Exhibit 10.1

 

 

 

CREDIT AGREEMENT

Dated as of October 11, 2012

among

SEARS AUTHORIZED HOMETOWN STORES, LLC,

as the Lead Borrower

For

The Borrowers Named Herein

SEARS HOMETOWN AND OUTLET STORES, INC.,

as the Parent

BANK OF AMERICA, N.A.

as Administrative Agent and Collateral Agent

and

The Other Lenders Party Hereto

CIT FINANCE LLC,

as Syndication Agent

BARCLAYS BANK PLC,

as Documentation Agent

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and CIT

FINANCE LLC,

as Joint Lead Arrangers and Joint Bookrunners

 

 

 

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TABLE OF CONTENTS

 

     Page  

Section

  

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1

  

1.01     Defined Terms

     1   

1.02     Other Interpretive Provisions

     46   

1.03     Accounting Terms

     47   

1.04     Rounding

     47   

1.05     Times of Day

     47   

1.06     Letter of Credit Amounts

     47   

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

     48   

2.01     Committed Loans; Reserves

     48   

2.02     Borrowings, Conversions and Continuations of Committed Loans

     48   

2.03     Letters of Credit

     50   

2.04     Swing Line Loans

     58   

2.05     Prepayments

     60   

2.06     Termination or Reduction of Commitments

     61   

2.07     Repayment of Obligations

     62   

2.08     Interest

     62   

2.09     Fees

     62   

2.10     Computation of Interest and Fees

     63   

2.11     Evidence of Debt

     63   

2.12     Payments Generally; Agent’s Clawback

     64   

2.13     Sharing of Payments by Lenders

     65   

2.14     Settlement Amongst Lenders

     66   

2.15     Increase in Commitments

     66   

2.16     Defaulting Lenders

     67   

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

     70   

3.01     Taxes

     70   

3.02     Illegality

     74   

3.03     Inability to Determine Rates

     74   

3.04     Increased Costs; Reserves on LIBOR Rate Loans

     74   

3.05     Compensation for Losses

     76   

3.06     Mitigation Obligations; Replacement of Lenders

     76   

3.07     Survival

     77   

3.08     Designation of Lead Borrower as Borrowers’ Agent

     77   

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     77   

4.01     Conditions of Initial Credit Extension

     77   

4.02     Conditions to all Credit Extensions

     80   

ARTICLE V REPRESENTATIONS AND WARRANTIES

     81   

5.01     Existence, Qualification and Power

     81   

5.02     Authorization; No Contravention

     82   

5.03     Governmental Authorization; Other Consents

     82   

5.04     Binding Effect

     82   

5.05     Financial Statements; No Material Adverse Effect

     82   

 

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5.06     Litigation

     83   

5.07     Reserved

     83   

5.08     Ownership of Property; Liens

     83   

5.09     Environmental Compliance

     83   

5.10     Insurance

     84   

5.11     Taxes

     84   

5.12     ERISA Compliance

     84   

5.13     Subsidiaries; Equity Interests

     85   

5.14     Margin Regulations; Investment Company Act

     85   

5.15     Disclosure

     86   

5.16     Compliance with Laws

     86   

5.17     Intellectual Property; Licenses, Etc.

     86   

5.18     Labor Matters

     86   

5.19     Security Documents

     87   

5.20     Solvency

     87   

5.21     Deposit Accounts; Credit Card Arrangements

     87   

5.22     Brokers

     87   

5.23     Customer and Trade Relations

     87   

5.24     Material Contracts

     87   

5.25     Casualty

     88   

5.26     Separation

     88   

ARTICLE VI AFFIRMATIVE COVENANTS

     88   

6.01     Financial Statements

     88   

6.02     Certificates; Other Information

     89   

6.03     Notices

     91   

6.04     Payment of Taxes

     92   

6.05     Preservation of Existence, Etc.

     92   

6.06     Maintenance of Properties

     92   

6.07     Maintenance of Insurance

     93   

6.08     Compliance with Laws

     94   

6.09     Books and Records; Accountants

     94   

6.10     Inspection Rights

     94   

6.11     Additional Loan Parties

     95   

6.12     Cash Management

     95   

6.13     Information Regarding the Collateral

     97   

6.14     Physical Inventories

     97   

6.15     Reserved

     97   

6.16     Further Assurances

     97   

6.17     Compliance with Terms of Leaseholds

     98   

6.18     Material Contracts

     98   

ARTICLE VII NEGATIVE COVENANTS

     98   

7.01     Liens

     98   

7.02     Investments

     98   

7.03     Indebtedness; Equity Issuances

     98   

7.04     Fundamental Changes

     99   

7.05     Dispositions

     99   

7.06     Restricted Payments

     99   

7.07     Prepayments of Indebtedness

     100   

 

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7.08     Change in Nature of Business

     100   

7.09     Transactions with Affiliates

     100   

7.10     Burdensome Agreements

     100   

7.11     Use of Proceeds

     101   

7.12     Amendment of Organization Documents and Material Indebtedness

     101   

7.13     Fiscal Year

     101   

7.14     Financial Covenants

     101   

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

     102   

8.01     Events of Default

     102   

8.02     Remedies Upon Event of Default

     104   

8.03     Application of Funds

     104   

ARTICLE IX THE AGENT

     106   

9.01     Appointment and Authority

     106   

9.02     Rights as a Lender

     106   

9.03     Exculpatory Provisions

     106   

9.04     Reliance by Agent

     107   

9.05     Delegation of Duties

     107   

9.06     Resignation of Agent

     108   

9.07     Non-Reliance on Agent and Other Lenders

     108   

9.08     No Other Duties, Etc.

     108   

9.09     Agent May File Proofs of Claim

     108   

9.10     Collateral and Guaranty Matters

     109   

9.11     Notice of Transfer

     110   

9.12     Reports and Financial Statements.

     110   

9.13     Agency for Perfection

     111   

9.14     Indemnification of Agent

     111   

9.15     Relation among Lenders

     111   

ARTICLE X MISCELLANEOUS

     111   

10.01   Amendments, Etc.

     111   

10.02   Notices; Effectiveness; Electronic Communications

     114   

10.03   No Waiver; Cumulative Remedies

     115   

10.04   Expenses; Indemnity; Damage Waiver

     116   

10.05   Payments Set Aside

     117   

10.06   Successors and Assigns

     117   

10.07   Treatment of Certain Information; Confidentiality

     121   

10.08   Right of Setoff

     122   

10.09   Interest Rate Limitation

     122   

10.10   Counterparts; Integration; Effectiveness

     123   

10.11   Survival

     123   

10.12   Severability

     123   

10.13   Replacement of Lenders

     123   

10.14   Governing Law; Jurisdiction; Etc.

     124   

10.15   Waiver of Jury Trial

     125   

10.16   No Advisory or Fiduciary Responsibility

     125   

10.17   USA PATRIOT Act Notice

     126   

10.18   Foreign Asset Control Regulations

     126   

10.19   Time of the Essence

     126   

10.20   Press Releases

     126   

 

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10.21   Releases

     127   

10.22   No Strict Construction

     128   

10.23   Attachments

     128   

10.24   Electronic Execution of Assignments and Certain Other Documents

     128   

SIGNATURES

     S-1   

 

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SCHEDULES

 

  1.01 Borrowers

 

  2.01 Commitments and Applicable Percentages

 

  5.18 Collective Bargaining Agreements

 

  6.02 Financial and Collateral Reporting

 

  6.12 Blocked Account Banks

 

  10.02 Agent’s Office; Certain Addresses for Notices

EXHIBITS

Form of

 

  A Committed Loan Notice

 

  B Swing Line Loan Notice

 

  C Revolving Note

 

  D Compliance Certificate

 

  E Assignment and Assumption

 

  F Borrowing Base Certificate

 

  G-1 U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not
Partnerships For U.S. Federal Income Tax Purposes)

 

  G-2 U.S. Tax Compliance Certificate (For Foreign Participants That Are Not
Partnerships For U.S. Federal Income Tax Purposes)

 

  G-3 U.S. Tax Compliance Certificate (For Foreign Participants That Are
Partnerships For U.S. Federal Income Tax Purposes)

 

  G-4 U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships
For U.S. Federal Income Tax Purposes)

 

  H Credit Card Notification

 

 

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CREDIT AGREEMENT

This CREDIT AGREEMENT (“Agreement”) is entered into as of October 11, 2012,
among

SEARS AUTHORIZED HOMETOWN STORES, LLC, a Delaware limited liability company (the
“Lead Borrower”),

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

SEARS HOMETOWN AND OUTLET STORES, INC., a Delaware corporation (the “Parent”);

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

BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent;

CIT FINANCE LLC, as Syndication Agent; and

BARCLAYS BANK PLC, as Documentation Agent.

W I T N E S S E T H:

Pursuant to the Rights Offering (as defined below), the Parent and its
Subsidiaries will, immediately following the effectiveness of this Agreement,
consummate the Separation (as defined below) from Sears Holdings Corporation, a
Delaware corporation (“SHC”) pursuant to which the Parent will no longer be a
Subsidiary of SHC.

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

The proceeds of the Loans made on the Closing Date will be used to pay the
Closing Date Dividend. The proceeds of Loans made and the Letters of Credit
issued after the Closing Date will be used for working capital and other general
corporate purposes of the Loan Parties, including the financing of Permitted
Acquisitions.

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

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

“ABL Collateral” means all “Collateral” as defined in the Guaranty and Security
Agreement as in effect on the Closing Date.

 

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“Accelerated Borrowing Base Delivery Event” means either (i) the occurrence and
continuance of any Event of Default, or (ii) the failure of the Borrowers to
maintain Availability at least equal to the greater of (x) $30,000,000 or
(y) fifteen percent (15%) of the Loan Cap. For purposes of this Agreement, the
occurrence of an Accelerated Borrowing Base Delivery Event shall be deemed
continuing (i) so long as such Event of Default has not been waived, and/or
(ii) if the Accelerated Borrowing Base Delivery Event arises as a result of the
Borrowers’ failure to achieve Availability as required hereunder, until
Availability has exceeded the greater of (x) $30,000,000 or (y) fifteen percent
(15%) of the Loan Cap for thirty (30) consecutive calendar days, in which case
an Accelerated Borrowing Base Delivery Event shall no longer be deemed to be
continuing for purposes of this Agreement. The termination of an Accelerated
Borrowing Base Delivery Event as provided herein shall in no way limit, waive or
delay the occurrence of a subsequent Accelerated Borrowing Base Delivery Event
in the event that the conditions set forth in this definition again arise.

“ACH” means automated clearing house transfers.

“Account” means “accounts” as defined in the UCC, and also means a right to
payment of a monetary obligation, whether or not earned by performance, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, or
(c) arising out of the use of a credit or charge card or information contained
on or for use with the card.

“Acquisition” means, with respect to any Person (a) a purchase of a Controlling
interest in the Equity Interests of any other Person, (b) a purchase or other
acquisition of all or substantially all of the assets or properties of, another
Person or of any business unit of another Person, or (c) any merger or
consolidation of such Person with any other Person or other transaction or
series of transactions resulting in the acquisition of all or substantially all
of the assets, or a Controlling interest in the Equity Interests, of any Person,
in each case in any transaction or group of transactions which are part of a
common plan, but in each case excluding any transaction resulting in the
acquisition solely of Store locations or other interests in real property or of
Equity Interests of Persons substantially all of whose assets constitutes Store
locations or other interest in real property.

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

“Additional Commitment Lender” shall have the meaning provided in
Section 2.15(c).

“Adjusted LIBOR Rate” means, with respect to any LIBOR Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of one percent (1%)) equal to the LIBOR Rate for such Interest
Period multiplied by the Statutory Reserve Rate. The Adjusted LIBOR Rate will be
adjusted automatically as to all LIBOR Borrowings then outstanding as of the
effective date of any change in the Statutory Reserve Rate.

“Adjustment Date” means the first day of each Fiscal Quarter, commencing
February 3, 2013.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Agent.

“Affiliate” means, with respect to any Person, (i) another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by
or is under common Control with the Person specified, (ii) any director,
officer, managing member, partner, trustee, or beneficiary of that Person, and
(iii) for purposes of Section 7.09, (a) any other Person directly or indirectly
holding 10% or more of any class of the Equity Interests of that Person, and
(b) any other Person 10% or more of any class of whose Equity Interests is held
directly or indirectly by that Person.

 

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

“Agent Parties” shall have the meaning specified in Section 10.02(c).

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

“Aggregate Commitments” means the sum of the Commitments of all the Lenders. As
of the Closing Date, the Aggregate Commitments are $250,000,000.

“Agreement” means this Credit Agreement.

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

“Applicable Margin” means:

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

(b) From and after the first Adjustment Date and on each Adjustment Date
thereafter, the Applicable Margin shall be determined from the following pricing
grid based upon the Average Daily Availability as of the Fiscal Quarter ended
immediately preceding such Adjustment Date; provided that, if any Borrowing Base
Certificate is at any time restated or otherwise revised (including as a result
of an audit) or if the information set forth in any Borrowing Base Certificate
otherwise proves to be false or incorrect such that the Applicable Margin would
have been higher than was otherwise in effect during any period, without
constituting a waiver of any Default or Event of Default arising as a result
thereof, interest due under this Agreement shall be immediately recalculated at
such higher rate for any applicable periods and shall be due and payable on
demand.

 

Level

  

Average Daily

Availability

   LIBOR
Margin     Base Rate
Margin   I    Equal to or greater than 66.67% of the Loan Cap      2.00 %     
1.00 %  II    Greater than 33.33% of the Loan Cap but less than 66.67% of the
Loan Cap      2.25 %      1.25 %  III    Less than or equal to 33.33% of the
Loan Cap      2.50 %      1.50 % 

 

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“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time, subject to adjustment
provided in Section 2.16. If the commitment of each Lender to make Loans and the
obligation of the L/C Issuer to make L/C Credit Extensions have been terminated
pursuant to Section 2.06 or Section 8.02 or if the Aggregate Commitments have
expired, then the Applicable Percentage of each Lender shall be determined based
on the Applicable Percentage of such Lender most recently in effect, giving
effect to any subsequent assignments. The initial Applicable Percentage of each
Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the
Assignment and Assumption pursuant to which such Lender becomes a party hereto,
as applicable.

“Applicable Rate” means, at any time of calculation, (a) with respect to
Commercial Letters of Credit, a per annum rate equal to fifty percent (50%) of
the Applicable Margin for Loans which are LIBOR Rate Loans, and (b) with respect
to Standby Letters of Credit, a per annum rate equal to the Applicable Margin
for Loans which are LIBOR Rate Loans.

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

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender (c) an entity or an Affiliate of an entity that
administers or manages a Lender, or (d) the same investment advisor or an
advisor under common control with such Lender, Affiliate or advisor, as
applicable.

“Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its
capacity as joint lead arranger and joint bookrunner.

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

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

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

“Audited Financial Statements” means the audited consolidated balance sheet of
the Parent and its Subsidiaries for the Fiscal Year ended January 28, 2012, and
the related consolidated statements of income or operations, Shareholders’
Equity and cash flows for such Fiscal Year of the Parent and its Subsidiaries,
including the notes thereto.

“Auto-Extension Letter of Credit” shall have the meaning specified in
Section 2.03(b)(iii).

 

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

(a) The Loan Cap

Minus

(b) The Total Outstandings.

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination
of the commitment of each Lender to make Loans and of the obligation of the L/C
Issuer to make L/C Credit Extensions pursuant to Section 8.02.

“Availability Reserves” means, without duplication of any other Reserves or
items that are otherwise addressed or excluded through eligibility criteria or
the definition of “Borrowing Base” or “Appraised Value”, such reserves as the
Agent from time to time determines in its Permitted Discretion as being
appropriate (a) to reflect the impediments to the Agent’s ability to realize
upon the ABL Collateral, (b) to reflect claims and liabilities that the Agent
determines will need to be satisfied in connection with the realization upon the
ABL Collateral, (c) to reflect criteria, events, conditions, contingencies or
risks which adversely affect any component of the Borrowing Base, or (d) to
reflect that a Default or an Event of Default then exists. Without limiting the
generality of the foregoing, Availability Reserves may include, in the Agent’s
Permitted Discretion, (but are not limited to) reserves based on: (i) rent;
(ii) customs duties, and other costs to release Inventory which is being
imported into the United States; (iii) outstanding Taxes and other governmental
charges, including, without limitation, ad valorem, real estate, personal
property, sales, claims of the PBGC and other Taxes which may have priority over
the interests of the Agent in the ABL Collateral; (iv) salaries, wages and
benefits due to employees of any Loan Parties, (v) Customer Credit Liabilities,
(vi) customer deposits, (viii) reserves for reasonably anticipated changes in
the Appraised Value of Eligible Inventory between appraisals,
(viii) warehousemen’s or bailee’s charges and other Permitted Encumbrances which
may have priority over the interests of the Agent in the ABL Collateral,
(ix) amounts due to SHC and its Subsidiaries under the Separation Agreements,
(x) commissions and other amounts due to Third Party Dealers and Third Party
Franchisees, (xi) Cash Management Reserves, and (xii) Bank Products Reserves.

“Average Daily Availability” shall mean the average daily Availability for the
immediately preceding Fiscal Quarter.

“Bank of America” means Bank of America, N.A. and its successors.

“Bank Products” means any services or facilities provided to any Loan Party by
the Agent, any Lender, or any of their respective Affiliates, including, without
limitation, on account of (a) Swap Contracts, (b) purchase cards, (c) leasing,
(d) factoring, (e) supply chain finance services (including, without limitation,
trade payable services and supplier accounts receivable purchases) and (f) other
extensions of credit (agreed by the Agent and the Lead Borrower as being a “Bank
Product” for purposes of this Agreement) to or for the benefit of any Loan Party
or to any other Person to the extent such other Person’s obligations thereunder
are guaranteed by any Loan Party, but excluding Cash Management Services.

 

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“Bank Product Reserves” means such reserves as the Agent from time to time
determine in its Permitted Discretion as being appropriate to reflect the
liabilities and obligations of the Loan Parties with respect to Bank Products
then provided or outstanding.

“Banker’s Acceptance” means a time draft or bill of exchange or other deferred
payment obligation relating to a Commercial Letter of Credit which has been
accepted by the L/C Issuer.

“Base Rate” means for any day a fluctuating rate per annum equal to the highest
of (a) the rate of interest in effect for such day as publicly announced from
time to time by the Agent as its “prime rate”; (b) the Federal Funds Rate for
such day, plus 0.50%; and (c) the LIBOR Rate for a one month interest period as
determined on such day, plus 1.0%. The “prime rate” is a rate set by the Agent
based upon various factors including the Agent’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in the Agent’s prime rate, the Federal Funds Rate or the LIBOR
Rate, respectively, shall take effect at the opening of business on the day
specified in the public announcement of such change.

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

“Blocked Account” means each DDA that is subject to a Blocked Account Agreement.

“Blocked Account Agreement” means with respect to an account established by a
Loan Party, an agreement, in form and substance reasonably satisfactory to the
Agent, establishing control (as defined in the UCC) of such account by the Agent
and whereby the bank maintaining such account agrees, upon the occurrence and
during the continuance of a Cash Dominion Event, to comply only with the
instructions originated by the Agent without the further consent of any Loan
Party.

“Blocked Account Bank” means each bank with whom deposit accounts are maintained
in which any funds of any of the Loan Parties from one or more DDAs are
concentrated and with whom a Blocked Account Agreement has been, or is required
to be, executed in accordance with the terms hereof.

“Borrower Materials” has the meaning specified in Section 6.02.

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

“Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the
context may require.

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

(a) the face amount of Eligible Credit Card Receivables multiplied by 90%;

plus

(b) the lesser of (i) the Cost of Eligible Inventory, net of Inventory Reserves,
multiplied by 85% multiplied by the Appraised Value of Eligible Inventory, or
(ii) the Cost of Eligible Inventory, net of Inventory Reserves, multiplied by
70%;

minus

(c) the then amount of all Availability Reserves.

 

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

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

“Capital Expenditures” means, with respect to any Person for any period, all
expenditures made (whether made in the form of cash or other property) or costs
incurred for the acquisition or improvement of fixed or capital assets of such
Person (excluding normal replacements and maintenance which are properly charged
to current operations), in each case that are (or should be) set forth as
capital expenditures in a Consolidated statement of cash flows of such Person
for such period, in each case prepared in accordance with GAAP.

“Capital Lease Obligations” means, with respect to any Person for any period,
the obligations of such Person to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) real or personal property, or
a combination thereof, which obligations are required to be classified and
accounted for as liabilities on a balance sheet of such Person under GAAP and
the amount of which obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

“Cash Collateral Account” means a non-interest bearing account established by
one or more of the Loan Parties with Bank of America, and in the name of, the
Agent (or as the Agent shall otherwise direct) and under the sole and exclusive
dominion and control of the Agent, in which deposits are required to be made in
accordance with Section 2.03(g) or 8.02(c).

“Cash Collateralize” means to deposit in the Cash Collateral Account or to
pledge and deposit with or deliver to the Agent, for the benefit of the Agent,
the L/C Issuer or the Lenders, as collateral for L/C Obligations or obligations
of the Lenders to fund participations in respect thereof (as the context may
require), cash or deposit account balances or, if the Agent and the L/C Issuer
shall agree in their sole discretion, other credit support, in each case
pursuant to documentation in form and substance reasonably satisfactory to the
Agent and the L/C Issuer. “Cash Collateral” shall have a meaning correlative to
the foregoing and shall include the proceeds of such cash collateral and other
credit support.

“Cash Dominion Event” means either (i) the occurrence and continuance of any
Event of Default, or (ii) the failure of the Borrowers to maintain Availability
of at least the greater of (x) 17.5% of the Loan Cap and (y) $35,000,000. For
purposes of this Agreement, the occurrence of a Cash Dominion Event shall be
deemed continuing (i) so long as such Event of Default has not been waived,
and/or (ii) if the Cash Dominion Event arises as a result of the Borrowers’
failure to achieve Availability as required hereunder, until Availability has
exceeded the greater of (x) 17.5% of the Loan Cap and (y) $35,000,000 for thirty
(30) consecutive days, in which case a Cash Dominion Event shall no longer be
deemed to be continuing for purposes of this Agreement; provided that, a Cash
Dominion Event shall be deemed continuing (even if an Event of Default is no
longer continuing and/or Availability exceeds the required amount for thirty
(30) consecutive days) at all times after a Cash Dominion Event has occurred and
been discontinued on two occasions in any twelve month period until both no
Event of Default is then continuing and Availability has exceed the amounts set
forth above for ninety (90) consecutive days. The termination of a Cash Dominion
Event as provided herein shall in no way limit, waive or delay the occurrence of
a subsequent Cash Dominion Event in the event that the conditions set forth in
this definition again arise.

 

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“Cash Management Reserves” means such reserves as the Agent, from time to time,
determines in its Permitted Discretion as being appropriate to reflect the
reasonably anticipated liabilities and obligations of the Loan Parties with
respect to Cash Management Services then provided or outstanding.

“Cash Management Services” means any cash management services provided to any
Loan Party by the Agent or any Lender or any of their respective Affiliates,
including, without limitation, (a) ACH transactions, (b) controlled disbursement
services, treasury, depository, overdraft, and electronic funds transfer
services, (c) credit card processing services, (d) credit or debit cards and
(e) foreign exchange facilities.

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

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

“CFC” means a Person that is a controlled foreign corporation under Section 957
of the Code.

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

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

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

 

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(b) during any period of 12 consecutive months, a majority of the members of the
board of directors or other equivalent governing body of the Parent cease to be
composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or by a Permitted Holder or (iii) whose election or nomination to that
board or other equivalent governing body was approved by individuals referred to
in clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body or by
a Permitted Holder (excluding, in the case of both clause (ii) and clause (iii),
any individual whose initial nomination for, or assumption of office as, a
member of that board or equivalent governing body occurs as a result of an
actual or threatened solicitation of proxies or consents for the election or
removal of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on behalf of the
board of directors); or

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

(d) the Parent fails at any time to own, directly or indirectly, 100% of the
Equity Interests of each Borrower.

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

“Closing Date Dividend” means the Restricted Payment made by the Parent to SHC
on the Closing Date immediately prior to the consummation of the Separation in a
maximum amount not to exceed $100,000,000.

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

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

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

“Collection Account” has the meaning provided in Section 6.12(c).

“Commercial Letter of Credit” means any letter of credit or similar instrument
(including, without limitation, Bankers’ Acceptances) issued for the purpose of
providing the primary payment mechanism in connection with the purchase of any
materials, goods or services by a Loan Party in the ordinary course of business
of such Loan Party.

 

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

“Commitment Fee Percentage” means (a) 0.50% per annum if the average daily Total
Outstandings during the previous Fiscal Quarter were 50% or less of the
Aggregate Commitments, and (b) 0.375% per annum if the average daily Total
Outstandings during the previous Fiscal Quarter were more than 50% of the
Aggregate Commitments.

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

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

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a
Conversion of Committed Loans from one Type to the other, or (c) a continuation
of LIBOR Rate Loans, pursuant to Section 2.02(b), which, if initially given in
writing or when confirmed in writing after telephonic notice has been given,
shall be substantially in the form of Exhibit A.

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

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

“Consolidated EBITDA” means, at any date of determination, without duplication,
an amount equal to Consolidated Net Income of the Parent and its Subsidiaries on
a Consolidated basis for the most recently completed Measurement Period, plus
(a) the following to the extent deducted in calculating such Consolidated Net
Income: (i) Consolidated Interest Charges, (ii) the provision for Federal,
state, local and foreign income Taxes, (iii) depreciation and amortization
expense, (iv) any items of loss resulting from the sale of assets other than in
the ordinary course of business, and (v) other expenses reducing such
Consolidated Net Income which do not represent a cash item in such period or any
future period (in each case of or by the Parent and its Subsidiaries for such
Measurement Period), minus (b) the following to the extent included in
calculating such Consolidated Net Income: (i) Federal, state, local and foreign
income tax credits, (ii) any items of gain resulting from the sale of assets
other than in the ordinary course of business and (iii) all non-cash items
increasing Consolidated Net Income (in each case of or by the Parent and its
Subsidiaries for such Measurement Period), all as determined on a Consolidated
basis in accordance with GAAP.

“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination,
the ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital
Expenditures made during such period (other than Financed Capital Expenditures),
minus (iii) the aggregate amount of Federal, state, local and foreign income
taxes paid in cash during such period net of cash refunds of such Taxes received
during such period (but in no event shall the amounts calculated under this
clause (iii) be less than zero) to (b) Debt Service Charges, in each case, of or
by the Parent and its Subsidiaries for the most recently completed Measurement
Period, all as determined on a Consolidated basis in accordance with GAAP.

 

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“Consolidated Interest Charges” means, for any Measurement Period, the sum of
(a) all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (including capitalized interest) or
in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing and net costs
under applicable Swap Contracts, but excluding any non-cash or deferred interest
financing costs, and (b) the portion of rent expense with respect to such period
under Capital Lease Obligations that is treated as interest in accordance with
GAAP, in each case of or by the Parent and its Subsidiaries for the most
recently completed Measurement Period, all as determined on a Consolidated basis
in accordance with GAAP.

“Consolidated Net Income” means, as of any date of determination, the net income
of the Parent and its Subsidiaries for the most recently completed Measurement
Period, all as determined on a Consolidated basis in accordance with GAAP,
provided, however, that there shall be excluded (a) extraordinary gains and
extraordinary losses for such Measurement Period, (b) the income (or loss) of
any Subsidiary that is not a Loan Party during such Measurement Period in which
any other Person has a joint interest, and of any non-Subsidiary joint venture,
except to the extent of the amount of cash dividends or other distributions
actually paid in cash to the Parent or a wholly-owned Subsidiary of the Parent
during such period, (c) the income (or loss) of such Subsidiary during such
Measurement Period and accrued prior to the date it becomes a Subsidiary of the
Parent or any of its Subsidiaries or is merged into or consolidated with the
Parent or any of its Subsidiaries or that Person’s assets are acquired by the
Parent or any of its Subsidiaries, and (d) the income of any direct or indirect
Subsidiary of the Parent that is not a Loan Party to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
Organization Documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, except
that the Parent’s equity in any net loss of any such Subsidiary for such
Measurement Period shall be included in determining Consolidated Net Income.

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

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Convert”, “Conversion” and “Converted” each refers to a conversion of Committed
Loans of one Type into Committed Loans of the other Type.

“Cost” means the lower of cost or market value of Inventory, based upon the
Borrowers’ accounting practices, known to the Agent, which practices are in
effect on the Closing Date as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’
stock ledger and on a consistent basis with the calculation of cost set forth in
the most recent Inventory appraisal delivered to the Agent. “Cost” does not
include inventory capitalization costs or other non-purchase price charges (such
as freight) used in the Borrowers’ calculation of cost of goods sold.

“Covenant Compliance Event” means, at any time after the first anniversary of
the Closing Date, Availability is less than the greater of (i) 12.5% of the Loan
Cap or (ii) $25,000,000. The termination of a Covenant Compliance as provided
herein shall in no way limit, waive or delay the occurrence of a subsequent
Covenant Compliance Event in the event that the conditions set forth in this
definition again arise.

 

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

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

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

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

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

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender,
(ii) the Agent, (iii) each L/C Issuer, (iv) the Arranger, (v) any other Person
to whom Obligations are owing, and (vi) the successors and assigns of each of
the foregoing, and (b) collectively, all of the foregoing.

“Credit Party Expenses” means (a) all reasonable out-of-pocket expenses incurred
by the Agent, the Arranger and their respective Affiliates, in connection with
this Agreement and the other Loan Documents, including without limitation
(i) the reasonable fees, charges and disbursements of (A) one primary counsel
and of one local counsel for the Agent and the Arranger, (B) outside consultants
for the Agent, (C) appraisers and (D) commercial finance examiners, and (ii) in
connection with (A) the syndication of the credit facilities provided for
herein, (B) the preparation, negotiation, administration, management, execution
and delivery of this Agreement and the other Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (C) the
enforcement or protection of their rights in connection with this Agreement or
the Loan Documents or efforts to preserve, protect, collect, or enforce the
Collateral or in connection with any proceeding under any Debtor Relief Laws, or
(D) any workout, restructuring or negotiations in respect of any Loan Agreement
Obligations, and (b) with respect to the L/C Issuer, and its Affiliates, all
reasonable out-of-pocket expenses incurred in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder; and (c) all reasonable out-of-pocket expenses incurred by
the Lenders who are not the Agent, the Arranger, the L/C Issuer or any Affiliate
of any of them in connection with the enforcement of the Loan Documents after
the occurrence and during the continuance of an Event of Default, provided that
such Lenders shall be entitled to reimbursement for no more than one counsel
representing all such Lenders (absent a conflict of interest in which case the
Lenders may engage and be reimbursed for additional counsel).

 

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“Customer Credit Liabilities” means at any time, the aggregate remaining value
at such time of (a) outstanding gift certificates and gift cards of the
Borrowers entitling the holder thereof to use all or a portion of the
certificate or gift card to pay all or a portion of the purchase price for any
Inventory, and (b) outstanding merchandise credits of the Borrowers.

“DDA” means each checking, savings or other demand deposit account maintained by
any of the Loan Parties other than Excluded Accounts.

“Debt Service Charges” means for any Measurement Period, the sum of
(a) Consolidated Interest Charges paid or required to be paid in cash for such
Measurement Period, plus (b) scheduled principal payments made or required to be
made on account of Indebtedness (excluding the Loan Agreement Obligations and
any Synthetic Lease Obligations but including, without limitation, principal
payments made in respect of Capital Lease Obligations) for such Measurement
Period, in each case determined on a Consolidated basis in accordance with GAAP.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect.

“Default” means any event or condition that constitutes an Event of Default or
that, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

“Default Rate” means (a) when used with respect to Loans, an interest rate equal
to the interest rate (including the Applicable Margin) otherwise applicable to
such Loan plus two percent (2%) per annum, (b) when used with respect to Letter
of Credit Fees, a rate equal to the Applicable Rate for Standby Letters of
Credit or Commercial Letters of Credit, as applicable, plus two percent (2%) per
annum, and (c) with respect to all other Loan Agreement Obligations, an interest
rate equal to the Base Rate, plus the then Applicable Margin, plus two percent
(2%) per annum.

“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has
failed to (i) fund all or any portion of its Loans within two Business Days of
the date such Loans were required to be funded hereunder, or (ii) pay to the
Agent, the L/C Issuer, the Swing Line Lender or any other Lender any other
amount required to be paid by it hereunder (including in respect of its
participation in Letters of Credit or Swing Line Loans) within two Business Days
of the date when due, (b) has notified the Borrower, the Agent, the L/C Issuer
or the Swing Line Lender in writing that it does not intend to comply with its
funding obligations hereunder, or has made a public statement to that effect,
(c) has failed, within three Business Days after written request by the Agent or
the Borrower, to confirm in writing to the Agent and the Borrower that it will
comply with its prospective funding obligations hereunder (provided that such
Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon
receipt of such written confirmation by the Agent and the Borrower), or
(d) after the Closing Date, has, or has a direct or indirect parent company that
has, (i) become the subject of a proceeding under any Debtor Relief Law, or
(ii) had appointed for it a receiver, custodian, conservator, trustee,
administrator, assignee for the benefit of creditors or similar Person charged
with reorganization or liquidation of its business or assets, including the
Federal Deposit Insurance Corporation or any other state or federal regulatory
authority acting in such a capacity; provided that a Lender shall not be a
Defaulting Lender solely by virtue of the ownership or acquisition of any Equity
Interest in that Lender or any direct or indirect parent company thereof by a
Governmental Authority so long as such ownership interest does not result in or
provide such Lender with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of attachment on its
assets or permit such Lender (or such Governmental Authority) to reject,
repudiate, disavow or disaffirm any contracts or agreements made with such
Lender. Any determination

 

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by the Agent that a Lender is a Defaulting Lender under any one or more of
clauses (a) through (d) above, and of the effective date of such status, shall
be conclusive and binding absent manifest error, and such Lender shall be deemed
to be a Defaulting Lender (subject to Section 2.16(b)) as of the date
established therefor by the Agent in a written notice of such determination,
which shall be delivered by the Agent to the Borrower, the L/C Issuer, the Swing
Line Lender and each other Lender promptly following such determination.

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

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

“Documentation Agent” means Barclays Bank PLC.

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

“Eligible Assignee” means (a) a Lender or any of its Affiliates; (b) a bank,
insurance company, or company engaged in the business of making commercial
loans, which Person, together with its Affiliates, has a combined capital and
surplus in excess of $250,000,000; (c) an Approved Fund; and (d) any Person to
whom a Lender assigns its rights and obligations under this Agreement as part of
an assignment and transfer of such Lender’s rights in and to a material portion
of such Lender’s portfolio of asset based credit facilities; provided that,
notwithstanding the foregoing, “Eligible Assignee” shall not include a Permitted
Holder, a Loan Party or any of their respective Affiliates or Subsidiaries or
any natural Person.

“Eligible Credit Card Receivables” means at the time of any determination
thereof, each Credit Card Receivable that satisfies the following criteria at
the time of creation and continues to meet the same at the time of such
determination: such Credit Card Receivable (i) has been earned by performance
and represents the bona fide amounts due to a Loan Party from a Credit Card
Issuer or Credit Card Processor (or from SHC and its Subsidiaries on behalf of
any such Credit Card Issuer or Credit Card Processor as set forth below), and in
each case is originated in the ordinary course of business of such Loan Party,
and (ii) in each case is not ineligible for inclusion in the calculation of the
Borrowing Base pursuant to any of clauses (a) through (i) below. Without
limiting the foregoing, to qualify as an Eligible Credit Card Receivable, a
Credit Card Receivable shall indicate no Person other than a Loan Party as payee
or remittance party; provided that from the Closing Date until the date which is
sixty (60) days following the Closing Date (as such time period may be extended
by the Agent in its sole discretion), proceeds of Credit Card Receivables due
from SHC and its Subsidiaries to the Loan Parties under the Separation
Agreements on account of amounts received by SHC or any of its Subsidiaries from
a Credit Card Issuer or Credit Card Processor which represent amounts due from
such Credit Card Issuer or Credit Card Processor (or from SHC and its
Subsidiaries, as set forth above) on Credit Card Receivables of the Loan Parties
and which are not otherwise ineligible by virtue of one or more of the criteria
set below shall be included as “Eligible Credit Card Receivables” hereunder. In
determining the amount to be so included, the face

 

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amount of an Account shall be reduced by, without duplication, to the extent not
reflected in such face amount, (i) the amount of all accrued and actual
discounts, claims, credits or credits pending, promotional program allowances,
price adjustments, finance charges or other allowances (including any amount
that a Loan Party may be obligated to rebate to a customer, a Credit Card Issuer
or Credit Card Processor pursuant to the terms of any agreement or understanding
(written or oral)) and (ii) the aggregate amount of all cash received in respect
of such Account but not yet applied by the Loan Parties to reduce the amount of
such Credit Card Receivable. Except as otherwise agreed by the Agent, any Credit
Card Receivable included within any of the following categories shall not
constitute an Eligible Credit Card Receivable:

(a) Credit Card Receivable which do not constitute an “Account” or “payment
intangible” (each as defined in the UCC);

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

(c) Except with respect to amounts due from SHC and its Subsidiaries as provided
above, Credit Card Receivables (i) that are not subject to a perfected first
priority security interest in favor of the Agent (subject to Permitted
Encumbrances having priority over the Lien of the Agent by operation of
applicable Law), or (ii) with respect to which a Loan Party does not have good
and valid title thereto, free and clear of any Lien (other than Permitted
Encumbrances);

(d) Credit Card Receivables which are disputed or with respect to which a claim,
counterclaim, offset or chargeback has been asserted (to the extent of such
dispute, claim, counterclaim, offset or chargeback);

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

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

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

(h) Credit Card Receivables which do not conform to all representations,
warranties or other provisions in the Loan Documents relating to Credit Card
Receivables; or

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

“Eligible Inventory” means, as of the date of determination thereof, items of
Inventory of a Loan Party that are finished goods, merchantable and readily
saleable to the public in the ordinary course of the Loan Parties’ business, in
each case that, except as otherwise agreed by the Agent, (A) complies with each
of the representations and warranties respecting Inventory made by the Loan
Parties in the Loan Documents, and (B) is not excluded as ineligible by virtue
of one or more of the criteria set forth below. Except as otherwise agreed by
the Agent, in its Permitted Discretion, the following items of Inventory shall
not be included in Eligible Inventory:

 

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(a) Inventory (i) that is not subject to a perfected first priority security
interest in favor of the Agent (subject to Permitted Encumbrances having
priority over the Lien of the Agent by operation of applicable Law), or
(ii) with respect to which a Loan Party does not have good and valid title
thereto, free and clear of any Lien (other than Permitted Encumbrances);

(b) Inventory that is leased or consigned from a vendor to a Loan Party;

(c) Inventory that is consigned by a Loan Party to a Person which is not a Loan
Party other than Inventory that is consigned to Third Party Dealers and Third
Party Franchisees for which the Loan Parties have met the Third Party Dealer and
Franchisee Eligibility Requirements;

(d) Inventory that is not located in the United States of America (excluding
territories or possessions of the United States) or Puerto Rico at a location
that is owned or leased by a Loan Party, except (i) Inventory in transit between
such owned or leased locations, or (ii) Inventory at locations owned or leased
by Third Party Dealers and Third Party Franchisees for which the Loan Parties
have met the Third Party Dealer and Franchisee Eligibility Requirements;

(e) Inventory that is located in a distribution center leased by a Loan Party
unless the applicable lessor has delivered to the Agent a Collateral Access
Agreement; provided that if such a Collateral Access Agreement is not obtained,
Inventory at such locations shall constitute Eligible Inventory as long as the
Agent has established an Availability Reserve in such amount as the Agent in its
Permitted discretion deemed appropriate;

(f) Other than Inventory customarily sold at outlet locations in the ordinary
course of business or otherwise in a manner consistent with past practice,
Inventory that is comprised of goods which (i) are damaged, defective,
“seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor,
(iii) are obsolete, or custom items, work-in-process, raw materials, or that
constitute samples, spare parts, promotional, marketing, labels, bags and other
packaging and shipping materials or supplies used or consumed in a Loan Party’s
business, (iv) which have been packed away and stored for more than 12 months,
(v) are not in material compliance with all standards imposed by any
Governmental Authority having regulatory authority over such Inventory, its use
or sale, or (vi) are bill and hold goods;

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

(h) Inventory that has been sold but not yet delivered or as to which a Loan
Party has accepted a deposit from a third party;

(i) Inventory that exhibits, includes or is identified by any trademark,
tradename or other Intellectual Property right which trademark, tradename or
other Intellectual Property right (i) is subject to a restriction that could
reasonably be expected to adversely affect the Agent’s ability to liquidate such
Inventory or (ii) the relevant Loan Party does not have the right to use in
connection with the sale of such Inventory, either through direct ownership or
through a written license or sublicense;

(j) Inventory acquired in a Permitted Acquisition, unless and until the Agent
has completed or received (A) an appraisal of such Inventory from appraisers
reasonably satisfactory to the Agent and establishes Inventory Reserves (if
applicable) therefor, and (B) such other due diligence as the Agent may
reasonably require, all of the results of the foregoing to be reasonably
satisfactory to the Agent; provided that such Inventory shall be deemed to
constitute Eligible

 

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Inventory for a period of 45 days after the date of its acquisition
notwithstanding that the Agent has not completed such due diligence as long as
such Inventory is of the same kind and quality as other of the Loan Parties’
Inventory and would otherwise constitute Eligible Inventory;

(k) Inventory (other than Inventory acquired in a Permitted Acquisition which is
governed by clause (j) above) which is not of the type usually sold in the
ordinary course of any Loan Party’s business, unless and until the Agent agrees
in its Permitted Discretion that such Inventory shall be deemed Eligible
Inventory; or

(l) Inventory which does not meet such other reasonable eligibility criteria for
Inventory as the Agent may determine in its Permitted Discretion.

