Exhibit 10.2

 

CREDIT AGREEMENT

 

dated as of

May 26, 2004

 

among

 

THE WET SEAL, INC.,

as Lead Borrower for:

 

THE WET SEAL, INC.

THE WET SEAL RETAIL, INC.

WET SEAL CATALOG, INC.,

as the Borrowers

 

WET SEAL GC, INC.

As Facility Guarantor

 

The LENDERS Party Hereto,

 

FLEET RETAIL GROUP, INC.

as Administrative Agent and Collateral Agent

 

FLEET NATIONAL BANK

as Issuing Bank

 

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TABLE OF CONTENTS

 

     Page

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ARTICLE I Definitions

   1

SECTION 1.01. Defined Terms

   1

SECTION 1.02. Terms Generally

   24

SECTION 1.03. Accounting Terms; GAAP

   24

ARTICLE II Amount and Terms of Credit

   24

SECTION 2.01. Commitment of the Lenders.

   24

SECTION 2.02. Reserves; Changes to Reserves.

   25

SECTION 2.03. Making of Loans.

   25

SECTION 2.04. Overadvances

   27

SECTION 2.05. Swingline Loans

   27

SECTION 2.06. Letters of Credit.

   28

SECTION 2.07. Settlements Amongst Lenders

   31

SECTION 2.08. Notes; Repayment of Loans.

   32

SECTION 2.09. Interest on Loans.

   33

SECTION 2.10. Default Interest.

   33

SECTION 2.11. Certain Fees.

   33

SECTION 2.12. Unused Commitment Fee.

   33

SECTION 2.13. Letter of Credit Fees.

   34

SECTION 2.14. Early Termination Fee.

   35

SECTION 2.15. Nature of Fees.

   35

SECTION 2.16. Termination or Reduction of Commitments.

   35

SECTION 2.17. Alternate Rate of Interest.

   35

SECTION 2.18. Conversion and Continuation of Loans.

   36

SECTION 2.19. Mandatory Prepayment; Commitment Termination; Cash Collateral.

   37

SECTION 2.20. Optional Prepayment of Loans; Reimbursement of Lenders.

   38

SECTION 2.21. Maintenance of Loan Account; Statements of Account.

   39

SECTION 2.22. Cash Receipts.

   40

SECTION 2.23. Application of Payments.

   41

SECTION 2.24. Increased Costs.

   42

SECTION 2.25. Change in Legality.

   43

SECTION 2.26. Payments; Sharing of Setoff.

   44

SECTION 2.27. Taxes.

   45

SECTION 2.28. Security Interests in Collateral.

   47

SECTION 2.29. Mitigation Obligations; Replacement of Lenders.

   47

ARTICLE III Representations and Warranties

   49

SECTION 3.01. Organization; Powers

   49

SECTION 3.02. Authorization; Enforceability

   49

 

(i)

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SECTION 3.03. Governmental Approvals; No Conflicts

   49

SECTION 3.04. Financial Condition

   49

SECTION 3.05. Properties

   49

SECTION 3.06. Litigation and Environmental Matters

   50

SECTION 3.07. Compliance with Laws and Agreements

   50

SECTION 3.08. Investment and Holding Company Status

   50

SECTION 3.09. Taxes

   50

SECTION 3.10. ERISA

   51

SECTION 3.11. Disclosure

   51

SECTION 3.12. Subsidiaries.

   51

SECTION 3.13. Insurance

   51

SECTION 3.14. Labor Matters

   51

SECTION 3.15. Security Documents

   52

SECTION 3.16. Federal Reserve Regulations

   52

SECTION 3.17. Solvency

   52

ARTICLE IV Conditions

   52

SECTION 4.01. Closing Date

   52

SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit.

   55

ARTICLE V Affirmative Covenants

   56

SECTION 5.01. Financial Statements and Other Information

   56

SECTION 5.02. Notices of Material Events

   58

SECTION 5.03. Information Regarding Collateral

   59

SECTION 5.04. Existence; Conduct of Business

   59

SECTION 5.05. Payment of Obligations

   59

SECTION 5.06. Maintenance of Properties

   59

SECTION 5.07. Insurance

   59

SECTION 5.08. Casualty and Condemnation

   60

SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals;
Accountants

   60

SECTION 5.10. Physical Inventories.

   61

SECTION 5.11. Compliance with Laws

   62

SECTION 5.12. Use of Proceeds and Letters of Credit

   62

SECTION 5.13. Additional Subsidiaries

   62

SECTION 5.14. Depository Account.

   62

SECTION 5.15. Further Assurances

   62

ARTICLE VI Negative Covenants

   63

SECTION 6.01. Indebtedness and Other Obligations

   63

SECTION 6.02. Liens

   64

SECTION 6.03. Fundamental Changes

   65

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions

   65

SECTION 6.05. Asset Sales

   65

SECTION 6.06. Restricted Payments; Certain Payments of Indebtedness

   66

 

(ii)

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SECTION 6.07. Transactions with Affiliates

   66

SECTION 6.08. Restrictive Agreements

   66

SECTION 6.09. Amendment of Material Documents

   67

SECTION 6.10. Additional Subsidiaries

   67

SECTION 6.11. Excess Availability

   67

SECTION 6.12. Fiscal Year

   67

SECTION 6.13. Environmental Laws

   67

ARTICLE VII Events of Default

   67

SECTION 7.01.

   67

SECTION 7.02. Remedies on Default

   70

SECTION 7.03. Application of Proceeds

   71

ARTICLE VIII The Agents

   71

SECTION 8.01. Administration by Administrative Agent.

   71

SECTION 8.02. The Collateral Agent.

   72

SECTION 8.03. Sharing of Excess Payments.

   72

SECTION 8.04. Agreement of Required Lenders.

   73

SECTION 8.05. Liability of Agents.

   73

SECTION 8.06. Notice of Default

   74

SECTION 8.07. Lenders’ Credit Decisions

   74

SECTION 8.08. Reimbursement and Indemnification.

   75

SECTION 8.09. Rights of Agents.

   75

SECTION 8.10. Independent Lenders and Issuing Bank.

   75

SECTION 8.11. Notice of Transfer.

   76

SECTION 8.12. Successor Agent

   76

SECTION 8.13. Reports and Financial Statements.

   76

SECTION 8.14. Delinquent Lender

   76

ARTICLE IX Miscellaneous

   77

SECTION 9.01. Notices

   77

SECTION 9.02. Waivers; Amendments

   78

SECTION 9.03. Expenses; Indemnity; Damage Waiver

   79

SECTION 9.04. Designation of Lead Borrower as Borrowers’ Agent

   81

SECTION 9.05. Successors and Assigns

   82

SECTION 9.06. Survival

   84

SECTION 9.07. Counterparts; Integration; Effectiveness

   85

SECTION 9.08. Severability

   85

SECTION 9.09. Right of Setoff

   85

SECTION 9.10. Governing Law; Jurisdiction; Consent to Service of Process.

   85

SECTION 9.11. WAIVER OF JURY TRIAL

   86

SECTION 9.12. Headings

   86

SECTION 9.13. Interest Rate Limitation

   86

SECTION 9.14. Additional Waivers.

   87

SECTION 9.15. Confidentiality.

   88

 

(iii)

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EXHIBITS

 

A.

  

Assignment and Acceptance

B-1.

  

Revolving Notes

B-2

  

Swingline Note

C

  

Opinion of Counsel to Loan Parties

D.

  

Form of Compliance Certificate

E.

  

Borrowing Base Certificate

 

(iv)

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SCHEDULES

 

1.1

  

Lenders and Commitments

2.22(a)

  

DDAs

2.22(b)

  

Credit Card Arrangements

2.22(c)

  

Blocked Accounts

2.22(f)

  

Disbursement Accounts

3.05(c)(i)

  

Title to Properties; Real Estate Owned

3.05(c)(ii)

  

Leased Properties

3.06

  

Disclosed Matters

3.09

  

Taxes

3.12

  

Subsidiaries

3.13

  

Insurance

5.01(i)

  

Financial Reporting Requirements

6.01

  

Indebtedness

6.02

  

Liens

6.04

  

Investments

6.07

  

Transactions with Affiliates

 

(v)

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CREDIT AGREEMENT dated as of May 26, 2004 among

 

THE WET SEAL, INC., a Delaware corporation, having its principal place of
business at 26972 Burbank, Foothill Ranch, California 92610, as Lead Borrower
for the Borrowers, being:

 

said WET SEAL, INC.,

 

WET SEAL CATALOG, INC., a Delaware corporation, having its principal place of
business at 26972 Burbank, Foothill Ranch, California 92610; and

 

THE WET SEAL RETAIL, INC., a Delaware corporation, having its principal place of
business at 26972 Burbank, Foothill Ranch, California 92610; and

 

WET SEAL GC, INC., a Virginia corporation, having its principal place of
business at 26972 Burbank, Foothill Ranch, California 92610, as Facility
Guarantor; and

 

the LENDERS party hereto; and

 

FLEET RETAIL GROUP, INC., as Administrative Agent and Collateral Agent for the
Lenders, a Delaware corporation, having its principal place of business at 40
Broad Street, Boston, Massachusetts 02109; and

 

FLEET NATIONAL BANK, as Issuing Bank, a national banking association having a
place of business at 100 Federal Street, Boston, Massachusetts 02110;

 

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

 

“ACH” shall mean automated clearing house transfers.

 

“Account” shall include, without limitation, “accounts” as defined in the UCC,
and also all: accounts, accounts receivable, receivables, and rights to payment
(whether or not earned by performance) (i) for property that has been or is to
be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of insurance issued or to be
issued, (iv) for a secondary obligation incurred or to be incurred, (v) for
energy provided or to be provided, (vi) for the use or hire of a vessel, (vii)
arising out of the use of a credit or charge card or information contained on or
used with that card, or (viii) for winnings in a lottery or other game of
chance.

 

“Adjusted LIBO Rate” means, with respect to any LIBO Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal

 

1

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to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory
Reserve Rate. The Adjusted LIBO Rate will be adjusted automatically as to all
LIBO Rate Loans then outstanding as of the effective date of any change in the
Statutory Reserve Rate.

 

“Administrative Agent” means Fleet, in its capacity as administrative agent for
the Lenders hereunder.

 

“Affiliate” means, with respect to a specified Person, 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.

 

“Agents” shall mean collectively, the Administrative Agent and the Collateral
Agent.

 

“Agreement” means this Credit Agreement, as modified, amended, supplemented or
restated, and in effect from time to time.

 

“Applicable Law” means as to any Person: (i) all statutes, rules, regulations,
orders, or other requirements having the force of law and (ii) all court orders
and injunctions, and/or similar rulings, in each instance ((i) and (ii)) of or
by any Governmental Authority, or court, or tribunal which has jurisdiction over
such Person, or any property of such Person, or of any other Person for whose
conduct such Person would be responsible.

 

“Applicable Margin” means initially, the rates for Prime Rate Loans and LIBO
Loans, set forth in Level 3, below:

 

Level

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Performance Criteria

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   Prime Rate Loans

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    LIBO Loans

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1

  

Average Excess

Availability greater than

$35,000,000

   0 %   1.25 %

2

  

Average Excess

Availability greater than

$20,000,000 but less than

or equal to $35,000,000

   0 %   1.50 %

3

  

Average Excess

Availability greater than

$10,000,000 but less than

or equal to $20,000,000

   0 %   1.75 %

4

  

Average Excess

Availability less than or

equal to $10,000,000

   0 %   2.00 %

 

The Applicable Margin shall be adjusted quarterly as of the first day of each
Fiscal Quarter, based upon the average Excess Availability for the immediately
preceding Fiscal Quarter. Notwithstanding the foregoing, the Applicable Margin
will be set at Level 3 on the Closing Date and will remain at Level 3 for the
period commencing on the Closing Date and ending November 26, 2004, unless
Excess Availability does not support the requirements of Level 3 or higher, in
which event the Applicable Margin will be set at Level 4. In no event shall the
Applicable

 

2

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Margin be set at Level 1 or 2 prior to six months subsequent to the Closing Date
(even if the Excess Availability requirements for Level 1 or 2 have been met).
Upon the occurrence and during the continuance of an Event of Default, at the
option of the Administrative Agent or at the direction of the Required Lenders,
interest shall be determined in the manner set forth in Section 2.10.

 

“Appraisal Percentage” shall mean 85%.

 

“Appraised Value” means the net appraised liquidation value of the Borrowers’
Eligible Inventory as set forth in the Borrowers’ stock ledger as determined
from time to time in accordance with an independent appraisal satisfactory to
the Administrative Agent.

 

“Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

 

“Availability Reserves” means such reserves as the Administrative Agent from
time to time determines in the Administrative Agent’s reasonable discretion as
being appropriate to reflect the impediments to the Agents’ ability to realize
upon the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to) reserves based on (i)
Rent (but only if a landlord’s waiver, acceptable to the Administrative Agent,
has not been received by the Administrative Agent); (ii) Gift Certificates and
Merchandise Credit Liability; (iii) customs, duties, and other costs to release
Inventory which is being imported into the United States; (iv) outstanding
customer deposits, and (v) outstanding Taxes and other governmental charges,
including, ad valorem, real estate, personal property, sales, and other Taxes
which might have priority over the interests of the Collateral Agent in the
Collateral; and (vi) salaries, wages and benefits due to employees of any
Borrower which might have priority over the interests of the Collateral Agent in
the Collateral.

 

“Blocked Account Agreements” has the meaning set forth in Section 2.22(c).

 

“Blocked Account Banks” shall mean the banks with whom the Borrowers have
entered into Blocked Account Agreements.

 

“Blocked Accounts” shall have the meaning set forth in Section 2.22(c).

 

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

 

“Borrowers” means collectively, The Wet Seal, Inc., Wet Seal Catalog, Inc. and
The Wet Seal Retail, Inc.

 

“Borrowing” shall mean (a) the incurrence of Loans of a single Type, on a single
date and having, in the case of LIBO Loans, a single Interest Period, or (b) a
Swingline Loan.

 

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

 

3

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(a) the Credit Card Advance Rate multiplied by the face amount of Eligible
Credit Card Receivables, plus

 

(b) the lesser of (i) the Appraisal Percentage of the Appraised Value of
Eligible Inventory, net of Inventory Reserves, or (ii) the Inventory Advance
Rate multiplied by the Cost of Eligible Inventory net of Inventory Reserves;
plus

 

(c) 100% of all Eligible Cash and Cash Equivalents, provided that Eligible Cash
and Cash Equivalents included in the Borrowing Base may not be withdrawn from
the respective account, thereby reducing the Borrowing Base, unless and until
the Lead Borrower furnishes the Administrative Agent with (i) notice of such
intended withdrawal and (ii) a Borrowing Base Certificate as of the date of such
proposed withdrawal reflecting that, after giving effect to such withdrawal, no
Overadvance will result; minus

 

(d) the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” has the meaning assigned to such term in Section
5.01(f).

 

“Borrowing Request” means a request by the Lead Borrower for a Borrowing in
accordance with Section 2.03.

 

“Breakage Costs” shall have the meaning set forth in Section 2.19(b).

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts are authorized or required by
law to remain closed, provided that, when used in connection with a LIBO Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market. Except as
otherwise provided herein, if any day on which a payment is due is not a
Business Day, then the payment shall be due on the next day following which is a
Business Day and such extension of time shall be included in computing interest
and fees in connection with such payment.

 

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

 

“Cash and Cash Equivalents” means (i) unrestricted cash, and (ii) Cash
Equivalents.

 

“Cash Collateral Account” shall mean an interest-bearing account established by
the Borrowers with the Collateral Agent at Fleet under the sole and exclusive
dominion and control of the Collateral Agent designated as the “Wet Seal Cash
Collateral Account”.

 

“Cash Dominion Event” means either (i) the occurrence and continuance of any
Event of Default, or (ii) the failure of the Borrowers to maintain Excess
Availability in an amount not less than $15,000,000 at any time.

 

4

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“Cash Equivalents” means all investment products offered by Fleet for overnight
investment of cash as of the Closing Date, and such additional overnight
investments as may hereafter be offered by Fleet or any successor to Fleet,
subject to the prior approval of the Administrative Agent, not to be
unreasonably withheld.

 

“Cash Receipts” has the meaning provided therefor in Section 2.21(c).

 

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

 

“Change in Control” means, at any time, (a) during any period of twelve months,
individuals who at the beginning of such period constituted the board of
directors of the Lead Borrower (together with any new directors whose election
or appointment by such board of directors, or whose nomination for election by
shareholders of the Lead Borrower, as the case may be, was approved by a vote of
a majority of the directors still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors then in office; or (b) any person or group (within the
meaning of the Securities and Exchange Act of 1934, as amended) is or becomes
the beneficial owner (within the meaning of Rule 13d-3 and 13d-5 of the
Securities and Exchange Act of 1934, as amended, except that such person shall
be deemed to have “beneficial ownership” of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time) directly or indirectly of fifty percent (50%) or more of
the total then outstanding voting power of the Voting Stock of the Lead Borrower
on a fully diluted basis, whether as a result of the issuance of securities of
the Lead Borrower, any merger, consolidation, liquidation or dissolution of the
Lead Borrower, any direct or indirect transfers of securities or otherwise, or
has the right or ability to Control the Lead Borrower; or (c) the Lead Borrower
fails to own one hundred percent (100%) of the capital stock of the other Loan
Parties.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 2.24(b), by any lending office of such Lender or by such
Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

 

“Charges” has the meaning provided therefor in Section 9.12.

 

“Closing Date” means the date on which the conditions specified in Section 4.01
are satisfied (or waived in accordance with Section 9.02).

 

“Code” means the Internal Revenue Code of 1986 and the Treasury regulations
promulgated thereunder, as amended from time to time.

 

“Collateral” means any and all “Collateral” as defined in any applicable
Security Document.

 

5

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“Collateral Agent” means FRG, in its capacity as collateral agent under the
Security Documents.

 

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose
of providing the primary payment mechanism in connection with the purchase of
any materials, goods or services by the Borrowers in the ordinary course of
business of the Borrowers.

 

“Commitment” shall mean, with respect to each Lender, the aggregate commitment
of such Lender hereunder in the amount set forth opposite its name on Schedule
1.1 hereto or as may subsequently be set forth in the Register from time to
time, as the same may be reduced from time to time pursuant to Section 2.16.

 

“Commitment Percentage” shall mean, with respect to each Lender, that percentage
of the Commitments of all Lenders hereunder in the amount set forth opposite its
name on Schedule 1.1 hereto or as may subsequently be set forth in the Register
from time to time, as the same may be reduced from time to time pursuant to
Section 2.16.

 

“Consent” means actual consent given by a Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice
to a Lender from the Administrative Agent of a proposed course of action to be
followed by the Administrative Agent without such Lender’s giving the
Administrative Agent written notice of that Lender’s objection to such course of
action.

 

“Consolidated” means, when used to modify a financial term, test, statement, or
report of a Person, refers to 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.

 

“Control” means the possession, directly or indirectly, of the power (a) to vote
50% or more of the securities having ordinary voting power for the election of
directors of a Person, or (b) 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. The terms “Controlling” and “Controlled” have meanings
correlative thereto.

 

“Cost” means the cost of purchases, as reported on the Borrowers’ stock ledger,
based upon the Borrowers’ accounting practices which are in effect on the date
of this Agreement. “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.

 

“Credit Card Advance Rate” means 85%.

 

“Credit Card Agreements” has the meaning provided therefor in Section 2.22(c).

 

“Credit Extensions” as of any day, shall be equal to the sum of (a) the
principal balance of all Loans then outstanding, and (b) the then amount of the
Letter of Credit Outstandings.

 

“DDAs” means any checking or other demand deposit account maintained by any
Borrower.

 

6

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“DDA Notification” has the meaning provided therefor in Section 2.22(c).

 

“Default” means any event or condition that constitutes an Event of Default or
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.

 

“Delinquent Lender” has the meaning therefor provided in Section 8.14.

 

“dollars” or “$” refers to lawful money of the United States of America.

 

“Early Termination Fee” has the meaning therefor provided in Section 8.14.

 

“Eligible Assignee” means a bank, insurance company, or company engaged in the
business of making commercial loans having a combined capital and surplus in
excess of $300,000,000, or any Affiliate of any Lender, or a Related Fund of any
Lender, or 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. For the purposes of this Agreement, “Related Fund” shall mean, with
respect to any Lender which is a fund that invests in loans, any other such fund
managed by the same investment advisor as such Lender or by an Affiliate of such
Lender or such advisor.

 

“Eligible Cash and Cash Equivalents” means Cash and Cash Equivalents of the
Borrowers, acceptable to the Administrative Agent, in its reasonable discretion,
subject to a first perfected security interest in favor of the Collateral Agent
for the benefit of itself and the Secured Parties, maintained in such accounts
under the control of the Collateral Agent, on terms and conditions reasonably
satisfactory to the Collateral Agent.

 

“Eligible Credit Card Receivables means Accounts due to a Borrower on a
non-recourse basis from Visa, MasterCard, American Express Co., Discover, and
other major credit card processors reasonably acceptable to the Administrative
Agent as arise in the ordinary course of business, which have been earned by
performance and are deemed by the Administrative Agent in its reasonable
discretion to be eligible for inclusion in the calculation of the Borrowing
Base. Without limiting the foregoing, unless otherwise approved in writing by
the Administrative Agent, none of the following shall be deemed to be Eligible
Credit Card Receivables:

 

  (a) Accounts that have been outstanding for more than five (5) Business Days
from the date of sale;

 

  (b) Accounts with respect to which a Borrower does not have good, valid and
marketable title thereto, free and clear of any Lien (other than Liens granted
to the Collateral Agent, for its benefit and the ratable benefit of the Secured
Parties, pursuant to the Security Documents);

 

  (c) Accounts that are not subject to a first priority security interest in
favor of the Collateral Agent, for the benefit of itself and the Secured Parties
(it being the intent that chargebacks in the ordinary course by the credit card
processors shall not be deemed violative of this clause);

 

  (d) Accounts which are disputed, are with recourse (other than standard
chargeback rights), or with respect to which a claim, counterclaim, offset or
chargeback has been asserted (to the extent of such claim, counterclaim, offset
or chargeback);

 

7

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  (e) Accounts which the Administrative Agent determines in its reasonable
discretion to be uncertain of collection.

 

“Eligible In-Transit Inventory” shall mean, as of the date of determination
thereof, without duplication of other Eligible Inventory, Inventory (a) which
has been shipped from a foreign location for receipt by a Borrower within sixty
(60) days of the date of determination, but which has not yet been delivered to
a Borrower, (b) for which payment has been made by a Borrower and title has
passed to a Borrower, (c) for which the document of title reflects a Borrower as
consignee (along with delivery to such Borrower of the documents of title with
respect thereto), (d) as to which the Collateral Agent has control over the
documents of title which evidence ownership of the subject Inventory (such as,
if requested by the Collateral Agent, by the delivery of a customs broker agency
agreement, satisfactory to the Collateral Agent), and (e) which otherwise would
constitute Eligible Inventory.

