Agent under the Loan Documents or at
law or equity, including all remedies provided under the Code; and pursuant to
the Interim Order and the Final Order. Following the termination of the Remedy
Standstill Period, subject at all time to Section 1.10(c)(iii), the Working
Capital Agent, whether or not it shall have received such direction from Term B
Agent may require the Credit Parties to conduct the sale process described in
Section 7.9.
     7.4 Use Rights. Without limiting any rights the Working Capital Agent may
otherwise have under applicable law or by agreement, and whether or not the Term
Agent or any Term B Lender has directed the Working Capital Agent to commence
exercising remedies against Term B Priority Collateral, Working Capital Agent or
any other Person acting with the consent and on behalf of Working Capital Agent,
shall have Use Rights. In the event that any Working Capital Agent has commenced
and is continuing the exercise of rights and remedies with respect to any
Revolving Priority Collateral or any other sale or liquidation of the Revolving
Priority Collateral has been commenced by or with the consent of the Working
Capital Agent, the Term B Agent may not and may not direct the Working Capital
Agent to, sell, assign or otherwise transfer the related Term B Priority
Collateral prior to the expiration of the Use Period, unless the purchaser,
assignee or transferee thereof agrees to be bound by the provisions hereof.

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     7.5 Restrictions on Remedies. Notwithstanding anything to the contrary
contained herein, (a) until repayment in full in cash of the Working Capital
Facility and a termination of the Revolving Commitments, (i) without the consent
of the Working Capital Agent and the Working Capital Lenders (A) the Agents
shall not seek relief from the automatic stay under Section 362 of the
Bankruptcy Code or any other stay in the Chapter 11 Cases in respect of the
Revolver Priority Collateral and (B) the Agents shall not consent to any release
of the liens granted to the Working Capital Agent on the Revolving Priority
Collateral; provided, however that, if the Working Capital Agent and the Working
Capital Lenders consent to any sale or other disposition of the Revolving
Priority Collateral, such sale or other disposition shall be made free and clear
of any liens of the Agents on such Revolving Priority Collateral, and (b) until
payment in full of the Term B Facility (i) without the consent of the Term B
Agent and the Term B Lenders (A) the Agents shall not seek relief from the
automatic stay under Section 362 of the Bankruptcy Code or any other stay in the
bankruptcy in respect of the Term Loan Priority Collateral and (B) the Agents
shall not consent to any release of the liens granted to the Working Capital
Agent on the Term Loan Priority Collateral; provided, however that, if the Term
B Agent and the Term B Lenders consent to any sale or other disposition of the
Term Loan Priority Collateral, such sale or other disposition shall be made free
and clear of any liens of the Agents on such Term Loan Priority Collateral. In
addition, notwithstanding anything to the contrary contained herein (i) the
Working Capital Agent and the Working Capital Lenders shall have the right to
object to any sale or disposition of Revolver Priority Collateral and (ii) the
Term B Agent and Term B Lenders shall have the right to object to any sale or
other disposition of Term B Priority Collateral.
     7.6 Borrowers’ Assistance, Intellectual Property Access. Upon the
occurrence and the continuance of an Event of Default and the exercise by
Working Capital Agent or Lenders of their rights and remedies under this
Agreement and the other Loan Documents, Borrowers shall assist Working Capital
Agent and Lenders in effecting a sale or other disposition of the Collateral
upon such terms as are reasonably acceptable to Working Capital Agent, Term
Agent and Required Lenders and shall assist Working Capital Agent in obtaining,
and shall provide Working Capital Agent with, access and the rights to use, at
no cost or expense, the Intellectual Property of the Credit Parties and all real
property owned or leased by the Credit Parties to the extent necessary,
appropriate or reasonably requested in order to sell, lease or otherwise dispose
of any of the Collateral.
     7.7 Rights Not Exclusive. The rights provided for in this Agreement and the
other Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
     7.8 Cash Collateral for Letters of Credit. If an Event of Default has
occurred and is continuing, this Agreement (or the Aggregate Revolving
Commitment) shall be terminated for any reason, or if any Letters of Credit
remain outstanding for any reason whatsoever after the Termination Date or if
otherwise required by the terms hereof, Working Capital Agent may, and upon
request of Required Working Capital Lenders, shall, demand (which demand shall
be deemed to have been delivered automatically upon any acceleration of the
Loans and other obligations hereunder pursuant to Section 7.2),

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and the Borrowers shall thereupon deliver to Working Capital Agent, to be held
for the benefit of the L/C Issuers, Working Capital Agent and the Revolving
Lenders entitled thereto, an amount of cash equal to 104% of the amount of L/C
Reimbursement Obligations as additional collateral security for such
Obligations. Working Capital Agent may at any time apply any or all of such cash
and cash collateral to the payment of any or all of the Credit Parties’
Obligations. The remaining balance of the cash collateral will be returned to
the Borrowers when all Letters of Credit have been terminated or discharged, the
Aggregate Revolving Commitments have been terminated and all Obligations have
been indefeasibly paid in full in cash.
     7.9 Sale Process Default. In addition to the rights and remedies set forth
above but expressly subject to Sections 7.5, upon the occurrence of a Sale
Process Default, Working Capital Agent may (or shall if requested to do so by
the Required Working Capital Lenders) or the Term B Agent may (or shall if
requested to do so by the Required Term B Lenders), by written notice to the
Borrowers, require the Credit Parties to file a motion or motions seeking to
sell, assume, assign, or otherwise dispose of any or all of the applicable
Collateral (including without limitation, inventory, leases, and furnishings,
fixtures, and equipment) pursuant to Sections 363 and 365 of the Bankruptcy
Code, on terms reasonably acceptable to the Agents. The Credit Parties shall
file such motion within ten (10) days of the Agent’s notice and shall diligently
prosecute such motion. The Credit Parties shall consult with the applicable
Agents with respect to such process (which process and any such disposition
shall be on terms reasonably acceptable to applicable Agent) and shall provide
such information as may be requested by Agents in connection therewith. Without
limiting the foregoing, the sale process shall include a motion or series of
motions seeking authority to establish bidding procedures and to engage an
Approved Liquidator to conduct a chain-wide going out of business sale as the
so-called “stalking horse” and going concern bids, which bidding procedures
shall be reasonably acceptable to the applicable Agent. Any such store closing
sales and any other store liquidations approved by the applicable Agents shall
be conducted only on a so-called “equity” basis and not a commission or other
basis. Any going concern sale shall be in cash and in an amount to be paid at
closing of such sale (subject to the application of proceeds provisions of the
Loan Documents) in excess of all Obligations with respect to the Term B
Facility, the obligations under the Pre-Petition Facilities (if not repaid), the
Working Capital Facility and shall contain no financing or due diligence
contingencies. The provisions of this Section 7.9 are expressly made subject to
Section 7.5 in all respects.
ARTICLE VIII.
THE AGENT
     8.1 Appointment and Duties.
     (a) Appointment of Agents. Each Lender and each L/C Issuer hereby appoints
GE Capital (together with any successor Working Capital Agent pursuant to
Section 8.9) as Working Capital Agent and GA Capital, LLC as Term B Agent
(together with any successor Term B Agent pursuant to Section 8.9) and
authorizes such Agents to (i) execute and deliver the Loan Documents and accept

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delivery thereof on its behalf from any Credit Party, (ii) take such action on
its behalf and to exercise all rights, powers and remedies and perform the
duties as are expressly delegated to such Agent under such Loan Documents and
(iii) exercise such powers as are incidental thereto. Without limiting the
generality of the foregoing, each Lender hereby authorizes the Agents to
consent, on behalf of each Lender, to an Interim Order substantially in the form
attached as Exhibit A hereto and a Final Order to be negotiated between the
Borrower, Agents and the Committee.
          (b) Duties of Working Capital Agent as Collateral Agent for all
Lenders and Disbursing Agent for Working Capital Lenders. Without limiting the
generality of clause (a) above, Working Capital Agent shall have the sole and
exclusive right and authority (to the exclusion of the Term B Agent, Lenders and
L/C Issuers), and is hereby authorized, to (i) act as the disbursing and
collecting agents for the Working Capital Lenders and the L/C Issuers (as
applicable) with respect to all payments and collections arising in connection
with the Loan Documents (including in any proceeding in the Chapter 11 Cases or
any other bankruptcy, insolvency or similar proceeding), and each Person making
any payment in connection with any Loan Document to any Working Capital Lender
is hereby authorized to make such payment to Working Capital Agent, (ii) file
and prove claims and file other documents necessary or desirable to allow the
claims of the Secured Parties with respect to any Obligation related to the
Working Capital Facility in any proceeding in the Chapter 11 Cases or any other
bankruptcy, insolvency or similar proceeding (but not to vote, consent or
otherwise act on behalf of such Person), (iii) act as collateral agent for each
Secured Party for purposes of the perfection of all Liens created by such
agreements and all other purposes stated therein, (iv) manage, supervise and
otherwise deal with the Collateral, (v) take such other action as is necessary
or desirable to maintain the perfection and priority of the Liens created or
purported to be created by the Loan Documents, (vi) except as may be otherwise
specified in any Loan Document, exercise all remedies given to Working Capital
Agent and the other Secured Parties with respect to the Collateral, whether
under the Loan Documents, applicable Requirements of Law or otherwise and
(vii) execute any amendment, consent or waiver under the Loan Documents on
behalf of any Lender that has consented in writing to such amendment, consent or
waiver; provided, however, that Working Capital Agent hereby appoints,
authorizes and directs each Lender and L/C Issuer to act as collateral sub-agent
for Working Capital Agent, Term B Agent, the Lenders and the L/C Issuers for
purposes of the perfection of Liens with respect to any deposit account
maintained by a Credit Party with, and cash and Cash Equivalents held by, such
Lender or L/C Issuer, and may further authorize and direct the Lenders and the
L/C Issuers to take further actions as collateral sub-agents for purposes of
enforcing such Liens or otherwise to transfer the Collateral subject thereto to
Working Capital Agent, and each Lender and L/C Issuer hereby agrees to take such
further actions to the extent, and only to the extent, so authorized and
directed.

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          (c) Duties of Term B Agent as Disbursing Agent for Term B Lenders.
Without limiting the generality of clause (a) above and subject to Sections 7.2,
7.3, 7.5, and 7.9, Term B Agent shall have the sole and exclusive right and
authority (to the exclusion of the Working Capital Agent, Lenders and L/C
Issuers), and is hereby authorized, to (i) act as the disbursing and collecting
agent for the Term B Lenders with respect to all payments and collections
arising in connection with the Loan Documents (including in any proceeding in
the Chapter 11 Cases or any other bankruptcy, insolvency or similar proceeding),
and each Person making any payment in connection with any Loan Document to any
Term B Lender is hereby authorized to make such payment to Term B Agent to the
Term B Collection Account, (ii) file and prove claims and file other documents
necessary or desirable to allow the claims of the Term B Lenders with respect to
any Obligation related to the Term B Facility in any proceeding in the Chapter
11 Cases or any other bankruptcy, insolvency or similar proceeding (but not to
vote, consent or otherwise act on behalf of such Person), and (iii) execute any
amendment, consent or waiver under the Loan Documents on behalf of any Term B
Lender that has consented in writing to such amendment, consent or waiver.
          (d) Limited Duties. Under the Loan Documents, Agents (i) are acting
solely on behalf of the Secured Parties (except to the limited extent provided
in Section 1.4(b) with respect to the Registers), with duties that are entirely
administrative in nature, notwithstanding the use of the defined term “Agents”,
the terms “agents”, “Agent” and “collateral agent” and similar terms in any Loan
Document to refer to Agents, which terms are used for title purposes only,
(ii) is not assuming any obligation under any Loan Document other than as
expressly set forth therein or any role as agent, fiduciary or trustee of or for
any Lender, L/C Issuer or any other Person and (iii) shall have no implied
functions, responsibilities, duties, obligations or other liabilities under any
Loan Document, and each Secured Party, by accepting the benefits of the Loan
Documents, hereby waives and agrees not to assert any claim against Agents based
on the roles, duties and legal relationships expressly disclaimed in clauses (i)
through (iii) above.
     8.2 Binding Effect. Each Secured Party, by accepting the benefits of the
Loan Documents, agrees that (i) any action taken by Agents or the Required
Lenders (or, if expressly required hereby, a greater proportion of the Lenders)
in accordance with the provisions of the Loan Documents, (ii) any action taken
by Agents in reliance upon the instructions of Required Lenders (or, where so
required, such greater proportion) and (iii) the exercise by Agents or the
Required Lenders (or, where so required, such greater proportion) of the powers
set forth herein or therein, together with such other powers as are incidental
thereto, shall be authorized and binding upon all of the Secured Parties.
     8.3 Use of Discretion.
          (a) Agents shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and

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powers expressly contemplated hereby or by the other Loan Documents that Agents
are required to exercise as directed in writing by the Required Lenders or the
Required Term B 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 no Agent shall be required to take any action that, in its
opinion or the opinion of its counsel, may expose such Agent to liability or
that is contrary to any Loan Document or applicable Requirement of Law; and
          (b) Agents shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to any Credit Party or its
Affiliates that is communicated to or obtained by Agents or any of their
Affiliates in any capacity.
          (c) Notwithstanding anything to the contrary contained herein or in
any other Loan Document, the authority to enforce rights and remedies hereunder
and under the other Loan Documents against the Credit Parties or any of them
shall be vested exclusively in, and all actions and proceedings at law in
connection with such enforcement shall be instituted and maintained exclusively
by, Working Capital Agent in accordance with the Loan Documents for the benefit
of all the Secured Parties and the L/C Issuer; provided that the foregoing shall
not prohibit (i) Working Capital Agent from exercising on its own behalf the
rights and remedies that inure to its benefit (solely in its capacity as Working
Capital Agent) hereunder and under the other Loan Documents, (ii) each of the
L/C Issuer and the Swingline Lender from exercising the rights and remedies that
inure to its benefit (solely in its capacity as L/C Issuer or Swingline Lender,
as the case may be) hereunder and under the other Loan Documents, (iii) any
Lender from exercising setoff rights in accordance with Section 9.11 or
(iv) Term B Agent or any Lender from filing proofs of claim or appearing and
filing pleadings on its own behalf during the pendency of a proceeding relative
to any Credit Party under any bankruptcy or other debtor relief law; and
provided further that if at any time there is no Person acting as Working
Capital Agent hereunder and under the other Loan Documents, then (A) the
Required Lenders shall have the rights otherwise ascribed to Working Capital
Agent pursuant to Section 7.2 and (B) in addition to the matters set forth in
clauses (ii), (iii) and (iv) of the preceding proviso and subject to
Section 9.11, any Lender may, with the consent of the Required Lenders, enforce
any rights and remedies available to it and as authorized by the Required
Lenders.
     8.4 Delegation of Rights and Duties. Agents may, upon any term or condition
it specifies, delegate or exercise any of its rights, powers and remedies under,
and delegate or perform any of its duties or any other action with respect to,
any Loan Document by or through any trustee, co-agent, employee,
attorney-in-fact and any other Person (including any Secured Party). Any such
Person shall benefit from this Article VIII to the extent provided by Agents.

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     8.5 Reliance and Liability.
          (a) Agents may, without incurring any liability hereunder, (i) treat
the payee of any Note as its holder until such Note has been assigned in
accordance with Section 9.9, (ii) rely on the Registers to the extent set forth
in Section 1.4, (iii) consult with any of its Related Persons and, whether or
not selected by it, any other advisors, accountants and other experts (including
advisors to, and accountants and experts engaged by, any Credit Party) and
(iv) rely and act upon any document and information (including those transmitted
by Electronic Transmission) and any telephone message or conversation, in each
case believed by it to be genuine and transmitted, signed or otherwise
authenticated by the appropriate parties.
          (b) No Agent nor any of such Agent’s Related Persons shall be liable
for any action taken or omitted to be taken by any of them under or in
connection with any Loan Document, and each Secured Party, each Borrower and
each other Credit Party hereby waive and shall not assert (and each of the
Borrowers shall cause each other Credit Party to waive and agree not to assert)
any right, claim or cause of action based thereon, except to the extent of
liabilities resulting primarily from the gross negligence or willful misconduct
of such Agent or, as the case may be, such Related Person (each as determined in
a final, non-appealable judgment by a court of competent jurisdiction) in
connection with the duties expressly set forth herein. Without limiting the
foregoing, no Agent:
          (i) shall be responsible or otherwise incur liability for any action
or omission taken in reliance upon the instructions of the Required Lenders or
for the actions or omissions of any of its Related Persons selected with
reasonable care (other than employees, officers and directors of such Agent,
when acting on behalf of Agent);
          (ii) shall be responsible to any Lender, L/C Issuer or other Person
for the due execution, legality, validity, enforceability, effectiveness,
genuineness, sufficiency or value of, or the attachment, perfection or priority
of any Lien created or purported to be created under or in connection with, any
Loan Document;
          (iii) make any warranty or representation, and shall not be
responsible, to any Lender, L/C Issuer or other Person for any statement,
document, information, representation or warranty made or furnished by or on
behalf of any Credit Party or any Related Person of any Credit Party in
connection with any Loan Document or any transaction contemplated therein or any
other document or information with respect to any Credit Party, whether or not
transmitted or (except for documents expressly required under any Loan Document
to be transmitted to the Lenders) omitted to be transmitted by such Agent,
including as to completeness, accuracy, scope or adequacy thereof, or for the
scope, nature or results of any due diligence performed by such Agent in
connection with the Loan Documents; and

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          (iv) shall have any duty to ascertain or to inquire as to the
performance or observance of any provision of any Loan Document, whether any
condition set forth in any Loan Document is satisfied or waived, as to the
financial condition of any Credit Party or as to the existence or continuation
or possible occurrence or continuation of any Default or Event of Default and
shall not be deemed to have notice or knowledge of such occurrence or
continuation unless it has received a notice from the Borrower Representative,
any other Agent, any Lender or L/C Issuer describing such Default or Event of
Default clearly labeled “notice of default” (in which case Agents shall promptly
give notice of such receipt to all Lenders);
and, for each of the items set forth in clauses (i) through (iv) above, each
Lender, L/C Issuer and each Borrower hereby waives and agrees not to assert (and
each Borrower shall cause each other Credit Party to waive and agree not to
assert) any right, claim or cause of action it might have against any Agent
based thereon.
          (c) Each Lender and L/C Issuer (i) acknowledges that it has performed
and will continue to perform its own diligence and has made and will continue to
make its own independent investigation of the operations, financial conditions
and affairs of the Credit Parties and (ii) agrees that it shall not rely on any
audit or other report provided by any Agent or any of such Agent’s Related
Persons (an “Agent Report”). Each Lender and L/C Issuer further acknowledges
that any Agent Report (i) is provided to the Lenders and L/C Issuers solely as a
courtesy, without consideration, and based upon the understanding that such
Lender or L/C Issuer will not rely on such Agent Report, (ii) was prepared by an
Agent or its Related Persons based upon information provided by the Credit
Parties solely for such Agent’s own internal use, (iii) may not be complete and
may not reflect all information and findings obtained by such Agent or its
Related Persons regarding the operations and condition of the Credit Parties.
Neither Agents nor any of their Related Persons makes any representations or
warranties of any kind with respect to (i) any existing or proposed financing,
(ii) the accuracy or completeness of the information contained in any Agent
Report or in any related documentation, (iii) the scope or adequacy of either
Agent’s and its Related Persons’ due diligence, or the presence or absence of
any errors or omissions contained in any Agent Report or in any related
documentation, and (iv) any work performed by either Agent or their Related
Persons in connection with or using any Agent Report or any related
documentation.
          (d) Neither Agent nor any of such Agent’s Related Persons shall have
any duties or obligations in connection with or as a result of any Lender or L/C
Issuer receiving a copy of any Agent Report. Without limiting the generality of
the forgoing, neither Agent nor any of their Related Persons shall have any
responsibility for the accuracy or completeness of any Agent Report, or the
appropriateness of any Agent Report for any Lender’s or L/C Issuer’s purposes,
and shall have no duty or responsibility to correct or update any Agent

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Report or disclose to any Lender or L/C Issuer any other information not
embodied in any Agent Report, including any supplemental information obtained
after the date of any Agent Report. Each Lender and L/C Issuer releases, and
agrees that it will not assert, any claim against either Agent or their Related
Persons that in any way relates to any Agent Report or arises out of any Lender
or L/C Issuer having access to any Agent Report or any discussion of its
contents, and agrees to indemnify and hold harmless Agents and their Related
Persons from all claims, liabilities and expenses relating to a breach by any
Lender or L/C Issuer arising out of such Lender’s or L/C Issuer’s access to any
Agent Report or any discussion of its contents.
     8.6 Agents Individually. Agents and their Affiliates (including any
Affiliate that is an Approved Liquidator) may make loans and other extensions of
credit to, acquire Stock and Stock Equivalents of, engage in any kind of
business with, any Credit Party or Affiliate thereof as though it were not
acting as Agent and may receive separate fees and other payments therefor. To
the extent Agents or any of their Affiliates makes any Loan or otherwise becomes
a Lender hereunder, it shall have and may exercise the same rights and powers
hereunder and shall be subject to the same obligations and liabilities as any
other Lender and the terms “Lender”, “Lender”, “Required Lender” and any similar
terms shall, except where otherwise expressly provided in any Loan Document,
include, without limitation, such Agent or such Affiliate, as the case may be,
in its individual capacity as Lender, Lender or as one of the Required Lenders,
respectively.
     8.7 Lender Credit Decision.
          (a) Each Lender and each L/C Issuer acknowledges that it shall,
independently and without reliance upon Agents, any Lender or L/C Issuer or any
of their Related Persons or upon any document (including any offering and
disclosure materials in connection with the syndication of the Loans) solely or
in part because such document was transmitted by an Agent or any of their
Related Persons, conduct its own independent investigation of the financial
condition and affairs of each Credit Party and make and continue to make its own
credit decisions in connection with entering into, and taking or not taking any
action under, any Loan Document or with respect to any transaction contemplated
in any Loan Document, in each case based on such documents and information as it
shall deem appropriate. Except for documents expressly required by any Loan
Document to be transmitted by Agents to the Lenders or L/C Issuers, Agents shall
not have any duty or responsibility to provide any Lender or L/C Issuer with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any Credit Party
or any Affiliate of any Credit Party that may come in to the possession of
Agents or any of their Related Persons.
          (b) If any Lender or L/C Issuer has elected to abstain from receiving
MNPI concerning the Credit Parties or their Affiliates, such Lender or L/C
Issuer acknowledges that, notwithstanding such election, Agents and/or the
Credit Parties will, from time to time, make available syndicate-information

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(which may contain MNPI) as required by the terms of, or in the course of
administering the Loans to the credit contact(s) identified for receipt of such
information on the Lender’s administrative questionnaire who are able to receive
and use all syndicate-level information (which may contain MNPI) in accordance
with such Lender’s compliance policies and contractual obligations and
applicable law, including federal and state securities laws; provided, that if
such contact is not so identified in such questionnaire, the relevant Lender or
L/C Issuer hereby agrees to promptly (and in any event within one (1) Business
Day) provide such a contact to Agents and the Credit Parties upon request
therefor by Agents or the Credit Parties. Notwithstanding such Lender’s or L/C
Issuer’s election to abstain from receiving MNPI, such Lender or L/C Issuer
acknowledges that if such Lender or L/C Issuer chooses to communicate with
Agents, it assumes the risk of receiving MNPI concerning the Credit Parties or
their Affiliates.
     8.8 Expenses; Indemnities; Withholding.
          (a) (i) Each Revolving Lender and FILO Lender agrees to reimburse the
Working Capital Agent and each of Working Capital Agent’s Related Persons and
(ii) each Term B Lender agrees to reimburse the Term B Agent and each of Term B
Agent’s Related Persons, in each case of clause (i) and (ii), to the extent not
reimbursed by any Credit Party, promptly upon demand, severally and ratably, for
any costs and expenses (including fees, charges and disbursements of financial,
legal, sales and other advisors and Other Taxes paid in the name of, or on
behalf of, any Credit Party) that may be incurred by such applicable Agents or
any of its Related Persons in connection with the preparation, syndication,
execution, delivery, administration, modification, consent, waiver or
enforcement (whether through negotiations, through any work-out, bankruptcy,
restructuring or other legal or other proceeding or otherwise) of, or legal
advice in respect of its rights or responsibilities under, any Loan Document.
          (b) (i) Each Revolving Lender and FILO Lender agrees to reimburse the
Working Capital Agent and each of Working Capital Agent’s Related Persons and
(ii) each Term B Lender agrees to reimburse the Term B Agent and each of Term B
Agent’s Related Persons, in each case of clause (i) and (ii), to the extent not
reimbursed by any Credit Party, severally and ratably, from and against
Liabilities (including, to the extent not indemnified pursuant to
Section 8.8(c), taxes, interests and penalties imposed for not properly
withholding or backup withholding on payments made to or for the account of any
Lender) that may be imposed on, incurred by or asserted against such applicable
Agent or any of its Related Persons in any matter relating to or arising out of,
in connection with or as a result of any Loan Document, any Related Document or
any other act, event or transaction related, contemplated in or attendant to any
such document, or, in each case, any action taken or omitted to be taken by such
applicable Agent or any of its Related Persons under or with respect to any of
the foregoing; provided, however, that no Lender shall be liable to any Agent or
any