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

“Environmental Liability” means any liability, obligation, damage, loss, claim,
action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent
or otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Borrower, any other Loan
Party or any of their respective Subsidiaries directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal or presence of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

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

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.

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

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan;
(b) the withdrawal of the Parent or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which such entity was a
“substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Parent or any ERISA Affiliate
from a Multiemployer Plan or

 

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notification that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a
Multiemployer Plan amendment as a termination, under Section 4041 or 4041A of
ERISA, respectively; (e) the institution by the PBGC of proceedings to terminate
a Pension Plan or a Multiemployer Plan; (f) any event or condition determined by
the PBGC to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; (g) the
determination that any Pension Plan is considered an at-risk plan or that a
Multiemployer Plan is in endangered or critical status within the meaning of
Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or
(h) the imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Parent or
any ERISA Affiliate.

“ETSA” means the Employee Transition and Administrative Services Agreement dated
August 31, 2012, by and between SHC and the Parent.

“Event of Default” has the meaning specified in Section 8.01. An Event of
Default shall be deemed to be continuing unless and until that Event of Default
has been duly waived as provided in Section 10.01 hereof.

“Excluded Accounts” means payroll, trust, tax withholding and zero balance
disbursement accounts funded in the ordinary course of business.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
any Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated
and including any Taxes imposed in lieu of income Taxes), franchise Taxes, and
branch profits Taxes, in each case, (i) imposed as a result of such Recipient
being organized under the laws of, or having its principal office or, in the
case of any Lender, its Lending Office located in, the jurisdiction imposing
such Tax (or any political subdivision thereof) or (ii) that are Other
Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable
to or for the account of such Recipient with respect to an applicable interest
in a Loan or Commitment pursuant to a law in effect on the date on which
(i) such Recipient acquires such interest in the Loan or Commitment (other than
pursuant to an assignment request by the Borrower under Section 10.13) or
(ii) in the case of a Lender, such Lender changes its Lending Office, except in
each case to the extent that, pursuant to Section 3.01(a)(ii) or (c), amounts
with respect to such Taxes were payable either to such Lender’s assignor
immediately before such Lender became a party hereto or to such Lender
immediately before it changed its Lending Office, (c) Taxes attributable to such
Recipient’s failure to comply with Section 3.01(e) and (d) any Taxes imposed
pursuant to FATCA.

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

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, indemnity payments and any purchase price adjustments.

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

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal

 

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Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on
such day on such transactions as determined by the Agent.

“Fee Letter” means the letter agreement dated as of the Closing Date among the
Borrowers, the Agent and the Arranger.

“Financed Capital Expenditures” shall mean Capital Expenditures made with the
proceeds of Indebtedness (other than from Credit Extensions hereunder),
including capital lease transactions permitted hereunder.

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on (i) with respect to the first fiscal quarter of any
Fiscal Year, the Saturday of the thirteenth week of such Fiscal Year, (ii) with
respect to the second fiscal quarter of any Fiscal Year, the Saturday of the
twenty- sixth week of such Fiscal Year, (iii) with respect to the third fiscal
quarter of any Fiscal Year, the Saturday of the thirty-ninth week of such Fiscal
Year, and (iv) with respect to the last fiscal quarter of any Fiscal Year, the
last day of such Fiscal Year, as such Fiscal Quarters may be amended in
accordance with the provisions of Section 7.13 hereof.

“Fiscal Year” means any period of twelve consecutive months ending on the
Saturday closest to January 31 of any calendar year, as such Fiscal Year may be
amended in accordance with the provisions of Section 7.13 hereof.

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

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

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

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with
respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the
outstanding L/C Obligations other than L/C Obligations as to which such
Defaulting Lender’s participation obligation has been reallocated to other
Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with
respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage
of Swing Line Loans other than Swing Line Loans as to which such Defaulting
Lender’s participation obligation has been reallocated to other Lenders in
accordance with the terms hereof.

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

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“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

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

“Guarantor” means the Parent and each wholly-owned domestic Subsidiary of the
Parent (other than any Borrower) existing on the Closing Date and each other
wholly-owned domestic Subsidiary of the Parent that shall be required to execute
and deliver a Joinder Agreement pursuant to Section 6.11.

“Guaranty and Security Agreement” means the Guaranty and Security Agreement
dated as of the Closing Date among the Loan Parties and the Agent.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Honor Date” has the meaning specified in Section 2.03(c)(i).

“Increase Effective Date” shall have the meaning provided therefor in
Section 2.15(d).

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

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

(b) the maximum amount of all direct or contingent obligations of such Person
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments;

 

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

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business and, in each case, not past due for more than sixty (60) days;

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

(f) All Attributable Indebtedness of such Person;

(g) all obligations of such Person in respect of Disqualified Stock of such
Person; and

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

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company unless the
Indebtedness of such joint venture is Guaranteed by such Person and covered by
clause (h) above) in which such Person is a general partner or a joint venturer,
unless such Indebtedness is expressly made non-recourse to such Person. The
amount of any net obligation under any Swap Contract on any date shall be deemed
to be the Swap Termination Value thereof as of such date.

“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of any Loan Party
under any Loan Document.

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

“Information” has the meaning specified in Section 10.07.

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

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

 

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

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

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

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

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

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

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

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

“Inventory Reserves” means such reserves as may be established from time to time
by the Agent in its Permitted Discretion, without duplication of any other
Reserves or items that are otherwise addressed or excluded through eligibility
criteria or the definition of “Borrowing Base” or “Appraised Value”, with
respect to the determination of the saleability, at retail, of the Eligible
Inventory, which reflect such other factors as affect the market value of the
Eligible Inventory or which reflect claims and liabilities that the Agent
determines will need to be satisfied in connection with the realization upon the
Inventory. Without limiting the generality of the foregoing, Inventory Reserves
may, in the Agent’s Permitted Discretion, include (but are not limited to)
reserves based on:

(a) Obsolescence;

(b) Seasonality;

(c) Shrink;

(d) Imbalance;

 

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(e) Change in Inventory character;

(f) Change in Inventory composition;

(g) Change in Inventory mix;

(h) Mark-downs (both permanent and point of sale);

(i) Retail mark-ons and mark-ups inconsistent with prior period practice and
performance, industry standards, current business plans or advertising calendar
and planned advertising events; and

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

“Investment” means, as to any Person, any direct or indirect (a) purchase or
other acquisition of Equity Interests of another Person, (b) loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) any
Acquisition. For purposes of covenant compliance, the amount of any Investment
shall be the amount actually invested, without adjustment for subsequent
increases or decreases in the value of such Investment.

“IRS” means the United States Internal Revenue Service.

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

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

“Joinder Agreement” means an agreement, in form satisfactory to the Agent
pursuant to which, among other things, a Person becomes a party to, and bound by
the terms of, this Agreement and/or the other Loan Documents in the same
capacity and to the same extent as either a Borrower or a Guarantor, as the
Agent may determine.

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable Percentage.

“L/C Borrowing” means an extension of credit resulting from a drawing under any
Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Committed Borrowing.

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

 

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“L/C Issuer” means Bank of America in its capacity as issuer of Letters of
Credit hereunder, or any successor issuer of Letters of Credit hereunder (which
successor may only be a Lender selected by the Agent in its discretion). The L/C
Issuer may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of the L/C Issuer, in which case the term “L/C Issuer”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.

“L/C Obligations” means, as at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate
of all Unreimbursed Amounts, including all outstanding L/C Borrowings. For
purposes of computing the amount available to be drawn under any Letter of
Credit, the amount of such Letter of Credit shall be determined in accordance
with Section 1.06. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP,
such Letter of Credit shall be deemed to be “outstanding” in the amount so
remaining available to be drawn.

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

“Lender” has the meaning specified in the introductory paragraph hereto and, as
the context requires, includes the Swing Line Lender.

“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Lead Borrower and
the Agent.

“Letter of Credit” means each Banker’s Acceptance, each Standby Letter of Credit
and each Commercial Letter of Credit issued hereunder.

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

“Letter of Credit Expiration Date” means the day that is five (5) Business Days
prior to the Maturity Date then in effect.

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

“Letter of Credit Sublimit” means an amount equal to $75,000,000. The Letter of
Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. A
permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less than
the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at Lead Borrower’s option, less than) the
Aggregate Commitments.

“LIBOR Borrowing” means a Borrowing comprised of LIBOR Rate Loans.

“LIBOR Rate” means:

(a) for any Interest Period with respect to a LIBOR Rate Loan, the rate per
annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Agent from

 

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time to time) at approximately 11:00 a.m., London time, two Business Days prior
to the commencement of such Interest Period, for Dollar deposits (for delivery
on the first day of such Interest Period) with a term equivalent to such
Interest Period. If such rate is not available at such time for any reason, then
the “LIBOR Rate” for such Interest Period shall be the rate per annum determined
by the Agent to be the rate at which deposits in Dollars for delivery on the
first day of such Interest Period in same day funds in the approximate amount of
the LIBOR Rate Loan being made, continued or Converted by Bank of America and
with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch to major banks in the London interbank eurodollar market
at their request at approximately 11:00 a.m. (London time) two Business Days
prior to the commencement of such Interest Period; and

(b) for any interest calculation with respect to a Base Rate Loan on any date,
the rate per annum equal to (i) BBA LIBOR, at approximately 11:00 a.m., London
time determined two London Banking Days prior to such date for Dollar deposits
being delivered in the London interbank market for a term of one month
commencing that day or (ii) if such published rate is not available at such time
for any reason, the rate per annum determined by the Agent to be the rate at
which deposits in Dollars for delivery on the date of determination in same day
funds in the approximate amount of the Base Rate Loan being made or maintained
and with a term equal to one month would be offered by Bank of America’s London
Branch to major banks in the London interbank Eurodollar market at their request
at the date and time of determination.

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

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), charge, or other security interest or
preferential arrangement in the nature of a security interest of any kind or
nature whatsoever (including the lien or retained security title of a
conditional vendor, any easement, right of way or other encumbrance on title to
real property, but excluding the interests of lessors under operating leases).

“Liquidation” means the exercise by the Agent of those rights and remedies
accorded to the Agent under the Loan Documents and applicable Laws as a creditor
of the Loan Parties with respect to the realization on the Collateral, including
(after the occurrence and during the continuation of an Event of Default) the
conduct by the Loan Parties acting with the consent of the Agent, of any public,
private or “going-out-of-business”, “store closing” or other similar sale or any
other disposition of the Collateral for the purpose of liquidating the
Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used
with like meaning in this Agreement.

“Loan” means an extension of credit by a Lender to the Borrower under Article II
in the form of a Committed Loan or a Swing Line Loan.

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

“Loan Agreement Obligations” means all advances to, and debts (including
principal, interest, fees, costs, and expenses), liabilities, obligations,
covenants, indemnities, and duties of, any Loan Party arising under any Loan
Document or otherwise with respect to any Loan or Letter of Credit (including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral therefor), whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest, fees,
costs, expenses and indemnities that accrue after the commencement by or against
any Loan Party or any Affiliate thereof of any proceeding under any Debtor
Relief Laws naming such Person as the debtor in such proceeding, regardless of
whether such interest, fees costs, expenses and indemnities are allowed claims
in such proceeding.

 

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

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

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

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent), or financial condition of the Parent and its Subsidiaries taken
as a whole; (b) a material impairment of the ability of the Loan Parties taken
as a whole to perform their obligations under the Loan Documents to which they
are a party; or (c) a material impairment of the rights and remedies of the
Agent or the Lenders under the Loan Documents taken as a whole or a material
adverse effect upon the legality, validity, binding effect or enforceability
against the Loan Parties of the Loan Documents to which they are a party taken
as a whole. In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event in and of itself does
not have such effect, a Material Adverse Effect shall be deemed to have occurred
if the cumulative effect of such event and all other then existing events would
result in a Material Adverse Effect.

“Material Contract” means, with respect to any Person, (a) the Separation
Agreements unless, with respect to any Separation Agreement, such Separation
Agreement has been terminated on a basis reasonably satisfactory to the Agent,
and (b) each contract to which such Person is a party set forth in the
Perfection Certificate as a Material Contract, and (c) any replacements of, or
substitutions for, any of the foregoing.

“Material Indebtedness” means Indebtedness (other than the Loan Agreement
Obligations) of the Loan Parties in an aggregate principal amount exceeding
$25,000,000. Notwithstanding the foregoing, any Indebtedness incurred under
clause (j) of the definition of “Permitted Indebtedness” shall at all times be
deemed Material Indebtedness hereunder. For purposes of determining the amount
of Material Indebtedness at any time, (a) the amount of the obligations in
respect of any Swap Contract at such time shall be calculated at the Swap
Termination Value thereof, (b) undrawn and committed amounts shall be included,
and (c) all amounts owing to all creditors under any combined or syndicated
credit arrangement shall be included.

“Maturity Date” means the earlier of (a) October 11, 2017, or (b) the date that
is six (6) months prior to the expiration of the Separation Agreements (other
than the Separation Agreement described in clause (g) of the definition of such
term), unless such Separation Agreements have been extended to a date later than
that set forth in clause (a) above or terminated on a basis reasonably
satisfactory to the Agent.

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

“Measurement Period” means, at any date of determination, the most recently
completed twelve fiscal month period.

 

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

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

“Multiple Employer Plan” means a Plan which has two or more contributing
sponsors (including the Parent or any ERISA Affiliate) at least two of whom are
not under common control, as such a plan is described in Section 4064 of ERISA.

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or
any of its Subsidiaries, or any Extraordinary Receipt received or paid to the
account of any Loan Party or any of its Subsidiaries, the excess, if any, of
(i) the sum of cash and cash equivalents received in connection with such
transaction (including any cash or cash equivalents received by way of deferred
payment pursuant to, or by monetization of, a note receivable or otherwise, but
only as and when so received) minus (ii) the sum of (A) the principal amount of
any Indebtedness that is secured by the applicable asset by a Lien permitted
hereunder which is senior to the Agent’s Lien (if any) on such asset and that is
required to be repaid (or to establish an escrow for the future repayment
thereof) in connection with such transaction (other than Indebtedness under the
Loan Documents), and (B) the reasonable and customary out-of-pocket expenses
incurred by such Loan Party or such Subsidiary in connection with such
transaction (including, without limitation, appraisals, and brokerage, legal,
title and recording or transfer tax expenses and commissions) paid by any Loan
Party to third parties (other than Affiliates)); and

(b) with respect to the sale or issuance of any Equity Interest by any Loan
Party or any of its Subsidiaries, or the incurrence or issuance of any
Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the
sum of the cash and cash equivalents received in connection with such
transaction minus (ii) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses, incurred by such Loan Party or
such Subsidiary in connection therewith.

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

“Note” means a promissory note made by the Borrowers in favor of a Lender
evidencing Committed Loans made by such Lender, substantially in the form of
Exhibit C, as each may be amended, supplemented or modified from time to time.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means, collectively, all Loan Agreement Obligations and all Other
Liabilities.

“Operating Segment” means each of (a) the hometown dealer business, including
the hardware business and the appliance showroom business, and (b) the outlet
stores business.

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust

 

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or other form of business entity, the partnership, joint venture or other
applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or
organization with the applicable Governmental Authority in the jurisdiction of
its formation or organization and, if applicable, any certificate or articles of
formation or organization of such entity, and (d) in each case, all shareholder
or other equity holder agreements, voting trusts and similar arrangements to
which such Person is a party.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising solely from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Liabilities” means any obligation on account of (a) any Cash Management
Services furnished to any of the Loan Parties or any of their Subsidiaries
and/or (b) any Bank Product furnished to any of the Loan Parties and/or any of
their Subsidiaries.

“Other Property” shall have the meaning provided in clause (r) of the definition
of “Permitted Encumbrances”.

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Excluded
Taxes (other than with respect to an assignment made pursuant to Section 3.06).

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

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

“Parent” has the meaning specified in the recitals hereto.

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

“Participation Register” has the meaning provided therefor in Section 10.06(d).

“Payment Conditions” means, at the time of determination with respect to any
specified transaction or payment, that (a) no Default or Event of Default then
exists or would arise as a result of entering into such transaction or the
making of such payment, (b) after giving effect to such transaction or payment,
the Pro Forma Availability Condition has been satisfied, and (c) after giving
effect to such transaction or payment, the Consolidated Fixed Charge Coverage
Ratio, as calculated on a pro forma basis for the Measurement Period preceding
such transaction or payment, is equal to or greater than 1.0:1.0. Prior to
undertaking any transaction or payment which is subject to the Payment
Conditions, the Loan Parties shall deliver to the Agent evidence of satisfaction
of the conditions contained in clauses (b) and (c) above on a basis reasonably
satisfactory to the Agent.

 

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“PBGC” means the Pension Benefit Guaranty Corporation.

“PCAOB” means the Public Company Accounting Oversight Board.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum
required contributions (including any installment payment thereof) to Pension
Plans and Multiemployer Plans and set forth in, with respect to plan years
ending prior to the effective date of the Pension Act, Section 412 of the Code
and Section 302 of ERISA, each as in effect prior to the Pension Act and,
thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302,
303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (including a Multiple
Employer Plan but excluding a Multiemployer Plan) that is maintained or is
contributed to by the Parent and any ERISA Affiliate and is either covered by
Title IV of ERISA or is subject to the minimum funding standards under
Section 412 of the Code.

“Perfection Certificate” means the Perfection Certificate dated as of the
Closing Date by the Loan Parties.

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

(a) such Acquisition shall have been approved by the Board of Directors of the
Person (or similar governing body if such Person is not a corporation) which is
the subject of such Acquisition and such Person shall not have announced that it
will oppose such Acquisition or shall not have commenced any action which
alleges that such Acquisition shall violate applicable Law;

(b) the Lead Borrower shall have furnished the Agent with thirty (30) days’
prior written notice of such intended Acquisition and a current draft of the
Acquisition documents (and final copies thereof as and when executed);

(c) if the total consideration payable in connection such Acquisition is
$20,000,000 or more, the Lead Borrower shall have furnished the Agent with a
summary of any due diligence undertaken by the Loan Parties in connection with
such Acquisition, customary historical financial statements of the Person which
is the subject of such Acquisition to the extent available, pro forma financial
statements for the most recently completed Measurement Period of the Parent
after giving effect to such Acquisition (including a balance sheet and income
statement), and such other information as the Agent may reasonably require;

(d) if the Acquisition is of Equity Interests and if any of the proceeds of the
Credit Extensions are to be used to consummate the Acquisition, the legal
structure of the Acquisition shall be reasonably acceptable to the Agent;

(e) any assets acquired shall be utilized in, and if the Acquisition involves a
merger, consolidation or acquisition of Equity Interests, the Person which is
the subject of such Acquisition shall be engaged in, a business otherwise
permitted to be engaged in by the Parent and its Subsidiaries under this
Agreement;

 

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(f) any Subsidiary acquired or formed in such Acquisition shall be joined as a
Loan Party, shall grant a first priority security interest in such property of
such Subsidiary of the same nature as constitutes Collateral under the Security
Documents and shall take such further actions within the time set forth in, and
subject to and in accordance with the provisions of, Section 6.11 hereof, to the
extent required thereunder; and

(g) the Payment Conditions shall have been satisfied.

“Permitted Cash Equivalents” shall mean:

(a) readily marketable obligations issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
having maturities of not more than 360 days from the date of acquisition
thereof; provided that the full faith and credit of the United States of America
is pledged in support thereof;

(b) commercial paper issued by any Person organized under the laws of any state
of the United States of America and rated at least “Prime-1” (or the then
equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by
S&P, in each case with maturities of not more than 180 days from the date of
acquisition thereof;

(c) time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States of America, any state thereof or the
District of Columbia or is the principal banking subsidiary of a bank holding
company organized under the laws of the United States of America, any state
thereof or the District of Columbia, and is a member of the Federal Reserve
System, and (ii) has combined capital and surplus of at least $1,000,000,000, in
each case with maturities of not more than 180 days from the date of acquisition
thereof;

(d) fully collateralized repurchase agreements with a term of not more than
thirty (30) days for securities described in clause (a) above (without regard to
the limitation on maturity contained in such clause) and entered into with a
financial institution satisfying the criteria described in clause (c) above or
with any primary dealer and having a market value at the time that such
repurchase agreement is entered into of not less than 100% of the repurchase
obligation of such counterparty entity with whom such repurchase agreement has
been entered into; and

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

“Permitted Discretion” means a determination made by the Agent in good faith and
in the exercise of commercially reasonable business judgment.

“Permitted Disposition” means any of the following:

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

 

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(b) bulk sales or other Dispositions of the Inventory of a Loan Party not in the
ordinary course of business in connection with Permitted Store Closings, at
arm’s length;

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

(d) licenses for the conduct of licensed departments within the Loan Parties’
Stores in the ordinary course of business; provided that, with respect to
licensed departments established after the Closing Date or with respect to any
material increase in revenue after the Closing Date of any existing licensed
departments as of the Closing Date, if requested by the Agent, the Lead Borrower
shall use commercially reasonable efforts to cause the Person operating such
licensed department to enter into an intercreditor agreement with the Agent on
terms and conditions similar to those entered into in connection with other
credit agreements in which Bank of America acts as agent or on other current
market agreements;

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

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

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

(h) Dispositions which constitute Restricted Payments that are otherwise
permitted hereunder;

(i) Dispositions permitted pursuant to Section 7.04 hereof;

(j) the Disposition of defaulted receivables and the compromise, settlement and
collection of receivables in the ordinary course of business or in bankruptcy or
other proceedings concerning the other account party thereon and not as part of
an accounts receivable financing transaction;

(k) leases, licenses or subleases or sublicenses of any real or personal
property not constituting ABL Collateral in the ordinary course of business;

(l) any surrender or waiver of contract rights or the settlement, release,
recovery on or surrender of contract, tort or other claims of any kind (other
than, in each case, with respect to rights to license the Related Intellectual
Property, unless the limited license granted to the Agent in such Related
Intellectual Property pursuant to the Loan Documents remains in effect and is
acknowledged by the licensee) to the extent that any of the foregoing could not
reasonably be expected to have a Material Adverse Effect;

(m) the sale of other Permitted Cash Equivalents in the ordinary course of
business;

(n) sales of Inventory (other than Eligible Inventory) determined by the
management of the applicable Loan Party not to be saleable in the ordinary
course of business of such Loan Party or any of the Loan Parties;

 

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(o) Dispositions of Related Intellectual Property to Persons that have entered
into an agreement, reasonably satisfactory to the Agent, acknowledging the
limited license granted to the Agent in such Related Intellectual Property
pursuant to the Loan Documents and agreeing to abide by, and not interfere with,
such limited license;

(p) Dispositions of property not constituting ABL Collateral in an amount not to
exceed $20,000,000 in the aggregate as to all such dispositions occurring after
the Closing Date, irrespective of whether the Payment Conditions have been
satisfied; and

(q) Dispositions of other property not constituting ABL Collateral so long as
the Payment Conditions are satisfied.

“Permitted Encumbrances” means:

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

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

(c) Liens, pledges and deposits made in the ordinary course of business in
connection with workers’ compensation and other casualty insurance lines,
unemployment insurance and other types of social security laws or regulations,
other than any Lien imposed by ERISA;

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

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

(f) easements, covenants, conditions, restrictions, building code laws, zoning
restrictions, rights-of-way and similar encumbrances on real property imposed by
Law or arising in the ordinary course of business that do not materially
interfere with the ordinary conduct of business of a Loan Party and such other
minor title defects or survey matters that are disclosed by current surveys
that, in each case, do not materially interfere with the current use of the real
property;

(g) Liens existing on the Closing Date listed in the Perfection Certificate and
Liens to secure any Permitted Refinancings of the Indebtedness with respect
thereto;

(h) Liens on fixed or capital assets of any Loan Party which secure Indebtedness
permitted under clause (c) of the definition of Permitted Indebtedness so long
as (i) such Liens and the Indebtedness secured thereby are incurred prior to or
within ninety (90) days after the acquisition thereof, (ii) the Indebtedness
secured thereby does not exceed the cost of acquisition of the applicable
assets, and (iii) such Liens shall attach only to the assets acquired, improved
or refinanced with such Indebtedness and shall not extend to any other property
or assets of the Loan Parties;

 

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(i) Liens in favor of the Agent securing the Obligations;

(j) landlords’ and lessors’ statutory Liens in respect of rent not in default;

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

(l) Liens arising solely by virtue of any statutory or common law provisions or
customary contractual provisions relating to banker’s Liens, Liens in favor of
securities intermediaries, rights of setoff or similar rights and remedies as to
deposit accounts or securities accounts or other funds maintained with
depository institutions or securities intermediaries, including rights of setoff
relating to the establishment of depository relations with banks not given in
connection with the issuance of Indebtedness or relating to pooled deposit or
sweep accounts of the Loan Parties to permit the satisfaction of overdraft or
similar obligations incurred in the ordinary course of business;

(m) any interest of a lessor or sublessor under, and Liens arising from,
precautionary UCC filings (or equivalent filings) regarding leases and subleases
permitted under the Loan Documents;

(n) any interest of, and Liens granted to consignors in the ordinary course of
business with respect to the consignment of goods to a Loan Party;

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

(p) Liens in favor of customs and revenues authorities imposed by applicable
Laws arising in the ordinary course of business in connection with the
importation of goods and securing obligations that are not overdue by more than
thirty (30) days or are being contested in compliance with Section 6.04;

(q) Liens on Related Intellectual Property with Persons that have entered into
an agreement, reasonably satisfactory to the Agent, acknowledging the limited
license granted to the Agent in such Related Intellectual Property pursuant to
the Loan Documents and agreeing to abide by, and not interfere with, such
limited license;

(r) Liens on property of the Loan Parties to secure Permitted Indebtedness under
clause (j) or (k) of the definition thereof and any Permitted Refinancings
thereof; provided that, (i) any Liens on the ABL Collateral granted by the Loan
Parties pursuant to this clause (r) shall be junior and subordinate to the
Agent’s Lien on the ABL Collateral and shall be subject to an intercreditor
agreement on terms similar to those entered into in connection with other credit

 

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agreements in which Bank of America acts as agent or on other current market
agreements, and (ii) if the Loan Parties grant Liens on both ABL Collateral and
on other property or assets which do not constitute ABL Collateral (“Other
Property”) pursuant to this clause (r), the Loan Parties shall grant a second
priority Lien on such Other Property to the Agent and shall cause the holder of
such Permitted Indebtedness to enter into an intercreditor agreement with the
Agent on terms similar to those entered into in connection with other credit
agreements in which Bank of America acts as agent or on other current market
agreements;

(s) other Liens securing obligations in an amount not to exceed $5,000,000 in
the aggregate;

(t) Liens in favor of issuers of credit cards arising in the ordinary course of
business securing the obligation to pay customary fees and expenses in
connection with credit card arrangements;

(u) Liens on premium rebates securing financing arrangements with respect to
insurance premiums;

(v) Liens on securities that are the subject of repurchase agreements
constituting Permitted Cash Equivalents;

(w) Liens on cash or Permitted Cash Equivalents posted as margin to secure
Indebtedness incurred pursuant to section (e) of the definition of Permitted
Indebtedness; and

(x) Liens solely on any cash earnest money deposits made by any Loan Party or
any of its Subsidiaries in connection with any letter of intent or purchase
agreement in respect of any Investment permitted hereunder.

“Permitted Holder” means ESL Investments, Inc. and any of its Affiliates other
than SHC and its Subsidiaries.

“Permitted Indebtedness” means each of the following:

(a) Indebtedness outstanding on the Closing Date listed in the Perfection
Certificate and any Permitted Refinancing thereof;

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

(c) purchase money Indebtedness of the Parent or any Subsidiary to finance the
acquisition of any real or personal property consisting solely of fixed or
capital assets, including Capital Lease Obligations, and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by a
Lien on any such assets prior to the acquisition thereof, and Permitted
Refinancings thereof, provided, however, that the aggregate principal amount of
Indebtedness permitted by this clause (c) shall not exceed $75,000,000 at any
time outstanding and further provided that, if reasonably requested by the Agent
with respect to property that is material to the realization on the ABL
Collateral, the Loan Parties shall use commercially reasonable efforts to cause
the holders of such Indebtedness to enter into a use and access agreement on
terms reasonably satisfactory to the Agent;

(d) contingent liabilities under surety bonds or similar instruments incurred in
the ordinary course of business in connection with the construction or
improvement of Stores;

 

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(e) obligations (contingent or otherwise) of any Loan Party or any Subsidiary
thereof existing or arising under any Swap Contract, provided that (i) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates, and not for purposes
of speculation or taking a “market view” and (ii) such Swap Contract does not
contain any provision exonerating the non-defaulting party from its obligation
to make payments on outstanding transactions to the defaulting party;

(f) Indebtedness arising from agreements of the Parent or any Subsidiary
providing for indemnification, adjustment of purchase or acquisition price,
deferred purchase price or similar obligations with respect to any Acquisition
permitted under Section 7.02 or Disposition permitted by Section 7.05;

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

(h) the Obligations;

(i) Indebtedness that is unsecured or subordinated so long as the terms of such
Indebtedness and the subordination provisions relating to such Indebtedness are
reasonably acceptable to the Agent;

(j) Indebtedness under one or more term loan facilities in an aggregate amount
not to exceed $250,000,000, which facilities have a maturity date of not earlier
than 91 days following the Maturity Date described in clause (a) of the
definition thereof, which do not require the repayment of principal prior to the
Maturity Date described in clause (a) of the definition thereof in excess of one
percent (1.00%) per annum of the original principal amount thereof (excluding,
for the avoidance of doubt, repayments required as a result of asset sales,
change of control or events of default thereunder) and which term loan
facilities if secured by Liens on ABL Collateral, shall be subject to an
intercreditor agreement with the holder of such Indebtedness subordinating such
Liens on the ABL Collateral to the Liens of the Agent and otherwise on terms
similar to those entered into in connection with other credit agreements in
which Bank of America acts as agent or on other current market agreements;

(k) other Indebtedness not otherwise permitted hereunder in a principal amount
not to exceed $30,000,000 at any time outstanding;

(l) (i) Indebtedness of any Subsidiary of the Parent that is not a Loan Party to
any other Subsidiary that is not a Loan Party, (ii) Indebtedness of any Loan
Party to any Subsidiary that is not a Loan Party, provided such Indebtedness is
subordinated to the Obligations on terms reasonably satisfactory to the Agent
and such Indebtedness does not mature prior to the Maturity Date described in
clause (a) of the definition thereof, and (iii) Indebtedness of any Subsidiary
that is not a Loan Party to any Loan Party arising from a Permitted Investment
by such Loan Party in such Subsidiary that is not a Loan Party;

(m) Indebtedness in respect of performance bonds, bid bonds, appeal bonds,
surety bonds and completion guarantees and similar obligations (including, in
each case, letters of credit issued to provide such bonds, guaranties and
similar obligations), in each case provided in the ordinary course of business,
including those incurred to secure health, safety and environmental obligations
in the ordinary course of business;

 

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(n) Indebtedness arising from overdraft facilities and/or the honoring by a bank
or other financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business or other cash
management services (including, but not limited to, intraday, ACH and purchasing
card/T&E services) in the ordinary course of business; provided, that (x) such
Indebtedness (other than credit or purchase cards) is extinguished within ten
Business Days of notification to the applicable Loan Party of its incurrence and
(y) such Indebtedness in respect of credit or purchase cards is extinguished
within 60 days from its incurrence;

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

(p) To the extent constituting Indebtedness, obligations incurred in the
ordinary course of business in respect of private label trade letters of credit
not constituting Obligations;

(q) Indebtedness that is Permitted Refinancing Indebtedness; and

(r) Indebtedness arising from a Guarantee of any Indebtedness otherwise
constituting Permitted Indebtedness.

“Permitted Investments” means each of the following:

(a) Permitted Cash Equivalents;

(b) Investments existing on the Closing Date and listed in the Perfection
Certificate, but not any increase in the amount thereof or any other
modification of the terms thereof;

(c) (i) Investments by any Loan Party and its Subsidiaries in their respective
Subsidiaries outstanding on the Closing Date, (ii) additional Investments by any
Loan Party and the Subsidiaries in Loan Parties (other than the Parent),
(iii) additional Investments by Subsidiaries of the Loan Parties that are not
Loan Parties in other Subsidiaries that are not Loan Parties and (iv) additional
Investments by the Loan Parties in Subsidiaries that are not Loan Parties in an
aggregate amount invested after the Closing Date not to exceed $15,000,000;

(h) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business, and Investments received in satisfaction or partial
satisfaction thereof from financially troubled account debtors to the extent
reasonably necessary in order to prevent or limit loss;

(i) Guarantees constituting Permitted Indebtedness and Guarantees of operating
leases or other obligations that do not constitute Indebtedness, in each case
entered into in the ordinary course of business;

(j) so long as no Default or Event of Default has occurred and is continuing or
would result from such Investment, Investments by any Loan Party in Swap
Contracts permitted hereunder;

 

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(k) Investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;

(l) advances to officers, directors and employees of the Loan Parties and
Subsidiaries in the ordinary course of business in an amount not to exceed
$1,000,000 to any individual at any time outstanding or in an aggregate amount
not to exceed $2,500,000 at any time outstanding, for ordinary business
purposes;

(m) Investments constituting Permitted Acquisitions and Investments held by the
Person acquired in such Acquisition at the time of such Acquisition (and not
acquired in contemplation of the Acquisition);

(n) Investments arising out of the receipt of non-cash consideration for the
sale of assets otherwise permitted under this Agreement;

(o) Investments in Swap Contracts not entered into for speculative purposes;

(p) advances in the form of a prepayment of expenses, so long as such expenses
are being paid in accordance with customary trade terms of the applicable Loan
Party;

(q) Investments consisting of the licensing or contribution of Intellectual
Property pursuant to joint marketing arrangements with other Persons, provided
that no such Investment shall impair in any manner the limited license granted
to the Agent in such Intellectual Property pursuant to the Loan Documents; and

(r) Investments in joint ventures that solely own real properties (and ancillary
assets) upon which Stores are located existing as of the Closing Date and
entered into hereafter in the ordinary course of business;

(s) other Investments not otherwise specifically described herein not to exceed
$10,000,000 at any time outstanding irrespective of whether the Payment
Conditions have been satisfied; and

(t) other Investments not otherwise specifically described herein so long as the
Payment Conditions have been satisfied.

“Permitted Overadvance” means an Overadvance made by the Agent, in its
discretion, which:

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

(ii) Is made to enhance the likelihood of, or to maximize the amount of,
repayment of any Obligation; or

(iii) Is made to pay any other amount chargeable to any Loan Party hereunder;
and

(b) Together with all other Permitted Overadvances then outstanding, shall not
(i) exceed five percent (5%) of the Borrowing Base at any time or (ii) unless a
Liquidation is occurring, remain outstanding for more than forty-five
(45) consecutive Business Days, unless in each case, the Required Lenders
otherwise agree;

 

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provided however, that the foregoing shall not (i) modify or abrogate any of the
provisions of Section 2.03 regarding the Lenders’ obligations with respect to
Letters of Credit or Section 2.04 regarding the Lenders’ obligations with
respect to Swing Line Loans, or (ii) result in any claim or liability against
the Agent (regardless of the amount of any Overadvance) for Unintentional
Overadvances, and such Unintentional Overadvances shall not reduce the amount of
Permitted Overadvances allowed hereunder, and further provided that in no event
shall the Agent make an Overadvance, if after giving effect thereto, the
principal amount of the Credit Extensions (including any such Overadvance) would
exceed the Aggregate Commitments (as in effect prior to any termination of the
Commitments pursuant to Sections 2.06 or 8.02 hereof).

“Permitted Refinancing” means, with respect to any Person, any Indebtedness
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting a
Permitted Refinancing); provided, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
Refinanced (plus unpaid accrued interest and premiums thereon and underwriting
discounts, defeasance costs, fees, commissions and expenses), (b) the weighted
average life to maturity of such Permitted Refinancing is greater than or equal
to the weighted average life to maturity of the Indebtedness being Refinanced
(c) such Permitted Refinancing shall not have a final maturity earlier than the
final maturity of the Indebtedness being refinanced, (d) in the case of a
Permitted Refinancing of Indebtedness of the type described in clause (j) of the
definition of Permitted Indebtedness, such Permitted Refinancing Indebtedness
shall not require any repayment of principal prior to the Maturity Date
described in clause (a) of the definition thereof in excess of one percent
(1.00%) per annum of the original principal amount thereof (excluding, for the
avoidance of doubt, repayments required as a result of assets sales, change of
control or events of default thereunder), (e) if the Indebtedness being
Refinanced is subordinated in right of payment to the Loan Agreement
Obligations, such Permitted Refinancing shall be subordinated in right of
payment to such Loan Agreement Obligations on terms at least as favorable to the
Agent and the Lenders as those contained in the documentation governing the
Indebtedness being Refinanced and (f) no Permitted Refinancing shall have direct
or indirect obligors who were not also obligors of the Indebtedness being
Refinanced, or greater guarantees or security, than the Indebtedness being
Refinanced.

“Permitted Store Closings” means (a) Store closures and related Inventory
dispositions which do not exceed (i) in any Fiscal Year of the Parent and its
Subsidiaries, Stores representing ten (10%) percent of the amount of Inventory
of the Loan Parties’ as of the beginning of such Fiscal Year and (ii) in the
aggregate from and after the Closing Date, Stores representing forty
(40%) percent of the amount of Inventory of the Loan Parties’ as of the Closing
Date, and (b) the related Inventory is either moved to a distribution center or
another retail location of the Loan Parties for future sale in the ordinary
course of business or is disposed of at such Stores in accordance with
liquidation agreements and with professional liquidators reasonably acceptable
to the Agent.

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

“Plan” means any employee benefit plan within the meaning of Section 3(3) of
ERISA (including a Pension Plan but excluding a Multiemployer Plan) maintained
for employees of the Parent or any ERISA Affiliate or any such Plan to which the
Parent or any ERISA Affiliate is required to contribute on behalf of any of its
employees.