 

“Eligible Inventory” shall mean, as of the date of determination thereof, (a)
Eligible In- Transit Inventory, (b) Eligible L/C Inventory, and (c) items of
Inventory of the Borrowers that are finished goods, merchantable and readily
saleable to the public in the ordinary course deemed by the Administrative Agent
in its reasonable discretion to be eligible for inclusion in the calculation of
the Borrowing Base. Without limiting the foregoing, unless otherwise approved in
writing by the Administrative Agent, none of the following shall be deemed to be
Eligible Inventory:

 

(a) Inventory that is not owned solely by a Borrower, or is leased or on
consignment or a Borrower does not have good and valid title thereto;

 

(b) Inventory (other than Eligible In-Transit Inventory and Eligible L/C
Inventory) that is not located at a distribution center used by a Borrower in
the ordinary course or at a property that is owned or leased by a Borrower;

 

(c) Inventory that represents (i) goods damaged, defective or otherwise
unmerchantable, (ii) goods that do not conform in all material respects to the
representations and warranties contained in this Agreement or any of the
Security Documents, or (iii) goods to be returned to the vendor;

 

(d) Inventory that is not located in the United States of America (excluding
territories and possessions thereof) other than Eligible In-Transit Inventory
and Eligible L/C Inventory;

 

(e) Inventory that is not subject to a perfected first-priority security
interest in favor of the Collateral Agent for the benefit of the Secured
Parties;

 

(f) Inventory which consists of supplies, samples, labels, bags, packaging, and
other similar non-merchandise categories;

 

8

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(g) Inventory as to which insurance in compliance with the provisions of Section
5.07 hereof is not in effect; or

 

(h) Inventory which has been sold but not yet delivered or as to which the
Borrower has accepted a deposit.

 

“Eligible L/C Inventory” shall mean, as of the date of determination thereof,
without duplication of other Eligible Inventory, Inventory (a) not yet delivered
to a Borrower, (b) the purchase of which is supported by a Commercial Letter of
Credit having an expiry within sixty (60) days of such date of determination,
(c) for which the document of title reflects a Borrower as consignee (along with
delivery to such Borrower of the documents of title with respect thereto), (d)
as to which the Collateral Agent has control over the documents of title which
evidence ownership of the subject Inventory (such as, if requested by the
Collateral Agent, by the delivery of a customs broker agency agreement,
satisfactory to the Collateral Agent), and (e) which otherwise would constitute
Eligible Inventory.

 

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by or with any Governmental Authority, relating in
any way to the environment, preservation or reclamation of natural resources,
handling, treatment, storage, disposal, Release or threatened Release of any
Hazardous Material or to health and safety matters.

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties or
indemnities), of any Person directly or indirectly resulting from or based upon
(a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the Release or threatened Release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

 

“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)
that, together with the Lead Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under Section
414 of the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Lead Borrower or any of its ERISA Affiliates of
any liability under Title IV of

 

9

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ERISA with respect to the termination of any Plan; (e) the receipt by the Lead
Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the Lead Borrower or any
of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the Lead Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Lead Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

 

“Event of Default” has the meaning assigned to such term in Section 7.01. An
“Event of Default” shall be deemed to have occurred and to be continuing unless
and until that Event of Default has been duly waived by the Administrative Agent
in writing or cured to the reasonable satisfaction of the Administrative Agent.

 

“Excess Availability” means, as of any date of determination, the excess, if
any, of (a) the Borrowing Base, minus (b) the outstanding Credit Extensions.

 

“Excluded Taxes” means, with respect to the Agents, any Lender, the Issuing Bank
or any other recipient of any payment to be made by or on account of any
obligation of the Borrowers hereunder, (a) income or franchise Taxes imposed on
(or measured by) its gross or net income by the United States of America, or by
the jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits Taxes imposed by
the United States of America or any similar Tax imposed by any other
jurisdiction in which a Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by a Borrower under Section
2.28(b)), any withholding Tax that (i) is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from a
Borrower with respect to such withholding Tax pursuant to Section 2.26(a), or
(ii) is attributable to such Foreign Lender’s failure to comply with Sections
2.26(e) or (f).

 

“FRG” means Fleet Retail Group, Inc., a Delaware corporation.

 

“FRG Concentration Account” shall have the meaning set forth in Section 2.22(c).

 

“Facility Guarantee” means the Guarantee executed by the Facility Guarantors in
favor of the Agents, the Issuing Bank and the Lenders.

 

“Facility Guarantors” means each of the Subsidiaries of the Lead Borrower, now
existing or hereafter created, other than Foreign Subsidiaries and the
Borrowers.

 

“Facility Guarantors Collateral Documents” means all security agreements,
mortgages, pledge agreements, deeds of trust, and other instruments, documents
or agreements executed and delivered by any Facility Guarantor to secure the
Facility Guarantee.

 

10

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“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

“Fee Letter” means the letter entitled “Fee Letter” between the Borrowers and
the Administrative Agent dated May 26, 2004, as such letter may from time to
time be amended.

 

“Financial Officer” means, with respect to the Borrowers, the chief financial
officer, treasurer, controller or assistant controller of the Lead Borrower.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on the Saturday nearest to the last day of each January,
April, July or October of such Fiscal Year in accordance with the fiscal
accounting calendar of the Borrowers.

 

“Fiscal Year” means any period of twelve consecutive months ending on the
Saturday nearest to the last day of January of any calendar year.

 

“Fleet” means Fleet National Bank, a national banking association.

 

“Fleet Disbursement Accounts” has the meaning provided therefor in Section
2.22(f).

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the
District of Columbia.

 

“Foreign Subsidiary” means any Subsidiary (a) that is organized under the laws
of a jurisdiction other than the United States of America or any State thereof
or the District of Columbia, (b) that conducts the major portion of its business
outside of the United States, and (c) all or substantially all of the property
and assets of which are located outside of the United States.

 

“Fronting Fee” has the meaning assigned to such term in Section 2.13(b).

 

“GAAP” means principles which are (a) consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in respect of
which reference to GAAP is being made, and (b) consistently applied with past
financial statements of the Lead Borrower and its Subsidiaries adopting the same
principles.

 

“Gift Certificate and Merchandise Credit Liability” means, at any time, the
aggregate face 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 to pay all or a portion of the purchase price for any Inventory,
and (b) outstanding merchandise credits of the Borrowers.

 

11

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“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation, provided that the term “Guarantee” shall not include endorsements
for collection or deposit in the ordinary course of business.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes, mold, fungi
or similar bacteria, and all other substances or wastes of any nature regulated
pursuant to any Environmental Law, including any material listed as a hazardous
substance under Section 101(14) of CERCLA.

 

“Hedging Agreement” means any interest rate protection agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
foreign currency exchange agreement, commodity price protection agreement, or
other interest or currency exchange rate or commodity price hedging arrangement
designed to hedge against fluctuations in interest rates or foreign exchange
rates.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money (including any obligations which are without
recourse to the credit of such Person) or with respect to deposits or advances
of any kind, (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (c) all obligations of such Person upon which
interest charges are customarily paid (excluding current accounts payable
incurred in the ordinary course of business), (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h)
all Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of

 

12

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credit and letters of guaranty (j) all obligations, contingent or otherwise, of
such Person in respect of bankers’ acceptances, (k) all Hedging Agreements
(provided that for purposes hereof the amount of Indebtedness in respect of any
Hedging Agreement at any time shall equal the maximum aggregate net amount that
a Borrower would be required to pay if such Hedging Agreement were terminated at
that time), and (l) the principal and interest portions of all rental
obligations of such Person under any Synthetic Lease, Tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing where such
transaction is considered borrowed money indebtedness for Tax purposes but is
classified as an operating lease in accordance with GAAP. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitee” has the meaning provided therefor in Section 9.03(b).

 

“Interest Payment Date” means (a) with respect to any Prime Rate Loan (including
a Swingline Loan), the first day of each calendar month, and (b) with respect to
any LIBO Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part, and, in addition, if such LIBO Loan has an
Interest Period of greater than three (3) months, the last day of the third
month of such Interest Period.

 

“Interest Period” means, with respect to any LIBO Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Lead Borrower may elect by notice to the Administrative Agent
in accordance with the provisions of this Agreement, provided that (a) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day, and (b) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month during which such Interest Period ends) shall end on the last
Business Day of the last calendar month of such Interest Period, (c) any
Interest Period which would otherwise end after the Termination Date shall end
on the Termination Date, and (d) notwithstanding the provisions of clause (c),
no Interest Period shall, unless approved by the Administrative Agent and all of
the Lenders, have a duration of less than one month, and if any Interest Period
applicable to a LIBO 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.

 

“Inventory” has the meaning assigned to such term in the Security Agreement.

 

13

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“Inventory Advance Rate”: The following percentage during the period indicated:

 

  (a) Wet Seal division

 

Calendar Period

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

   Applicable
Percentage

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

 

December 16 through March 31

   58 %

April 1 through September 30

   69 %

October 1 through December 15

   75 %

 

  (a) Arden B. division

 

Calendar Period

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

   Applicable
Percentage

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

 

December 16 through June 30

   81 %

July 1 through September 30

   91 %

October 1 through December 15

   95 %

 

“Inventory Reserves” means such reserves as may be established from time to time
by the Administrative Agent in the Administrative Agent’s reasonable discretion
with respect to the determination of the saleability, at retail, of the Eligible
Inventory or which reflect such other factors as affect the market value of the
Eligible Inventory. Without limiting the generality of the foregoing, Inventory
Reserves may include (but are not limited to) reserves based on obsolescence or
Shrink, or reasonably required by the Administrative Agent to protect Collateral
value based upon changes to the ordinary course business of the Borrowers..

 

“Investment” means (a) any stock, evidence of Indebtedness or other security,
including any option, warrant or other right to acquire any of the foregoing, of
another Person, (b) any loan, advance, contribution to capital, extension of
credit (except for current trade and customer accounts receivable for inventory
sold or services rendered in the ordinary course of business and payable in
accordance with customary trade terms) to another Person, (c) any purchase of
(i) stock or other securities of another Person, or (ii) any business or
undertaking of any Person (whether by purchase of assets or securities in one
transaction or a series of transactions), (d) any commitment or option to make
any such purchase, or (e) any other investment, in all cases whether now
existing or hereafter made.

 

“Issuing Bank” means Fleet, in its capacity as the issuer of Letters of Credit
hereunder, and any successor to Fleet in such capacity (which may only be a
Lender selected by the

 

14

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Administrative Agent in its discretion, including, without limitation, Bank of
America). The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.

 

“L/C Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

 

“Lead Borrower” means The Wet Seal, Inc.

 

“Lease” means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which any Borrower is entitled to the use or occupancy
of any space in a structure, land, improvements or premises for any period of
time.

 

“Lenders” shall mean the Persons identified on Schedule 1.1 hereto and each
assignee that becomes a party to this Agreement as set forth in Section 9.04(b).

 

“Letter of Credit” shall mean a letter of credit that is (i) issued pursuant to
this Agreement for the account of a Borrower, (ii) a Standby Letter of Credit or
Commercial Letter of Credit, (iii) issued in connection with the purchase of
Inventory by a Borrower and for other purposes for which a Borrower has
historically obtained letters of credit, or for any other purpose that is
reasonably acceptable to the Administrative Agent, and (iv) in form and
substance reasonably satisfactory to the Issuing Bank.

 

“Letter of Credit Fees” shall mean the fees payable in respect of Letters of
Credit pursuant to Section 2.13.

 

“Letter of Credit Outstandings” shall mean, at any time, the sum of (a) with
respect to Letters of Credit outstanding at such time, the aggregate maximum
amount that then is or at any time thereafter may become available for drawing
or payment thereunder plus (b) all amounts theretofore drawn or paid under
Letters of Credit for which the Issuing Bank has not then been reimbursed.

 

“LIBO Borrowing” shall mean a Borrowing comprised of LIBO Loans.

 

“LIBO Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Adjusted LIBO Rate in accordance with the provisions of Article
II.

 

“LIBO Rate” means, with respect to any LIBO Borrowing for any Interest Period,
the rate of interest (rounded upwards, if necessary, to the next 1/16 of 1%) per
annum at which deposits in dollars are offered by banks in the London interbank
market, appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two (2)
Business Days before the first day of the Interest Period for the subject LIBO
Borrowing, for a deposit approximately in the amount of the subject Borrowing
and for a period of time approximately equal to such Interest Period; provided,
however, if the rate described above does not appear on the Reuters System on
any applicable interest determination date, the LIBO Rate shall be the rate
(rounded upward, if necessary, to the nearest 1/16 of one percent (1%)),
determined on the basis of the offered rates for deposits in dollars for a
period of time comparable to such Interest Period which are offered

 

15

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to the Administrative Agent by two (2) major banks in the London interbank
market as selected by Administrative Agent at approximately 11:00 a.m. London
time, on the day that is two (2) Business Days preceding the first day of such
Interest Period. In the event that the Administrative Agent is unable to obtain
any such quotation as provided above, it will be deemed that a LIBO Rate
pursuant to a LIBO Borrowing cannot be obtained.

 

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Loan Ceiling” means $50,000,000, as such amount may be modified in accordance
with the terms of this Agreement.

 

“Loan Documents” means this Agreement, the Notes, the Letters of Credit, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA
Notifications, the Credit Card Agreements, the Security Documents, the Facility
Guarantee, the Facility Guarantors Collateral Documents, 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 Party” or “Loan Parties” means the Borrowers and the Facility Guarantors.

 

“Loans” shall mean all loans at any time made to the Borrowers or for account of
the Borrowers pursuant to this Agreement.

 

“Margin Stock” has the meaning assigned to such term in Regulation U.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property, assets, or condition, financial or otherwise, of the Lead
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Loan
Parties to perform any material obligation or to pay any Obligations under this
Agreement or any of the other Loan Documents, or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents or any of
the material rights or remedies of the Administrative Agent, the Collateral
Agent or the Lenders hereunder or thereunder. 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 Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit) of any one or more of the Borrowers in an aggregate principal amount
exceeding $20,000,000. For purposes of determining the amount of Material
Indebtedness at any time, the “principal amount” of the obligations in respect
of any Hedging Agreement at such time shall be the maximum aggregate amount that
a Borrower would be required to pay if such Hedging Agreement were terminated at
that time.

 

16

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“Maturity Date” means May 26, 2007.

 

“Maximum Rate” has the meaning provided therefor in Section 9.12.

 

“Minority Lenders” has the meaning provided therefor in Section 9.02(d).

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA to which the Lead Borrower or any ERISA Affiliate is making or accruing
an obligation to make contributions, or has within the preceding five plan years
made or accrued an obligation to make contributions.

 

“Multiple Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of the Lead Borrower
or any of its Subsidiaries or any ERISA Affiliate and at least one Person other
than the Lead Borrower, any Subsidiary or the ERISA Affiliate or (b) was so
maintained and in respect of which the Lead Borrower, any Subsidiary or any
ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.

 

“Notes” shall mean (i) the promissory notes of the Borrowers substantially in
the form of Exhibit B-1, each payable to the order of a Lender, evidencing the
Revolving Loans, and (ii) the promissory note of the Borrowers substantially in
the form of Exhibit B-2, payable to the Swingline Lender, evidencing the
Swingline Loans.

 

“Obligations” means (a) the due and punctual payment by the Loan Parties of (i)
the principal of, and interest (including all interest that accrues after the
commencement of any case or proceeding by or against any Loan Party under any
federal or state bankruptcy, insolvency, receivership or similar law, whether or
not allowed in such case or proceeding) on the Loans, as and when due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Loan Parties under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise, of the Loan Parties to the Secured
Parties under the Credit Agreement and the other Loan Documents, and (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Loan Parties under or pursuant to the Credit Agreement and
the other Loan Documents, (c) any Hedging Agreements which are permitted
pursuant to Section 6.01(a)(vi) hereof, and (d) any transaction with FRG or
Fleet, or any of their respective Affiliates, which arises out of any cash
management, depository, investment, letter of credit, or other banking or
financial services provided by any such Person.

 

“Organizational Document” means, relative to any Loan Party, its partnership
agreement, its certificate of incorporation, its by-laws and all shareholder or
equity holder agreements, voting trusts and similar arrangements to which such
Loan Party is a party or which is applicable to its capital stock, its
partnership agreement and all other arrangements relating to the control or
management of such entity.

 

17

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“Other Taxes” means any and all current or future stamp or documentary Taxes or
any other excise or property Taxes, charges or similar levies arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

 

“Overadvance” means, at any time of calculation, a circumstance in which the
Credit Extensions exceed the lesser of (a) the Commitments or (b) the Borrowing
Base.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

 

“Permitted Encumbrances” means:

 

(a) Liens imposed by law for Taxes that are not yet due or are being contested
in compliance with Section 5.05;

 

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.05;

 

(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

 

(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

 

(e) judgment liens in respect of judgments that do not constitute an Event of
Default under Section 7.01(k); and

 

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of a Borrower or any Subsidiary;

 

provided that, except as provided in any one or more of clauses (a) through (g)
above, the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.

 

“Permitted Investments” means each of the following:

 

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), and municipal securities with an “AA”
long-term credit rating obtainable from S&P and/or from Moody’s, including
pre-funded municipal bonds escrowed to maturity and guaranteed by the securities
issued by the United States of America (or by any agency thereof);

 

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(b) Investments in commercial paper (taxable and tax-exempt);

 

(c) Investments in (i) securities issued by a corporation (other than a Loan
Party or an Affiliate of a Loan Party) and denominated in U.S. Dollars maturing
within three (3) years from the date of acquisition thereof and having, at such
date of acquisition, the long-term credit rating of “A/A” or the short-term
credit rating of “A1/P1 SP1/MIG-1” or better obtainable from S&P and/or from
Moody’s, (ii) securities issued by a Lender or another banking institution with
total assets in excess of $2,000,000,000 maturing within three (3) years from
the date of acquisition thereof; and (iii) auction rate preferred stock or bonds
having, at such date of acquisition, the long-term credit rating of “AA” with a
reset and maturing within 180 days from the date of acquisition thereof;

 

(d) Investments in certificates of deposit, banker’s acceptances and time
deposits (including Eurodollar denominated and Yankee issues) maturing within
three (3) years from the date of acquisition thereof issued or guaranteed by or
placed with, and demand deposit and money market deposit accounts issued or
offered by, any Lender or another banking institution with total assets in
excess of $2,000,000,000;

 

(e) fully collateralized repurchase agreements for securities described in
clause (a) above (without regard to the limitation on maturity contained in such
clause) and entered into 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;

 

(f) short-term Tax exempt securities (including municipal notes, auction rate
floaters and floating rate notes); and

 

(g) Shares of investment companies that are registered under the Investment
Company Act of 1940, as amended, and invest solely in one or more of the types
of securities described in clauses (a) through (f) above.

 

provided that, notwithstanding the foregoing, no such Investments shall be
permitted (i) after the occurrence of a Cash Dominion Event, unless no Loans are
then outstanding, and (ii) unless such Investments are pledged to the Collateral
Agent as additional collateral for the Obligations pursuant to such agreements
as may be reasonably required by the Collateral Agent.

 

“Permitted Overadvance” means an Overadvance determined by the Administrative
Agent, in its reasonable discretion, (a) which is made to maintain, protect or
preserve the Collateral and/or the Lenders’ rights under the Loan Documents, or
(b) which is otherwise in the Lenders’ interests; provided that Permitted
Overadvances shall not (i) exceed ten percent (10%) of the then Borrowing Base
in the aggregate outstanding at any time or (ii) remain outstanding for more
than forty-five (45) consecutive Business Days, unless in case of clause (ii),
the Required Supermajority Lenders otherwise agree; and provided further that
the foregoing shall not (1) modify or abrogate any of the provisions of Section
2.06(f) hereof regarding the Lender’s obligations with respect to L/C
Disbursements, or (2) result in any claim or liability against the

 

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Administrative Agent (regardless of the amount of any Overadvance) for
“inadvertent Overadvances” (i.e. where an Overadvance results from changed
circumstances beyond the control of the Administrative Agent (such as a
reduction in the collateral value)), and further provided that in no event shall
the Administrative Agent make an Overadvance, if after giving effect thereto,
the principal amount of the Credit Extensions (including any Overadvance or
proposed Overadvance) would exceed the Total Commitments.

 

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

 

“Plan” means a Single Employer Plan or a Multiple Employer Plan.

 

“Pledge Agreement” means the Pledge Agreement dated as of May 26, 2004 among the
Loan Parties and the Collateral Agent for the benefit of the Secured Parties, as
amended and in effect from time to time.

 

“Prime Rate” shall mean, for any day, the higher of (a) the variable annual rate
of interest then most recently announced by Fleet at its head office in Boston,
Massachusetts as its “Prime Rate” and (b) the Federal Funds Effective Rate in
effect on such day plus ½ of 1% (0.50%) per annum. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate being charged to
any customer. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient
quotations thereof in accordance with the terms hereof, the Prime Rate shall be
determined without regard to clause (b) of the first sentence of this
definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Prime Rate due to a change in Fleet’s Prime Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in Fleet’s Prime Rate or the Federal Funds Effective Rate, respectively.

 

“Prime Rate Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Prime Rate in accordance with the provisions of Article II.

 

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

 

“Register” has the meaning set forth in Section 9.04(c).

 

“Regulation U” means Regulation U of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” means Regulation X of the Board as from time to time in effect
and all official rulings and interpretations thereunder or thereof.

 

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“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

“Release” has the meaning set forth in Section 101(22) of CERCLA.

 

“Required Lenders” shall mean, subject to the provisions of Section 8.14, at any
time, Lenders having Commitments greater than 50% of the Total Commitments, or
if the Commitments have been terminated, Lenders whose percentage of the
outstanding Obligations (after settlement and repayment of all Swingline Loans
by the Lenders) aggregate greater than 50% of all such Obligations.

 

“Required Supermajority Lenders” shall mean, subject to the provisions of
Section 8.14, at any time, Lenders having Commitments outstanding representing
at least 66 2/3% of the Total Commitments outstanding or if the Commitments have
been terminated, Lenders whose percentage of the outstanding Obligations (after
settlement and repayment of all Swingline Loans by the Lenders) aggregate not
less than 66 2/3% of all such Obligations.

 

“Reserves” means all (if any) Inventory Reserves and Availability Reserves.

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of capital
stock of any Loan Party or any Subsidiary of any Loan Party, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital stock of
any Loan Party or any such Subsidiary or any option, warrant or other right to
acquire any such shares of capital stock of any Loan Party or any such
Subsidiary. Without limiting the foregoing, “Restricted Payments” with respect
to any Person shall also include all payments made by such Person with respect
to any stock appreciation rights, plans, equity incentive or achievement plans
or any similar plans and all proceeds of a dissolution or liquidation of such
Person payable to the shareholders of such Person.

 

“Revolving Loans” means all Loans at any time made by a Lender pursuant to
Section 2.01.

 

“S&P” means Standard & Poor’s.

 

“SEC” means the Securities and Exchange Commission.

 

“Secured Parties” has the meaning assigned to such term in the Security
Agreement.

 

“Security Agreement” means the Security Agreement dated as of May 26, 2004 among
the Loan Parties and the Collateral Agent for the benefit of the Secured
Parties, as amended and in effect from time to time.

 

“Security Documents” means the Security Agreement, the Pledge Agreement, the
Facility Guarantors Collateral Documents, and each other security agreement or
other instrument or document executed and delivered pursuant to Sections 5.13 or
5.14 to secure any of the Obligations.

 

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“Settlement Date” has the meaning provided in Section 2.07(b) hereof.

 

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

 

“Single Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of the Lead Borrower
or any of its Subsidiaries or any ERISA Affiliate and no Person other than the
Lead Borrower, its Subsidiaries or the ERISA Affiliate or (b) was so maintained
and in respect of which the Lead Borrower, any Subsidiary or any ERISA Affiliate
could have liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.

 

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

 

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

 

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“Subordinated Indebtedness” means Indebtedness which is expressly subordinated
in right of payment, in form and on terms approved by the Administrative Agent
in writing, to the prior payment in full of the Obligations.