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of its Related Persons to the extent such liability has resulted primarily from
the gross negligence or willful misconduct of such Agent or, as the case may be,
such Related Person, as determined by a court of competent jurisdiction in a
final non-appealable judgment or order.
          (c) To the extent required by any applicable law, each Agent may
withhold from any payment to any Lender under a Loan Document an amount equal to
any applicable withholding tax. If the IRS or any other Governmental Authority
asserts a claim that either such Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate
certification form was not delivered, was not properly executed, or fails to
establish an exemption from, or reduction of, withholding tax with respect to a
particular type of payment, or because such Lender failed to notify Agents or
any other Person of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason), or such
Agent reasonably determines that it was required to withhold taxes from a prior
payment but failed to do so, such Lender shall promptly indemnify such Agent
fully for all amounts paid, directly or indirectly, by such Agent as tax or
otherwise, including penalties and interest, and together with all expenses
incurred by such Agent, including legal expenses, allocated internal costs and
out-of-pocket expenses. Each Agent may offset against any payment to any Lender
under a Loan Document, any applicable withholding tax that was required to be
withheld from any prior payment to such Lender but which was not so withheld, as
well as any other amounts for which such Agent is entitled to indemnification
from such Lender under this Section 8.8(c).
     8.9 Resignation of Agent or L/C Issuer.
          (a) Either Agent may resign at any time by delivering notice of such
resignation to the Lenders and the Borrower Representative, effective on the
date (the “Effective Resignation Date”) which is the later of (i) thirty
(30) days after receipt by the Lenders and the Borrower Representative of such
notice and (ii) the date set forth in such notice. If an Agent delivers any such
notice, the Required Working Capital Lenders or Required Term B Lenders shall
have the right to appoint a successor Working Capital Agent and Term B Agent,
respectively. If, within thirty (30) days after the retiring Agent having given
notice of resignation, no successor Agent has been appointed by the Required
Working Capital Lenders or Required Term B Lenders (as applicable) that has
accepted such appointment, then the retiring Agent may, on behalf of the
applicable Lenders, appoint a successor Agent from among the Lenders. Each
appointment under this clause (a) shall be subject to the prior consent of the
Borrowers, which may not be unreasonably withheld but shall not be required
during the continuance of an Event of Default.
          (b) Effective immediately upon the Effective Resignation Date, (i) the
retiring Agent shall be discharged from its duties and obligations under the
Loan Documents, (ii) the Revolving Lenders shall assume and perform all of the

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duties of Working Capital Agent until a successor Working Capital Agent shall
have accepted a valid appointment hereunder, (iii) the Term B Lenders shall
assume and perform all of the duties of Term B Agent until a successor Term B
Agent shall have accepted a valid appointment hereunder, (iv) the retiring Agent
and its Related Persons shall no longer have the benefit of any provision of any
Loan Document other than with respect to any actions taken or omitted to be
taken while such retiring Agent was, or because such Agent had been, validly
acting as Agent under the Loan Documents and (v) subject to its rights under
Section 8.3, the retiring Agent shall take such action as may be reasonably
necessary to assign to the successor Agent its rights as Agent under the Loan
Documents. Effective immediately upon its acceptance of a valid appointment as
Agent, a successor Agent shall succeed to, and become vested with, all the
rights, powers, privileges and duties of the retiring Agent under the Loan
Documents.
     8.10 Release of Collateral or Guarantors. Each Lender and L/C Issuer hereby
consents to the release and hereby directs Working Capital Agent to release (or,
in the case of clause (b)(ii) below, release or subordinate) the following:
          (a) any Subsidiary of a Borrower from its guaranty of any Obligation
if all of the Stock and Stock Equivalents of such Subsidiary owned by any Credit
Party are sold or transferred in a transaction permitted under the Loan
Documents (including pursuant to a waiver or consent); and
          (b) any Lien held by Working Capital Agent for the benefit of the
Secured Parties against (i) any Collateral that is sold, transferred, conveyed
or otherwise disposed of by a Credit Party in a transaction permitted by the
Loan Documents (including pursuant to a waiver or consent), (ii) any property
subject to a Lien permitted hereunder in reliance upon Section 5.1(h) or 5.1(i)
and (iii) all of the Collateral and all Credit Parties, upon (A) termination of
the Revolving Commitments, (B) payment and satisfaction in full of all Loans,
all L/C Reimbursement Obligations and all other Obligations under the Loan
Documents and all Obligations arising under Secured Rate Contracts, that Working
Capital Agent has theretofore been notified in writing by the holder of such
Obligation are then due and payable, (C) deposit of cash collateral with respect
to all contingent Obligations (or, as an alternative to cash collateral in the
case of any Letter of Credit Obligation, receipt by Working Capital Agent of a
back-up letter of credit), in amounts and on terms and conditions and with
parties satisfactory to Agents and each Indemnitee that is, or may be, owed such
Obligations (excluding contingent Obligations (other than L/C Reimbursement
Obligations) as to which no claim has been asserted) and (D) to the extent
requested by either Agent, receipt by Agents and the Secured Parties of
liability releases from the Credit Parties each in form and substance acceptable
to Agents.
Each Lender and L/C Issuer hereby directs Working Capital Agent, and Working
Capital Agent hereby agrees, upon receipt of at least five (5) Business Days’
advance notice from the Borrower Representative, to execute and deliver or file
such documents and to

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perform other actions reasonably necessary to release the guaranties and Liens
when and as directed in this Section 8.10.
     8.11 Additional Secured Parties. The benefit of the provisions of the Loan
Documents directly relating to the Collateral or any Lien granted thereunder
shall extend to and be available to any Secured Party that is not a Lender or
L/C Issuer party hereto as long as, by accepting such benefits, such Secured
Party agrees, as among Working Capital Agent and all other Secured Parties, that
such Secured Party is bound by (and, if requested by any Agent, shall confirm
such agreement in a writing in form and substance acceptable to Agents) this
Article VIII and Sections 9.3, 9.9, 9.10, 9.11, 9.17, 9.24 and 10.1 (and, solely
with respect to L/C Issuers, Section 1.1(c)) and the decisions and actions of
each Agent and the Required Lenders (or, where expressly required by the terms
of this Agreement, a greater proportion of the Lenders or other parties hereto
as required herein) to the same extent a Lender is bound; provided, however,
that, notwithstanding the foregoing, (a) such Secured Party shall be bound by
Section 8.8 only to the extent of Liabilities, costs and expenses with respect
to or otherwise relating to the Collateral held for the benefit of such Secured
Party, in which case the obligations of such Secured Party thereunder shall not
be limited by any concept of pro rata share or similar concept, (b) each of
Working Capital Agent, Term Agent, the Lenders and the L/C Issuers party hereto
shall be entitled to act at its sole discretion, without regard to the interest
of such Secured Party, regardless of whether any Obligation to such Secured
Party thereafter remains outstanding, is deprived of the benefit of the
Collateral, becomes unsecured or is otherwise affected or put in jeopardy
thereby, and without any duty or liability to such Secured Party or any such
Obligation and (c) except as otherwise set forth herein, such Secured Party
shall not have any right to be notified of, consent to, direct, require or be
heard with respect to, any action taken or omitted in respect of the Collateral
or under any Loan Document.
     8.12 Documentation Agent and Syndication Agent. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Documentation Agent and Syndication Agent shall not have any
duties or responsibilities, nor shall the Documentation Agent and Syndication
Agent have or be deemed to have any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Documentation Agent and Syndication Agent. At any
time that any Lender serving (or whose Affiliate is serving) as Documentation
Agent and/or Syndication Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loans and the Revolving
Commitment, such Lender (or an Affiliate of such Lender acting as Documentation
Agent or Syndication Agent) shall be deemed to have concurrently resigned as
such Documentation Agent and/or Syndication Agent.

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ARTICLE IX.
MISCELLANEOUS
     9.1 Amendments and Waivers.
          (a) No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by any Credit
Party therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by Working Capital Agent with the consent of
the Required Lenders), and the Borrowers, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Lenders directly affected thereby
(or by Working Capital Agent with the consent of all the Lenders directly
affected thereby), in addition to the Required Lenders (or by Working Capital
Agent with the consent of the Required Lenders) and the Borrowers, do any of the
following:
         (i) increase or extend the Revolving Commitment of any Revolving Lender
(or reinstate any Revolving Commitment terminated pursuant to Section 7.2(a));
         (ii) postpone or delay any date fixed for, or reduce or waive, any
scheduled installment of principal or any payment of interest, fees or other
amounts (other than principal) due to the Lenders (or any of them) or L/C Issuer
hereunder or under any other Loan Document (for the avoidance of doubt,
mandatory prepayments pursuant to Section 1.8 (other than under Section 1.8(a))
may be postponed, delayed, waived or modified with the consent of Required
Lenders);
         (iii) reduce the principal of, or the rate of interest specified herein
or the amount of interest payable in cash specified herein on any Loan, or of
any fees or other amounts payable hereunder or under any other Loan Document,
including L/C Reimbursement Obligations;
         (iv) Intentionally Omitted;
         (v) amend this Section 9.1 or the definition of Required Lenders,
Required Working Capital Lenders or Required Term B Lenders or any provision
providing for consent or other action by all Lenders; or
         (vi) discharge any Credit Party from its respective payment Obligations
under the Loan Documents, or subject to Section 7, release all or substantially
all of the Collateral, except as otherwise may be provided in this Agreement or
the other Loan Documents;
it being agreed that all Lenders shall be deemed to be directly affected by an
amendment or waiver of the type described in the preceding clauses (v) and (vi).
          (b) No amendment, waiver or consent shall, unless in writing and
signed by Working Capital Agent, the Swingline Lender or the L/C Issuer, as the
case may be, in addition to the Required Working Capital Lenders or all Lenders
directly affected thereby, as the case may be (or by Working Capital

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Agent with the consent of the Required Working Capital Lenders or all the
Lenders directly affected thereby, as the case may be), affect the rights or
duties of Working Capital Agent, the Swingline Lender or the L/C Issuer, as
applicable, under this Agreement or any other Loan Document. No amendment,
modification or waiver of this Agreement or any Loan Document altering the order
of treatment of Obligations arising under Secured Rate Contracts in a manner
adverse to any Secured Swap Provider or otherwise resulting in Obligations owing
to any Secured Swap Provider becoming unsecured (other than releases of Liens
permitted in accordance with the terms hereof), shall be effective without the
written consent of such Secured Swap Provider or, in the case of a Secured Rate
Contract provided or arranged by GE Capital or an Affiliate of GE Capital, GE
Capital.
          (c) No amendment or waiver shall, unless signed by Working Capital
Agent and Required Lenders (or by Working Capital Agent with the consent of
Required Lenders) in addition to the Required Lenders (or by Working Capital
Agent with the consent of the Required Lenders): (i) amend or waive compliance
with the conditions precedent to the obligations of FILO Lenders to make the
FILO Loan, (ii) amend or waive compliance with the conditions precedent to the
obligations of Term B Lenders to make the Term B Loans, (iii) amend or waive
compliance with the conditions precedent to the obligations of Revolving Lenders
to make any Revolving Loan (or of L/C Issuer to issue any Letter of Credit) in
Section 2.2; (iv) amend or waive non-compliance with any provision of Section
1.1(b)(ii); (v) waive any Default or Event of Default for the purpose of
satisfying the conditions precedent to the obligations of Revolving Lenders to
make any Revolving Loan (or of L/C Issuer to issue any Letter of Credit) in
Section 2.2; or (vi) amend or waive this Section 9.1(c) or the definitions of
the terms used in this Section 9.1(c) insofar as the definitions affect the
substance of this Section 9.1(c).
          (d) No amendment or waiver shall, unless signed by Agents, Required
Lenders (or by Working Capital Agent with the consent of Required Lenders) and
Term B Lenders (or by Term B Agent with the consent of Term B Lenders) (A) amend
and or modify any of the following definitions: Borrowing Base (and any
component definitions thereof), Mandatory Reserves, Availability Reserves, Term
B Reserve, Minimum Excess Availability Amount, Excluded Cash Management
Services, Lease Assumption Reserve Commencement Date, Lease Rejection Date,
Carve-Out, Carve-Out Amount, Approved Budget, Variance Report, Interim Order,
Final Order or Sale Process Default, (B) amend or waive any provision in
Article IV or V, (C) waive any Event of Default or (D) amend this
Section 9.1(d). As among the Lenders and the Agents, nothing contained herein
shall limit, restrict or impair the discretionary rights and ability of the
Working Capital Agent to impose or establish any and all Reserves and to
thereafter reduce or eliminate such Reserves (other than Reserves the amount or
methodology of calculation of which are expressly set forth pursuant to the
terms of this Agreement), or to determine the eligibility of Collateral for
inclusion in the calculation of the Borrowing Base, consistent with Working
Capital Agent’s usual

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business practices and in accordance with the terms of this Agreement; provided,
that, other than as expressly set forth herein, the Working Capital Agent agrees
to impose a methodology no less restrictive than that used as of the date hereof
in determining reserves or eligibility.
          (e) Notwithstanding anything to the contrary contained in this
Section 9.1, (w) Borrowers may amend Schedules 3.16, 3.19 and 3.21 upon notice
to Agents, (x) Borrowers may amend Schedules 3.22, provided that the Borrowers
shall have complied with the requirements set forth in Section 4.11, (y) Working
Capital Agent may amend Schedules 1.1(a)(ii) or 1.1(b) to reflect Sales entered
into pursuant to Section 9.9 and Term B Agent may amend Schedule 1.1(a)(ii) to
reflect Sales entered into pursuant to Section 9.9, and (z) Agents and Borrowers
may amend or modify this Agreement and any other Loan Document to (1) cure any
ambiguity, omission, defect or inconsistency therein, or (2) grant a new Lien
for the benefit of the Secured Parties, extend an existing Lien over additional
property for the benefit of the Secured Parties or join additional Persons as
Credit Parties; provided that no Credit Card Receivables or Inventory of such
Person shall be included as Eligible Credit Card Accounts or Eligible Inventory
until a field examination (and, if required by Working Capital Agent, an
Inventory appraisal) with respect thereto has been completed to the satisfaction
of Working Capital Agent, including the establishment of Reserves required in
Working Capital Agent’s Permitted Discretion.
     9.2 Notices.
          (a) Addresses. All notices and other communications required or
expressly authorized to be made by this Agreement shall be given in writing,
unless otherwise expressly specified herein, and (i) addressed to the address
set forth on the applicable signature page hereto, (ii) in the case of notices
to Persons other than the Credit Parties, posted to Intralinks® (to the extent
such system is available and set up by or at the direction of Working Capital
Agent prior to posting) in an appropriate location by uploading such notice,
demand, request, direction or other communication to www.intralinks.com, faxing
it to 866-545-6600 with an appropriate bar-code fax coversheet or using such
other means of posting to Intralinks® as may be available and reasonably
acceptable to Working Capital Agent prior to such posting, (iii) in the case of
notices to Persons other than the Credit Parties, posted to any other E-System
approved by or set up by or at the direction of Working Capital Agent or
(iv) addressed to such other address as shall be notified in writing (A) in the
case of the Agents and the Swingline Lender, to the other parties hereto, (B) in
the case of the Credit Parties, to the Agents and (C) in the case of all other
parties, to the Borrower Representative and Agents. Transmissions made by
electronic mail or E-Fax to Agents shall be effective only (x) for notices where
such transmission is specifically authorized by this Agreement, (y) if such
transmission is delivered in compliance with procedures of Agents applicable at
the time and previously communicated to Borrower Representative, and (z) if
receipt of such transmission is acknowledged by Agents.

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          (b) Effectiveness. (i) All communications described in clause (a)
above and all other notices, demands, requests and other communications made in
connection with this Agreement shall be effective and be deemed to have been
received (i) if delivered by hand, upon personal delivery, (ii) if delivered by
overnight courier service, one (1) Business Day after delivery to such courier
service, (iii) if delivered by mail, three (3) Business Days after deposit in
the mail, (iv) if delivered by facsimile (other than to post to an E-System
pursuant to clause (a)(ii) or (a)(iii) above), upon sender’s receipt of
confirmation of proper transmission, and (v) if delivered by posting to any
E-System, on the later of the Business Day of such posting and the Business Day
access to such posting is given to the recipient thereof in accordance with the
standard procedures applicable to such E-System; provided, however, that no
communications to Agents pursuant to Article I shall be effective until received
by Agents.
               (ii) The posting, completion and/or submission by any Credit
Party of any communication pursuant to an E-System shall constitute a
representation and warranty by the Credit Parties that any representation,
warranty, certification or other similar statement required by the Loan
Documents to be provided, given or made by a Credit Party in connection with any
such communication is true, correct and complete except as expressly noted in
such communication or E-System.
          (c) Each Lender shall notify Agents in writing of any changes in the
address to which notices to such Lender should be directed, of addresses of its
Lending Office, of payment instructions in respect of all payments to be made to
it hereunder and of such other administrative information as either Agent shall
reasonably request.
     9.3 Electronic Transmissions.
          (a) Authorization. Subject to the provisions of Section 9.2(a), each
of Working Capital Agent, Term B Agent, Lenders, each Credit Party and each of
their Related Persons, is authorized (but not required) to transmit, post or
otherwise make or communicate, in its sole discretion, Electronic Transmissions
in connection with any Loan Document and the transactions contemplated therein.
Each Credit Party and each Secured Party hereto acknowledges and agrees that the
use of Electronic Transmissions is not necessarily secure and that there are
risks associated with such use, including risks of interception, disclosure and
abuse and each indicates it assumes and accepts such risks by hereby authorizing
the transmission of Electronic Transmissions.
          (b) Signatures. Subject to the provisions of Section 9.2(a), (i)(A) no
posting to any E-System shall be denied legal effect merely because it is made
electronically, (B) each E-Signature on any such posting shall be deemed
sufficient to satisfy any requirement for a “signature” and (C) each such
posting shall be deemed sufficient to satisfy any requirement for a “writing”,
in each case including pursuant to any Loan Document, any applicable provision
of any UCC, the federal Uniform Electronic Transactions Act, the Electronic
Signatures in

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Global and National Commerce Act and any substantive or procedural Requirement
of Law governing such subject matter, (ii) each such posting that is not readily
capable of bearing either a signature or a reproduction of a signature may be
signed, and shall be deemed signed, by attaching to, or logically associating
with such posting, an E-Signature, upon which Agents, each Secured Party and
each Credit Party may rely and assume the authenticity thereof, (iii) each such
posting containing a signature, a reproduction of a signature or an E-Signature
shall, for all intents and purposes, have the same effect and weight as a signed
paper original and (iv) each party hereto or beneficiary hereto agrees not to
contest the validity or enforceability of any posting on any E-System or
E-Signature on any such posting under the provisions of any applicable
Requirement of Law requiring certain documents to be in writing or signed;
provided, however, that nothing herein shall limit such party’s or beneficiary’s
right to contest whether any posting to any E-System or E-Signature has been
altered after transmission.
          (c) Separate Agreements. All uses of an E-System shall be governed by
and subject to, in addition to Section 9.2 and this Section 9.3, the separate
terms, conditions and privacy policy posted or referenced in such E-System (or
such terms, conditions and privacy policy as may be updated from time to time,
including on such E-System) and related Contractual Obligations executed by
Agents and Credit Parties in connection with the use of such E-System.
          (d) LIMITATION OF LIABILITY. ALL E-SYSTEMS AND ELECTRONIC
TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF AGENTS,
LENDERS OR ANY OF THEIR RELATED PERSONS WARRANTS THE ACCURACY, ADEQUACY OR
COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC TRANSMISSION AND DISCLAIMS ALL
LIABILITY FOR ERRORS OR OMISSIONS THEREIN. NO WARRANTY OF ANY KIND IS MADE BY
EITHER AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY
E-SYSTEMS OR ELECTRONIC COMMUNICATION, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF
THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS. Each of each
Borrower, each other Credit Party executing this Agreement and each Secured
Party agrees that Agents have no responsibility for maintaining or providing any
equipment, software, services or any testing required in connection with any
Electronic Transmission or otherwise required for any E-System.
     9.4 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of either Agent or any Lender, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. No course

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of dealing between any Credit Party, any Affiliate of any Credit Party, either
Agent or any Lender shall be effective to amend, modify or discharge any
obligation or provision of this Agreement or any of the other Loan Documents.
     9.5 Costs and Expenses. Borrower shall reimburse (i) each Agent for all
fees, costs and expenses (including the reasonable fees and expenses of all of
such Agent’s counsel, advisors, consultants and auditors (including without
limitation financial advisors and sales consultants)), (ii) Lenders for all
reasonable and actual out of pocket costs and expenses (other than Attorneys
Costs), and (iii) each Agent (and, with respect to clauses (c) and (d) below,
all Lenders) for all fees, costs and expenses, including the reasonable fees,
costs and expenses of counsel or other advisors (including sales consultants and
advisors, environmental and management consultants and appraisers), incurred in
connection with the negotiation and preparation of the Loan Documents, the
Interim Order and the Final Order and incurred in connection with:
          (a) the forwarding to any Borrower or any other Person on behalf of
any Borrower by any Agent of the proceeds of any Loan;
          (b) any amendment, modification or waiver of, consent with respect to,
or termination of, any of the Loan Documents or advice in connection with the
syndication and administration of the Loans made pursuant hereto or its rights
hereunder or thereunder;
          (c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by any Agent, any Lender, any Borrower or any other Person
and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case or proceeding commenced by or against any
Borrower or any other Person that may be obligated to any Agent by virtue of the
Loan Documents; including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than Agents, such
reimbursement shall be limited to one counsel for all Revolving Lenders and one
counsel for all Term B Lenders; provided, further, that no Person shall be
entitled to reimbursement under this clause (c) in respect of any litigation,
contest, dispute, suit, proceeding or action to the extent any of the foregoing
results from such Person’s gross negligence or willful misconduct (as determined
by a final non-appealable judgment);
          (d) any attempt to enforce any remedies of any Agent against any or
all of the Credit Parties or any other Person that may be obligated to any Agent
or any Lender by virtue of any of the Loan Documents, including any such attempt
to enforce any such remedies in the course of any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided, that
in the case of reimbursement of counsel for Lenders other than

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Agents, such reimbursement shall be limited to one counsel for all Revolving
Lenders and one counsel for all Term B Lenders;
          (e) any workout or restructuring of the Loans during the pendency of
one or more Events of Default;
          (f) the obtaining of approval of the Loan Documents by the Bankruptcy
Court;
          (g) the preparation and review of pleadings, documents and reports
related to the Chapter 11 Cases and any subsequent case under Chapter 7 of the
Bankruptcy Code, attendance at meetings, court hearings or conferences related
to the Chapter 11 Cases and any subsequent case under Chapter 7 of the
Bankruptcy Code, and general monitoring of the Chapter 11 Cases and any
subsequent case under Chapter 7 of the Bankruptcy Code;
          (h) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral; and
          (i) any lien searches or request for information listing financing
statements or liens filed or searches conducted to confirm receipt and due
filing of financing statements and security interests in all or a portion of the
Collateral;
including, as to each of clauses (a) through (i) above, all reasonable
attorneys’ and other professional and service providers’ fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 9.5, all of
which shall be payable, on demand, by Borrowers to applicable Agent. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
may include: fees, costs and expenses of accountants, sales consultants,
financial advisors, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.
     9.6 Indemnity.
          (a) Each Credit Party agrees to indemnify, hold harmless and defend
each Agent, each Lender, each L/C Issuer and each of their respective Related
Persons (each such Person being an “Indemnitee”) from and against all
Liabilities (including brokerage commissions, fees and other compensation) that
may be imposed on, incurred by or asserted against any such Indemnitee in any