 

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“Platform” has the meaning specified in Section 6.02.

“Pro Forma Availability Condition” shall mean, as of any date of calculation,
Pro Forma Excess Availability will be equal to or greater than the greater of
(a) 20% of the Loan Cap and (b) $40,000,000.

“Pro Forma Excess Availability” shall mean, as of any date of calculation, after
giving pro forma effect to the transaction then to be consummated or payment to
be made, Availability as of the date of such transaction or payment and
projected average monthly Availability for each month during the subsequent
projected twelve (12) fiscal months.

“Public Lender” has the meaning specified in Section 6.02.

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

“Recipient” means the Agent, any Lender, the L/C Issuer or any other recipient
of any payment to be made by or on account of any obligation of any Loan Party
hereunder.

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

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

“Related Intellectual Property” means such rights with respect to the
Intellectual Property of the applicable Subsidiaries of SHC (other than Sears
Canada Inc. and its Subsidiaries) as are reasonably necessary to permit the
Agent to enforce its rights and remedies under the Loan Documents with respect
to the ABL Collateral.

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

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

“Reports” has the meaning provided in Section 9.12(b).

“Request for Credit Extension” means (a) with respect to a Borrowing, Conversion
or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to
an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to
a Swing Line Loan, a Swing Line Loan Notice.

“Required Lenders” means, as of any date of determination, Lenders holding at
least 51% of the Aggregate Commitments or, if the Commitment of each Lender to
make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated, Lenders holding in the aggregate at least 51% of the Total
Outstandings (with the aggregate amount of each Lender’s risk participation and
funded participation in L/C Obligations and Swing Line Loans being deemed “held”
by such Lender for purposes of this definition); provided that the Commitment
of, and the portion of the Total Outstandings held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of
Required Lenders.

 

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“Reserves” means all Inventory Reserves and Availability Reserves. The Agent
shall have the right, at any time and from time to time after the Closing Date
in its Permitted Discretion to establish, modify or eliminate Reserves.

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

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

“Restricted Payment Conditions” means, with respect to any Restricted Payment,
either (a) (i) no Default or Event of Default then exists or would arise as a
result of the making of such Restricted Payment, (ii) the Borrowers have
demonstrated to the reasonable satisfaction of the Agent that monthly
Availability, immediately following the making of such Restricted Payment and as
projected on a pro forma basis for the twelve (12) months following and after
giving effect to such Restricted Payment, will be at least equal to the greater
of (x) 25% of the Loan Cap, and (y) $50,000,000, and (iii) after giving pro
forma effect to such Restricted Payment as if such Restricted Payment
constituted a “Debt Service Charge”, the Consolidated Fixed Charge Coverage
Ratio, as calculated on a trailing twelve months basis, is equal to or greater
than 1.1:1.0, or (b) (i) no Default or Event of Default then exists or would
arise as a result of the making of such Restricted Payment, (ii) such Restricted
Payment is not made with the proceeds of any Credit Extension hereunder,
(iii) during the 120-day period prior to such Restricted Payment, no Loans were
outstanding under this Agreement; and (iv) the Borrowers have demonstrated to
the reasonable satisfaction of the Agent that, on a pro forma and projected
basis, no Loans will be outstanding hereunder for the 120-day period following
the making of such Restricted Payment.

“Rights Offering” means the planned distribution by SHC to each holder of its
common stock of transferable subscription rights to purchase the Equity
Interests of the Parent on the terms and conditions set forth in the Form S-1
Registration Statement dated April 26, 2012 (as amended and in effect on the
Closing Date).

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

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

“Sears Tri-Party Agreement” means the Tri-Party Agreement dated the Closing Date
among the Agent, the Loan Parties and SHC and certain of its Subsidiaries, as
the same may be amended and in effect from time to time.

 

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

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

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

“Separation” means the Disposition by SHC on the Closing Date of 100% of the
Equity Interests of the Parent pursuant to the Rights Offering, as a result of
which the Parent will become a publicly traded company independent from SHC and
its Subsidiaries.

“Separation Agreements” means each of (a) the Services Agreement dated August 8,
2012 between Sears Holding Management Corporation and the Parent, (b) the
Merchandising Agreement dated August 8, 2012 by and among Sears, Roebuck and
Co., Kmart Corporation and SHC, on the one hand, and the Parent, the Lead
Borrower, and Sears Outlet Stores, L.L.C., on the other hand, (c) the Store
License Agreement dated August 8, 2012 between Sears, Roebuck and Co. and the
Lead Borrower, (d) the Store License Agreement dated August 8, 2012 between
Sears, Roebuck and Co. and Sears Outlet Stores, L.L.C., (e) the Store License
Agreement dated August 8, 2012 between Sears, Roebuck and Co. and Sears Home
Appliance Showrooms, LLC, (f) the Trademark License Agreement dated August 8,
2012 between Sears, Roebuck and Co. and the Parent, (g) the Shop Your Way
Rewards Retail Establishment Agreement dated August 8, 2012 between Sears
Holdings Management Corporation and the Parent, (h) the Tax Sharing Agreement
dated August 8, 2012 between SHC and the Parent, and (i) the ETSA.

“Settlement Date” has the meaning provided in Section 2.14(a).

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

“SHC” has the meaning specified in the recitals hereto.

“SHC Credit Agreement” means that certain Second Amended and Restated Credit
Agreement dated as of April 8, 2011 among Sears Roebuck Acceptance Corp. and
Kmart Corporation, as Borrowers, SHC, Bank of America, as agent, and a syndicate
of lenders.

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

“Solvent” and “Solvency” means, with respect to any Person and its Subsidiaries
on a Consolidated basis on a particular date, that on such date (a) at fair
valuation, all of the properties and assets of such Person are greater than the
sum of the debts, including contingent liabilities, of such Person, (b) the
present fair saleable value of the properties and assets of such Person is not
less than the amount that would be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such Person is
able to realize upon its properties and assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (d) such Person does not intend to, and does not
believe that it will, incur debts beyond such

 

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

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial
Letter of Credit and that (a) is used in lieu or in support of performance
guaranties or performance, surety or similar bonds (excluding appeal bonds)
arising in the ordinary course of business, (b) is used in lieu or in support of
stay or appeal bonds, (c) supports the payment of insurance premiums for
reasonably necessary casualty insurance carried by any of the Loan Parties, or
(d) supports payment or performance for identified purchases or exchanges of
products or services in the ordinary course of business.

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

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the FRB to which the Agent is subject with respect to the
Adjusted LIBOR Rate, for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. LIBOR
Rate Loans shall be deemed to constitute eurocurrency funding and to be subject
to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

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

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

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

 

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

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to
Section 2.04.

“Swing Line Lender” means Bank of America in its capacity as provider of Swing
Line Loans, or any successor swing line lender hereunder.

“Swing Line Loan” has the meaning specified in Section 2.04(a).

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to
Section 2.04(b), which, if in writing, shall be substantially in the form of
Exhibit B.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $25,000,000 and
(b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not in
addition to, the Aggregate Commitments. A permanent reduction of the Aggregate
Commitments shall not require a corresponding pro rata reduction in the Swing
Line Sublimit; provided, however, that if the Aggregate Commitments are reduced
to an amount less than the Swing Line Sublimit, then the Swing Line Sublimit
shall be reduced to an amount equal to (or, at Lead Borrower’s option, less
than) the Aggregate Commitments.

“Synthetic Lease Obligation” means the obligations of a Person under any lease
that is treated as an operating lease for financial accounting purposes and a
financing lease for tax purposes.

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

“Termination Date” means the earliest to occur of (i) the Maturity Date,
(ii) the date on which the maturity of the Loan Agreement Obligations is
accelerated (or deemed accelerated) and the Commitments are irrevocably
terminated (or deemed terminated) in accordance with Article VIII, or (iii) the
termination of the Commitments in accordance with the provisions of Section 2.06
hereof.

“Third Party Dealers” means, as of the Closing Date, the individuals and
entities listed in the Perfection Certificate as “third party dealers”, and
thereafter, any additional individual or entity that meets the Third Party
Dealer and Franchisee Eligibility Requirements.

“Third Party Dealer and Franchisee Eligibility Requirements” means,
collectively, each of the following:

(a) The applicable Loan Party has executed an agreement (i) with the applicable
Third Party Dealer to operate a “Sears Authorized Hometown Store”, “Sears Home
Appliance Showroom” or “Sears Hardware Store” at a location owned or leased and
operated by such Third

 

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Party Dealer, substantially on the standard form agreements containing terms and
conditions established by the Loan Parties from time to time, and with respect
to any agreement executed, or renewed or extended, after the Closing Date to
include (A) an acknowledgement from such Third Party Dealer that the Loan
Parties, or the Agent, acting on behalf of the Loan Parties, are authorized to
transfer proceeds of the Inventory consigned by such Loan Party to such Third
Party Dealer from the bank account maintained by such Third Party Dealer to an
account in the name of a Loan Party, and (B) an acknowledgement by the Third
Party Dealer that the applicable Loan Party has granted a Lien to the Agent on
the Inventory consigned by such Loan Party to the Third Party Dealer and an
agreement by the Third Party Dealer to reasonably cooperate with the Agent in
the event of the exercise by the Agent of its rights and remedies with respect
to such Lien, or (ii) with the applicable Third Party Franchisee to operate a
“Sears Home Appliance Showroom” or a “Sears Hardware Store” at a location owned
or leased and operated by such Third Party Franchisee, substantially on the
standard form agreements containing terms and conditions established by the Loan
Parties from time to time, and with respect to any agreement executed, or
renewed or extended, after the Closing Date to include (A) an acknowledgement
from such Third Party Franchisee that the Loan Parties, or the Agent, acting on
behalf of the Loan Parties, are authorized to transfer proceeds of the Inventory
consigned by such Loan Party to such Third Party Franchisee from the bank
account maintained by such Third Party Franchisee to an account in the name of a
Loan Party, and (B) an acknowledgement by the Third Party Franchisee that the
applicable Loan Party has granted a Lien to the Agent on the Inventory consigned
by such Loan Party to the Third Party Franchisee and an agreement by the Third
Party Franchisee to reasonably cooperate with the Agent in the event of the
exercise by the Agent of its rights and remedies with respect to such Lien;

(b) The applicable Loan Party has provided the Agent with evidence that such
Loan Party has filed appropriate UCC financing statements against the applicable
Third Party Dealer or Third Party Franchisee evidencing the consignment
arrangement between such Loan Party and the applicable Third Party Dealer or
Third Party Franchisee with respect to the Inventory consigned by the such Loan
Party to the applicable Third Party Dealer or Third Party Franchisee, and has
taken all other action required under applicable Law to obtain a valid, first
priority perfected security interest in such Inventory (including, without
limitation, providing notification to other secured parties of the applicable
Third Party Dealer or Third Party Franchisee as required by the UCC);

(c) If requested by the Agent, the applicable Loan Party has provided the Agent
with an assignment of the UCC financing statements set forth in clause
(b) above;

(d) The applicable Loan Party has complied with all representations, warranties
and covenants set forth herein and in the other Loan Documents relating to
federal and state franchise and other regulatory Law in connection with the
operation of “Sears Authorized Hometown Stores”, “Sears Home Appliance
Showrooms” and “Sears Hardware Stores” by the applicable Third Party Dealer or
Third Party Franchisee; and

(e) The agreements between the applicable Loan Party and the applicable Third
Party Dealer or Third Party Franchisee provide that all amounts owed by such
Third Party Dealer or Third Party Franchisee to such Loan Party shall be swept
daily into a Blocked Account.

For the purposes of paragraph (a) above, “reasonably cooperate with the Agent”
means that the Third Party Dealer or Third Party Franchisee, as the case may be,
will, at the Agent’s expense, (i) give the Agent and its representatives access
during normal business hours to all Inventory consigned by the applicable Loan
Party to the Third Party Dealer or Third Party

 

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Franchisee, as the case may be, (ii) permit the Agent and its representatives to
take possession and control of the Inventory consigned by the applicable Loan
Party to the Third Party Dealer or Third Party Franchisee, as the case may be,
and to remove the Inventory from the premises of the Third Party Dealer or Third
Party Franchisee, as the case may be, (iii) to the extent not prohibited by
applicable location occupancy agreements (such as leases), conduct “going out of
business sales” and engage in similar activities with respect to the Inventory
consigned by the applicable Loan Party to the Third Party Dealer or Third Party
Franchisee, as the case may be, and (iv) take all other commercially reasonable
actions with respect to the Inventory consigned by the applicable Loan Party to
the Third Party Dealer or Third Party Franchisee, as the case may be, that, upon
the Agent’s request, may be reasonably necessary to permit the Agent to exercise
all of its rights and remedies with respect to the Lien on the Inventory
consigned by such Loan Party to the Third Party Dealer or Third Party
Franchisee, as the case may be.

“Third Party Franchisees” means, as of the Closing Date, the individuals and
entities listed in the Perfection Certificate as “third party franchisees”, and
thereafter, any additional individual or entity that meets the Third Party
Dealer and Franchisee Eligibility Requirements.

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

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

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

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the state of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
“Uniform Commercial Code” means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection or availability of such
remedy, as the case may be.

“UCP 600” means, with respect to any Letter of Credit, the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce (“ICC”)
Publication No. 600 (or such later version thereof as may be in effect at the
time of issuance).

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

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

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.

 

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“U.S. Tax Compliance Certificate” has the meaning specified in
Section 3.01(e)(ii)(B)(III).

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

(a) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document (including any Organization Document) shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time, and (vi) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means “to and
including.”

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

(d) Any reference herein or in any other Loan Document to the satisfaction,
repayment, or payment in full of the Obligations shall mean the repayment in
Dollars in full in cash or immediately available funds (or, in the case of
contingent reimbursement obligations with respect to Letters of Credit,
providing Cash Collateralization) of all of the Obligations (including the
payment of any termination amount then applicable (or which would or could
become applicable as a result of the repayment of the other Obligations) under
Swap Contracts) other than (i) unasserted contingent indemnification
Obligations, (ii) any Obligations relating to Bank Products (including Swap
Contracts) that, at such time, are allowed by the applicable Bank Product
provider to remain outstanding without being required to be repaid or Cash
Collateralized, and (iii) any Obligations relating to Cash Management Services
that, at such time, are allowed by the applicable provider of such Cash
Management Services to remain outstanding without being required to be repaid.

 

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1.03 Accounting Terms

(a) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except
as otherwise specifically prescribed herein.

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

1.04 Rounding. Any financial ratios required to be maintained by the Loan
Parties pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding up if
there is no nearest number).

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

1.06 Letter of Credit Amounts. Unless otherwise specified, all references herein
to the amount of a Letter of Credit at any time shall be deemed to be the Stated
Amount of such Letter of Credit in effect at such time; provided, however, that
with respect to any Letter of Credit that, by its terms or the terms of any
Issuer Documents related thereto, provides for one or more automatic increases
in the Stated Amount thereof, the amount of such Letter of Credit shall be
deemed to be the maximum Stated Amount of such Letter of Credit after giving
effect to all such increases, whether or not such maximum Stated Amount is in
effect at such time. Any Letter of Credit issued pursuant to Section 2.03 hereof
in a currency other than Dollars shall be issued in an amount equivalent to
Dollars in such currency, such equivalent amount thereof in the applicable
currency to be determined by the Agent at such time on the basis of the Spot
Rate (as defined below) for the purchase of such currency with Dollars. For
purposes of this Section 1.06, the “Spot Rate” for a currency means the rate
determined by the Agent to be the rate quoted by the Person acting in such
capacity as the spot rate for the purchase by such Person of such currency with
another currency through its principal foreign exchange trading office at
approximately 11:00 a.m. on the date two Business Days prior to the date of such
determination; provided that the Agent may obtain such spot rate from another
financial institution designated by the Agent if the Person acting in such
capacity does not have as of the date of determination a spot buying rate for
any such currency.

 

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ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

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

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

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

Within the limits of each Lender’s Commitment, and subject to the other terms
and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay
under Section 2.05, and reborrow under this Section 2.01.

2.02 Borrowings, Conversions and Continuations of Committed Loans.

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

(b) Each Committed Borrowing, each Conversion of Committed Loans from one Type
to the other, and each continuation of LIBOR Rate Loans shall be made upon the
Lead Borrower’s irrevocable notice to the Agent, which may be given by
telephone. Each such notice must be received by the Agent not later than
(i) 12:00 p.m. three Business Days prior to the requested date of any Borrowing
of, Conversion to or continuation of LIBOR Rate Loans or of any Conversion of
LIBOR Rate Loans to Base Rate Loans, and (ii) 1:00 p.m. on the requested date of
any Borrowing of Base Rate Loans. Each telephonic notice by the Lead Borrower
pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the
Agent of a written Committed Loan Notice, appropriately completed and signed by
a Responsible Officer of the Lead Borrower. Each Borrowing of, Conversion to or
continuation of LIBOR Rate Loans shall be in a principal amount of $5,000,000 or
a whole multiple of $1,000,000 in excess thereof, provided that one Borrowing
of, Conversion to or continuation of LIBOR Rate Loans may be in a principal
amount of less than $5,000,000 but in all events shall be greater than
$2,000,000. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing
of or Conversion to Base Rate Loans shall be in minimum amounts of $500,000.
Each Committed Loan Notice (whether telephonic or written) shall specify
(i) whether the Lead Borrower is requesting a Committed Borrowing, a Conversion
of Committed Loans from one Type to the other, or a continuation of LIBOR Rate
Loans, (ii) the requested date of the Borrowing, Conversion or continuation, as
the case may be (which shall be a Business Day), (iii) the principal amount of
Committed Loans to be borrowed, Converted or continued, (iv) the Type of
Committed Loans to be borrowed or to which existing Committed Loans are to be
Converted, and (v) if applicable, the duration of the Interest Period with
respect thereto. If the Lead Borrower fails to specify a Type of Committed Loan
in a Committed Loan Notice or if the Lead Borrower fails to give a timely notice
requesting a Conversion or continuation, then the applicable Committed Loans
shall be made as, or

 

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Converted to, Base Rate Loans. Any such automatic Conversion to Base Rate Loans
shall be effective as of the last day of the Interest Period then in effect with
respect to the applicable LIBOR Rate Loans. If the Lead Borrower requests a
Borrowing of, Conversion to, or continuation of LIBOR Rate Loans in any such
Committed Loan Notice, but fails to specify an Interest Period, it will be
deemed to have specified an Interest Period of one month. Notwithstanding
anything to the contrary herein, a Swing Line Loan may not be Converted to a
LIBOR Rate Loan.

(c) Following receipt of a Committed Loan Notice, the Agent shall promptly
notify each Lender in writing of the amount of its Applicable Percentage of the
applicable Committed Loans, and if no timely notice of a Conversion or
continuation is provided by the Lead Borrower, the Agent shall notify each
Lender of the details of any automatic Conversion to Base Rate Loans described
in Section 2.02(b). In the case of a Committed Borrowing, each Lender shall make
the amount of its Committed Loan available to the Agent in immediately available
funds at the Agent’s Office not later than 3:00 p.m. on the Business Day
specified in the applicable Committed Loan Notice. Upon satisfaction of the
applicable conditions set forth in Section 4.02 (and, if such Borrowing is the
initial Credit Extension, Section 4.01), the Agent shall make all funds so
received available to the Borrowers in like funds as received by the Agent
either by (i) crediting the account of the Lead Borrower on the books of the
Agent with the amount of such funds or (ii) wire transferring such funds, in
each case in accordance with instructions provided to (and reasonably acceptable
to) the Agent by the Lead Borrower; provided, however, that if, on the date the
Committed Loan Notice with respect to such Borrowing is given by the Lead
Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Borrowing, first, shall be applied to the payment in full of any such L/C
Borrowings, and second, shall be made available to the Borrowers as provided
above.

(d) The Agent, without the request of the Lead Borrower, may advance any
interest, fee, service charge (including direct wire fees), expenses, or other
payment to which the Agent, the L/C Issuer or any Lender is entitled from the
Loan Parties pursuant hereto or any other Loan Document and may charge the same
to the Loan Account notwithstanding that an Overadvance may result thereby. The
Agent shall advise the Lead Borrower of any such advance or charge promptly
after the making thereof. Such action on the part of the Agent shall not
constitute a waiver of the Agent’s rights and the Borrowers’ obligations under
Section 2.05(c). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2.02(d) shall bear interest at the interest
rate then and thereafter applicable to Base Rate Loans (including the Default
Rate).

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

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

(g) After giving effect to all Committed Borrowings, all Conversions of
Committed Loans from one Type to the other, and all continuations of Committed
Loans as the same Type, there shall not be more than seven (7) Interest Periods
in effect with respect to LIBOR Rate Loans.

 

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(h) The Agent, the Lenders, the Swing Line Lender and the L/C Issuer shall have
no obligation to make any Loan or to provide any Letter of Credit if an
Overadvance would result. The Agent may, in its discretion, make Permitted
Overadvances without the consent of the Borrowers, the Lenders, the Swing Line
Lender and the L/C Issuer and the Borrowers and each Lender and L/C Issuer shall
be bound thereby; provided that the Required Lenders may suspend the Agent’s
authorization to make any or all Permitted Overadvances. Any Permitted
Overadvance may constitute a Swing Line Loan. A Permitted Overadvance is for the
account of the Borrowers and shall constitute a Base Rate Loan and a Loan
Agreement Obligation and shall be repaid by the Borrowers in accordance with the
provisions of Section 2.05(c). The making of any such Permitted Overadvance on
any one occasion shall not obligate the Agent or any Lender to make or permit
any Permitted Overadvance on any other occasion or to permit such Permitted
Overadvances to remain outstanding. The making by the Agent of a Permitted
Overadvance shall not modify or abrogate any of the provisions of Section 2.03
regarding the Lenders’ obligations to purchase participations with respect to
Letter of Credits or of Section 2.04 regarding the Lenders’ obligations to
purchase participations with respect to Swing Line Loans. Except as expressly
provided in Section 9.03, the Agent shall have no liability for, and no Loan
Party or Credit Party shall have the right to, or shall, bring any claim of any
kind whatsoever against the Agent with respect to Unintentional Overadvances
regardless of the amount of any such Overadvance.

2.03 Letters of Credit.

(a) The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer
agrees, in reliance upon the agreements of the Lenders set forth in this
Section 2.03, (1) from time to time on any Business Day during the period from
the Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit for the account of the Borrowers and the other Loan Parties, and to amend
or extend Letters of Credit previously issued by it, in accordance with
Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit;
and (B) the Lenders severally agree to participate in Letters of Credit issued
for the account of the Borrowers and the other Loan Parties and any drawings
thereunder; provided that after giving effect to any L/C Credit Extension with
respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the
Loan Cap, (y) the aggregate Outstanding Amount of the Committed Loans of any
Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of
all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding
Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and
(z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of
Credit Sublimit. Each request by the Lead Borrower for the issuance or amendment
of a Letter of Credit shall be deemed to be a representation by the Borrowers
that the L/C Credit Extension so requested complies with the conditions set
forth in the proviso to the preceding sentence. Within the foregoing limits, and
subject to the terms and conditions hereof, the Borrowers’ ability to obtain
Letters of Credit shall be fully revolving, and accordingly the Borrowers may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit that have expired or that have been drawn upon and reimbursed. Each
Letter of Credit shall be denominated in Dollars or any other lawful foreign
currency which is approved in writing on a case by case basis by the L/C Issuer
and the Agent in their sole and absolute discretion.

(ii) The L/C Issuer shall not issue any Letter of Credit, if:

(A) subject to Section 2.03(b)(iii), the expiry date of such requested Standby
Letter of Credit would occur more than twelve months after the date of issuance
or last extension, unless the Required Lenders have approved such expiry date;
or

(B) the expiry date of such requested Commercial Letter of Credit would occur
more than 180 days after the date of issuance, unless the Required Lenders have
approved such expiry date; or

 

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(C) the expiry date of such requested Letter of Credit would occur after the
Letter of Credit Expiration Date, unless either such Letter of Credit is Cash
Collateralized on or prior to the date that is ten (10) Business Days prior to
the Letter of Credit Expiration Date (or such later date as to which the Agent
may agree) or all the Lenders have approved such expiry date; or

(D) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the L/C Issuer from issuing
such Letter of Credit, or any Law applicable to the L/C Issuer or any request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over the L/C Issuer shall prohibit, or request that
the L/C Issuer refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon the L/C Issuer with respect
to such Letter of Credit any restriction, reserve or capital requirement (for
which the L/C Issuer is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss,
cost or expense which was not applicable on the Closing Date and which the L/C
Issuer in good faith deems material to it;

(E) the issuance of such Letter of Credit would violate one or more policies of
the L/C Issuer applicable to letters of credit generally;

(F) such Letter of Credit contains any provisions for automatic reinstatement of
the Stated Amount after any drawing thereunder; or

(G) any Lender is at that time a Defaulting Lender, unless the L/C Issuer has
entered into arrangements, including the delivery of Cash Collateral,
satisfactory to the L/C Issuer (in its sole discretion) with the Borrowers or
such Lender to eliminate the L/C Issuer’s actual or potential Fronting Exposure
(after giving effect to Section 2.16(a)(iv)) with respect to the Defaulting
Lender arising from either the Letter of Credit then proposed to be issued or
that Letter of Credit and all other L/C Obligations as to which the L/C Issuer
has actual or potential Fronting Exposure, as it may elect in its sole
discretion.

(iii) The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer
would not be permitted at such time to issue such Letter of Credit in its
amended form under the terms hereof or if the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.

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

(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension
Letters of Credit.

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon
the request of the Lead Borrower delivered to the L/C Issuer (with a copy to the
Agent) in the form of a Letter of Credit Application, appropriately completed
and signed by a Responsible Officer of the Lead Borrower. Such Letter of Credit
Application may be sent by facsimile, by United States mail, by

 

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overnight courier, by electronic transmission using the system provided by the
L/C Issuer, by personal delivery or by any other means acceptable to the L/C
Issuer. Such Letter of Credit Application must be received by the L/C Issuer and
the Agent not later than 11:00 a.m. at least two Business Days (or such other
date and time as the Agent and the L/C Issuer may agree in a particular instance
in their sole discretion) prior to the proposed issuance date or date of
amendment, as the case may be. In the case of a request for an initial issuance
of a Letter of Credit, such Letter of Credit Application shall specify in form
and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the
requested Letter of Credit (which shall be a Business Day); (B) the amount
thereof; (C) the expiry date thereof; (D) the name and address of the
beneficiary thereof; (E) the documents to be presented by such beneficiary in
case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the L/C Issuer may require. In the case of a request for an
amendment of any outstanding Letter of Credit, such Letter of Credit Application
shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which shall
be a Business Day); (C) the nature of the proposed amendment; and (D) such other
matters as the L/C Issuer may require. Additionally, the Lead Borrower shall
furnish to the L/C Issuer and the Agent such other documents and information
pertaining to such requested Letter of Credit issuance or amendment, including
any Issuer Documents, as the L/C Issuer or the Agent may reasonably require.

(ii) Subject to the provisions of Section 2.02(b)(iv) hereof, promptly after
receipt of any Letter of Credit Application, the L/C Issuer will confirm with
the Agent (by telephone or in writing) that the Agent has received a copy of
such Letter of Credit Application from the Lead Borrower and, if not, the L/C
Issuer will provide the Agent with a copy thereof. Unless the L/C Issuer has
received written notice from any Lender, the Agent or any Loan Party, at least
one Business Day prior to the requested date of issuance or amendment of the
applicable Letter of Credit, that one or more applicable conditions contained in
Article IV is not then satisfied or unless the L/C Issuer would not be
permitted, or would have no obligation, at such time to issue such Letter of
Credit under the terms hereof (by reason of the provisions of
Section 2.03(a)(ii) or otherwise), then, subject to the terms and conditions
hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit
for the account of the applicable Borrower (or the applicable Loan Party) or
enter into the applicable amendment, as the case may be, in each case in
accordance with the L/C Issuer’s usual and customary business practices.
Immediately upon the issuance or amendment of each Letter of Credit, each Lender
shall be deemed to (without any further action), and hereby irrevocably and
unconditionally agrees to, purchase from the L/C Issuer, without recourse or
warranty, a risk participation in such Letter of Credit in an amount equal to
the product of such Lender’s Applicable Percentage times the Stated Amount of
such Letter of Credit. Upon any change in the Commitments under this Agreement,
it is hereby agreed that with respect to all L/C Obligations, there shall be an
automatic adjustment to the participations hereby created to reflect the new
Applicable Percentages of the assigning and assignee Lenders.

(iii) If the Lead Borrower so requests in any applicable Letter of Credit
Application, the L/C Issuer may, in its sole and absolute discretion, agree to
issue a Standby Letter of Credit that has automatic extension provisions (each,
an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension
Letter of Credit must permit the L/C Issuer to prevent any such extension at
least once in each twelve-month period (commencing with the date of issuance of
such Standby Letter of Credit) by giving prior notice to the beneficiary thereof
not later than a day (the “Non-Extension Notice Date”) in each such twelve-month
period to be agreed upon at the time such Standby Letter of Credit is issued.
Unless otherwise directed by the L/C Issuer, the Lead Borrower shall not be
required to make a specific request to the L/C Issuer for any such extension.
Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be
deemed to have authorized (but may not require) the L/C Issuer to permit the
extension of such Standby Letter of Credit at any time to an expiry date not
later than (i) the Letter of Credit Expiration Date, or (ii) to a date later
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Borrowers Cash Collateralize such Letter of Credit on or prior to the date that
is ten (10) Business Days prior to the Letter of Credit Expiration Date;
provided, however, that the L/C Issuer shall not permit any such extension if
(A) the L/C Issuer has determined that it would not be permitted, or would have
no obligation, at such time to issue such Standby Letter of Credit in its
revised form (as extended) under the terms hereof (by reason of the provisions
of Section 2.03(a)(ii) or otherwise), or (B) it has received notice (which may
be by telephone or in writing) on or before the day that is seven Business Days
before the Non-Extension Notice Date (1) from the Agent that the Required
Lenders have elected not to permit such extension or (2) from the Agent, any
Lender or the Lead Borrower that one or more of the applicable conditions
specified in Section 4.02 is not then satisfied, and in each such case directing
the L/C Issuer not to permit such extension.

(iv) Promptly after its delivery of any Letter of Credit or any amendment to a
Letter of Credit to an advising bank with respect thereto or to the beneficiary
thereof, the L/C Issuer will also deliver to the Lead Borrower and the Agent a
true and complete copy of such Letter of Credit or amendment.

(c) Drawings and Reimbursements; Funding of Participations.

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the L/C Issuer shall notify the Lead
Borrower and the Agent thereof. Not later than 12:00 p.m. on (i) the Business
Day that the Lead Borrower receives notice of any payment by the L/C Issuer
under a Letter of Credit, if such notice is received on such day prior to 10:00
a.m. or (ii) if clause (i) above does not apply, the Business Day immediately
following the day that the Lead Borrower receives such notice (each such date,
an “Honor Date”), the Borrowers shall reimburse the L/C Issuer through the Agent
in an amount equal to the amount of such drawing. If the Borrowers fail to so
reimburse the L/C Issuer by such time, the Agent shall promptly notify each
Lender of the Honor Date, the amount of the unreimbursed drawing (the
“Unreimbursed Amount”), and the amount of such Lender’s Applicable Percentage
thereof. In such event, the Borrowers shall be deemed to have requested a
Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an
amount equal to the Unreimbursed Amount, without regard to the minimum and
multiples specified in Section 2.02 for the principal amount of Base Rate Loans,
but subject to the amount of the unutilized portion of the Loan Cap and the
conditions set forth in Section 4.02 (other than the delivery of a Committed
Loan Notice). Any notice given by the L/C Issuer or the Agent pursuant to this
Section 2.03(c)(i) may be given by telephone if immediately confirmed in
writing; provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.

(ii) Each Lender shall upon any notice from the Agent pursuant to
Section 2.03(c)(i) make funds available to the Agent (and the Agent may apply
Cash Collateral provided for this purpose) for the account of the L/C Issuer at
the Agent’s Office in an amount equal to its Applicable Percentage of the
Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in
such notice by the Agent, whereupon, subject to the provisions of
Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Loan to the Borrowers in such amount. The Agent shall
remit the funds so received to the L/C Issuer.

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Committed Borrowing of Base Rate Loans because the conditions set forth in
Section 4.02 cannot be satisfied or for any other reason, the Borrowers shall be
deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of
the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be
due and payable on demand (together with interest) and shall bear interest at
the Default Rate for Base Rate Loans. In such event, each Lender’s payment to
the Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii)
shall be deemed payment in respect of its participation in such L/C Borrowing
and shall constitute an L/C Advance from such Lender in satisfaction of its
participation obligation under this Section 2.03.

 

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(iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this
Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any
Letter of Credit, interest in respect of such Lender’s Applicable Percentage of
such amount shall be solely for the account of the L/C Issuer.

(v) Each Lender’s obligation to make Committed Loans or L/C Advances to
reimburse the L/C Issuer for amounts drawn under Letters of Credit, as
contemplated by this Section 2.03(c), shall be absolute and unconditional and
shall not be affected by any circumstance, including (A) any setoff,
counterclaim, recoupment, defense or other right which such Lender may have
against the L/C Issuer, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of a Default or Event of Default,
or (C) any other occurrence, event or condition, whether or not similar to any
of the foregoing; provided, however, that each Lender’s obligation to make
Committed Loans pursuant to this Section 2.03(c) is subject to the conditions
set forth in Section 4.02 (other than delivery by the Lead Borrower of a
Committed Loan Notice). No such making of an L/C Advance shall relieve or
otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for
the amount of any payment made by the L/C Issuer under any Letter of Credit,
together with interest as provided herein.

(vi) If any Lender fails to make available to the Agent for the account of the
L/C Issuer any amount required to be paid by such Lender pursuant to the
foregoing provisions of this Section 2.03(c) by the time specified in
Section 2.03(c)(ii), without limiting the other provisions of this Agreement,
the L/C Issuer shall be entitled to recover from such Lender (acting through the
Agent), on demand, such amount with interest thereon for the period from the
date such payment is required to the date on which such payment is immediately
available to the L/C Issuer at a rate per annum equal to the greater of the
Federal Funds Rate and a rate determined by the L/C Issuer in accordance with
banking industry rules on interbank compensation plus any administrative,
processing or similar fees customarily charged by the L/C Issuer in connection
with the foregoing. If such Lender pays such amount (with interest and fees as
aforesaid), the amount so paid shall constitute such Lender’s Committed Loan
included in the relevant Committed Borrowing or L/C Advance in respect of the
relevant L/C Borrowing, as the case may be. A certificate of the L/C Issuer
submitted to any Lender (through the Agent) with respect to any amounts owing
under this clause (vi) shall be conclusive absent manifest error.

(d) Repayment of Participations.

(i) At any time after the L/C Issuer has made a payment under any Letter of
Credit and has received from any Lender its L/C Advance in respect of such
payment in accordance with Section 2.03(c), if the L/C Issuer, or the Agent for
the account of the L/C Issuer, receives any payment in respect of the related
Unreimbursed Amount or interest thereon (whether directly from the Borrowers or
otherwise, including proceeds of Cash Collateral applied thereto by the Agent
pursuant to Section 2.03(g)), the L/C Issuer shall distribute any payment it
receives to the Agent and the Agent will distribute to such Lender its
Applicable Percentage thereof (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s L/C Advance
was outstanding) in the same funds as those received by the Agent.

(ii) If any payment received by the L/C Issuer or by Agent for the account of
the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under
any of the circumstances described in Section 10.05 (including pursuant to any
settlement entered into by the L/C Issuer in its discretion), each Lender shall
pay to the Agent for the account of the L/C Issuer its Applicable Percentage
thereof on demand of the Agent, plus interest thereon from the date of such
demand to the date such

 

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amount is returned by such Lender, at a rate per annum equal to the Federal
Funds Rate from time to time in effect. The obligations of the Lenders under
this clause shall survive the payment in full of the Loan Agreement Obligations
and the termination of this Agreement.

(e) Obligations Absolute. The obligation of the Borrowers to reimburse the L/C
Issuer for each drawing under each Letter of Credit and to repay each L/C
Borrowing shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other Loan Document;

(ii) the existence of any claim, counterclaim, setoff, defense or other right
that the Borrowers or any Subsidiary may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the L/C Issuer or
any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;

(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit;

(iv) waiver by the L/C Issuer of any requirement that exists for the L/C
Issuer’s protection and not the protection of the Borrowers or any waiver by the
L/C Issuer which does not in fact materially prejudice the Borrowers;

(v) honor of a demand for payment presented electronically even if such Letter
of Credit requires that demand be in the form of a draft;

(vi) any payment made by the L/C Issuer in respect of an otherwise complying
item presented after the date specified as the expiration date of, or the date
by which documents must be received under such Letter of Credit if presentation
after such date is authorized by the UCC, the ISP or the UCP, as applicable;

(vii) any payment by the L/C Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or any payment made by the L/C Issuer under such
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with
any proceeding under any Debtor Relief Law;

(viii) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Borrowers or any of
their Subsidiaries; or

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

 

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The Lead Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim of
non-compliance with the Lead Borrower’s instructions or other irregularity, the
Lead Borrower will promptly notify the L/C Issuer. The Borrowers shall be
conclusively deemed to have waived any such claim against the L/C Issuer and its
correspondents unless such notice is given as aforesaid.

(f) Role of L/C Issuer. Each Lender and the Borrowers agree that, in paying any
drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the L/C Issuer,
the Agent, any of their respective Related Parties nor any correspondent,
participant or assignee of the L/C Issuer shall be liable to any Loan Party or
to any Lender for (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or enforceability of
any document or instrument related to any Letter of Credit or Issuer Document.
The Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrowers’ pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. None of the
L/C Issuer, the Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable or
responsible for any of the matters described in clauses (i) through (ix) of
Section 2.03(e); provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer,
and the L/C Issuer may be liable to the Borrowers, to the extent, but only to
the extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary, and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason. The L/C Issuer may send a Letter of
Credit or conduct any communication to or from the beneficiary via the Society
for Worldwide Interbank Financial Telecommunication (“SWIFT”) message or
overnight courier, or any other commercially reasonable means of communicating
with a beneficiary.

(g) Cash Collateral. If, as of the Letter of Credit Expiration Date, any L/C
Obligation for any reason remains outstanding, the Borrowers shall, in each
case, immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations in an amount equal to 105% of the Outstanding Amount of all L/C
Obligations, pursuant to documentation in form and substance reasonably
satisfactory to the Agent and the L/C Issuer (which documents are hereby
consented to by the Lenders). The Borrowers hereby grant to the Agent a security
interest in all such cash, deposit accounts and all balances therein and all
proceeds of the foregoing to secure all Obligations. Such cash collateral shall
be maintained in blocked, non-interest bearing deposit accounts at Bank of
America. If at any time the Agent reasonably determines that any funds held as
cash collateral are subject to any right or claim of any Person other than the
Agent or that the total amount of such funds is less than the aggregate
Outstanding Amount of all L/C Obligations, the Borrowers will, forthwith upon
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Agent, as additional funds to be deposited as cash collateral, an amount equal
to the excess of (x) such aggregate Outstanding Amount of all L/C Obligations
over (y) the total amount of funds, if any, then held as cash collateral that
the Agent determines to be free and clear of any such right and claim. Upon the
drawing of any Letter of Credit for which funds are on deposit as cash
collateral, such funds shall be applied to reimburse the L/C Issuer and, to the
extent not so applied, shall thereafter be applied to satisfy other Loan
Agreement Obligations and other Obligations to the extent applied pursuant to
Section 8.03 hereof. After all such Letters of Credit shall have expired or been
fully drawn upon, all reimbursement obligations shall have been satisfied and
all other obligations of the Borrowers hereunder and under the other Loan
Documents shall have been paid in full, the balance, if any, in such cash
collateral account shall be returned to the Borrowers (or such other Person as
may be lawfully entitled thereto).