 

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s Consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held.

 

“Swingline Lender” means FRG, in its capacity as lender of Swingline Loans
hereunder.

 

“Swingline Loan” shall mean a Loan made by the Swingline Lender to the Borrowers
pursuant to Section 2.05 hereof.

 

“Synthetic Lease” means any lease or other agreement for the use or possession
of property creating obligations which do not appear as indebtedness on the
balance sheet of the lessee thereunder but which, upon the insolvency or
bankruptcy of such Person, may be characterized as Indebtedness of such lessee
without regard to the accounting treatment.

 

“Taxes” means any and all current or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Termination Date” shall mean the earliest to occur of (i) the Maturity Date, or
(ii) the date on which the maturity of the Loans are accelerated and the
Commitments are terminated in accordance with Section 7.01, or (iii) the date of
the occurrence of any Event of Default pursuant to Section 7.01(h) or 7.01(i)
hereof.

 

“Total Commitment” shall mean, at any time, the sum of the Commitments at such
time. As of the Closing Date, the Total Commitments aggregate $50,000,000.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Prime Rate.

 

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the Commonwealth of Massachusetts.

 

“Unused Commitment” shall mean, on any day, (a) the then Total Commitments minus
(b) the sum of (i) the principal amount of Loans then outstanding (including the
principal amount of Swingline Loans then outstanding) and (ii) the then Letter
of Credit Outstandings.

 

“Voting Stock” means, with respect to any corporation, the outstanding stock of
all classes (or equivalent interests) which ordinarily, in the absence of
contingencies, entitles holders thereof to vote for the election of directors
(or Persons performing similar functions) of such corporation, even though the
right so to vote has been suspended by the happening of such contingency.

 

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“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

SECTION 1.03. Accounting Terms; GAAP Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect on the Closing Date, provided that, if the
Lead Borrower notifies the Administrative Agent that the Borrowers request an
amendment to any provision hereof to reflect the effect of any change occurring
after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Lead Borrower that
the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such provision shall have been
amended in accordance herewith.

 

ARTICLE II

 

Amount and Terms of Credit

 

SECTION 2.01. Commitment of the Lenders.

 

(a) Each Lender severally and not jointly with any other Lender, agrees, upon
the terms and subject to the conditions herein set forth, to extend credit to
the Borrowers on a revolving basis, in the form of Revolving Loans and Letters
of Credit and in an amount not to exceed the lesser of such Lender’s Commitment
or such Lender’s Commitment Percentage of the Borrowing Base, subject to the
following limitations:

 

(a) The aggregate outstanding amount of the Credit Extensions shall not at any
time exceed the lower of (i) $50,000,000, or any other amount to which the
Commitments have then been reduced by the Borrower pursuant to Section 2.16, and
(ii) the then amount of the Borrowing Base.

 

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(b) No Lender shall be obligated to issue any Letter of Credit, and Letters of
Credit shall be available from the Issuing Bank, subject to the ratable
participation of all Lenders, as set forth in Section 2.06. The Borrowers will
not at any time permit the aggregate Letter of Credit Outstandings to exceed
$50,000,000.

 

(c) Subject to all of the other provisions of this Agreement, Revolving Loans
that are repaid may be reborrowed prior to the Termination Date. No new Credit
Extension, however, shall be made to the Borrowers after the Termination Date.

 

(b) Each Borrowing of Revolving Loans (other than Swingline Loans) shall be made
by the Lenders pro rata in accordance with their respective Commitment
Percentages. The failure of any Lender to make any Loan shall neither relieve
any other Lender of its obligation to fund its Loan in accordance with the
provisions of this Agreement nor increase the obligation of any such other
Lender.

 

SECTION 2.02. Reserves; Changes to Reserves.

 

(a) The initial Inventory Reserves and Availability Reserves as of the date of
this Agreement are the following:

 

(a) Shrink (an Inventory Reserve).

 

(b) Rent (an Availability reserve): Two months’ rent (but only if a landlord’s
waiver, acceptable to the Lender, has not been received by the Lender) as to any
of any Borrower’s locations in Pennsylvania, Virginia or Washington

 

(c) Gift Certificates and Merchant Credit Liabilities (an Availability reserve):
50% of the amount thereof reflected on the Borrowers’ books and records.

 

(b) The Administrative Agent may hereafter establish additional Reserves or
change any of the foregoing Reserves, in the exercise of the reasonable judgment
of the Administrative Agent.

 

SECTION 2.03. Making of Loans.

 

(a) Except as set forth in Sections 2.17 and 2.25, Loans (other than Swingline
Loans) by the Lenders shall be either Prime Rate Loans or LIBO Loans as the Lead
Borrower may request subject to and in accordance with this Section 2.03,
provided that all Swingline Loans shall be only Prime Rate Loans. All Loans made
pursuant to the same Borrowing shall, unless otherwise specifically provided
herein, be Loans of the same Type. Each Lender may

 

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fulfill its Commitment with respect to any Loan by causing any lending office of
such Lender to make such Loan; but any such use of a lending office shall not
affect the obligation of the Borrowers to repay such Loan in accordance with the
terms of the applicable Note. Each Lender shall, subject to its overall policy
considerations, use reasonable efforts (but shall not be obligated) to select a
lending office which will not result in the payment of increased costs by the
Borrowers pursuant to Section 2.25. Subject to the other provisions of this
Section 2.03 and the provisions of Section 2.25, Borrowings of Loans of more
than one Type may be incurred at the same time, but no more than four (4)
Borrowings of LIBO Loans may be outstanding at any time.

 

(b) The Lead Borrower shall give the Administrative Agent three Business Days’
prior telephonic notice (thereafter confirmed in writing) of each Borrowing of
LIBO Loans and one Business Days’ notice of each Borrowing of Prime Rate Loans.
Any such notice, to be effective, must be received by the Administrative Agent
not later than 12:00 p.m., Boston time, on the third Business Day in the case of
LIBO Loans prior to the date on which, and 1:00 p.m. Boston time one Business
Day prior to the date of Borrowing in the case of Prime Rate Loans that, such
Borrowing is to be made. Notwithstanding the foregoing, in the case of Prime
Rate Loans, provided that there is only one Lender under this Agreement, the
Lead Borrower shall give the Administrative Agent notice each Borrowing of Prime
Rate Loan prior to 1:00 p.m. Boston time on the Business Day of the requested
Borrowing. Such notice shall be irrevocable and shall specify the amount of the
proposed Borrowing (which shall be not less than $1,000,000 in the case of LIBO
Loans, and in an integral multiple of $500,000, and not less than $100,000 in
the case of Prime Rate Loans) and the date thereof (which shall be a Business
Day) and shall contain disbursement instructions. Such notice shall specify
whether the Borrowing then being requested is to be a Borrowing of Prime Rate
Loans or LIBO Loans and, if LIBO Loans, the Interest Period with respect
thereto. If no election of Interest Period is specified in any such notice for a
Borrowing of LIBO Loans, such notice shall be deemed a request for an Interest
Period of one month. If no election is made as to the Type of Loan, such notice
shall be deemed a request for Borrowing of Prime Rate Loans. The Administrative
Agent shall promptly notify each Lender of its proportionate share of such
Borrowing, the date of such Borrowing, the Type of Borrowing being requested and
the Interest Period or Interest Periods applicable thereto, as appropriate. On
the borrowing date specified in such notice, each Lender shall make its share of
the Borrowing available at the office of Fleet at 100 Federal Street, Boston,
Massachusetts 02110, no later than 1:00 p.m., Boston time, in immediately
available funds. Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with this Section and may, in
reliance upon such assumption, make available to the Borrowers a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrowers
to but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to Prime Rate Loans. If such Lender pays such amount to the
Administrative

 

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Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing. Upon receipt of the funds made available by the Lenders to fund any
Borrowing hereunder, the Administrative Agent shall disburse such funds into a
Fleet Disbursement Account or otherwise in the manner specified in the notice of
borrowing delivered by the Lead Borrower and shall use reasonable efforts to
make the funds so received from the Lenders available to the Borrowers no later
than 4:00 p.m., Boston time.

 

(c) The Administrative Agent, without the request of any Borrower, may advance
any interest, fee, service charge, or other payment to which any Agent or their
Affiliates or any Lender is entitled from the Borrowers pursuant hereto or any
other Loan Document and may charge the same to the Loan Account notwithstanding
that an Overadvance may result thereby. The Administrative Agent shall advise
the Lead Borrower of any such advance or charge promptly after the making
thereof. Such action on the part of the Administrative Agent shall not
constitute a waiver of the Administrative Agent’s rights and the Borrowers’
obligations under Section 2.18(a). Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.03(c) shall bear
interest at the interest rate then and thereafter applicable to Prime Rate
Loans.

 

SECTION 2.04. Overadvances. The Agents and the Lenders have no obligation to
make any Loan or to provide any Letter of Credit if an Overadvance would result.
The Administrative Agent may, in its discretion, make Permitted Overadvances
without the Consent of the Lenders and each Lender shall be bound thereby. Any
Permitted Overadvances may constitute Swingline Loans. The making of any
Permitted Overadvance is for the benefit of the Borrowers; such Permitted
Overadvances constitute Revolving Loans and Obligations. The making of any such
Permitted Overadvances on any one occasion shall not obligate the Administrative
Agent or any Lender to make or permit any Permitted Overadvances on any other
occasion or to permit such Permitted Overadvances to remain outstanding.

 

SECTION 2.05. Swingline Loans

 

(a) The Swingline Lender is authorized by the Lenders, but is not obligated, to
make Swingline Loans up to (i) $5,000,000 plus (ii) the maximum Permitted
Overadvance, in the aggregate outstanding at any time, consisting only of Prime
Rate Loans, upon a notice of Borrowing received by the Administrative Agent and
the Swingline Lender (which notice may be submitted prior to 1:00 p.m., Boston
time, on the Business Day on which such Swingline Loan is requested). Swingline
Loans shall be subject to periodic settlement with the Lenders under Section
2.07 below.

 

(b) Swingline Loans shall only be made in the event that there is more than one
Lender under this Agreement, and may be made only in the following
circumstances: (A) for administrative convenience, the Swingline Lender may, but
is not obligated to, make Swingline Loans in reliance upon the Borrowers’ actual
or deemed representations under Section 4.02, that the applicable conditions for
borrowing are satisfied or (B) for Permitted Overadvances. If the conditions for
borrowing under Section 4.02 cannot be fulfilled, the Required Lenders may
direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease
making Swingline Loans (other than Permitted Overadvances) until such conditions
can be satisfied or are waived in accordance with Section 9.02 hereof. Unless
the Required Lenders so direct the Swingline

 

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Lender, the Swingline Lender may, but is not obligated to, continue to make
Swingline Loans notwithstanding that the conditions for borrowing under Section
4.02 cannot be fulfilled. No Swingline Loans shall be made pursuant to this
subsection (b) if the aggregate outstanding amount of the Credit Extensions and
Swingline Loans would exceed the lower of (i) $50,000,000 or any other amount to
which the Commitments have then been reduced by the Borrowers pursuant to
Sections 2.16, and (ii) (other than with respect to Permitted Overadvances) the
then amount of the Borrowing Base.

 

SECTION 2.06. Letters of Credit.

 

(a) Upon the terms and subject to the conditions herein set forth, the Lead
Borrower may request the Issuing Bank, at any time and from time to time after
the date hereof and prior to the Termination Date, to issue, and subject to the
terms and conditions contained herein, the Issuing Bank shall issue, for the
account of the Borrowers one or more Letters of Credit; provided that no Letter
of Credit shall be issued if after giving effect to such issuance (i) the
aggregate Letter of Credit Outstandings shall exceed $50,000,000, or (ii) the
aggregate Credit Extensions would exceed the limitation set forth in Section
2.01(a)(i); and provided, further, that no Letter of Credit shall be issued if
the Issuing Bank shall have received notice from the Administrative Agent or the
Required Lenders that the conditions to such issuance have not been met.

 

(b) Each Standby Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance
of such Letter of Credit (or, in the case of any renewal or extension thereof,
one year after such renewal or extension) and (ii) the date that is five
Business Days prior to the Maturity Date, provided that each Standby Letter of
Credit may, upon the request of the Lead Borrower, include a provision whereby
such Letter of Credit shall be renewed automatically for additional consecutive
periods of 12 months or less (but not beyond the date that is five Business Days
prior to the Maturity Date) unless the Issuing Bank notifies the beneficiary
thereof at least 30 days prior to the then-applicable expiration date that such
Letter of Credit will not be renewed.

 

(c) Each Commercial Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date 120 days after the date of the issuance
of such Commercial Letter of Credit and (ii) the date that is five Business Days
prior to the Maturity Date.

 

(d) Drafts drawn under each Letter of Credit shall be reimbursed by the
Borrowers in dollars on the same Business Day of any such drawing by paying to
the Administrative Agent an amount equal to such drawing not later than 12:00
noon, Boston time, on (i) the date that the Lead Borrower shall have received
notice of such drawing, if such notice is received prior to 10:00 a.m., Boston
time, on such date, or (ii) the Business Day immediately following the day that
the Lead Borrower receives such notice, if such notice is received after 10:00
a.m., Boston time on the day of drawing, provided that the Lead Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 that such payment be financed with a Revolving Loan consisting
of a Prime Rate Loan or Swingline Loan in an equivalent amount and, to the
extent so financed, the Borrowers’ obligation to make such payment shall be
discharged and replaced by the resulting Prime Rate Loan or Swingline Loan. The
Issuing Bank shall, promptly following its receipt thereof, examine all
documents purporting

 

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to represent a demand for payment under a Letter of Credit. The Issuing Bank
shall promptly notify the Administrative Agent and the Lead Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the
Issuing Bank has made or will make payment thereunder, provided that any failure
to give or delay in giving such notice shall not relieve the Borrowers of their
obligation to reimburse the Issuing Bank and the Lenders with respect to any
such payment.

 

(e) If the Issuing Bank shall make any L/C Disbursement, then, unless the
Borrowers shall reimburse the Issuing Bank in full on the date such payment is
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such payment is made to but excluding the date that the
Borrowers reimburse the Issuing Bank therefor, at the rate per annum then
applicable to Prime Rate Loans, provided that, if the Borrowers fail to
reimburse such Issuing Bank when due pursuant to paragraph (d) of this Section,
then Section 2.10 shall apply. Interest accrued pursuant to this paragraph shall
be for the account of the Issuing Bank, except that interest accrued on and
after the date of payment by any Lender pursuant to paragraph (g) of this
Section to reimburse the Issuing Bank shall be for the account of such Lender to
the extent of such payment.

 

(f) Immediately upon the issuance of any Letter of Credit by the Issuing Bank
(or the amendment of a Letter of Credit increasing the amount thereof), and
without any further action on the part of the Issuing Bank, the Issuing Bank
shall be deemed to have sold to each Lender, and each such Lender shall be
deemed unconditionally and irrevocably to have purchased from the Issuing Bank,
without recourse or warranty, an undivided interest and participation, to the
extent of such Lender’s Commitment Percentage, in such Letter of Credit, each
drawing thereunder and the obligations of the Borrowers under this Agreement and
the other Loan Documents with respect thereto. Upon any change in the
Commitments pursuant to Section 9.04, it is hereby agreed that with respect to
all Letter of Credit Outstandings, there shall be an automatic adjustment to the
participations hereby created to reflect the new Commitment Percentages of the
assigning and assignee Lenders. Any action taken or omitted by the Issuing Bank
under or in connection with a Letter of Credit, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not create for the
Issuing Bank any resulting liability to any Lender.

 

(g) In the event that the Issuing Bank makes any L/C Disbursement and the
Borrowers shall not have reimbursed such amount in full to the Issuing Bank
pursuant to this Section 2.06, the Issuing Bank shall promptly notify the
Administrative Agent, which shall promptly notify each Lender of such failure,
and each Lender shall promptly and unconditionally pay to the Administrative
Agent for the account of the Issuing Bank the amount of such Lender’s Commitment
Percentage of such unreimbursed payment in dollars and in same day funds. If the
Issuing Bank so notifies the Administrative Agent, and the Administrative Agent
so notifies the Lenders prior to 11:00 a.m., Boston time, on any Business Day,
each such Lender shall make available to the Issuing Bank such Lender’s
Commitment Percentage of the amount of such payment on such Business Day in same
day funds (or if such notice is received by the Lenders after 11:00 a.m., Boston
time on the day of receipt, payment shall be made on the immediately following
Business Day). If and to the extent such Lender shall not have so made its
Commitment Percentage of the amount of such payment available to the Issuing
Bank, such Lender agrees to pay to the Issuing Bank, forthwith on demand such
amount, together with

 

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interest thereon, for each day from such date until the date such amount is paid
to the Administrative Agent for the account of the Issuing Bank at the greater
of the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation. Each
Lender agrees to fund its Commitment Percentage of such unreimbursed payment
notwithstanding a failure to satisfy any applicable lending conditions or the
provisions of Sections 2.01 or 2.06, or the occurrence of the Termination Date.
The failure of any Lender to make available to the Issuing Bank its Commitment
Percentage of any payment under any Letter of Credit shall neither relieve any
Lender of its obligation hereunder to make available to the Issuing Bank its
Commitment Percentage of any payment under any Letter of Credit on the date
required, as specified above, nor increase the obligation of such other Lender.
Whenever any Lender has made payments to the Issuing Bank in respect of any
reimbursement obligation for any Letter of Credit, such Lender shall be entitled
to share ratably, based on its Commitment Percentage, in all payments and
collections thereafter received on account of such reimbursement obligation.

 

(h) Whenever the Borrowers desire that the Issuing Bank issue a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit), the
Lead Borrower shall give to the Issuing Bank and the Administrative Agent at
least two Business Days’ prior written (including telegraphic, telex, facsimile
or cable communication) notice (or such shorter period as may be agreed upon in
writing by the Issuing Bank and the Lead Borrower) specifying the date on which
the proposed Letter of Credit is to be issued, amended, renewed or extended
(which shall be a Business Day), the stated amount of the Letter of Credit so
requested, the expiration date of such Letter of Credit, the name and address of
the beneficiary thereof, and the provisions thereof. If requested by the Issuing
Bank, the Lead Borrower shall also submit a letter of credit application on the
Issuing Bank’s standard form in connection with any request for the issuance,
amendment, renewal or extension of a Letter of Credit.

 

(i) The obligations of the Borrowers to reimburse the Issuing Bank for any L/C
Disbursement shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation: (i) any lack of validity or enforceability of any
Letter of Credit; (ii) the existence of any claim, setoff, defense or other
right which the Borrowers may have at any time against a beneficiary of any
Letter of Credit or against the Issuing Bank or any of the Lenders, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction; (iii) any draft, demand, certificate or other document
presented under any 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; (iv) payment by the Issuing Bank of any Letter of
Credit against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit in any immaterial
respect; (v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrowers’ obligations hereunder; or (vi) the fact that any
Event of Default shall have occurred and be continuing. None of the
Administrative Agent, the Lenders, the Issuing Bank or any of their Affiliates
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or

 

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other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank, provided that the foregoing provisions of this subparagraph (i)
shall not be construed to excuse the Issuing Bank from liability to the
Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrowers to the
extent permitted by Applicable Law) suffered by the Borrowers that are caused by
the Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented that appear on their face to be in
compliance with the terms of a Letter of Credit, the Issuing Bank may, in its
sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

SECTION 2.07. Settlements Amongst Lenders

 

(a) The Swingline Lender may (but shall not be obligated to), at any time, on
behalf of the Borrowers (which hereby authorizes the Swingline Lender to act on
its behalf in that regard) request the Administrative Agent to cause the Lenders
to make a Revolving Loan (which shall be a Prime Rate Loan) in an amount equal
to such Lender’s Commitment Percentage of the outstanding amount of Swingline
Loans made in accordance with Section 2.05, which request may be made regardless
of whether the conditions set forth in Article IV have been satisfied. Upon such
request, each Lender shall make available to the Administrative Agent the
proceeds of such Revolving Loan for the account of the Swingline Lender. If the
Swingline Lender requires a Revolving Loan to be made by the Lenders and the
request therefor is received prior to 12:00 Noon, Boston time, on a Business
Day, such transfers shall be made in immediately available funds no later than
3:00 p.m., Boston time, that day; and, if the request therefor is received after
12:00 Noon, Boston time, then no later than 3:00 p.m., Boston time, 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
Administrative Agent or the Swingline Lender. If and to the extent any Lender
shall not have so made its transfer to the Administrative Agent, such Lender
agrees to pay to the Administrative 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 Administrative Agent at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

 

(b) The amount of each Lender’s Commitment Percentage of outstanding Revolving
Loans (excluding Swingline Loans) shall be computed weekly (or more frequently
in the Administrative Agent’s discretion) and shall be adjusted upward or
downward based on all Revolving Loans (excluding Swingline Loans) and repayments
of Revolving Loans (excluding Swingline Loans) received by the Administrative
Agent as of 3:00 p.m., Boston time, on the first Business Day following the end
of the period specified by the Administrative Agent (such date, the “Settlement
Date”).

 

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(c) The Administrative Agent shall deliver to each of the Lenders promptly after
the Settlement Date a summary statement of the amount of outstanding Revolving
Loans (excluding Swingline Loans) for the period and the amount of repayments
received for the period. As reflected on the summary statement, each Lender
shall transfer to the Administrative Agent (as provided below), or the
Administrative Agent shall transfer to each Lender, such amounts as are
necessary to insure that, after giving effect to all such transfers, the amount
of Revolving Loans made by each Lender with respect to Revolving Loans
(excluding Swingline Loans) shall be equal to such Lender’s applicable
Commitment Percentage of Revolving Loans (excluding Swingline Loans) outstanding
as of such Settlement Date. If the summary statement requires transfers to be
made to the Administrative Agent by the Lenders and is received prior to 12:00
Noon, Boston time, on a Business Day, such transfers shall be made in
immediately available funds no later than 3:00 p.m., Boston time, that day; and,
if received after 12:00 Noon, Boston time, then no later than 3:00 p.m., Boston
time, 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
Administrative Agent. If and to the extent any Lender shall not have so made its
transfer to the Administrative Agent, such Lender agrees to pay to the
Administrative 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
Administrative Agent at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.

 

SECTION 2.08. Notes; Repayment of Loans.

 

(a) The Loans made by each Lender (and by the Swingline Lender, with respect to
Swingline Loans) shall be evidenced by a Note duly executed on behalf of the
Borrowers, dated the Closing Date, in substantially the form attached hereto as
Exhibit B-1 or B-2, as applicable, payable to the order of each such Lender (or
the Swingline Lender, as applicable) in an aggregate principal amount equal to
such Lender’s Commitment (or, in the case of the Note evidencing the Swingline
Loans, $5,000,000). The outstanding principal balance of all Swingline Loans
shall be repaid on the earlier of the Termination Date or on the date otherwise
requested by the Swingline Lender in accordance with the provisions of Section
2.07(a). The outstanding principal balance of all other Obligations shall be
payable on the Termination Date (subject to earlier repayment as provided
below). Each Note shall bear interest from the date thereof on the outstanding
principal balance thereof as set forth in this Article II. Each Lender is hereby
authorized by the Borrowers to endorse on a schedule attached to each Note
delivered to such Lender (or on a continuation of such schedule attached to such
Note and made a part thereof), or otherwise to 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,
each payment of interest on any such Loan and the other information provided for
on such schedule; provided, however, that the failure of any Lender to make such
a notation or any error therein shall not affect the obligation of the Borrowers
to repay the Loans made by such Lender in accordance with the terms of this
Agreement and the applicable Notes.