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matter relating to or arising out of, in connection with or as a result of
(i) any Loan Document, any Obligation (or the repayment thereof), any Letter of
Credit, the use or intended use of the proceeds of any Loan or the use of any
Letter of Credit or any securities filing of, or with respect to, any Credit
Party, (ii) any commitment letter, proposal letter or term sheet with any Person
or any Contractual Obligation, arrangement or understanding with any broker,
finder or consultant, in each case entered into by or on behalf of any Credit
Party or any Affiliate of any of them in connection with any of the foregoing
and any Contractual Obligation entered into in connection with any E-Systems or
other Electronic Transmissions, (iii) with respect to any act, event or
transaction related, contemplated in or attendant to any of the foregoing, any
actual or prospective investigation, litigation or other proceeding, whether or
not brought by any such Indemnitee or any of its Related Persons, any holders of
securities or creditors (and including attorneys’ fees in any case), whether or
not any such Indemnitee, Related Person, holder or creditor is a party thereto,
and whether or not based on any securities or commercial law or regulation or
any other Requirement of Law or theory thereof, including common law, equity,
contract, tort or otherwise or (iv) any other act, event or transaction related,
contemplated in or attendant to any of the foregoing (collectively, subject to
the following proviso, the “Indemnified Matters”); provided, however, that no
Credit Party shall have any liability under this Section 9.6 to any Indemnitee
with respect to any Indemnified Matter, and no Indemnitee shall have any
liability with respect to any Indemnified Matter other than (to the extent
otherwise liable), to the extent such liability has resulted primarily from the
gross negligence or willful misconduct of such Indemnitee, as determined by a
court of competent jurisdiction in a final non-appealable judgment or order.
Furthermore, each of each Borrower and each other Credit Party executing this
Agreement waives and agrees not to assert against any Indemnitee, and shall
cause each other Credit Party to waive and not assert against any Indemnitee,
any right of contribution with respect to any Liabilities that may be imposed
on, incurred by or asserted against any Related Person.
          (b) Without limiting the foregoing, “Indemnified Matters” includes all
Environmental Liabilities, including those arising from, or otherwise involving,
any property of any Credit Party or any Related Person of any Credit Party or
any actual, alleged or prospective damage to property or natural resources or
harm or injury alleged to have resulted from any Release of Hazardous Materials
on, upon or into such property or natural resource or any property on or
contiguous to any Real Estate of any Credit Party or any Related Person or any
Credit Party, whether or not, with respect to any such Environmental
Liabilities, any Indemnitee is a mortgagee pursuant to any leasehold mortgage, a
mortgagee in possession, the successor-in-interest to any Credit Party or any
Related Person of any Credit Party or the owner, lessee or operator of any
property of any Related Person through any foreclosure action, in each case
except to the extent such Environmental Liabilities (i) are incurred solely
following foreclosure by Working Capital Agent or following either Agent or any
Lender having become the successor-in-interest to any Credit Party or any

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Related Person of any Credit Party and (ii) are attributable solely to acts of
such Indemnitee.
     9.7 Marshaling; Payments Set Aside. No Secured Party shall be under any
obligation to marshal any property in favor of any Credit Party or any other
Person or against or in payment of any Obligation. To the extent that any
Secured Party receives a payment from a Borrower, from any other Credit Party,
from the proceeds of the Collateral, from the exercise of its rights of setoff,
any enforcement action or otherwise, and such payment is subsequently, in whole
or in part, invalidated, declared to be fraudulent or preferential, set aside or
required to be repaid to a trustee, receiver or any other party, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not occurred.
     9.8 Intentionally Omitted.
     9.9 Assignments and Participations; Binding Effect.
          (a) Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrowers, the other Credit Parties signatory
hereto and Agents and when Agents shall have been notified by each Lender and
the initial L/C Issuer that such Lender or L/C Issuer has executed it.
Thereafter, it shall be binding upon and inure to the benefit of, but only to
the benefit of, the Borrowers, the other Credit Parties hereto (in each case
except for Article VIII), Agents, each Lender and each L/C Issuer receiving the
benefits of the Loan Documents and, to the extent provided in Section 8.11, each
other Secured Party and, in each case, their respective successors and permitted
assigns. Except as expressly provided in any Loan Document (including in
Section 8.9), none of any Borrower, any other Credit Party, any L/C Issuer or
Agents shall have the right to assign any rights or obligations hereunder or any
interest herein.
          (b) Right to Assign. Each Lender may sell, transfer, negotiate or
assign (a “Sale”) all or a portion of its rights and obligations hereunder
(including all or a portion of its Revolving Commitments, FILO Commitments, Term
B Commitments and its rights and obligations with respect to Loans and Letters
of Credit) to (i) any existing Lender, (ii) any Affiliate or Approved Fund of
any existing Lender or (iii) any other Person acceptable (which acceptance shall
not be unreasonably withheld or delayed) to the applicable Agent and, with
respect to Sales of Revolving Commitments, each L/C Issuer that is a Lender and,
as long as no Event of Default is continuing, the Borrower Representative (which
acceptances of the L/C Issuers and the Borrower Representative shall be deemed
to have been given unless an objection is delivered to Agents within five
(5) Business Days after written notice of a proposed sale is delivered to such
L/C Issuers and Borrower Representative, as applicable); provided, however, that
(u) provided, that no assignment may be made to certain pre-agreed competitors
of the Borrowers, (v) such Sales do not have to be ratable between the Revolving
Loan and FILO Loan but must be ratable among the obligations owing to and

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owed by such Lender with respect to the Revolving Loans or the FILO Loan,
(w) for each Loan, the aggregate outstanding principal amount (determined as of
the effective date of the applicable Assignment) of the Loans, Revolving
Commitments and Letter of Credit Obligations subject to any such Sale shall be
in a minimum amount of $1,000,000, unless such Sale is made to an existing
Lender or an Affiliate or Approved Fund of any existing Lender, is of the
assignor’s (together with its Affiliates and Approved Funds) entire interest in
such facility or is made with the prior consent of the Borrower Representative
(to the extent required) and Agents, (x) such Sales shall be effective only upon
the acknowledgement in writing of such Sale by the applicable Agent,
(y) interest accrued prior to and through the date of any such Sale may not be
assigned, and (z) such Sales by Non-Funding Lenders shall be subject to Working
Capital Agent’s prior written consent in all instances. A Sale to a Credit
Party, an Affiliate of a Credit Party, a holder of Subordinated Debt or an
Affiliate of such a holder shall be at the discretion of the Agents and subject
to the imposition of conditions or limitations (including limitations on
voting).
          (c) Procedure. The parties to each Sale made in reliance on clause (b)
above (other than those described in clause (e) or (f) below) shall execute and
deliver to the applicable Agent an Assignment via an electronic settlement
system designated by such Agent (or, if previously agreed with such Agent, via a
manual execution and delivery of the Assignment) evidencing such Sale, together
with any existing Note subject to such Sale (or any affidavit of loss therefor
acceptable to such Agent), any tax forms required to be delivered pursuant to
Section 10.1 and payment of an assignment fee in the amount of $3,500 to such
Agent, unless waived or reduced by such Agent; provided, that (i) if a Sale by a
Revolving Lender is made to an Affiliate or an Approved Fund of such assigning
Revolving Lender, then no assignment fee shall be due in connection with such
Sale, and (ii) if a Sale by a Lender is made to an assignee that is not an
Affiliate or Approved Fund of such assignor Lender, and concurrently to one or
more Affiliates or Approved Funds of such Assignee, then only one assignment fee
of $3,500 shall be due in connection with such Sale (unless waived or reduced by
such Agent). Upon receipt of all the foregoing, and conditioned upon such
receipt and, if such Assignment is made in accordance with clause (iii) of
Section 9.9(b), upon such Agent (and the Borrower, if applicable) consenting to
such Assignment, from and after the effective date specified in such Assignment,
such Agent shall record or cause to be recorded in the Registers the information
contained in such Assignment.
          (d) Effectiveness. Subject to the recording of an Assignment by the
applicable Agent in the applicable Register pursuant to Section 1.4(b), (i) the
assignee thereunder shall become a party hereto and, to the extent that rights
and obligations under the Loan Documents have been assigned to such assignee
pursuant to such Assignment, shall have the rights and obligations of a Lender,
(ii) any applicable Note shall be transferred to such assignee through such
entry and (iii) the assignor thereunder shall, to the extent that rights and
obligations under this Agreement have been assigned by it pursuant to such

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Assignment, relinquish its rights (except for those surviving the termination of
the Revolving Commitments and the payment in full of the Obligations) and be
released from its obligations under the Loan Documents, other than those
relating to events or circumstances occurring prior to such assignment (and, in
the case of an Assignment covering all or the remaining portion of an assigning
Lender’s rights and obligations under the Loan Documents, such Lender shall
cease to be a party hereto).
          (e) Grant of Security Interests. In addition to the other rights
provided in this Section 9.9, each Lender may grant a security interest in, or
otherwise assign as collateral, any of its rights under this Agreement, whether
now owned or hereafter acquired (including rights to payments of principal or
interest on the Loans), to (A) any federal reserve bank (pursuant to
Regulation A of the Federal Reserve Board), without notice to Agents or (B) any
holder of, or trustee for the benefit of the holders of, such Lender’s
Indebtedness or equity securities, by notice to Agents; provided, however, that
no such holder or trustee, whether because of such grant or assignment or any
foreclosure thereon (unless such foreclosure is made through an assignment in
accordance with clause (b) above), shall be entitled to any rights of such
Lender hereunder and no such Lender shall be relieved of any of its obligations
hereunder.
          (f) Participants and SPVs. In addition to the other rights provided in
this Section 9.9, each Lender may, (x) with notice to Agents, grant to an SPV
the option to make all or any part of any Loan that such Lender would otherwise
be required to make hereunder (and the exercise of such option by such SPV and
the making of Loans pursuant thereto shall satisfy the obligation of such Lender
to make such Loans hereunder) and such SPV may assign to such Lender the right
to receive payment with respect to any Obligation and (y) without notice to or
consent from Agents or the Borrowers, sell participations to one or more Persons
in or to all or a portion of its rights and obligations under the Loan Documents
(including all its rights and obligations with respect to the FILO Loan, Term B
Loans, Revolving Loans and Letters of Credit); provided, however, that, whether
as a result of any term of any Loan Document or of such grant or participation,
(i) no such SPV or participant shall have a commitment, or be deemed to have
made an offer to commit, to make Loans hereunder, and, except as provided in the
applicable option agreement, none shall be liable for any obligation of such
Lender hereunder, (ii) such Lender’s rights and obligations, and the rights and
obligations of the Credit Parties and the Secured Parties towards such Lender,
under any Loan Document shall remain unchanged and each other party hereto shall
continue to deal solely with such Lender, which shall remain the holder of the
Obligations in the Registers, except that (A) each such participant and SPV
shall be entitled to the benefit of Article X, but, with respect to
Section 10.1, only to the extent such participant or SPV delivers the tax forms
such Lender is required to collect pursuant to Section 10.1(f) and then only to
the extent of any amount to which such Lender would be entitled in the absence
of any such grant or participation and (B) each such SPV may receive other
payments that would otherwise be made to such Lender with respect to Loans

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funded by such SPV to the extent provided in the applicable option agreement and
set forth in a notice provided to Agents by such SPV and such Lender, provided,
however, that in no case (including pursuant to clause (A) or (B) above) shall
an SPV or participant have the right to enforce any of the terms of any Loan
Document, and (iii) the consent of such SPV or participant shall not be required
(either directly, as a restraint on such Lender’s ability to consent hereunder
or otherwise) for any amendments, waivers or consents with respect to any Loan
Document or to exercise or refrain from exercising any powers or rights such
Lender may have under or in respect of the Loan Documents (including the right
to enforce or direct enforcement of the Obligations), except for those described
in clauses (ii) and (iii) of Section 9.1(a) with respect to amounts, or dates
fixed for payment of amounts, to which such participant or SPV would otherwise
be entitled and, in the case of participants, except for those described in
clause (vi) of Section 9.1(a). No party hereto shall institute (and each
Borrower shall cause each other Credit Party not to institute) against any SPV
grantee of an option pursuant to this clause (f) any bankruptcy, reorganization,
insolvency, liquidation or similar proceeding, prior to the date that is one
year and one day after the payment in full of all outstanding commercial paper
of such SPV; provided, however, that each Lender having designated an SPV as
such agrees to indemnify each Indemnitee against any Liability that may be
incurred by, or asserted against, such Indemnitee as a result of failing to
institute such proceeding (including a failure to get reimbursed by such SPV for
any such Liability). The agreement in the preceding sentence shall survive the
termination of the Revolving Commitments and the payment in full of the
Obligations.
     9.10 Non-Public Information; Confidentiality.
          (a) Non-Public Information. Agents, each Lender and L/C Issuer
acknowledges and agrees that it may receive material non-public information
(“MNPI”) hereunder concerning the Credit Parties and their Affiliates and agrees
to use such information in compliance with all relevant policies, procedures and
applicable Requirements of Laws (including United States federal and state
security laws and regulations).
          (b) Confidential Information. Each Lender, L/C Issuer and Agents agree
to use all reasonable efforts to maintain, in accordance with its customary
practices, the confidentiality of information obtained by it pursuant to any
Loan Document and designated in writing by any Credit Party as confidential,
except that such information may be disclosed (i) with the Borrower
Representative’s written consent, (ii) to Related Persons of such Lender, L/C
Issuer or such Agent, as the case may be, or to any Person that any L/C Issuer
causes to issue Letters of Credit hereunder, that are advised of the
confidential nature of such information and are instructed (and such Related
Persons agree) to keep such information confidential in accordance with the
terms hereof, (iii) to the extent such information presently is or hereafter
becomes (A) publicly available other than as a result of a breach of this
Section 9.10 or (B) available to such Lender, L/C Issuer or such Agent or any of
their Related Persons, as the case

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may be, from a source (other than any Credit Party) not known by them to be
subject to disclosure restrictions, (iv) to the extent disclosure is required by
applicable Requirements of Law or other legal process or requested or demanded
by any Governmental Authority, (v) to the extent necessary or customary for
inclusion in league table measurements, (vi) (A) to the National Association of
Insurance Commissioners or any similar organization, any examiner or any
nationally recognized rating agency or (B) otherwise to the extent consisting of
general portfolio information that does not identify Credit Parties, (vii) to
current or prospective assignees, SPVs (including the investors or prospective
investors therein) or participants, direct or contractual counterparties to any
Secured Rate Contracts and to their respective Related Persons, in each case to
the extent such assignees, investors, participants, counterparties or Related
Persons agree to be bound by provisions substantially similar to the provisions
of this Section 9.10 (and such Person may disclose information to their
respective Related Persons in accordance with clause (ii) above), (viii) to any
other party hereto, and (ix) in connection with the exercise or enforcement of
any right or remedy under any Loan Document, in connection with any litigation
or other proceeding to which such Lender, L/C Issuer or such Agent or any of
their Related Persons is a party or bound, or to the extent necessary to respond
to public statements or disclosures by Credit Parties or their Related Persons
referring to a Lender, L/C Issuer or Agent or any of their Related Persons. In
the event of any conflict between the terms of this Section 9.10 and those of
any other Contractual Obligation entered into with any Credit Party (whether or
not a Loan Document), the terms of this Section 9.10 shall govern.
          (c) Tombstones. Each Credit Party consents to the publication by
Agents or any Lender of advertising material relating to the financing
transactions contemplated by this Agreement using any Credit Party’s name,
product photographs, logo or trademark. Agents or such Lender shall provide a
draft of any advertising material to Borrower Representative for review and
comment prior to the publication thereof.
          (d) Press Release and Related Matters. No Credit Party shall, and no
Credit Party shall permit any of its Affiliates to, issue any press release or
other public disclosure (other than any document filed with any Governmental
Authority relating to a public offering of securities of any Credit Party) using
the name, logo or otherwise referring to GE Capital or GA Capital or of any of
their Affiliates, the Loan Documents or any transaction contemplated therein to
which Agents are party without the prior consent of GE Capital or GA Capital (as
applicable) except to the extent required to do so under applicable Requirements
of Law and then, only after consulting with GE Capital.
          (e) Distribution of Materials to Lenders and L/C Issuers. The Credit
Parties acknowledge and agree that the Loan Documents and all reports, notices,
communications and other information or materials provided or delivered by, or
on behalf of, the Credit Parties hereunder (collectively, the “Borrower
Materials”) may be disseminated by, or on behalf of, Agents, and made available,

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to the Lenders and the L/C Issuers by posting such Borrower Materials on an
E-System. The Credit Parties authorize Agents to download copies of their logos
from its website and post copies thereof on an E-System.
          (f) Material Non-Public Information. The Credit Parties hereby agree
that if either they, any parent company or any Subsidiary of the Credit Parties
has publicly traded equity or debt securities in the U.S., they shall (and shall
cause such parent company or Subsidiary, as the case may be, to) (i) identify in
writing, and (ii) to the extent reasonably practicable, clearly and
conspicuously mark such Borrower Materials that contain only information that is
publicly available or that is not material for purposes of U.S. federal and
state securities laws as “PUBLIC”. The Credit Parties agree that by identifying
such Borrower Materials as “PUBLIC” or publicly filing such Borrower Materials
with the Securities and Exchange Commission, then Agents, the Lenders and the
L/C Issuers shall be entitled to treat such Borrower Materials as not containing
any MNPI for purposes of U.S. federal and state securities laws. The Credit
Parties further represent, warrant, acknowledge and agree that the following
documents and materials shall be deemed to be PUBLIC, whether or not so marked,
and do not contain any MNPI: (A) the Loan Documents, including the schedules and
exhibits attached thereto, and (B) administrative materials of a customary
nature prepared by the Credit Parties or Agents (including, Notices of
Borrowing, Notices of Conversion/Continuation, L/C requests, Swingline requests
and any similar requests or notices posted on or through an E-System). Before
distribution of any Borrower Materials, the Credit Parties agree to execute and
deliver to Agents a letter authorizing distribution of the evaluation materials
to prospective Lenders and their employees willing to receive MNPI, and a
separate letter authorizing distribution of evaluation materials that do not
contain MNPI and represent that no MNPI is contained therein.
     9.11 Set-off; Sharing of Payments.
          (a) Right of Setoff. Each of Agents, each Lender, each L/C Issuer and
each Affiliate (including each branch office thereof) of any of them is hereby
authorized (notwithstanding the provisions of 362 of the Bankruptcy Code,
without any application, motion or notice to, hearing before, or order from, the
Bankruptcy Court), without notice or demand (each of which is hereby waived by
each Credit Party), at any time and from time to time during the continuance of
any Event of Default and to the fullest extent permitted by applicable
Requirements of Law, to set off and apply any and all deposits (whether general
or special, time or demand, provisional or final) at any time held and other
Indebtedness, claims or other obligations at any time owing by Agents, such
Lender, such L/C Issuer or any of their respective Affiliates to or for the
credit or the account of the Borrowers or any other Credit Party against any
Obligation of any Credit Party now or hereafter existing, whether or not any
demand was made under any Loan Document with respect to such Obligation and even
though such Obligation may be unmatured. No Lender or L/C Issuer shall exercise
any such right of setoff without the prior consent of Agents or Required
Lenders. Each of

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Agents, each Lender and each L/C Issuer agrees promptly to notify the Borrower
Representative and Agents after any such setoff and application made by such
Lender or its Affiliates; provided, however, that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
under this Section 9.11 are in addition to any other rights and remedies
(including other rights of setoff) that Agents, the Lenders, the L/C Issuer,
their Affiliates and the other Secured Parties, may have.
          (b) Sharing of Payments, Etc. If any Lender, directly or through an
Affiliate or branch office thereof, obtains any payment of any Obligation of any
Credit Party (whether voluntary, involuntary or through the exercise of any
right of setoff or the receipt of any Collateral or “proceeds” (as defined under
the applicable UCC) of Collateral) other than pursuant to Section 9.9 or
Article X and such payment exceeds the amount such Lender would have been
entitled to receive if all payments had gone to, and been distributed by, the
applicable Agent in accordance with the provisions of the Loan Documents, such
Lender shall purchase for cash from other Lenders such participations in their
Obligations as necessary for such Lender to share such excess payment with such
Lenders to ensure such payment is applied as though it had been received by the
applicable Agent and applied in accordance with this Agreement (or, if such
application would then be at the discretion of the Borrowers, applied to repay
the Obligations in accordance herewith); provided, however, that (a) if such
payment is rescinded or otherwise recovered from such Lender or L/C Issuer in
whole or in part, such purchase shall be rescinded and the purchase price
therefor shall be returned to such Lender or L/C Issuer without interest and
(b) such Lender shall, to the fullest extent permitted by applicable
Requirements of Law, be able to exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of the applicable Credit Party in the amount of
such participation. If a Non-Funding Lender or Impacted Lender receives any such
payment as described in the previous sentence, such Lender shall turn over such
payments to Working Capital Agent in an amount that would satisfy the cash
collateral requirements set forth in Section 1.11(b).
     9.12 Counterparts; Facsimile Signature. This Agreement may be executed in
any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Signature
pages may be detached from multiple separate counterparts and attached to a
single counterpart. Delivery of an executed signature page of this Agreement by
facsimile transmission or Electronic Transmission shall be as effective as
delivery of a manually executed counterpart hereof.
     9.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.