(h) Applicability of ISP and UCP; Limitation of Liability. Unless otherwise
expressly agreed by the L/C Issuer and the Lead Borrower when a Letter of Credit
is issued, (i) the rules of the ISP shall apply to each Standby Letter of
Credit, and (ii) the rules of the UCP shall apply to each Commercial Letter of
Credit. Notwithstanding the foregoing, the L/C Issuer shall not be responsible
to the Borrowers for, and the L/C Issuer’s rights and remedies against the
Borrowers shall not be impaired by, any action or inaction of the L/C Issuer
required or permitted under any law, order, or practice that is required or
permitted to be applied to any Letter of Credit or this Agreement, including the
Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is
located, the practice stated in the ISP or UCP, as applicable, or in the
decisions, opinions, practice statements, or official commentary of the ICC
Banking Commission, the Bankers Association for Finance and Trade—International
Financial Services Association (BAFT-IFSA), or the Institute of International
Banking Law & Practice, whether or not any Letter of Credit chooses such law or
practice.

(i) Letter of Credit Fees. The Borrowers shall pay to the Agent for the account
of each Lender in accordance with its Applicable Percentage a Letter of Credit
fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the
Applicable Rate times the daily Stated Amount under each such Letter of Credit
(whether or not such maximum amount is then in effect under such Letter of
Credit). For purposes of computing the daily amount available to be drawn under
any Letter of Credit, the amount of the Letter of Credit shall be determined in
accordance with Section 1.06. Letter of Credit Fees shall be (i) due and payable
on the 5th day subsequent to the last day of each April, July, October and
January, commencing with the first such date to occur after the issuance of such
Letter of Credit, and as to each Letter of Credit, on the expiry date of such
Letter of Credit, and (ii) computed on a quarterly basis in arrears.
Notwithstanding anything to the contrary contained herein, upon the request of
the Required Lenders, while any Event of Default exists, all Letter of Credit
Fees shall accrue at the Default Rate as provided in Section 2.08(b) hereof.

(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.
The Borrowers shall pay directly to the L/C Issuer for its own account a
fronting fee with respect to each Letter of Credit, at a rate equal to
0.125% per annum, computed on the daily amount available to be drawn under each
such Letter of Credit on a quarterly basis in arrears. Such fronting fees shall
be due and payable on the 5th day subsequent to the last day of each April,
July, October and January, commencing with the first such date to occur after
the issuance of such Letter of Credit and on the expiry date thereof. For
purposes of computing the daily amount available to be drawn under any Letter of
Credit, the amount of the Letter of Credit shall be determined in accordance
with Section 1.06. In addition, the Borrowers shall pay directly to the L/C
Issuer for its own account the customary issuance, presentation, amendment and
other processing fees, and other standard costs and charges, of the L/C Issuer
relating to letters of credit as from time to time in effect. Such customary
fees and standard costs and charges are due and payable on demand and are
nonrefundable.

 

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(k) Conflict with Issuer Documents. In the event of any conflict between the
terms hereof and the terms of any Issuer Document, the terms hereof shall
control.

2.04 Swing Line Loans.

(a) The Swing Line. Subject to the terms and conditions set forth herein, the
Swing Line Lender may, in its discretion, in reliance upon the agreements of the
other Lenders set forth in this Section 2.04, make loans (each such loan, a
“Swing Line Loan”) to the Borrowers from time to time on any Business Day during
the Availability Period in an aggregate amount not to exceed at any time
outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that
such Swing Line Loans, when aggregated with the Applicable Percentage of the
Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting
as Swing Line Lender, may exceed the amount of such Lender’s Commitment;
provided, however, that after giving effect to any Swing Line Loan, (i) the
Total Outstandings shall not exceed Loan Cap, and (ii) the aggregate Outstanding
Amount of the Committed Loans of any Lender (other than the Swing Line Lender)
at such time, plus such Lender’s Applicable Percentage of the Outstanding Amount
of all L/C Obligations at such time, plus such Lender’s Applicable Percentage of
the Outstanding Amount of all Swing Line Loans at such time shall not exceed
such Lender’s Commitment, and provided, further, that the Borrowers shall not
use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line
Loan, and provided further that the Swing Line Lender shall not be obligated to
make any Swing Line Loan if it shall determine (which determination shall be
conclusive and binding absent manifest error) that it has, or by such Credit
Extension may have, Fronting Exposure. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Borrowers may borrow under this
Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.
Each Swing Line Loan shall be a Base Rate Loan. Immediately upon the making of a
Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Swing Line Lender a risk
participation in such Swing Line Loan in an amount equal to the product of such
Lender’s Applicable Percentage multiplied by the amount of such Swing Line Loan.
The Swing Line Lender shall have all of the benefits and immunities (A) provided
to the Agent in Article IX with respect to any acts taken or omissions suffered
by the Swing Line Lender in connection with Swing Line Loans made by it or
proposed to be made by it as if the term “Agent” as used in Article IX included
the Swing Line Lender with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the Swing Line Lender.

(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Lead
Borrower’s irrevocable notice to the Swing Line Lender and the Agent, which may
be given by telephone. Each such notice must be received by the Swing Line
Lender and the Agent not later than 1:00 p.m. on the requested borrowing date,
and shall specify (i) the amount to be borrowed, which shall be a minimum of
$100,000, and (ii) the requested borrowing date, which shall be a Business Day.
Each such telephonic notice must be confirmed promptly by delivery to the Swing
Line Lender and the Agent of a written Swing Line Loan Notice, appropriately
completed and signed by a Responsible Officer of the Lead Borrower. Promptly
after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice,
the Swing Line Lender will confirm with the Agent (by telephone or in writing)
that the Agent has also received such Swing Line Loan Notice and, if not, the
Swing Line Lender will notify the Agent (by telephone or in writing) of the
contents thereof. Unless the Swing Line Lender has received notice (by telephone
or in writing) from the Agent or the Required Lenders prior to 2:00 p.m. on the
date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender
not to make such Swing Line Loan as a result of the limitations set forth in the
provisos to the first sentence of Section 2.04(a), or (B) that one or more of
the applicable conditions specified in Article IV is not then satisfied, then,
subject to the terms and conditions hereof, the Swing Line Lender may, not later
than 4:00 p.m. on the borrowing date specified in such Swing Line Loan Notice,
make the amount of its Swing Line Loan available to the Borrowers either by
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Lender with the amount of such funds or (ii) wire transferring such funds, in
each case in accordance with instructions provided to (and reasonably acceptable
to) the Swing Line Lender by the Lead Borrower; provided, however, that if, on
the date of the proposed Swing Line Loan, there are L/C Borrowings outstanding,
then the proceeds of such Borrowing, first, shall be applied to the payment in
full of any such L/C Borrowings, and second, shall be made available to the
Borrowers as provided above.

(c) Refinancing of Swing Line Loans.

(i) In addition to settlements required under Section 2.14 hereof, the Swing
Line Lender at any time in its sole and absolute discretion may request, on
behalf of the Borrowers (which hereby irrevocably authorize the Swing Line
Lender to so request on their behalf), that each Lender make a Base Rate Loan in
an amount equal to such Lender’s Applicable Percentage of the amount of Swing
Line Loans then outstanding. Such request shall be made in writing (which
written request shall be deemed to be a Committed Loan Notice for purposes
hereof) and in accordance with the requirements of Section 2.02, without regard
to the minimum and multiples specified therein for the principal amount of Base
Rate Loans, but subject to the unutilized portion of the Loan Cap and the
conditions set forth in Section 4.02. The Swing Line Lender shall furnish the
Lead Borrower with a copy of the applicable Committed Loan Notice promptly after
delivering such notice to the Agent. Each Lender shall make an amount equal to
its Applicable Percentage of the amount specified in such Committed Loan Notice
available to the Agent in immediately available funds for the account of the
Swing Line Lender at the Agent’s Office not later than 1:00 p.m. on the day
specified in such Committed Loan Notice, whereupon, subject to
Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Loan to the Borrowers in such amount. The Agent shall
remit the funds so received to the Swing Line Lender.

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a
Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base
Rate Loans submitted by the Swing Line Lender as set forth herein shall be
deemed to be a request by the Swing Line Lender that each of the Lenders fund
its risk participation in the relevant Swing Line Loan and each Lender’s payment
to the Agent for the account of the Swing Line Lender pursuant to
Section 2.04(c)(i) shall be deemed payment in respect of such participation.

(iii) If any Lender fails to make available to the Agent for the account of the
Swing Line Lender any amount required to be paid by such Lender pursuant to the
foregoing provisions of this Section 2.04(c) by the time specified in
Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such
Lender (acting through the Agent), on demand, such amount with interest thereon
for the period from the date such payment is required to the date on which such
payment is immediately available to the Swing Line Lender at a rate per annum
equal to the greater of the Federal Funds Rate and a rate determined by the
Swing Line Lender in accordance with banking industry rules on interbank
compensation plus any administrative, processing or similar fees customarily
charged by the Swing Line Lender in connection with the foregoing. If such
Lender pays such amount (with interest and fees as aforesaid), the amount so
paid shall constitute such Lender’s Committed Loan included in the relevant
Committed Borrowing or funded participation in the relevant Swing Line Loan, as
the case may be. A certificate of the Swing Line Lender submitted to any Lender
(through the Agent) with respect to any amounts owing under this clause
(iii) shall be conclusive absent manifest error.

(iv) Each Lender’s obligation to make Committed Loans or to purchase and fund
risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right which
such Lender may have against the Swing Line Lender, the Borrowers or any other
Person for any reason whatsoever, (B) the occurrence or continuance of a Default

 

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or an Event of Default, or (C) any other occurrence, event or condition, whether
or not similar to any of the foregoing; provided, however, that each Lender’s
obligation to make Committed Loans pursuant to this Section 2.04(c) is subject
to the conditions set forth in Section 4.02. No such funding of risk
participations shall relieve or otherwise impair the obligation of the Borrowers
to repay Swing Line Loans, together with interest as provided herein.

(d) Repayment of Participations.

(i) At any time after any Lender has purchased and funded a risk participation
in a Swing Line Loan, if the Swing Line Lender, or the Agent on behalf of the
Swing Line Lender, receives any payment on account of such Swing Line Loan, the
Swing Line Lender will distribute such payment to the Agent and the Agent shall
distribute to each such Lender its Applicable Percentage of such payment
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender’s risk participation was funded) in the same
funds as those received by the Swing Line Lender.

(ii) If any payment received by the Swing Line Lender, or the Agent on behalf of
the Swing Line Lender, in respect of principal or interest on any Swing Line
Loan is required to be returned by the Swing Line Lender under any of the
circumstances described in Section 10.05 (including pursuant to any settlement
entered into by the Swing Line Lender in its discretion), each Lender shall pay
to the Swing Line Lender its Applicable Percentage thereof on demand of the
Agent, plus interest thereon from the date of such demand to the date such
amount is returned, at a rate per annum equal to the Federal Funds Rate. The
Agent will make such demand upon the request of the Swing Line Lender. The
obligations of the Lenders under this clause shall survive the payment in full
of the Loan Agreement Obligations and the termination of this Agreement.

(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be
responsible for invoicing the Borrowers for interest on the Swing Line Loans.
Until each Lender funds its Base Rate Loan or risk participation pursuant to
this Section 2.04 to refinance such Lender’s Applicable Percentage of any Swing
Line Loan, interest in respect of such Applicable Percentage shall be solely for
the account of the Swing Line Lender.

(f) Payments Directly to Swing Line Lender. The Borrowers shall make all
payments of principal and interest in respect of the Swing Line Loans directly
to the Swing Line Lender.

2.05 Prepayments.

(a) The Borrowers may, upon irrevocable notice from the Lead Borrower to the
Agent, at any time or from time to time voluntarily prepay Committed Loans in
whole or in part without premium or penalty; provided that (i) such notice must
be received by the Agent not later than (A) 5:00 p.m. three Business Days prior
to any date of prepayment of LIBOR Rate Loans and (B) 1:00 p.m. on the date of
prepayment of Base Rate Loans; and (ii) any prepayment of LIBOR Rate Loans shall
be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof or, in each case, if less, the entire principal amount thereof
then outstanding. Each such notice shall specify the date and amount of such
prepayment and the Type(s) of Loans to be prepaid and, if LIBOR Rate Loans, the
Interest Period(s) of such Loans. The Agent will promptly notify each Lender of
its receipt of each such notice, and of the amount of such Lender’s Applicable
Percentage of such prepayment. If such notice is given by the Lead Borrower, the
Borrowers shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein. Any prepayment of
a LIBOR Rate Loan shall be accompanied by all accrued interest on the amount
prepaid, together with any additional amounts required pursuant to Section 3.05.
Subject to Section 2.16, each such prepayment shall be applied to the Committed
Loans of the Lenders in accordance with their respective Applicable Percentages.

 

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(b) The Borrowers may, upon irrevocable notice from the Lead Borrower to the
Swing Line Lender (with a copy to the Agent), at any time or from time to time,
voluntarily prepay Swing Line Loans in whole or in part without premium or
penalty; provided that (i) such notice must be received by the Swing Line Lender
and the Agent not later than 1:00 p.m. on the date of the prepayment, and
(ii) any such prepayment shall be in a minimum principal amount of $100,000.
Each such notice shall specify the date and amount of such prepayment. If such
notice is given by the Lead Borrower, the Borrowers shall make such prepayment
and the payment amount specified in such notice shall be due and payable on the
date specified therein.

(c) If for any reason the Total Outstandings at any time exceed the Loan Cap as
then in effect, the Borrowers shall immediately prepay the Loans and L/C
Borrowings and Cash Collateralize the L/C Obligations (other than L/C
Borrowings) in an aggregate amount equal to such excess; provided, however, that
the Borrowers shall not be required to Cash Collateralize the L/C Obligations
(other than L/C Borrowings) pursuant to this Section 2.05(c) unless after the
prepayment in full of the Loans the Total Outstandings exceed the Loan Cap as
then in effect.

(d) The Borrower shall prepay the Loans and, after the occurrence and during the
continuance of an Event of Default or, to the extent required by the provisions
of Section 2.06(c), Cash Collateralize the L/C Obligations to the extent
required pursuant to the provisions of Section 6.12 hereof.

(e) Prepayments made pursuant to Section 2.05(c) and (d) above, first, shall be
applied ratably to the L/C Borrowings and the Swing Line Loans, second, shall be
applied ratably to the outstanding Committed Loans, third, after the occurrence
and during the continuance of an Event of Default, shall be used to Cash
Collateralize the remaining L/C Obligations; fourth, shall be applied ratably to
any other Loan Agreement Obligations that are then due and owing, and, fifth,
the amount remaining, if any, after the application of prepayments pursuant to
clauses first through fourth above shall be deposited by the Agent in a deposit
account of the Lead Borrower and may be utilized by the Borrowers in the
ordinary course of its business to the extent otherwise permitted hereunder.
Upon the drawing of any Letter of Credit that has been Cash Collateralized, the
funds held as Cash Collateral shall be applied (without any further action by or
notice to or from the Borrowers or any other Loan Party) to reimburse the L/C
Issuer or the Lenders, as applicable, and, to the extent not so applied, shall
thereafter be applied to satisfy other Loan Agreement Obligations that are then
due and owing.

2.06 Termination or Reduction of Commitments.

(a) The Borrowers may, upon irrevocable notice from the Lead Borrower to the
Agent, terminate the Aggregate Commitments or from time to time permanently
reduce the Aggregate Commitments; provided that (i) any such notice shall be
received by the Agent not later than 11:00 a.m. five Business Days prior to the
date of termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess
thereof, (iii) the Borrowers shall not terminate or reduce the Aggregate
Commitments if, after giving effect thereto and to any concurrent prepayments
hereunder, the Total Outstandings would exceed the Aggregate Commitments.

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

 

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(c) The Agent will promptly notify the Lenders of any termination or reduction
of the Letter of Credit Sublimit, Swing Line Sublimit or the Aggregate
Commitments under this Section 2.06. Upon any reduction of the Aggregate
Commitments, the Commitment of each Lender shall be reduced by such Lender’s
Applicable Percentage of such reduction amount. If, as a result of such
termination or reduction, (i) the Outstanding Amount of L/C Obligations not
fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit,
the Borrowers shall contemporaneously with such reduction or termination, Cash
Collateralize such excess amount, and (B) the Total Outstandings hereunder would
exceed the Aggregate Commitments or the Swing Line Loans hereunder would exceed
the Swing Line Sublimit, as applicable, the Borrowers shall contemporaneously
with such reduction or termination, pay the Agent an amount equal to such
excess, together with any additional amounts required pursuant to Section 3.05).

2.07 Repayment of Obligations.

The Borrower shall repay to the Lenders on the Termination Date all Loan
Agreement Obligations outstanding on such date (other than contingent
indemnification obligations for which claims have not been asserted), and shall
cause each Letter of Credit to be returned to the L/C Issuer undrawn or shall
Cash Collateralize all L/C Obligations (to the extent not previously Cash
Collateralized as required herein).

2.08 Interest.

(a) Subject to the provisions of Section 2.08(b) below, (i) each LIBOR Rate Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the Adjusted LIBOR Rate for such
Interest Period plus the Applicable Margin for LIBOR Rate Loans; (ii) each Base
Rate Loan shall bear interest on the outstanding principal amount thereof from
the applicable borrowing date at a rate per annum equal to the Base Rate plus
the Applicable Margin for Base Rate Loans; and (iii) each Swing Line Loan shall
bear interest on the outstanding principal amount thereof from the applicable
borrowing date at a rate per annum equal to the Base Rate plus the Applicable
Margin for Base Rate Loans.

(b) If any Event of Default exists, then the Agent may, and upon the request of
the Required Lenders shall, notify the Lead Borrower that all outstanding Loan
Agreement Obligations shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate and thereafter (for so
long as such Event of Default is continuing) such Loan Agreement Obligations
shall bear interest at the Default Rate to the fullest extent permitted by Law.
Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.

(c) Except as provided in Section 2.08(b), interest on each Loan shall be due
and payable in arrears on each Interest Payment Date applicable thereto and at
such other times as may be specified herein. Interest hereunder shall be due and
payable in accordance with the terms hereof before and after judgment, and
before and after the commencement of any proceeding under any Debtor Relief Law.

2.09 Fees. In addition to certain fees described in subsections (i) and (j) of
Section 2.03:

(a) Commitment Fee. The Borrowers shall pay to the Agent for the account of each
Lender in accordance with its Applicable Percentage, a commitment fee equal to
the Commitment Fee Percentage multiplied by the actual daily amount by which the
Aggregate Commitments exceed the Total Outstandings (subject to adjustment as
provided in Section 2.16) during the immediately preceding quarter. The
commitment fee shall accrue at all times during the Availability Period,
including at any

 

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time during which one or more of the conditions in Article IV is not met, and
shall be due and payable quarterly in arrears on the 5th day subsequent to the
last day of each April, July, October and January, commencing with the first
such date to occur after the Closing Date, and on the last day of the
Availability Period.

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

2.10 Computation of Interest and Fees. All computations of interest for Base
Rate Loans when the Base Rate is determined by the Agent’s “prime rate” shall be
made on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed. Interest shall accrue on each
Loan for the day on which the Loan is made, and shall not accrue on a Loan, or
any portion thereof, for the day on which the Loan or such portion is paid,
provided that any Loan that is repaid on the same day on which it is made shall,
subject to Section 2.12(a), bear interest for one day. Each determination by the
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.

2.11 Evidence of Debt.

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

(b) In addition to the accounts and records referred to in Section 2.11(a), each
Lender and the Agent shall maintain in accordance with its usual practice
accounts or records evidencing the purchases and sales by such Lender of
participations in Letters of Credit and Swing Line Loans. In the event of any
conflict between the accounts and records maintained by the Agent and the
accounts and records of any Lender in respect of such matters, the accounts and
records of the Agent shall control in the absence of manifest error.

 

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2.12 Payments Generally; Agent’s Clawback.

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

(b) (i) Funding by Lenders; Presumption by Agent. Unless the Agent shall have
received notice from a Lender prior to (A) the proposed date of any Borrowing of
LIBOR Rate Loans (or in the case of any Borrowing of Base Rate Loans, prior to
12:00 noon on the date of such Borrowing), or (B) the date that such Lender’s
participation in a Letter of Credit or Swing Line Loan is required to be funded,
that such Lender will not make available to the Agent such Lender’s share of
such Borrowing or participation, the Agent may assume that such Lender has made
such share available on such date in accordance with Section 2.02 (or in the
case of a Borrowing of Base Rate Loans, that such Lender has made such share
available in accordance with and at the time required by Section 2.02),
Section 2.03 or Section 2.05, as applicable, and may, in reliance upon such
assumption, make available to the Borrowers, the L/C Issuer or the Swing Line
Lender, as applicable, a corresponding amount. In such event, if a Lender has
not in fact made its share of the applicable Committed Borrowing or
participation available to the Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Agent forthwith on demand such
corresponding amount in immediately available funds with interest thereon, for
each day from and including the date such amount is made available to the
Borrowers to but excluding the date of payment to the Agent, at (A) in the case
of a payment to be made by such Lender, the greater of the Federal Funds Rate
and a rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative processing or similar fees
customarily charged by the Agent in connection with the foregoing, and (B) in
the case of a payment to be made by the Borrowers, the interest rate applicable
to Base Rate Loans. If the Borrowers and such Lender shall pay such interest to
the Agent for the same or an overlapping period, the Agent shall promptly remit
to the Borrowers the amount of such interest paid by the Borrowers for such
period. If such Lender pays its share of the applicable Committed Borrowing or
participation to the Agent, then the amount so paid shall constitute such
Lender’s Committed Loan included in such Committed Borrowing or participation in
such Letter of Credit or Swing Line Loan. Any payment by the Borrowers shall be
without prejudice to any claim the Borrowers may have against a Lender that
shall have failed to make such payment to the Agent.

(ii) Payments by Borrowers; Presumptions by Agent. Unless the Agent shall have
received notice from the Lead Borrower prior to the time at which any payment is
due to the Agent for the account of any of the Lenders or the L/C Issuer
hereunder that the Borrowers will not make such payment, the Agent may assume
that the Borrowers have made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to the Lenders or the L/C
Issuer, as the case may be, the amount due. In such event, if the Borrowers have
not in fact made such payment, then each of the Lenders or the L/C Issuer, as
the case may be, severally agrees to repay to the Agent forthwith on demand the
amount so distributed to such Lender or the L/C Issuer, in immediately available
funds with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the Agent,
at the greater of the Federal Funds Rate and a rate determined by the Agent in
accordance with banking industry rules on interbank compensation. A notice of
the Agent to any Lender or the Lead Borrower with respect to any amount owing
under this subsection (b) shall be conclusive, absent manifest error.

 

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

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

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

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

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

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

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

 

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2.14 Settlement Amongst Lenders.

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

(b) The Agent shall deliver to each of the Lenders promptly after a Settlement
Date a summary statement of the amount of outstanding Loans for the period and
the amount of repayments received for the period. As reflected on the summary
statement, (i) the Agent shall transfer to each Lender its Applicable Percentage
of repayments, and (ii) each Lender shall transfer to the Agent (as provided
below) or the Agent shall transfer to each Lender, such amounts as are necessary
to insure that, after giving effect to all such transfers, the amount of Loans
made by each Lender shall be equal to such Lender’s Applicable Percentage of all
Loans outstanding as of such Settlement Date. If the summary statement requires
transfers to be made to the Agent by the Lenders and is received prior to 1:00
p.m. on a Business Day, such transfers shall be made in immediately available
funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then
no later than 3:00 p.m. on the next Business Day. The obligation of each Lender
to transfer such funds is irrevocable, unconditional and without recourse to or
warranty by the Agent. If and to the extent any Lender shall not have so made
its transfer to the Agent, such Lender agrees to pay to the Agent, forthwith on
demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Agent, equal to the greater of the
Federal Funds Rate and a rate determined by the Agent in accordance with banking
industry rules on interbank compensation plus any administrative, processing, or
similar fees customarily charged by the Agent in connection with the foregoing.

2.15 Increase in Commitments.

(a) Request for Increase. Provided no Default or Event of Default then exists or
would arise therefrom, upon notice to the Agent (which shall promptly notify the
Lenders), the Lead Borrower may from time to time, request an increase in the
Aggregate Commitments by an amount (for all such requests) not exceeding
$100,000,000; provided that (i) any such request for an increase shall be in a
minimum amount of $10,000,000, and (ii) the Lead Borrower may make a maximum of
five (5) such requests. At the time of sending such notice, the Lead Borrower
(in consultation with the Agent) shall specify the time period within which each
Lender is requested to respond (which shall in no event be less than ten
Business Days from the date of delivery of such notice to the Lenders unless the
Lead Borrower, in its discretion, specifies a longer time period).

(b) Lender Elections to Increase. Each Lender shall notify the Agent within such
time period whether or not it agrees to increase its Commitment and, if so,
whether by an amount equal to, greater than, or less than its Applicable
Percentage of such requested increase. Any Lender not responding within such
time period shall be deemed to have declined to increase its Commitment. For the
avoidance of doubt, no Lender shall have any obligation to increase its
Commitment under this Section 2.15.

(c) Notification by Agent; Additional Lenders. The Agent shall notify the Lead
Borrower and each Lender of the Lenders’ responses to each request made
hereunder. To achieve the full amount of a requested increase and subject to the
approval of the Agent and the Borrower (whose approval shall not be unreasonably
withheld), to the extent that the existing Lenders decline to increase their
Commitments, or decline to increase their Commitments to the amount requested by
the Lead Borrower, the Agent, in consultation with the Lead Borrower, will use
its reasonable efforts to arrange for other Eligible Assignees to become a
Lender hereunder (each such Lender, an “Additional Commitment Lender”) and to
issue commitments in an amount equal to the amount of the increase in the
Aggregate Commitments requested by the Lead Borrower and not accepted by the
existing Lenders, provided, however, that without the consent of the Agent, at
no time shall the Commitment of any Additional Commitment Lender be less than
$5,000,000.

 

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(d) Effective Date and Allocations. If the Aggregate Commitments are increased
in accordance with this Section, the Agent, in consultation with the Lead
Borrower, shall determine the effective date (the “Increase Effective Date”) and
the final allocation of such increase. The Agent shall promptly notify the Lead
Borrower and the Lenders of the final allocation of such increase and the
Increase Effective Date and on the Increase Effective Date (i) the Aggregate
Commitments under, and for all purposes of, this Agreement shall be increased by
the aggregate amount of such Commitment Increases, and (ii) Schedule 2.01 shall
be deemed modified, without further action, to reflect the revised Commitments
and Applicable Percentages of the Lenders.

(e) Conditions to Effectiveness of Increase. As a condition precedent to such
increase, (i) the Lead Borrower shall deliver to the Agent (a) a certificate of
each Borrower dated as of the Increase Effective Date signed by a Responsible
Officer of such Borrower certifying and attaching the resolutions adopted by
such Borrower approving or consenting to such increase, (b) a certificate of the
Lead Borrower that (1) the representations and warranties contained in Article V
and the other Loan Documents are true and correct in all material respects on
and as of the Increase Effective Date, except (A) to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they are true and correct in all material respects as of such earlier date,
(B) in the case of any representation and warranty qualified by materiality, in
which case they shall be true and correct in all respects, and (C) except that
for purposes of this Section 2.15, the representations and warranties contained
in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most
recent statements furnished pursuant to clauses (a) and (b), respectively, of
Section 6.01, and (2) before and after giving effect to such increase, no
Default or Event of Default exists or would arise therefrom, (ii) the Loan
Parties, the Agent, and any Additional Commitment Lender shall have executed and
delivered a joinder to the Loan Documents in such form as the Agent shall
reasonably require; (iii) the Borrowers shall have paid such fees and other
compensation to the Additional Commitment Lenders as the Lead Borrower and such
Additional Commitment Lenders shall agree; (iv) the Borrowers shall have paid
such arrangement fees to the Agent as the Lead Borrower and the Agent may agree;
(v) if requested by the Agent, the Borrowers shall deliver an opinion or
opinions, in form and substance reasonably satisfactory to the Agent, from
counsel to the Borrowers reasonably satisfactory to the Agent and dated such
date; (vi) the Borrowers and the Additional Commitment Lender shall have
delivered such other instruments, documents and agreements as the Agent may
reasonably have requested; and (vii) no Default or Event of Default exists. Any
Committed Loans outstanding on the Increase Effective Date shall be
automatically adjusted to the extent necessary to keep the outstanding Committed
Loans ratable with any revised Applicable Percentages arising from any
nonratable increase in the Commitments under this Section. Any increase under
this Section 2.15 shall be on terms identical to those applicable to the
existing Commitments, except with respect to any commitment, arrangement,
upfront or similar fees that may be agreed to among the Loan Parties and the
Lenders and Additional Commitment Lenders agreeing to participate in such
increase.

(f) Conflicting Provisions. This Section shall supersede any provisions in
Sections 2.13 or 10.01 to the contrary.

2.16 Defaulting Lenders.

(a) Adjustments. Notwithstanding anything to the contrary contained in this
Agreement, if any Lender becomes a Defaulting Lender, then, until such time as
that Lender is no longer a Defaulting Lender, to the extent permitted by
applicable Law:

 

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(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or
disapprove any amendment, waiver or consent with respect to this Agreement shall
be restricted as set forth in the definition of “Required Lenders” and
Section 10.01.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or
other amounts received by the Agent for the account of such Defaulting Lender
(whether voluntary or mandatory, at maturity, pursuant to Article VIII or
otherwise) or received by the Agent from a Defaulting Lender pursuant to
Section 10.08 shall be applied at such time or times as may be determined by the
Agent as follows: first, to the payment of any amounts owing by such Defaulting
Lender to the Agent hereunder; second, to the payment on a pro rata basis of any
amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender
hereunder; third, to Cash Collateralize the L/C Issuer’s Fronting Exposure with
respect to such Defaulting Lender (after giving effect to Section 2.16(a)(iv));
fourth, as the Lead Borrower may request (so long as no Default or Event of
Default exists), to the funding of any Loan in respect of which such Defaulting
Lender has failed to fund its portion thereof as required by this Agreement, as
determined by the Agent; fifth, if so determined by the Agent and the Lead
Borrower, to be held in a deposit account and released pro rata in order to
(x) satisfy such Defaulting Lender’s potential future funding obligations with
respect to Loans under this Agreement and (y) Cash Collateralize the L/C
Issuer’s future Fronting Exposure with respect to such Defaulting Lender with
respect to future Letters of Credit issued under this Agreement (after giving
effect to Section 2.16(a)(iv)); sixth, to the payment of any amounts owing to
the Non-Defaulting Lenders, the L/C Issuer or the Swing Line Lender as a result
of any judgment of a court of competent jurisdiction obtained by any Lender, the
L/C Issuer or the Swing Line Lender against such Defaulting Lender as a result
of such Defaulting Lender’s breach of its obligations under this Agreement;
seventh, so long as no Default or Event of Default exists, to the payment of any
amounts owing to the Borrowers as a result of any judgment of a court of
competent jurisdiction obtained by the Borrowers against such Defaulting Lender
as a result of such Defaulting Lender’s breach of its obligations under this
Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a
court of competent jurisdiction; provided that if (x) such payment is a payment
of the principal amount of any Loans or L/C Borrowings in respect of which such
Defaulting Lender has not fully funded its appropriate share, and (y) such Loans
were made or the related Letters of Credit were issued at a time when the
conditions set forth in Section 4.02 were satisfied or waived, such payment
shall be applied solely to pay the Loans of, and L/C Obligations owed to, all
Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment
of any Loans of, or L/C Obligations owed to, such Defaulting Lender until such
time as all Loans and funded and unfunded participations in L/C Obligations and
Swing Line Loans are held by the Lenders pro rata in accordance with the
Commitments hereunder without giving effect to Section 2.16(a)(iv). Any
payments, prepayments or other amounts paid or payable to a Defaulting Lender
that are applied (or held) to pay amounts owed by a Defaulting Lender or to post
Cash Collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and
redirected by such Defaulting Lender, and each Lender irrevocably consents
hereto.

(iii) Certain Fees.

(A) No Defaulting Lender shall be entitled to receive any fee payable under
Section 2.09(a) for any period during which that Lender is a Defaulting Lender
(and the Borrowers shall not be required to pay any such fee that otherwise
would have been required to have been paid to that Defaulting Lender).

 

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(B) Each Defaulting Lender shall be entitled to receive Letter of Credit Fees
for any period during which that Lender is a Defaulting Lender only to the
extent allocable to its Applicable Percentage of the stated amount of Letters of
Credit for which it has provided Cash Collateral pursuant to Section 2.03(g).

(C) With respect to any fee payable under Section 2.09(a) or any Letter of
Credit Fee not required to be paid to any Defaulting Lender pursuant to clause
(A) or (B) above, the Borrowers shall (x) pay to each Non-Defaulting Lender that
portion of any such fee otherwise payable to such Defaulting Lender with respect
to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans
that has been reallocated to such Non-Defaulting Lender pursuant to clause
(iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the
amount of any such fee otherwise payable to such Defaulting Lender to the extent
allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such
Defaulting Lender, and (z) not be required to pay the remaining amount of any
such fee.

(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure. All or
any part of such Defaulting Lender’s participation in L/C Obligations and Swing
Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance
with their respective Applicable Percentages (calculated without regard to such
Defaulting Lender’s Commitment) but only to the extent that (x) the conditions
set forth in Section 4.02 are satisfied at the time of such reallocation (and,
unless the Borrowers shall have otherwise notified the Agent at such time, the
Borrowers shall be deemed to have represented and warranted that such conditions
are satisfied at such time), and (y) such reallocation does not cause the
aggregate Outstanding Amount of Loan Agreement Obligations of any Non-Defaulting
Lender to exceed such Non-Defaulting Lender’s Commitment. No reallocation
hereunder shall constitute a waiver or release of any claim of any party
hereunder against a Defaulting Lender arising from that Lender having become a
Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of
such Non-Defaulting Lender’s increased exposure following such reallocation.

(v) Cash Collateral, Repayment of Swing Line Loans. If the reallocation
described in clause (a)(iv) above cannot, or can only partially, be effected,
the Borrowers shall, without prejudice to any right or remedy available to them
hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an
amount equal to the Swing Line Lenders’ Fronting Exposure (provided that such
prepayment shall be applied to reduce such Defaulting Lender’s participation in
such Swing Line Loans, and shall not reduce the participation of any
Non-Defaulting Lender in such Swing Line Loans) and (y) second, Cash
Collateralize the L/C Issuers’ Fronting Exposure in accordance with the
procedures set forth in Section 2.03(g).

(b) Defaulting Lender Cure. If the Lead Borrower, the Agent, the Swing Line
Lender and the L/C Issuer agree in writing that a Lender is no longer a
Defaulting Lender, the Agent will so notify the parties hereto, whereupon as of
the effective date specified in such notice and subject to any conditions set
forth therein (which may include arrangements with respect to any Cash
Collateral), that Lender will, to the extent applicable, purchase at par that
portion of outstanding Loans of the other Lenders or take such other actions as
the Agent may determine to be necessary to cause the Committed Loans and funded
and unfunded participations in Letters of Credit and Swing Line Loans to be held
on a pro rata basis by the Lenders in accordance with their Applicable
Percentages (without giving effect to Section 2.16(a)(iv)), whereupon such
Lender will cease to be a Defaulting Lender; provided that no adjustments will
be made retroactively with respect to fees accrued or payments made by or on
behalf of the Borrowers

 

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while that Lender was a Defaulting Lender; and provided, further, that except to
the extent otherwise expressly agreed by the affected parties, no change
hereunder from Defaulting Lender to Lender will constitute a waiver or release
of any claim of any party hereunder arising from that Lender’s having been a
Defaulting Lender.

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

3.01 Taxes.

(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes.

(i) Any and all payments by or on account of any obligation of any Loan Party
under any Loan Document shall be made without deduction or withholding for any
Taxes, except as required by applicable Laws. If any applicable Laws (as
determined in the good faith discretion of the Agent) require the deduction or
withholding of any Tax from any such payment by the Agent or a Loan Party, then
the Agent or such Loan Party shall be entitled to make such deduction or
withholding, upon the basis of the information and documentation to be delivered
pursuant to subsection (e) below.

(ii) If any Loan Party or the Agent shall be required by any applicable Laws
other than the Code to withhold or deduct any Taxes from any payment, then
(A) such Loan Party or the Agent, as required by such Laws, shall withhold or
make such deductions as are determined by it to be required based upon the
information and documentation it has received pursuant to subsection (e) below,
(B) such Loan Party or the Agent, to the extent required by such Laws, shall
timely pay the full amount withheld or deducted to the relevant Governmental
Authority in accordance with such Laws, and (C) to the extent that the
withholding or deduction is made on account of Indemnified Taxes, the sum
payable by the applicable Loan Party shall be increased as necessary so that
after any required withholding or the making of all required deductions
(including deductions applicable to additional sums payable under this
Section 3.01) the applicable Recipient receives an amount equal to the sum it
would have received had no such withholding or deduction been made.

(b) Payment of Other Taxes by the Borrowers. Without limitation or duplication
of the provisions of subsection (a) above, the Borrowers shall timely pay to the
relevant Governmental Authority in accordance with applicable Law, or at the
option of the Agent timely reimburse it for the payment of, any Other Taxes.

(c) Tax Indemnifications.

(i) The Loan Parties shall, and each Loan Party does hereby, jointly and
severally indemnify each Recipient, and shall make payment in respect thereof
within 10 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section 3.01) payable or paid by such Recipient or
required to be withheld or deducted from a payment to such Recipient, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority. A

 

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certificate as to the amount of such payment or liability delivered to the Lead
Borrower by a Lender or the L/C Issuer (with a copy to the Agent), or by the
Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be
conclusive absent manifest error.

(ii) Each Lender and the L/C Issuer shall, and does hereby, severally indemnify,
and shall make payment in respect thereof within 10 days after demand therefor,
(x) the Agent against any Indemnified Taxes attributable to such Lender or the
L/C Issuer (but only to the extent that any Loan Party has not already
indemnified the Agent for such Indemnified Taxes and without limiting the
obligation of the Loan Parties to do so), (y) the Agent and the Loan Parties, as
applicable, against any Taxes attributable to such Lender’s failure to comply
with the provisions of Section 10.06(d) relating to the maintenance of a
Participant Register and (z) the Agent and the Loan Parties, as applicable,
against any Excluded Taxes attributable to such Lender or the L/C Issuer, in
each case, that are payable or paid by the Agent or a Loan Party in connection
with any Loan Document, and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to any Lender by the Agent shall be
conclusive absent manifest error. Each Lender and the L/C Issuer hereby
authorizes the Agent to set off and apply any and all amounts at any time owing
to such Lender or the L/C Issuer, as the case may be, under this Agreement or
any other Loan Document against any amount due to the Agent under this clause
(ii).

(d) Evidence of Payments. Upon request by the Lead Borrower or the Agent, as the
case may be, after any payment of Taxes by the Lead Borrower or by the Agent to
a Governmental Authority as provided in this Section 3.01, the Lead Borrower
shall deliver to the Agent or the Agent shall deliver to the Lead Borrower, as
the case may be, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of any return required by
Laws to report such payment or other evidence of such payment reasonably
satisfactory to the Lead Borrower or the Agent, as the case may be.

(e) Status of Recipients; Tax Documentation.

(i) Any Recipient that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made under any Loan Document shall
deliver to the Lead Borrower and the Agent, at the time or times reasonably
requested by the Lead Borrower or the Agent, such properly completed and
executed documentation reasonably requested by the Lead Borrower or the Agent as
will permit such payments to be made without withholding or at a reduced rate of
withholding. In addition, any Recipient, if reasonably requested by the Lead
Borrower or the Agent, shall deliver such other documentation prescribed by
applicable Law or reasonably requested by the Lead Borrower or the Agent as will
enable the Lead Borrower or the Agent to determine whether or not such Recipient
is subject to backup withholding or information reporting requirements.
Notwithstanding anything to the contrary in the preceding two sentences, the
completion, execution and submission of such documentation (other than such
documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below)
shall not be required if in the Recipient’s reasonable judgment such completion,
execution or submission would subject such Recipient to any material
unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Recipient.