 

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(b) Upon receipt of and indemnification reasonably satisfactory to the
Borrowers, and 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.

 

SECTION 2.09. Interest on Loans.

 

(a) Subject to Section 2.10, each Prime Rate Loan shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 365 days, as
applicable) at a rate per annum that shall be equal to the then Prime Rate, plus
the Applicable Margin for Prime Rate Loans.

 

(b) Subject to Section 2.10, each LIBO Loan shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 360 days) at a rate
per annum equal, during each Interest Period applicable thereto, to the Adjusted
LIBO Rate for such Interest Period, plus the Applicable Margin for LIBO Loans.

 

(c) Accrued interest on all Loans shall be payable in arrears on each Interest
Payment Date applicable thereto, at maturity (whether by acceleration or
otherwise), after such maturity on demand and (with respect to LIBO Loans) upon
any repayment or prepayment thereof (on the amount prepaid).

 

SECTION 2.10. Default Interest.

 

Effective upon the occurrence of any Event of Default and at all times
thereafter while such Event of Default is continuing, at the option of the
Administrative Agent or upon the direction of the Required Lenders, interest
shall accrue on all outstanding Loans (including Swingline Loans) (after as well
as before judgment, as and to the extent permitted by law) at a rate per annum
equal to the rate (including the Applicable Margin for Loans) in effect from
time to time plus 2.00% per annum, and such interest shall be payable on demand.

 

SECTION 2.11. Certain Fees.

 

The Borrowers shall pay to the Administrative Agent, for the account of the
Administrative Agent, the fees set forth in the Fee Letter as and when payment
of such fees is due as therein set forth.

 

SECTION 2.12. Unused Commitment Fee.

 

The Borrowers shall pay to the Administrative Agent for the account of the
Lenders, a commitment fee (the “Commitment Fee”) equal to 0.30% per annum (on
the basis of actual days elapsed in a year of 360 days) of the average daily
balance of the Unused Commitment for each day commencing on and including the
Closing Date and ending on but excluding the Termination Date. The Commitment
Fee so accrued in any calendar quarter shall be payable on the first Business
Day of the immediately succeeding calendar quarter, except that all Commitment
Fees so accrued as of the Termination Date shall be payable on the Termination
Date.

 

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SECTION 2.13. Letter of Credit Fees.

 

(a) The Borrowers shall pay the Administrative Agent, for the account of the
Lenders, on the first day of each calendar quarter, in arrears, a fee (each, a
“Letter of Credit Fee”) equal to the following per annum percentages of the
average face amount of the following categories of Letters of Credit outstanding
during the subject quarter:

 

(a) Standby Letters of Credit: At a per annum rate equal to the then Applicable
Margin for LIBO Loans.

 

(b) Commercial Letters of Credit: At a per annum rate equal to the then
Applicable Margin for LIBO Loans minus 0.50%.

 

(c) After the occurrence and during the continuance of an Event of Default, at
the option of the Administrative Agent or upon the direction of the Required
Lenders, the Letter of Credit Fee shall be increased by an amount equal to one
percent (1%) per annum.

 

(b) The Borrowers shall pay to the Administrative Agent, for the account of the
Issuing Bank, and in addition to all Letter of Credit Fees otherwise provided
for hereunder, a fronting fee in the amount of .125% on the face amount of each
Letter of Credit upon the issuance thereof (each, a “Fronting Fee”) and such
other fees and charges in connection with the issuance, negotiation, settlement,
amendment and processing of each Letter of Credit issued by the Issuing Bank as
are customarily imposed by the Issuing Bank from time to time in connection with
letter of credit transactions.

 

All Letter of Credit Fees shall be calculated on the basis of a 360-day year and
actual days elapsed.

 

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SECTION 2.14. Early Termination Fee. In the event that the Termination Date
occurs, for any reason, prior to the Maturity Date, the Borrowers shall pay to
the Administrative Agent, for the ratable benefit of the Lenders, a fee (the
“Early Termination Fee”) in respect of amounts which are or become payable by
reason thereof equal to the following: (i) one percent (1%) of the Loan Ceiling
in effect on the Closing Date if the Termination Date shall occur at any time on
or before May 26, 2005, less any Early Termination Fee paid in accordance with
Section 2.16, below; and (ii) one-half percent (.5%) of the Loan Ceiling in
effect on the Closing Date if the Termination Date shall occur at any time on or
after May 26, 2005 but prior to May 26, 2006, less any Early Termination Fee
paid in accordance with Section 2.16, below. All parties to this Agreement agree
and acknowledge that the Revolving Credit Lenders will have suffered damages on
account of the early termination of this Agreement and that, in view of the
difficulty in ascertaining the amount of such damages, the Early Termination Fee
constitutes reasonable compensation and liquidated damages to compensate the
Revolving Credit Lenders on account thereof. Notwithstanding the foregoing, in
the event that the Borrowers refinance the Credit Extensions with a credit
facility provided by Fleet or any of its Affiliates, or the Credit Extensions
are refinanced with another institution and Fleet retains a portion of the
Credit Extensions, the Early Termination Fee shall not be payable.

 

SECTION 2.15. Nature of Fees.

 

All fees shall be paid on the dates due, in immediately available funds, to the
Administrative Agent, for the respective accounts of the Administrative Agent,
the Issuing Bank, and the Lenders, as and to the extent provided herein. All
fees shall be fully earned on the date when due and shall not be refundable
under any circumstances.

 

SECTION 2.16. Termination or Reduction of Commitments.

 

(a) Upon at least three (3) Business Days’ prior written notice to the
Administrative Agent, the Borrowers may, at any time, in whole permanently
terminate, or from time to time in part permanently reduce, the Commitments.
Each such reduction shall be in the principal amount of $5,000,000 or any
integral multiple of $1,000,000 in excess thereof. Each such reduction or
termination shall (i) be applied ratably to the Commitments of each Lender and
(ii) be irrevocable when given. At the effective time of each such reduction or
termination, the Borrowers shall pay to the Administrative Agent for application
as provided herein (i) all Commitment Fees accrued on the amount of the
Commitments so terminated or reduced through the date thereof, (ii) any amount
by which the Credit Extensions outstanding on such date exceed the amount to
which the Commitments are to be reduced effective on such date, in each case pro
rata based on the amount prepaid, and (iii) an Early Termination Fee on the
amount of such reduction based upon the percentages that would have been due had
the Termination Date occurred during the dates set forth in Section 2.14.

 

SECTION 2.17. Alternate Rate of Interest.

 

If prior to the commencement of any Interest Period for a LIBO Borrowing:

 

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or

 

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(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders of making or maintaining their Loans included
in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Lead Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Lead Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Borrowing
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a LIBO Borrowing shall be ineffective and (ii) if any Borrowing
Request requests a LIBO Borrowing, such Borrowing shall be made as a Borrowing
of Prime Rate Loans.

 

SECTION 2.18. Conversion and Continuation of Loans.

 

The Borrowers shall have the right at any time, on three Business Days’ prior
irrevocable notice to the Administrative Agent (which notice, to be effective,
must be received by the Administrative Agent not later than 11:00 a.m., Boston
time, on the third Business Day preceding the date of any conversion), (x) to
convert any outstanding Borrowings of Loans (but in no event Swingline Loans) of
one Type (or a portion thereof) to a Borrowing of Loans of the other Type or (y)
to continue an outstanding Borrowing of LIBO Loans for an additional Interest
Period, subject to the following:

 

(a) no Borrowing of Loans may be converted into, or continued as, LIBO Loans at
any time when an Event of Default has occurred and is continuing;

 

(b) if less than a full Borrowing of Loans is converted, such conversion shall
be made pro rata among the Lenders based upon their Commitment Percentages in
accordance with the respective principal amounts of the Loans comprising such
Borrowing held by such Lenders immediately prior to such conversion;

 

(c) the aggregate principal amount of Loans being converted into or continued as
LIBO Loans shall be in an integral of $500,000 and at least $1,000,000;

 

(d) each Lender shall effect each conversion by applying the proceeds of its
LIBO Loan or Prime Rate Loan, as the case may be, to its Loan being so
converted;

 

(e) the Interest Period with respect to a Borrowing of LIBO Loans effected by a
conversion or in respect to the Borrowing of LIBO Loans being continued as LIBO
Loans shall commence on the date of conversion or the expiration of the current
Interest Period applicable to such continuing Borrowing, as the case may be;

 

(f) a Borrowing of LIBO Loans may be converted only on the last day of an
Interest Period applicable thereto;

 

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(g) each request for a conversion or continuation of a Borrowing of LIBO Loans
which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month; and

 

(h) no more than four (4) Borrowings of LIBO Loans may be outstanding at any
time.

 

If the Lead Borrower does not give notice to convert any Borrowing of LIBO
Loans, or does not give notice to continue, or does not have the right to
continue, any Borrowing as LIBO Loans, in each case as provided above, such
Borrowing shall automatically be converted to a Borrowing of Prime Rate Loans at
the expiration of the then-current Interest Period. The Administrative Agent
shall, after it receives notice from the Lead Borrower, promptly give each
Lender notice of any conversion, in whole or part, of any Loan made by such
Lender.

 

SECTION 2.19. Mandatory Prepayment; Commitment Termination; Cash Collateral.

 

The outstanding Obligations shall be subject to mandatory prepayment as follows:

 

(a) If at any time the amount of the Credit Extensions exceeds the lower of (i)
the then amount of the Total Commitments and (ii) the then amount of the
Borrowing Base, the Borrowers will immediately upon notice from the
Administrative Agent (A) prepay the Loans in an amount necessary to eliminate
such excess, and (B) if, after giving effect to the prepayment in full of all
outstanding Loans such excess has not been eliminated, deposit cash into the
Cash Collateral Account in an amount equal to the lesser of (a) such excess, and
(b) 103% of the Letter of Credit Outstandings at such time.

 

(b) The Revolving Loans shall be repaid daily in accordance with the provisions
of Section 2.23 hereof.

 

(c) Subject to the provisions of Sections 2.19(a) and (b), outstanding Prime
Rate Loans shall be prepaid before outstanding LIBO Loans are prepaid. Each
partial prepayment of LIBO Loans shall be in an integral multiple of $500,000.
No prepayment of LIBO Loans shall be permitted pursuant to this Section 2.19
other than on the last day of an Interest Period applicable thereto, unless the
Borrowers simultaneously reimburse the Lenders for all “Breakage Costs” (as
defined in Section 2.20(b) below) associated therewith. In order to avoid such
Breakage Costs, as long as no Event of Default has occurred and is continuing,
at the request of the Lead Borrower, the Administrative Agent shall hold all
amounts required to be applied to LIBO Loans in the Cash Collateral Account and
will apply such funds to the applicable LIBO Loans at the end of the then
pending Interest Period therefor and such LIBO Loans shall continue to bear
interest at the rate set forth in Section 2.09 until the amounts in the Cash
Collateral Account have been so applied (provided that the foregoing shall in no
way limit or restrict the Agents’ rights upon the subsequent occurrence of an
Event of Default). No partial prepayment of a Borrowing of LIBO Loans shall
result in the aggregate principal amount of the LIBO Loans remaining outstanding
pursuant to such Borrowing being less than $1,000,000. Except as provided in
Section 2.16, any prepayment of the Revolving Loans shall not permanently reduce
the Commitments.

 

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(d) All amounts required to be applied to all Loans hereunder (other than
Swingline Loans) shall be applied ratably in accordance with each Lender’s
Commitment Percentage.

 

(e) Upon the Termination Date, the Commitments and the credit facility provided
hereunder shall be terminated in full and the Borrowers shall pay, in full and
in cash, all outstanding Loans and all other outstanding Obligations.

 

SECTION 2.20. Optional Prepayment of Loans; Reimbursement of Lenders.

 

(a) The Borrowers shall have the right at any time and from time to time to
prepay outstanding Loans in whole or in part, (x) with respect to LIBO Loans,
upon at least two (2) Business Days’ prior written, telex or facsimile notice to
the Administrative Agent prior to 11:00 a.m., Boston time, and (y) with respect
to Prime Rate Loans, on the same Business Day if written, telex or facsimile
notice is received by the Administrative Agent prior to 1:00 p.m., Boston time,
subject to the following limitations:

 

(a) Subject to Section 2.19, all prepayments shall be paid to the Administrative
Agent for application, first, to the prepayment of outstanding Swingline Loans,
second, to the prepayment of other outstanding Loans ratably in accordance with
each Lender’s Commitment Percentage, and third, to the funding of a cash
collateral deposit in the Cash Collateral Account in an amount equal to 103% of
all Letter of Credit Outstandings.

 

(b) Subject to the foregoing, outstanding Prime Rate Loans shall be prepaid
before outstanding LIBO Loans are prepaid. Each partial prepayment of LIBO Loans
shall be in an integral multiple of $500,000. No prepayment of LIBO Loans shall
be permitted pursuant to this Section 2.19 other than on the last day of an
Interest Period applicable thereto, unless the Borrowers simultaneously
reimburse the Lenders for all “Breakage Costs” (as defined in Section 2.20(b)
below) associated therewith. No partial prepayment of a Borrowing of LIBO Loans
shall result in the aggregate principal amount of the LIBO Loans remaining
outstanding pursuant to such Borrowing being less than $1,000,000.

 

(c) Each notice of prepayment shall specify the prepayment date, the principal
amount and Type of the Loans to be prepaid and, in the case of LIBO Loans, the
Borrowing or Borrowings pursuant to which such Loans were made. Each notice of
prepayment shall be irrevocable and shall commit the Borrowers to prepay such
Loan by the amount and on the date stated therein. The Administrative Agent
shall, promptly after receiving notice from the Lead Borrower hereunder, notify
each Lender of the principal amount and Type of the Loans held by such Lender
which are to be prepaid, the prepayment date and the manner of application of
the prepayment.

 

(b) The Borrowers shall reimburse each Lender on demand for any loss incurred or
to be incurred by it in the reemployment of the funds released (i) resulting
from any prepayment (for any reason whatsoever, including, without limitation,
conversion to Prime Rate Loans or acceleration by virtue of, and after, the
occurrence of an Event of Default) of any LIBO

 

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Loan required or permitted under this Agreement, if such Loan is prepaid other
than on the last day of the Interest Period for such Loan or (ii) in the event
that after the Lead Borrower delivers a notice of borrowing under Section 2.03
in respect of LIBO Loans, such Loans are not made on the first day of the
Interest Period specified in such notice of borrowing for any reason other than
a breach by such Lender of its obligations hereunder. Such loss shall be the
amount as reasonably determined by such Lender as the excess, if any, of (A) the
amount of interest which would have accrued to such Lender on the amount so paid
or not borrowed at a rate of interest equal to the Adjusted LIBO Rate for such
Loan, for the period from the date of such payment or failure to borrow to the
last day (x) in the case of a payment or refinancing with Prime Rate Loans other
than on the last day of the Interest Period for such Loan, of the then current
Interest Period for such Loan or (y) in the case of such failure to borrow, of
the Interest Period for such Loan which would have commenced on the date of such
failure to borrow, over (B) the amount of interest which would have accrued to
such Lender on such amount by investing such amount in United States Treasury
securities (bills on a discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the last day of the applicable Interest Period
(collectively, “Breakage Costs”). Any Lender demanding reimbursement for such
loss shall deliver to the Lead Borrower from time to time one or more
certificates setting forth the amount of such loss as determined by such Lender
and setting forth in reasonable detail the manner in which such amount was
determined.

 

(c) In the event the Borrowers fail to prepay any Loan on the date specified in
any prepayment notice delivered pursuant to Section 2.20(a), the Borrowers on
demand by any Lender shall pay to the Administrative Agent for the account of
such Lender any amounts required to compensate such Lender for any loss incurred
by such Lender as a result of such failure to prepay, including, without
limitation, any loss, cost or expenses incurred by reason of the acquisition of
deposits or other funds by such Lender to fulfill deposit obligations incurred
in anticipation of such prepayment. Any Lender demanding such payment shall
deliver to the Lead Borrower from time to time one or more certificates setting
forth the amount of such loss as determined by such Lender and setting forth in
reasonable detail the manner in which such amount was determined.

 

(d) Whenever any partial prepayment of Loans are to be applied to LIBO Loans,
such LIBO Loans shall be prepaid in the chronological order of their Interest
Payment Dates.

 

SECTION 2.21. Maintenance of Loan Account; Statements of Account.

 

(a) The Administrative Agent shall maintain an account on its books in the name
of the Borrowers (the “Loan Account”) which will reflect (i) all Swingline
Loans, all Revolving Loans and other advances made by the Lenders to the
Borrowers or for the Borrowers’ account, (ii) all L/C Disbursements, fees and
interest that have become payable as herein set forth, and (iii) any and all
other Obligations that have become payable.

 

(b) The Loan Account will be credited with all amounts received by the
Administrative Agent from the Borrowers or otherwise for the Borrowers’ account,
including all amounts received in the FRG Concentration Account from the Blocked
Account Banks, and the amounts so credited shall be applied as set forth in
Section 2.23(a). After the end of each month,

 

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the Administrative Agent shall send to the Lead Borrower a statement accounting
for the charges, loans, advances and other transactions occurring among and
between the Administrative Agent, the Lenders and the Borrowers during that
month. The monthly statements shall, absent manifest error, be final, conclusive
and binding on the Borrowers.

 

SECTION 2.22. Cash Receipts.

 

(a) Annexed hereto as Schedule 2.22(a) is a list of all present DDAs, which
Schedule includes, with respect to each depository (i) the name and address of
that depository; (ii) the account number(s) maintained with such depository; and
(iii) to the extent known, a contact person at such depository.

 

(b) Annexed hereto as Schedule 2.22(b) is a list describing all arrangements to
which any Borrower is a party with respect to the payment to a Borrower of the
proceeds of all credit card charges for sales by a Borrower.

 

(c) On or prior to the Closing Date, the Lead Borrower shall (i) deliver to the
Administrative Agent notifications executed on behalf of the Borrowers to each
depository institution with which any DDA is maintained in form satisfactory to
the Administrative Agent, of the Administrative Agent’s interest in such DDA
(each, a “DDA Notification”), such DDA Notifications to be held in escrow by the
Administrative Agent until the occurrence of a Cash Dominion Event, at which
time the Administrative Agent may, in its discretion, forward such DDA
Notifications to the applicable institutions, and (ii) deliver to the
Administrative Agent agreements executed with each of each Borrower’s credit
card clearinghouses and processors in form satisfactory to the Administrative
Agent, (each, a “Credit Card Agreement”), and (iii) enter into agency agreements
with the banks maintaining the deposit accounts identified on Schedule 2.22(c)
(collectively, the “Blocked Accounts”), which agreements (the “Blocked Account
Agreements”) shall be in form and substance satisfactory to the Administrative
Agent. The DDA Notifications, Credit Card Agreements and Blocked Account
Agreements shall require, after the occurrence and during the continuance of a
Cash Dominion Event, the sweep on each Business Day of all available cash
receipts from the sale of Inventory and other assets, all collections of
Accounts, and all other cash payments received by any Borrower from any Person
or from any source or on account of any sale or other transaction or event (all
such cash receipts and collections, “Cash Receipts”), to a concentration account
maintained by the Collateral Agent at Fleet (the “FRG Concentration Account”).
In that regard, after the occurrence and during the continuance of a Cash
Dominion Event, the Borrowers shall cause the ACH or wire transfer to a Blocked
Account or to the FRG Concentration Account, no less frequently than daily (and
whether or not there is then an outstanding balance in the Loan Account) of (A)
the then contents of each DDA, each such transfer to be net of any minimum
balance, not to exceed $2,500, as may be required to be maintained in the
subject DDA by the bank at which such DDA is maintained; and (B) the proceeds of
all credit card charges not otherwise provided for pursuant hereto. Further,
after the occurrence and during the continuance of a Cash Dominion Event,
whether or not any Obligations are then outstanding, the Borrowers shall cause
the ACH or wire transfer to the FRG Concentration Account, no less frequently
than daily, of the then entire ledger balance of each Blocked Account, net of
such minimum balance, not to exceed $2,500, as may be required to be maintained
in the subject Blocked Account by the bank at which such Blocked Account is
maintained. In the event that, notwithstanding the provisions of this Section

 

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2.22, any Borrower receives or otherwise has dominion and control of any such
proceeds or collections, such proceeds and collections shall be held in trust by
such Borrower for the Administrative Agent and shall not be commingled with any
of any Borrower’s other funds or deposited in any account of any Borrower and
shall either be promptly deposited into a Blocked Account or the FRG
Concentration Account, or dealt with in such other fashion as the Lead Borrower
may be instructed by the Administrative Agent.

 

(d) The Lead Borrower shall accurately report to the Administrative Agent all
amounts deposited in the Blocked Accounts (other than any such amounts deposited
with Fleet) to ensure the proper transfer of funds as set forth above. If at any
time other than the times set forth above any cash or cash equivalents owned by
any Borrower are deposited to any account, or held or invested in any manner,
otherwise than in a Blocked Account that is subject to a Blocked Account
Agreement, the Administrative Agent shall require such Borrower to close such
account and have all funds therein transferred to an account maintained by the
Administrative Agent at Fleet and all future deposits made to a Blocked Account
which is subject to a Blocked Account Agreement.

 

(e) The Borrowers may close DDAs or Blocked Accounts and/or open new DDAs or
Blocked Accounts, subject to the execution and delivery to the Administrative
Agent of appropriate DDA Notifications or Blocked Account Agreements (unless
expressly waived by the Administrative Agent) consistent with the provisions of
this Section 2.22 and otherwise satisfactory to the Administrative Agent. Unless
consented to in writing by the Administrative Agent, the Borrowers may not
maintain any bank accounts (other than accounts that in the aggregate have
balances of $2,500 or less) or enter into any agreements with credit card
processors other than the ones expressly contemplated herein.

 

(f) The Borrowers shall also maintain with the Administrative Agent at Fleet one
or more disbursement accounts (the “Fleet Disbursement Accounts”) to be used by
the Borrowers for disbursements and payments (including payroll) in the ordinary
course of business or as otherwise permitted hereunder. The only Disbursement
Accounts as of the Closing Date are those described in Schedule 2.22(f).

 

(g) The FRG Concentration Account is, and shall remain, under the sole dominion
and control of the Collateral Agent. The Borrowers acknowledge and agree that,
subject to the provisions of the next to last sentence of Section 2.23(a), (i)
the Borrowers have no right of withdrawal from the FRG Concentration Account,
(ii) the funds on deposit in the FRG Concentration Account shall continue to be
collateral security for all of the Obligations, and (iii) the funds on deposit
in the FRG Concentration Account shall be applied as provided in Section
2.23(a).

 

SECTION 2.23. Application of Payments.