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     9.14 Captions. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
     9.15 Independence of Provisions. The parties hereto acknowledge that this
Agreement and the other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
     9.16 Interpretation. This Agreement is the result of negotiations among and
has been reviewed by counsel to Credit Parties, Agents, each Lender and other
parties hereto, and is the product of all parties hereto. Accordingly, this
Agreement and the other Loan Documents shall not be construed against the
Lenders or Agents merely because of Agents’ or Lenders’ involvement in the
preparation of such documents and agreements. Without limiting the generality of
the foregoing, each of the parties hereto has had the advice of counsel with
respect to Sections 9.18 and 9.19.
     9.17 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Borrowers, the Lenders, the L/C
Issuers party hereto, Agents and, subject to the provisions of Section 8.11,
each other Secured Party, and their permitted successors and assigns, and no
other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents. Neither Agent nor any Lender shall have any
obligation to any Person not a party to this Agreement or the other Loan
Documents.
     9.18 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA (INCLUDING THE BANKRUPTCY CODE).
EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND
THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THE BANKRUPTCY COURT MAY
HAVE TO BE HEARD BY A COURT OTHER THAN THE BANKRUPTCY COURT; PROVIDED FURTHER,
THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN

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ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT
PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN SECTION 9.2 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR 3
DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
     9.19 WAIVER OF JURY TRIAL. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY
LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING
OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER
APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE.
     9.20 Entire Agreement; Release; Survival.
          (a) THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER
THEREOF AND ANY PRIOR LETTER OF INTEREST, COMMITMENT LETTER, CONFIDENTIALITY AND
SIMILAR AGREEMENTS INVOLVING ANY CREDIT PARTY AND ANY LENDER OR ANY L/C ISSUER
OR ANY OF THEIR RESPECTIVE AFFILIATES RELATING TO A FINANCING OF SUBSTANTIALLY
SIMILAR FORM, PURPOSE OR EFFECT OTHER THAN THE FEE LETTER. IN THE EVENT OF ANY
CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE
TERMS OF THIS AGREEMENT SHALL GOVERN (UNLESS SUCH TERMS OF SUCH OTHER LOAN
DOCUMENTS ARE NECESSARY TO COMPLY WITH APPLICABLE REQUIREMENTS OF LAW, IN WHICH
CASE SUCH TERMS SHALL GOVERN TO THE EXTENT NECESSARY TO COMPLY THEREWITH). IF

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ANY PROVISION IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT CONFLICTS WITH ANY
PROVISION IN THE INTERIM ORDER OR FINAL ORDER, THE PROVISION IN THE INTERIM
ORDER OR FINAL ORDER SHALL GOVERN AND CONTROL.
          (b) Execution of this Agreement by the Credit Parties constitutes a
full, complete and irrevocable release of any and all claims which each Credit
Party may have at law or in equity in respect of all prior discussions and
understandings, oral or written, relating to the subject matter of this
Agreement and the other Loan Documents. In no event shall any Indemnitee be
liable on any theory of liability for any special, indirect, consequential or
punitive damages (including any loss of profits, business or anticipated
savings). Each of each Borrower and each other Credit Party signatory hereto
hereby waives, releases and agrees (and shall cause each other Credit Party to
waive, release and agree) not to sue upon any such claim for any special,
indirect, consequential or punitive damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
          (c) (i) Any indemnification or other protection provided to any
Indemnitee pursuant to this Section 9.20, Sections 9.5 (Costs and Expenses) and
9.6 (Indemnity) and Articles VIII (Agents) and X (Taxes, Yield Protection and
Illegality) and (ii) the provisions of Section 8.1 of the Guaranty and Security
Agreement, in each case, shall (x) survive the termination of the Revolving
Commitments and the payment in full of all other Obligations and (y) with
respect to clause (i) above, inure to the benefit of any Person that at any time
held a right thereunder (as an Indemnitee or otherwise) and, thereafter, its
successors and permitted assigns.
     9.21 Patriot Act. Each Lender that is subject to the Patriot Act hereby
notifies the Credit Parties that pursuant to the requirements of the Patriot
Act, it is required to obtain, verify and record information that identifies
each Credit Party, which information includes the name and address of each
Credit Party and other information that will allow such Lender to identify each
Credit Party in accordance with the Patriot Act.
     9.22 Replacement of Lender. Within forty-five days after: (i) receipt by
the Borrower Representative of written notice and demand from any Lender that is
not an Agent or an Affiliate of an Agent (an “Affected Lender”) for payment of
additional costs as provided in Sections 10.1, 10.3 and/or 10.6; or (ii) any
failure by any Lender (other than either Agent) to consent to a requested
amendment, waiver or modification to any Loan Document in which Required Lenders
have already consented to such amendment, waiver or modification but the consent
of each Lender (or each Lender directly affected thereby, as applicable) is
required with respect thereto, the Borrowers may, at their option, notify Agents
and such Affected Lender (or such defaulting or non-consenting Lender, as the
case may be) of the Borrowers’ intention to obtain, at the Borrowers’ expense, a
replacement Lender (“Replacement Lender”) for such Affected Lender (or such
defaulting or non-consenting Lender, as the case may be), which Replacement
Lender shall be reasonably satisfactory to Agents. In the event the Borrowers
obtain a

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Replacement Lender within forty-five (45) days following notice of its intention
to do so, the Affected Lender (or defaulting or non-consenting Lender, as the
case may be) shall sell and assign its Loans and Revolving Commitments to such
Replacement Lender, at par, provided that the Borrowers have reimbursed such
Affected Lender for its increased costs for which it is entitled to
reimbursement under this Agreement through the date of such sale and assignment.
In the event that a replaced Lender does not execute an Assignment pursuant to
Section 9.9 within five (5) Business Days after receipt by such replaced Lender
of notice of replacement pursuant to this Section 9.22 and presentation to such
replaced Lender of an Assignment evidencing an assignment pursuant to this
Section 9.22, the Borrowers shall be entitled (but not obligated) to execute
such an Assignment on behalf of such replaced Lender, and any such Assignment so
executed by the Borrowers, the Replacement Lender and Agents, shall be effective
for purposes of this Section 9.22 and Section 9.9. Notwithstanding the
foregoing, with respect to a Lender that is a Non-Funding Lender or an Impacted
Lender, the Borrowers or Working Capital Agent may obtain a Replacement Lender
and execute an Assignment on behalf of such Non-Funding Lender or an Impacted
Lender at any time and without prior notice to such Non-Funding Lender or an
Impacted Lender and cause its Loans and Revolving Commitments to be sold and
assigned at par. Upon any such assignment and payment and compliance with the
other provisions of Section 9.9, such replaced Lender shall no longer constitute
a “Lender” for purposes hereof; provided, that any rights of such replaced
Lender to indemnification hereunder shall survive.
     9.23 Joint and Several. Each Credit Party is part of a group of affiliated
Persons, and each Credit Party expects to receive substantial direct and
indirect benefits from the extension of the credit facility established pursuant
to this Agreement. In consideration of the foregoing, each Credit Party hereby
irrevocably and unconditionally agrees that it is jointly and severally liable
for all of the liabilities, obligations, covenants and agreements of the Credit
Party hereunder and under the other Loan Documents, whether now or hereafter
existing or due or to become due. The obligations of the Credit Parties under
the Loan Documents may be enforced by Working Capital Agent, Term Agent and the
Lenders pursuant to the terms hereof against any Credit Party in any manner or
order selected by Agents or Required Lenders in their sole discretion. Each
Credit Party hereby irrevocably waives (i) any rights of subrogation and
(ii) any rights of contribution, indemnity or reimbursement, in each case, that
it may acquire or that may arise against any other Credit Party due to any
payment or performance made under this Agreement, in each case until all
Obligations shall have been fully satisfied. Without limiting the foregoing
provisions of this Section 9.23, each Borrower acknowledges and agrees that:
          (a) its obligations under this Agreement shall remain enforceable
against it even though such obligations may be unenforceable or not allowable
against any other Borrower due to the existence of an insolvency proceeding
involving any other Borrower;
          (b) its obligations under this Agreement are independent of the
obligations of any other Credit Party, and a separate action or actions may be
brought and prosecuted against it in respect of such obligations irrespective of

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whether any action is brought against any other Credit Party or any other Credit
Party is joined in any such action or actions;
          (c) it hereby irrevocably waives any defenses it may now have or
hereafter acquire in any way relating to, any or all of the following:
               (i) any lack of validity or enforceability of this Agreement, any
other Loan Document or any agreement or instrument relating hereto or thereto in
respect of any other Credit Party;
               (ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of any other Credit Party under
or in respect of this Agreement, the other Loan Documents, or any other
amendment or waiver of or any consent to departure from this Agreement or any
other Loan Document, in respect of any other Credit Party;
               (iii) any change, restructuring or termination of the structure
or existence of any other Borrower;
               (iv) the failure of any other Person to execute or deliver any
other agreement or the release or reduction of liability of any other Person
with respect to any obligations of the Borrowers under this Agreement or any
other Loan Document;
               (v) any other circumstance (including any statute of limitations
but other than the Obligations having been fully satisfied) or any existence of
or reliance on any representation by any other Person that might otherwise
constitute a defense available to, or a discharge of, any other Credit Party; or
               (vi) the application of any Loan proceeds to, or the extension of
any other credit for the benefit of, any other Borrower, any other Credit Party,
or any of their Subsidiaries;
          (d) its obligations under this Agreement and the other Loan Documents
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any such obligations is rescinded or must otherwise be
returned by any Person upon the insolvency, bankruptcy or reorganization of any
other Borrower, all as though such payment had not been made; and
          (e) it hereby unconditionally and irrevocably waives any right to
revoke its joint and several liability under the Loan Documents and acknowledges
that such liability is continuing in nature and applies to all obligations of
the Credit Parties under the Loan Documents, whether existing now or in the
future.
     9.24 Creditor-Debtor Relationship. The relationship between Agents, each
Lender and the L/C Issuer, on the one hand, and the Credit Parties, on the other
hand, is solely that of creditor and debtor. No Secured Party has any fiduciary
relationship or duty to any Credit Party arising out of or in connection with,
and there is no agency,

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tenancy or joint venture relationship between the Secured Parties and the Credit
Parties by virtue of, any Loan Document or any transaction contemplated therein.
     9.25 Actions in Concert. Notwithstanding anything contained herein to the
contrary, each Lender hereby agrees with each other Lender that no Lender shall
take any action to protect or enforce its rights against any Credit Party
arising out of this Agreement or any other Loan Document (including exercising
any rights of setoff) without first obtaining the prior written consent of
Agents or Required Lenders, it being the intent of Lenders that any such action
to protect or enforce rights under this Agreement and the other Loan Documents
shall be taken in concert and at the direction or with the consent of Agents or
Required Lenders, except as set forth in Sections 7.2, 7.3 and 7.9.
ARTICLE X.
TAXES, YIELD PROTECTION AND ILLEGALITY
     10.1 Taxes.
          (a) Except as otherwise provided in this Section 10.1, each payment by
any Credit Party under any Loan Document shall be made free and clear of all
present or future taxes, levies, imposts, deductions, charges or withholdings
imposed by any Governmental Authority and all liabilities with respect thereto
(and without deduction for any of them) (collectively, but excluding the taxes
set forth in clauses (i) and (ii) below, the “Taxes”) other than for (i) taxes
measured by overall net income (however denominated, including branch profits
taxes) and franchise taxes imposed in lieu of net income taxes, in each case
imposed on any Secured Party by the jurisdiction (or any political subdivision
thereof) in which such Secured Party is organized, maintains its principal
office or applicable Lending Office, or is considered to be present or engaged
in business (other than solely from the execution or performance of its
obligations or receipt of a payment under, or enforcement of, the Loan
Documents), (ii) taxes that are directly attributable to the failure (other than
as a result of a change in any Requirement of Law) by Agents or any Lender to
deliver the documentation required to be delivered pursuant to clause (f) below
or (iii) in the case of a Non-U.S. Lender Party, any United States withholding
tax that is imposed on amounts payable or on account of a Credit Party pursuant
to Section 1471 through 1474 of the Code, provided that such Credit Party shall
cooperate to the extent reasonably requested by a Non-U.S. Lender Party in any
respect to any documentation required to avoid or reduce the amount of such
withholding tax.
          (b) If any Taxes shall be required by law to be deducted from or in
respect of any amount payable under any Loan Document to any Secured Party
(i) such amount shall be increased as necessary to ensure that, after all
required deductions for Taxes are made (including deductions applicable to any
increases to any amount under this Section 10.1), such Secured Party receives
the amount it would have received had no such deductions been made, (ii) the
relevant Credit Party shall make such deductions, (iii) the relevant Credit
Party

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shall timely pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable Requirements of Law and
(iv) within 30 days after such payment is made, the relevant Credit Party shall
deliver to Agents an original or certified copy of a receipt evidencing such
payment or other evidence of payment reasonably satisfactory to Agents;
provided, however, that no such increase shall be made with respect to, and no
Credit Party shall be required to indemnify any Secured Party pursuant to clause
(d) below for, (x) withholding taxes to the extent that the obligation to
withhold amounts existed on the date that such Person became a “Secured Party”
under this Agreement in the capacity under which such Person makes a claim under
this clause (b), designates a new Lending Office or experiences a change in
circumstances (other than a change in a Requirement of Law), except in each case
to the extent such Person is a direct or indirect assignee (other than pursuant
to Section 9.22) of any other Secured Party that was entitled, at the time the
assignment to such Person became effective, or such Secured Party was entitled
at the time of designation of a new Lending Office or change in circumstances,
to receive additional amounts under this clause (b), or (y) any United States
backup withholding tax required by the Code to be withheld from amounts payable
to a Secured Party that is subject to backup withholding due to (A) notified
payee underreporting of reportable interest or dividend payments or other
reportable payments or (B) the IRS notifying either Agent or Borrower that the
furnished taxpayer identification number is incorrect.
          (c) In addition, the Credit Parties agree to pay, and authorize Agents
to pay in their name, any stamp, documentary, excise or property tax, charges or
similar levies imposed by any applicable Requirement of Law or Governmental
Authority and all Liabilities with respect thereto (including by reason of any
delay in payment thereof), in each case arising from the execution, delivery or
registration of, or otherwise with respect to, any Loan Document or any
transaction contemplated therein (collectively, “Other Taxes”). The Swingline
Lender may, without any need for notice, demand or consent from the Borrowers or
the Borrower Representative, by making funds available to the applicable Agent
in the amount equal to any such payment, make a Swing Loan to the Borrowers in
such amount, the proceeds of which shall be used by the applicable Agent in
whole to make such payment. Within 30 days after the date of any payment of
Other Taxes by any Credit Party, the Borrowers shall furnish to such Agent, at
its address referred to in Section 9.2, the original or a certified copy of a
receipt evidencing payment thereof or other evidence of payment reasonably
satisfactory to such Agent.
          (d) The Borrowers shall reimburse and indemnify, within 30 days after
receipt of demand therefor (with copy to Agents), each Secured Party for all
Taxes and Other Taxes with respect to any payment under any Loan Document
(including any Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 10.1) paid by such Secured Party and any Liabilities
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. A certificate of the Secured Party

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(or of an Agent on behalf of such Secured Party) claiming any compensation under
this clause (d), setting forth the amounts to be paid thereunder and delivered
to the Borrower Representative with copy to Agents, shall be conclusive, binding
and final for all purposes, absent manifest error. In determining such amount,
Agents and such Secured Party may use any reasonable averaging and attribution
methods.
          (e) Any Secured Party claiming any additional amounts payable pursuant
to this Section 10.1 shall use its commercially reasonable efforts (consistent
with its internal policies and Requirements of Law) to change the jurisdiction
of its Lending Office if such a change would reduce or eliminate any such
additional amounts (or any similar amount that may thereafter accrue) and would
not, in the sole determination of such Secured Party, be otherwise
disadvantageous to such Secured Party.
          (f) (i) Each Non-U.S. Lender Party that, at any of the following
times, is entitled to an exemption from United States withholding tax or is
subject to such withholding tax at a reduced rate under an applicable tax
treaty, shall (w) on or prior to the date such Non-U.S. Lender Party becomes a
“Non-U.S. Lender Party” hereunder, (x) on or prior to the date on which any such
form or certification expires or becomes obsolete, (y) after the occurrence of
any event requiring a change in the most recent form or certification previously
delivered by it pursuant to this clause (i) and (z) from time to time if
requested by the Borrower Representative or Agents (or, in the case of a
participant or SPV, the relevant Lender), provide Agents and the Borrower
Representative (or, in the case of a participant or SPV, the relevant Lender)
with two completed originals of each of the following, as applicable: (A) Forms
W-8ECI (claiming exemption from U.S. withholding tax because the income is
effectively connected with a U.S. trade or business), W-8BEN (claiming exemption
from, or a reduction of, U.S. withholding tax under an income tax treaty) and/or
W-8IMY (together with appropriate forms, certifications and supporting
statements) or any successor forms, (B) in the case of a Non-U.S. Lender Party
claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN
(claiming exemption from U.S. withholding tax under the portfolio interest
exemption) or any successor form and a certificate in form and substance
acceptable to Agents that such Non-U.S. Lender Party is not (1) a “bank” within
the meaning of Section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder”
of the Borrowers within the meaning of Section 881(c)(3)(B) of the Code or (3) a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code
or (C) any other applicable document prescribed by the IRS certifying as to the
entitlement of such Non-U.S. Lender Party to such exemption from United States
withholding tax or reduced rate with respect to all payments to be made to such
Non-U.S. Lender Party under the Loan Documents. Unless the Borrower
Representative and the applicable Agent have received forms or other documents
satisfactory to them indicating that payments under any Loan Document to or for
a Non-U.S. Lender Party are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the Credit
Parties and the applicable Agent

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shall withhold amounts required to be withheld by applicable Requirements of Law
from such payments at the applicable statutory rate.
               (ii) Each U.S. Lender Party shall (A) on or prior to the date
such U.S. Lender Party becomes a “U.S. Lender Party” hereunder, (B) on or prior
to the date on which any such form or certification expires or becomes obsolete,
(C) after the occurrence of any event requiring a change in the most recent form
or certification previously delivered by it pursuant to this clause (f) and (D)
from time to time if requested by the Borrower Representative or an Agent (or,
in the case of a participant or SPV, the relevant Lender), provide such Agent
and the Borrower Representative (or, in the case of a participant or SPV, the
relevant Lender) with two completed originals of Form W-9 (certifying that such
U.S. Lender Party is entitled to an exemption from U.S. backup withholding tax)
or any successor form.
               (iii) Each Lender having sold a participation in any of its
Obligations or identified an SPV as such to such Agent shall collect from such
participant or SPV the documents described in this clause (f) and provide them
to such Agent.
          (g) The agreements in this Section 10.1 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder
     10.2 Illegality. If after the date hereof any Lender shall determine that
the introduction of any Requirement of Law, or any change in any Requirement of
Law or in the interpretation or administration thereof, has made it unlawful, or
that any central bank or other Governmental Authority has asserted that it is
unlawful, for any Lender or its Lending Office to make LIBOR Rate Loans, then,
on notice thereof by such Lender to the Borrowers through the applicable Agent,
the obligation of that Lender to make LIBOR Rate Loans shall be suspended until
such Lender shall have notified such Agent and the Borrower Representative that
the circumstances giving rise to such determination no longer exists.
          (a) Subject to clause (c) below, if any Lender shall determine that it
is unlawful to maintain any LIBOR Rate Loan, the Borrowers shall prepay in full
all LIBOR Rate Loans of such Lender then outstanding, together with interest
accrued thereon, either on the last day of the Interest Period thereof if such
Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such LIBOR
Rate Loans, together with any amounts required to be paid in connection
therewith pursuant to Section 10.4.
          (b) If the obligation of any Lender to make or maintain LIBOR Rate
Loans has been terminated, the Borrower Representative may elect, by giving
notice to such Lender through the applicable Agent that all Loans which would
otherwise be made by any such Lender as LIBOR Rate Loans shall be instead Base
Rate Loans.

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          (c) Before giving any notice to such Agent pursuant to this
Section 10.2, the affected Lender shall designate a different Lending Office
with respect to its LIBOR Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Lender, be illegal or otherwise disadvantageous to the Lender.
     10.3 Increased Costs and Reduction of Return.
          (a) If any Lender or L/C Issuer shall determine that, due to either
(i) the introduction of, or any change in, or in the interpretation of, any law
or regulation or (ii) the compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), in the case of either clause (i) or (ii) subsequent to the date hereof,
there shall be any increase in the cost to such Lender or L/C Issuer of agreeing
to make or making, funding or maintaining any LIBOR Rate Loans or of issuing or
maintaining any Letter of Credit, then the Borrowers shall be liable for, and
shall from time to time, within thirty (30) days of demand therefor by such
Lender or L/C Issuer (with a copy of such demand to the applicable Agent), pay
to such Agent for the account of such Lender or L/C Issuer, additional amounts
as are sufficient to compensate such Lender or L/C Issuer for such increased
costs; provided, that the Borrowers shall not be required to compensate any
Lender or L/C Issuer pursuant to this Section 10.3(a) for any increased costs
incurred more than 180 days prior to the date that such Lender or L/C Issuer
notifies the Borrower Representative, in writing of the increased costs and of
such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided,
further, that if the circumstance giving rise to such increased costs is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.
          (b) If any Lender or L/C Issuer shall have determined that:
          (i) the introduction of any Capital Adequacy Regulation;
          (ii) any change in any Capital Adequacy Regulation;
          (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof; or
          (iv) compliance by such Lender or L/C Issuer (or its Lending Office)
or any entity controlling the Lender or L/C Issuer, with any Capital Adequacy
Regulation;
in the case of any of clauses (i) — (iv) subsequent to the date hereof, affects
the amount of capital required or expected to be maintained by such Lender or
L/C Issuer or any entity controlling such Lender or L/C Issuer and (taking into
consideration such Lender’s or such entities’ policies with respect to capital
adequacy and such Lender’s or L/C Issuer’s

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desired return on capital) determines that the amount of such capital is
increased as a consequence of its Revolving Commitment(s), loans, credits or
obligations under this Agreement, then, within thirty (30) days of demand of
such Lender or L/C Issuer (with a copy to the applicable Agent), the Borrowers
shall pay to such Lender or L/C Issuer, from time to time as specified by such
Lender or L/C Issuer, additional amounts sufficient to compensate such Lender or
L/C Issuer (or the entity controlling the Lender or L/C Issuer) for such
increase; provided, that the Borrowers shall not be required to compensate any
Lender or L/C Issuer pursuant to this Section 10.3(b) for any amounts incurred
more than 180 days prior to the date that such Lender or L/C Issuer notifies the
Borrower Representative, in writing of the amounts and of such Lender’s or L/C
Issuer’s intention to claim compensation thereof; provided, further, that if the
event giving rise to such increase is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
     10.4 Funding Losses. The Borrowers agree to reimburse each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of:
          (a) the failure of the Borrowers to make any payment or mandatory
prepayment of principal of any LIBOR Rate Loan (including payments made after
any acceleration thereof);
          (b) the failure of the Borrowers to borrow, continue or convert a Loan
after the Borrower Representative has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
          (c) the failure of the Borrowers to make any prepayment after the
Borrowers have given a notice in accordance with Section 1.7;
          (d) the prepayment (including pursuant to Section 1.8) of a LIBOR Rate
Loan on a day which is not the last day of the Interest Period with respect
thereto; or
          (e) the conversion pursuant to Section 1.6 of any LIBOR Rate Loan to a
Base Rate Loan on a day that is not the last day of the applicable Interest
Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans hereunder or from fees
payable to terminate the deposits from which such funds were obtained; provided
that, with respect to the expenses described in clauses (d) and (e) above, such
Lender shall have notified the applicable Agent of any such expense within two
(2) Business Days of the date on which such expense was incurred. Solely for
purposes of calculating amounts payable by the Borrowers to the Lenders under
this Section 10.4 and under Section 10.3(a): each LIBOR Rate Loan made by a
Lender (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the LIBOR used in determining the
interest rate for such LIBOR Rate Loan by a matching deposit or other

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borrowing in the interbank Eurodollar market for a comparable amount and for a
comparable period, whether or not such LIBOR Rate Loan is in fact so funded.
     10.5 Inability to Determine Rates. If either Agent shall have determined in
good faith that for any reason adequate and reasonable means do not exist for
ascertaining the LIBOR for any requested Interest Period with respect to a
proposed LIBOR Rate Loan or that the LIBOR applicable pursuant to Section 1.3(a)
for any requested Interest Period with respect to a proposed LIBOR Rate Loan
does not adequately and fairly reflect the cost to the Lenders of funding or
maintaining such Loan, such Agent will forthwith give notice of such
determination to the Borrower Representative and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall
be suspended until such Agent revokes such notice in writing. Upon receipt of
such notice, the Borrower Representative may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Borrower
Representative does not revoke such notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Borrower Representative, in the amount
specified in the applicable notice submitted by the Borrower Representative, but
such Loans shall be made, converted or continued as Base Rate Loans.
     10.6 Reserves on LIBOR Rate Loans. The Borrowers shall pay to each Lender,
as long as such Lender shall be required under regulations of the Federal
Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
“Eurocurrency liabilities”), additional costs on the unpaid principal amount of
each LIBOR Rate Loan equal to actual costs of such reserves allocated to such
Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive absent manifest error), payable on each date
on which interest is payable on such Loan provided the Borrower Representative
shall have received at least fifteen (15) days’ prior written notice (with a
copy to Agents) of such additional interest from the Lender. If a Lender fails
to give notice fifteen (15) days prior to the relevant Interest Payment Date,
such additional interest shall be payable fifteen (15) days from receipt of such
notice.
     10.7 Certificates of Lenders. Any Lender claiming reimbursement or
compensation pursuant to this Article X shall deliver to the Borrower
Representative (with a copy to Agents) a certificate setting forth in reasonable
detail the amount payable to such Lender hereunder and such certificate shall be
conclusive and binding on the Borrowers in the absence of manifest error.
     10.8 Parties Including Trustees; Bankruptcy Court Proceedings. This
Agreement, the other Loan Documents, and all Liens and other rights and
privileges created hereby or pursuant hereto or to any other Loan Document shall
be binding upon each Credit Party, the estates of the Credit Parties, and any
trustee, other estate representative or any successor in interest of the Credit
Parties in the Chapter 11 Cases or any subsequent case commenced under Chapter 7
of the Bankruptcy Code, and shall not be subject to Section 365 of the
Bankruptcy Code. This Agreement and the other Loan Documents shall be binding
upon, and inure to the benefit of, the successors of Agents and Lenders and
their respective assigns, transferees and endorsees. The Liens created

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by this Agreement and the other Loan Documents shall be and remain valid and
perfected in the event of the substantive consolidation or conversion of the
Chapter 11 Cases or any other bankruptcy case of any Credit Party to a case
under Chapter 7 of the Bankruptcy Code or in the event of dismissal of the
Chapter 11 Cases or the release of any Collateral from the jurisdiction of the
Bankruptcy Court for any reason, without the necessity that Agents file
financing statements or otherwise perfect its Liens under applicable law. No
Credit Party may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the other Loan
Documents without the prior express written consent of Agents and Lenders. Any
such purported assignment, transfer, hypothecation or other conveyance by any
Credit Party without the prior express written consent of Agents and Lenders
shall be void. The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each Credit Party, Agents and
Lenders with respect to the transactions contemplated hereby and no Person shall
be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
     10.9 Intercreditor Agreement Superseded. Upon the entry of the Final Order,
that certain Intercreditor Agreement dated as of March 31, 2010 relating to the
Pre-Petition Facilities is superseded in all respects by the provisions of this
Agreement and the Interim Order (or Final Order, as applicable) and the rights
and remedies of and as among the Secured Parties with respect to the Collateral,
the Term B Priority Collateral and the Revolving Priority Collateral shall be
governed by this Agreement and the Interim Order (or Final Order, as
applicable).
ARTICLE XI.
DEFINITIONS
     11.1 Defined Terms. The following terms have the following meanings:
     “Account” means, as at any date of determination, all “accounts” (as such
term is defined in the UCC) of the Credit Parties, including, without
limitation, the unpaid portion of the obligation of a customer of a Credit Party
in respect of Inventory purchased by and shipped to such customer and/or the
rendition of services by a Credit Party, as stated on the respective invoice of
a Credit Party, net of any credits, rebates or offsets owed to such customer.
     “Account Debtor” means the customer of a Credit Party who is obligated on
or under an Account.
     “Acquisition” means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of fifty percent (50%) of
the Stock and Stock Equivalents of any Person or otherwise causing any Person to
become a Subsidiary of a Borrower, or (c) a merger or consolidation or any other
combination with another Person.