 

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(ii) Without limiting the generality of the foregoing, in the event that the
Lead Borrower is a U.S. Person,

(A) any Lender that is a U.S. Person shall deliver to the Lead Borrower and the
Agent on or prior to the date on which such Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the
Lead Borrower or the Agent), executed originals of IRS Form W-9 certifying that
such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Lead Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Lead Borrower or the Agent), whichever of the
following is applicable:

(I) (x) with respect to payments of interest under any Loan Document, executed
originals of IRS Form W-8BEN establishing an exemption from, or reduction of,
U.S. federal withholding Tax pursuant to the “interest” article of a tax treaty
and (y) with respect to any other applicable payments under any Loan Document,
IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “business profits” or “other income” article of
such tax treaty;

(II) executed originals of IRS Form W-8ECI;

(III) (x) a certificate substantially in the form of Exhibit G-1 to the effect
that such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN; or

(IV) executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS
Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of
Exhibit G-2 or Exhibit G-3, IRS Form W-9, and/or other certification documents
from each beneficial owner, as applicable; provided that if the Foreign Lender
is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit
G-4 on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Lead Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Lead Borrower or the Agent), executed originals of any
other form prescribed by applicable Law as a basis for claiming exemption from
or a reduction in U.S. federal withholding Tax, duly completed, together with
such supplementary documentation as may be prescribed by applicable Law to
permit the Lead Borrower or the Agent to determine the withholding or deduction
required to be made; and

 

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(D) if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Lead Borrower and the Agent at the time or times prescribed
by law and at such time or times reasonably requested by the Lead Borrower or
the Agent such documentation prescribed by applicable Law (including as
prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Lead Borrower or the Agent as may be
necessary for the Lead Borrower and the Agent to comply with their obligations
under FATCA and to determine that such Lender has complied with such Lender’s
obligations under FATCA or to determine the amount to deduct and withhold from
such payment. Solely for purposes of this clause (D), “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.

(iii) Each Lender agrees that if any form or certification it previously
delivered pursuant to this Section 3.01 expires or becomes obsolete or
inaccurate in any respect, it shall update such form or certification or
promptly notify the Lead Borrower and the Agent in writing of its legal
inability to do so.

(f) Treatment of Certain Refunds. Unless required by applicable Laws, at no time
shall the Agent have any obligation to file for or otherwise pursue on behalf of
a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the
L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the
account of such Lender or the L/C Issuer, as the case may be. If any Recipient
determines, in its sole discretion exercised in good faith, that it has received
a refund of any Taxes as to which it has been indemnified by any Loan Party or
with respect to which any Loan Party has paid additional amounts pursuant to
this Section 3.01, it shall pay to the Loan Party an amount equal to such refund
(but only to the extent of indemnity payments made, or additional amounts paid,
by a Loan Party under this Section 3.01 with respect to the Taxes giving rise to
such refund), net of all out-of-pocket expenses (including Taxes) incurred by
such Recipient, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that the
Loan Party, upon the request of the Recipient, agrees to repay the amount paid
over to the Loan Party (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to the Recipient in the event the Recipient
is required to repay such refund to such Governmental Authority. Notwithstanding
anything to the contrary in this subsection, in no event will the applicable
Recipient be required to pay any amount to the Loan Party pursuant to this
subsection the payment of which would place the Recipient in a less favorable
net after-Tax position than such Recipient would have been in if the
indemnification payments or additional amounts giving rise to such refund had
never been paid. This subsection shall not be construed to require any Recipient
to make available its tax returns (or any other information relating to its
taxes that it deems confidential) to any Loan Party or any other Person.

(g) Survival. Each party’s obligations under this Section 3.01 shall survive the
resignation or replacement of the Agent or any assignment of rights by, or the
replacement of, a Lender or the L/C Issuer, the termination of the Commitments
and the repayment, satisfaction or discharge of all other Loan Agreement
Obligations.

 

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3.02 Illegality. If any Lender determines that any Law has made it unlawful, or
that any Governmental Authority has asserted that it is unlawful, for any Lender
or its applicable Lending Office to make, maintain or fund LIBOR Rate Loans, or
to determine or charge interest rates based upon the LIBOR Rate, or any
Governmental Authority has imposed material restrictions on the authority of
such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Lead Borrower
through the Agent, (i) any obligation of such Lender to make or continue LIBOR
Rate Loans or to Convert Base Rate Loans to LIBOR Rate Loans shall be suspended,
and (ii) if such notice asserts the illegality of such Lender making or
maintaining Base Rate Loans the interest rate on which is determined by
reference to the LIBOR Rate component of the Base Rate, the interest rate on
which Base Rate Loans of such Lender shall, if necessary to avoid such
illegality, be determined by the Agent without reference to the LIBOR Rate
component of the Base Rate, in each case, until such Lender notifies the Agent
and the Lead Borrower that the circumstances giving rise to such determination
no longer exist. Upon receipt of such notice, (x) the Borrowers shall, upon
demand from such Lender (with a copy to the Agent), prepay or, if applicable,
Convert all LIBOR Rate Loans of such Lender to Base Rate Loans (the interest
rate on which Base Rate Loans of such Lender shall, if necessary to avoid such
illegality, be determined by the Agent without reference to the LIBOR Rate
component of the Base Rate), either on the last day of the Interest Period
therefor, if such Lender may lawfully continue to maintain such LIBOR Rate Loans
to such day, or immediately, if such Lender may not lawfully continue to
maintain such LIBOR Rate Loans and (y) if such notice asserts the illegality of
such Lender determining or charging interest rates based upon the LIBOR Rate,
the Agent shall during the period of such suspension compute the Base Rate
applicable to such Lender without reference to the LIBOR Rate component thereof
until the Agent is advised in writing by such Lender that it is no longer
illegal for such Lender to determine or charge interest rates based upon the
LIBOR Rate. Upon any such prepayment or Conversion, the Borrowers shall also pay
accrued interest on the amount so prepaid or Converted.

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

3.04 Increased Costs; Reserves on LIBOR Rate Loans.

(a) Increased Costs Generally. If any Change in Law occurring after the date
that such Lender or L/C Issuer first became a Lender or L/C Issuer, as
applicable, shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended or participated in by, any Lender
(except any reserve requirement contemplated by Section 3.04(e) or otherwise
reflected in the LIBOR Rate) or the L/C Issuer;

 

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(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes,
(B) Excluded Taxes and (C) Other Taxes) on its loans, loan principal, letters of
credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto; or

(iii) impose on any Lender or the L/C Issuer or the London interbank market any
other condition, cost or expense affecting this Agreement or LIBOR Rate Loans
made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making, converting to, continuing or maintaining any LIBOR Rate Loan
(or of maintaining its obligation to make any such Loan), or to increase the
cost to such Lender or the L/C Issuer of participating in, issuing or
maintaining any Letter of Credit (or of maintaining its obligation to
participate in or to issue any Letter of Credit), or to reduce the amount of any
sum received or receivable by such Lender or the L/C Issuer hereunder (whether
of principal, interest or any other amount) then, upon request of such Lender or
the L/C Issuer, the Borrowers will pay to such Lender or the L/C Issuer, as the
case may be, such additional amount or amounts as will compensate such Lender or
the L/C Issuer, as the case may be, for such additional costs incurred or
reduction suffered.

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

(c) Certificates for Reimbursement. A certificate of a Lender or the L/C Issuer
setting forth the amount or amounts necessary to compensate such Lender or the
L/C Issuer or its holding company, as the case may be, as specified in
subsection (a) or (b) of this Section and delivered to the Lead Borrower shall
include a written statement setting forth in reasonable detail the basis for
calculating such amount or amounts and be conclusive absent manifest error. The
Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the
amount shown as due on any such certificate within 10 days after receipt
thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender or the L/C
Issuer to demand compensation pursuant to the foregoing provisions of this
Section 3.04 shall not constitute a waiver of such Lender’s or the L/C Issuer’s
right to demand such compensation, provided that the Borrowers shall not be
required to compensate a Lender or the L/C Issuer pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than six months prior to the date that such Lender or the L/C
Issuer, as the case may be, notifies the Lead Borrower of the

 

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Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the L/C Issuer’s intention to claim compensation therefor (except
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof).

(e) Reserves on LIBOR Rate Loans. The Borrowers shall pay to each Lender, as
long as such Lender shall be required to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency liabilities”), additional interest on the
unpaid principal amount of each LIBOR Rate Loan equal to the actual costs of
such reserves allocated to such Loan by such Lender (as determined by such
Lender in good faith, which determination shall be conclusive), which shall be
due and payable on each date on which interest is payable on such Loan, provided
the Lead Borrower shall have received at least 10 days’ prior notice (with a
copy to the Agent) of such additional interest from such Lender, together with a
written statement setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Lender under this Section 3.04(e). If a
Lender fails to give notice 10 days prior to the relevant Interest Payment Date,
such additional interest shall be due and payable 10 days from receipt of such
notice.

3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the
Agent), which demand shall include a written statement, setting forth in
reasonable detail the basis for calculating amounts owed to such Lender pursuant
to this Section 3.05, from time to time, the Borrowers shall promptly compensate
such Lender for and hold such Lender harmless from any loss, cost or expense
actually incurred, without duplication of any amounts to which a Lender is
otherwise entitled pursuant to the other provisions of this Article III, by it
as a result of:

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

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

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

including any loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained (but excluding any loss of
anticipated profits). The Borrowers shall also pay any customary administrative
fees charged by such Lender in connection with the foregoing.

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

3.06 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender or L/C Issuer
requests compensation under Section 3.04, or requires the Borrowers to pay any
additional amounts to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant
to Section 3.02, then such Lender or L/C Issuer shall use reasonable efforts to

 

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designate a different Lending Office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender or L/C Issuer, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the
need for the notice pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender or L/C Issuer to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender or L/C Issuer.
The Borrowers hereby agree to pay all reasonable costs and expenses incurred by
any Lender or L/C Issuer in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 3.04, has invoked the provisions of Section 3.02, or if the Borrowers
are required to pay any additional amounts to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01 and, in each
case, such Lender has declined or is unable to designate a different Lending
Office in accordance with Section 3.06(a) that eliminates such increased
compensation or other additional amounts, the Borrowers may replace such Lender
in accordance with Section 10.13.

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

3.08 Designation of Lead Borrower as Borrowers’ Agent.

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

(b) Each Borrower recognizes that credit available to it hereunder is in excess
of and on better terms than it otherwise could obtain on and for its own account
and that one of the reasons therefor is its joining in the credit facility
contemplated herein with all other Borrowers. Consequently, each Borrower hereby
assumes and agrees to discharge all Loan Agreement Obligations of each of the
other Borrowers.

(c) The Lead Borrower shall act as a conduit for each Borrower (including
itself, as a “Borrower”) on whose behalf the Lead Borrower has requested a
Credit Extension. Neither the Agent nor any other Credit Party shall have any
obligation to see to the application of such proceeds therefrom.

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

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

(a) The Agent’s receipt of the following, each of which shall be originals,
telecopies or other electronic image scan transmission (e.g., “pdf” or “tif “
via e-mail) (followed promptly by originals) unless otherwise specified, each
dated the Closing Date (or, in the case of certificates of governmental
officials, a recent date before the Closing Date):

 

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(i) counterparts of this Agreement each properly executed by a Responsible
Officer of the signing Loan Party and the Lenders in such number as the Agent
may request;

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

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

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

(v) a favorable opinion of each of (i) Wachtell, Lipton, Rosen & Katz,
(ii) Richards, Layton & Finger, P.A. and (iii) general counsel to the Loan
Parties, addressed to the Agent and each Lender, as to such matters concerning
the Loan Parties and the Loan Documents as the Agent may reasonably request, in
form and substance reasonably satisfactory to the Agent;

(vi) a certificate of a Responsible Officer of the Lead Borrower certifying
(A) that the conditions specified in Sections 4.01 and 4.02 have been satisfied,
(B) that there has been no event or circumstance since the date of the Audited
Financial Statements that has had or could be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect, (C) to the
Solvency of the Loan Parties as of the Closing Date after giving effect to the
transactions contemplated hereby, and (D) to the knowledge of such Responsible
Officer, that all consents, licenses or approvals required in connection with
the execution, delivery and performance by the Loan Parties of the Loan
Documents to which they are party, if any, have been obtained and are in full
force and effect;

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

(viii) a release from the agent under the SHC Credit Agreement reasonably
satisfactory in form and substance to the Agent evidencing that the Loan Parties
liable in respect of the SHC Credit Agreement immediately prior to the
Separation have been or concurrently with the Closing Date are being released as
Guarantors under the SHC

 

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Credit Agreement and the other “Loan Documents” (as defined in the SHC Credit
Agreement), and all Liens securing obligations of the Loan Parties under the SHC
Credit Agreement have been or concurrently with the Closing Date are being
released;

(ix) the Security Documents and all other Loan Documents (to the extent to be
executed on the Closing Date), each duly executed by the applicable Loan
Parties;

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

(xi) results of searches or other evidence reasonably satisfactory to the Agent
(in each case dated as of a date reasonably satisfactory to the Agent)
indicating the absence of Liens on the assets of the Loan Parties, except for
Liens permitted by Section 7.01 and Liens for which termination statements
satisfactory to the Agent are being tendered concurrently with such extension of
credit or other arrangements satisfactory to the Agent for the delivery of such
termination statements have been made;

(xii) evidence that the Loan Parties have established DDAs in the name of the
Loan Parties into which amounts owed by Third Party Dealers and Third Party
Franchisees will be deposited;

(xiii) (A) all documents and instruments, including Uniform Commercial Code
financing statements reasonably requested by the Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under the Loan
Documents shall have been so filed, registered or recorded to the satisfaction
of the Agent, (B) the Credit Card Notifications and Blocked Account Agreements
to the extent required pursuant to Section 6.12 hereof shall have been obtained,
and (C) control agreements with respect to the Loan Parties’ securities and
investment accounts have been obtained to the extent required under the Security
Documents;

(xiv) the Agent shall have received a duly executed agreement from each
applicable Subsidiary of SHC (other than Sears Canada Inc. and its Subsidiaries)
which owns any Real Estate constituting a warehouse or distribution center that
houses ABL Collateral or owns Related Intellectual Property, pursuant to which
each such Subsidiary grants to the Agent a rent-free or royalty-free (as
applicable) license to use such Real Estate and Related Intellectual Property in
connection with the Agent’s enforcement of its rights and remedies under the
Loan Documents with respect to the ABL Collateral, during the occurrence and
continuation of an Event of Default; and

(xv) the Agent shall have received such other assurances, certificates,
documents, consents or opinions as the Agent reasonably may require.

(b) After giving effect to the initial Credit Extensions hereunder, Availability
shall be not less than $100,000,000.

(c) The Agent shall have received a Borrowing Base Certificate dated the Closing
Date, relating to the month ended on August 25, 2012, and executed by a
Responsible Officer of the Lead Borrower.

 

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

(e) The organizational and capital structure of the Parent and its Subsidiaries
shall be as previously disclosed to the Agent and the Arranger, and the Agent
and the Lenders shall have received and be satisfied with a Borrowing Base
Availability analysis for the period from the Closing Date through January 31,
2013, on a monthly basis.

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

(g) There shall not have occurred any default of any Material Contract of any
Loan Party.

(h) The consummation of the transactions contemplated hereby shall not violate
any Law or any Organization Document of any Loan Party.

(i) All fees required to be paid to the Agent or the Arranger on or before the
Closing Date shall have been paid in full, and all fees required to be paid to
the Lenders on or before the Closing Date shall have been paid in full.

(j) The Borrowers shall have paid all fees, charges and disbursements of counsel
to the Agent to the extent invoiced prior to or on the Closing Date, plus such
additional amounts of such fees, charges and disbursements as shall constitute
its reasonable estimate of such fees, charges and disbursements incurred or to
be incurred by it through the Closing Date (provided that such estimate shall
not thereafter preclude a final settling of accounts between the Borrowers and
the Agent).

(k) The Agent and the Lenders shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including without
limitation the USA PATRIOT Act.

(l) As of the Closing Date, SHC shall own and control legally and beneficially,
either directly or indirectly, 100% of the Equity Interests of each Loan Party;

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

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

(a) Except with respect to the initial Credit Extension to be made hereunder on
the Closing Date, the Rights Offering shall have been

 

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completed, the Separation shall have been consummated and the Separation
Agreements shall have been executed (other than the Separation Agreement
described in clause (g) of the definition of such term) and shall be in full
force and effect, unless terminated on a basis reasonably satisfactory to the
Agent, consistent with the definition of “Maturity Date”.

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

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

(d) The Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall
have received a Request for Credit Extension in accordance with the requirements
hereof.

(e) After giving effect to the Credit Extension requested to be made on any such
date and the use of proceeds thereof, Availability shall be not less than zero.

Each Request for Credit Extension (other than a Committed Loan Notice requesting
only a Conversion of Committed Loans to the other Type or a continuation of
LIBOR Rate Loans) submitted by the Lead Borrower shall be deemed to be a
representation and warranty by the Borrowers that the conditions specified in
Sections 4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension. The conditions set forth in this Section 4.02 are
for the sole benefit of the Agent, the L/C Issuer and the Lenders, but until the
Required Lenders otherwise direct the Agent to cease making Loans and issuing
Letters of Credit, the Lenders will fund their Applicable Percentage of all
Loans and L/C Advances and participate in all Swing Line Loans and Letters of
Credit whenever made or issued, which are requested by the Lead Borrower and
which, notwithstanding the failure of the Loan Parties to comply with the
provisions of this Article IV, agreed to by the Agent, provided, however, the
making of any such Loans or the issuance of any Letters of Credit shall not be
deemed a modification or waiver by the Agent, the L/C Issuer or any Lender of
the provisions of this Article IV on any future occasion or a waiver of any
rights or the Agent, the L/C Issuer or any Lender as a result of any such
failure to comply.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Agent, the L/C Issuer and the Lenders to enter into this Agreement
and to make Loans and to issue Letters of Credit hereunder, the Parent and the
Borrowers, on behalf of each Loan Party, represent and warrant to the Agent, the
L/C Issuer and the Lenders that:

5.01 Existence, Qualification and Power. Each Loan Party (a) is a corporation,
limited liability company, partnership or limited partnership, duly
incorporated, organized or formed, validly existing and, where applicable, in
good standing under the Laws of the jurisdiction of its incorporation,
organization or formation, (b) has all requisite power and authority and all
requisite governmental licenses, permits, authorizations, consents and approvals
to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents to which it is a

 

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party, and (c) is duly qualified and is licensed and, where applicable, in good
standing under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clause (c), to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect. The Perfection Certificate sets forth, as of the Closing Date,
each Loan Party’s name as it appears in official filings in its state of
incorporation or organization, its state of incorporation or organization,
organization type, organization number, if any, issued by its state of
incorporation or organization, and its federal employer identification number.

5.02 Authorization; No Contravention. The execution, delivery and performance by
each Loan Party of each Loan Document to which such Person is or is to be a
party, has been duly authorized by all necessary corporate or other
organizational action, and does not and will not (a) contravene the terms of any
of such Person’s Organization Documents; (b) conflict with or result in any
breach, termination, or contravention of, or constitute a default under (i) any
Material Contract or any Material Indebtedness to which such Person is a party
or (ii) any order, injunction, writ or decree of any Governmental Authority or
any arbitral award to which such Person or its property is subject; (c) result
in or require the creation of any Lien upon any asset of any Loan Party (other
than Liens in favor of the Agent under the Security Documents and Liens
permitted by Section 7.01); or (d) violate any Law.

5.03 Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document, except for
(a) the perfection or maintenance of the Liens created under the Security
Documents or (b) such as have been obtained or made and are in full force and
effect.

5.04 Binding Effect. This Agreement has been, and each other Loan Document, when
delivered, will have been, duly executed and delivered by each Loan Party that
is party thereto. This Agreement constitutes, and each other Loan Document when
so delivered will constitute, a legal, valid and binding obligation of such Loan
Party, enforceable against each Loan Party that is party thereto in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

5.05 Financial Statements; No Material Adverse Effect.

(a) The Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein and (ii) fairly present the financial condition of the
Parent and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein.

(b) The unaudited Consolidated balance sheet of the Parent and its Subsidiaries
dated July 28, 2012, and the related Consolidated statements of income or
operations, Shareholders’ Equity and cash flows for the Fiscal Quarter ended on
that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, and (ii) fairly present the financial condition of the Parent and its
Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to the
absence of footnotes and to normal year-end audit adjustments.

 

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

(d) To the best knowledge of the Loan Parties, no Internal Control Event has
occurred and is continuing that could reasonably be expected to materially
impair the calculation of the Borrowing Base.

(e) The Consolidated forecasted balance sheet and statements of income and cash
flows of the Parent and its Subsidiaries delivered pursuant to Section 6.01(d)
were prepared in good faith on the basis of the assumptions stated therein,
which assumptions were fair in light of the conditions existing at the time of
delivery of such forecasts.

5.06 Litigation. There are no actions, suits, proceedings, claims or disputes
pending or, to the knowledge of the Loan Parties, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against any Loan Party or any of its Subsidiaries or against any of its
properties or revenues that either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.

5.07 Reserved.

5.08 Ownership of Property; Liens.

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

(b) The Perfection Certificate sets forth the address of all Real Estate
(excluding Leases) that is owned by the Loan Parties, together with a list of
the holders of any mortgage or other Lien thereon as of the Closing Date. The
Perfection Certificate sets forth the address of all Leases of the Loan Parties,
together with the name of each lessor and its contact information with respect
to each such Lease as of the Closing Date. Each of such Leases is in full force
and effect and the Loan Parties are not in default of the terms thereof except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

5.09 Environmental Compliance.

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

(b) Except, in each case, as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: none of the properties
currently or formerly owned or operated by any Loan Party is listed or proposed
for listing on the NPL or on the CERCLIS or any analogous foreign, state or
local list or is adjacent to any such property; there are no and never have been

 

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any underground or above-ground storage tanks or any surface impoundments,
septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or
have been treated, stored or disposed on any property currently owned or
operated by any Loan Party or, to the best of the knowledge of the Loan Parties,
on any property formerly owned or operated by any Loan Party; there is no
asbestos or asbestos-containing material on any property currently owned or
operated by any Loan Party; and Hazardous Materials have not been released,
discharged or disposed of on any property currently or formerly owned or
operated by any Loan Party.

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

5.10 Insurance. The properties of the Loan Parties are insured with financially
sound and reputable insurance companies which are not Affiliates of the Loan
Parties, in such amounts (after giving effect to any self-insurance compatible
with the following standards), with such deductibles and covering such risks
(including, without limitation, worker’s compensation, commercial general
liability, insurance on real and personal property and directors and officers
liability insurance) as are reasonably determined by the Parent and customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Loan Parties operate. The Perfection Certificate sets
forth a description of all insurance maintained by or on behalf of the Loan
Parties as of the Closing Date. As of the Closing Date, each insurance policy
listed in the Perfection Certificate is in full force and effect and all
premiums in respect thereof that are due and payable have been paid.

5.11 Taxes. The Loan Parties have filed all Federal, state and other material
tax returns and reports required to be filed, and have paid all Federal, state
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable, except those which are being contested in good faith by appropriate
proceedings being diligently conducted, for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
any Loan Party that would, if made, have a Material Adverse Effect. No Loan
Party or any Subsidiary thereof is a party to any tax sharing agreement other
than in connection with the Separation Agreements.

5.12 ERISA Compliance.

(a) Except as would not reasonably be expected to have a Material Adverse
Effect, (i) each Plan and, to the knowledge of the Loan Parties, any
Multiemployer Plan is in compliance with the applicable provisions of ERISA, the
Code and other Federal or state laws, and (ii) each Pension Plan that is
intended to be a qualified plan under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service to the effect
that the form of such Plan is qualified under Section 401(a) of the Code and the
trust related thereto has been determined by the Internal Revenue Service to be
exempt from federal income tax under Section 501(a) of the Code, or an
application for such a letter is currently being processed by the Internal
Revenue Service. To the best knowledge of the Loan Parties, nothing has occurred
that would prevent or cause the loss of such tax-qualified status.

 

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

(c) Except as would not reasonably be expected to have a Material Adverse
Effect, (i) no ERISA Event has occurred, and neither the Parent nor any ERISA
Affiliate is aware of any fact, event or circumstance that would reasonably be
expected to constitute or result in an ERISA Event with respect to any Pension
Plan; (ii) the Parent and each ERISA Affiliate meet all applicable requirements
under the Pension Funding Rules in respect of each Pension Plan, and no waiver
of the minimum funding standards under the Pension Funding Rules has been
applied for or obtained; (iii) as of the most recent valuation date for any
Pension Plan, the funding target attainment percentage (as defined in
Section 430(d)(2) of the Code) is 80% or higher; (iv) neither the Parent nor any
ERISA Affiliate has incurred any unsatisfied liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become
due that are unpaid; (v) neither the Parent nor any ERISA Affiliate has engaged
in a transaction described in Section 4069 or Section 4212(c) of ERISA; and
(vi) no Pension Plan has been terminated by the plan administrator thereof nor
by the PBGC, and no event or circumstance has occurred or exists that would
reasonably be expected to cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any Pension Plan.

5.13 Subsidiaries; Equity Interests. As of the Closing Date, the Loan Parties
have no Subsidiaries other than those disclosed in the Perfection Certificate,
which sets forth the legal name, jurisdiction of incorporation or formation and
authorized Equity Interests of each such Subsidiary. All of the outstanding
Equity Interests in the Loan Parties (other than the Parent) and such
Subsidiaries have been validly issued, are fully paid and non-assessable and, as
of the Closing Date, are owned by the Persons specified and in the amounts
specified in the Perfection Certificate free and clear of all Liens other than
Liens permitted by Section 7.01. Except as set forth in the Perfection
Certificate, there are no outstanding rights to purchase any Equity Interests in
any Subsidiary as of the Closing Date. As of the Closing Date, the Loan Parties
have no equity investments in any other corporation or entity other than those
specifically disclosed in the Perfection Certificate. The copies of the
Organization Documents of each Loan Party and each amendment thereto provided
pursuant to Section 4.01 are true and correct copies of each such document as of
the Closing Date, each of which was valid and in full force and effect as of the
Closing Date.

5.14 Margin Regulations; Investment Company Act.

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

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

 

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5.15 Disclosure. No report, financial statement, certificate or other
information furnished (whether in writing or orally) by or on behalf of any Loan
Party to the Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document (in each case, as modified or supplemented by
other information so furnished) contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that, with respect to projected financial information, the Loan Parties
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.

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

5.17 Intellectual Property; Licenses, Etc. Except as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect,
the Loan Parties own, or possess the right to use, all of the Intellectual
Property, licenses, permits and other authorizations that are reasonably
necessary for the operation of their respective businesses, without, to the
knowledge of the Loan Parites, conflict with the rights of any other Person or
infringement upon any rights held by any other Person. No claim or litigation
regarding any of the foregoing is pending or, to the best knowledge of the Loan
Parties, threatened, which, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.

5.18 Labor Matters.

Except as, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect, (i) there are no strikes, lockouts, slowdowns or
other material labor disputes against any Loan Party pending or, to the
knowledge of any Loan Party, threatened; (ii) the hours worked by and payments
made to employees of the Loan Parties comply with the Fair Labor Standards Act
and any other applicable federal, state, local or foreign Law dealing with such
matters; (iii) no Loan Party has incurred any liability or obligation under the
Worker Adjustment and Retraining Act or similar state Law; and (iv) all payments
due from any Loan Party, or for which any claim may be made against any Loan
Party, on account of wages and employee health and welfare insurance and other
benefits, have been paid or properly accrued in accordance with GAAP as a
liability on the books of such Loan Party. Except as set forth on Schedule 5.18,
as of the Closing Date, no Loan Party is a party to or bound by any collective
bargaining agreement. As of the Closing Date, there are no representation
proceedings pending or, to any Loan Party’s knowledge, threatened to be filed
with the National Labor Relations Board, and no labor organization or group of
employees of any Loan Party has made a pending demand for recognition. There are
no complaints, unfair labor practice charges, grievances, arbitrations, unfair
employment practices charges or any other claims or complaints against any Loan
Party pending or, to the knowledge of any Loan Party, threatened to be filed
with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any employee of any Loan Party which would individually or in the
aggregate reasonably be expected to result in a Material Adverse Effect. The
consummation of the transactions contemplated by the Loan Documents will not
give rise to any right of termination or right of renegotiation on the part of
any union under any collective bargaining agreement to which any Loan Party is
bound.

 

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5.19 Security Documents.

The Guaranty and Security Agreement creates in favor of the Agent, for the
benefit of the Secured Parties referred to therein, a legal, valid, continuing
and enforceable security interest in the Collateral (as defined in the Guaranty
and Security Agreement), the enforceability of which is subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law. Upon the
making of the filings contemplated in the Guaranty and Security Agreement and/or
the obtaining of “control” (as defined in the UCC) of the Collateral under the
Guaranty and Security Agreement, the Agent will have a perfected Lien on, and
security interest in, to and under all right, title and interest of the Loan
Parties thereunder in all Collateral that may be perfected under the UCC (in
effect on the date this representation is made) by filing, recording or
registering a financing statement or analogous document (including without
limitation the proceeds of such Collateral subject to the limitations relating
to such proceeds in the UCC) or by obtaining control, in each case prior and
superior in right to any other Person (other than Permitted Encumbrances which
by operation of Law would have priority to the Liens securing the Obligations).

5.20 Solvency.

After giving effect to the transactions contemplated by this Agreement, and
before and after giving effect to each Credit Extension, the Loan Parties, on a
Consolidated basis, are and will be Solvent.

5.21 Deposit Accounts; Credit Card Arrangements.

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

(b) The Perfection Certificate sets forth a list describing all arrangements as
of the Closing Date to which any Loan Party is a party with respect to the
processing and/or payment to such Loan Party of the proceeds of any credit card
charges and debit card charges for sales made by such Loan Party.

5.22 Brokers. No Loan Party or Affiliate thereof has any obligation to any
Person in respect of any finder’s or brokerage fees in connection with the entry
into this Agreement, other than as set forth in the Fee Letter.

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

5.24 Material Contracts. The Loan Parties have delivered to the Agent true,
correct and complete copies of the Material Contracts, as in effect on the
Closing Date. The Loan Parties are not in breach or in default in any material
respect of or under any Material Contract and have not received any notice of
material default under, or of the intention of any other party thereto to
terminate, any Material Contract.

 

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5.25 Casualty. Neither the businesses nor the properties of the Loan Parties or
their Subsidiaries, considered as a whole, have been affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

5.26 Separation.

(a) The Loan Parties have delivered to the Agent a complete and correct copy of
each Separation Agreement, including all schedules and exhibits thereto, as of
the Closing Date. Such Separation Agreements sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby, in each case as of the Closing Date.
The execution, delivery and performance of each such Separation Agreement has
been duly authorized by all necessary action on the part of each such Person. No
authorization or approval or other action by, and no notice to filing with or
license from, any Governmental Authority is required for the consummation of the
transactions contemplated by the Separation Agreements other than such as have
been obtained on or prior to the Closing Date. Each Separation Agreement is the
legal, valid and binding obligation of each Loan Party party thereto and, to the
best knowledge of any Loan Party, the other parties thereto, enforceable against
such parties in accordance with its terms (other than, following the Closing
Date, (i) the Separation Agreement described in clause (g) of the definition of
such term or (ii) to the extent terminated on a basis reasonably acceptable to
the Agent, consistent with the definition of “Maturity Date”).

(b) Contemporaneously with the Closing Date, all aspects of the Separation have
been effected in all material respects in accordance with terms of the
Separation Agreements and applicable Law. All consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
Government Authorities required in order to consummate the Separation have been
obtained, given, filed or taken and are in full force and effect
contemporaneously with the Closing Date.

ARTICLE VI

AFFIRMATIVE COVENANTS

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

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

(a) as soon as available, but in any event within 95 days after the end of each
Fiscal Year of the Parent (commencing with the fiscal year ended February 2,
2013), (i) a Consolidated balance sheet of the Parent and its Subsidiaries as at
the end of such Fiscal Year, and the related consolidated statements of income
or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous Fiscal Year,
all in reasonable detail and prepared in accordance with GAAP, such consolidated
statements to be audited and accompanied by a report and unqualified opinion of
a Registered Public Accounting Firm of nationally recognized standing reasonably
acceptable to the Agent, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and shall not be subject
to any “going concern” or like qualification or exception or any qualification
or exception as to the scope of such audit; and (ii) to the extent not otherwise
included in the financial statements delivered pursuant to clause (i), a
reasonably detailed build-up of EBITDA and inventory balances for each Operating
Segment for such period, certified by a Responsible Officer of the Parent as
stating fairly in all material respects the financial position of each Operating
Segment;

 

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(b) as soon as available, but in any event within 50 days after the end of each
of the first three Fiscal Quarters of each Fiscal Year of the Parent (commencing
with the Fiscal Quarter ended October 27, 2012), (i) a Consolidated balance
sheet of the Parent and its Subsidiaries as at the end of such Fiscal Quarter,
and the related consolidated statements of income or operations, Shareholders’
Equity and cash flows for such Fiscal Quarter and for the portion of the
Parent’s Fiscal Year then ended, setting forth in each case in comparative form
the figures for (A) the corresponding Fiscal Quarter of the previous Fiscal Year
and (B) the corresponding portion of the previous Fiscal Year, all in reasonable
detail, such Consolidated statements to be certified by a Responsible Officer of
the Parent as fairly presenting the financial condition, results of operations,
Shareholders’ Equity and cash flows of the Parent and its Subsidiaries as of the
end of such Fiscal Quarter in accordance with GAAP, subject only to normal
year-end audit adjustments and the absence of footnotes, and (ii) to the extent
not otherwise included in the financial statements delivered pursuant to clause
(i), a reasonably detailed build-up of EBITDA and inventory balances for each
Operating Segment for such period, certified by a Responsible Officer of the
Parent as stating fairly in all material respects the financial position of each
Operating Segment;

(c) as soon as available, but in any event within 30 days after the end of each
month (commencing with the month ended October 31, 2012), a Consolidated balance
sheet of the Parent and its Subsidiaries as at the end of such month, and the
related Consolidated statements of income or operations, Shareholders’ Equity
and cash flows for such month, and for the portion of the Parent’s Fiscal Year
then ended, setting forth in each case in comparative form the figures for
(A) the corresponding month of the previous Fiscal Year and (B) the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
such Consolidated statements to be certified by a Responsible Officer of the
Parent as, to its knowledge, fairly presenting the financial condition, results
of operations, Shareholders’ Equity and cash flows of the Parent and its
Subsidiaries as of the end of such month in accordance with GAAP, subject only
to normal year-end audit adjustments and the absence of footnotes;

(d) as soon as available, but in any event no more than 60 days after the end of
each Fiscal Year of the Parent, forecasts prepared by management of the Parent,
in form reasonably satisfactory to the Agent, consisting of a projected balance
sheet, income statement, cash flows and Availability of the Parent and its
Subsidiaries on a monthly basis for the immediately following Fiscal Year
(including the Fiscal Year in which the Maturity Date occurs).

6.02 Certificates; Other Information. Deliver to the Agent:

(a) concurrently with the delivery of the financial statements referred to in
Sections 6.01(a), (b) and (c), a duly completed Compliance Certificate signed by
a Responsible Officer of the Lead Borrower, and in the event of any change in
generally accepted accounting principles used in the preparation of such
financial statements, a statement of reconciliation conforming such financial
statements to GAAP;

(b) Within ten (10) Business Days after the end of each fiscal month, a
Borrowing Base Certificate showing the Borrowing Base as of the close of
business as of the last day of the immediately preceding month, each Borrowing
Base Certificate to be certified as complete and correct by a Responsible
Officer of the Lead Borrower; provided that at any time that an Accelerated
Borrowing Base Delivery Event has occurred and is continuing, such Borrowing

 

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Base Certificate shall be delivered on Friday of each week (or, if Friday is not
a Business Day, on the next succeeding Business Day), as of the close of
business on the immediately preceding Saturday (it being understood that any
weekly Borrowing Base Certificate shall constitute the results of rolled forward
information regarding Eligible Inventory and other items, as applicable);

(c) promptly upon receipt, copies of any report submitted to the board of
directors (or the audit committee of the board of directors) of any Loan Party
by its Registered Public Accounting Firm in connection with any Internal Control
Event or any other event that would reasonably be expected, individually or in
the aggregate with other events, to result in a Material Adverse Effect;

(d) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the stockholders
of the Loan Parties, and copies of all annual, regular, periodic and special
reports and registration statements which any Loan Party may file or be required
to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of
1934 or with any national securities exchange;

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

(f) promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt securities of any Loan Party or any Subsidiary
thereof pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Lenders pursuant to
Section 6.01 or any other clause of this Section 6.02; (other than borrowing
notices or other routine communications thereunder)

(g) as soon as available, but in any event within 30 days after the end of each
Fiscal Year of the Loan Parties, a report summarizing the insurance coverage
(specifying type, amount and carrier) in effect for each Loan Party and its
Subsidiaries and containing such additional information as the Agent, or any
Lender through the Agent, may reasonably specify;

(h) promptly after the Agent’s request therefor, copies of all Material
Contracts and documents evidencing Material Indebtedness, and promptly after
receipt thereof by any Loan Party, copies of all notices (other than notices
delivered in the ordinary course) received from SHC and its Subsidiaries under
the Separation Agreements;

(i) promptly, and in any event within five Business Days after receipt thereof
by any Loan Party or any Subsidiary thereof, copies of each notice or other
correspondence received from any Governmental Authority (including, without
limitation, the SEC (or comparable agency in any applicable non-U.S.
jurisdiction)) concerning any proceeding with, or investigation or possible
investigation or other inquiry by such Governmental Authority regarding
financial or other operational results of any Loan Party or any Subsidiary
thereof or any other matter which, if adversely determined, could reasonably
expected to have a Material Adverse Effect; and

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

Documents required to be delivered pursuant to Section 6.01 or Section 6.02 may
be delivered by electronic mail or by posting to a website and, if so delivered
by posting to a website, shall be deemed to have been delivered on the date
(i) on which the Lead Borrower posts such documents, or provides a link

 

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thereto on the Lead Borrower’s website on the Internet at the website address
listed on Schedule 10.02; or (ii) on which such documents are posted on the Lead
Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Agent have access (whether a commercial, third-party website or
whether sponsored by the Agent and including, without limitation, the website of
the SEC). The Agent shall have no obligation to request the delivery or to
maintain copies of the documents referred to above, and in any event shall have
no responsibility to monitor compliance by the Loan Parties with any such
request for delivery, and each Lender shall be solely responsible for requesting
delivery to it or maintaining its copies of such documents.

The Loan Parties hereby acknowledge that (a) the Agent and/or the Arranger will
make available to the Lenders and the L/C Issuer materials and/or information
provided by or on behalf of the Loan Parties hereunder (collectively, “Borrower
Materials”) by posting the Borrower Materials on Debt Domain, IntraLinks,
Syndtrak or another similar electronic system (the “Platform”) and (b) certain
of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to
receive material non-public information with respect to the Loan Parties or
their securities) (each, a “Public Lender”). The Loan Parties hereby agree that
so long as any Loan Party is the issuer of any outstanding debt or equity
securities that are registered or issued pursuant to a private offering or is
actively contemplating issuing any such securities they will use commercially
reasonable efforts to identify that portion of the Borrower Materials that may
be distributed to the Public Lenders and that (w) all such Borrower Materials
shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall
mean that the word “PUBLIC” shall appear prominently on the first page thereof;
(x) by marking Borrower Materials “PUBLIC,” the Loan Parties shall be deemed to
have authorized the Agent, the Arranger, the L/C Issuer and the Lenders to treat
such Borrower Materials as not containing any material non-public information
(although it may be sensitive and proprietary) with respect to the Loan Parties
or their securities for purposes of the Securities Laws (provided, however, that
to the extent such Borrower Materials constitute Information, they shall be
treated as set forth in Section 10.07); (y) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform
designated “Public Investor”; and (z) the Agent and the Arranger shall be
entitled to treat any Borrower Materials that are not marked “PUBLIC” as being
suitable only for posting on a portion of the Platform not designated “Public
Investor.”