 

(a) As long as no Cash Dominion Event has occurred and is continuing, and no
Event of Default has occurred and is continuing, and the Obligations have not
been accelerated, all amounts received by the Agents from any source shall be
applied to the Obligations as the Administrative Agent and the Lead Borrower may
agree. Subject to the provisions of Section 2.23, if a Cash Dominion Event has
occurred and is continuing, as long as

 

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the Obligations have not been accelerated, all amounts received in the FRG
Concentration Account from any source, including the Blocked Account Banks,
shall be applied in the following order: first, to pay interest due and payable
on Credit Extensions and to pay fees and expense reimbursements and
indemnification then due and payable to the Administrative Agent, the Issuing
Bank, the Collateral Agent, and the Lenders (other than fees, expenses and
indemnifications relating to Obligations described in clause SIXTH of this
Section 2.22(a)); second to repay outstanding Swingline Loans; third, to repay
other outstanding Revolving Loans that are Prime Rate Loans and all outstanding
reimbursement obligations under Letters of Credit; fourth, to repay outstanding
Revolving Loans that are LIBO Loans and all Breakage Costs due in respect of
such repayment pursuant to Section 2.19(b) or, at the Borrowers’ option (if no
Event of Default has occurred and is then continuing), to fund a cash collateral
deposit to the Cash Collateral Account sufficient to pay, and with direction to
pay, all such outstanding LIBO Loans on the last day of the then-pending
Interest Period therefor; fifth to pay all other Obligations that are then
outstanding and then due and payable, including without limitation, all
Obligations arising out of any cash management, depository, investment, letter
of credit, Hedging Agreement, or other banking or financial services provided by
FRG or Fleet. If all Obligations are paid, any excess amounts shall be deposited
in a separate cash collateral account, and as long as no Event of Default then
exists, shall be released to the Borrowers upon the request of the Lead Borrower
and utilized by the Borrowers prior to any further Revolving Loans being made.
Any other amounts received by the Administrative Agent, the Issuing Bank, the
Collateral Agent, or any Lender as contemplated by Section 2.22 shall also be
applied in the order set forth above in this Section 2.22.

 

(b) All credits against the Obligations shall be conditioned upon final payment
to the Administrative Agent of the items giving rise to such credits. If any
item deposited to the FRG Concentration Account and credited to the Loan Account
is dishonored or returned unpaid for any reason, whether or not such return is
rightful or timely, the Administrative Agent shall have the right to reverse
such credit and charge the amount of such item to the Loan Account and the
Borrowers shall indemnify the Administrative Agent, the Collateral Agent, the
Issuing Bank and the Lenders against all claims and losses resulting from such
dishonor or return. Interest on the unpaid principal balance of the Loan Account
shall be calculated as if payments had been made one Business Day after such
application.

 

SECTION 2.24. Increased Costs.

 

(a) If any Change in Law shall:

 

(a) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender or any holding company of any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

 

(b) impose on any Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or LIBO Loans made by such Lender or
any Letter of Credit or participation therein;

 

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and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBO Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to such Lender or the Issuing
Bank of participating in, issuing or maintaining any Letter of Credit or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

 

(b) If any Lender or the Issuing Bank reasonably determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s or the Issuing Bank’s capital or on the capital
of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender’s or the
Issuing Bank’s holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s or the Issuing Bank’s policies and the
policies of such Lender’s or the Issuing Bank’s holding company with respect to
capital adequacy), then from time to time the Borrowers will pay to such Lender
or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

 

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section and setting forth in reasonable detail the manner in which such amount
or amounts were determined shall be delivered to the Lead Borrower and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.

 

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation, provided that
no compensation shall be required to be paid for any amounts incurred more than
120 days prior to the date of such demand.

 

SECTION 2.25. Change in Legality.

 

(a) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, if (x) any Change in Law shall make it unlawful for a Lender to make
or maintain a LIBO Loan or to give effect to its obligations as contemplated
hereby with respect to a LIBO Loan or (y) at any time any Lender determines that
the making or continuance of any of its LIBO Loans has become impracticable as a
result of a contingency occurring after the date hereof which adversely affects
the London interbank market or the position of such Lender in the London
interbank market, then, by written notice to the Lead Borrower, such Lender may
(i) declare that LIBO Loans will not thereafter be made by such Lender
hereunder, whereupon any request by the Lead Borrower for a LIBO Borrowing
shall, as to such Lender only, be deemed a

 

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request for a Prime Rate Loan unless such declaration shall be subsequently
withdrawn; and (ii) require that all outstanding LIBO Loans made by it be
converted to Prime Rate Loans, in which event all such LIBO Loans shall be
automatically converted to Prime Rate Loans as of the effective date of such
notice as provided in paragraph (b) below. In the event any Lender shall
exercise its rights under clause (i) or (ii) of this paragraph (a), all payments
and prepayments of principal which would otherwise have been applied to repay
the LIBO Loans that would have been made by such Lender or the converted LIBO
Loans of such Lender shall instead be applied to repay the Prime Rate Loans made
by such Lender in lieu of, or resulting from the conversion of, such LIBO Loans.

 

(b) For purposes of this Section 2.25, a notice to the Lead Borrower by any
Lender pursuant to paragraph (a) above shall be effective, if any LIBO Loans
shall then be outstanding, on the last day of the then-current Interest Period;
and otherwise such notice shall be effective on the date of receipt by the Lead
Borrower.

 

SECTION 2.26. Payments; Sharing of Setoff.

 

(a) The Borrowers shall make each payment required to be made by it hereunder or
under any other Loan Document (whether of principal, interest, fees or
reimbursement of drawings under Letters of Credit, or of amounts payable under
Sections 2.20(b), 2.24 or 2.27, or otherwise) prior to 12:00 noon, Boston time,
on the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at Fleet’s offices at
100 Federal Street, Boston, Massachusetts, except payments to be made directly
to the Issuing Bank or Swingline Lender as expressly provided herein and except
that payments pursuant to Sections 2.20(b), 2.24, 2.27 and 9.03 shall be made
directly to the Persons entitled thereto and payments pursuant to other Loan
Documents shall be made to the Persons specified therein. The Administrative
Agent shall distribute any such payments received by it for the account of any
other Person to the appropriate recipient promptly following receipt thereof. If
any payment under any Loan Document shall be due on a day that is not a Business
Day, except with respect to LIBO Borrowings, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments under each Loan Document shall be made in U.S. dollars.

 

(b) All funds received by and available to the Administrative Agent to pay
principal, unreimbursed drawings under Letters of Credit, interest and fees then
due hereunder, shall be applied in accordance with the provisions of Section
2.23(a) hereof or Section 6.02 of the Security Agreement, as applicable, ratably
among the parties entitled thereto.

 

(c) Unless the Administrative Agent shall have received notice from the Lead
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrowers will not make such payment, the Administrative 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 Issuing
Bank, as the case may be, the amount due. In such event, if the Borrowers

 

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have not in fact made such payment, then each of the Lenders or the Issuing
Bank, as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or Issuing Bank
with interest thereon, for each day from and including the date such amount is
distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation.

 

(d) If any Lender shall fail to make any payment required to be made by it
pursuant to this Agreement, then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender’s obligations under such Sections until all such unsatisfied
obligations are fully paid.

 

SECTION 2.27. Taxes.

 

(a) Any and all payments by or on account of any obligation of the Borrowers
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes, provided that if the Borrowers
shall be required to deduct any Indemnified Taxes from such payments, then (i)
the sum payable shall be increased as necessary so that after making all
required deductions for Indemnified Taxes (including deductions for Indemnified
Taxes applicable to additional sums payable under this Section) the Agents, such
Lender or the Issuing Bank (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrowers
shall make such deductions, and (iii) the Borrowers shall pay the full amount
deducted to the relevant Governmental Authority in accordance with Applicable
Law.

 

(b) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with Applicable Law.

 

(c) The Borrowers shall indemnify the Agents, each Lender and the Issuing Bank,
within ten (10) Business Days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes paid by the Agents, such Lender or the
Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrowers hereunder or under any other Loan
Document (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Lead Borrower by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of
an Agent, a Lender or the Issuing Bank setting forth in reasonable detail the
manner in which such amount was determined, shall be conclusive absent manifest
error.

 

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrowers to a Governmental Authority, the Borrowers shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

 

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(e) Any Foreign Lender that is entitled to an exemption from or reduction in
U.S. Federal withholding tax shall deliver to the Lead Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form W-8BEN or Form W-8ECI, or any subsequent versions thereof or successors
thereto, or, in the case of a Foreign Lender claiming exemption from in U.S.
Federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of “portfolio interest”, a (i) Form W-8BEN, or any subsequent
versions thereof or successors thereto and (ii) a certificate representing that
such Foreign Lender is not (A) a bank for purposes of Section 881(c) of the
Code, (B) is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of any Borrower and (C) is not a controlled foreign
corporation related to any Borrower (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Foreign Lender
claiming, as applicable, complete exemption from or reduced rate of, U.S.
Federal withholding Tax on payments by the Borrowers under this Agreement and
the other Loan Documents, or in the case of a Foreign Lender claiming exemption
for “portfolio interest” certifying that it is not a foreign corporation,
partnership, estate or trust. Such forms shall be delivered by each Foreign
Lender on or before the date it becomes a party to this Agreement (or, in the
case of a transferee that is a participation holder, on or before the date such
participation holder becomes a transferee hereunder) and on or before the date,
if any, such Foreign Lender changes its applicable lending office by designating
a different lending office (a “New Lending Office”). In addition, each Foreign
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Foreign Lender. Notwithstanding any other
provision of this Section 2.26(e), a Foreign Lender shall not be required to
deliver any form pursuant to this Section 2.26(e) that such Foreign Lender is
not legally able to deliver.

 

(f) Upon the request of the Lead Borrower, any Lender that is not a Foreign
Lender shall deliver to the Lead Borrower two copies of United States Internal
Revenue Service Form W-9 or any subsequent versions thereof or successors
thereto, properly completed and duly executed. If any Lender fails to deliver
Form W-9 or any subsequent versions thereof or successors thereto as required
herein, then the Borrowers may withhold from any payment to such party an amount
equivalent to the applicable backup withholding Tax imposed by the Code, without
reduction.

 

(g) The Borrowers shall not be required to indemnify any Lender or to pay any
additional amounts to any Lender in respect of U.S. Federal withholding tax
pursuant to paragraph (a) or (c) above to the extent that the obligation to pay
such additional amounts would not have arisen but for a failure by such Lender
to comply with the provisions of paragraphs (e) or (f) above. Should a Lender
become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrowers shall, at such Lender’s expense, take such steps as
such Lender shall reasonably request to assist such Lender to recover such
Taxes.

 

(h) Each of the Lenders agrees that upon the occurrence of any circumstances
entitling such party to indemnification or additional amounts pursuant to
Section 2.27(a) or (c), such party shall use reasonable efforts to take any
action (including designating a new lending office and signing any prescribed
forms or other documentation appropriate in the circumstances) if such action
would reduce or eliminate any Tax (including penalties or interest, as
applicable) with respect to which such indemnification or additional amounts may
thereafter accrue.

 

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(i) If any Lender reasonably determines that it has actually and finally
realized, by reason of a refund, deduction or credit of any Taxes paid or
reimbursed by the Borrowers pursuant to subsection (a) or (c) above in respect
of payments under the Loan Documents, a current monetary benefit that it would
otherwise not have obtained and that would result in the total payments under
this Section 2.27 exceeding the amount needed to make such Lender whole, such
Lender shall pay to the Lead Borrower, with reasonable promptness following the
date upon which it actually realizes such benefit, an amount equal to the lesser
of the amount of such benefit or the amount of such excess, in each case net of
all out-of-pocket expenses incurred in securing such refund, deduction or
credit.

 

SECTION 2.28. Security Interests in Collateral.

 

To secure their Obligations under this Agreement and the other Loan Documents,
the Loan Parties shall grant to the Collateral Agent, for its benefit and the
ratable benefit of the other Secured Parties, a first-priority security interest
in all of the Collateral pursuant to the Security Documents.

 

SECTION 2.29. Mitigation Obligations; Replacement of Lenders.

 

(a) If any Lender requests compensation under Section 2.24, or if the Borrowers
are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.27, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.24 or 2.27, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment; provided, however, that the
Borrowers shall not be liable for such costs and expenses of a Lender requesting
compensation if (i) such Lender becomes a party to this Agreement on a date
after the Closing Date and (ii) the relevant Change in Law occurs on a date
prior to the date such Lender becomes a party hereto.

 

(b) If any Lender requests compensation under Section 2.24, or if the Borrowers
are required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.27, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrowers
may, at their sole expense and effort, upon notice to such Lender and the
Administrative Agent by the Lead Borrower, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that (i) the
Lead Borrower shall have

 

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received the prior written consent of the Administrative Agent, the Issuing Bank
and Swingline Lender, which consent shall not unreasonably be withheld, (ii)
such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in unreimbursed drawings under Letters
of Credit and Swingline Loans, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.24 or payments required
to be made pursuant to Section 2.27, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrowers to require
such assignment and delegation cease to apply.

 

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ARTICLE III

 

Representations and Warranties

 

Each Loan Party represents and warrants to the Agents and the Lenders that:

 

SECTION 3.01. Organization; Powers. Each Loan Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

 

SECTION 3.02. Authorization; Enforceability. The transactions contemplated
hereby and by the other Loan Documents to be entered into by each Loan Party are
within such Loan Party’s corporate or partnership and other powers, as
applicable, and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by each Loan Party that is a party hereto and constitutes, and each
other Loan Document to which any Loan Party is a party, when executed and
delivered by such Loan Party will constitute, a legal, valid and binding
obligation of such Loan Party (as the case may be), enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

SECTION 3.03. Governmental Approvals; No Conflicts. The transactions to be
entered into contemplated by the Loan Documents (a) do not require any consent
or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for such as have been obtained or made and are in
full force and effect and except filings and recordings necessary to perfect
Liens created under the Loan Documents, (b) will not violate any Applicable Law
or the Organizational Documents of any Loan Party or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon any Loan Party or its
assets, or give rise to a right thereunder to require any payment to be made by
any Loan Party, and (d) will not result in the creation or imposition of any
Lien on any asset of any Loan Party, except Liens created under the Loan
Documents.

 

SECTION 3.04. Financial Condition The Lead Borrower has heretofore furnished to
the Lenders the Consolidated balance sheet, and statements of income,
stockholders’ equity, and cash flows for the Lead Borrower and its Subsidiaries
as of and for the Fiscal Year ending January 31, 2004, certified by a Financial
Officer of the Lead Borrower. Such financial statements present fairly, in all
material respects, the financial position, results of operations and cash flows
of the Lead Borrower and its Subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year end audit adjustments and the absence
of footnotes. Since March 31, 2004, there have been no changes in the assets,
liabilities, financial condition, or business of the Lead Borrower and its
Subsidiaries other than changes in the ordinary course of business, the effect
of which has had a Material Adverse Effect.

 

SECTION 3.05. Properties(a) Except as disclosed in Schedules 3.05(c)(i) and
3.05(c)(ii), each Loan Party has good title to, or valid leasehold interests in,
all its real and personal property material to its business, except for defects
which could not reasonably be expected to have a Material Adverse Effect.

 

(b) Each Loan Party owns, or is licensed to use, all trademarks, trade names,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Loan Parties does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

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(c) Schedule 3.05(c)(i) sets forth the address (including county) of all Real
Estate 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. Schedule 3.05(c)(ii)
sets forth the address (including county) of all Leases of the Loan Parties,
together with a list of the holders of any mortgage or other Lien on any
Borrower’s interest in 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.

 

SECTION 3.06. Litigation and Environmental Matters(a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of the Borrowers, threatened against or
affecting any Loan Party (i) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve any of the Loan Documents.

 

(b) Except for the matters set forth on Schedule 3.06, 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.

 

(c) Since the date of this Agreement, there has been no change in the status of
the matters set forth on Schedule 3.06 that, individually or in the aggregate,
has resulted in, or could reasonably be expected to result in, a Material
Adverse Effect.

 

SECTION 3.07. Compliance with Laws and Agreements Each Loan Party is in
compliance with all Applicable Law and all indentures, material agreements and
other instruments binding upon it or its property, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No Default has occurred and is continuing.

 

SECTION 3.08. Investment and Holding Company Status No Loan Party is (a) an
“investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a “holding company” as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

 

SECTION 3.09. Taxes Except as set forth on Schedule 3.09 hereto, each Loan Party
has timely filed or caused to be filed all federal and state Tax returns and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings, for which such Loan Party has set aside
on its books adequate reserves, and as to which no Lien has been filed, or (b)
to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.

 

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SECTION 3.10. ERISA No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed the fair market value of the assets of all such underfunded
Plans.

 

SECTION 3.11. Disclosure The Borrowers have disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which any Loan
Party is subject, and all other matters known to any of them, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of any of the reports, financial statements, certificates
or other written information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or thereunder (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.

 

SECTION 3.12. Subsidiaries.

 

(a) Schedule 3.12 sets forth the name of, and the ownership interest of each
Loan Party in each Subsidiary as of the Closing Date. There is no other capital
stock or ownership interest of any class outstanding as of the Closing Date. The
Loan Parties are not party to any joint venture, general or limited partnership,
or limited liability company, agreements or any other business ventures or
entities as of the Closing Date.

 

(b) The Lead Borrower and its Subsidiaries have received the consideration for
which the capital stock and other ownership interests was authorized to be
issued and have otherwise complied with all legal requirements relating to the
authorization and issuance of shares of stock and other ownership interests, and
all such shares and ownership interests are validly issued, fully paid, and
non-assessable.

 

SECTION 3.13. Insurance Schedule 3.13 sets forth a description of all insurance
maintained by or on behalf of the Loan Parties and their Subsidiaries. Each of
such policies is in full force and effect. All premiums in respect of such
insurance that are due and payable have been paid.

 

SECTION 3.14. Labor Matters There are no strikes, lockouts or slowdowns against
any Loan Party pending or, to the knowledge of the Borrowers, threatened. The
hours worked by and payments made to employees of the Loan Parties have not been
in violation of the Fair Labor Standards Act or any other applicable federal,
state, local or foreign law dealing with such matters to the extent that any
such violation could reasonably be expected to have a Material

 

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Adverse Effect. 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 accrued as a liability
on the books of such member. 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.

 

SECTION 3.15. Security Documents The Security Documents create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral, and the Security Documents
constitute the creation of a fully perfected first priority Lien on, and
security interest in, all right, title and interest of the Loan Parties
thereunder in such Collateral, in each case prior and superior in right to any
other Person (other than Permitted Encumbrances having priority under Applicable
Law).

 

SECTION 3.16. Federal Reserve Regulations(a) No Loan Party is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of buying or carrying Margin Stock.

 

(b) No part of the proceeds of any Loan or any Letter of Credit will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to buy or carry Margin Stock or to extend credit to others for
the purpose of buying or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose or (ii) for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation U or X.

 

SECTION 3.17. Solvency The Loan Parties, on a Consolidated basis, are Solvent.
No transfer of property is being made by any Loan Party and no obligation is
being incurred by any Loan Party in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of any Loan Party.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01. Closing Date The obligation of the Lenders to make each Loan and
of the Issuing Bank to issue each Letter of Credit, including the initial Loan
and the initial Letters of Credit, if any, on the Closing Date, is subject to
the following conditions precedent:

 

(a) The Agents (or their counsel) shall have received from each party hereto
either (i) a counterpart of this Agreement and all other Loan Documents
(including, without limitation, the Security Documents) signed on behalf of such
party or (ii) written evidence satisfactory to the Agents (which may include
telecopy transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement and all other Loan Documents.

 

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(b) The Agents shall have received a favorable written opinion (addressed to
each Agent and the Lenders and dated the Closing Date) of Akin Gump Strauss
Hauer & Feld LLP, counsel for the Loan Parties, and covering such matters
relating to the Loan Parties, the Loan Documents or the transactions
contemplated thereby as the Required Lenders shall reasonably request. The
Borrowers hereby request such counsel to deliver such opinion.

 

(c) The Agents shall have received such documents and certificates as the Agents
or their counsel may reasonably request relating to the organization, existence
and good standing of each Loan Party, the authorization of the transactions
contemplated by the Loan Documents and any other legal matters relating to the
Loan Parties, the Loan Documents or the transactions contemplated thereby, all
in form and substance reasonably satisfactory to the Agents and their counsel.

 

(d) After giving effect to the first funding under the Loans; any charges to the
Loan Account made in connection with the establishment of the credit facility
contemplated hereby; all Letters of Credit to be issued at, or immediately
subsequent to, such establishment, and all then held checks, accounts payable
which are beyond credit terms then accorded the Borrowers, and overdrafts,
Excess Availability shall be not less than $15,000,000. The Agents shall have
received a Borrowing Base Certificate dated the Closing Date, relating to the
most recent week ending on May 22, 2004, and executed by a Financial Officer of
the Lead Borrower.

 

(e) The Agents shall have received a certificate, reasonably satisfactory in
form and substance to the Agents, (i) with respect to the Solvency of the Loan
Parties as of the Closing Date, and (ii) certifying that, as of the Closing
Date, the representations and warranties made by the Loan Parties in the Loan
Documents and otherwise are true and complete and that no Default or Event of
Default exists.

 

(f) All of the Loan Parties’ accounts payable and Taxes then due and owing shall
be paid currently, other than those amounts subject to the good faith dispute of
the Loan Parties.

 

(g) The corporate structure and organization of the Loan Parties shall be
reasonably satisfactory to the Administrative Agent, and the Administrative
Agent shall be reasonably satisfied that all Loan Parties are Solvent as of the
Closing Date, and are left with capital sufficient to operate, and that all
transactions and conditions required to consummate the closing and post closing
will not be subject to a successful claim of fraudulent conveyance.

 

(h) All necessary consents and approvals to the transactions contemplated hereby
shall have been obtained and shall be reasonably satisfactory to the Agents.

 

(i) The Collateral Agent shall have received (a) appraisals of the Collateral
consisting of Inventory by a third party appraiser acceptable to the Collateral
Agent, the results of which are reasonably satisfactory to the Collateral 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
Collateral Agent.

 

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(j) The Agents shall be reasonably satisfied that any financial statements
delivered to them fairly present the business and financial condition of the
Lead Borrower and its Subsidiaries, and that there has been no material adverse
change in the assets, business, financial condition, income or prospects of the
Lead Borrower and its Subsidiaries since the date of the most recent financial
information delivered to the Agents.

 

(k) The Administrative Agent shall have received and be reasonably satisfied
with (a) monthly detailed one-year financial projections and business
assumptions for the Lead Borrower and its Subsidiaries, and (b) such other
information (financial or otherwise) reasonably requested by the Administrative
Agent.

 

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

 

(m) There shall not have occurred any default of any material contract or
agreement of any Loan Party which could reasonably be expected to have a
Material Adverse Effect.

 

(n) The Collateral Agent shall have received results of searches or other
evidence reasonably satisfactory to the Collateral Agent (in each case dated as
of a date reasonably satisfactory to the Collateral Agent) indicating the
absence of Liens on the assets of the Loan Parties, except for (i) Permitted
Encumbrances and (ii) Liens for which termination statements and releases or
subordination agreements reasonably satisfactory to the Collateral Agent are
being tendered concurrently with such extension of credit.

 

(o) The Collateral Agent shall have received (i) all documents and instruments,
including Uniform Commercial Code financing statements, required by law or
reasonably requested by the Collateral Agent to be filed, registered or recorded
to create or perfect the first priority Liens intended to be created under the
Loan Documents and all such documents and instruments shall have been so filed,
registered or recorded to the satisfaction of the Collateral Agent, and (ii) the
DDA Notifications, Credit Card Agreements, and Blocked Account Agreements
required pursuant to Section 2.22(c) hereof.

 

(p) The Collateral Agent shall have received, and be reasonably satisfied with,
evidence of the Loan Parties’ insurance, together with such endorsements as are
required by the Loan Documents.

 

(q) The Collateral Agent shall be reasonably satisfied that those Investments
held by the Borrowers, to be transferred to an account with Bank of America have
been fully transferred, and that the Collateral Agent shall have received a
first perfected security interest in all such account, subject to a control
agreement satisfactory to the Collateral Agent.

 

(r) All fees due at or immediately prior to the Closing Date and all costs and
expenses incurred by the Agents in connection with the establishment of the
credit facility contemplated hereby (including the fees and expenses of counsel
to the Agents) shall have been paid in full.