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     “Actual Cash Management Exposure” shall mean the obligations due and owing
to Bank of America, N.A. with respect to the cash management services (other
than Excluded Cash Management Services) from time to time made available to the
Credit Parties in the ordinary course of business consistent with past practices
through the date that is three (3) Business Days following receipt by Bank of
America, N.A. of a Termination Notice.
     “Actual Disbursement Amount” shall mean the actual amount of all
disbursements made by the Credit Parties during the relevant Period.
     “Actual Sales Receipts” shall mean the actual amount of all sales receipts
received by the Credit Parties during the relevant Period as determined in a
manner consistent with the Approved Budget.
     “Adequate Protection Superpriority Claims” has the meaning assigned to the
term “Adequate Protection Superpriority Claims” in the Interim Order (or the
Final Order, when applicable).
     “Affected Asset Sale” means a liquidation in one or a series of related
transactions of the assets located on the property that are subject to leases
rejected on the Lease Rejection Date.
     “Affected Lender” has the meaning specified in Section 9.22.
     “Affiliate” means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of five percent
(5%) or more of the Stock (either directly or through ownership of Stock
Equivalents) of a Person shall for the purposes of this Agreement, be deemed to
be an Affiliate of the other Person. Notwithstanding the foregoing, neither
Agent nor any Lender shall be deemed an “Affiliate” of any Credit Party or of
any Subsidiary of any Credit Party solely by reason of the provisions of the
Loan Documents.
     “Agents” means the Working Capital Agent and the Term B Agent, and where
the context so requires either of the Working Capital Agent or Term B Agent as
to the applicable type of Loan or extension of credit.
     “Agent Report” has the meaning specified in Section 8.5(c).
     “Aggregate Commitment” means, at any time, the combined Aggregate Revolving
Commitments, as such amount may be reduced from time to time pursuant to this
Agreement plus the Aggregate FILO Commitments.

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     “Aggregate Exposure” means, at any time, the Aggregate Revolving Exposure
of all the Revolving Lenders at such time plus the Aggregate FILO Exposure of
all the FILO Lenders at such time.
     “Aggregate FILO Exposure” means, at any time, the aggregate FILO Exposure
of all the FILO Lenders at such time.
     “Aggregate FILO Commitment” means the combined FILO Commitments of all of
the FILO Lenders, which shall initially be in the amount of $20,000,000, as such
amount may be reduced from time to time pursuant to this Agreement.
     “Aggregate Revolving Exposure” means, at any time, the aggregate Revolving
Exposure of all the Revolving Lenders at such time.
     “Aggregate Revolving Commitment” means the combined Revolving Commitments
of all of the Revolving Lenders, which shall initially be in the amount of
$410,000,000, as such amount may be reduced from time to time pursuant to this
Agreement.
     “Aggregate Term B Commitment” means the combined Term B Commitments of all
of the Term B Lenders, which shall initially be in the amount of $55,000,000, as
such amount may be reduced from time to time pursuant to this Agreement.
     “Aggregate Term Exposure” means, at any time, the aggregate Term Exposure
of all the Term B Lenders at such time.
     “Approved Budget” shall mean the budget prepared by the Borrowers and
furnished to Agents and the Lenders on the Closing Date and which is approved
by, and in form and substance satisfactory to, Agents and the Term B Lenders in
their reasonable discretion, as the same may be updated, modified or
supplemented from time to time as provided in Section 4.16 which shall include a
weekly cash budget, including information on a line item basis as to
(x) projected cash receipts, (y) projected disbursements (including ordinary
course operating expenses, bankruptcy-related expenses (including professional
fees), capital expenditures, asset sales and fees and expenses of Agents and
Lenders (including counsel therefor) and any other fees and expenses relating to
the Loan Documents), and (z) total available liquidity (consisting of Maximum
Borrowing Availability and Maximum Revolving Borrowing Availability).
     “Approved Budget Variance Report” shall mean a weekly report provided by
the Borrower Representative to Agents (i) showing by line item Actual Sales
Receipts, Actual Disbursement Amounts and total available liquidity for the last
day of the Prior Week, the Cumulative Four Week Period and the Cumulative
Period, noting therein all variances, on a line-item basis, from amounts set
forth for such period in the Approved Budget, and shall include explanations for
all material variances, and (ii) certified by the chief financial officer of the
Borrowers.
     “Approved Fund” means, with respect to any Lender, any Person (other than a
natural Person) that (a) (i) is or will be engaged in making, purchasing,
holding or

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otherwise investing in commercial loans and similar extensions of credit in the
Ordinary Course of Business for such Lender or (ii) temporarily warehouses loans
for any Lender or any Person described in clause (i) above and (b) is advised or
managed by (i) such Lender, (ii) any Affiliate of such Lender or (iii) any
Person (other than an individual) or any Affiliate of any Person (other than an
individual) that administers or manages such Lender.
     “Approved Liquidation Agreement” shall mean an agreement between a Credit
Party and an Approved Liquidator for the liquidation on an equity basis of the
Inventory of a Store to be closed, such agreement to be in form and substance
reasonably satisfactory to Agents.
     “Approved Liquidator” shall mean a nationally recognized liquidator of
recognized standing approved by Agents.
     “Assignment” means an assignment agreement entered into by a Lender, as
assignor, and any Person, as assignee, pursuant to the terms and provisions of
Section 9.9 (with the consent of any party whose consent is required by
Section 9.9), accepted by Agent, in substantially in the form of Exhibit 11.1(a)
or any other form approved by Agent.
     “Attorney Costs” means and includes all reasonable fees and disbursements
of any law firm or other external counsel.
     “Availability” means, at any time, the amount by which (a) the Maximum
Borrowing Availability at such time, exceeds (b) the Aggregate Exposure.
Availability shall at all time be calculated based on trade payables being paid
currently in accordance with usual and customary standards for the retail
industry and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales.
     “Availability Reserves” means (a) the Gift Card and Merchandise Credit
Reserve, (b) the Rent Reserve, (c) reserves in respect of Bank Products
established by Working Capital Agent in its Permitted Discretion, and (d) those
other miscellaneous reserves identified in the initial Approved Budget as “Other
Reserves.”
     “Bank Product” shall mean any of the following products, services or
facilities extended to any Credit Party or any of its Subsidiaries by GE Capital
or any of its Affiliates: (a) any services provided from time to time in
connection with operating, collections, payroll, trust, or other depository or
disbursement accounts, including automatic clearinghouse, controlled
disbursement, depository, electronic funds transfer, information reporting,
lockbox, stop payment, overdraft and/or wire transfer services; (b) commercial
credit card and purchasing cards; (c) leases and letters of credit and (d) other
banking products or services approved by Agent.
     “Bankruptcy Code” has the meaning assigned to it in the recitals to the
Agreement.

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     “Bankruptcy Court” has the meaning assigned to it in the recitals to the
Agreement.
     “Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure, as the
same may from time to time be in effect and applicable to the Chapter 11 Cases.
     “Base Rate” means, for any day, a rate per annum equal to the higher of
(a) the rate last quoted by The Wall Street Journal as the “Prime Rate” in the
United States or, if The Wall Street Journal ceases to quote such rate, the
highest per annum interest rate published by the Federal Reserve Board in
Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the
“bank prime loan” rate or, if such rate is no longer quoted therein, any similar
rate quoted therein (as reasonably determined by Working Capital Agent) or any
similar release by the Federal Reserve Board (as determined by Working Capital
Agent), (b) the sum of 0.50% per annum and the Federal Funds Rate. Any change in
the Base Rate due to a change in any of the foregoing shall be effective on the
effective date of such change in the Federal Funds Rate. With respect to all
Term B Loans, the Base Rate shall not be less than 3.75%.
     “Base Rate Loan” means a Loan that bears interest based on the Base Rate.
     “Benefit Plan” means any employee benefit plan as defined in Section 3(3)
of ERISA (whether governed by the laws of the United States or otherwise) to
which any Credit Party incurs or otherwise has any obligation or liability,
contingent or otherwise.
     “Borrower” and “Borrowers” has the meaning specified in the preamble to
this Agreement.
     “Borrower Materials” has the meaning specified in Section 9.10(e).
     “Borrower Representative” has the meaning specified in Section 1.12.
     “Borrowing” means a borrowing hereunder consisting of Loans made to or for
the benefit of the Borrowers on the same day by the Lenders pursuant to
Article I.
     “Borrowing Base” means, as of any date of determination by Working Capital
Agent, from time to time, an amount equal to the sum at such time of:
          (a) 90% of the book value of Eligible Credit Card Accounts at such
time; and
          (b) 90% of the book value of Eligible Inventory valued at the lower of
cost or market on a first-in, first-out basis, multiplied by the NOLV Percentage
for Inventory;
in each case of clauses (a) and (b), less Availability Reserves established by
Working Capital Agent at such time in its Permitted Discretion.

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     “Borrowing Base Certificate” means a certificate of the Borrower
Representative, on behalf of each Credit Party, in substantially the form of
Exhibit 11.1(b) hereto, duly completed as of a date acceptable to Agents in
their sole discretion.
     “Budgeted Disbursement Amount” means the line items contained in the
Approved Budget under the headings ‘non-operating disbursement subtotal’ and
‘operating disbursements subtotal’ during the relevant Period of determination
as set forth in the Approved Budget.
     “Budgeted Sales Receipts” means the line items contained in the Approved
Budget under the headings ‘receipts subtotal’ during the relevant Period of
determination as set forth in the Approved Budget.
     “Business Day” means any day other than a Saturday, Sunday or other day on
which federal reserve banks are authorized or required by law to close and, if
the applicable Business Day relates to any LIBOR Rate Loan, a day on which
dealings are carried on in the London interbank market.
     “Capital Adequacy Regulation” means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any Lender or of any corporation controlling a Lender.
     “Capital Lease” means any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease.
     “Capital Lease Obligations” means all monetary obligations of any Credit
Party or any Subsidiary of any Credit Party under any Capital Leases.
     “Carve-Out” shall mean, collectively, (i) all fees required to be paid to
the Clerk of the Bankruptcy Court and to the Office of the United States Trustee
pursuant to 28 U.S.C. §1930(a), (ii) upon the delivery of a Carve-Out Trigger
Notice, an amount equal to the Carve-Out Amount, which amount may be used
subject to the terms of the applicable DIP Order to pay any budgeted fees or
expenses incurred by the Borrowers and any statutory committees appointed in the
Chapter 11 Cases (each, a “Committee”) that remain unpaid subsequent to the
payment of such fees and expenses from available funds remaining in the Credit
Parties’ estates for such creditors, in respect of (A) compensation for services
rendered or reimbursement of expenses allowed and awarded by the Bankruptcy
Court to the Borrowers’ or any Committee’s professionals and (B) the
reimbursement of expenses allowed by the Bankruptcy Court incurred by the
Committee members in the performance of their duties (but excluding fees and
expenses of third party professionals employed by such members) (“Committee
Fees”), in each case, incurred after the delivery of a Carve-Out Trigger Notice,
(iii) any budgeted and accrued and unpaid fees and expenses of Borrowers’ and
the Committee’s professionals incurred prior to the receipt of the Carve-Out
Trigger Notice, whether or not such accrued and unpaid fees have yet been
invoiced to the Borrowers or submitted for approval to the Bankruptcy Court to
the extent allowed; and (iv) any professional fees and documented

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out-of-pocket expenses of a chapter 7 trustee under section 726(b) of the
Bankruptcy Code up to a maximum amount of $100,000 in the aggregate. No portion
of the Carve-Out, any cash collateral or proceeds of the Loans may be used for
the payment of the fees and expenses of any person incurred in challenging, or
in relation to the challenge of the liens or claims of any or all of the Agents
or the Lenders, or the initiation or prosecution of any claim or action against
any or all of the Agents or the Lenders, including any claim under Chapter 5 of
the Bankruptcy Code, in respect of the Pre-Petition Facilities. So long as the
Carve-Out Trigger Notice has not been delivered, the Borrowers shall be
permitted to pay, as the same may become due and payable, budgeted fees and
expenses payable under 11 U.S.C. § 330 and § 331 pursuant to court order, and
the same shall not reduce the Carve-Out Amount.
     “Carve-Out Trigger Notice” shall mean a written notice delivered by either
Agent to the Borrowers’ lead counsel, the U.S. Trustee, and lead counsel to any
Committee which notice may be delivered following the occurrence and during the
continuation of an Event of Default, expressly stating that the Carve-Out Amount
is invoked.
     “Carve-Out Amount” means $4,000,000.
     “Cash Equivalents” means (a) any readily-marketable securities (i) issued
by, or directly, unconditionally and fully guaranteed or insured by the United
States federal government or (ii) issued by any agency of the United States
federal government the obligations of which are fully backed by the full faith
and credit of the United States federal government, (b) any readily-marketable
direct obligations issued by any other agency of the United States federal
government, any state of the United States or any political subdivision of any
such state or any public instrumentality thereof, in each case having a rating
of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any commercial
paper rated at least “A-1” by S&P or “P-1” by Moody’s and issued by any Person
organized under the laws of any state of the United States, (d) any
Dollar-denominated time deposit, insured certificate of deposit, overnight bank
deposit or bankers’ acceptance issued or accepted by (i) any Lender or (ii) any
commercial bank that is (A) organized under the laws of the United States, any
state thereof or the District of Columbia, (B) “adequately capitalized” (as
defined in the regulations of its primary federal banking regulators) and
(C) has Tier 1 capital (as defined in such regulations) in excess of
$250,000,000 and (e) shares of any United States money market fund that (i) has
substantially all of its assets invested continuously in the types of
investments referred to in clause (a), (b), (c) or (d) above with maturities as
set forth in the proviso below, (ii) has net assets in excess of $500,000,000
and (iii) has obtained from either S&P or Moody’s the highest rating obtainable
for money market funds in the United States; provided, however, that the
maturities of all obligations specified in any of clauses (a), (b), (c) or (d)
above shall not exceed 365 days.
     “Cash Management L/C Facility” has the meaning specified in the preamble to
this Agreement.
     “Cash Management Letter of Credit” means a standby letter of credit issued
for the account of the Credit Parties by the Working Capital Agent (as L/C
Issuer of the Cash

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Management Letter of Credit), for which Working Capital Agent and Revolving
Lenders (subject to Section 1.1(c)(viii)) has incurred Letter of Credit
Obligations.
     “Cash Management Order” means the Interim Order Pursuant to 11 U.S.C. §§
105(a), 45(b), 63(b), 363(c), AND 364(a) and Fed. R. Bankr. P. 6003 and 6004
Granting (I) Authority To (A) Continue To Operate The Debtors’ Cash Management
System, (B) Honor Certain Prepetition Obligations On Account Of Service Charges
Related Thereto, (C) Maintain Existing Bank Accounts and Business Forms,
(D) Maintain The Ability to Use Debit, Wire and ACH Payments, And (E) Honor The
Continued Use of Certain Corporate Credit Cards; and (II) An Extension of Time
To Comply With 11 U.S.C. § 345(b), in form and substance acceptable to Agent.
     “Cash Management Systems” has the meaning ascribed to it in Section 2.1(i).
     “CERCLA” has the meaning specified in Section 3.12.
     “Change of Control” shall mean (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 any other “person” or “group”
that the Agent shall have approved in writing in its 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 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 voting Stock or Stock
Equivalents 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; or (c) BGI fails to own
100% of the Stock and Stock Equivalents of all other Credit Parties, except as a
result of a transaction permitted hereunder.
     “Chapter 11 Cases” has the meaning assigned to it in the recitals to the
Agreement.
     “Closing Date” means the date on which all of the conditions precedent set
forth in Section 2.1 have been satisfied or waived in writing by the Agents and
the initial Loans are made or initial Letters of Credit Issued.

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     “Code” means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
     “Collateral” means all Property and interests in Property and proceeds
thereof now owned or hereafter acquired by any Credit Party, that is at any time
subject to a security interest or Lien in favor of Working Capital Agent, on
behalf of itself, the Lenders and the other Secured Parties, pursuant to the
Guaranty and Security Agreement or any other Collateral Document, in each case,
to secure the Obligations, including, without limitation, all collateral
described in the Interim Order or the Final Order, as applicable.
     “Collateral Documents” means, collectively, the Guaranty and Security
Agreement, the IP Security Agreements, the Interim Order, the Final Order, the
Mortgages, each Control Agreement, and all other security agreements, pledge
agreements, patent security agreement, trademark security agreements, lease
assignments, bailee agreements, guarantees and other similar agreements, and all
amendments, restatements, modifications or supplements thereof or thereto, by or
between any one or more of any Credit Party and any Lender, L/C Issuer or
Working Capital Agent for the benefit of Working Capital Agent, the Lenders, L/C
Issuers and other Secured Parties now or hereafter delivered to the Lenders or
any Agent pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents now or hereafter
filed in accordance with the UCC or comparable law) against any such Person as
debtor in favor of any Lender or any Agent for the benefit of Agents, the
Lenders, L/C Issuer and the other Secured Parties, as secured party, as any of
the foregoing may be amended, restated and/or modified from time to time.
     “Commitment”, means (a) for each Revolving Lender, the sum of its Revolving
Commitment, (b) for each FILO Lender, the sum of its FILO Commitment, and
(c) for each Term B Lender, the sum of its Term B Commitment.
     “Commitment Percentage”, means (a) for each Revolving Lender, such
Revolving Lender’s Revolving Commitment Percentage, (b) for each FILO Lender,
such FILO Lender’s FILO Commitment Percentage and (c) for each Term B Lender,
such Term B Lender’s Term B Commitment Percentage.
     “Committees” shall have the meaning set forth in the definition of
“Carve-Out”.
     “Concentration Account” means the Control Account, Account No. 4427082445
held at Bank of America, N.A., or such other Control Account that may be
specified by Working Capital Agent in writing.
     “Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person: (a) with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will

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be protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (c) under
any Rate Contracts; (d) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; or
(e) for the obligations of another Person through any agreement to purchase,
repurchase or otherwise acquire such obligation or any Property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance sheet
item or level of income of another Person. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed or supported.
     “Contractual Obligations” means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, license agreement,
document or agreement to which such Person is a party or by which it or any of
its Property is bound.
     “Control Account” means each deposit account now or hereafter owned by the
Credit Parties, other than (i) payroll accounts (so long as each such payroll
account is a zero balance account), withholding tax and other fiduciary
accounts, (ii) local store operating accounts with cash or cash equivalents not
exceeding $3,000,000 at any time in the aggregate for all such local store
operating accounts and (iii) deposit accounts not maintained in the United
States or Puerto Rico with cash or cash equivalents not exceeding $300,000 at
any time in the aggregate for all such accounts.
     “Control Agreement” means a tri-party deposit account, securities account,
or commodities account control agreement by and among the applicable Credit
Party, Working Capital Agent and the depository, securities intermediary or
commodities intermediary, and each in form and substance satisfactory to Agents
and in any event providing to Working Capital Agent “control” of such deposit
account, securities or commodities account (including, without limitation, any
lockbox or similar arrangements) within the meaning of Articles 8 and 9 of the
UCC, as applicable.
     “Conversion Date” means any date on which the Borrowers convert a Base Rate
Loan to a LIBOR Rate Loan or a LIBOR Rate Loan to a Base Rate Loan.
     “Copyrights” means all rights, title and interests (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
copyrights and all mask work, database and design rights, whether or not
registered or published, all registrations and recordations thereof and all
applications in connection therewith.
     “Copyright Security Agreement” means the Copyright Security Agreement,
dated as of even date herewith, made in favor of Working Capital Agent, for the
benefit of the Secured Parties, by each applicable Credit Party, in form and
substance reasonably satisfactory to Agents, as the same may be amended from
time to time.