6.03 Notices Promptly notify the Agent upon obtaining knowledge:

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

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

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

(d) of any breach or non-performance of, or any default under, any agreements
with any Third Party Dealer or Third Party Franchisee, or of any failure of SHC
or any of its Subsidiaries to make rent payments due with respect to any
location operated by a Third Party Franchisee, that, in either case, would
adversely impact the Borrowing Base or the ability of the Agent to realize upon
the ABL Collateral;

(e) of any dispute, litigation, investigation, proceeding or suspension between
any Loan Party or any Subsidiary thereof and any Governmental Authority; or the
commencement of, or any material development in, any litigation or proceeding
affecting any Loan Party or any Subsidiary thereof, including pursuant to any
applicable Environmental Laws, in each case which would be reasonably expected
to result in a Material Adverse Effect;

 

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(f) of the occurrence of any ERISA Event;

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

(h) of any change in any Loan Party’s senior executive officers;

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

(j) of the filing of any Lien for unpaid Taxes against any Loan Party in excess
of $5,000,000;

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

(l) of any failure by any Loan Party to pay rent at (i) any of the Loan Parties’
distribution centers or warehouses; or (ii) any of such Loan Party’s other
locations if such failure would reasonably be expected to result in a Material
Adverse Effect.

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

6.04 Payment of Taxes. Pay and discharge before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property (ii) all payments required to be made to
any Pension Plan, and (iii) all lawful claims that, if unpaid, might by law
become a Lien upon its property; provided that neither Parent, the Borrowers nor
any of their Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim (x) that is being contested in good faith and by
proper proceedings and as to which appropriate reserves are being maintained,
unless and until any Lien resulting therefrom attaches to its property and
becomes enforceable against its other creditors or (y) if such non-payments,
either individually or in the aggregate, would not be reasonably expected to
have a Material Adverse Effect.

6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization or formation except in a transaction permitted
by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so would
not reasonably be expected to have a Material Adverse Effect; and (c) preserve
or renew all of its Intellectual Property, except to the extent the failure to
do so would not reasonably be expected to have a Material Adverse Effect.

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

 

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6.07 Maintenance of Insurance. (a) Maintain or cause to be maintained with
financially sound and reputable insurance companies and not Affiliates of the
Loan Parties, insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by Persons engaged in the
same or similar business and operating in the same or similar locations or as is
required by Law, of such types and in such amounts (after giving effect to any
self-insurance compatible with the following standards) as are customarily
carried under similar circumstances by such other Persons.

(b) Maintain for themselves and their Subsidiaries, a Directors and Officers
insurance policy, and a “Blanket Crime” policy with responsible companies in
such amounts as are customarily carried by business entities engaged in similar
businesses similarly situated, and will upon request by the Agent furnish the
Agent certificates evidencing renewal of each such policy.

(c) Cause fire and extended coverage policies maintained with respect to any ABL
Collateral to be endorsed or otherwise amended to include (i) a lenders’ loss
payable clause (regarding personal property), in form and substance reasonably
satisfactory to the Agent, which endorsements or amendments shall provide that
the insurer shall pay all proceeds otherwise payable to the Loan Parties under
the policies directly to the Agent and (ii) a provision to the effect that none
of the Loan Parties, Credit Parties or any other Person shall be a co-insurer.

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

(e) Cause business interruption policies, if any, to name the Agent as a loss
payee and to be endorsed or amended to include (i) a provision that, from and
after the Closing Date, the insurer shall pay all proceeds otherwise payable to
the Loan Parties under the policies directly to the Agent, and (ii) a provision
to the effect that none of the Loan Parties, the Agent, the Agent or any other
party shall be a co-insurer.

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

(g) Deliver to the Agent, prior to the cancellation or non-renewal of any such
policy of insurance, evidence of a renewal or replacement policy, including an
insurance binder) therefor, together with evidence satisfactory to the Agent of
payment of the premium therefor.

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

 

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

6.09 Books and Records; Accountants.

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

(b) at all times retain a Registered Public Accounting Firm which is reasonably
satisfactory to the Agent and instruct such Registered Public Accounting Firm to
cooperate with, and be available to, the Agent or its representatives to discuss
the Loan Parties’ financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
Registered Public Accounting Firm, as may be raised by the Agent.

6.10 Inspection Rights.

(a) Permit representatives and independent contractors of the Agent to visit and
inspect any of its properties, to examine its corporate, financial and operating
records, the insurance policies maintained by or on behalf of the Loan Parties
and make copies thereof or abstracts therefrom, and to discuss its affairs,
finances and accounts with its directors, officers, and Registered Public
Accounting Firm, all at the expense of the Loan Parties and at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Lead Borrower; provided, however, that
when a Default or an Event of Default exists the Agent (or any of its
representatives or independent contractors) may do any of the foregoing at the
expense of the Loan Parties at any time during normal business hours and without
advance notice.

(b) Upon the request of the Agent after reasonable prior notice, permit the
Agent or professionals (including investment bankers, consultants, accountants,
and lawyers) retained by the Agent to conduct commercial finance examinations
and other evaluations, including, without limitation, of (i) the Lead Borrower’s
practices in the computation of the Borrowing Base (ii) the assets included in
the Borrowing Base and related financial information such as, but not limited
to, sales, gross margins, payables, accruals and reserves, and (iii) the Loan
Parties’ business plan, forecasts and cash flows. The Loan Parties shall pay the
reasonable fees and expenses of the Agent and such professionals with respect to
(i) from the Closing Date until the second anniversary of the Closing Date, up
to two (2) commercial finance examinations during each twelve month period, and
(ii) after the second anniversary of the Closing Date, (x) if Availability is
equal to or greater than 35% of the Loan Cap, one (1) commercial finance
examination during each twelve month period, and (y) if Availability is less
than 35% of the Loan Cap, up to two (2) commercial finance examinations in any
twelve month period. Notwithstanding the foregoing, the Agent may cause
additional commercial finance examinations to be undertaken (i) as it in its
discretion deems necessary or appropriate, at the Credit Parties’ expense or,
(ii) if a Default or Event of Default shall have occurred and be continuing, at
the expense of the Loan Parties.

 

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(c) Upon the request of the Agent after reasonable prior notice, permit the
Agent or professionals (including appraisers) retained by the Agent to conduct
appraisals of the ABL Collateral, including, without limitation, the assets
included in the Borrowing Base. The Loan Parties shall pay the reasonable fees
and expenses of the Agent and such professionals with respect to (i) from the
Closing Date until the first anniversary of the Closing Date, up to two
(2) inventory appraisals during such period, and (ii) after the first
anniversary of the Closing Date, (x) if Availability is equal to or greater than
35% of the Loan Cap, one (1) inventory appraisal during any twelve month period,
and (y) if Availability is less than 35% of the Loan Cap, up to two
(2) inventory appraisals in each twelve month period. Notwithstanding the
foregoing, the Agent may cause additional appraisals to be undertaken (i) as it
in its discretion deems necessary or appropriate, at the Credit Parties’ expense
or, (ii) if a Default or Event of Default shall have occurred and be continuing,
at the expense of the Loan Parties.

6.11 Additional Loan Parties. Notify the Agent at the time that any Person
becomes a Subsidiary, and promptly thereafter (and in any event within fifteen
(15) days or such later date as the Agent may agree), cause any such Person that
is a wholly-owned domestic Subsidiary to (a) become a Loan Party by executing
and delivering to the Agent a Joinder Agreement or such other documents as the
Agent shall deem appropriate for such purpose, (b) grant a Lien to the Agent on
such Person’s assets of the same type that constitute Collateral to secure the
Obligations, and (c) deliver to the Agent documents of the types referred to in
clauses (iii) and (iv) of Section 4.01(a) and, if requested by the Agent,
customary favorable opinions of counsel to such Person (which shall cover, among
other things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), in each case in form, content and
scope reasonably satisfactory to the Agent; provided that, if any such
wholly-owned domestic Subsidiary owns assets of the type which would be included
in the Borrowing Base, such Subsidiary shall join the Loan Documents as a
Borrower thereunder. In no event shall compliance with this Section 6.11 waive
or be deemed a waiver or consent to any transaction giving rise to the need to
comply with this Section 6.11 if such transaction was not otherwise expressly
permitted by this Agreement or constitute or be deemed to constitute, with
respect to any Subsidiary, an approval of such Person as a Borrower or permit
the inclusion of any acquired assets in the computation of the Borrowing Base.

6.12 Cash Management.

(a) On or prior to the date which is sixty (60) days following the Closing Date
(as such time period may be extended by the Agent in its sole discretion),
(i) deliver to the Agent copies of notifications in the form of Exhibit H hereto
(each, a “Credit Card Notification”), or otherwise reasonably satisfactory in
form and substance to the Agent which have been executed by the applicable Loan
Parties and delivered to such Loan Party’s Credit Card Issuers and Credit Card
Processors listed in the Perfection Certificate with respect to which the Loan
Parties have established credit card processing arrangements independent of SHC
and its Subsidiaries, and (ii) enter into a Blocked Account Agreement with each
Blocked Account Bank set forth on Schedule 6.12.

(b) ACH or wire transfer no less frequently than daily (and whether or not there
are then any outstanding Loan Agreement Obligations) to a Blocked Account all
amounts on deposit in each DDA (net of any minimum balance as may be required to
be kept in the subject DDA by the depository institution at which such DDA is
maintained) and all payments received from all Credit Card Issuers and Credit
Card Processors and from SHC and its Subsidiaries pursuant to the Separation
Agreements.

(c) After the occurrence and during the continuance of a Cash Dominion Event,
cause the ACH or wire transfer to the collection account maintained by the Agent
at Bank of America or with another financial institution acceptable to the Agent
in its sole discretion (the “Collection Account”), no less frequently than daily
(and whether or not there are then any outstanding Loan Agreement Obligations),
all cash receipts and collections received by each Loan Party from all sources,
including, without limitation, the following:

 

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(i) all available cash receipts from the sale of Inventory (including without
limitation, proceeds of credit card charges) and other assets (whether or not
constituting Collateral);

(ii) all proceeds of collections of Accounts;

(iii) all Net Proceeds received by a Loan Party from any Person or from any
source or on account of any Disposition or other transaction or event;

(iv) the then contents of each DDA (net of any minimum balance, not to exceed
$2,500.00, as may be required to be kept in the subject DDA by the depository
institution at which such DDA is maintained); and

(v) the then entire ledger balance of each Blocked Account (net of any minimum
balance, not to exceed $50,000.00, as may be required to be kept in the subject
Blocked Account by the Blocked Account Bank);

All funds in each DDA and each Blocked Account shall be conclusively presumed to
be Collateral and proceeds of Collateral and the Agent and the Lenders shall
have no duty to inquire as to the source of the amounts on deposit in any DDA or
Blocked Account.

(d) The Collection Account shall at all times during the continuance of a Cash
Dominion Event be under the sole dominion and control of the Agent. The Loan
Parties hereby acknowledge and agree that (i) during the continuance of a Cash
Dominion Event, the Loan Parties have no right of withdrawal from the Collection
Account, (ii) the funds on deposit in the Collection Account shall at all times
be collateral security for all of the Obligations and (iii) during the
continuance of a Cash Dominion Event, (A) unless the Loan Agreement Obligations
have been accelerated pursuant to Section 8.02 hereof, the funds on deposit in
the Collection Account shall be applied to the Loan Agreement Obligations as
provided in Section 2.05(e) hereof, and (B) if the Loan Agreement Obligations
have been accelerated pursuant to Section 8.02 hereof, the funds on deposit in
the Collection Account shall be applied to the Obligations as provided in
Section 8.03 hereof. In the event that, notwithstanding the provisions of this
Section 6.12, any Loan Party receives or otherwise has dominion and control of
any such cash receipts or collections, such receipts and collections shall be
held in trust by such Loan Party for the Agent, shall not be commingled with any
of such Loan Party’s other funds or deposited in any account of such Loan Party
and shall, not later than the Business Day after receipt thereof, be deposited
into the Collection Account or dealt with in such other fashion as such Loan
Party may be instructed by the Agent.

(e) Upon entering into any agreements with any new Credit Card Issuer or Credit
Card Processor, the Loan Parties shall deliver to the Agent a Credit Card
Notification as set forth in Section 6.12(a) hereof.

(f) The Agent agrees that (1) it shall not direct any Credit Card Issuer or
Credit Card Processor to transfer any proceeds pursuant to any Credit Card
Notification unless a Cash Dominion Event has occurred and is continuing and
(2) if any Loan Party shall so request, unless a Cash Dominion Event has
occurred and is continuing, the Agent shall countersign any notification,
request, order or direction from such Loan Party to any Credit Card Issuer or
Credit Card Processor directing payments from such Credit Card Issuer or Credit
Card Processor to be made to a new or different DDA, provided such DDA is a
Blocked Account.

 

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

6.13 Information Regarding the Collateral.

Furnish to the Agent at least ten (10) days prior written notice of any change
in: (i) any Loan Party’s name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties; (ii) the location
of any Loan Party’s chief executive office, its principal place of business, any
office in which it maintains books or records relating to ABL Collateral
(including the establishment of any such new office); (iii) any Loan Party’s
organizational structure or jurisdiction of incorporation or formation; or
(iv) any Loan Party’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its state of organization.

6.14 Physical Inventories.

(a) Cause not less than one physical inventory to be undertaken, at the expense
of the Loan Parties, in each Fiscal Year and periodic cycle counts, in each case
consistent with past practices, conducted by such inventory takers as are
reasonably satisfactory to the Agent and following such methodology as is
consistent with past practice or as otherwise may be reasonably satisfactory to
the Agent. The Agent, at the expense of the Loan Parties, may participate in
and/or observe each scheduled physical count of Inventory which is undertaken on
behalf of any Loan Party. The Lead Borrower, within 45 days following the
completion of such inventory, shall provide the Agent with a reconciliation of
the results of such inventory (as well as of any other physical inventory or
cycle counts undertaken by a Loan Party) and shall post such results to the Loan
Parties’ stock ledgers and general ledgers, as applicable.

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

6.15 Reserved.

6.16 Further Assurances.

(a) Execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements and other documents), that may be required
under any Law, or which the Agent may reasonably request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security Documents
or the validity or priority of any such Lien, all at the expense of the Loan
Parties.

(b) If any material assets of the type which constitute Collateral under the
Security Documents are acquired by any Loan Party after the Closing Date (other
than assets constituting Collateral under the Security Documents that become
subject to the perfected first priority Lien under the Security Documents upon
acquisition thereof), notify the Agent thereof, and the Loan Parties will cause
such assets to be subjected to a Lien securing the Obligations and will take
such actions as shall be necessary or shall be reasonably requested by the Agent
to grant and perfect such Liens, including actions

 

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described in paragraph (a) of this Section 6.16, all at the expense of the Loan
Parties. In no event shall compliance with this Section 6.16(b) waive or be
deemed a waiver or consent to any transaction giving rise to the need to comply
with this Section 6.16(b) if such transaction was not otherwise expressly
permitted by this Agreement or constitute or be deemed to constitute consent to
the inclusion of any acquired assets in the computation of the Borrowing Base.

(c) Upon the reasonable request of the Agent, use commercially reasonable
efforts to cause each of its customs brokers, freight forwarders, consolidators
and/or carriers to deliver an agreement to the Agent covering such matters and
in such form as the Agent may reasonably require.

6.17 Compliance with Terms of Leaseholds.

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

6.18 Material Contracts. (a) Perform and observe all the terms and provisions of
each Material Contract to be performed or observed by it to the extent required
to maintain each such Material Contract in full force and effect and enforce
each such Material Contract in accordance with its terms, except in each case to
the extent such Material Contract is no longer used or useful in the conduct of
the business of the Loan Parties in the ordinary course of business.

ARTICLE VII

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other
Loan Agreement Obligation hereunder shall remain unpaid or unsatisfied (other
than contingent indemnification claims for which a claim has not been asserted),
or any Letter of Credit shall remain outstanding (unless Cash Collateralized),
Parent shall not, nor shall it permit any of its Subsidiaries to, directly or
indirectly:

7.01 Liens Create, incur, assume or suffer to exist any Lien upon any ABL
Collateral, whether now owned or hereafter acquired, or on any Related
Intellectual Property, other than, as to all of the above, Permitted
Encumbrances.

7.02 Investments Make any Investments, except Permitted Investments; provided
that, after the occurrence and during the continuance of a Cash Dominion Event,
no further Permitted Investments of the types specified in clauses (a) (s), and
(t) of the definition thereof shall be permitted to be made unless (i) either no
Loans or, if then required to be Cash Collateralized, Letters of Credit are then
outstanding, and (ii) such Investments shall be pledged to the Agent as
additional collateral for the Obligations pursuant to such agreements as may be
reasonably required by the Agent.

7.03 Indebtedness; Equity Issuances.

(a) Create, incur, assume, guarantee, suffer to exist or otherwise become or
remain liable with respect to, any Indebtedness, except Permitted Indebtedness;
or (b) issue and sell any other Equity Interests of the Borrowers unless such
Equity Interests are issued only to the Parent or another Borrower.

 

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

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

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

(c) in connection with a Permitted Acquisition, any Subsidiary of a Loan Party
may merge with or into or consolidate with any other Person or permit any other
Person to merge with or into or consolidate with it; provided that (i) the
Person surviving such merger shall be a wholly-owned Subsidiary of a Loan Party
and such Person shall become a Loan Party to the extent required in accordance
with the provisions of Section 6.11 hereof, and (ii) in the case of any such
merger to which any Loan Party is a party, such Loan Party is the surviving
Person;

(d) any Subsidiary may liquidate or dissolve into its parent entity to the
extent the Lead Borrower reasonably determines that the continued existence of
such Subsidiary is no longer in the best interests of the Parent and its
Subsidiaries; and

(e) in connection with a Permitted Disposition of a Subsidiary, such Subsidiary
may merge or consolidate into any Person that is not a Subsidiary.

7.05 Dispositions Make any Disposition, except Permitted Dispositions.

7.06 Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except the following:

(a) each Subsidiary of a Loan Party may make Restricted Payments to the holder
of its Equity Interests, provided that any such Restricted Payment to a Person
that is not a Loan Party shall not exceed such Person’s ratable share of the
Restricted Payments so made;

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

(c) the Parent may make the Closing Date Dividend; and

(d) following the first anniversary of the Closing Date, if the Restricted
Payment Conditions are satisfied, the Parent may (i) purchase, redeem or
otherwise acquire Equity Interests issued by it and (ii) declare or pay cash
dividends to its stockholders.

 

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7.07 Prepayments of Indebtedness. Prepay, redeem, purchase, defease or otherwise
satisfy prior to the scheduled maturity thereof in any manner any Indebtedness
for borrowed money, except (a) as long as no Default or Event of Default then
exists, regularly scheduled or mandatory repayments, repurchases, redemptions or
defeasances of Permitted Indebtedness, (b) as long as the Payment Conditions are
satisfied, voluntary prepayments, repurchases, redemptions or defeasances of
Permitted Indebtedness, (c) Permitted Refinancings of any such Indebtedness and
(d) as long as no Event of Default exists or would result therefrom, up to
$20,000,000 of aggregate Indebtedness so long as any individual facility or
tranche of Indebtedness prepaid, redeemed, purchased or otherwise satisfied
pursuant to this clause (d) does not individually have an original principal
amount of more than $10,000,000.

7.08 Change in Nature of Business.

(a) In the case of the Parent, engage in any business or activity other than
(a) the direct or indirect ownership of all outstanding Equity Interests in its
Subsidiaries, including the other Loan Parties, (b) maintaining its corporate
existence and complying with its obligations as a public company,
(c) participating in tax, accounting and other administrative activities as the
parent of the consolidated group of companies, including the Loan Parties,
(d) the execution and delivery of the Separation Agreements and the Loan
Documents to which it is a party and the performance of its obligations
thereunder, and (e) activities incidental to the businesses or activities
described in clauses (a) through (d) of this Section 7.08(a).

(b) In the case of each of the Loan Parties, engage in any line of business
substantially different from the business conducted by the Loan Parties and
their Subsidiaries on the Closing Date or any business substantially related or
incidental thereto.

7.09 Transactions with Affiliates. Enter into, renew, extend or be a party to
any transaction of any kind with any Affiliate of any Loan Party, whether or not
in the ordinary course of business, other than on fair and reasonable terms
substantially as favorable to the Loan Parties or such Subsidiary as would be
obtainable by the Loan Parties or such Subsidiary at the time in a comparable
arm’s length transaction with a Person other than an Affiliate, provided that
the foregoing restriction shall not apply to (a) transactions between or among
the Loan Parties, (b) transactions described in the Separation Agreements,
(c) transactions described in the Parent’s Form S-1 under the Section titled
“Certain Relationships and Related Party Transactions”, (d) advances for
commissions, travel and other similar purposes in the ordinary course of
business to directors, officers and employees, (e) the payment of reasonable
fees and out-of-pocket costs to directors, and compensation and employee benefit
arrangements paid to, and indemnities provided for the benefit of, directors,
officers or employees of the Parent or any of its Subsidiaries, (f) the
provision of ordinary course administrative services to the Subsidiaries that
are not Loan Parties, and (g) as long as no Change of Control results therefrom,
any issuances of securities of the Parent (other than Disqualified Stock) or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment agreements, stock options and stock ownership
plans (in each case in respect of Equity Interests in the Parent) of the Parent
or any of its Subsidiaries.

7.10 Burdensome Agreements. Enter into or permit to exist any Contractual
Obligation (other than this Agreement or any other Loan Document) that
(a) limits the ability (i) of any Subsidiary to make Restricted Payments or
other distributions to any Loan Party or to otherwise transfer property to or
invest in a Loan Party, (ii) of any Subsidiary to Guarantee the Obligations or
(iii) of the Loan Parties or any Subsidiary to create, incur, assume or suffer
to exist Liens on property of such Person in favor of the Agent except for
encumbrances and restrictions under Contractual Obligations existing under or by
reason of (i) this Agreement and the other Loan Documents and the documents
governing the Other Liabilities; (ii) any restrictions with respect to a
Subsidiary imposed pursuant to an agreement that has

 

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been entered into in connection with the disposition of all or any portion of
the equity interests or assets of such Subsidiary; (iii) the provisions
contained in any Permitted Indebtedness (and in any refinancing of such
indebtedness so long as no more restrictive than those contained in the
respective Indebtedness so refinanced); (iv) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of any
Borrower or a Subsidiary of any Borrower entered into in the ordinary course of
business; (v) customary provisions restricting assignment of any contract
entered into by any Borrower or any Subsidiary of any Borrower in the ordinary
course of business; (vi) any agreement or instrument governing acquired
Indebtedness permitted hereunder, which restriction is not applicable to any
Person or the properties or assets of any Person, other than the Person or the
properties or assets of the Person acquired pursuant to the respective
acquisition and so long as the respective encumbrances or restrictions were not
created (or made more restrictive) in connection with or in anticipation of the
respective acquisition; (vii) customary provisions restricting the assignment of
licensing agreements, management agreements or franchise agreements entered into
by any Borrower or any of its Subsidiaries in the ordinary course of business;
(viii) restrictions on the transfer of assets securing purchase money
obligations and capitalized lease obligations which are permitted hereunder; and
(ix) customary net worth provisions contained in real property leases entered
into by Subsidiaries of any Borrower, so long as the applicable Borrower has
determined in good faith that such net worth provisions could not reasonably be
expected to impair the ability of the Borrowers and their Subsidiaries to meet
their ongoing obligations.

7.11 Use of Proceeds. Use the proceeds of any Credit Extension, whether directly
or indirectly, and whether immediately, incidentally or ultimately, (a) to
purchase or carry margin stock (within the meaning of Regulation U of the FRB)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund Indebtedness originally incurred for such purpose, or (b) for
any purposes other than (i) to make the Closing Date Dividend, (ii) the
acquisition of working capital assets in the ordinary course of business,
(iii) to finance Capital Expenditures of the Loan Parties, and (iv) for general
corporate purposes, in each case to the extent expressly permitted under Law and
the Loan Documents.

7.12 Amendment of Organization Documents and Material Indebtedness.

Amend, modify or waive any of a Loan Party’s rights under (a) its Organization
Documents in a manner materially adverse to the Agent and the Lenders, or
(b) any Material Indebtedness if such amendment, modification or waiver would be
in violation of any intercreditor agreement among the Agent and the holder of
such Material Indebtedness.

7.13 Fiscal Year.

Change the Fiscal Year of any Loan Party, or the accounting policies or
reporting practices of the Loan Parties, except as required by GAAP or to
coincide with the calendar year.

7.14 Financial Covenants.

(a) Availability. From the Closing Date until the first anniversary thereof,
permit Availability at any time to be less than the greater of (i) 12.5% of the
Loan Cap or (ii) $25,000,000.

(b) Consolidated Fixed Charge Coverage Ratio. During the continuance of a
Covenant Compliance Event, permit the Consolidated Fixed Charge Coverage Ratio,
calculated on a trailing twelve month basis, to be less than 1.0:1.0, commencing
with the month ending immediately preceding the date on which a Covenant
Compliance Event first occurred.

 

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

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

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

(b) Specific Covenants. (i) Any Loan Party fails to perform or observe any term,
covenant or agreement contained in any of Sections 6.01, 6.02, 6.03(a), 6.05,
6.07 (with respect to property of the type included in the Borrowing Base),
6.10, 6.11, 6.12 or 6.18 or Article VII; or

(c) Other Defaults. Any Loan Party fails to perform or observe (i) any term,
covenant or agreement contained in any of Sections 6.03 (other than
Section 6.03(a)) or 6.13 and such failure continues for 15 days, or (ii) any
other covenant or agreement (not specified in subsection (a), (b) or (c)(i)
above) contained in any Loan Document on its part to be performed or observed
and such failure continues for 30 days; or

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

(e) Cross-Default. Any Loan Party (A) fails to make any payment when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Material Indebtedness, or (B) fails to observe or
perform any other agreement or condition relating to any such Material
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, or to permit the holder or holders of such Material
Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or

(f) Insolvency Proceedings, Etc. Any Loan Party or any Subsidiary thereof
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of its property; or a proceeding shall be commenced or a petition filed,
without the application or consent of such Person, seeking or requesting the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed and the appointment continues
undischarged, undismissed or unstayed for 45 calendar days or an order or decree
approving or ordering any of the foregoing shall be entered; or any proceeding
under any Debtor Relief Law relating to any such Person or to all or any
material part of its property is instituted without the consent of such Person
and continues undismissed or unstayed for 45 calendar days, or an order for
relief is entered in any such proceeding; or

 

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(g) Judgments. There is entered against any Loan Party or any Subsidiary thereof
one or more judgments or orders for the payment of money in an aggregate amount
(as to all such judgments and orders) exceeding $25,000,000 (to the extent not
covered by independent third-party insurance as to which the insurer is rated at
least “A” by A.M. Best Company, has been notified of the potential claim and
does not dispute coverage), and (i) enforcement proceedings are commenced by any
creditor upon such judgment or order, or (ii) there is a period of 20
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, is not in effect; or

(h) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which would reasonably be expected to result in a Material
Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan which would reasonably be expected to result in a
Material Adverse Effect; or

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

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

(k) Cessation of Business. Except as otherwise expressly permitted hereunder,
the Loan Parties, taken as a whole, shall take any action to suspend the
operation of their business in the ordinary course, liquidate all or
substantially all of their assets or Store locations, or employ an agent or
other third party to conduct a program of closings, liquidations or
“Going-Out-Of-Business” sales of substantially all of their business; or

(l) Separation Agreements. The Separation Agreements are terminated, whether by
rejection as part of any insolvency proceeding of SHC and its Subsidiaries under
any Debtor Relief Law or otherwise, by SHC and its Subsidiaries, unless
terminated on a basis reasonably satisfactory to the Agent, consistent with the
definition of “Maturity Date”; or

(m) Indictment. (i) Any Loan Party is (A) criminally indicted or convicted of a
felony for fraud or dishonesty in connection with the Loan Parties’ business, or
(B) charged by a Governmental Authority under any law that would reasonably be
expected to lead to forfeiture of any material portion of Collateral, or
(ii) any director or senior officer of any Loan Party is (A) criminally indicted
or convicted of a felony for fraud or dishonesty in connection with the Loan
Parties’ business, unless such director or senior officer promptly resigns or is
removed or replaced or (B) charged by a Governmental Authority under any law
that would reasonably be expected to lead to forfeiture of any material portion
of Collateral; or

 

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(n) Guaranty. The termination or attempted termination of any guaranty set forth
in the Guaranty and Security Agreement or any Joinder Agreement except as
expressly permitted hereunder or under any other Loan Document.

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

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

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

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

(d) whether or not the maturity of the Loan Agreement Obligations shall have
been accelerated pursuant hereto, proceed to protect, enforce and exercise all
rights and remedies of the Agent under this Agreement, any of the other Loan
Documents or Law, including, but not limited to, by suit in equity, action at
law or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which the Loan Agreement Obligations are
evidenced, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Agent;

provided, however, that upon the occurrence of any Default or Event of Default
with respect to any Loan Party or any Subsidiary thereof under Section 8.01(f),
the obligation of each Lender to make Loans and any obligation of the L/C Issuer
to make L/C Credit Extensions shall automatically terminate, the unpaid
principal amount of all outstanding Loans, all interest accrued thereon and all
other Loan Agreement Obligations shall automatically become due and payable, and
the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as
aforesaid shall automatically become effective, in each case without further act
of the Agent or any Lender.

No remedy herein is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of Law.

8.03 Application of Funds. After the exercise of remedies provided for in
Section 8.02 (or after the Obligations have automatically become immediately due
and payable and the L/C Obligations have automatically been required to be Cash
Collateralized as set forth in the proviso to Section 8.02), any amounts
received on account of the Obligations shall, subject to the provisions of
Section 2.16, be applied by the Agent in the following order:

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

 

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Second, to payment of that portion of the Loan Agreement Obligations
constituting indemnities (including indemnities due under Section 10.03 hereof),
Credit Party Expenses, and other amounts (other than principal, interest and
fees) payable to the Lenders and the L/C Issuer (including Credit Party Expenses
to the respective Lenders and the L/C Issuer and amounts payable under Article
III), ratably among them in proportion to the amounts described in this clause
Second payable to them;

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

Fourth, to the extent that Swing Line Loans have not been refinanced by a
Committed Loan, payment to the Swing Line Lender of that portion of the Loan
Agreement Obligations constituting principal and accrued and unpaid interest on
the Swing Line Loans;

Fifth, to payment of that portion of the Loan Agreement Obligations constituting
accrued and unpaid interest on the Committed Loans, L/C Borrowings and other
Loan Agreement Obligations, and fees (including Letter of Credit Fees), ratably
among the Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Fifth payable to them;

Sixth, to payment of that portion of the Loan Agreement Obligations constituting
unpaid principal of the Committed Loans and L/C Borrowings, ratably among the
Lenders and the L/C Issuer in proportion to the respective amounts described in
this clause Sixth held by them;

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

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

Ninth, to payment of that portion of the Other Liabilities arising from Cash
Management Services, ratably among the Credit Parties in proportion to the
respective amounts described in this clause Ninth held by them;

Tenth, to payment of all Other Liabilities arising from Bank Products, ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Tenth held by them; and

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

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Seventh above shall be
applied to satisfy drawings under such Letters of Credit as they occur. If any
amount remains on deposit as Cash Collateral after all Letters of Credit have
either been fully drawn or expired, such remaining amount shall be applied to
the other Obligations, if any, in the order set forth above.

 

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ARTICLE IX

THE AGENT

9.01 Appointment and Authority.

Each of the Lenders (in its capacity as a Lender), the Swing Line Lender and the
L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as
the administrative agent and collateral agent hereunder and under the other Loan
Documents and authorizes the Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Agent by the terms hereof or
thereof (including, without limitation, acquiring, holding and enforcing any and
all Liens on Collateral granted by any of the Loan Parties to secure any of the
Obligations), together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the Agent
and the other Credit Parties, and no Loan Party or any Subsidiary thereof shall
have rights as a third party beneficiary of any of such provisions. It is
understood and agreed that the use of the term “agent” herein or in any other
Loan Documents (or any other similar term) with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law. Instead such term is used
as a matter of market custom, and is intended to create or reflect only an
administrative relationship between contracting parties.

9.02 Rights as a Lender. The Person serving as the Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Agent and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Person serving as the Agent hereunder in its
individual capacity. Such Person and its Affiliates may accept deposits from,
lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Loan Parties or any
Subsidiary or other Affiliate thereof as if such Person were not the Agent
hereunder and without any duty to account therefor to the Lenders.

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

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default or Event of Default has occurred and is continuing;

(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Agent is required to
exercise as directed in writing by the Applicable Lenders, provided that the
Agent shall not be required to take any action that, in its opinion or the
opinion of its counsel, may expose the Agent to liability or that is contrary to
any Loan Document or Law, including for the avoidance of doubt any action that
may be in violation of the automatic stay under any Debtor Relief Law or that
may effect a forfeiture, modification or termination of property of a Defaulting
Lender in violation of any Debtor Relief Law; and

(c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Loan Parties or any of its Affiliates
that is communicated to or obtained by the Person serving as the Agent or any of
its Affiliates in any capacity.

 

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The Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Applicable Lenders (as the Agent shall
believe in good faith shall be necessary under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

The Agent shall not be deemed to have knowledge of any Default or Event of
Default unless and until notice describing such Default or Event of Default is
given to the Agent by a Loan Party, a Lender or the L/C Issuer. In the event
that the Agent obtains such actual knowledge or receives such a notice, the
Agent shall give prompt notice thereof to the L/C Issuer and the Lenders. Upon
the occurrence of a Default or an Event of Default, the Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Applicable Lenders. Unless and until the Agent shall have
received such direction, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to any such Default or
Event of Default as it shall deem advisable in the best interest of the Credit
Parties. In no event shall the Agent be required to comply with any such
directions to the extent that the Agent believes that its compliance with such
directions would be unlawful.

The Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default or Event of Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or the creation,
perfection or priority of any Lien purported to be created by the Security
Documents, (v) the value or the sufficiency of any Collateral, or (vi) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent.

9.04 Reliance by Agent.

The Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including, but not limited to, any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Agent also may rely upon any statement made to it orally or
by telephone and believed by it to have been made by the proper Person, and
shall not incur any liability for relying thereon. In determining compliance
with any condition hereunder to the making of a Loan, or the issuance,
extension, renewal or increase of a Letter of Credit, that by its terms must be
fulfilled to the satisfaction of a Lender or the L/C Issuer, the Agent may
presume that such condition is satisfactory to such Lender or the L/C Issuer
unless the Agent shall have received written notice to the contrary from such
Lender or the L/C Issuer prior to the making of such Loan or the issuance of
such Letter of Credit. The Agent may consult with legal counsel (who may be
counsel for any Loan Party), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.

9.05 Delegation of Duties. The Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document by or
through any one or more sub-agents appointed by the Agent. The Agent and any
such sub-agent may perform any and all of its duties and exercise its rights and
powers by or through their respective Related Parties. The exculpatory
provisions of this Article shall apply to any such sub-agent and to the Related
Parties of the Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as the Agent. The Agent shall not be
responsible for the negligence or misconduct of any sub-agents except to the
extent that a court of competent jurisdiction determines in a final and
non-appealable judgment that the Agent acted with gross negligence or willful
misconduct in the selection of such sub-agents.

 

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9.06 Resignation of Agent. The Agent may at any time give written notice of its
resignation to the Lenders, the L/C Issuer and the Lead Borrower. Upon receipt
of any such notice of resignation, the Required Lenders shall have the right, in
consultation with the Lead Borrower, to appoint a successor, which shall be a
bank with an office in the United States, or an Affiliate of any such bank with
an office in the United States. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a
successor Agent meeting the qualifications set forth above; provided that if the
Agent shall notify the Lead Borrower and the Lenders that no qualifying Person
has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents (except that in the case of any Collateral held by the Agent on behalf
of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring
Agent shall continue to hold such collateral security until such time as a
successor Agent is appointed) and (2) all payments, communications and
determinations provided to be made by, to or through the Agent shall instead be
made by or to each Lender and the L/C Issuer directly, until such time as the
Required Lenders appoint a successor Agent as provided for above in this
Section. Upon the acceptance of a successor’s appointment as Agent hereunder,
such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring (or retired) Agent, and the
retiring Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this Section). The fees payable by the Borrowers to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Lead Borrower and such successor. After the
retiring Agent’s resignation hereunder and under the other Loan Documents, the
provisions of this Article and Section 10.04 shall continue in effect for the
benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while the retiring Agent was acting as Agent hereunder.

9.07 Non-Reliance on Agent and Other Lenders. Each Lender and the L/C Issuer
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender and the L/C Issuer also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder. Except as provided in Section 9.12, the Agent shall not
have any duty or responsibility to provide any Credit Party with any other
credit or other information concerning the affairs, financial condition or
business of any Loan Party that may come into the possession of the Agent.

9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none
of the Bookrunners, Arrangers, Syndication Agent or Documentation Agent listed
on the cover page hereof shall have any powers, duties or responsibilities under
this Agreement or any of the other Loan Documents, except in its capacity as the
Agent, a Lender or the L/C Issuer hereunder.

9.09 Agent May File Proofs of Claim. In case of the pendency of any proceeding
under any Debtor Relief Law or any other judicial proceeding relative to any
Loan Party, the Agent (irrespective of whether the principal of any Loan or L/C
Obligation shall then be due and payable as herein expressed or by declaration
or otherwise and irrespective of whether the Agent shall have made any demand on
the Loan Parties) shall be entitled and empowered, by intervention in such
proceeding or otherwise

 

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(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders, the L/C
Issuer, the Agent and the other Credit Parties (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
the L/C Issuer, the Agent, such Credit Parties and their respective agents and
counsel and all other amounts due the Lenders, the L/C Issuer the Agent and such
Credit Parties under Sections 2.03(i), 2.03(j), 2.09 and 10.04) allowed in such
judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to the Agent and to pay to
the Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Agent and its agents and counsel, and any
other amounts due the Agent under Sections 2.09 and 10.04.

Nothing contained herein shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Credit Party any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Credit Party or to authorize the Agent to vote in respect
of the claim of any Credit Party in any such proceeding.

9.10 Collateral and Guaranty Matters. The Credit Parties irrevocably authorize
the Agent, at its option and in its discretion,

(a) to release any Lien on any property granted to or held by the Agent under
any Loan Document (i) upon termination of the Aggregate Commitments and payment
in full of all Loan Agreement Obligations (other than contingent indemnification
obligations for which no claim has been asserted), and/or the expiration,
termination or Cash Collateralization of all Letters of Credit, (ii) that is
sold or otherwise disposed of or to be sold or otherwise disposed of as part of
or in connection with any sale or other disposition permitted hereunder or under
any other Loan Document, or (iii) if approved, authorized or ratified in writing
by the Applicable Lenders in accordance with Section 10.01;

(b) to subordinate any Lien on any Other Property granted to or held by the
Agent as Collateral under any Loan Document to the holder of any Lien on such
property, as contemplated by clause (r) of the definition of Permitted
Encumbrances and to enter into the intercreditor agreements contemplated under
clause (r) of the definition of Permitted Encumbrances or otherwise under this
Agreement;

(c) to release any Guarantor from its obligations under the Loan Documents if
such Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder and to release any Loan Party from its obligations under the Loan
Documents in the event that such Loan Party shall dispose of all or
substantially all of its assets and shall cease to own any Collateral in a
transaction permitted hereunder; and

 

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(d) to release any Lien on any Other Property that is granted to or held by the
Agent under any Loan Document if such Other Property is no longer subject to a
Lien in favor of the lenders of Permitted Indebtedness under clause (j) or
(k) of the definition thereof (or any Permitted Refinancings of such
Indebtedness).