 

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(s) The consummation of the transactions contemplated hereby shall not (a)
violate any Applicable Law or (b) conflict with, or result in a default or event
of default under, any material agreement of any Loan Party. No event shall exist
which is, or solely with the passage of time, the giving of notice or both,
would be a default under any material agreement of any Loan Party.

 

(t) There shall have been delivered to the Administrative Agent such additional
instruments and documents as the Agents or counsel to the Agents reasonably may
require or request.

 

The Administrative Agent shall notify the Lead Borrower and the Lenders of the
Closing Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived by the Administrative Agent
in writing) at or prior to 12:00 noon, Boston time, on May 28, 2004 (and, in the
event such conditions are not so satisfied or waived, this Agreement shall
terminate at such time).

 

SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit.

 

In addition to those conditions described in Section 4.01, the obligation of the
Lenders to make each Revolving Loan and of the Issuing Bank to issue each Letter
of Credit, is subject to the following conditions precedent:

 

(a) Notice. The Administrative Agent shall have received a notice with respect
to such Borrowing or issuance, as the case may be, as required by Article II.

 

(b) Representations and Warranties. All representations and warranties contained
in this Agreement and the other Loan Documents or otherwise made in writing in
connection herewith or therewith shall be true and correct in all material
respects on and as of the date of each Borrowing or the issuance of each Letter
of Credit hereunder with the same effect as if made on and as of such date,
other than representations and warranties that relate solely to an earlier date.

 

(c) No Default. On the date of each Borrowing hereunder and the issuance of each
Letter of Credit and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing.

 

(d) Borrowing Base Certificate. The Administrative Agent shall have received the
timely delivery of the most recently required Borrowing Base Certificate, with
each such Borrowing Base Certificate including schedules as required by the
Administrative Agent.

 

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The request by the Lead Borrower for, and the acceptance by the Borrowers of,
each extension of credit hereunder shall be deemed to be a representation and
warranty by the Borrowers that the conditions specified in this Section 4.02
have been satisfied at that time and that after giving effect to such extension
of credit the Borrowers shall continue to be in compliance with the Borrowing
Base. The conditions set forth in this Section 4.02 are for the sole benefit of
the Administrative Agent and each Lender and may be waived by the Administrative
Agent, in whole or in part, without prejudice to the Administrative Agent or any
Lender.

 

ARTICLE V

 

Affirmative Covenants

 

Until (i) the Commitments have expired or been terminated, and (ii) the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, and (iii) all Letters of Credit shall have expired or
terminated or been collateralized, to the extent of 103% of the then Letter of
Credit Outstandings, and (iv) all L/C Disbursements shall have been reimbursed,
each Loan Party covenants and agrees with the Agents and the Lenders that:

 

SECTION 5.01. Financial Statements and Other Information The Lead Borrower will
furnish to the Agents:

 

(a) within ninety (90) days after the end of each Fiscal Year of the Lead
Borrower, its Consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous Fiscal Year,
all audited and reported on by independent public accountants of recognized
national standing (without a “going concern” or like qualification or exception
and without a qualification or exception as to the scope of such audit) to the
effect that such Consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the Lead
Borrower and its Subsidiaries on a Consolidated basis in accordance with GAAP
consistently applied;

 

(b) within forty-five (45) days after the end of each Fiscal Quarter of the Lead
Borrower, its Consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows, as of the end of and for such Fiscal
Quarter and the elapsed portion of the Fiscal Year, setting forth in each case
in comparative form the figures for the previous Fiscal Year, all certified by
one of its Financial Officers as presenting in all material respects the
financial condition and results of operations of the Lead Borrower and its
Subsidiaries on a Consolidated basis in accordance with GAAP consistently
applied, subject to normal year end audit adjustments and the absence of
footnotes;

 

(c) within thirty (30) days after the end of each fiscal month of the Lead
Borrower, its Consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows, as of the end of and for such fiscal month
and the elapsed portion of the Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year and the figures as set
forth in the business plan delivered pursuant to Section 5.01(e) hereof, all
certified by one of its Financial Officers as presenting in all material
respects the financial condition and results of operations of the Lead Borrower
and its Subsidiaries on a Consolidated basis in accordance with GAAP
consistently applied, subject to normal year end audit adjustments and the
absence of footnotes;

 

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(d) concurrently with any delivery of financial statements under clause (a),
(b), or (c) above, a certificate of a Financial Officer of the Lead Borrower in
the form of Exhibit D (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, and (ii) setting forth reasonably
detailed calculations (A) with respect to the average Excess Availability for
such period, and (B) demonstrating compliance with Section 6.11, and (iii)
stating whether any change in GAAP or in the application thereof has occurred
since the date of the Lead Borrower’s audited financial statements referred to
in Section 3.04 and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;

 

(e) within thirty (30) days after the commencement of each Fiscal Year of the
Lead Borrower, a preliminary business plan, and within ninety (90) days after
the commencement of each Fiscal Year of the Lead Borrower, a final business
plan, including a detailed Consolidated budget by month for such Fiscal Year
(including a projected Consolidated balance sheet and related statements of
projected operations and cash flow as of the end of and for such Fiscal Year);

 

(f) on Wednesday of each week, a certificate in the form of Exhibit E (a
“Borrowing Base Certificate”) showing the Borrowing Base as of the close of
business on the immediately preceding Saturday, each Borrowing Base Certificate
to be certified as complete and correct on behalf of the Borrowers by a
Financial Officer of the Lead Borrower. Notwithstanding the foregoing, as long
as no Cash Dominion Event has occurred, such Borrowing Base Certificate shall be
provided within three (3) days after the end of each fiscal month;

 

(g) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed in final form by
any Loan Party with the Securities and Exchange Commission (including, without
limitation, Forms 10K and 10Q but excluding any registration statement on Form
S-8 or its equivalent), or any Governmental Authority succeeding to any or all
of the functions of said Commission, or with any national securities exchange,
as the case may be;

 

(h) promptly upon receipt thereof, copies of all reports submitted to any Loan
Party by independent certified public accountants in connection with each
annual, interim or special audit of the books of the Loan Parties or any of
their Subsidiaries made by such accountants, including any management letter
commenting on the Loan Parties’ internal controls submitted by such accountants
to management in connection with their annual audit;

 

(i) the financial and collateral reports described on Schedule 5.01(i) hereto,
at the times set forth in such Schedule;

 

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(j) notice of any intended sale or other disposition of any material portion of
the assets of any Loan Party permitted hereunder or incurrence of any material
amount of Indebtedness permitted hereunder at least thirty (30) Business Days
prior to the date of consummation of such sale or disposition or the incurrence
of such Indebtedness; and

 

(k) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of any Loan Party, or
compliance with the terms of any Loan Document, as the Agents or any Lender
(acting through an Agent) may reasonably request.

 

SECTION 5.02. Notices of Material Events The Lead Borrower will furnish to the
Agents prompt written notice of the following:

 

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

 

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting any Loan Party or
any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

 

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect;

 

(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect;

 

(e) any change in any Loan Party’s chief executive officer, chief financial
officer or chairman;

 

(f) the discharge by any Loan Party of its present independent accountants or
any withdrawal or resignation by such independent accountants;

 

(g) any failure by any Loan Party to pay rent at any of such Loan Party’s
locations, which failure continues for more than ten (10) days following the day
on which such rent first came due if the result of such failure would be
reasonably likely to result in a Material Adverse Effect;

 

(h) any collective bargaining agreement or other labor contract to which a Loan
Party becomes a party, or the application for the certification of a collective
bargaining agent; and

 

(i) the filing of any Lien for unpaid Taxes against any Loan Party.

 

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Lead Borrower setting
forth the details of the event or development requiring such notice and, if
applicable, any action taken or proposed to be taken with respect thereto.

 

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SECTION 5.03. Information Regarding Collateral The Lead Borrower will furnish to
the Agents at least ten (10) days’ prior written notice of any change (i) in any
Loan Party’s corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in any Loan Party’s corporate structure or jurisdiction of incorporation
or formation, or (iv) in any Loan Party’s Federal Taxpayer Identification Number
or organizational identification number assigned to it by its state of
organization. The Borrowers also agree promptly to notify the Agents if any
material portion of the Collateral is damaged or destroyed.

 

SECTION 5.04. Existence; Conduct of Business Each Loan Party will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to comply with its respective Organizational Documents, as applicable, and to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its business, provided
that the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03.

 

SECTION 5.05. Payment of Obligations Each Loan Party will, and will cause each
of the Subsidiaries to, pay its Indebtedness and other obligations, including
Tax liabilities, and claims for labor, materials, or supplies, before the same
shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) such
Loan Party or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP, (c) such contest effectively suspends
collection of the contested obligation and enforcement of any Lien securing such
obligation, (d) no Lien has been filed with respect thereto, and (e) the failure
to make payment pending such contest could not reasonably be expected to result
in a Material Adverse Effect. Nothing contained herein shall be deemed to limit
the rights of the Administrative Agent under Section 2.03(b) hereof.

 

SECTION 5.06. Maintenance of Properties Each Loan Party will, and will cause
each of the Subsidiaries to, keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted and with the exception of storing closings and asset dispositions
permitted hereunder.

 

SECTION 5.07. Insurance(a) Each Loan Party shall (i) maintain insurance with
financially sound and reputable insurers reasonably acceptable to the
Administrative Agent (or, to the extent consistent with prudent business
practice, a program of self-insurance) on such of its property and in at least
such amounts and against at least such risks as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
occurring upon, in or about or in connection with the use of any properties
owned, occupied or controlled by it (including the insurance required pursuant
to the Security Documents); (ii) maintain such other insurance as may be
required by law; and (iii) furnish to the Administrative Agent, upon written
request, full information as to the insurance carried.

 

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(b) Fire and extended coverage policies maintained with respect to any
Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders’ loss payable clause (regarding personal property), in form and
substance reasonably satisfactory to the Collateral 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 Collateral Agent,
(ii) a provision to the effect that none of the Loan Parties, the Administrative
Agent, the Collateral Agent, or any other party shall be a coinsurer and (iii)
such other provisions as the Collateral Agent may reasonably require from time
to time to protect the interests of the Lenders. Commercial general liability
policies shall be endorsed to name the Collateral Agent as an additional
insured. Business interruption policies shall name the Collateral Agent as a
loss payee and shall 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 Administrative
Agent or the Collateral Agent, which amounts shall be released to the Borrowers
provided that no Event of Default or Cash Dominion Event has occurred and is
then continuing, (ii) a provision to the effect that none of the Loan Parties,
the Administrative Agent, the Collateral Agent or any other party shall be a
co-insurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Lenders.
Each such policy referred to in this paragraph also shall provide that it shall
not be canceled, modified or not renewed (i) by reason of nonpayment of premium
except upon not less than 10 days’ prior written notice thereof by the insurer
to the Collateral Agent (giving the Collateral Agent the right to cure defaults
in the payment of premiums) or (ii) for any other reason except upon not less
than 30 days’ prior written notice thereof by the insurer to the Collateral
Agent. The Lead Borrower shall deliver to the Collateral Agent, prior to the
cancellation, modification or nonrenewal of any such policy of insurance, a copy
of a renewal or replacement policy (or other evidence of renewal of a policy
previously delivered to the Collateral Agent, including an insurance binder)
together with evidence reasonably satisfactory to the Collateral Agent of
payment of the premium therefor.

 

SECTION 5.08. Casualty and Condemnation The Borrowers will furnish to the Agents
and the Lenders prompt written notice 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.

 

SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals;
Accountants(a) Each Loan Party will, and will cause each of the Subsidiaries to,
keep proper books of record and account in accordance with GAAP and in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. Each Loan Party will, and will cause
each of the Subsidiaries to, permit any representatives designated by any Agent,
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times and as often as reasonably requested, provided that Lead
Borrower shall be furnished the opportunity to participate in any such
discussions.

 

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(b) Each Loan Party will, and will cause each of the Subsidiaries to, from time
to time upon the request of the Collateral Agent or the Required Lenders through
the Administrative Agent and after reasonable prior notice, permit any Agent or
professionals (including investment bankers, consultants, accountants, lawyers
and appraisers) retained by the Agents to conduct appraisals, commercial finance
examinations and other evaluations, including, without limitation, of (i) the
Borrowers’ practices in the computation of the Borrowing Base and (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
pay the reasonable fees and expenses of the Agents or such professionals with
respect to such evaluations and appraisals. Without limiting the foregoing, the
Loan Parties acknowledge that the Agents intend to undertake at least one (1)
inventory appraisal and one (1) commercial finance examination each Fiscal Year
after the Closing Date, at the Loan Parties’ expense. Notwithstanding the
foregoing, the Agents may cause additional appraisals and commercial finance
examinations to be undertaken as they in their reasonable discretion deem
necessary or appropriate, or as may be required by Applicable Law, provided that
the Loan Parties shall not be obligated to pay for any such additional
appraisals and commercial finance examinations unless (i) an Event of Default
has occurred and is continuing, or (ii) Excess Availability is at any time less
than the greater of (A) forty percent (40%) of the Borrowing Base at the time of
calculation, or (B) $20,000,000, in which case all such additional appraisals
and commercial finance examinations shall be at the expense of the Borrowers.
The Agents contemplate undertaking not more than four (4) inventory appraisals
and four (4) commercial finance examinations each Fiscal Year but reserve the
discretion to require additional appraisals and/or examination.

 

(c) The Loan Parties shall, at all times, retain independent certified public
accountants who are reasonably satisfactory to the Administrative Agent and
instruct such accountants to cooperate with, and be reasonably available to, the
Administrative 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 accountants, as
may be raised by the Administrative Agent, provided that Lead Borrower shall be
furnished the opportunity to participate in any such discussions.

 

SECTION 5.10. Physical Inventories.

 

(a) The Collateral Agent, at the expense of the Loan Parties, may participate in
and/or observe each physical count and/or inventory of so much of the Collateral
as consists of Inventory which is undertaken on behalf of the Borrowers so long
as such participation does not disrupt the normal inventory schedule or process.

 

(b) The Borrowers, at their own expense, shall cause not less than one physical
inventory per location of the Borrowers’ Inventory in each twelve (12) month
period during which this Agreement is in effect, conducted by nationally
recognized inventory takers and using practices consistent with practices in
effect on the date hereof, provided, however, if no Cash Dominion Event has
occurred, the Borrowers shall not be required to engage nationally recognized
inventory takers to conduct such physical inventories.

 

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(c) The Lead Borrower shall provide the Collateral Agent with the preliminary
Inventory levels at each of each Borrower’s stores within ten (10) days
following the completion of such inventory.

 

(d) The Lead Borrower, within forty-five (45) days following the completion of
such inventory, shall provide the Collateral Agent with a reconciliation of the
results of each such inventory (as well as of any other physical inventory
undertaken by the Borrowers) and shall post such results to the Borrowers’ stock
ledger and general ledger, as applicable.

 

(e) The Collateral Agent, in its discretion, if any Event of Default exists, may
cause such additional inventories to be taken as the Collateral Agent determines
(each, at the expense of the Borrowers).

 

SECTION 5.11. Compliance with Laws Each Loan Party will, and will cause each of
the Subsidiaries to, comply with all Applicable Laws, except where the failure
to do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

 

SECTION 5.12. Use of Proceeds and Letters of Credit The proceeds of Loans made
hereunder and Letters of Credit issued hereunder will be used only (a) to
refinance existing Indebtedness, (b) to finance the acquisition of working
capital assets of the Borrowers, including the purchase of inventory, in the
ordinary course of business, and (c) for general corporate purposes. No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.

 

SECTION 5.13. Additional Subsidiaries If any additional Subsidiary of any Loan
Party is formed or acquired after the Closing Date, the Lead Borrower will
notify the Agents and the Lenders thereof and (a) if such Subsidiary is not a
Foreign Subsidiary, the Borrowers will cause such Subsidiary to become a Loan
Party hereunder and under each applicable Security Document in the manner
provided therein within ten (10) Business Days after such Subsidiary is formed
or acquired and promptly take such actions to create and perfect Liens on such
Subsidiary’s assets to secure the Obligations as any Agent or the Required
Lenders shall reasonably request and (b) if any shares of capital stock or
Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the
Borrowers will cause such shares and promissory notes evidencing such
Indebtedness to be pledged within ten (10) Business Days after such Subsidiary
is formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary
shares of stock of such Subsidiary to be pledged may be limited to 65% of the
outstanding shares of Voting Stock of such Subsidiary).

 

SECTION 5.14. Depository Account. In order to facilitate the administration of
the Revolving Loans and Collateral Agent’s security interest in the Loan
Parties’ assets, the Borrowers shall maintain Fleet or its Affiliates as each
Borrower’s principal depository bank, including for the maintenance of
operating, administrative, cash management, collection activity and other
deposit accounts for the conduct of such Borrower’s business.

 

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SECTION 5.15. Further Assurances(a) Each Loan Party will 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 Applicable Law,
or which any Agent or the Required Lenders may reasonably request, 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. The Loan Parties also agree to provide to the
Agents, from time to time upon request, evidence reasonably satisfactory to the
Agents as to the perfection and priority of the Liens created or intended to be
created by the Security Documents.

 

(b) If any material assets are acquired by any Loan Party after the Closing Date
(other than assets constituting Collateral under the Security Agreement that
become subject to the Lien of the Security Agreement upon acquisition thereof),
except for real property leaseholds to the extent that the consent of the
landlord is required but is not obtained, the Lead Borrower will notify the
Agents and the Lenders 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 reasonably requested by any Agent or the Required Lenders
to grant and perfect such Liens, including actions described in paragraph (a) of
this Section, all at the expense of the Loan Parties.

 

(c) Upon the request of the Administrative Agent, each Borrower shall cause each
of its customs brokers to deliver an agreement to the Administrative Agent
covering such matters and in such form as the Administrative Agent may
reasonably require.

 

ARTICLE VI

 

Negative Covenants

 

Until (i) the Commitments have expired or been terminated, and (ii) the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, and (iii) all Letters of Credit shall have expired or
terminated or been collateralized, to the extent of 103% of the then Letter of
Credit Outstandings, and (iv) all L/C Disbursements shall have been reimbursed,
each Loan Party covenants and agrees with the Agents and the Lenders that:

 

SECTION 6.01. Indebtedness and Other Obligations The Loan Parties will not, and
will not permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:

 

(a) Indebtedness created under the Loan Documents;

 

(b) Indebtedness set forth in Schedule 6.01 and extensions, renewals and
replacements of any such Indebtedness provided that after giving effect to the
refinancing (i) the principal amount of the outstanding Indebtedness is not
increased, (ii) neither the tenor nor the weighted average life to maturity is
reduced, and (iii) the holders of such refinancing Indebtedness are not afforded
covenants, defaults, rights or remedies more burdensome in any material respect
to the obligor or obligors than those contained in the Indebtedness being
refinanced;

 

(c) Indebtedness of any Loan Party to any other Loan Party, all of which
Indebtedness shall be reflected in the Loan Parties’ books and records in
accordance with GAAP;

 

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(d) Indebtedness of any Loan Party to finance the acquisition of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness assumed
in connection with the acquisition of any such assets or secured by a Lien on
any such assets prior to the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof or result in an earlier maturity date or decreased
weighted average life to maturity thereof, provided that the aggregate principal
amount of Indebtedness permitted by this clause (iv) shall not exceed
$20,000,000 at any time outstanding;

 

(e) Indebtedness incurred to finance any Real Estate owned by any Loan Party or
incurred in connection with sale-leaseback transactions;

 

(f) Indebtedness under Hedging Agreements with Fleet or an Affiliate of Fleet;
and

 

(g) other unsecured Indebtedness, in an aggregate principal amount not exceeding
$5,000,000 at any time outstanding.

 

(h) Subordinated Indebtedness, in amounts, and on terms and conditions
reasonably satisfactory to the Administrative Agent.

 

SECTION 6.02. Liens The Loan Parties will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including Accounts) or rights in respect of any thereof:

 

(a) Liens created under the Loan Documents;

 

(b) Permitted Encumbrances;

 

(c) any Lien on any property or asset of any Loan Party set forth in Schedule
6.02, provided that (i) such Lien shall not apply to any other property or asset
of any Loan Party and (ii) such Lien shall secure only those obligations that it
secures as of the Closing Date, and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;

 

(d) Liens on fixed or capital assets acquired by any Loan Party, provided that
(i) such Liens secure Indebtedness permitted by clause (iv) of Section 6.01(a),
(ii) the Indebtedness secured thereby does not exceed 100% of the cost of
acquiring such fixed or capital assets and (iii) such Liens shall not extend to
any other property or assets of the Loan Parties; and

 

(e) Liens to secure Indebtedness permitted by clause (v) of Section 6.01(a)
provided that such Liens shall not extend to any property or assets of the Loan
Parties other than the Real Estate so financed or which is the subject of a
sale-leaseback transaction.

 

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SECTION 6.03. Fundamental Changes(a) The Loan Parties will not merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default or Event of
Default shall have occurred and be continuing, (i) any Facility Guarantor may
merge into any other Facility Guarantor, provided that in any such transaction
involving the Lead Borrower, the Lead Borrower shall be the surviving entity,
and (ii) any Facility Guarantor (other than the Lead Borrower) may liquidate or
dissolve voluntarily into the Lead Borrower or into any other Facility
Guarantor.

 

(b) The Loan Parties will not engage in any business other than businesses of
the type conducted by the Loan Parties on the date of execution of this
Agreement and businesses reasonably related thereto.

 

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions The Loan
Parties will not make any Investment, except:

 

(a) Permitted Investments;

 

(b) Investments existing on the Closing Date, and set forth on Schedule 6.04;

 

(c) loans or advances made by any Loan Party to any other Loan Party;

 

(d) Guarantees constituting Indebtedness permitted by Section 6.01;

 

(e) 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;

 

(f) loans or advances to employees for the purpose of travel, entertainment or
relocation in the ordinary course of business in an amount not to exceed $50,000
in the aggregate at any time outstanding; and

 

(g) other Investments not to exceed $1,000,000 in the aggregate at any time
outstanding.

 

SECTION 6.05. Asset Sales The Loan Parties will not, and will not permit any of
the Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset,
including any capital stock, nor will the Loan Parties permit any of the
Subsidiaries to issue any additional shares of its capital stock or other
ownership interest in such Subsidiary, except:

 

(a) (i) sales of Inventory in the ordinary course of business, or (ii) sales of
used or surplus equipment, or (iii) Permitted Investments, in each case in the
ordinary course of business;

 

(b) sales, transfers and dispositions among the Loan Parties and their
Subsidiaries, provided that any such sales, transfers or dispositions involving
a Subsidiary that is not a Loan Party shall be made in compliance with Section
6.07; and

 

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(c) sale-leaseback transactions involving any Loan Party’s Real Estate as long
as if the Administrative Agent so requests, the Administrative Agent shall have
received an intercreditor agreement executed by the purchaser of such Real
Estate on terms and conditions reasonably satisfactory to the Administrative
Agent;

 

provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other disposition permitted under clause
(b)) shall be made at arm’s length and for fair value and solely for cash
consideration.

 

SECTION 6.06. Restricted Payments; Certain Payments of Indebtedness (a) The Loan
Parties will not, and will not permit any Subsidiary to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, except
that any Loan Party may pay dividends to the Lead Borrower. None of the Loan
Parties will, nor will they permit any Subsidiary to, issue any preferred stock
(except for preferred stock that is not subject to redemption other than
redemption at the option of the Loan Party issuing such preferred stock or be or
become liable in respect of any obligation (contingent or otherwise) to
purchase, redeem, retire, acquire or make any other payment in respect of (i)
any shares of capital stock of any Loan Party or (ii) any option, warrant or
other right to acquire any such shares of capital stock.