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     “Credit Card Agreements” shall mean all agreements or notices, each in form
and substance reasonably satisfactory to Agents, now or hereafter entered into
by applicable Credit Party(ies) with any credit card issuer or any credit card
processor, as the same may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced; provided, that any such credit card
agreement or notice shall provide, among other things, that each such credit
card processor shall transfer all proceeds due with respect to credit card
charges for sales (net of expenses and chargebacks of the credit card issuer or
processor) by applicable Credit Party(ies) received by it (or other amounts
payable by such credit card processor) into the Concentration Account on a daily
basis, or on such other basis as Agents may agree in writing in the exercise of
their Permitted Discretion.
     “Credit Card Receivables” shall mean, collectively, all present and future
rights of Borrowers to payment from (a) any major credit card issuer or major
credit card processor arising from sales of goods or rendition of services to
customers who have purchased such goods or services using a credit or debit card
and (b) any major credit card issuer or major credit card processor in
connection with the sale or transfer of Accounts arising pursuant to the sale of
goods or rendition of services to customers who have purchased such goods or
services using a credit card or a debit card, including, but not limited to, all
amounts at any time due or to become due from any major credit card issuer or
major credit card processor under the Credit Card Agreements or otherwise.
     “Credit Parties” means each Borrower, each Guarantor and each other Person
(a) which executes a guaranty of the Obligations, (b) which grants a Lien on all
or substantially all of its assets to secure payment of the Obligations and
(c) all of the Stock of which is pledged to Working Capital Agent for the
benefit of the Secured Parties. As of the Closing Date, the Credit Parties are
Borders Group, Inc., Borders, Inc., Borders Properties Inc., Borders
International Services Inc, and Borders Direct LLC.
     “Cumulative Period” means the period from the Petition Date through the
most recent week ended.
     “Cumulative Four Week Period” shall mean the four-week period up to and
through the Saturday of the most recent week then ended, or if a four-week
period has not then elapsed from the Petition Date, such shorter period since
the Petition Date through the Saturday of the most recent week then ended.
     “Default” means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
     “DIP Indemnity Account” has the meaning ascribed to such term in the
Interim Order (or the Final Order, when applicable).
     “DIP Term Indemnity Account” has the meaning ascribed to such term in the
Interim Order (or the Final Order, when applicable).
     “Disposition” means (a) the sale, lease, conveyance or other disposition of
Property and (b) the sale or transfer by a Borrower or any Subsidiary of a
Borrower of

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any Stock or Stock Equivalent issued by any Subsidiary of a Borrower and held by
such transferor Person.
     “Dollars”, “dollars” and “$” each mean lawful money of the United States of
America.
     “Domestic Subsidiary” means any Subsidiary other than a Foreign Subsidiary.
     “Effective Resignation Date” has the meaning specified in Section 8.9.
     “Electronic Transmission” means each document, instruction, authorization,
file, information and any other communication transmitted, posted or otherwise
made or communicated by e-mail or E-Fax, or otherwise to or from an E-System or
other equivalent service acceptable to Working Capital Agent.
     “Eligible Credit Card Accounts” means all of the Credit Card Receivables
(net of fees) of the Credit Parties that arise in the ordinary course of
business, which have been earned by performance, that are not excluded as
ineligible by virtue of one or more of the criteria set forth below and are
reflected in the most recent Borrowing Base Certificate delivered by the
Borrower Representative to Agents. None of the following shall be deemed to be
Eligible Credit Card Accounts:
     (a) Credit Card Receivables due from major credit card processors that have
been outstanding for more than five (5) Business Days from the date of sale;
     (b) Credit Card Receivables due from major credit card processors 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 the offset or
chargeback rights of such credit card processors (which shall be governed by
clause (d) below);
     (c) Credit Card Receivables due from major credit card processors that are
not subject to a first priority perfected security interest in favor of Working
Capital Agent, as applicable, for its own benefit and the benefit of the other
Secured Parties;
     (d) Credit Card Receivables due from major credit card processors which are
disputed, or with respect to which a claim, counterclaim, offset or chargeback
has been asserted by the related credit card processor (but only to the extent
of such dispute, counterclaim, offset or chargeback);
     (e) Credit Card Receivables due from major credit card processors as to
which the credit card processor has the right under certain circumstances to
require the Borrowers to repurchase such Accounts from such credit card
processor;
     (f) Except as otherwise approved by Working Capital Agent, Credit Card
Receivables due from major credit card processors as to which Working

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Capital Agent has not received an acceptable Credit Card Agreement (a copy of
which has been delivered to Term B Agent);
     (g) Accounts due from major credit card processors (other than Visa,
MasterCard, American Express, Diners Club and Discover) which Working Capital
Agent determines, in its Permitted Discretion, to be unlikely to be collected;
     (h) Credit Card Receivables due from major credit card processors which are
not located in the United States of America; or
     (i) Credit Card Receivables that are not denominated in U.S. dollars.
     “Eligible Inventory” means all of the finished goods Inventory owned by a
Credit Party and properly reflected in the most recent Borrowing Base
Certificate delivered by Borrower Representative to Agents, except any Inventory
to which any of the exclusionary criteria set forth below applies. Eligible
Inventory shall not include the following Inventory of a Credit Party:
     (a) Inventory that is excess, obsolete, unsaleable, shopworn, or seconds;
     (b) Inventory that is damaged or unfit for sale;
     (c) Intentionally Omitted
     (d) Inventory that is placed on consignment;
     (e) Inventory that (i) is not located on premises owned, leased or rented
by a Borrower or a Guarantor and set forth in Schedule 3.21, (ii) is stored at a
leased location, unless (x) a reasonably satisfactory landlord waiver has been
delivered to Working Capital Agent, or (y) Reserves reasonably satisfactory to
Working Capital Agent have been established with respect thereto or landlord
liens and collateral access rights have been addressed Agents’ reasonable
satisfaction pursuant to the Final Order, (iii) is stored with a bailee or
warehouseman unless (x) a reasonably satisfactory, acknowledged bailee letter
has been received by Working Capital Agent with respect thereto or provisions
with respect thereto have been addressed to Agents’ reasonable satisfaction
pursuant to the Final Order and (y) Reserves reasonably satisfactory to Agents
have been established with respect thereto, (iv) is located at an owned location
subject to a mortgage in favor of a lender other than an Agent, unless a
reasonably satisfactory mortgagee waiver has been delivered to Working Capital
Agent (with a copy delivered to Term Agent) or provisions with respect thereto
have been addressed to Agents’ reasonable satisfaction pursuant to the Final
Order or (v) is located at a closed Store;

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     (f) Inventory that is in transit, except for Inventory in transit between
domestic locations of the Borrowers and the Guarantors as to which Working
Capital Agent’s Liens have been perfected at origin and destination;
     (g) Inventory subject to any licensing, trademark, trade name or copyright
agreements with any third parties which would require any consent of any third
party for the sale or disposition of that Inventory (which consent has not been
obtained) or the payment of any monies to any third party upon such sale or
other disposition (to the extent of such monies);
     (h) Inventory that consists of samples, labels, bags, packaging, packing or
shipping materials, or manufacturing supplies;
     (i) Inventory that consists of tooling or replacement parts;
     (j) Inventory that consists of display items;
     (k) Inventory that consists of goods which to be returned to the vendor;
     (l) Inventory that consists of any costs associated with “freight in
charges”;
     (m) Inventory that consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;
     (n) Inventory that is not covered by casualty insurance reasonably
acceptable to Agents;
     (o) Inventory that is not owned by a Borrower or a Guarantor or is subject
to Liens other than Permitted Liens described in Sections 5.1(b), (c), (d) and
(f) (provided that, with respect to Permitted Liens described in
Sections 5.1(c), (d) and (f), Reserves reasonably satisfactory to Agents have
been established with respect thereto) or rights of any other Person (including
the rights of a purchaser that has made progress payments and the rights of a
surety that has issued a bond to assure a Credit Party’s performance with
respect to that Inventory);
     (p) Inventory that is not subject to a first priority perfected Lien in
favor of Working Capital Agent on behalf of itself and the Secured Parties,
except for Liens described in Section 5.1(d) (subject to Reserves);
     (q) Inventory that is covered by a negotiable document of title, unless
such document has been delivered to Working Capital Agent with all necessary
endorsements, free and clear of all Liens except Liens in favor of Working
Capital Agent, on behalf of itself and the Secured Parties;

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     (r) Inventory (other than raw materials) that is not of a type held for
sale in the Ordinary Course of Business of such Borrower or such Guarantor;
     (s) Inventory that is located outside of the United States or Puerto Rico;
     (t) Inventory that consists of raw materials, parts, work-in-process,
subassemblies or other unfinished goods;
     (u) Inventory at any Store that is the subject of a Permitted Store
Closing; or
     (v) Inventory which has been sold but not yet delivered or as to which any
Borrower has accepted a deposit.
     “Environmental Laws” means all present and future Requirements of Law and
Permits imposing liability or standards of conduct for or relating to the
regulation and protection of human health, safety (including, human, health and
safety in the workplace), the environment and natural resources, and including
public notification requirements and environmental transfer of ownership,
notification or approval statutes.
     “Environmental Liabilities” means all Liabilities (including costs of
Remedial Actions, natural resource damages and costs and expenses of
investigation and feasibility studies, including the cost of environmental
consultants and the cost of attorney’s fees) that may be imposed on, incurred by
or asserted against any Credit Party or any Subsidiary of any Credit Party as a
result of, or related to, any claim, suit, action, investigation, proceeding or
demand by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law or
otherwise, arising under any Environmental Law or in connection with any
environmental condition or with any Release and resulting from the ownership,
lease, sublease or other operation or occupation of property by any Credit Party
or any Subsidiary of any Credit Party, whether on, prior or after the date
hereof.
     “ERISA” means the Employee Retirement Income Security Act of 1974.
     “ERISA Affiliate” means, collectively, any Credit Party and any Person
under common control or treated as a single employer with, any Credit Party,
within the meaning of Section 414(b), (c), (m) or (o) of the Code.
     “ERISA Event” means any of the following: (a) a reportable event described
in Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been
duly waived under the applicable regulations, Section 4043(c) of ERISA) with
respect to a Title IV Plan; (b) the withdrawal of any ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any ERISA Affiliate from any Multiemployer
Plan; (d) with respect to any Multiemployer Plan, the filing of a notice of
reorganization, insolvency or termination (or treatment of a plan amendment as
termination) under Section 4041A of ERISA; (e) the filing of a notice

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of intent to terminate a Title IV Plan (or treatment of a plan amendment as
termination) under Section 4041 of ERISA; (f) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to
make any required contribution to any Title IV Plan or Multiemployer Plan when
due; (h) the imposition of a lien under Section 412 or 430(k) of the Code or
Section 303 or 4068 of ERISA on any property (or rights to property, whether
real or personal) of any ERISA Affiliate; (i) the failure of a Benefit Plan or
any trust thereunder intended to qualify for tax exempt status under Section 401
or 501 of the Code or other Requirements of Law to qualify thereunder; (j) a
Title IV plan is in “at risk” status within the meaning of Code Section 430(i);
(k) a Multiemployer Plan is in “endangered status” or “critical status” within
the meaning of Section 432(b) of the Code; and (l) any other event or condition
that might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of any material
liability upon any ERISA Affiliate under Title IV of ERISA other than for PBGC
premiums due but not delinquent.
     “Event of Default” has the meaning specified in Section 7.1.
     “Event of Loss” means, with respect to any Property, any of the following:
(a) any loss, destruction or damage of such Property; (b) any pending or
threatened institution of any proceedings for the condemnation or similar
seizure of such Property or for the exercise of any right of eminent domain; or
(c) any actual condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, of such Property, or confiscation of such Property
or the requisition of the use of such Property.
     “E-Fax” means any system used to receive or transmit faxes electronically.
     “E-Signature” means the process of attaching to or logically associating
with an Electronic Transmission an electronic symbol, encryption, digital
signature or process (including the name or an abbreviation of the name of the
party transmitting the Electronic Transmission) with the intent to sign,
authenticate or accept such Electronic Transmission.
     “E-System” means any electronic system approved by Working Capital Agent,
including Intralinks® and ClearPar® and any other Internet or extranet-based
site, whether such electronic system is owned, operated or hosted by Working
Capital Agent, any of its Related Persons or any other Person, providing for
access to data protected by passcodes or other security system.
     “Excluded Cash Management Services” means obligations of the Credit Parties
owing to Bank of America, N.A. relating to purchase card services and credit
card processing services.
     “Excluded Inventory” shall mean any Inventory at any locations where the
lease has not been assumed by the Lease Assumption Reserve Commencement Date.
     “Excluded Subsidiaries” means each of (a) Borders/JGE Joint Venture LLC, a
Michigan limited liability company, (b) Borders Online, Inc., a Colorado
corporation, (c)

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Walden Online, Inc., a Colorado corporation, (d) Borders Fulfillment, Inc., a
Delaware corporation, (e) Borders Online, LLC, a Delaware limited liability
company, (f) BGI Franchise PTY Ltd., a limited company organized under the laws
of Australia, (g) Borders Bookstore (M) SDN BHD, a limited liability company
organized under the laws of Malaysia, (h) BGI (UK), Ltd., a company with limited
liability incorporated under the laws of England and Wales, (i) BGP (UK), Ltd.,
a company with limited liability incorporated under the laws of England and
Wales, (j) Borders Superstores (UK) Limited, a company with limited liability
incorporated under the laws of England and Wales, and (k) Bookshop Acquisitions
Ltd., a company with limited liability incorporated under the laws of England
and Wales.
     “Federal Flood Insurance” means Federally backed Flood Insurance available
under the National Flood Insurance Program to owners of real property
improvements located in Special Flood Hazard Areas in a community participating
in the National Flood Insurance Program.
     “Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that if no such rate is so published on such
next succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to Working Capital Agent on such day on such transactions as
determined by Working Capital Agent in a commercially reasonable manner.
     “Federal Reserve Board” means the Board of Governors of the Federal Reserve
System, or any entity succeeding to any of its principal functions.
     “Fee Letter” has the meaning specified in Section 1.9(a).
     “FEMA” means the Federal Emergency Management Agency, a component of the
U.S. Department of Homeland Security that administers the National Flood
Insurance Program.
     “FILO Applicable Margin” means, with respect to the FILO Loans, (a) if a
Base Rate Loan, six and three quarters of one percent (6.75%) per annum and
(b) if a LIBOR Rate Loan, nine and one half of one percent (9.50%) per annum.
     “FILO Commitment” has the meaning specified in Section 1.1(a)(i).
     “FILO Commitment Percentage” means for each FILO Lender, the percentage
equivalent of such FILO Lender’s FILO Commitment divided by the Aggregate FILO
Commitment; provided that after the FILO Loan has been funded, FILO Commitment
Percentages shall be determined for the FILO Loan by reference to the
outstanding principal balance thereof as of any date of determination rather
than the Commitments therefor;.

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     “FILO Exposure” means, with respect to any FILO Lender at any time, the
aggregate outstanding principal amount of such FILO Lender’s FILO Loans.
     “FILO Lenders” means each of the financial institutions from time to time
party to this Agreement holding a FILO Loan and individually each a “FILO
Lender”.
     “FILO Loan” has the meaning specified in Section 1.1(a)(i).
     “FILO Note” means a promissory note of the Borrowers payable to the order
of a FILO Lender in substantially the form of Exhibit 11.1(c) hereto, evidencing
Indebtedness of the Borrowers under the FILO Commitment of such FILO Lender.
     “Final Availability Date” means the earlier of the Termination Date and one
(1) Business Day prior to the date specified in clause (a) of the definition of
Termination Date.
     “Final Order” means, collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Cases after a final hearing under Bankruptcy
Rule 4001(c)(2) or such other procedures as approved by the Bankruptcy Court
which order shall be satisfactory in form and substance to Agents, and from
which no appeal or motion to reconsider has been timely filed, or if timely
filed, such appeal or motion to reconsider has been dismissed or denied unless
each Agent waives such requirement), together with all extensions, modifications
and amendments thereto, in form and substance satisfactory to Agents and
Required Term B Lenders, which, among other matters but not by way of
limitation, authorizes the Credit Parties to obtain credit, incur (or guaranty)
Indebtedness, and grant Liens under this Agreement and the other Loan Documents,
as the case may be, and provides for the super priority of Agents’ and the
Lenders’ claims.
     “FIRREA” means the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended.
     “First Tier Foreign Subsidiary” means a Foreign Subsidiary held directly by
a Credit Party or indirectly by a Credit Party through one or more Domestic
Subsidiaries.
     “Fiscal Month” means each monthly accounting period of Borrowers.
     “Fiscal Quarter” means 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.
     “Fiscal Year” means the annual accounting period of Borrowers ending on the
Saturday nearest to January 31st in each calendar year.
     “Flood Insurance” means, for any Real Estate located in a Special Flood
Hazard Area, Federal Flood Insurance or private insurance that meets the
requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance
Guidelines. Flood Insurance

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shall be in an amount as reasonably determined by Agents, but in no event in
excess of the liquidation value of such Real Estate.
     “Foreign Subsidiary” means, with respect to any Person, a Subsidiary of
such Person that is a “controlled foreign corporation” under Section 957 of the
Code.
     “Funds Flow Memorandum” has the meaning specified in Section 2.1(g).
     “GAAP” means generally accepted accounting principles in the United States
set forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
accounting profession), which are applicable to the circumstances as of the date
of determination, subject to Section 11.3 hereof.
     “Gift Card and Merchandise Credit Reserve” means, at any time of
determination, an amount equal to fifty percent (50%) of the aggregate value at
such time of all outstanding merchandise credit and gift certificates and gift
cards of the Credit Parties or any of their Subsidiaries issued over the past
24 months entitling the holder thereof to use all or a portion of the value of
any such merchandise credit, gift certificate or gift card to pay all or a
portion of the purchase price for any Inventory of the Credit Parties.
     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
     “Guarantors” means, collectively, the Subsidiaries of the Borrowers listed
on Schedule 3.19 on the Closing Date and each other Subsidiary of the Borrowers
that shall be required to execute and deliver a guaranty or guaranty supplement
pursuant to Section 4.13(b).
     “Guaranteed Indebtedness” means as to any Person, any obligation of such
Person guaranteeing, providing comfort or otherwise supporting any Indebtedness,
lease, dividend, or other obligation (“primary obligation”) of any other Person
(the “primary obligor”) in any manner, including any obligation or arrangement
of such Person to (a) purchase or repurchase any such primary obligation,
(b) advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such

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primary obligation against loss in respect thereof. The amount of any Guaranteed
Indebtedness at any time shall be deemed to be an amount equal to the lesser at
such time of (x) the stated or determinable amount of the primary obligation in
respect of which such Guaranteed Indebtedness is incurred and (y) the maximum
amount for which such Person may be liable pursuant to the terms of the
instrument embodying such Guaranteed Indebtedness, or, if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
     “Guaranty and Security Agreement” means that certain Guaranty and Security
Agreement, dated as of even date herewith, in form and substance reasonably
acceptable to Agents, by the Borrowers and Guarantors in favor of Working
Capital Agent, for the benefit of the Secured Parties, as the same may be
amended, restated and/or modified from time to time, together with each other
guaranty and security agreement executed and delivered by any other Credit Party
in favor of Working Capital Agent and the Secured Parties.
     “Hazardous Materials” means any substance, material or waste that is
regulated or otherwise gives rise to liability under any Environmental Law,
including but not limited to any “Hazardous Waste” as defined by the Resource
Conservation and Recovery Act (RCRA) (42 U.S.C. § 6901 et seq. (1976)), any
“Hazardous Substance” as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) (42 U.S.C. §9601 et seq. (1980)), any
contaminant, pollutant, petroleum or any fraction thereof, asbestos, asbestos
containing material, polychlorinated biphenyls, mold, and radioactive substances
or any other substance that is toxic, ignitable, reactive, corrosive, caustic,
or dangerous.
     “Impacted Lender” means any Lender that fails promptly to provide Working
Capital Agent, upon Working Capital Agent’s request, satisfactory assurance that
such Lender will not become a Non-Funding Lender.
     “Inadvertent Overadvances” shall mean the funding of any loan or advance
under the Working Capital Facility or the issuance, renewal or amendment of a
Letter of Credit by an L/C Issuer which (i) did not result in an Overadvance
when made based upon the most recent Borrowing Base Certificate delivered to the
Working Capital Agent prior to such funding or issuance, renewal or amendment
but which has become an Overadvance as the result of (a) a decline in the value
of the Collateral, (b) errors or fraud on a Borrowing Base Certificate,
(c) components of the Borrowing Base on any date thereafter being deemed
ineligible, (d) the return of uncollected checks or other items of payment
applied to the reduction of Loans or other similar involuntary or unintentional
actions, (e) any other circumstance beyond the reasonable control of the Working
Capital Agent or the Revolving Lenders that results in the reduction of the
realizable value of the Borrowing Base or (f) the occurrence of a Term B Advance
Rate Reduction, or (ii) the funding of any loan or advance under the Working
Capital Facility or the issuance, renewal or amendment of any Letter of Credit
resulting from the Working Capital Lender’s obligation to disgorge, refund or
reimburse proceeds received from an Approved Liquidator in connection with a
Permitted Store Closing pursuant to a clawback or other similar rights under the
relevant Approved Liquidation Agreement.

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     “Indebtedness” of any Person means, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of Property or services (other than trade
payables entered into in the Ordinary Course of Business); (c) the face amount
of all letters of credit issued for the account of such Person and without
duplication, all drafts drawn thereunder and all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments issued for the account of such Person; (d) all obligations evidenced
by notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of Property, assets or
businesses; (e) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to Property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such Property); (f) all Capital Lease
Obligations; (g) the principal balance outstanding under any synthetic lease,
off-balance sheet loan or similar off balance sheet financing product, or if
less, the stipulated loss value, termination value or other equivalent amount;
(h) all obligations, whether or not contingent, to purchase, redeem, retire,
defease or otherwise acquire for value any of its own Stock or Stock Equivalents
(or any Stock or Stock Equivalent of a direct or indirect parent entity thereof)
prior to the date that is 180 days after the scheduled Termination Date, valued
at, in the case of redeemable preferred Stock, the greater of the voluntary
liquidation preference and the involuntary liquidation preference of such Stock
plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses
(a) through (h) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
or in Property (including accounts and contracts rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of such
indebtedness; and (j) all Contingent Obligations described in clause (i) of the
definition thereof in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (i) above.
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 equity instruments 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 Matters” has the meaning specified in Section 9.6.
     “Indemnitee” has the meaning specified in Section 9.6.
     “Insolvency Proceeding” means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion

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of its creditors; in each case in (a) and (b) above, undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
     “Intellectual Property” means, collectively, with respect to any Credit
Party, any and all of the rights, title and interests of such Credit Party in
and to any and all United States, international or foreign: (a) Trademarks;
(b) Patents; (c) Copyrights; (d) confidential and proprietary information,
including, without limitation, all Trade Secrets, technology, ideas, know-how,
formulae and customer lists; (e) any and all intellectual property rights in
computer software and computer software products (including, without limitation,
source codes, object codes, data and related documentation); (f) any and all
design rights owned or used by such Company; and (g) all other intellectual
property rights of every description.
     “Interest Payment Date” means, (a) with respect to any LIBOR Rate Loan
(other than Term B Loans), the last day of each Interest Period applicable to
such Loan, (b) with respect to Base Rate Loans (including Swing Loans but
excluding Term B Loans) the first day of each month and (c) with respect to Term
B Loans the first day of each month.
     “Interest Period” means, with respect to any LIBOR Rate Loan, the period
commencing on the Business Day such Loan is disbursed or continued or on the
Conversion Date on which a Base Rate Loan is converted to the LIBOR Rate Loan
and ending on the date seven (7), thirty (30), sixty (60) or ninety (90) days
thereafter, as selected by the Borrower Representative in its Notice of
Borrowing or Notice of Conversion/Continuation; provided that:
     (a) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise
end on a day which 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) for Interest Periods longer than seven (7) days, any Interest Period
pertaining to a LIBOR 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 the calendar month at the end of such Interest Period; and
     (c) no Interest Period for any FILO Loan or Revolving Loan shall extend
beyond the Termination Date.
     “Interim Order” means, collectively, the order of the Bankruptcy Court
entered in the Chapter 11 Cases after an interim hearing (assuming satisfaction
of the standards prescribed in Section 364 of the Bankruptcy Code and Bankruptcy
Rule 4001 and other applicable law), together with all extension, modifications,
and amendments thereto, in form and substance satisfactory to Agents and
Required Term B Lenders, which, among other matters but not by way of
limitation, authorizes, on an interim basis, the Credit

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Parties to execute and perform under the terms of this Agreement and the other
Loan Documents, substantially in the form of Exhibit A.
     “Internet Domain Name” means all right, title and interest (and all related
IP Ancillary Rights) arising under any Requirement of Law in or relating to
internet domain names.
     “Inventory” means all of the “inventory” (as such term is defined in the
UCC) of the Credit Parties, including, but not limited to, all merchandise, raw
materials, parts, supplies, work-in-process and finished goods intended for
sale, together with all the containers, packing, packaging, shipping and similar
materials related thereto, and including such inventory as is temporarily out of
a Credit Party’s custody or possession, including inventory on the premises of
others and items in transit.
     “Inventory Percentage” means (i) from the Closing Date through and
including March 25, 2011, 105%, (ii) from March 26, 2011 through and including
April 8, 2011, 103%, and (iii) thereafter, 100%, provided that, notwithstanding
the foregoing, at any time an Event of Default shall have occurred and be
continuing, “Inventory Percentage” shall mean 100% (a “Term B Advance Rate
Reduction”).
     “Investments” has the meaning specified in Section 5.4.
     “IP Ancillary Rights” means, with respect to any other Intellectual
Property, as applicable, all foreign counterparts to, and all divisionals,
reversions, continuations, continuations-in-part, reissues, reexaminations,
renewals and extensions of, such Intellectual Property and all income,
royalties, proceeds and Liabilities at any time due or payable or asserted under
or with respect to any of the foregoing or otherwise with respect to such
Intellectual Property, including all rights to sue or recover at law or in
equity for any past, present or future infringement, misappropriation, dilution,
violation or other impairment thereof, and, in each case, all rights to obtain
any other IP Ancillary Right.
     “IP License” means all Contractual Obligations (and all related IP
Ancillary Rights), whether written or oral, granting any right, title and
interest in or relating to any Intellectual Property.
     “IP Security Agreements” means, collectively, the Patent Security
Agreement, Copyright Security Agreement and Trademark Security Agreement, in
each case, made in favor of Working Capital Agent, for the benefit of the
Secured Parties, by each applicable Credit Party, as amended from time to time.
     “IRS” means the Internal Revenue Service of the United States and any
successor thereto.
     “Issue” means, with respect to any Letter of Credit, to issue, extend the
expiration date of, renew (including by failure to object to any automatic
renewal on the last day such objection is permitted), increase the face amount
of, or reduce or eliminate any

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scheduled decrease in the face amount of, such Letter of Credit, or to cause any
Person to do any of the foregoing. The terms “Issued” and “Issuance” have
correlative meanings.
     “Landlord Lien State” means the states of Washington, Virginia,
Pennsylvania and such other state(s) or jurisdictions in which a landlord’s
claim for rent or other obligations has priority over the Lien of Working
Capital Agent in any of the Collateral.
     “Large Inventory Location” means any distribution center, warehouse,
cross-docking station or storage facility at which Inventory is located.
     “L/C Issuer” means any Revolving Lender or an Affiliate thereof or a bank
or other legally authorized Person, in each case, reasonably acceptable to
Working Capital Agent, in such Person’s capacity as an issuer of Letters of
Credit hereunder; provided, however that with respect to the Cash Management
Letter of Credit, the L/C Issuer shall be the Working Capital Agent or an
affiliate of Working Capital Agent, in such Person’s capacity as an issuer of
Cash Management Letter of Credit hereunder.
     “L/C Reimbursement Agreement” has the meaning specified in Section
1.1(c)(i)(C).
     “L/C Reimbursement Date” has the meaning specified in Section 1.1(c)(vi).
     “L/C Reimbursement Obligation” means, for any Letter of Credit, the
obligation of the Borrowers to the L/C Issuer thereof, as and when matured, to
pay all amounts drawn under such Letter of Credit.
     “L/C Request” has the meaning specified in Section 1.1(c)(ii).
     “Lease Assumption Reserve Commencement Date” means the date that is twelve
(12) weeks prior to the end of the Lease Rejection Date.
     “Lease Rejection Date” means the last day of the 120 day lease
rejection/assumption period, as such period may be extended or shortened by the
Bankruptcy Court.
     “Lease Reserve” means, without duplication of Inventory included in the
calculation of the Excluded Inventory to the extent Excluded Inventory is
deducted from the calculation of Maximum Borrowing Availability and Maximum
Revolving Borrowing Availability, a reserve, in an amount established by Working
Capital Agent in its Permitted Discretion, in respect of (i) Inventory held at
any leased or rented location intended to be closed with respect to which the
lease therefor is or is intended to be terminated by the applicable Credit Party
(ii) Inventory at leased locations with respect to which the lease has not been
assumed commencing on the Lease Assumption Reserve Commencement Date, or
(iii) Inventory held at any leased location as to which there has been filed a
motion to compel the assumption or rejection of the lease, unless the Working
Capital Agent has adequate assurance that if will continue to have access to
such location following any determination relating to such motion (as a result
of provisions in the Interim Order, Final Order or otherwise).