Upon request by the Agent at any time, the Applicable Lenders will confirm in
writing the Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Guaranty and Security Agreement pursuant to this
Section 9.10 and its authority to give the releases set forth in Section 10.21.

9.11 Notice of Transfer.

The Agent may deem and treat a Lender party to this Agreement as the owner of
such Lender’s portion of the Loan Agreement Obligations for all purposes, unless
and until, and except to the extent, an Assignment and Acceptance shall have
become effective as set forth in Section 10.06.

9.12 Reports and Financial Statements.

By signing this Agreement, each Lender:

(a) agrees to furnish the Agent after the occurrence and during the continuance
of a Cash Dominion Event (and thereafter at such frequency as the Agent may
reasonably request) with a summary of all Other Liabilities due or to become due
to such Lender. In connection with any distributions to be made hereunder, the
Agent shall be entitled to assume that no amounts are due to any Lender on
account of Other Liabilities unless the Agent has received written notice
thereof from such Lender and if such notice is received, the Agent shall be
entitled to assume that the only amounts due to such Lender on account of Other
Liabilities is the amount set forth in such notice;

(b) is deemed to have requested that the Agent furnish, and the Agent agrees to
furnish, such Lender, promptly after they become available, copies of all
Borrowing Base Certificates and financial statements required to be delivered by
the Lead Borrower hereunder;

(c) is deemed to have requested that the Agent furnish, and the Agent agrees to
furnish, such Lender, promptly after they become available, copies of all
commercial finance examinations and appraisals of the Collateral received by the
Agent (collectively, the “Reports”);

(d) expressly agrees and acknowledges that the Agent makes no representation or
warranty as to the accuracy of the Borrowing Base Certificates, financial
statements or Reports, and shall not be liable for any information contained in
any Borrowing Base Certificate, financial statement or Report;

(e) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that the Agent or any other party performing any audit
or examination will inspect only specific information regarding the Loan Parties
and will rely significantly upon the Loan Parties’ books and records, as well as
on representations of the Loan Parties’ personnel;

(f) agrees to keep all Borrowing Base Certificates, financial statements and
Reports confidential in accordance with the provisions of Section 10.07 hereof;
and

 

 

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(g) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold the Agent and any such other
Person preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any Credit Extensions that the indemnifying Lender has made or
may make to the Borrowers, or the indemnifying Lender’s participation in, or the
indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay and protect,
and indemnify, defend, and hold the Agent and any such other Person preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including attorney costs) incurred by the
Agent and any such other Person preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.

9.13 Agency for Perfection.

Each Credit Party hereby appoints each other Credit Party as agent for the
purpose of perfecting Liens for the benefit of the Credit Parties, in assets
which, in accordance with Article 9 of the UCC or any other Law of the United
States can be perfected only by possession or control. Should any Credit Party
(other than the Agent) obtain possession or control of any such Collateral, such
Credit Party shall notify the Agent thereof, and, promptly upon the Agent’s
request therefor shall deliver such Collateral to the Agent or otherwise deal
with such Collateral in accordance with the Agent’s instructions.

9.14 Indemnification of Agent. Without limiting the obligations of Loan Parties
hereunder, to the extent that the Loan Parties for any reason fails to
indefeasibly pay any amount required under Section 10.04 to be paid by them to
the Agent (or any sub-agent thereof), the Lenders shall indemnify the Agent, any
sub-agent thereof, the L/C Issuer and any Related Party, as the case may be
ratably according to their Applicable Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent, any sub-agent thereof,
the L/C Issuer and their Related Parties in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted to
be taken by the Agent, any sub-agent thereof, the L/C Issuer and their Related
Parties in connection therewith; provided, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent’s, any sub-agent’s, the L/C Issuer’s and their Related Parties’ gross
negligence or willful misconduct as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

9.15 Relation among Lenders. The Lenders are not partners or co-venturers, and
no Lender shall be liable for the acts or omissions of, or (except as otherwise
set forth herein in case of the Agent) authorized to act for, any other Lender.

ARTICLE X

MISCELLANEOUS

10.01 Amendments, Etc. (a) No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by any
Loan Party therefrom, shall be effective unless in writing signed by the
Required Lenders or by the Agent, with the consent of the Required Lenders, and
the Lead Borrower or the applicable Loan Party, as the case may be, and each
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such amendment,
waiver or consent shall:

 

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(i) increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written consent of such Lender;

(ii) as to any Lender, postpone any date fixed by this Agreement or any other
Loan Document for (i) any scheduled payment (including on the Maturity Date) of
principal, interest, fees or other amounts due hereunder or under any of the
other Loan Documents without the written consent of such Lender, or (ii) any
scheduled or mandatory reduction or termination of the Aggregate Commitments
hereunder or under any other Loan Document, without the written consent of such
Lender;

(iii) as to any Lender, reduce the principal of, or the rate of interest
specified herein on, any Loan or L/C Borrowing held by such Lender, or (subject
to clause (iv) of the second proviso to this Section 10.01) any fees or other
amounts payable hereunder or under any other Loan Document to or for the account
of such Lender, without the written consent of such Lender; provided, however,
that only the consent of the Required Lenders shall be necessary to amend the
definition of “Default Rate” or to waive any obligation of the Borrowers to pay
interest or Letter of Credit Fees at the Default Rate;

(iv) as to any Lender, change Section 2.13 or Section 8.03 in a manner that
would alter the priorities set forth therein or the pro rata sharing of payments
required thereby without the written consent of such Lender;

(v) change any provision of this Section 10.01 or the definition of “Required
Lenders”, or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or
make any determination or grant any consent hereunder, without the written
consent of each Lender;

(vi) except as expressly permitted hereunder or under any other Loan Document,
release, or limit the liability of, any Loan Party without the written consent
of each Lender;

(vii) except for Permitted Dispositions or as provided in Section 9.10, release
any material portion of the Collateral from the Liens of the Security Documents
without the written consent of each Lender;

(viii) change the definition of the term “Borrowing Base” or any component
definition thereof if, as a result thereof, the amounts available to be borrowed
by the Borrowers would be increased without the written consent of each Lender,
provided that the foregoing shall not limit the discretion of the Agent to
change, establish or eliminate any Reserves;

(ix) modify the definition of Permitted Overadvance so as to increase the amount
thereof or, except as otherwise provided in such definition, the time period for
which a Permitted Overadvance may remain outstanding without the written consent
of each Lender; and

(x) except as expressly permitted herein or in any other Loan Document,
subordinate the Loan Agreement Obligations hereunder or the Liens granted
hereunder or under the other Loan Documents, to any other Indebtedness or Lien,
as the case may be without the written consent of each Lender;

 

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and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any Issuer
Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver
or consent shall, unless in writing and signed by the Agent in addition to the
Lenders required above, affect the rights or duties of any Agent under this
Agreement or any other Loan Document; and (iv) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed only by the
parties thereto. Notwithstanding anything to the contrary herein, no Defaulting
Lender shall have any right to approve or disapprove any amendment, waiver or
consent hereunder (and any amendment, waiver or consent which by its terms
requires the consent of all Lenders or each affected Lender may be effected with
the consent of the applicable Lenders other than Defaulting Lenders), except
that (x) the Commitment of any Defaulting Lender may not be increased or
extended without the consent of such Lender and (y) any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender that
by its terms affects any Defaulting Lender disproportionately adversely relative
to other affected Lenders shall require the consent of such Defaulting Lender.

(b) Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, (x) no provider or holder of any Bank Products or Cash Management
Services shall have any voting or approval rights hereunder (or be deemed a
Lender) solely by virtue of its status as the provider or holder of such
agreements or products or the Other Liabilities owing thereunder, nor shall the
consent of any such provider or holder be required (other than in their
capacities as Lenders, to the extent applicable) for any matter hereunder or
under any of the other Loan Documents, including as to any matter relating to
the Collateral or the release of Collateral or any Loan Party, and (y) any Loan
Document may be amended and waived with the consent of the Agent at the request
of the Lead Borrower without the need to obtain the consent of any other Lender
if such amendment or waiver is delivered in order (i) to comply with local Law
or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to
cause any Loan Document to be consistent with this Agreement and the other Loan
Documents.

(c) If any Lender does not consent (a “Non-Consenting Lender”) to a proposed
amendment, waiver, consent or release with respect to any Loan Document that
requires the consent of each Lender or each affected Lender, as applicable, and
that has been approved by the Required Lenders, the Lead Borrower may replace
such Non-Consenting Lender in accordance with Section 10.13; provided that such
amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by such Section (together with all other such
assignments required by the Lead Borrower to be made pursuant to this
paragraph).

(d) Notwithstanding any provision herein to the contrary, this Agreement may be
amended with the written consent of the Required Lenders, the Agent and the
Borrowers (i) to add one or more additional revolving credit or term loan
facilities to this Agreement, and to permit the extensions of credit and all
related obligations and liabilities arising in connection therewith from time to
time outstanding to share (on a basis subordinated to the existing facilities
hereunder) in the benefits of this Agreement and the other Loan Documents with
the obligations and liabilities from time to time outstanding in respect of the
existing facilities hereunder, and (ii) in connection with the foregoing, to
permit, as deemed appropriate by the Agent and approved by the Lenders, the
Lenders providing such additional credit facilities to participate in any
required vote or action required to be approved by the Required Lenders or by
any other number, percentage or class of Lenders hereunder.

 

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(e) Notwithstanding and in addition to the foregoing, the Agent may, with the
consent of Lead Borrower only, amend, modify or supplement any Loan Document to
cure any ambiguity, omission, defect or inconsistency therein, so long as such
amendment, modification or supplement does not adversely affect the rights of
any Credit Party.

10.02 Notices; Effectiveness; Electronic Communications.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier or electronic mail
as follows, and all notices and other communications expressly permitted
hereunder to be given by telephone shall be made to the applicable telephone
number, as follows:

(i) if to a Loan Party, the Agent, the L/C Issuer or the Swing Line Lender, to
the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.02; and

(ii) if to any other Lender, to the address, telecopier number, electronic mail
address or telephone number specified in its Administrative Questionnaire.

Notices and other communications sent by hand or overnight courier service, or
mailed by certified or registered mail, shall be deemed to have been given when
received; notices and other communications sent by facsimile shall be deemed to
have been given when sent (except that, if not given during normal business
hours for the recipient, shall be deemed to have been given at the opening of
business on the next Business Day for the recipient). Notices and other
communications delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

(b) Electronic Communications. Notices and other communications to the Lenders
and the L/C Issuer hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by the Agent, provided that the foregoing shall not apply to
notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or
the L/C Issuer, as applicable, has notified the Agent that it is incapable of
receiving notices under such Article by electronic communication. Each of the
Agent and the Lead Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications.

Unless the Agent otherwise prescribes, (i) notices and other communications sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communication is available and
identifying the website address therefor; provided that, for both clauses
(i) and (ii), if such notice, email or other communication is not sent during
the normal business hours of the recipient, such notice, email or communication
shall be deemed to have been sent at the opening of business on the next
business day for the recipient.

 

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(c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF
ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event
shall the Agent or any of its Related Parties (collectively, the “Agent
Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer or
any other Person for losses, claims, damages, liabilities or expenses of any
kind (whether in tort, contract or otherwise) arising out of the Loan Parties’
or the Agent’s transmission of Borrower Materials through the Internet.

(d) Change of Address, Etc. Each of the Loan Parties, the Agent, the L/C Issuer
and the Swing Line Lender may change its address, telecopier or telephone number
for notices and other communications hereunder by notice to the other parties
hereto. Each other Lender may change its address, telecopier or telephone number
for notices and other communications hereunder by notice to the Lead Borrower,
the Agent, the L/C Issuer and the Swing Line Lender. In addition, each Lender
agrees to notify the Agent from time to time to ensure that the Agent has on
record (i) an effective address, contact name, telephone number, telecopier
number and electronic mail address to which notices and other communications may
be sent and (ii) accurate wire instructions for such Lender. Furthermore, each
Public Lender agrees to cause at least one individual at or on behalf of such
Public Lender to at all times have selected the “Private Side Information” or
similar designation on the content declaration screen of the Platform in order
to enable such Public Lender or its delegate, in accordance with such Public
Lender’s compliance procedures and applicable Law, including United States
Federal and state securities Laws, to make reference to Borrower Materials that
are not made available through the “Public Side Information” portion of the
Platform and that may contain material non-public information with respect to
the Borrowers or their securities for purposes of the Securities Laws.

(e) Reliance by Agent, L/C Issuer and Lenders. The Agent, the L/C Issuer and the
Lenders shall be entitled to rely and act upon any notices (including telephonic
Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on
behalf of the Loan Parties even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Loan Parties shall
indemnify the Agent, the L/C Issuer, each Lender and the Related Parties of each
of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the
Loan Parties. All telephonic notices to and other telephonic communications with
the Agent may be recorded by the Agent, and each of the parties hereto hereby
consents to such recording.

10.03 No Waiver; Cumulative Remedies. No failure by any Credit Party to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under any other Loan Document preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided herein and in the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. Without limiting the generality of the foregoing, the making of
a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default or Event of Default, regardless of whether any Credit Party may have
had notice or knowledge of such Default or Event of Default at the time.

 

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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 Loan 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, the Agent in
accordance with Section 8.02 for the benefit of all the Lenders and the L/C
Issuer; provided, however, that the foregoing shall not prohibit (a) the Agent
from exercising on its own behalf the rights and remedies that inure to its
benefit (solely in its capacity as Agent) hereunder and under the other Loan
Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the
rights and remedies that inure to its benefit (solely in its capacity as L/C
Issuer or Swing Line Lender, as the case may be) hereunder and under the other
Loan Documents, or (c) any Lender from exercising setoff rights in accordance
with Section 10.08 (subject to the terms of Section 2.13); and provided,
further, that if at any time there is no Person acting as Agent hereunder and
under the other Loan Documents, then (i) the Required Lenders shall have the
rights otherwise ascribed to the Agent pursuant to Section 8.02 and (ii) in
addition to the matters set forth in clauses (b) and (c) of the preceding
proviso and subject to Section 2.13, 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.

10.04 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrowers shall pay all Credit Party Expenses.

(b) Indemnification by the Loan Parties. The Loan Parties shall indemnify the
Agent (and any sub-agent thereof), the L/C Issuer, the Lenders, and each Related
Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis)
from, any and all losses, claims, causes of action, damages, liabilities,
settlement payments, costs, and related expenses (including the reasonable fees,
charges and out-of-pocket disbursements of any counsel for any Indemnitee),
incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by any Borrower or any other Loan Party arising out of, in connection with,
or as a result of (i) the execution or delivery of this Agreement, any other
Loan Document, the performance by the parties hereto of their respective
obligations hereunder or thereunder, the consummation of the transactions
contemplated hereby or thereby, or the administration of this Agreement and the
other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed
use of the proceeds therefrom (including any refusal by the L/C Issuer to honor
a demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit or the actions of any other Person seeking to enforce the rights of a
Borrower, beneficiary, transferee, or assignee of Letter of Credit proceeds),
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any property owned or operated by any Loan Party or any of its
Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any
Indemnitee to, a Blocked Account Bank or other Person in connection with or
arising under a control agreement entered into in connection with this Agreement
with any Indemnitee hereunder, or (v) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by any Borrower or any other Loan Party or any of the Loan Parties’
directors, shareholders or creditors, and regardless of whether any Indemnitee
is a party thereto, in all cases, whether or not caused by or arising, in whole
or in part, out of the comparative, contributory or sole negligence of the
Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and non-appealable judgment to have resulted from (1) the gross negligence, bad
faith, or willful misconduct of such Indemnitee, or (2) in respect of disputes
solely among Indemnitees that do not result from an act or omission of a Loan
Party. Without limiting the provisions of Section 3.01(c), this Section 10.4(b)
shall not apply with respect to Taxes other than any Taxes that represent
losses, claims, damages, etc. arising from any non-Tax claim.

 

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(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Law, the Loan Parties shall not assert, and hereby waive, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the
use of the proceeds thereof.

(d) Payments. All amounts due under this Section shall be payable on demand
therefor.

(e) Limitation of Liability. No Indemnitee shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed to such unintended recipients by such Indemnitee through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby other than for direct or actual damages resulting
from the gross negligence or willful misconduct of such Indemnitee as determined
by a final and nonappealable judgment of a court of competent jurisdiction.

(f) Survival. The agreements in this Section and the indemnity provisions of
Section 10.02(e) shall survive the resignation of any Agent, the L/C Issuer or
the Swing Line Lender, the assignment of any Commitment or Loan by any Lender,
the replacement of any Lender, the termination of the Aggregate Commitments and
the repayment, satisfaction or discharge of all the other Loan Agreement
Obligations.

10.05 Payments Set Aside. To the extent that any payment by or on behalf of the
Loan Parties is made to any Credit Party, or any Credit Party exercises its
right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by such
Credit Party in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to
the Agent upon demand its Applicable Percentage (without duplication) of any
amount so recovered from or repaid by the Agent, plus interest thereon from the
date of such demand to the date such payment is made at a rate per annum equal
to the Federal Funds Rate from time to time in effect. The obligations of the
Lenders and the L/C Issuer under clause (b) of the preceding sentence shall
survive the payment in full of the Loan Agreement Obligations and the
termination of this Agreement.

10.06 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that no Loan Party may assign or
otherwise transfer any of its rights or obligations hereunder or under any other
Loan Document without the prior written consent of the Agent and each Lender,
and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee in accordance with the provisions
of Section 10.06(b), (ii) by way of participation in accordance with the
provisions of subsection Section 10.06(d), or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of
Section 10.06(f) (and any other

 

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attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in subsection
(d) of this Section and, to the extent expressly contemplated hereby, the
Related Parties of each of the Credit Parties) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment(s) and the Loans
(including for purposes of this Section 10.06(b), participations in L/C
Obligations and in Swing Line Loans) at the time owing to it); provided that any
such assignment shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, no minimum amount need be assigned; and

(B) in any case not described in subsection (b)(i)(A)of this Section, the
aggregate amount of the Commitment (which for this purpose includes Loans and
participations in the L/C Obligations and Swing Line Loans outstanding
thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Agent or, if “Trade Date” is specified in
the Assignment and Assumption, as of the Trade Date, shall not be less than
$5,000,000 unless each of the Agent and, so long as no Default or Event of
Default has occurred and is continuing, the Lead Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met;

(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Commitment
assigned, except that this clause (ii) shall not apply to the Swing Line
Lender’s rights and obligations in respect of Swing Line Loans;

(iii) Required Consents. No consent shall be required for any assignment except
to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A) the consent of the Lead Borrower (such consent not to be unreasonably
withheld or delayed) shall be required unless (1) a Default or Event of Default
has occurred and is continuing at the time of such assignment or (2) such
assignment is to a Lender, an Affiliate of a Lender or an Approved Fund with
respect to such Lender; provided that, to the extent the consent of the Lead
Borrower is required, it shall be reasonable for the Borrower to withhold
consent based on the nature of the proposed assignee’s business; and provided
further that, to the extent the consent of the Lead Borrower is required, the
Lead Borrower shall be deemed to have consented to such assignment if the Lead
Borrower has been given ten (10) Business Days’ prior notice of such assignment
and has not objected to such assignment within such period; and

 

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(B) the consent of the Agent, (such consent not to be unreasonably withheld or
delayed) shall be required for assignments in respect of any Commitment if such
assignment is to a Person that is not a Lender, an Affiliate of such Lender or
an Approved Fund with respect to such Lender.

(iv) Assignment and Assumption. The parties to each assignment shall execute and
deliver to the Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, provided, however, that the Agent may, in its
sole discretion, elect to waive such processing and recordation fee in the case
of any assignment. The assignee, if it shall not be a Lender, shall deliver to
the Agent an Administrative Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made (A) to
the Loan Parties or any of the Loan Parties’ Subsidiaries or Affiliates
(including any Permitted Holder), (B) to any Defaulting Lender or any of its
Subsidiaries or Affiliates, or any Person who, upon becoming a Lender hereunder,
would constitute any of the foregoing Persons described in this clause (B), or
(C) to a natural Person.

(vi) Certain Additional Payments. In connection with any assignment of rights
and obligations of any Defaulting Lender hereunder, no such assignment shall be
effective unless and until, in addition to the other conditions thereto set
forth herein, the parties to the assignment shall make such additional payments
to the Agent in an aggregate amount sufficient, upon distribution thereof as
appropriate (which may be outright payment, purchases by the assignee of
participations or subparticipations, or other compensating actions, including
funding, with the consent of the Lead Borrower and the Agent, the applicable pro
rata share of Loans previously requested but not funded by the Defaulting
Lender, to each of which the applicable assignee and assignor hereby irrevocably
consent), to (x) pay and satisfy in full all payment liabilities then owed by
such Defaulting Lender to the Agent, the L/C Issuer or any Lender hereunder (and
interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro
rata share of all Loans and participations in Letters of Credit and Swing Line
Loans in accordance with its Applicable Percentage. Notwithstanding the
foregoing, in the event that any assignment of rights and obligations of any
Defaulting Lender hereunder shall become effective under applicable Law without
compliance with the provisions of this paragraph, then the assignee of such
interest shall be deemed to be a Defaulting Lender for all purposes of this
Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the Eligible Assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with
respect to facts and circumstances occurring prior to the effective date of such
assignment; provided, that except to the extent otherwise expressly agreed by
the affected parties, no assignment by a Defaulting Lender will constitute a
waiver or release of any claim of any party hereunder arising from that Lender’s
having been a Defaulting Lender. Upon request, the Borrowers (at their expense)
shall execute and deliver a Note to the assignee Lender. Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this subsection shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 10.06(d).

 

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(c) Register. The Agent, acting solely for this purpose as an agent of the
Borrowers (and such agency being solely for tax purposes), shall maintain at the
Agent’s Office a copy of each Assignment and Assumption delivered to it (or the
equivalent thereof in electronic form) and a register for the recordation of the
names and addresses of the Lenders, and the Commitments of, and principal
amounts (and stated interest) of the Loans and L/C Obligations owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”). The
entries in the Register shall be conclusive, absent manifest error, and the Loan
Parties, the Agent and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register
shall be available for inspection by the Lead Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.

(d) Participations. (i) Any Lender may at any time, without the consent of, or
notice to, the Loan Parties or the Agent, sell participations to any Person
(other than a Defaulting Lender, a natural person or the Loan Parties or any of
the Loan Parties’ Affiliates or Subsidiaries (including any Permitted Holder))
(each, a “Participant”) in all or a portion of such Lender’s rights and/or
obligations under this Agreement (including all or a portion of its Commitment
and the Loans (including such Lender’s participations in L/C Obligations and/or
Swing Line Loans) owing to it); provided that (i) such Lender’s obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Loan Parties, the Agent, the Lenders and the L/C
Issuer shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement. Any Participant
shall agree in writing to comply with all confidentiality obligations set forth
in Section 10.07 as if such Participant was a Lender hereunder.

(ii) Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in clauses (i) through
(iv) of the first proviso to Section 10.01 that affects such Participant.
Subject to subsection (e) of this Section, the Loan Parties agree that each
Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 10.06(b). To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08 as though it
were a Lender, provided such Participant agrees to be subject to Section 2.13 as
though it were a Lender.

(iii) Each Lender that sells a participation shall, acting solely for this
purpose as a non-fiduciary agent of the Borrowers, maintain a register on which
it enters the name and address of each Participant and the principal amounts
(and stated interest) of each Participant’s interest in the Loans or other
obligations under the Loan Documents (the “Participant Register”); provided that
no Lender shall have any obligation to disclose all or any portion of the
Participant Register (including the identity of any Participant or any
information relating to a Participant’s interest in any Commitments, Loans,
Letters of Credit or its other Obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such Commitment, Loan, Letter of Credit or other Obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations. The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person

 

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whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent)
shall have no responsibility for maintaining a Participant Register.

(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.01 or 3.04 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Lead Borrower’s prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 3.01 unless the Lead Borrower is notified of
the participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a
Lender.

(f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under its Note, if any) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

(g) Resignation as L/C Issuer or Swing Line Lender after Assignment or
Resignation. Any resignation or assignment by Bank of America as Agent under
this Agreement shall also constitute its resignation as L/C Issuer and Swing
Line Lender. Upon the appointment by the Borrower of a successor L/C Issuer or
Swing Line Lender hereunder, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring L/C
Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and
Swing Line Lender shall be discharged from all of their respective duties and
obligations hereunder or under the other Loan Documents, and (c) the successor
L/C Issuer shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other
arrangements reasonably satisfactory to Bank of America to effectively assume
the obligations of Bank of America with respect to such Letters of Credit.

10.07 Treatment of Certain Information; Confidentiality. Each of the Credit
Parties agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Affiliates, Approved
Funds, and to its and its Affiliates’ and Approved Funds’ respective partners,
directors, officers, employees, agents, funding sources, attorneys, advisors and
representatives (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority purporting to have jurisdiction over it (including
any self-regulatory authority), (c) to the extent required by Laws or
regulations or by any subpoena or similar legal process; provided that any
Person that discloses any Information pursuant to this clause (c) shall notify
the Lead Borrower in advance of such disclosure (if permitted by Law) or shall
provide the Lead Borrower with prompt written notice of such disclosure, (d) to
any other party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement (including any electronic
agreement contained in any Platform) containing provisions substantially the
same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Contract relating to any Loan Party and its obligations,
(g) with the consent of the Lead Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes available to any Credit Party or any of their respective
Affiliates on a non-confidential basis from a source other than the Loan Parties
not known by such source to be in breach of any duty of confidentiality with
respect to such Information.

 

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For purposes of this Section, “Information” means all information received from
the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

Each of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public
information in accordance with Law, including Federal and state securities Laws.

10.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender, the L/C
Issuer and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the Agent or
the Required Lenders, to the fullest extent permitted by Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) or other property at any time held and other
obligations (in whatever currency) at any time owing by such Lender, the L/C
Issuer or any such Affiliate to or for the credit or the account of the
Borrowers or any other Loan Party against any and all of the Loan Agreement
Obligations now or hereafter existing under this Agreement or any other Loan
Document to such Lender or the L/C Issuer, regardless of the adequacy of the
Collateral, and irrespective of whether or not such Lender or the L/C Issuer
shall have made any demand under this Agreement or any other Loan Document and
although such obligations of the Borrowers or such Loan Party may be contingent
or unmatured or are owed to a branch or office of such Lender or the L/C Issuer
different from the branch or office holding such deposit or obligated on such
indebtedness; provided, that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Agent for further application in accordance with the
provisions of Section 2.16 and, pending such payment, shall be segregated by
such Defaulting Lender from its other funds and deemed held in trust for the
benefit of the Agent, the L/C Issuer and the Lenders, and (y) the Defaulting
Lender shall provide promptly to the Agent a statement describing in reasonable
detail the Obligations owing to such Defaulting Lender as to which it exercised
such right of setoff. The rights of each Lender, the L/C Issuer and their
respective Affiliates under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender, the L/C Issuer or
their respective Affiliates may have. Each Lender and the L/C Issuer agrees to
notify the Lead Borrower and the Agent promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application.

10.09 Interest Rate Limitation. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by Law (the “Maximum Rate”). If the Agent or any Lender shall receive
interest in an amount that exceeds the Maximum Rate, the excess interest shall
be applied to the principal of the Loans and other Obligations (other than Other
Liabilities not then due and owing) or, if it exceeds such unpaid principal,
refunded to the Borrowers. In determining whether the interest contracted for,
charged, or received by the Agent or a Lender exceeds the Maximum Rate, such
Person may, to the extent permitted by Law, (a) characterize any payment that is
not principal as an expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations hereunder.

 

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10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Agent and when the Agent shall have received counterparts hereof
that, when taken together, bear the signatures of each of the other parties
hereto. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy, pdf or other electronic transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.

10.11 Survival. All representations and warranties made hereunder and in any
other Loan Document or other document delivered pursuant hereto or thereto or in
connection herewith or therewith shall survive the execution and delivery hereof
and thereof. Such representations and warranties have been or will be relied
upon by the Credit Parties, regardless of any investigation made by any Credit
Party or on their behalf and notwithstanding that any Credit Party may have had
notice or knowledge of any Default or Event of Default at the time of any Credit
Extension, and shall continue in full force and effect as long as any Loan or
any other Loan Agreement Obligation hereunder shall remain unpaid or unsatisfied
or any Letter of Credit shall remain outstanding. Further, the provisions of
Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in
full force and effect regardless of the repayment of the Loan Agreement
Obligations, the expiration of the Letters of Credit or the termination of the
Commitments or the termination of this Agreement or any provision hereof.

10.12 Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Without limiting the foregoing provisions of this
Section 10.12, if and to the extent that the enforceability of any provisions in
this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief
Laws, as determined in good faith by the Agent, the L/C Issuer or the Swing Line
Lender, as applicable, then such provisions shall be deemed to be in effect only
to the extent not so limited.

10.13 Replacement of Lenders. If the Borrower is entitled to replace a Lender
pursuant to the provisions of Section 3.06, or if any Lender is a Defaulting
Lender or a Non-Consenting Lender, then the Borrowers may, at their sole expense
and effort, upon notice to such Lender (if permitted by Law) and the Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by,
Section 10.06; provided that the consent of the assigned Lender shall not be
required in connection with any such assignment and delegation), all of its
interests, rights (other than its existing rights to payments pursuant to
Sections 3.01 and 3.04) and obligations under this Agreement and the related
Loan Documents to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment), provided that:

(a) the Borrowers shall have paid to the Agent the assignment fee specified in
Section 10.06(b);

(b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and L/C Advances, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other
Loan Documents (including any amounts under Section 3.05) from the assignee (to
the extent of such outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts);

 

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(c) in the case of any such assignment resulting from a claim for compensation
under Section 3.04 or payments required to be made pursuant to Section 3.01,
such assignment will result in a reduction in such compensation or payments
thereafter;

(d) such assignment does not conflict with Laws; and

(e) in the case of an assignment resulting from a Lender becoming a
Non-Consenting Lender, the applicable assignee shall have consented to the
applicable amendment, waiver or consent.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

10.14 Governing Law; Jurisdiction; Etc.

(a) GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS,
CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR
OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH
THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b) SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY
KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR
OTHERWISE, AGAINST THE AGENT, ANY LENDER, THE L/C ISSUER, OR ANY RELATED PARTY
OF THE FOREGOING IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN
THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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(c) WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO
IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.

10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

10.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of
each transaction contemplated hereby, the Loan Parties each acknowledge and
agree that: (i) the credit facility provided for hereunder and any related
arranging or other services in connection therewith (including in connection
with any amendment, waiver or other modification hereof or of any other Loan
Document) are an arm’s-length commercial transaction between the Loan Parties,
on the one hand, and the Credit Parties, on the other hand, and each of the Loan
Parties is capable of evaluating and understanding and understands and accepts
the terms, risks and conditions of the transactions contemplated hereby and by
the other Loan Documents (including any amendment, waiver or other modification
hereof or thereof); (ii) in connection with the process leading to such
transaction, each Credit Party is and has been acting solely as a principal and
is not the financial advisor, agent or fiduciary, for the Loan Parties or any of
their respective Affiliates, stockholders, creditors or employees or any other
Person; (iii) none of the Credit Parties has assumed or will assume an advisory,
agency or fiduciary responsibility in favor of the Loan Parties with respect to
any of the transactions contemplated hereby or the process leading thereto,
including with respect to any amendment, waiver or other modification hereof or
of any other Loan Document (irrespective of whether any of the Credit Parties
has advised or is currently advising any Loan Party or any of its Affiliates on
other matters) and none of the Credit Parties has any obligation to any Loan
Party or any of its Affiliates with respect to the transactions contemplated
hereby except those obligations expressly set forth herein and in the other Loan
Documents; (iv) the Credit Parties and their respective Affiliates may be
engaged in a broad range of transactions that involve interests that differ from
those of the Loan Parties and their respective Affiliates, and none of the
Credit Parties has any obligation to disclose any of such interests by virtue of
any advisory, agency or fiduciary relationship; and (v) the Credit Parties have
not provided and will not provide any legal, accounting, regulatory or tax
advice with respect to any of the transactions contemplated hereby (including
any amendment, waiver or other modification hereof or of any other Loan
Document) and each of the Loan Parties has consulted its

 

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own legal, accounting, regulatory and tax advisors to the extent it has deemed
appropriate. Each of the Loan Parties hereby waives and releases, to the fullest
extent permitted by law, any claims that it may have against each of the Credit
Parties with respect to any breach or alleged breach of agency or fiduciary
duty.

10.17 USA PATRIOT Act Notice. Each Lender that is subject to the Act (as
hereinafter defined) and the Agent (for itself and not on behalf of any Lender)
hereby notifies the Loan Parties that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
each Loan Party and other information that will allow such Lender or the Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each Loan
Party is in compliance, in all material respects, with the Act. No part of the
proceeds of the Loans will be used by the Loan Parties, directly or indirectly,
for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended. The Loan Parties shall, promptly following a
request by the Agent or any Lender, provide all documentation and other
information that the Agent or such Lender requests in order to comply with its
ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the Act.

10.18 Foreign Asset Control Regulations. Neither of the advance of the Loans nor
the use of the proceeds of any thereof will violate the Trading With the Enemy
Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive order relating
thereto (which for the avoidance of doubt shall include, but shall not be
limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Act.
Furthermore, none of the Borrowers or their Affiliates (a) is or will become a
“blocked person” as described in the Executive Order, the Trading With the Enemy
Act or the Foreign Assets Control Regulations or (b) engages or will engage in
any dealings or transactions, or be otherwise associated, with any such “blocked
person” or in any manner violative of any such order.

10.19 Time of the Essence. Time is of the essence of the Loan Documents.

10.20 Press Releases.

(a) Each Credit Party executing this Agreement agrees that neither it nor its
Affiliates will in the future issue any press releases or other public
disclosure using the name of the Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days’
prior notice to the Agent and without the prior written consent of the Agent
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under Law and then, in any event, such Credit Party or Affiliate will
consult with the Agent before issuing such press release or other public
disclosure.

(b) Each Loan Party consents to the publication by the Agent or any Lender of
advertising material relating to the financing transactions contemplated by this
Agreement using any Loan Party’s name, product photographs, logo or trademark.
The Agent or such Lender shall provide a draft reasonably in advance of any
advertising material to the Lead Borrower prior to the publication thereof. The
Agent reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements.

 

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10.21 Releases.

(a) Any Lien on any property granted to or held by the Agent under any Loan
Document shall terminate upon termination of the Aggregate Commitments and
payment in full of all Obligations (other than (A) contingent indemnification
obligations for which claims have not been asserted and (B) unless the
Obligations have been accelerated as a result of the occurrence of any Event of
Default or the Loan Parties are liquidating substantially all of their assets,
subject to the first proviso hereto, Obligations in respect of Bank Products and
Cash Management Services) and the expiration, termination or Cash
Collateralization (or issuance of a supporting letter of credit satisfactory to
the L/C Issuer and the Agent) of all Letters of Credit; provided, however, that
in connection with the termination of this Aggregate Commitments and
satisfaction of the Loan Agreement Obligations as set forth above, the Agent may
require such indemnities or, in the case of the succeeding clause (y) only,
collateral security as they shall reasonably deem necessary or appropriate to
protect the Credit Parties against (x) loss on account of credits previously
applied to the Obligations that may subsequently be reversed or revoked, and
(y) any Obligations that may then exist or thereafter arise with respect to Bank
Products and Cash Management Services to the extent not provided for thereunder;
provided, further, that any such Liens granted pursuant to the Loan Documents
shall be reinstated if at any time payment, or any part thereof, of any Loan
Agreement Obligation is rescinded or must otherwise be restored by any Credit
Party upon the bankruptcy or reorganization of any Loan Party. At the request
and sole expense of any Loan Party following any such termination, the Agent
shall deliver to such Loan Party any Collateral held by the Agent under any Loan
Document, and execute and deliver to such Loan Party such documents as such Loan
Party shall reasonably request to evidence such termination.

(b) If any of the Collateral shall be sold, transferred or otherwise disposed of
by any Loan Party in a transaction permitted by this Agreement, then such
Collateral shall be released from the Liens created by the Loan Documents
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to such Loan Party or its transferee,
as the case may be, and the Agent, at the request and sole expense of such Loan
Party, shall execute and deliver to such Loan Party all releases or other
documents reasonably necessary or desirable to evidence the release of the Liens
created by the Loan Documents on such Collateral. At the request and sole
expense of the Borrowers, the Agent shall release any Loan Party from its
obligations under the Loan Documents, including the Guaranty and Security
Agreement, and shall execute and deliver to the Loan Parties all releases or
other documentation reasonably necessary or desirable to evidence such release,
in the event that all the equity interest of such Loan Party shall be sold,
transferred or otherwise disposed of in a transaction permitted by this
Agreement and/or in the event that such Loan Party shall dispose of all or
substantially all of its assets and shall cease to own any Collateral.

(c) If any Other Property is no longer subject to a Lien in favor of the lenders
of Permitted Indebtedness under clause (j) or (k) of the definition thereof (or
any Permitted Refinancings of such Indebtedness), then, so long as no Event of
Default then exists or would arise therefrom, such Other Property shall be
released from the Liens created by the Loan Documents without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to such Loan Party or its transferee, as the case may
be, and the Agent, at the request and sole expense of such Loan Party, shall
execute and deliver to such Loan Party all releases or other documents
reasonably necessary or desirable to evidence the release of the Liens created
by the Loan Documents on such Collateral

 

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10.22 No Strict Construction.

The parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

10.23 Attachments.

The exhibits, schedules and annexes attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.

10.24 Electronic Execution of Assignments and Certain Other Documents.

The words “execute,” “execution,” “signed,” “signature,” and words of like
import in any Assignment and Assumption or in any amendment or other
modification hereof (including waivers and consents) shall be deemed to include
electronic signatures, the electronic matching of assignment terms and contract
formations on electronic platforms approved by the Agent, or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

[remainder of page intentionally left blank]

 

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

 

BORROWERS: SEARS AUTHORIZED HOMETOWN STORES, LLC, as Lead Borrower and as a
Borrower By:   /s/ Steven D. Barnhart   Name:   Steven D. Barnhart   Title:  
Senior Vice President and Treasurer SEARS HOME APPLIANCE SHOWROOMS, LLC, as a
Borrower By:   /s/ Steven D. Barnhart   Name:   Steven D. Barnhart   Title:  
Senior Vice President and Treasurer SEARS OUTLET STORES, L.L.C., as a Borrower
By:   /s/ Steven D. Barnhart   Name:   Steven D. Barnhart   Title:   Senior Vice
President and Treasurer PARENT: SEARS HOMETOWN AND OUTLET STORES, INC. By:   /s/
Steven D. Barnhart   Name:   Steven D. Barnhart   Title:   Senior Vice
President, Chief Financial Officer and Treasurer

 

Signature Page to Credit Agreement

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

BANK OF AMERICA, N.A., as Agent, L/C Issuer, Swing Line Lender and as a Lender
By:   /s/ Stephen J. Garvin   Name: Stephen J. Garvin   Title:   Managing
Director

 

Signature Page to Credit Agreement

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

CIT FINANCE LLC, as a Lender By:   /s/ Robert L. Klein   Name: Robert L. Klein  
Title:   Director

 

Signature Page to Credit Agreement

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

SIEMENS FINANCIAL SERVICES, INC., as a Lender By:   /s/ Sharon Prusakowski  
Name: Sharon Prusakowski   Title: Vice President By:   /s/ Paul Ramseur   Name:
Paul Ramseur   Title: Vice President/Head of Risk Management

 

Signature Page to Credit Agreement

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

SOVEREIGN BANK N.A., as a Lender By:   /s/ Barry S. Renow   Name: Barry S. Renow
  Title:   Senior Vice Prsident

 

Signature Page to Credit Agreement

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

AMALGAMATED BANK, as a Lender By:   /s/ Arminda Youse-Warde   Name: Arminda
Youse-Warde   Title:   Vice President

 

Signature Page to Credit Agreement

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

CAPITAL ONE LEVERAGE FINANCE CORP., as a Lender By:   /s/ Paul Dellova   Name:
Paul Dellova   Title:   Senior Vice President

 

Signature Page to Credit Agreement

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

HSBC BANK USA, NATIONAL ASSOCIATION., as a Lender By:   /s/ Kambiz Ghorashi  
Name: Kambiz Ghorashi   Title: Vice President

 

Signature Page to Credit Agreement

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

KEYBANK NATIONAL ASSOCIATION, as a Lender By:   /s/ Andrew Blickensderfer  
Name: Andrew Blickensderfer   Title: AVP

 

Signature Page to Credit Agreement

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

PEOPLE’S UNITED BANK, as a Lender By:   /s/ Matt Modlish   Name: Matt Modlish  
Title:   Senior Vice President

 

Signature Page to Credit Agreement

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

BARCLAYS BANK PLC, as Documentation Agent and as a Lender By:   /s/ Ronnie Glenn
  Name: Ronnie Glenn   Title:   Vice President

 

Signature Page to Credit Agreement

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

Schedule 1.01

Borrowers

 

1. Sears Authorized Hometown Stores, LLC

 

2. Sears Home Appliance Showrooms, LLC

 

3. Sears Outlet Stores, L.L.C.

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

Schedule 2.01

Commitments and Applicable Percentages

 

Lender

   Commitment      Applicable Percentage  

Bank of America, N.A.