 

(b) The Loan Parties will not, and will not permit any Subsidiary to, make or
agree to pay or make, directly or indirectly, any payment or other distribution
(whether in cash securities or other property) of or in respect of principal of
or interest on any Indebtedness, or any payment or other distribution (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any Indebtedness, except:

 

(a) mandatory payments as and when due in respect of any other Indebtedness
permitted hereunder; and

 

(b) refinancings of Indebtedness described in clause (i), above, to the extent
permitted by Section 6.01.

 

SECTION 6.07. Transactions with Affiliates The Loan Parties will not, and will
not permit any Subsidiary to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except transactions in the ordinary course of business that are at prices and on
terms and conditions not less favorable to the Loan Parties or such Subsidiary
than could be obtained on an arm’s-length basis from unrelated third parties.
The Loan Parties will not conduct any business in the name of, nor permit any
business to be conducted in the name of, WSCC Buying Group, Inc., nor will any
of the Loan Parties transfer any assets to WSCC Buying Group, Inc.

 

SECTION 6.08. Restrictive Agreements The Loan Parties will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Loan Parties or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets or
(b) the ability of any Subsidiary to pay dividends or other distributions with

 

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respect to any shares of its capital stock or to make or repay loans or advances
to the Loan Parties or any other Subsidiary or to guarantee Indebtedness of the
Loan Parties or any other Subsidiary, provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by any Loan Document,
(ii) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (iii) clause (a) of the foregoing shall
not apply to customary provisions in leases restricting the assignment or
subleasing thereof.

 

SECTION 6.09. Amendment of Material Documents The Loan Parties will not, and
will not permit any Subsidiary to, amend, modify or waive any of its rights
under (a) its Organizational Documents, and (b) any other instruments, documents
or agreements, in each case to the extent that such amendment, modification or
waiver would be materially adverse to the interests of the Lenders.

 

SECTION 6.10. Additional Subsidiaries The Loan Parties will not, and will not
permit any Subsidiary to, create any additional Subsidiary unless no Default or
Event of Default would arise therefrom and the requirements of Section 5.13 are
satisfied.

 

SECTION 6.11. Excess Availability. The Borrowers shall maintain Excess
Availability at all times of not less than the greater of (i) fifteen percent
(15%) of the Borrowing Base at any time of calculation, or (ii) $7,500,000.

 

SECTION 6.12. Fiscal Year The Lead Borrower and its Subsidiaries shall not
change their Fiscal Year without the prior written consent of the Administrative
Agent, which consent shall not be unreasonably withheld.

 

SECTION 6.13. Environmental Laws The Loan Parties shall not (a) fail to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, or (b) become
subject to any Environmental Liability, in each case which is reasonably likely
to have a Material Adverse Effect.

 

SECTION 6.14 Store Closings. The Borrowers will not commit to close, or close,
any location at which any Borrower maintains, offers for sale or stores any of
its Inventory or other Collateral, except that the Borrowers may downsize by
closing up to 10% of the number of stores existing as of the Closing Date in any
twelve (12) month period, provided that if the Borrowers close more than 5% of
the number of stores existing as of the Closing Date in any twelve (12) month
period, all such closings in excess of 5% of the number of stores existing as of
the Closing Date in any twelve (12) month period shall be conducted by
professional liquidators, subject to the approval of, and on terms and
conditions reasonably acceptable to the Administrative Agent.

 

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ARTICLE VII

 

Events of Default

 

SECTION 7.01. Events of Default.

 

If any of the following events (“Events of Default”) shall occur:

 

(a) the Loan Parties shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

 

(b) (i) the Loan Parties shall fail to pay any interest on any Loan payable
under this Agreement, when and as the same shall become due and payable, or (ii)
the Loan Parties shall fail to pay any fee or any other amount (other than an
amount referred to in clause (a) or (b) of this Article) payable under this
Agreement or any other Loan Document, when and as the same shall become due and
payable and such failure continues for five (5) days;

 

(c) any representation or warranty made or deemed made by or on behalf of any
Loan Party in or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when made
or deemed made;

 

(d) the Loan Parties shall fail to observe or perform any covenant, condition or
agreement contained in Sections 2.22, 5.01(f), 5.07 (with respect to insurance
covering the Collateral), 5.09, or 5.12, or in Article VI;

 

(e) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in any Loan Document (other than those specified in clause
(a), (b), (c), or (d) of this Article), and such failure shall continue
unremedied for a period of 15 days after notice thereof from the Administrative
Agent to the Lead Borrower;

 

(f) any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness when
and as the same shall become due and payable (after giving effect to the
expiration of any grace or cure period set forth therein);

 

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (after
giving effect to the expiration of any grace or cure period set forth therein)
the holder or holders of any such Material Indebtedness or any trustee or agent
on its or their behalf to cause any such Material Indebtedness to become due, or
to require the prepayment, repurchase, redemption or defeasance thereof, prior
to its scheduled maturity;

 

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of any Loan Party or its debts, or of a substantial part of its assets,
under any federal or state bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan Party or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

 

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(i) any Loan Party shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any federal
or state bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Section 7.01, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for any Loan
Party or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing;

 

(j) any Loan Party shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

 

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $1,000,000 shall be rendered against any Loan Party or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to attach or levy upon any material
assets of any Loan Party to enforce any such judgment;

 

(l) an ERISA Event shall have occurred that when taken together with all other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Loan Parties in an aggregate amount exceeding $500,000;

 

(m) (i) any challenge in writing by or on behalf of any Loan Party to the
validity of any Loan Document or the applicability or enforceability of any Loan
Document strictly in accordance with the subject Loan Document’s terms or which
seeks to void, avoid, limit, or otherwise adversely affect any security interest
created by or in any Loan Document or any payment made pursuant thereto;

 

      (ii) any judicial proceeding by or on behalf of any other Person seeking
to challenge the validity of any Loan Document or the applicability or
enforceability of any Loan Document strictly in accordance with the subject Loan
Document’s terms or which seeks to void, avoid, limit, or otherwise adversely
affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.

 

      (iii) any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by any Loan Party not to be, a valid and
perfected Lien on any Collateral, with the priority required by the applicable
Security Document, except as a result of the sale or other disposition of the
applicable Collateral in a transaction permitted under the Loan Documents;

 

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(n) the occurrence of any uninsured loss to any material portion of the
Collateral;

 

(o) the indictment of, or institution of any legal process or proceeding
against, any Loan Party, under any federal, state, municipal, and other civil or
criminal statute, rule, regulation, order, or other requirement having the force
of law where the relief, penalties, or remedies sought or available include the
forfeiture of any material property of any Loan Party and/or the imposition of
any stay or other order, the effect of which could reasonably be to restrain in
any material way the conduct by the Loan Parties, taken as a whole, of their
business in the ordinary course;

 

(p) the determination by the Borrowers, whether by vote of the Borrowers’ board
of directors or otherwise to: suspend the operation of any Borrower’s business
in the ordinary course, liquidate all or a material portion of the Borrowers’
assets or store locations, or employ an agent or other third party to conduct
any so-called store closing, store liquidation or “Going-Out-Of-Business” sales;
or

 

(q) the occurrence of any Change in Control;

 

then, and in every such event (other than an event with respect to any Loan
Party described in clause (h) or (i) of this Section 7.01), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Lead
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrowers
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties; and in case of any event with respect to any
Loan Party described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrowers accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties.

 

SECTION 7.02. Remedies on Default

 

(a) In case any one or more of the Events of Default shall have occurred and be
continuing, and whether or not the maturity of the Loans shall have been
accelerated pursuant hereto, the Administrative Agent may proceed to protect and
enforce its rights and remedies under this Agreement, the Notes or any of the
other Loan Documents by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable

 

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right of the Agents or the Lenders. 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.

 

If any Event of Default shall occur and be continuing, on the Business Day that
the Lead Borrower receives notice from the Administrative Agent or the Required
Lenders demanding the deposit of cash collateral pursuant to this paragraph, the
Borrowers shall deposit in the Cash Collateral Account an amount in cash equal
to 103% of the Letter of Credit Outstandings as of such date plus any accrued
and unpaid interest thereon. Each such deposit shall be held by the Collateral
Agent as collateral for the payment and performance of the Obligations of the
Borrowers under this Agreement. The Collateral Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
Cash Collateral Account. Other than any interest earned on the investment of
such deposits, which investments shall be made at the option and sole discretion
of the Collateral Agent at the request of the Lead Borrower and at the
Borrowers’ risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such Cash Collateral Account shall be applied by the Collateral Agent to
reimburse the Issuing Bank for payments on account of drawings under Letters of
Credit for which it has not been reimbursed and, to the extent not so applied,
shall be held first for the satisfaction of the reimbursement obligations of the
Borrowers for the Letter of Credit Outstandings at such time and thereafter be
applied to satisfy other Obligations of the Borrowers under this Agreement.

 

SECTION 7.03. Application of Proceeds

 

After the occurrence of an Event of Default and acceleration of the Obligations,
all proceeds realized from any Loan Party or on account of any Collateral shall
be applied in the manner set forth in Section 6.02 of the Security Agreement.
All amounts required to be applied to Loans hereunder (other than Swingline
Loans) shall be applied ratably in accordance with each Lender’s Commitment
Percentage.

 

ARTICLE VIII

 

The Agents

 

SECTION 8.01. Administration by Administrative Agent.

 

Each Lender, the Collateral Agent and the Issuing Bank hereby irrevocably
designate Fleet as Administrative Agent under this Agreement and the other Loan
Documents. The general administration of the Loan Documents shall be by the
Administrative Agent. The Lenders, the Collateral Agent and the Issuing Bank
each hereby irrevocably authorizes the Administrative Agent (i) to enter into
the Loan Documents to which it is a party and (ii) at its discretion, to take or
refrain from taking such actions as agent on its behalf and to exercise or
refrain from exercising such powers under the Loan Documents and the Notes as
are delegated by the terms hereof or thereof, as appropriate, together with all
powers reasonably incidental thereto. The Administrative Agent shall have no
duties or responsibilities except as set forth in this Agreement and the
remaining Loan Documents, nor shall it have any fiduciary relationship with any
Lender, and no implied covenants, responsibilities, duties, obligations, or
liabilities shall be read into the Loan Documents or otherwise exist against the
Administrative Agent.

 

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SECTION 8.02. The Collateral Agent.

 

Each Lender, the Administrative Agent and the Issuing Bank hereby irrevocably
(i) designate FRG as Collateral Agent under this Agreement and the other Loan
Documents, (ii) authorize the Collateral Agent to enter into the Collateral
Documents and the other Loan Documents to which it is a party and to perform its
duties and obligations thereunder, together with all powers reasonably
incidental thereto, and (iii) agree and consent to all of the provisions of the
Security Documents. All Collateral shall be held or administered by the
Collateral Agent (or its duly-appointed agent) for its benefit and for the
ratable benefit of the other Secured Parties. Any proceeds received by the
Collateral Agent from the foreclosure, sale, lease or other disposition of any
of the Collateral and any other proceeds received pursuant to the terms of the
Security Documents or the other Loan Documents shall be paid over to the
Administrative Agent for application as provided in Sections 2.19, 2.23, or
7.04, as applicable. The Collateral Agent shall have no duties or
responsibilities except as set forth in this Agreement and the remaining Loan
Documents, nor shall it have any fiduciary relationship with any Lender, and no
implied covenants, responsibilities, duties, obligations, or liabilities shall
be read into the Loan Documents or otherwise exist against the Collateral Agent.

 

SECTION 8.03. Sharing of Excess Payments.

 

Each of the Lenders, the Agents and the Issuing Bank agrees that if it shall,
through the exercise of a right of banker’s lien, setoff or counterclaim against
the Loan Parties, including, but not limited to, a secured claim under Section
506 of the Bankruptcy Code or other security or interest arising from, or in
lieu of, such secured claim and received by such Lender, any Agent or the
Issuing Bank under any applicable bankruptcy, insolvency or other similar law,
or otherwise, obtain payment in respect of the Obligations owed it (an “excess
payment”) as a result of which such Lender, such Agent or the Issuing Bank has
received payment of any Loans or other Obligations outstanding to it in excess
of the amount that it would have received if all payments at any time applied to
the Loans and other Obligations had been applied in the order of priority set
forth in Section 7.04, then such Lender, Agent or the Issuing Bank shall
promptly purchase at par (and shall be deemed to have thereupon purchased) from
the other Lenders, such Agent and the Issuing Bank, as applicable, a
participation in the Loans and Obligations outstanding to such other Persons, in
an amount determined by the Administrative Agent in good faith as the amount
necessary to ensure that the economic benefit of such excess payment is
reallocated in such manner as to cause such excess payment and all other
payments at any time applied to the Loans and other Obligations to be
effectively applied in the order of priority set forth in Section 7.04 in
proportion to its Commitment Percentages; provided, that if any such excess
payment is thereafter recovered or otherwise set aside such purchase of
participations shall be correspondingly rescinded (without interest). The Loan
Parties expressly consent to the foregoing arrangements and agree that any
Lender, any Agent or the Issuing Bank holding (or deemed to be holding) a
participation in any Loan or other Obligation may exercise any and all rights of
banker’s lien, setoff or counterclaim with respect to any and all moneys owing
by such Loan Party to such Lender, such Agent or the Issuing Bank as fully as if
such Lender, Agent or the Issuing Bank held a Note and was the original obligee
thereon, in the amount of such participation.

 

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SECTION 8.04. Agreement of Required Lenders.

 

(i) Upon any occasion requiring or permitting an approval, consent, waiver,
election or other action on the part of only the Required Lenders, action shall
be taken by the Agents for and on behalf or for the benefit of all Lenders upon
the direction of the Required Lenders, and any such action shall be binding on
all Lenders, and (ii) upon any occasion requiring or permitting an approval,
consent, waiver, election or other action on the part of the Required
Supermajority Lenders, action shall be taken by the Agents for and on behalf or
for the benefit of all Lenders upon the direction of the Required Supermajority
Lenders and any such action shall be binding on all Lenders. No amendment,
modification, consent, or waiver shall be effective except in accordance with
the provisions of Section 9.02.

 

(ii) Upon the occurrence of an Event of Default, the Agents shall (subject to
the provisions of Section 9.02) take such action with respect thereto as may be
reasonably directed by the Required Lenders; provided that unless and until the
Agents shall have received such directions, the Agents may (but shall not be
obligated to) take such action as it shall deem advisable in the best interests
of the Lenders. In no event shall the Agents be required to comply with any such
directions to the extent that the Agents believe that the Agents’ compliance
with such directions would be unlawful.

 

SECTION 8.05. Liability of Agents.

 

(i) Each of the Agents, when acting on behalf of the Lenders and the Issuing
Bank, may execute any of its respective duties under this Agreement by or
through any of its respective officers, agents and employees, and none of the
Agents nor their respective directors, officers, agents or employees shall be
liable to the Lenders or the Issuing Bank or any of them for any action taken or
omitted to be taken in good faith, or be responsible to the Lenders or the
Issuing Bank or to any of them for the consequences of any oversight or error of
judgment, or for any loss, except to the extent of any liability imposed by law
by reason of such Agent’s own gross negligence or willful misconduct. The Agents
and their respective directors, officers, agents and employees shall in no event
be liable to the Lenders or the Issuing Bank or to any of them for any action
taken or omitted to be taken by them pursuant to instructions received by them
from the Required Lenders, or Required Supermajority Lenders, as applicable, or
in reliance upon the advice of counsel selected by it. Without limiting the
foregoing, none of the Agents, nor any of their respective directors, officers,
employees, or agents (A) shall be responsible to any Lender or the Issuing Bank
for the due execution, validity, genuineness, effectiveness, sufficiency, or
enforceability of, or for any recital, statement, warranty or representation in,
this Agreement, any Loan Document or any related agreement, document or order,
or (B) shall be required to ascertain or to make any inquiry concerning the
performance or observance by any Loan Party of any of the terms, conditions,
covenants, or agreements of this Agreement or any of the Loan Documents, or (C)
shall be responsible to any Lender or the Issuing Bank for the state or
condition of any properties of any Borrower or any other obligor hereunder
constituting Collateral for the Obligations of the Borrower hereunder, or any
information contained in the books or records of the Borrowers; or (D) shall be
responsible to any Lender or the Issuing Bank

 

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for the validity, enforceability, collectibility, effectiveness or genuineness
of this Agreement or any other Loan Document or any other certificate, document
or instrument furnished in connection therewith; or (E) shall be responsible to
any Lender or the Issuing Bank for the validity, priority or perfection of any
lien securing or purporting to secure the Obligations or the value or
sufficiency of any of the Collateral.

 

(ii) The Agents may execute any of their duties under this Agreement or any
other Loan Document by or through their agents or attorneys-in-fact, and shall
be entitled to the advice of counsel concerning all matters pertaining to its
rights and duties hereunder or under the Loan Documents. The Agents shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by them with reasonable care.

 

(iii) None of the Agents nor any of their respective directors, officers,
employees, or agents shall have any responsibility to the Loan Parties on
account of the failure or delay in performance or breach by any Lender (other
than by the Agent in its capacity as a Lender) or the Issuing Bank of any of
their respective obligations under this Agreement or the Notes or any of the
Loan Documents or in connection herewith or therewith.

 

(iv) The Agents shall be entitled to rely, and shall be fully protected in
relying, upon any notice, consent, certificate, affidavit, or other document or
writing believed by it to be genuine and correct and to have been signed, sent
or made by the proper person or persons, and upon the advice and statements of
legal counsel (including, without, limitation, counsel to the Loan Parties),
independent accountants and other experts selected by the Agents. The Agents
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless they shall first receive such advice
or concurrence of the Required Lenders as they deem appropriate or they shall
first be indemnified to their satisfaction by the Lenders against any and all
liability and expense which may be incurred by them by reason of the taking or
failing to take any such action.

 

SECTION 8.06. Notice of Default. The Agents shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agents have actual knowledge of the same or has received notice from a
Lender or the Loan Parties referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a “notice of default”. In
the event that the Agents obtain such actual knowledge or receive such a notice,
the Agents shall give prompt notice thereof to each of the Lenders. The Agents
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders. Unless and until the Agents
shall have received such direction, the Agents 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 they shall deem advisable in the best
interest of the Lenders.

 

SECTION 8.07. Lenders’ Credit Decisions. Each Lender acknowledges that it has,
independently and without reliance upon the Agents or any other Lender, and
based on the financial statements prepared by the Loan Parties and such other
documents and information as it has deemed appropriate, made its own credit
analysis and investigation into the business, assets, operations, property, and
financial and other condition of the Loan Parties and has made its own decision
to enter into this Agreement and the other Loan Documents. Each Lender also

 

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acknowledges that it will, independently and without reliance upon the Agents 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
determining whether or not conditions precedent to closing any Loan hereunder
have been satisfied and in taking or not taking any action under this Agreement
and the other Loan Documents.

 

SECTION 8.08. Reimbursement and Indemnification.

 

Each Lender agrees (i) to reimburse (x) each Agent for such Lender’s Commitment
Percentage of any expenses and fees incurred by such Agent for the benefit of
the Lenders or the Issuing Bank under this Agreement, the Notes and any of the
Loan Documents, including, without limitation, counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders or the
Issuing Bank, and any other expense incurred in connection with the operations
or enforcement thereof not reimbursed by the Loan Parties and (y) each Agent for
such Lender’s Commitment Percentage of any expenses of such Agent incurred for
the benefit of the Lenders or the Issuing Bank that the Loan Parties have agreed
to reimburse pursuant to Section 9.03 and has failed to so reimburse and (ii) to
indemnify and hold harmless the Agents and any of their directors, officers,
employees, or agents, on demand, in the amount of such Lender’s Commitment
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against it or any of them in any way relating to or arising out of this
Agreement, the Notes or any of the Loan Documents or any action taken or omitted
by it or any of them under this Agreement, the Notes or any of the Loan
Documents to the extent not reimbursed by the Loan Parties (except such as shall
result from their respective gross negligence or willful misconduct). The
provisions of this Section 8.08 shall survive the repayment of the Obligations
and the termination of the Commitments.

 

SECTION 8.09. Rights of Agents.

 

It is understood and agreed that Fleet and FRG shall each have the same rights
and powers hereunder (including the right to give such instructions) as the
other Lenders and may exercise such rights and powers, as well as its rights and
powers under other agreements and instruments to which it is or may be party,
and engage in other transactions with any Borrower, as though they were not the
Administrative Agent or the Collateral Agent, respectively, of the Lenders under
this Agreement. The Agents and their affiliates may accept deposits from, lend
money to, and generally engage in any kind of commercial or investment banking,
trust, advisory or other business with the Loan Parties and their Subsidiaries
and Affiliates as if it were not the Agent hereunder.

 

SECTION 8.10. Independent Lenders and Issuing Bank.

 

The Lenders and the Issuing Bank each acknowledge that they have decided to
enter into this Agreement and to make the Loans or issue the Letters of Credit
hereunder based on their own analysis of the transactions contemplated hereby
and of the creditworthiness of the Loan Parties and agrees that the Agents shall
bear no responsibility therefor.

 

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SECTION 8.11. Notice of Transfer.

 

The Agents may deem and treat a Lender party to this Agreement as the owner of
such Lender’s portion of the Loans for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 9.04(b).

 

SECTION 8.12. Successor Agent

 

Any Agent may resign at any time by giving five (5) Business Days’ written
notice thereof to the Lenders, the Issuing Bank, the other Agents and the Lead
Borrower. Upon any such resignation of any Agent, the Required Lenders shall
have the right to appoint a successor Agent, which so long as there is no
Default or Event of Default, shall be reasonably satisfactory to the Lead
Borrower (whose consent shall not be unreasonably withheld or delayed). If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment, within 30 days after the retiring Agent’s giving
of notice of resignation, the retiring Agent may, on behalf of the Lenders, the
other Agents and the Issuing Bank, appoint a successor Agent which shall be a
Person capable of complying with all of the duties of such Agent (and the
Issuing Bank), hereunder (in the opinion of the retiring Agent and as certified
to the Lenders in writing by such successor Agent) which, so long as there is no
Default or Event of Default, shall be reasonably satisfactory to the Lead
Borrower (whose consent shall not be unreasonably withheld or delayed).
Notwithstanding the foregoing, if Fleet resigns as Administrative Agent, FRG
may, at its option, become successor Administrative Agent; and if FRG resigns as
Collateral Agent, Fleet may, at its option, become successor Collateral Agent.
Upon the acceptance of any appointment as Agent by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent’s resignation hereunder as such Agent, the provisions
of this Article VIII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was such Agent under this Agreement.

 

SECTION 8.13. Reports and Financial Statements.

 

Promptly after receipt thereof from the Lead Borrower, the Administrative Agent
shall remit to each Lender and the Collateral Agent copies of all financial
statements required to be delivered by the Borrowers hereunder and all
commercial finance examinations and appraisals of the Collateral received by the
Administrative Agent.