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     “Lenders” means the Revolving Lenders, the Term B Lenders and the FILO
Lenders and individually each a “Lender”.
     “Lender-Related Distress Event” means, with respect to any Revolving
Lenders or any Person that directly or indirectly controls such Revolving Lender
(each a “Distressed Person”), (a) a voluntary or involuntary case with respect
to such Distressed Person under the Bankruptcy Code or any similar bankruptcy
laws of its jurisdiction of formation, (b) a custodian, conservator, receiver or
similar official is appointed for such Distressed Person or any substantial part
of such Distressed Person’s assets, (c) such Distressed Person is subject to a
forced liquidation, merger, sale or other change of majority control supported
in whole or in part by guaranties or other support (including, without
limitation, the nationalization or assumption of majority ownership or operating
control by) the U.S. government or other Governmental Authority, or (d) such
Distressed Person makes a general assignment for the benefit of creditors or is
otherwise adjudicated as, or determined by any Governmental Authority having
regulatory authority over such Distressed Person or its assets to be, insolvent
or bankrupt. For purposes of this definition, control of a Person shall have the
same meaning as in the second sentence of the definition of “Affiliate”.
     “Lending Office” means, with respect to any Revolving Lender or FILO Lender
and Working Capital Agent and with respect to the Term B Lenders the office or
offices of such Lender specified as its “Lending Office” beneath its name on the
applicable signature page hereto, or such other office or offices of such Lender
as it may from time to time notify the Borrower Representative and Term B Agent.
     “Letter of Credit” means documentary or standby letters of credit issued
for the account of a Credit Party by L/C Issuers, and bankers’ acceptances
issued by a Credit Party, for which Working Capital Agent and Revolving Lenders
have incurred Letter of Credit Obligations.
     “Letter of Credit Obligations” means all outstanding obligations incurred
by Working Capital Agent and Revolving Lenders at the request of the Borrowers
or the Borrower Representative, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance of Letters of Credit
by L/C Issuers or the purchase of a participation as set forth in Section 1.1(c)
with respect to any Letter of Credit. The amount of such Letter of Credit
Obligations shall equal the maximum amount that may be payable by Working
Capital Agent and/or Revolving Lenders thereupon or pursuant thereto.
     “Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, taxes, commissions, charges, disbursements and expenses, in each case of
any kind or nature (including interest accrued thereon or as a result thereto
and fees, charges and disbursements of financial, legal and other advisors and
consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.

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     “LIBOR” means, for each Interest Period, the higher of (a) the offered rate
per annum for deposits of Dollars for the applicable Interest Period that
appears on Reuters Screen LIBOR 01 Page as of 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such Interest Period or (b) the
offered rate per annum for deposits of Dollars for an Interest Period of three
(3) months that appears on Reuters Screen LIBOR 01 Page as of 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day of the
applicable Interest Period. If no such offered rate exists, such rate will be
the rate of interest per annum, as determined by Working Capital Agent at which
deposits of Dollars in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in such
Interest Period by major financial institutions reasonably satisfactory to
Working Capital Agent in the London interbank market for such Interest Period
for the applicable principal amount on such date of determination. With respect
to all FILO Loans, LIBOR shall not be less than 1.50% and with respect to all
Term B Loans, LIBOR shall not be less than 1.00%.
     “LIBOR Rate Loan” means a Loan that bears interest based on LIBOR.
     “Lien” means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
otherwise) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the UCC or any comparable law) and any contingent
or other agreement to provide any of the foregoing, but not including the
interest of a lessor under a lease which is not a Capital Lease.
     “Lien Waiver” means an agreement, in form and substance satisfactory to
Agents, and otherwise which (a) for any Collateral located on leased premises,
the lessor waives or subordinates any Lien it may have on the Collateral, and
agrees to permit Working Capital Agent to enter upon the premises and remove the
Collateral or to use the premises to store or dispose of the Collateral; (b) for
any Collateral held by a warehouseman, processor, shipper or freight forwarder,
such Person waives or subordinates any Lien it may have on the Collateral,
agrees to hold any documents in its possession relating to the Collateral as
agent for Working Capital Agent, and agrees to deliver the Collateral to Working
Capital Agent upon request; and (c) for any Collateral held by a repairman,
mechanic or bailee, such Person acknowledges Working Capital Agent’s Lien,
waives or subordinates any Lien it may have on the Collateral, and agrees to
deliver the Collateral to Working Capital Agent upon request.
     “Loan” means an extension of credit by a Lender to the Borrowers pursuant
to Article I, and may be a Base Rate Loan or a LIBOR Rate Loan. Unless the
context otherwise requires, references to the outstanding principal balance of
the Loans shall include the outstanding balance of Letter of Credit Obligations,
Swing Loans, Overadvances, FILO Loans and Revolving Loans.

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     “Loan Documents” means this Agreement, the Notes, the Fee Letter, the L/C
Reimbursement Agreements, the Approved Budget, the Collateral Documents, the
Borrowing Base Certificates and all documents delivered to any Agent and/or any
Lender in connection with any of the foregoing, including the Interim Order and
the Final Order.
     “Local Deposit Accounts” has the meaning specified in Section 4.11(a).
     “Mandatory Reserves” means (a) the Term B Reserve, (b) the Lease Reserve
(without duplication of any amounts deducted in the calculation of the Term B
Reserve to the extent Excluded Inventory is deducted from the calculation of
Maximum Borrowing Availability and Maximum Revolving Borrowing Availability),
(c) the Minimum Excess Availability Amount and (d) a reserve or reserves in the
full amount of the Carve-Out Amount as established by Working Capital Agent on
the Closing Date and thereafter modified, as and to the extent, Working Capital
Agent determines to do so.
     “Margin Stock” means “margin stock” as such term is defined in
Regulation T, U or X of the Federal Reserve Board.
     “Material Adverse Effect” means, other than the filing of the Chapter 11
Cases: (a) a material adverse change in, or a material adverse effect upon, the
operations, business, Properties, condition (financial or otherwise) or
prospects of any Borrower or the Credit Parties taken as a whole; (b) a material
impairment of the ability of the Credit Parties to perform in any material
respect their obligations under any Loan Document; (c) a material impairment of
the rights and remedies of any Agent or any Lender under any Loan Document or
(d) a material adverse effect upon (i) the legality, validity, binding effect or
enforceability of any Loan Document, (ii) the perfection or priority of any Lien
granted to the Lenders or to Working Capital Agent for the benefit of the
Secured Parties under any of the Collateral Documents or (iii) the realizable
value of the Collateral. Without limiting the generality of the foregoing, any
event or occurrence which results or would reasonably be expected to result in
Liabilities to the Credit Parties in excess of $1,000,000 individually or in the
aggregate shall be deemed to have a Material Adverse Effect.
     “Material Environmental Liabilities” means Environmental Liabilities
exceeding $1,000,000 in the aggregate.
     “Maximum Borrowing Availability” means, at any time, an amount equal to the
lesser of (a) the Aggregate Commitment then in effect or, if less, the maximum
amount of Loans and Letter of Credit Obligations permitted by the Interim Order
or the Final Order, as applicable and (b) the result of (i) the Borrowing Base
at such time minus (ii) the Mandatory Reserves at such time or any other
Reserves (but without duplication of any Availability Reserves deducted in
calculating Maximum Borrowing Availability).
     “Maximum Lawful Rate” has the meaning specified in Section 1.3(d).
     “Maximum Revolving Borrowing Availability” means, at any time, an amount
equal to the lesser of (a) the Aggregate Revolving Commitment then in effect or,
if less, the maximum amount of Revolving Loans, Swing Loans, Overadvances and
Letter of

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Credit Obligations (other than with respect to the Cash Management Letter of
Credit permitted by the Interim Order or the Final Order, as applicable and
(b) the result of (i) the Borrowing Base at such time minus (ii) the Mandatory
Reserves or any other Reserves, at such time (but without duplication of any
Availability Reserves deducted in calculating Maximum Revolving Borrowing
Availability).
     “Minimum Excess Availability Amount” means, at any time, an amount equal to
the greater of (i) ten percent (10.00%) of the Borrowing Base (based upon the
most recent Borrowing Base Certificate received by Agents prior to the requested
funding of Revolving Loans or issuance, renewal or amendment of any Letter of
Credit) and (ii) $30,000,000; provided that, if Availability should be less than
$25,000,000, the amount in clause (ii) herein shall be increased to an aggregate
total of $45,000,000.
     “MNPI” has the meaning specified in Section 9.10(a).
     “Mortgage” means any deed of trust, leasehold deed of trust, mortgage,
leasehold mortgage, deed to secure debt, leasehold deed to secure debt or other
document creating a Lien on Real Estate or any interest in Real Estate.
     “Multiemployer Plan” means any multiemployer plan, as defined in
Section 3(37) or 4001(a)(3) of ERISA, as to which any ERISA Affiliate incurs or
otherwise has any obligation or liability, contingent or otherwise.
     “National Flood Insurance Program” means the program created by the U.S.
Congress pursuant to the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as revised by the National Flood Insurance
Reform Act of 1994, that mandates the purchase of flood insurance to cover real
property improvements located in Special Flood Hazard Areas in participating
communities and provides protection to property owners through a Federal
insurance program.
     “Net Orderly Liquidation Value” means the cash proceeds of Inventory, as
applicable, which could be obtained in an orderly liquidation (net of all
liquidation expenses, costs of sale, operating expenses and retrieval and
related costs), as determined pursuant to the most recent third-party appraisal
of such Inventory delivered to Working Capital Agent by an appraiser reasonably
acceptable to Working Capital Agent.
     “Net Proceeds” means proceeds in cash, checks or other cash equivalent
financial instruments (including Cash Equivalents) as and when received by the
Person making a Disposition and insurance proceeds received on account of an
Event of Loss, net of: (a) in the event of a Disposition (i) the direct costs
relating to such Disposition excluding amounts payable to a Borrower or any
Affiliate of a Borrower, (ii) sale, use or other transaction taxes paid or
payable as a result thereof, and (iii) amounts required to be applied to repay
principal, interest and prepayment premiums and penalties on Indebtedness
secured by a non-avoidable Lien on the asset which is the subject of such
Disposition (to the extent such Lien constitutes a Permitted Encumbrance
hereunder and is permitted to have priority over Working Capital Agent’s Liens
securing the Obligations) and (b) in the event of an Event of Loss, (i) all
money actually applied to

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repair or reconstruct the damaged Property or Property affected by the
condemnation or taking, (ii) all of the costs and expenses reasonably incurred
in connection with the collection of such proceeds, award or other payments, and
(iii) any amounts retained by or paid to parties having superior rights to such
proceeds, awards or other payments.
     “Net Term B Proceeds” means proceeds in cash, checks or other cash
equivalent financial instruments (including Cash Equivalents) as and when
received by the Person making a Disposition and insurance proceeds received on
account of an Event of Loss, net only of any commissions related to such
Disposition.
     “NOLV Percentage” means at any time, the quotient of the Net Orderly
Liquidation Value of Inventory divided by the book value of Inventory, as
reflected on the most recent appraisal received by Agents; provided that in
order to more accurately reflect the dates when a sale of such Inventory might
take place, Working Capital Agent may, in Working Capital Agent’s Permitted
Discretion, (i) calculate the NOLV Percentage based upon the Net Orderly
Liquidation Value of Inventory for the periods occurring after the date on which
the Borrowing Base is being calculated or (ii) impose reserves to reflect the
likely future sale date of such Inventory. The NOLV Percentage will be increased
or reduced promptly upon receipt by Agents of each updated appraisal.
     “Non-Funding Lender” means any Lender (a) that has failed to fund any
payments required to be made by it under the Loan Documents within two
(2) Business Days after any such payment is due, (b) that has given verbal or
written notice to a Borrower, Working Capital Agent or any Lender or has
otherwise publicly announced that such Lender believes it will fail to fund all
payments required to be made by it or fund all purchases of participations
required to be funded by it under this Agreement and the other Loan Documents,
(c) as to which Working Capital Agent has a good faith belief that such Lender
or an Affiliate of such Lender has defaulted in fulfilling its obligations (as a
lender, agent or letter of credit issuer) under one or more other syndicated
credit facilities or (d) with respect to which one or more Lender-Related
Distress Events has occurred with respect to such Person or any Person that
directly or indirectly controls such Lender and Working Capital Agent has
determined that such Lender may become a Non-Funding Lender. For purposes of
this definition, control of a Person shall have the same meaning as in the
second sentence of the definition of Affiliate.
     “Non-U.S. Lender Party” means each of Working Capital Agent, each Lender
(or any transferee or assignee thereof), each L/C Issuer, each SPV and each
participant, in each case that is not a United States person as defined in
Section 7701(a)(30) of the Code.
     “Note” means any Revolving Note, FILO Note, Term Note or Swingline Note and
“Notes” means all such Notes.
     “Notice of Borrowing” means a notice given by the Borrower Representative
to Working Capital Agent pursuant to Section 1.5, in substantially the form of
Exhibit 11.1(d) hereto.

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     “Notice of Conversion/Continuation” has the meaning specified in Section
1.6(a).
     “Obligations” means (i) all Loans (including Letters of Credit) and other
Indebtedness, advances, debts, liabilities, obligations, covenants and duties
owing by any Credit Party to any Lender, any Agent, any L/C Issuer, any Secured
Swap Provider or any other Person required to be indemnified, that arises under
any Loan Document or any Secured Rate Contract, whether or not for the payment
of money, whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired and (ii) all obligations and
liabilities in respect of Bank Products owing by any Credit Party or any of its
Subsidiaries to GE Capital or any of its Affiliates or any Lender, now existing
or hereafter arising and however acquired.
     “Ordinary Course of Business” means, in respect of any transaction
involving any Person, the ordinary course of such Person’s business, as
conducted by any such Person in accordance with past practice and undertaken by
such Person in good faith and not for purposes of evading any covenant or
restriction in any Loan Document, but with respect to any Credit Party, taking
into account the filing of the Chapter 11 Cases.
     “Organization Documents” means, (a) for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation
and any shareholder rights agreement, (b) for any partnership, the partnership
agreement and, if applicable, certificate of limited partnership, (c) for any
limited liability company, the operating agreement and articles or certificate
of formation or (d) any other document setting forth the manner of election or
duties of the officers, directors, managers or other similar persons, or the
designation, amount or relative rights, limitations and preference of the Stock
of a Person.
     “Other Taxes” has the meaning specified in Section 10.1(c).
     “Overadvance” has the meaning specified in Section 1.1(b)(ii).
     “Patents” means all rights, title and interests (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to letters
patent and applications therefor.
     “Patent Security Agreement” means the Patent Security Agreement, dated as
of even date herewith, made in favor of Working Capital Agent, for the benefit
of the Secured Parties, by each applicable Credit Party, in form and substance
reasonably satisfactory to Agents as the same may be amended from time to time.
     “Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L.
107-56, as amended.

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     “PBGC” means the United States Pension Benefit Guaranty Corporation any
successor thereto.
     “Period” shall mean a Prior Week, a Cumulative Four Week Period or a
Cumulative Period, as applicable.
     “Permits” means, with respect to any Person, any permit, approval,
authorization, license, registration, certificate, concession, grant, franchise,
variance or permission from, and any other Contractual Obligations with, any
Governmental Authority, in each case whether or not having the force of law and
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
     “Permitted Discretion” means a determination made in good faith and in the
exercise of reasonable business judgment (from the perspective of a secured
asset-based lender).
     “Permitted Liens” has the meaning specified in Section 5.1.
     “Permitted Overadvance” shall mean (i) Protective Overadvances in an
aggregate amount at any one time outstanding not in excess of 5% of the
Borrowing Base based upon the most recent Borrowing Base Certificate received by
Working Capital Agent prior to the occurrence of such Protective Overadvance
(even if such Borrowing Base Certificate proves to be inaccurate based upon, but
not limited, to errors, fraud or changes in Collateral value) plus
(ii) Inadvertent Overadvances.
     “Permitted Store Closings” means the closure of (i) between 190 and 205
store locations listed on Schedule 11.1 and (ii) up to an additional 75 stores
upon consent of, and subject to terms acceptable to, Agents, and in each case,
the liquidation of assets related thereto by an Approved Liquidator pursuant to
bidding procedures, Approved Liquidation Agreement and all other relevant
documents executed in connection therewith, each, as applicable, to be in form
and substance reasonably satisfactory to Agents.
     “Pershing Square Warrants” means 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” means 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” means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
     “Petition Date” has the meaning assigned to it in the recitals to this
Agreement.

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     “Post-Petition” means the time period beginning immediately upon the
Petition Date.
     “Post-Petition Indebtedness” means any or all Indebtedness of the Credit
Parties incurred after the Petition Date.
     “Pre-Petition” means the time period ending immediately prior to the
Petition Date.
     “Pre-Petition Facilities” shall mean the Pre-Petition Revolving Facility
and the Pre-Petition Term Facility.
     “Pre-Petition Indebtedness” means all Indebtedness of the Credit Parties
outstanding on the Petition Date immediately prior to the Petition Date,
including, without limitation the Pre-Petition Facilities.
     “Pre-Petition Perfected Lien” has the meaning assigned to it in the Interim
Order (or the Final Order, when applicable).
     “Pre-Petition Revolving Facility” shall mean the credit facility evidenced
by that certain Third Amended and Restated Revolving Credit Agreement dated as
of March 31, 2010.
     “Pre-Petition Term Facility” shall mean that certain Term Loan Agreement
dated as of March 31, 2010 among the Borrowers, the guarantors party thereto,
the lenders party thereto and the Term B Agent, as administrative agent.
     “Prior Week” shall mean, as of any date of determination, the immediately
preceding week ended on a Saturday and commencing on the prior Sunday.
     “Property” means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
     “Protective Overadvances” shall mean an Overadvance which the Working
Capital Agent in its Permitted Discretion determines to be necessary or
desirable to, directly or indirectly, (i) maintain, protect or preserve the
value of the Collateral and/or the Working Capital Agent’s rights therein as
determined in the discretion of the Working Capital Agent, including to preserve
the Credit Parties’ business assets and infrastructure (such as the payment of
insurance premiums, taxes, necessary suppliers, rent and payroll), (ii) commence
the enforcement of the Working Capital Agent’s rights and remedies pursuant to
Section 7.2, (iii) fund an orderly liquidation or wind-down of the Credit
Parties’ assets or business, or (iv) enhance the likelihood, or maximize, the
repayment of the Working Capital Facility.
     “Rate Contracts” means swap agreements (as such term is defined in
Section 101 of the Bankruptcy Code) and any other agreements or arrangements
designed to provide protection against fluctuations in interest or currency
exchange rates.

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     “RCRA” has the meaning specified in Section 3.12.
     “Real Estate” means any real estate owned, leased, subleased or otherwise
operated or occupied by any Credit Party or any Subsidiary of any Credit Party.
     “Register” has the meaning specified in Section 1.4(b).
     “Related Persons” means, with respect to any Person, each Affiliate of such
Person and each director, officer, employee, agent, trustee, representative,
attorney, accountant and each insurance, environmental, legal, financial and
other advisor (including those retained in connection with the satisfaction or
attempted satisfaction of any condition set forth in Article II) and other
consultants and agents of or to such Person or any of its Affiliates.
     “Releases” means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material into
or through the environment.
     “Remedial Action” means all actions required to (a) clean up, remove, treat
or in any other way address any Hazardous Material in the indoor or outdoor
environment, (b) prevent or minimize any Release so that a Hazardous Material
does not migrate or endanger or threaten to endanger public health or welfare or
the indoor or outdoor environment or (c) perform pre remedial studies and
investigations and post-remedial monitoring and care with respect to any
Hazardous Material.
     “Remedies Notice Period” has the meaning ascribed to it in the Interim
Order (or the Final Order when applicable).
     “Remedy Standstill Period” shall mean, (a) with respect to Revolving
Priority Collateral, the five (5) Business Day period commenced upon receipt of
the Term B Agent’s written notice to Working Capital Agent of its intention to
direct the Working Capital Agent to take enforcement action against Revolving
Priority Collateral and stating that it is a “remedy standstill notice” and
(b) with respect to Term B Priority Collateral, the five (5) Business Day period
commenced upon receipt of the Working Capital Agent’s written notice to Term B
Agent of its intention to take enforcement action against Term B Priority
Collateral and stating that it is a “remedy standstill notice”.
     “Rent Reserve” means an amount equal to $0.
     “Required Lenders” means each of Required Working Capital Lenders and
Required Term B Lenders.
     “Required Term B Lenders” means Term B Lenders having or holding at least
51% of the aggregate outstanding Term B Loan.
     “Requirement of Law” means, as to any Person, any law (statutory or
common), ordinance, treaty, rule, regulation, order, policy, other legal
requirement or determination

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of an arbitrator or of a Governmental Authority, in each case applicable to or
binding upon such Person or any of its Property or to which such Person or any
of its Property is subject.
     “Required Working Capital Lenders” means at any time, Working Capital Agent
plus (a) (i) at least two Revolving Lenders then holding in the aggregate more
than fifty percent (50%) of the sum of the Aggregate Revolving Commitment then
in effect plus (ii) at least two FILO Lenders holding in the aggregate more than
fifty percent (50%) of the sum of the Aggregate FILO Commitment then in effect,
or (b) (i) if the Aggregate Revolving Commitments have terminated, at least two
Revolving Lenders then holding in the aggregate more than fifty percent (50%) of
the sum of the aggregate unpaid principal amount of Revolving Loans (other than
Swing Loans) then outstanding, outstanding Letter of Credit Obligations, amounts
of participations in Swing Loans and the principal amount of unparticipated
portions of Swing Loans plus (ii) at least two FILO Lenders holding in the
aggregate more than fifty percent (50%) of the sum of the aggregate unpaid
principal amount of the FILO Loans.
     “Replacement Lender” has the meaning specified in Section 9.22.
     “Reserves” means (i) the Availability Reserves, (ii) Mandatory Reserves,
and (iii) such additional reserves as the Working Capital Agent may, in its
Permitted Discretion, determine to implement.
     “Responsible Officer” means the chief executive officer or the president of
a Borrower or Borrower Representative, as applicable, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants or delivery of financial information, the
chief financial officer or the treasurer of a Borrower or Borrower
Representative, as applicable, or any other officer having substantially the
same authority and responsibility.
     “Revolving Applicable Margin” means, with respect to the Revolving Loans
and Swing Loans, (a) if a Base Rate Loan, one and one quarter of one percent
(1.25%) per annum and (b) if a LIBOR Rate Loan, four percent (4.00%) per annum.
Notwithstanding anything herein to the contrary, Swing Loans may not be LIBOR
Rate Loans.
     “Restricted Payments” has the meaning specified in Section 5.11.
     “Revolving Commitment” has the meaning specified in Section 1.1(b)(i).
     “Revolving Commitment Percentage” means, as to any Revolving Lender, the
percentage equivalent of such Revolving Lender’s Revolving Commitment, divided
by the Aggregate Revolving Commitment. provided, further, that following
acceleration of the Revolving Loans or termination of the Revolving Commitments,
such term means, as to any Revolving Lender, the percentage equivalent of the
principal amount of the Revolving Loans held by such Revolving Lender, divided
by the aggregate principal amount of the Revolving Loans held by all Revolving
Lenders.