   $ 40,000,000.00         16.0000 % 

CIT Finance LLC

   $ 35,000,000.00         14.0000 % 

Siemens Financial Services, Inc.

   $ 30,000,000.00         12.0000 % 

Sovereign Bank N.A.

   $ 30,000,000.00         12.0000 % 

Amalgamated Bank

   $ 20,000,000.00         8.0000 % 

Capital One Leverage Finance Corp.

   $ 20,000,000.00         8.0000 % 

HSBC Bank USA, N.A.

   $ 20,000,000.00         8.0000 % 

KeyBank National Association

   $ 20,000,000.00         8.0000 % 

People’s United Bank

   $ 20,000,000.00         8.0000 % 

Barclays Bank PLC

   $ 15,000,000.00         6.0000 % 

TOTAL

   $ 250,000,000.00         100.0000 % 

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

Schedule 5.18

Collective Bargaining Agreements

 

1. Agreement, made and entered into on October 27, 2011, by and between Sears,
Roebuck and Company, local management, Livonia, Michigan, and Local Union
No. 243, located at 39420 Schoolcraft, Plymouth Township, Michigan 48170,
affiliated with the International Brotherhood of Teamsters. Contract Term:
10/27/11 – 10/26/14. The rights and obligations of Sears, Roebuck and Company
under the foregoing agreement were transferred to Sears Outlet Stores, L.L.C.
pursuant to the General Conveyance, Bill of Sale, Assignment and Assumption
dated as of August 31, 2012.

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

Schedule 6.02

Financial and Collateral Reporting

 

A. Within 10 business days after the end of each month1

  

1. Borrowing Base Certificate

    

2. Summary Source document of Stock Ledger

    

3. Summary Source document of inventory ineligibles

    

4. Summary Source document showing Credit Card A/R

    

5. Summary Source document showing Credit Card A/R ineligibles

    

6. Gift Card Liability Report

    

7. Monthly Store Rent in WA, VA, PA

    

8. Report identifying Customer Deposits

    

9. Report with Dealer Commision Payable accrual

    

10. Report identifying A/P & A/R for Discover

    

B. Within 30 days after the end of each month

  

1. Consolidated Balance Sheet

    

2. Consolidated Statement of Income or Operations

    

3. Consolidated Statement of Cash Flows

    

4. Consolidated Statement of Shareholders’ Equity

    

5. Compliance Certificate

    

C. Within 50 days after the end of the first three Fiscal Quarters

  

1. Consolidated Balance Sheet

    

2. Consolidated Statement of Income or Operations

    

3. Consolidated Statement of Cash Flows

    

4. Consolidated Statement of Shareholders’ Equity

    

5. Compliance Certificate

    

6. Reasonably detailed build-up of EBITDA and inventory balances by Operating
Segment

    

D. Within 60 days after the end of each Fiscal Year

  

1. Forecast (including projected balance sheet, income statement, cash flows and
Availability model on a monthly basis) for the succeeding Fiscal Year

    

E. Within 95 days after the end of each Fiscal Year

  

1. Annual Audited Consolidated Balance Sheet

    

2. Annual Audited Consolidated Statement of Income or Operations

    

3. Annual Audited Consolidated Statement of Cash Flows

    

4. Annual Audited Consolidated Statement of Shareholders’ Equity

    

5. Compliance Certificate

    

6. Reasonably detailed build-up of EBITDA and inventory balances by Operating
Segment

    

 

1 

Upon the occurrence and during the continuance of an Accelerated Borrowing Base
Delivery Event, such Borrowing Base Certificate and supporting information shall
be delivered on Friday of each week (or, if Friday is not a Business Day, on the
next succeeding Business Day), as of the close of business on the immediately
preceding Saturday (it being understood that any weekly Borrowing Base
Certificate shall constitute the result of rolled forward information regarding
Eligible Inventory and other items, as applicable).

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

Schedule 6.12

Blocked Account Banks

 

1. Bank of America

 

2. First Tennessee

 

3. PNC Bank

 

4. JP Morgan Chase Bank

 

5. Wells Fargo Bank

 

6. First Hawaiian Bank

 

7. Union Bank

 

8. US Bank

 

9. Banco Popular

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

Schedule 10.02

Agent’s Office; Certain Addresses for Notices

Agent, L/C Issuer and Swing Line Lender

Bank of America, N.A.

100 Federal Street, 9th Floor

Boston, Massachusetts 02110

Attention:           Stephen J. Garvin

Telephone:         (617) 434-3933

Facsimile:         (617) 434-4312

E-mail: stephen.garvin@baml.com

with a copy to:

Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attention:         David S. Berman, Esq.

Telephone:         (617) 523-9000

Facsimile:         (617) 692-3423

E-mail: dberman@riemerlaw.com

The Lead Borrower and the Other Loan Parties

c/o Sears Authorized Hometown Stores, LLC

3333 Beverly Road

Hoffman Estates, Illinois 60179

Attention: Chief Financial Officer

Telephone: 847-286-8650

Facsimile: 847-286-0266

E-mail: steve.barnhart@searshc.com

with a copy to:

Sears Hometown and Outlet Stores, Inc.

3333 Beverly Road

Hoffman Estates, Illinois 60179

Attention:         General Counsel

Telephone:         847-286-7795

Facsimile:         847-286-0266

E-mail: charles.hansen@searshc.com

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

EXHIBIT A

FORM OF COMMITTED LOAN NOTICE

Date:             ,             

To: Bank of America, N.A., as Agent

Ladies and Gentlemen:

Reference is made to the Credit Agreement dated as of October 11, 2012 (as
amended, modified, supplemented or restated hereafter, the “Credit Agreement”)
by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware limited
liability company, for itself and as Lead Borrower (in such capacity, the “Lead
Borrower”) for the other Borrowers party thereto from time to time, (ii) the
other Borrowers and Guarantors party thereto from time to time, (iii) Bank of
America, N.A., as administrative agent and collateral agent (in such capacities,
the “Agent”) for the benefit of the Credit Parties referred to therein,
(iv) Bank of America, N.A., as L/C Issuer, and (v) the lenders from time to time
party thereto (individually, a “Lender” and, collectively, the “Lenders”). All
capitalized terms used herein and not otherwise defined shall have the same
meaning herein as in the Credit Agreement.

 

1.

The Lead Borrower hereby requests [a Committed Borrowing][a Conversion of
Committed Loans from one Type to the other][a continuation of LIBOR Rate
Loans]1:

 

  (a)

On             (a Business Day)2

 

  (b)

In the principal amount of $            3

 

  (c)

Comprised of a [Base Rate][LIBOR Rate] Loan (Type of Committed Loan)4

 

  (d)

For LIBOR Rate Loans: with an Interest Period of             month(s)5

 

1 

A Committed Borrowing must be a borrowing consisting of simultaneous Loans of
the same Type and, in the case of LIBOR Rate Loans, must have the same Interest
Period.

2 

Each notice of a Committed Borrowing, Conversion of Committed Loans from one
Type to the other, or a continuation of LIBOR Rate Loans must be received by the
Agent not later than (i) 12:00 p.m. three (3) Business Days prior to the
requested date of any Borrowing of LIBOR Rate Loans, and (ii) 1:00 p.m. on the
requested date of any Borrowing of Base Rate Loans. Notice may be given by
telephone, but must be confirmed promptly in writing in accordance with
Section 2.02(b) of the Credit Agreement.

3 

Each Borrowing, conversion to, or continuation of LIBOR Rate Loans must be in a
principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof, provided that one Borrowing of, Conversion to or continuation of LIBOR
Rate Loans may be in a principal amount of less than $5,000,000 but in all
events shall be greater than $2,000,000.

4 

Committed Loans may be either Base Rate Loans or LIBOR Rate Loans. If the Type
of Committed Loan is not specified, then the applicable Committed Loans will be
made as Base Rate Loans.

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

The Lead Borrower hereby represents and warrants (for itself and on behalf of
the other Borrowers) that (a) the Borrowing requested herein complies with
Sections 2.02(b) and 2.02(g) of the Credit Agreement, and (b) the conditions
specified in Sections 4.01 (as to Borrowings requested on the Closing Date only)
and 4.02 of the Credit Agreement have been satisfied on and as of the date
specified in Item 1(a) above.

 

SEARS AUTHORIZED HOMETOWN STORES, LLC, as Lead Borrower

By:

 

 

Name:

 

 

Title:

 

 

 

5 

The Lead Borrower may request a Borrowing of LIBOR Rate Loans with an Interest
Period of one, two, three or six months. If no election of Interest Period is
specified, then the Lead Borrower will be deemed to have specified an Interest
Period of one month.

 

Signature Page to Committed Loan Notice

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EXHIBIT B

FORM OF SWING LINE LOAN NOTICE

Date:             ,             

 

To: Bank of America, N.A., as Swing Line Lender

Bank of America, N.A., as Agent

Ladies and Gentlemen:

Reference is made to the Credit Agreement dated as of October 11, 2012 (as
amended, modified, supplemented or restated hereafter, the “Credit Agreement”)
by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware limited
liability company, for itself and as Lead Borrower (in such capacity, the “Lead
Borrower”) for the other Borrowers party thereto from time to time, (ii) the
other Borrowers and Guarantors party thereto from time to time, (iii) Bank of
America, N.A., as administrative agent and collateral agent (in such capacities,
the “Agent”) for the benefit of the Credit Parties referred to therein,
(iv) Bank of America, N.A., as L/C Issuer, and (v) the lenders from time to time
party thereto (individually, a “Lender” and, collectively, the “Lenders”). All
capitalized terms used herein and not otherwise defined shall have the same
meaning herein as in the Credit Agreement.

The Lead Borrower hereby requests a Swing Line Borrowing:

 

  1.

On                                               (a Business Day)1

 

  2.

In the principal amount of $            2

The Swing Line Borrowing requested herein complies with the provisions of
Sections 2.04(a) and 2.04(b) of the Credit Agreement.

 

SEARS AUTHORIZED HOMETOWN STORES, LLC, as Lead Borrower By:  

 

Name:  

 

Title:  

 

 

1 

Each notice of a Swing Line Borrowing must be received by the Swing Line Lender
and the Agent not later than 1:00 p.m. on the requested borrowing date. Notice
may be given by telephone, but must be confirmed promptly in writing in
accordance with Section 2.04(b) of the Credit Agreement.

2 

Each Swing Line Borrowing must be in a minimum amount of $100,000.

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

EXHIBIT C

FORM OF NOTE

NOTE

 

$                       October 11, 2012

FOR VALUE RECEIVED, the undersigned (individually, a “Borrower” and,
collectively, the “Borrowers”), jointly and severally promise to pay to the
order of             (hereinafter, with any subsequent permitted holders, the
“Lender”), c/o Bank of America, N.A. 100 Federal Street, 9th Floor, Boston,
Massachusetts 02110, the principal sum of             ($            ), or, if
less, the aggregate unpaid principal balance of Committed Loans made by the
Lender to or for the account of any Borrower pursuant to the Credit Agreement
dated as of October 11, 2012 (as amended, modified, supplemented or restated and
in effect from time to time, the “Credit Agreement”) by and among (i) the
Borrowers and Guarantors party thereto, (ii) Bank of America, N.A., as
administrative agent and collateral agent (in such capacities, the “Agent”) for
its own benefit and the benefit of the other Credit Parties referred to therein,
(iii) Bank of America, N.A., as L/C Issuer, and (iv) the lenders from time to
time party thereto (individually, a “Lender” and, collectively, the “Lenders”),
with interest at the rate and payable in the manner stated therein.

This is a “Note” to which reference is made in the Credit Agreement and is
subject to all terms and provisions thereof. The principal of, and interest on,
this Note shall be payable at the times, in the manner, and in the amounts as
provided in the Credit Agreement and shall be subject to prepayment and
acceleration as provided therein. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

The Agent’s books and records concerning the Committed Loans, the accrual of
interest thereon, and the repayment of such Committed Loans, shall be prima
facie evidence of the indebtedness to the Lender hereunder.

No delay or omission by the Agent or the Lender in exercising or enforcing any
of the Agent’s or such Lender’s powers, rights, privileges, remedies, or
discretions hereunder shall operate as a waiver thereof on that occasion nor on
any other occasion. No waiver of any Event of Default shall operate as a waiver
of any other Event of Default, nor as a continuing waiver of any such Event of
Default.

Each Borrower, and each guarantor of this Note, waives presentment, demand,
notice, and protest, and also waives any delay on the part of the holder hereof.

 

1

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

This Note shall be binding upon each Borrower, and each guarantor hereof, and
upon their respective successors, assigns, and representatives, and shall inure
to the benefit of the Lender and its successors, endorsees, and assigns.

The liabilities of each Borrower, and of any guarantor of this Note, are joint
and several, provided, however, the release by the Agent or the Lender of any
one or more such Persons shall not release any other Person obligated on account
of this Note. Each reference in this Note to any Borrower, and any guarantor, is
to such Person individually and also to all such Persons jointly. No Person
obligated on account of this Note may seek contribution from any other Person
also obligated unless and until all of the Obligations have been paid in full in
cash.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

EACH OF THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY AND ANY FEDERAL COURT SITTING THEREIN, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE BORROWERS IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE
BORROWERS AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS NOTE OR IN ANY OTHER LOAN
DOCUMENT SHALL AFFECT ANY RIGHT THAT THE AGENT OR THE LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS NOTE OR ANY OTHER LOAN
DOCUMENT AGAINST ANY OF THE BORROWERS OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

EACH OF THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE.
EACH OF THE BORROWERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

Each Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the
Borrowers contemplated by this Note, are each relying thereon.

 

2

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

EACH BORROWER, EACH GUARANTOR AND SURETY, AND THE LENDER, BY ITS ACCEPTANCE
HEREOF, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE AGENT AND THE LENDER HAVE
BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS NOTE BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

[SIGNATURE PAGES FOLLOW]

 

3

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

IN WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed as
of the date set forth above.

 

BORROWERS: SEARS AUTHORIZED HOMETOWN STORES, LLC, as Lead Borrower and as a
Borrower By:       Name:       Title:     SEARS HOME APPLIANCE SHOWROOMS, LLC,
as a Borrower By:       Name:       Title:     SEARS OUTLET STORES, L.L.C., as a
Borrower By:       Name:       Title:    

 

Signature Page to Note

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

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

 

To:  

Bank of America, N.A., as Agent

      Date:    

100 Federal Street, 9th Floor

Boston, Massachusetts 02110

Attention: Stephen Garvin

       

Re: Credit Agreement dated as of October 11, 2012 (as amended, modified,
supplemented or restated hereafter, the “Credit Agreement”) by, among others,
Sears Authorized Hometown Stores, LLC, a Delaware limited liability company, as
the Lead Borrower (in such capacity, the “Lead Borrower”), the Borrowers and
Guarantors party thereto from time to time, the several banks and other
financial institutions or entities from time to time party thereto as Lenders,
and Bank of America, N.A., as administrative agent and collateral agent (in such
capacities, the “Agent”) for the benefit of the Credit Parties referred to
therein. All capitalized terms used herein and not otherwise defined shall have
the same meaning herein as in the Credit Agreement.

The undersigned, a duly authorized and acting Responsible Officer of the Lead
Borrower, hereby certifies to you as follows:

 

1. No Default.

 

  a. To the knowledge of the undersigned Responsible Officer, since
                    (the date of the last similar certification) and except as
set forth in Appendix I, no Default or Event of Default has occurred and is
continuing.

 

  b. If a Default or Event of Default has occurred and is continuing since
                    (the date of the last similar certification), the Borrowers
propose to take action as set forth in Appendix I with respect to such Default
or Event of Default.

 

2. Financial Calculations. Attached hereto as Appendix II are reasonably
detailed calculations necessary to determine the Consolidated Fixed Charge
Coverage Ratio (whether or not compliance therewith is then required under
Section 7.14(b) of the Credit Agreement).

 

3. Financial Statements.

[Use following paragraph (a) for fiscal month-end financial statements]

 

  (a)

Attached hereto as Appendix III (or, if not attached, delivered to the Agent in
accordance with the penultimate paragraph of Section 6.02 of the Credit
Agreement) are the Consolidated balance sheet of the Parent and its Subsidiaries
as at the end of the fiscal month ended             , and the related
Consolidated statements of income or operations, Shareholders’ Equity and cash

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

  flows for such month, and for the portion of the Parent’s Fiscal Year then
ended, setting forth in each case in comparative form the figures for (A) the
corresponding month of the previous Fiscal Year and (B) the corresponding
portion of the previous Fiscal Year, all in reasonable detail, which
Consolidated statements, to my knowledge, fairly present the financial
condition, results of operations, Shareholders’ Equity and cash flows of the
Parent and its Subsidiaries as of the end of such month in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes.

[Use following paragraph (b) for fiscal quarter-end financial statements]

 

  (b) Attached hereto as Appendix III (or, if not attached, delivered to the
Agent in accordance with the penultimate paragraph of Section 6.02 of the Credit
Agreement) are (i) a Consolidated balance sheet of the Parent and its
Subsidiaries as at the end of the Fiscal Quarter ended             , and the
related consolidated statements of income or operations, Shareholders’ Equity
and cash flows for such Fiscal Quarter and for the portion of the Parent’s
Fiscal Year then ended, setting forth in each case in comparative form the
figures for (A) the corresponding Fiscal Quarter of the previous Fiscal Year and
(B) the corresponding portion of the previous Fiscal Year, all in reasonable
detail, which Consolidated statements fairly present the financial condition,
results of operations, Shareholders’ Equity and cash flows of the Parent and its
Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP,
subject to normal year-end audit adjustments and the absence of footnotes, and
(ii) to the extent not otherwise included in the financial statements delivered
pursuant to clause (i), a reasonably detailed build-up of EBITDA and inventory
balances for each Operating Segment for such period, which state fairly in all
material respects the financial position of each Operating Segment.

[Use following paragraph (c) for fiscal year-end financial statements]

 

  (c) Attached hereto as Appendix III (or, if not attached, delivered to the
Agent in accordance with the penultimate paragraph of Section 6.02 of the Credit
Agreement) are (i) a Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of the Fiscal Year ended             , and the
related consolidated statements of income or operations, Shareholders’ Equity
and cash flows for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year, all in reasonable detail and
prepared in accordance with GAAP, audited and accompanied by a report and
unqualified opinion of a Registered Public Accounting Firm of nationally
recognized standing reasonably acceptable to the Agent, which report and opinion
have been prepared in accordance with generally accepted auditing standards and
are not be subject to any “going concern” or like qualification or exception or
any qualification or exception as to the scope of such audit; and (ii) to the
extent not otherwise included in the financial statements delivered pursuant to
clause (i), a reasonably detailed build-up of EBITDA and inventory balances for
each Operating Segment for such period, which state fairly in all material
respects the financial position of each Operating Segment.

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

4. No Material Accounting Changes. There has been no material change in GAAP or
the application thereof since the date of the audited financial statements
furnished to the Agent for the Fiscal Year ending [            ], other than as
disclosed on Appendix IV hereto.

[Remainder of page intentionally left blank.]

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

IN WITNESS WHEREOF, I have executed this certificate as of the date first
written above.

 

By:     Name:     Title:   [Responsible Officer of Lead Borrower]

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

APPENDIX I

Except as set forth below, no Default or Event of Default presently exists. [If
a Default or Event of Default exists, describe the nature of the Default in
reasonable detail and the steps being taken or contemplated by the Borrowers to
be taken on account thereof.]

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

Appendix II

Calculation of Consolidated Fixed Charge Coverage Ratio

 

A.     Calculation of Consolidated Fixed Charge Coverage Ratio for trailing
twelve month period ending                 :

  

1.      Consolidated EBITDA for such period

(see detailed calculation of Consolidated EBITDA attached hereto):             

    

2.      Minus the following:

  

(a)    Capital Expenditures made during such period (other than Financed Capital
Expenditures):             

    

(b)    the aggregate amount of Federal, state, local and foreign income taxes
paid in cash during such period net of refunds of such Taxes received during
such period (but in no event shall the amounts calculated under this clause
(2)(b) be less than zero):

    

3.      Line 1, minus the sum of Lines 2(a) and 2(b):             

    

4.      The sum of the following:

  

(a)    Consolidated Interest Charges paid or required to be paid in cash for
such period:             

    

plus

  

(b)    scheduled principal payments made or required to be made on account of
Indebtedness (excluding the Loan Agreement Obligations and any Synthetic Lease
Obligations but including, without limitation, principal payments made in
respect of Capital Lease Obligations) for such period:             

    

(c)    The sum of Lines 4(a) and 4(b):             

    

5.      CONSOLIDATED FIXED CHARGE COVERAGE RATIO AS OF THE LAST TWELVE MONTH
PERIOD ENDED (Line 3 divided by Line 4(c):             

    

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

B. Consolidated Fixed Charge Coverage Ratio Covenant: During the continuance of
a Covenant Compliance Event, Parent shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly, permit the Consolidated Fixed Charge
Coverage Ratio, calculated on a trailing twelve month basis, to be less than
1.0:1.0, commencing with the month ending immediately preceding the date on
which a Covenant Compliance Event first occurred.

 

1. Is a Covenant Compliance Event1 continuing?

   Yes                No            

2. If yes (covenant required to be tested), in compliance?

   Yes                No            

 

1 

“Covenant Compliance Event” means, at any time after the first anniversary of
the Closing Date, Availability is less than the greater of (i) 12.5% of the Loan
Cap or (ii) $[25,000,000]. The termination of a Covenant Compliance shall in no
way limit, waive or delay the occurrence of a subsequent Covenant Compliance
Event in the event that the conditions set forth in this definition again arise.

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

Appendix III

[Attach financial statements.]

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

Appendix IV

[If material changes in GAAP or the application thereof have occurred since [the
date of the most recently delivered financial statements to the Agent prior to
the date of this Certificate], describe the nature of such changes in reasonable
detail and the effect, if any, of each such material change in GAAP or in
application thereof in the determination of the calculation of the financial
statements described in the Credit Agreement.]

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

EXHIBIT E

FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between
[the][each]1 Assignor identified in item 1 below ([the][each, an] “Assignor”)
and [the][each]2 Assignee identified in item 2 below ([the][each, an]
“Assignee”). [It is understood and agreed that the rights and obligations of
[the Assignors][the Assignees]3 hereunder are several and not joint.]4
Capitalized terms used but not defined herein shall have the meanings given to
them in the Credit Agreement identified below (the “Credit Agreement”), receipt
of a copy of which is hereby acknowledged by [each, the] Assignee. The Standard
Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to
and incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and
assigns to [the Assignee][the respective Assignees], and [the][each] Assignee
hereby irrevocably purchases and assumes from [the Assignor][the respective
Assignors], subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the Agent as
contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights
and obligations in [its capacity as a Lender][their respective capacities
Lenders] under the Credit Agreement and any other documents or instruments
delivered pursuant thereto to the extent related to the amount and percentage
interest identified below of all of such outstanding rights and obligations of
[the Assignor][the respective Assignors] under the respective facilities
identified below (including, without limitation, participations in Letters of
Credit included in such facilities) and (ii) to the extent permitted to be
assigned under applicable Law, all claims, suits, causes of action and any other
right of [the Assignor (in its capacity as a Lender)][the respective Assignors
(in their respective capacities as Lenders)] against any Person, whether known
or unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including, but not limited to, contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity

 

1 

For bracketed language here and elsewhere in this form relating to the
Assignor(s), if the assignment is from a single Assignor, choose the first
bracketed language. If the assignment is from multiple Assignors, choose the
second bracketed language.

2 

For bracketed language here and elsewhere in this form relating to the
Assignee(s), if the assignment is to a single Assignee, choose the first
bracketed language. If the assignment is to multiple Assignees, choose the
second bracketed language.

3 

Select as appropriate.

4 

Include bracketed language if there are either multiple Assignors or multiple
Assignees.

 

1

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

related to the rights and obligations sold and assigned pursuant to clause
(i) above (the rights and obligations sold and assigned by [the][any] Assignor
to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to
herein collectively as [the][an] “Assigned Interest”). Each such sale and
assignment is without recourse to [the][any] Assignor and, except as expressly
provided in this Assignment and Assumption, without representation or warranty
by [the][any] Assignor.

 

1.    Assignor[s]:                    2.    Assignee[s]:                   

 

3. Borrowers: Sears Authorized Hometown Stores, LLC, Sears Home Appliance
Showrooms, LLC and Sears Outlet Stores, L.L.C.

 

4. Agent: Bank of America, N.A., as the Agent under the Credit Agreement.

 

5. Credit Agreement: Credit Agreement dated as of October 11, 2012 by and among
(i) Sears Authorized Hometown Stores, LLC, a Delaware limited liability company,
the Borrowers and Guarantors party thereto from time to time, (ii) Bank of
America, N.A., as Agent for its own benefit and the benefit of the other Credit
Parties referred to therein, (iii) Bank of America, N.A., as L/C Issuer, and
(iv) the lenders from time to time party thereto.

 

7. Assigned Interest[s]:

 

Assignor[s]5

   Assignee[s]6    Aggregate
Amount of
Commitment/Loans
for all Lenders7      Amount of
Commitment/
Loans
Assigned8      Percentage
Assigned of
Commitment/
Loans9         $         $             %        $         $             % 

 

[7.

Trade Date:             ]10

 

5 

List each Assignor, as appropriate.

6 

List each Assignee, as appropriate.

7 

Amounts in this column and in the column immediately to the right to be adjusted
by the counterparties to take into account any payments or prepayments made
between the Trade Date and the Effective Date.

8 

Subject to minimum amount requirements pursuant to Section 10.06(b) of the
Credit Agreement and subject to proportionate amount requirements pursuant to
Section 10.06(b) of the Credit Agreement.

9 

Set forth, to at least 9 decimals, as a percentage of the Commitments/ Loans of
all Lenders thereunder.

 

2

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

Effective Date:             , 20            [TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE DATE OF DELIVERY OF THIS ASSIGNMENT AND ASSUMPTION FOR RECORDATION
OF TRANSFER IN THE REGISTER THEREFOR.]

 

10 

To be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.

 

3

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

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:     Name:     Title:    

 

ASSIGNEE

[NAME OF ASSIGNEE]

By:     Name:     Title:    

 

[Consented to and]11 Accepted:

 

BANK OF AMERICA, N.A., as Agent

By:     Name:     Title:    

 

11 

To the extent that the Agent’s consent is required under Section 10.06 of the
Credit Agreement.

 

4

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

[Consented to:]12

 

SEARS AUTHORIZED HOMETOWN STORES, LLC, as Lead Borrower

By:     Name:     Title:    

 

12 

To the extent required under Section 10.06 of the Credit Agreement.

 

5

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ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

Reference is made to the Credit Agreement dated as of October 11, 2012 (as
amended, modified, supplemented or restated hereafter, the “Credit Agreement”)
by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware limited
liability company, for itself and as Lead Borrower (in such capacity, the “Lead
Borrower”) for the other Borrowers party thereto from time to time
(individually, a “Borrower” and, collectively, the “Borrowers”), (ii) the
Borrowers and Guarantors party thereto from time to time, (iii) Bank of America,
N.A., as administrative agent and collateral agent (in such capacities, the
“Agent”) for its own benefit and the benefit of the other Credit Parties
referred to therein, (iv) Bank of America, N.A., as L/C Issuer, and (v) the
lenders from time to time party thereto (individually, a “Lender” and,
collectively, the “Lenders”). All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Credit Agreement.

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of [the][[the relevant] Assigned Interest,
(ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim and (iii) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document,
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Credit Parties or any other Person obligated in respect of any
Loan Document or (iv) the performance or observance by the Loan Parties or any
other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all the requirements to be an Eligible Assignee under the Credit Agreement
(subject to such consents, if any, as may be required by Section 10.06 of the
Credit Agreement), (iii) from and after the Effective Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the extent
of [the][the relevant] Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it is sophisticated with respect to decisions to acquire assets
of the type represented by [the][such] Assigned Interest and either it, or the
Person exercising discretion in making its decision to acquire [the][such]
Assigned Interest, is experienced in acquiring assets of such type, (v) it has
received a copy of the Credit Agreement, and has received or has been accorded
the opportunity to receive copies of the most recent financial statements
delivered pursuant to Section 6.01

 

6

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

thereof, as applicable, and such other documents and information as it deems
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it
has, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Assignment and Assumption
and to purchase [the][such] Assigned Interest, and (vii) attached hereto is any
documentation required to be delivered by it pursuant to the terms of
Section 3.01 the Credit Agreement, duly completed and executed by [the][such]
Assignee; and (b) agrees that (i) it will, independently and without reliance
upon the Agent, [the][any] Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

2. Payments. From and after the Effective Date, the Agent shall make all
payments in respect of [the][each] Assigned Interest (including payments of
principal, interest, fees and other amounts) to [the][the relevant] Assignor for
amounts which have accrued up to but excluding the Effective Date and to
[the][the relevant] Assignee for amounts which have accrued from and after the
Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

4. Fees. Unless waived by the Agent in accordance with Section 10.06(b) of the
Credit Agreement, this Assignment and Assumption shall be delivered to the Agent
with a processing and recordation fee of $3,500.

 

7

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EXHIBIT F

Sears Hometown and Outlet Stores, Inc.

Borrowing Base Certificate

As of

(thousands)

 

Inventory per Stock Ledger

     $ —        

 

 

 

Less Ineligible Inventory:

    

Consigned Inventory

     $ —   

Inventory located outside of U.S/Puerto Rico

     $ —   

Store Closure Sale Inventory Reserve in Excess of 4 Weeks

     $ —   

Shrink (0.5% of Inventory)

     $ —        

 

 

 

Net Eligible Inventory

     $ —        

 

 

 

NOLV

    

Advance Rate (Lesser of 70% or 85% of NOLV)

          

Inventory Availability

     $ —   

Credit Card Receivables

     $ —   

Less CC A/R Ineligibles

     $ —   

Eligible Credit Card Receivables

     $ —   

Advance Rate

       90 % 

Credit Card Availability

     $ —   

Availability Reserves

    

Gift Card Liability (1.5x 12 month monthly average)

     $ —   

Two Months Store Rent Reserve (Landlord Lien States WA, VA, PA)

     $ —   

Customer Deposits (50%)

     $ —   

Dealer Commission Payable

     $ —   

Payable to Discover/SHC From In-Store Payments

     $ —   

Borrowing Base

     $ —   

Beginning Principal Balance

     $ —           

 

 

     Add prior days advance      $ —           

 

 

     Add fees charged today      $ —           

 

 

     Less prior day's pay down      $ —           

 

 

 

Ending principal

     $ —           

 

 

     Add Letters of Credit         Commercial L/C          $ —           

 

 

     Standby L/C          $ —           

 

 

     Banker’s Acceptance      $ —           

 

 

 

Total liability prior to request

     $ —        

 

 

 

(a) Aggregate Commitments

     $           250,000.00   

(b) Borrowing Base

     $ —   

Not to exceed (lower of a or b)

     $ —        

 

 

 

Availability prior to today’s request

     $ —           

 

 

     Advance Request             

 

 

 

Availability after today’s request

     $ —           

 

 

 

The undersigned, a Responsible Officer of Sears Authorized Hometown Stores, LLC
(the “Lead Borrower”), represents and warrants that (A) the information set
forth above (i) is complete and correct in all material respects, and (ii) has
been prepared in accordance with the requirements of that certain Credit
Agreement dated October 11, 2012 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), by, among others,
(1) the Lead Borrower, as agent for itself and the other Borrowers party
thereto, (2) the other Borrowers party thereto, (3) the Parent, (4) the Lenders
party thereto, and (5) Bank of America, N.A., as Agent (in such capacity, the
“Agent”), and (B) the Lead Borrower is not aware of the occurrence or
continuance of any Default or Event of Default (as such terms are defined in the
Credit Agreement).

 

Responsible Officer:

   

By:

 

Name:

 

Title:

 

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

EXHIBIT G-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 11, 2012
(as amended, modified, supplemented or restated hereafter, the “Credit
Agreement”) by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware
limited liability company (the “Lead Borrower”), (ii) the other Borrowers and
Guarantors named therein, (iii) the Lenders party thereto from time to time, and
(iv) Bank of America, N.A., as administrative agent and collateral agent (in
such capacities, the “Agent”) for its own benefit and the benefit of the other
Credit Parties referred to therein. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Credit Agreement.

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Lead Borrower or any other Borrower within the meaning of
Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign
corporation related to the Lead Borrower or any other Borrower as described in
Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent and the Lead Borrower and any other
relevant Borrower with a certificate of its non-U.S. Person status on IRS Form
W-8BEN. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform the Lead Borrower, any other relevant Borrower and the Agent, and
(2) the undersigned shall have at all times furnished the Lead Borrower, any
other relevant Borrower and the Agent with a properly completed and currently
effective certificate in either the calendar year in which each payment is to be
made to the undersigned, or in either of the two calendar years preceding such
payments.

 

  [NAME OF LENDER]   By:         Name:         Title:    

Date:             , 20[     ]

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EXHIBIT G-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 11, 2012
(as amended, modified, supplemented or restated hereafter, the “Credit
Agreement”) by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware
limited liability company (the “Lead Borrower”), (ii) the other Borrowers and
Guarantors named therein, (iii) the Lenders party thereto from time to time, and
(iv) Bank of America, N.A., as administrative agent and collateral agent (in
such capacities, the “Agent”) for its own benefit and the benefit of the other
Credit Parties referred to therein. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Credit Agreement.

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Lead Borrower or any other
Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is
not a controlled foreign corporation related to the Lead Borrower or any other
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

 

 

[NAME OF PARTICIPANT]

  By:         Name:         Title:    

Date:             , 20[     ]

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EXHIBIT G-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 11, 2012
(as amended, modified, supplemented or restated hereafter, the “Credit
Agreement”) by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware
limited liability company (the “Lead Borrower”), (ii) the other Borrowers and
Guarantors named therein, (iii) the Lenders party thereto from time to time, and
(iv) Bank of America, N.A., as administrative agent and collateral agent (in
such capacities, the “Agent”) for its own benefit and the benefit of the other
Credit Parties referred to therein. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Credit Agreement.

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the Lead
Borrower or any other Borrower within the meaning of Section 871(h)(3)(B) of the
Code and (v) none of its direct or indirect partners/members is a controlled
foreign corporation related to the Lead Borrower or any other Borrower as
described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

 

 

[NAME OF PARTICIPANT]

  By:         Name:         Title:    

Date:             , 20[     ]

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EXHIBIT G-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 11, 2012
(as amended, modified, supplemented or restated hereafter, the “Credit
Agreement”) by and among (i) Sears Authorized Hometown Stores, LLC, a Delaware
limited liability company (the “Lead Borrower”), (ii) the other Borrowers and
Guarantors named therein, (iii) the Lenders party thereto from time to time, and
(iv) Bank of America, N.A., as administrative agent and collateral agent (in
such capacities, the “Agent”) for its own benefit and the benefit of the other
Credit Parties referred to therein. All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Credit Agreement.

Pursuant to the provisions of Section 3.01(e) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Lead Borrower
or any other Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(v) none of its direct or indirect partners/members is a controlled foreign
corporation related to the Lead Borrower or any other Borrower as described in
Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent, the Lead Borrower and any other
relevant Borrower with IRS Form W-8IMY accompanied by one of the following forms
from each of its partners/members that is claiming the portfolio interest
exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an
IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Lead Borrower, any other
relevant Borrower and the Agent, and (2) the undersigned shall have at all times
furnished the Lead Borrower, any other relevant Borrower and the Agent with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

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  [NAME OF LENDER]   By:         Name:         Title:    

Date:             , 20[     ]

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EXHIBIT H

FORM OF CREDIT CARD NOTIFICATION

PREPARE ON BORROWER LETTERHEAD—ONE FOR EACH PROCESSOR

            ,             

 

To: [Name and Address of Credit Card Processor] (The “Processor”)

 

  Re: [            ] (the “Company”)

Merchant Account Number:             

Dear Sir/Madam:

In connection with that certain Credit Agreement dated as of October 11, 2012
(as amended, restated, supplemented or otherwise modified and in effect from
time to time, the “Credit Agreement”) between, among others, the Company,
certain affiliates of the Company, and Bank of America, N.A., a national banking
association with offices at 100 Federal Street, 9th Floor, Boston, MA 02110, as
administrative agent and collateral agent (in such capacities, the “Agent”) for
a syndicate of lenders and other credit parties (together with the Agent,
collectively, the “Credit Parties”), the Company has granted to the Agent, for
its own benefit and the benefit of the other Credit Parties, a security interest
in and to certain assets of the Company, including, without limitation, all
payments with respect to credit card charges (the “Charges”) submitted by the
Company to the Processor for processing and the amounts which the Processor owes
to the Company on account thereof (the “Credit Card Proceeds”).

 

1. The undersigned hereby instructs the Processor that, until the Processor
receives written notification (i) executed by the Company and the Agent to the
contrary, or (ii) executed by Agent to the contrary, all amounts as may become
due from time to time from the Processor to the Company shall be transferred
only by ACH, Depository Transfer Check, or Electronic Depository Transfer to:

[                                     ]

ABA #                           

Account No.                  

Re:                                 

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The Company further instructs the Processor to follow any subsequent
instructions received in writing and (i) executed by the Company and the Agent,
or (ii) executed by Agent, in each case with respect to the transfer of amounts
as may become due from time to time from the Processor to the Company.

 

2. Upon request of the Agent, a copy of each periodic statement provided by the
Processor to the Company should be provided to the Agent at the following
address (which address may be changed upon seven (7) days’ written notice given
to the Processor by the Agent):

Bank of America, N.A.

100 Federal Street, 9th Floor

Boston, MA 02110

Attention: Stephen Garvin

Re: Sears Hometown Stores

 

3. The Processor shall be fully protected in acting on any written order or
direction executed (i) by the Company and the Agent, or (ii) by the Agent, in
each case respecting the Charges and the Credit Card Proceeds without making any
inquiry whatsoever as to the Company’s right or authority (so long as such order
or direction is also executed by the Agent) or Agent’s right or authority to
give such order or direction or as to the application of any payment made
pursuant thereto.

This letter may be amended only by the written agreement of the Processor, the
Company, and an officer of the Agent and may be terminated solely by written
notice signed by an officer of the Agent.

[remainder of page intentionally left blank]

 

2

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Very truly yours,

 

[            ], as the Company

By:     Name:     Title:    

 

cc: Bank of America, N.A.

Signature Page to Credit Card Notification