 

SECTION 8.14. Delinquent Lender. If for any reason any Lender shall fail or
refuse to abide by its obligations under this Agreement, including without
limitation its obligation to make available to Administrative Agent its
Commitment Percentage of any Revolving Loans, expenses or setoff or purchase its
Commitment Percentage of a participation interest in the Swingline Loans (a
“Delinquent Lender”) and such failure is not cured within ten (10) days of
receipt from the Administrative Agent of written notice thereof, then, in
addition to the rights and remedies that may be available to Agents, other
Lenders, the Loan Parties or any other party at law or in equity, and not at
limitation thereof, (i) such Delinquent Lender’s right to participate in the
administration of, or decision-making rights related to, the Loans, this
Agreement or the other Loan Documents shall be suspended during the pendency of
such failure or refusal, and (ii) a

 

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Delinquent Lender shall be deemed to have assigned any and all payments due to
it from the Loan Parties, whether on account of outstanding Loans, interest,
fees or otherwise, to the remaining non-delinquent Lenders for application to,
and reduction of, their proportionate shares of all outstanding Loans until, as
a result of application of such assigned payments the Lenders’ respective
Commitment Percentage of all outstanding Loans shall have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency. The Delinquent Lender’s decision-making and
participation rights and rights to payments as set forth in clauses (i) and (ii)
hereinabove shall be restored only upon the payment by the Delinquent Lender of
its Commitment Percentage of any Loans, any participation obligation, or
expenses as to which it is delinquent, together with interest thereon at the
rate set forth in Section 2.11 hereof from the date when originally due until
the date upon which any such amounts are actually paid.

 

The non-delinquent Lenders shall also have the right, but not the obligation, in
their respective, sole and absolute discretion, to acquire for no cash
consideration, (pro rata, based on the respective Commitments of those Lenders
electing to exercise such right) the Delinquent Lender’s Commitment to fund
future Loans. Upon any such purchase of the Commitment Percentage of any
Delinquent Lender’s future commitment, the Delinquent Lender’s share in future
Loans and its rights under the Loan Documents with respect thereto shall
terminate on the date of purchase, and the Delinquent Lender shall promptly
execute all documents reasonably requested to surrender and transfer such
interest, including, if so requested, an Assignment and Acceptance. Each
Delinquent Lender shall indemnify the Agents and each non-delinquent Lender from
and against any and all loss, damage or expenses, including but not limited to
reasonable attorneys’ fees and funds advanced by any Agent or by any
non-delinquent Lender, on account of a Delinquent Lender’s failure to timely
fund its Commitment Percentage of a Loan or to otherwise perform its obligations
under the Loan Documents.

 

ARTICLE IX

 

Miscellaneous

 

SECTION 9.01. Notices. Except in the case of notices and other communications
expressly permitted to be given by telephone, 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 telecopy, as follows:

 

(a) if to any Loan Party, to it at The Wet Seal, Inc., 26972 Burbank, Foothill
Ranch, California 92610, Attention: Chief Financial Officer (Telecopy No. (858)
206-4977), with a copy to Akin Gump Strauss Hauer & Feld LLP, 590 Madison
Avenue, New York, New York 10022, Attention: Steven Scheinman, Esquire (Telecopy
No. (212) 872-1090);

 

(b) if to the Administrative Agent or the Collateral Agent, or the Swingline
Lender to Fleet Retail Group, Inc., 40 Broad Street, Boston, Massachusetts
02109, Attention Daniel T. Platt (Telecopy No. (617) 434-4312), with a copy to
Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108,
Attention: Robert E. Paul, Esquire (Telecopy No. (617) 880-3456);

 

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Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

 

(b) if to any other Lender, to it at its address (or telecopy number) set forth
on the signature pages hereto or on any Assignment and Acceptance for such
Lender.

 

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Agents, the
Issuing Bank or any Lender in exercising any right or power hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Agents, the Issuing Bank and the Lenders hereunder and under
the other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality of
the foregoing, the making of a Loan or issuance of a Letter of Credit shall not
be construed as a waiver of any Default, regardless of whether the Agents, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.

 

(b) Neither this Agreement nor any other Loan Document nor any provision hereof
or thereof may be waived, amended or modified except, in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by the
Lead Borrower and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by the
Agents and the Loan Parties that are parties thereto, in each case with the
Consent of the Required Lenders, provided that no such agreement shall (i)
increase the Commitment of any Lender without the Consent of such Lender, (ii)
reduce the principal amount of any Loan or L/C Disbursement or reduce the rate
of interest thereon, or reduce any fees payable hereunder, without the Consent
of each Lender affected thereby, (iii) postpone the scheduled date of payment of
the principal amount of any Loan or L/C Disbursement, or any interest thereon,
or any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of the Commitments or the
Maturity Date, without the Consent of each Lender affected thereby, (iv) change
Sections 2.19, 2.22, or 2.23 or Section 6.02 of the Security Agreement, without
the Consent of each Lender, (v) change any of the provisions of this Section
9.02 or the definition of the term “Required Lenders” or “Required Supermajority
Lenders” or any other provision of any Loan Document specifying the number or
percentage of Lenders required to waive, amend or modify any rights thereunder
or make any determination or grant any consent thereunder, without the Consent
of each Lender, (vi) release any Loan Party from its obligations under any Loan
Document, or limit its liability in respect of such Loan Document, without the
Consent of each Lender, (vii) except for sales described in Section 6.05 or as
permitted in the Security Documents, release any material portion of the
Collateral from the Liens of the Security Documents, without the 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

 

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available to be borrowed by the Borrowers would be increased, without the
Consent of each Lender, provided that the foregoing shall not limit the
discretion of the Administrative Agent to change, establish or eliminate any
Reserves, (ix) increase the Permitted Overadvance, without the Consent of each
Lender, (x) subordinate the Obligations hereunder, or the Liens granted
hereunder or under the other Loan Documents, to any other Indebtedness or Lien,
as the case may be without the prior Consent of each Lender, and provided
further that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Agents or the Issuing Bank without the prior written
consent of the Agents or the Issuing Bank, as the case may be.

 

(c) Notwithstanding anything to the contrary contained herein, no modification,
amendment or waiver which increases the maximum amount of the Swingline Loans to
an amount in excess of $10,000,000 (or such greater amount to which such limit
has been previously increased in accordance with the provisions of this Section
9.02(c)) shall be made without the Consent of the Required Supermajority
Lenders.

 

(d) Notwithstanding anything to the contrary contained in this Section 9.02, in
the event that the Borrowers request that this Agreement or any other Loan
Document be modified, amended or waived in a manner which would require the
Consent of the Lenders pursuant to Sections 9.02(b) or 9.02(c) and such
amendment is approved by the Required Lenders, but not by the percentage of the
Lenders set forth in said Sections 9.02(b) or 9.02(c), as applicable, the
Borrowers, and the Required Lenders shall be permitted to amend this Agreement
without the Consent of the Lender or Lenders which did not agree to the
modification or amendment requested by the Borrowers (such Lender or Lenders,
collectively the “Minority Lenders”) subject to providing for (w) the
termination of the Commitment of each of the Minority Lenders, (x) the addition
to this Agreement of one or more other financial institutions (reasonably
acceptable to the Administrative Agent), or an increase in the Commitment of one
or more of the Required Lenders, so that the aggregate Commitments after giving
effect to such amendment shall be in the same amount as the aggregate
Commitments immediately before giving effect to such amendment, (y) if any Loans
are outstanding at the time of such amendment, the making of such additional
Loans by such new or increasing Lender or Lenders, as the case may be, as may be
necessary to repay in full the outstanding Loans (including principal, interest,
and fees) of the Minority Lenders immediately before giving effect to such
amendment and (z) such other modifications to this Agreement or the Loan
Documents as may be appropriate and incidental to the foregoing.

 

(e) No notice to or demand on any Loan Party shall entitle any Loan Party to any
other or further notice or demand in the same, similar or other circumstances.
Each holder of a Note shall be bound by any amendment, modification, waiver or
consent authorized as provided herein, whether or not a Note shall have been
marked to indicate such amendment, modification, waiver or consent and any
consent by a Lender, or any holder of a Note, shall bind any Person subsequently
acquiring a Note, whether or not a Note is so marked. No amendment to this
Agreement or any other Loan Document shall be effective against the Borrowers
unless signed by the Borrowers or other applicable Loan Party.

 

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Loan Parties shall
jointly and severally pay (i) all reasonable out-of-pocket expenses incurred by
the Agents and their Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Agents,

 

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outside consultants for the Agents, appraisers, for commercial finance
examinations and environmental site assessments, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of the Loan Documents or any amendments, modifications or waivers
of the provisions thereof (whether or not the transactions contemplated hereby
or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder, and
(iii) all reasonable out-of-pocket expenses incurred by the Agents, the Issuing
Bank or any Lender, including the reasonable fees, charges and disbursements of
any counsel and any outside consultants for the Agents, the Issuing Bank or any
Lender, for appraisers, commercial finance examinations, and environmental site
assessments, in connection with the enforcement or protection of its rights in
connection with the Loan Documents, including its rights under this Section, or
in connection with the Loans made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit;
provided that the Lenders who are not the Agents or the Issuing Bank 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).

 

(b) The Loan Parties shall, jointly and severally, indemnify the Agents, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable and documented fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any other agreement or instrument
contemplated hereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the transactions
contemplated by the Loan Documents or any other transactions contemplated
hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by any Loan Party or any of the
Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of the Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or wilful
misconduct of such Indemnitee. In connection with any indemnified claim
hereunder, the Indemnitee shall be entitled to select its own counsel and the
Loan Parties shall promptly pay the reasonable fees and expenses of such
counsel.

 

(c) To the extent that any Loan Party fails to pay any amount required to be
paid by it to the Agents or the Issuing Bank under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Agents or the Issuing Bank,
as the case may be, such Lender’s Commitment Percentage (determined as of the
time that the applicable unreimbursed

 

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expense or indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the Agents or
the Issuing Bank.

 

(d) To the extent permitted by Applicable Law, no Loan Party shall assert, and
each hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
transactions contemplated by the Loan Documents, any Loan or Letter of Credit or
the use of the proceeds thereof. The Loan Parties further agree that no
Indemnitee shall have any liability to the Loan Parties, any Person asserting
claims by or on behalf of any Loan Party or any other Person in connection with
this Agreement or the other Loan Documents except (i) for breach of the
Indemnitee’s obligations under this Agreement and the other Loan Documents, or
(ii) the Indemnitee’s gross negligence, willful misconduct or bad faith.

 

(e) All amounts due under this Section shall be payable promptly after written
demand therefor.

 

SECTION 9.04. Designation of Lead Borrower as Borrowers’ Agent

 

(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower
as that Borrower’s agent to obtain Loans and Letters of Credit hereunder, the
proceeds of which shall be available to each Borrower for those uses as those
set forth herein. As the disclosed principal for its agent, each Borrower shall
be obligated to the Agents and each Lender on account of Loans so made and
Letters of Credit so issued hereunder as if made directly by the Lenders to that
Borrower, notwithstanding the manner by which such Loans and Letters of Credit
are recorded on the books and records of the Lead Borrower and of any Borrower.

 

(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, guarantees, and agrees to discharge all Obligations of all other
Borrowers as if the Borrower so assuming and guarantying were each other
Borrower.

 

(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 Loan.

 

(d) The Lead Borrower shall cause the transfer of the proceeds of each Loan to
the (those) Borrower(s) on whose behalf such Loan was obtained. Neither the
Agents nor any Lender shall have any obligation to see to the application of
such proceeds.

 

(e) If, for any reason, and at any time during the term of this Agreement, any
Borrower, including the Lead Borrower, as agent for the Borrowers, shall be
unable to, or prohibited from carrying out the terms and conditions of this
Agreement (as determined by the Administrative Agent in the Administrative
Agent’s sole and absolute discretion); or the Administrative Agent deems it
inexpedient (in the Administrative Agent’s sole and

 

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absolute discretion) to continue making Loans and cause Letters of Credit to be
issued to or for the account of any particular Borrower, or to channel such
Loans and Letters of Credit through the Lead Borrower, then the Lenders may make
Loans directly to, and cause the issuance of Letters of Credit directly for the
account of such of the Borrowers as the Administrative Agent determines to be
expedient, which Loans may be made without regard to the procedures otherwise
included herein.

 

(f) In the event that the Administrative Agent determines to forgo the
procedures included herein pursuant to which Loans and Letters of Credit are to
be channeled through the Lead Borrower, then the Administrative Agent may
designate one or more of the Borrowers to fulfill the financial and other
reporting requirements otherwise imposed herein upon the Lead Borrower.

 

(g) Each of the Borrowers shall remain liable to the Agents and the Lenders for
the payment and performance of all Obligations (which payment and performance
shall continue to be secured by all Collateral granted by each of the Borrowers)
notwithstanding any determination by the Administrative Agent to cease making
Loans or causing Letters of Credit to be issued to or for the benefit of any
Borrower.

 

(h) The authority of the Lead Borrower to request Loans on behalf of, and to
bind, the Borrowers, shall continue unless and until the Administrative Agent
acts as provided in subparagraph (c), above, or the Administrative Agent
actually receives written notice of: (i) the termination of such authority, and
(ii) the subsequent appointment of a successor Lead Borrower, which notice is
signed by the respective chief executive officers of each Borrower (other than
the chief executive officer of the Lead Borrower being replaced) then eligible
for borrowing under this Agreement; and written notice from such successive Lead
Borrower (i) accepting such appointment; (ii) acknowledging that such removal
and appointment has been effected by the respective chief executive officers of
such Borrowers eligible for borrowing under this Agreement; and (iii)
acknowledging that from and after the date of such appointment, the newly
appointed Lead Borrower shall be bound by the terms hereof, and that as used
herein, the term “Lead Borrower” shall mean and include the newly appointed Lead
Borrower.

 

SECTION 9.05. Successors and Assigns.(a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any such attempted
assignment or transfer without such consent 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 (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

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(b) Any Lender may assign to no more than one Eligible Assignee all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it), provided that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender, the
Lead Borrower (but only if no Default then exists) (which consent shall not be
unreasonably withheld or delayed), the Agents and the Issuing Bank must give
their prior written consent to such assignment, (ii) except in the case of an
assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless the Administrative Agent otherwise consents, (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender’s rights and obligations, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, and, after completion of the syndication of the Loans, together
with a processing and recordation fee of $3,500. Subject to acceptance and
recording thereof pursuant to paragraph (d) of this Section, from and after the
effective date specified in each Assignment and Acceptance the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, 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 Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance 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 Section 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.

 

(c) The Administrative Agent, acting for this purpose as an agent of the Loan
Parties, shall maintain at one of its offices in Boston, Massachusetts a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and L/C Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive and the Loan Parties, the Administrative Agent,
the Issuing Bank 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, the Issuing Bank and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

 

(d) Upon its receipt of a duly completed Assignment and Acceptance executed by
an assigning Lender and an assignee, the processing and recordation fee referred
to in paragraph (b) of this Section and any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall accept
such Assignment and Acceptance and record the information contained therein in
the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.

 

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(e) Any Lender may, without the consent of the Loan Parties, the Agents, and the
Issuing Bank, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it), provided that (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 Agents, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation in the Commitments, the
Loans and the Letters of Credit Outstandings shall provide that such Lender
shall retain the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents,
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in Section 9.02(b)(ii) or (iii) that affects
such Participant. Subject to paragraph (f) of this Section, the Loan Parties
agree that each Participant shall be entitled to the benefits of Sections 2.24,
2.26 and 2.27 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 9.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.26(c) as though it were a Lender.

 

(f) A Participant shall not be entitled to receive any greater payment under
Section 2.24 or 2.27 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 2.27 unless (i) the Lead
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with Section
2.27(e) as though it were a Lender and (ii) such Participant is eligible for
exemption from the withholding Tax referred to therein, following compliance
with Section 2.27(e).

 

(g) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to any of the
twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve
Act, 12 U.S.C. Section 341, and this Section shall not apply to any such pledge
or assignment of a security interest, provided that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

 

SECTION 9.06. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is

 

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extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit
is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.24, 2.27 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Letters of Credit and the Commitments or the termination of
this Agreement or any provision hereof.

 

SECTION 9.07. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all contemporaneous or 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 Agents and the Lenders and
when the Administrative Agent shall have received counterparts hereof that, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

 

SECTION 9.08. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

SECTION 9.09. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender, each Participant and each of its Affiliates is hereby
authorized with the consent of the Administrative Agent or required Lenders at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Loan
Parties against any of and all the obligations of the Loan Parties now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured and regardless of the adequacy of the
Collateral. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) that such Lender
may have.

 

SECTION 9.10. Governing Law; Jurisdiction; Consent to Service of Process.

 

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

 

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(b) The Loan Parties agree that any suit for the enforcement of this Agreement
or any other Loan Document may be brought in any Massachusetts state or federal
court sitting in Suffolk County in Boston, Massachusetts as the Administrative
Agent may elect in its sole discretion and consent to the non-exclusive
jurisdiction of such courts. The Loan Parties hereby waive any objection which
they may now or hereafter have to the venue of any such suit or any such court
or that such suit is brought in an inconvenient forum. The Loan Parties agree
that any action commenced by any Loan Party asserting any claim or counterclaim
arising under or in connection with this Agreement or any other Loan Document
shall be brought solely in any Massachusetts or federal court sitting in Suffolk
County in Boston, Massachusetts as the Administrative Agent may elect in its
sole discretion and consent to the exclusive jurisdiction of such courts with
respect to any such action.

 

(c) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

 

SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A JURY IN ANY TRIAL OF
ANY CASE OR CONTROVERSY IN WHICH ANY BORROWER, ANY AGENT, FLEET, ANY LENDER OR
ANY PARTICIPANT IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST ANY BORROWER, THE AGENT, FLEET, AND/OR SUCH LENDER OR
PARTICIPANT OR IN WHICH ANY BORROWER, THE AGENT, FLEET, OR SUCH LENDER OR
PARTICIPANT, IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR
ANY OTHER PERSON AND THE AGENT, FLEET, OR SUCH LENDER OR PARTICIPANT. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.12. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts that are treated as interest on such Loan
under Applicable Law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
Applicable Law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and,

 

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to the extent lawful, the interest and Charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this
Section shall be cumulated and the interest and Charges payable to such Lender
in respect of other Loans or periods shall be increased (but not above the
Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Effective Rate to the date of repayment, shall have
been received by such Lender.

 

SECTION 9.14. Additional Waivers.

 

(a) The Obligations are the joint and several obligations of each Loan Party. To
the fullest extent permitted by Applicable Law, the obligations of each Loan
Party hereunder shall not be affected by (i) the failure of any Agent or any
other Secured Party to assert any claim or demand or to enforce or exercise any
right or remedy against any other Loan Party under the provisions of this
Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of, this Agreement or any other Loan Document, or (iii) the failure to perfect
any security interest in, or the release of, any of the security held by or on
behalf of the Collateral Agent or any other Secured Party.

 

(b) To the fullest extent permitted by Applicable Law, the obligations of each
Loan Party hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or set-off, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Loan Party hereunder shall not be discharged or impaired or
otherwise affected by the failure of any Agent or any other Secured Party to
assert any claim or demand or to enforce any remedy under this Agreement, any
other Loan Document or any other agreement, by any waiver or modification of any
provision of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or
omission that may or might in any manner or to any extent vary the risk of any
Loan Party or that would otherwise operate as a discharge of any Loan Party as a
matter of law or equity (other than the indefeasible payment in full in cash of
all the Obligations).

 

(c) To the fullest extent permitted by Applicable Law, each Loan Party waives
any defense based on or arising out of any defense of any other Loan Party or
the unenforceability of the Obligations or any part thereof from any cause, or
the cessation from any cause of the liability of any other Loan Party, other
than the indefeasible payment in full in cash of all the Obligations. The
Collateral Agent and the other Secured Parties may, at their election, foreclose
on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with any other Loan Party, or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of any Loan Party hereunder except to the extent that
all the Obligations have been paid in full in cash and the Commitments have been
terminated. Pursuant to Applicable Law, each Loan Party waives any defense
arising out of any such election even

 

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though such election operates, pursuant to Applicable Law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Loan Party against any other Loan Party, as the case may be, or any
security.

 

(d) Upon payment by any Loan Party of any Obligations, all rights of such Loan
Party against any other Loan Party arising as a result thereof by way of right
of subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior payment in
full in cash of all the Obligations. In addition, any indebtedness of any Loan
Party now or hereafter held by any other Loan Party is hereby subordinated in
right of payment to the prior payment in full of the Obligations.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
Loan Party may make payments to any other Loan Party on account of any such
indebtedness. After the occurrence and during the continuance of an Event of
Default, none of the Loan Parties will demand, sue for, or otherwise attempt to
collect any such indebtedness. If any amount shall erroneously be paid to any
Loan Party on account of (a) such subrogation, contribution, reimbursement,
indemnity or similar right or (b) any such indebtedness of any Loan Party, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Obligations, whether matured or unmatured, in accordance with the terms of
the Loan Documents.

 

SECTION 9.15. Confidentiality.

 

Each of the Lenders agrees that it will use its best efforts not to disclose
without the prior consent of the Lead Borrower (other than to its employees,
auditors, counsel or other professional advisors, to Affiliates, to another
Lender or to such Lender’s holding or parent company) any information with
respect to the Borrowers or any other Loan Party which is furnished pursuant to
this Agreement and which is designated by the Lead Borrower to the Lenders in
writing as confidential provided that any Lender may disclose any such
information (a) as has become generally available to the public, (b) as may be
required or appropriate in any report, statement or testimony submitted to any
municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required or appropriate
in response to any summons or subpoena or in connection with any litigation, (d)
in order to comply with any law, order, regulation or ruling applicable to such
Lender, (e) in connection with the enforcement of remedies under this Agreement
and the other Loan Documents, and (f) to any prospective transferee in
connection with any contemplated transfer of any of the Loans or Notes or any
interest therein by such Lender provided that such prospective transferee agrees
to be bound by the provisions of this Section. The Loan Parties hereby agree
that the failure of a Lender to comply with the provisions of this Section 9.14
shall not relieve the Loan Parties of any of its obligations to such Lender
under this Agreement and the other Loan Documents.

 

[SIGNATURE PAGES FOLLOW]

 

88

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

 

THE WET SEAL, INC.

By:

 

/s/    DOUGLAS C. FELDERMAN

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

Name:

 

Douglas C. Felderman

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

Title:

 

SVP & Chief Financial Officer

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

THE WET SEAL RETAIL, INC.

By:

 

/s/    DOUGLAS C. FELDERMAN

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

Name:

 

Douglas C. Felderman

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

Title:

 

Secretary – Treasurer

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

WET SEAL CATALOG, INC.

By:

 

/s/    DOUGLAS C. FELDERMAN

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

Name:

 

Douglas C. Felderman

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

Title:

 

Secretary – Treasurer

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

WET SEAL GC, INC.

By:

 

/s/    DOUGLAS C. FELDERMAN

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

Name:

 

Douglas C. Felderman

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

Title:

 

Secretary – Treasurer

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

 

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FLEET RETAIL GROUP, INC.,

As Administrative Agent, Collateral Agent, as Swingline Lender and as Lender

By:

 

/s/ Daniel T. Platt

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

Name:

  Daniel T. Platt

Title:

  Director

Address:

    40 Broad Street, 10th Floor Boston, Massachusetts 02109

Attn:

  Daniel T. Platt

Telephone:

  (617) 434-4190

Telecopy:

  (617) 434-4312

FLEET NATIONAL BANK,

as Issuing Bank

By :

 

/s/ Daniel T. Platt

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

Name:

  Daniel T. Platt

Title:

  Director

Address:

    40 Broad Street Boston, Massachusetts 02109

Attn:

  Daniel T. Platt

Telephone:

  (617) 434-4190

Telecopy:

  (617) 434-4312

 

S-2