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     “Revolving Exposure” means, with respect to any Revolving Lender at any
time, the sum of (a) the aggregate outstanding principal amount of such
Revolving Lender’s Revolving Loans plus (b) the aggregate outstanding Letter of
Credit Obligations (other than with respect to the Cash Management Letter of
Credit) of such Revolving Lender plus (c) an amount equal to its Revolving
Commitment Percentage of the aggregate principal amount of Overadvances and
Swing Loans outstanding at such time.
     “Revolving Lenders” means each of the financial institutions from time to
time party to this Agreement holding a Revolving Loan and individually each a
“Revolving Lender”.
     “Revolving Loan” has the meaning specified in Section 1.1(b)(i).
     “Revolving Note” means a promissory note of the Borrowers payable to the
order of a Revolving Lender in substantially the form of Exhibit 11.1(e) hereto,
evidencing Indebtedness of the Borrowers under the Revolving Commitment of such
Revolving Lender.
     “Revolving Priority Collateral” means all Collateral that is not Term B
Priority Collateral.
     “Sale” has the meaning specified in Section 9.9(b).
     “Sale Process Default” means the occurrence of any of the following events:
(a) a failure by the Credit Parties to make any payment as and when due
hereunder, (b) any Event of Default under Sections 7.1(m)(i) through (v), or
(iii) a failure by the Credit Parties to comply with any of the covenants set
forth in Section 5.21.
     “SARA” has the meaning specified in Section 3.12.
     “Secured Party” means each Agent, each Lender, each other Indemnitee and
each other holder of any Obligation of a Credit Party including each Secured
Swap Provider.
     “Secured Rate Contract” means any Rate Contract between a Borrower and the
counterparty thereto, which (a) has been provided or arranged by GE Capital or
an Affiliate of GE Capital, or (b) Working Capital Agent has acknowledged in
writing constitutes a “Secured Rate Contract” hereunder after the applicable
Lender or Affiliate of a Lender and the applicable Credit Party or Subsidiary
have provided written notice to Working Capital Agent of (i) the existence of
such Rate Contract, (ii) the maximum dollar amount of obligations arising
thereunder, and (iii) the methodology to be used by such parties in determining
the Indebtedness owing from time to time with respect thereto.
     “Secured Swap Provider” means (i) a Lender or an Affiliate of a Lender (or
a Person who was a Lender or an Affiliate of a Lender at the time of execution
and delivery of a Rate Contract) who has entered into a Secured Rate Contract
with a Borrower, or (ii) a Person with whom Borrower has entered into a Secured
Rate Contract provided or arranged by GE Capital or an Affiliate of GE Capital,
and any assignee thereof.

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     “Settlement Date” has the meaning specified in Section 1.11(b).
     “Software” means (a) all computer programs, including source code and
object code versions, (b) all data, databases and compilations of data, whether
machine readable or otherwise, and (c) all documentation, training materials and
configurations related to any of the foregoing.
     “Solvent” means, with respect to any Person as of any date of
determination, that, as of such date, (a) the value of the assets of such Person
(both at fair value and present fair saleable value) is greater than the total
amount of liabilities (including contingent and unliquidated liabilities) of
such Person, (b) such Person is able to pay all liabilities of such Person as
such liabilities mature and (c) such Person does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
     “Special Flood Hazard Area” means an area that FEMA’s current flood maps
indicate has at least a one percent (1%) chance of a flood equal to or exceeding
the base flood elevation (a 100-year flood) in any given year.
     “SPV” means any special purpose funding vehicle identified as such in a
writing by any Lender to applicable Agent.
     “Stock” means all shares of capital stock (whether denominated as common
stock or preferred stock), equity interests, beneficial, partnership or
membership interests, joint venture interests, participations or other ownership
or profit interests in or equivalents (regardless of how designated) of or in a
Person (other than an individual), whether voting or non-voting.
     “Stock Equivalents” means all securities convertible into or exchangeable
for Stock or any other Stock Equivalent and all warrants, options or other
rights to purchase, subscribe for or otherwise acquire any Stock or any other
Stock Equivalent, whether or not presently convertible, exchangeable or
exercisable.
     “Store” means any retail store operated by the Credit Parties or any of
their Subsidiaries.
     “Store Lease” means each lease identified by its address under the
subheading “Store Leases” on Schedule 4.18 (as any such lease may be hereinafter
amended, modified, restated, extended, supplemented, renewed or consolidated in
accordance with the terms hereof), and all other leases which may now or
hereinafter be entered into by a Credit Party as lessee, as any such lease may
be hereinafter amended, modified, restated, extended, supplemented, renewed or
consolidated in accordance with the terms hereof.
     “Subordinated Indebtedness” means any Indebtedness of any Credit Party or
any Subsidiary of any Credit Party which is subordinated to the Obligations as
to right and

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time of payment and as to other rights and remedies thereunder and having such
other terms as are, in each case, reasonably satisfactory to Agents.
     “Subsidiary” of a Person means any corporation, association, limited
liability company, partnership, joint venture or other business entity of which
more than fifty percent (50%) of the voting Stock, is owned or controlled
directly or indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof.
     “Swingline Commitment” means $50,000,000.
     “Swingline Lender” means, each in its capacity as Swingline Lender
hereunder, GE Capital or, upon the resignation of GE Capital as Working Capital
Agent hereunder, any Lender (or Affiliate or Approved Fund of any Lender) that
agrees, with the approval of Working Capital Agent (or, if there is no such
successor Working Capital Agent, the Required Lenders) and the Borrowers, to act
as the Swingline Lender hereunder.
     “Swingline Note” means a promissory note of the Borrowers payable to the
order of the Swingline Lender, in substantially the form of Exhibit 11.1(f)
hereto, evidencing the Indebtedness of the Borrowers to the Swingline Lender
resulting from the Swing Loans made to the Borrowers by the Swingline Lender.
     “Swingline Request” has the meaning specified in clause (ii) of Section
1.1(d).
     “Swing Loan” has the meaning specified in clause (i) of Section 1.1(d).
     “Tax Affiliate” means, (a) each Borrower and its Subsidiaries and (b) any
Affiliate of a Borrower with which such Borrower files or is required to file
tax returns on a consolidated, combined, unitary or similar group basis.
     “Tax Returns” has the meaning specified in Section 3.10.
     “Taxes” has the meaning specified in Section 10.1(a).
     “Term B Advance Rate Reduction” has the meaning specified in the defined
term “Inventory Percentage”.
     “Term B Applicable Margin” means (a) if a Base Rate Loan, nine and three
quarters of one percent (9.75%) per annum and (b) if a LIBOR Rate Loan, twelve
and one half of one percent (12.5%).
     “Term B Borrowing Base” shall mean the sum of (I) $7.5 million (reduced
dollar for dollar by any prepayments or repayments from the Disposition of fixed
assets), (II) the product of (x) (A) the Inventory Percentage minus (B) 90%
multiplied by (y) 100% of Net Orderly Liquidation Value of Eligible Inventory
less the Excluded Inventory, and (III) 10% of the face amount of Eligible Credit
Card Accounts.
     “Term B Collection Account” means that certain account of Term B Agent,
ABA#: 121000248, Account#: 4124907445, Reference: Borders, in the name of Term B

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Agent at Wells Fargo Bank, Woodland Hills, CA, or such other account as may be
specified in writing by Term B Agent as the “Term B Collection Account.”
     “Term B Commitment” has the meaning specified in Section 1.1(a)(ii).
     “Term B Commitment Percentage” means for each Term B Lender, the percentage
equivalent of such Term B Lender’s Term B Commitment divided by the Aggregate
Term B Commitment; provided that after the Term Be Loans have been funded, the
Term Commitment Percentage shall be determined for the Term B Loans by reference
to the outstanding principal balance thereof as of any date of determination
rather than the Commitments therefor.
     “Term B Exposure” means, with respect to any Term B Lender at any time, the
aggregate outstanding principal amount of such Term B Lender’s Term B Loans.
     “Term B Facility” has the meaning assigned to it in the recitals to the
Agreement.
     “Term B Lenders” means each of the financial institutions from time to time
party to this Agreement holding a Term B Loan and individually each a “Term B
Lender.”
     “Term B Loans” has the meaning specified in Section 1.1(a)(ii)
     “Term B Note” means a promissory note of the Borrowers payable to the order
of a Term B Lender in substantially the form of Exhibit 11.1(g) hereto,
evidencing Indebtedness of the Borrowers under the Term B Commitment of such
Term B Lender.
     “Term B Priority Collateral” means (i) furniture, fixtures and equipment of
the Credit Parties, (ii) all stock in Kobo, Inc., a corporation incorporated
under the laws of the province of Ontario, Canada, owned by the Credit Parties,
(iii) all Intellectual Property of the Credit Parties, (iv) all proceeds of
leases of Real Estate, (v) standby letters of credit or Letter-of-Credit Rights
associated with such standby letters of credit, in each case relating to Term B
Priority Collateral, (vi) Documents relating to the foregoing, (vii) subject to
the entry of the Final Order, the proceeds of any avoidance actions brought
pursuant to Section 549 of the Bankruptcy Code to recover any postpetition
transfer of Term B Priority Collateral, (viii) any accessions thereto and
proceeds, substitutions and replacements of the foregoing clauses (i) through
(viii). Term B Priority Collateral shall also include: (x) any accounts, or
other property received in consideration of, or exchange for, any of the Term B
Priority Collateral, and (y) any insurance policies or proceeds in respect of
the Term B Priority Collateral.
     “Term B Reserve” means, if at any time the Aggregate Term B Exposure
exceeds the Term Borrowing Base, an amount equal to the positive difference
between the Aggregate Term B Exposure and the Term Borrowing Base at such time.
     “Termination Date” means the earliest of (a) the first anniversary of the
Closing Date, (b) the date of termination of Revolving Lenders’ obligations to
make Advances and to incur Letter of Credit Obligations or Lenders’ obligations
to permit existing Loans to remain outstanding, (c) the date of indefeasible
prepayment in full by Borrowers of the

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Loans and the cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit Obligations, and
the permanent reduction of all Commitments to zero dollars ($0), (d) five
(5) days following the Petition Date if the Interim Order has not been entered
by the Bankruptcy Court by such date, (e) forty-five (45) days following the
Petition Date if the Final Order has not been entered by the Bankruptcy Court by
such date, (f) the date upon which the Interim Order expires, unless the Final
Order shall have been entered and become effective by such date, (g) the close
of business on the first Business Day after the entry of the Final Order, if by
that time Borrower any has not paid Agents the fees required to be paid to
Agents, unless Agents and the Lenders agree otherwise, (h) the date of entry of
an order of the Bankruptcy Court confirming a plan of reorganization in the
Chapter 11 Cases that has not been consented to by the Required Lenders and
fails to provide for the payment in full in cash of all Obligations under this
Agreement and the other Loan Documents on the effective date of such plan,
(i) the date of the closing of a sale of all or substantially all of the
Borrower’s assets pursuant to Section 363 of the Bankruptcy Code, a confirmed
plan of reorganization or a liquidation pursuant to Chapter 7 of the Bankruptcy
Code, and (j) if a plan of reorganization that has been consented to by the
Required Lenders or that provides for payment in full in cash of all Obligations
under this Agreement and the other Loan Documents has been confirmed by order of
the Bankruptcy Court, the earlier of the effective date of such plan of
reorganization or the thirtieth day after the date of entry of such confirmation
order.
     “Termination Notice” shall mean a notice from Working Capital Agent to Bank
of America, N.A. and Term B Agent asserting that an Event of Default has
occurred.
     “Title IV Plan” means a pension plan subject to Title IV of ERISA, other
than a Multiemployer Plan, to which any ERISA Affiliate incurs or otherwise has
any obligation or liability, contingent or otherwise.
     “Trade Secrets” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to trade
secrets.
     “Trademark” means all rights, title and interests (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers and, in each case, all goodwill associated therewith,
all registrations and recordations thereof and all applications in connection
therewith.
     “Trademark Security Agreement” means the Trademark Security Agreement,
dated as of even date herewith, made in favor of Working Capital Agent, for the
benefit of the Secured Parties, by each applicable Credit Party, in form and
substance satisfactory to Agents as the same may be amended from time to time.
     “Transaction Expenses” means all costs and expenses incurred by the Credit
Parties prior to the Closing Date with respect to the transactions under the
Loan Documents.

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     “UCC” shall be as defined in the Guaranty and Security Agreement.
     “United States” and “U.S.” each means the United States of America.
     “Unused Commitment Fee” has the meaning specified in Section 1.9(b).
     “Unused Commitment Fee Rate” means one half of one percent (.50%).
     “U.S. Lender Party” means each of Working Capital Agent, each Lender (or
any transferee or assignee thereof), each L/C Issuer, each SPV and each
participant, in each case that is a United States person as defined in
Section 7701(a)(30) of the Code.
     “Use Rights” means, the right of the Working Capital Agent (i) during
normal business hours on any Business Day, to access Revolving Priority
Collateral that (x) is stored or located in or on, (y) has become an accession
with respect to (within the meaning of Section 9-335 of the Uniform Commercial
Code), or (z) has been commingled with (within the meaning of Section 9-336 of
the Uniform Commercial Code), Term B Priority Collateral, and (ii) during the
Use Period and after reasonable prior notice, shall have the right to use the
Term B Priority Collateral (including, without limitation, Equipment, Fixtures,
Intellectual Property and Real Property), each of the foregoing in order to
assemble, inspect, copy or download information stored on, take actions to
perfect its Lien on, complete a production run of Inventory involving, take
possession of, move, prepare and advertise for sale, sell (by public auction,
private sale or a “store closing”, “going out of business” or similar sale,
whether in bulk, in lots or to customers in the ordinary course of business or
otherwise and which sale may include augmented Inventory of the same type sold
in Borrowers’ business), store or otherwise deal with the Revolving Priority
Collateral, in each case without the involvement of or interference by any Term
B Agent or Term B Lenders or liability to any such Person.
     “Use Period” means the period of 120 days commencing on the date that the
Working Capital Agent commences the liquidation and sale of the Revolving
Priority Collateral, following prior written notice to the Term B Agent of such
exercise of remedies. If any stay or order, including with respect to the
Remedies Notice Period, that prohibits any of the Working Capital Agent or the
other Working Capital Lenders from commencing and continuing the exercise of any
right or remedies or liquidating and selling the Revolving Priority Collateral
has been entered by a court of competent jurisdiction, such 120-day period shall
be tolled during the pendency of any such stay or other order and the Use Period
shall be so extended.
     “Wholly-Owned Subsidiary” means any Subsidiary in which (other than
directors’ qualifying shares required by law) one hundred percent (100%) of the
Stock and Stock Equivalents, at the time as of which any determination is being
made, is owned, beneficially and of record, by any Credit Party, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
     “Working Capital Agent” means GE Capital in its capacity as administrative
and collateral agent for the Secured Parties hereunder, and any successor
administrative and collateral agent.

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     “Working Capital Collection Account” means that certain account of Working
Capital Agent, ABA# 021001033, Account #50285681, Reference: CFK 1550 Borders
Group, Inc. in the name of Working Capital Agent at Deutsche Bank Trust Company
Americas, New York, or such other account as may be specified in writing by
Working Capital Agent as the “Working Capital Collection Account.”
     “Working Capital Facility” has the meaning assigned to it in the recitals
to the Agreement.
     11.2 Other Interpretive Provisions.
          (a) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement or in any other Loan Document shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto. The meanings of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. Terms
(including uncapitalized terms) not otherwise defined herein and that are
defined in the UCC shall have the meanings therein described.
          (b) The Agreement. The words “hereof”, “herein”, “hereunder” and words
of similar import when used in this Agreement or any other Loan Document shall
refer to this Agreement or such other Loan Document as a whole and not to any
particular provision of this Agreement or such other Loan Document; and Section,
subsection, clause, schedule and exhibit references are to this Agreement or
such other Loan Documents unless otherwise specified.
          (c) Certain Common Terms. The term “documents” includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced. The term “including” is not limiting and means
“including without limitation.”
          (d) Performance; Time. Whenever any performance obligation hereunder
or under any other Loan Document (other than a payment obligation) shall be
stated to be due or required to be satisfied on a day other than a Business Day,
such performance shall be made or satisfied on the next succeeding Business Day.
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.”
If any provision of this Agreement or any other Loan Document refers to any
action taken or to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be interpreted to encompass any and all means,
direct or indirect, of taking, or not taking, such action.
          (e) Contracts. Unless otherwise expressly provided herein or in any
other Loan Document, references to agreements and other contractual instruments,
including this Agreement and the other Loan Documents, shall be deemed to
include all subsequent amendments, thereto, restatements and

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substitutions thereof and other modifications and supplements thereto which are
in effect from time to time, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document.
          (f) Laws. References to any statute or regulation are to be construed
as including all statutory and regulatory provisions related thereto or
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
          (g) Times of Day. Unless otherwise specified, all references herein to
times of day shall be references to Eastern time (daylight or standard, as
applicable).
     11.3 Accounting Terms and Principles. All accounting determinations
required to be made pursuant hereto shall, unless expressly otherwise provided
herein, be made in accordance with GAAP. No change in the accounting principles
used in the preparation of any financial statement hereafter adopted by the
Credit Parties shall be given effect for purposes of measuring compliance with
any provision of Article V or VI unless the Borrowers, Agents and the Required
Lenders agree to modify such provisions to reflect such changes in GAAP and,
unless such provisions are modified, all financial statements and similar
documents provided hereunder shall be provided together with a reconciliation
between the calculations and amounts set forth therein before and after giving
effect to such change in GAAP. Notwithstanding any other provision contained
herein, all terms of an accounting or financial nature used herein shall be
construed, and all computations of amounts and ratios referred to in Article V
and Article VI shall be made, without giving effect to any election under
Statement of Financial Accounting Standards 159 (or any other Financial
Accounting Standard having a similar result or effect) to value any Indebtedness
or other liabilities of any Credit Party or any Subsidiary of any Credit Party
at “fair value.”
     11.4 Payments. Working Capital Agent may set up standards and procedures to
determine or redetermine the equivalent in Dollars of any amount expressed in
any currency other than Dollars and otherwise may, but shall not be obligated
to, rely on any determination made by any Credit Party or any L/C Issuer. Any
such determination or redetermination by Working Capital Agent shall be
conclusive and binding for all purposes, absent manifest error. No determination
or redetermination by any Secured Party or any Credit Party and no other
currency conversion shall change or release any obligation of any Credit Party
or of any Secured Party (other than Working Capital Agent and its Related
Persons) under any Loan Document, each of which agrees to pay separately for any
shortfall remaining after any conversion and payment of the amount as converted.
Working Capital Agent may round up or down, and may set up appropriate
mechanisms to round up or down, any amount hereunder to nearest higher or lower
amounts and may determine reasonable de minimis payment thresholds.
[Signature Pages Follow.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
BORROWERS:
BORDERS GROUP, INC.
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President and Chief
Financial Officer
FEIN: 38-3294588
Name: Scott Henry
Title: Executive Vice President and Chief
Financial Officer
BORDERS, INC
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President and Chief
Financial Officer and Treasurer
FEIN: 38-2104285
BORROWER REPRESENTATIVE:
BORDERS, INC
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President and Chief
Financial Officer
FEIN: 38-2104285
Address for notices:
100 Phoenix Drive
Ann Arbor, MI 48108
Attn: Scott Henry
Facsimile:                                                             
Address for wire transfers:
100 Phoenix Drive
Ann Arbor, MI 48108
Attn: Scott Henry
Facsimile:                                                             
Borders DIP Credit Agreement

 

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
BORDERS PROPERTIES, INC.
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President, Chief Financial
Officer and Treasurer
FEIN: 38-3237978
Address for notices:
100 Phoenix Drive
Ann Arbor, MI 48108
Attn: Scott Henry
Facsimile:                                                             
BORDERS INTERNATIONAL SERVICES, INC.
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President, Chief Financial
Officer and Treasurer
FEIN: 20-2025075
Address for notices:
100 Phoenix Drive
Ann Arbor, MI 48108
Attn: Scott Henry
Facsimile:                                                             

Borders DIP Credit Agreement

 

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BORDERS DIRECT, LLC
By: /s/ Scott Henry
Name: Scott Henry
Title: Executive Vice President, Chief
Financial Officer and Treasurer
FEIN: 20-899-0084
Address for notices:
100 Phoenix Drive
Ann Arbor, MI 48108
Attn: Scott Henry
Facsimile:                                                             
Borders DIP Credit Agreement

 

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
GENERAL ELECTRIC CAPITAL
CORPORATION, as Working Capital Agent,
Swingline Lender, Revolving Lender
and FILO Lender
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title: Duly Authorized Signatory
Address for Notices:
General Electric Capital Corporation
500 West Monroe Street
10th Floor
Chicago, IL 60661-3679 USA
Attn: Kristina M. Miller
Senior Vice President and Team Lead
Facsimile: 312 441 6817
With a copy to:
General Electric Capital Corporation
201 Merritt 7
PO Box 5201
Norwalk, CT 06851
Attn: Borders/John Pistocchi
Facsimile: 203 956 4002
Address for payments:
ABA# 021001033
Account# 50285681
Deutsche Bank Trust Company Americas
New York, NY
Account Name: GECC/CAF
Reference: Borders Group, Inc.
Borders DIP Credit Agreement

 

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GA CAPITAL, LLC, as Term B Agent
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title: Authorized Signatory
Borders DIP Credit Agreement

 

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                  SPECIAL VALUE CONTINUATION
PARTNERS, LP, as a Term B Lender    
 
           
 
  By:   Tennenbaum Capital Partners, LLC    
 
  Its:   Investment Manager    
 
           
 
  By:   /s/ Authorized Signatory    
 
     
 
Name: Authorized Signatory    
 
      Title: Authorized Signatory :    
 
                TENNENBAUM OPPORTUNITIES
PARTNERS V, LP, as a Term B Lender    
 
           
 
  By:   Tennenbaum Capital Partners, LLC    
 
  Its:   Investment Manager    
 
           
 
  By:   /s/ Authorized Signatory
 
Name: Authorized Signatory    
 
      Title: Authorized Signatory    

Borders DIP Credit Agreement

 

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                  1903 ONSHORE FUNDING, LLP, as a Term
B Lender    
 
           
 
  By:   GB Merchant Partners, LLC    
 
  Its:   Investment Manager    
 
           
 
  By:
Name:   /s/ Authorized Signatory
 
Authorized Signatory    
 
  Title:   Authorized Signatory    
 
                1903 OFFSHORE LOANS SPV LIMITED,
as a Term B Lender    
 
           
 
  By:   GB Merchant Partners, LLC    
 
  Its:   Investment Manager    
 
           
 
  By:
Name:   /s/ Authorized Signatory
 
Authorized Signatory    
 
  Title:   Authorized Signatory    

Borders DIP Credit Agreement

 

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

 

                  STONE TOWER CREDIT FUNDING I
LTD., as a Term B Lender    
 
           
 
  By:   Stone Tower Fund Management LLC    
 
  Its:   Collateral Manager    
 
           
 
  By:
Name:   /s/ Authorized Signatory
 
Authorized Signatory    
 
  Title:   Authorized Signatory    

Borders DIP Credit Agreement

 

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

 

                  CIT CAPITAL SECURITIES, LLC,
as Syndication Agent and as a Lender    
 
           
 
  By:
Name:   /s/ Authorized Signatory
 
Authorized Signatory    
 
  Title:   Authorized Signatory    
 
                Address for notices:    
 
                     
 
                     
 
                          Attn:    
 
 
 
    Facsimile:    
 
 
 
   
 
                Lending office:    
 
                     
 
                     
 
                     

Borders DIP Credit Agreement

 

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                  CRYSTAL FINANCIAL LLC,
as a Lender    
 
           
 
  By:
Name:   /s/ Authorized Signatory
 
Authorized Signatory    
 
  Title:   Authorized Signatory    
 
                Address for notices:    
 
                     
 
                     
 
                          Attn:    
 
 
 
        Facsimile:    
 
 
 
   
 
                Lending office: