Exhibit 10.2
CREDIT AGREEMENT
dated as of
August 15, 2007
among
PETSMART, INC.
as Lead Borrower for:
PETSMART, INC.
PETSMART STORE SUPPORT GROUP, INC.
as Borrowers
The LENDERS Party Hereto
BANK OF AMERICA, N.A.
as Issuing Bank
BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent
and
BANC OF AMERICA SECURITIES LLC
as Sole Arranger and Sole Bookrunner

 

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TABLE OF CONTENTS

              Page  
ARTICLE I Definitions
    1  
 
       
SECTION 1.01. Defined Terms
    1  
SECTION 1.02. Terms Generally
    26  
SECTION 1.03. Accounting Terms; GAAP
    26  
 
       
ARTICLE II Amount and Terms of Credit
    26  
 
       
SECTION 2.01. Commitment of the Lenders
    26  
SECTION 2.02. Increase in Total Commitment
    27  
SECTION 2.03. Reserves; Changes to Reserves
    28  
SECTION 2.04. Making of Loans
    29  
SECTION 2.05. Overadvances
    30  
SECTION 2.06. Swingline Loans
    30  
SECTION 2.07. Letters of Credit
    31  
SECTION 2.08. Settlements Amongst Lenders
    35  
SECTION 2.09. Notes; Repayment of Loans
    36  
SECTION 2.10. Interest on Loans
    37  
SECTION 2.11. Default Interest
    37  
SECTION 2.12. Certain Fees
    37  
SECTION 2.13. Commitment Fee
    37  
SECTION 2.14. Letter of Credit Fees
    38  
SECTION 2.15. Nature of Fees
    38  
SECTION 2.16. Termination or Reduction of Commitments
    38  
SECTION 2.17. Alternate Rate of Interest
    39  
SECTION 2.18. Conversion and Continuation of Loans
    39  
SECTION 2.19. Mandatory Prepayment; Commitment Termination; Cash Collateral
    40  
SECTION 2.20. Optional Prepayment of Loans; Reimbursement of Lenders
    41  
SECTION 2.21. Maintenance of Loan Account; Statements of Account
    43  
SECTION 2.22. Cash Receipts
    43  
SECTION 2.23. Application of Payments
    45  
SECTION 2.24. Increased Costs
    46  
SECTION 2.25. Change in Legality
    47  
SECTION 2.26. Payments; Sharing of Setoff
    48  
SECTION 2.27. Taxes
    49  
SECTION 2.28. Security Interests in Collateral
    51  
SECTION 2.29. Mitigation Obligations
    51  
SECTION 2.30. Acknowledgments Regarding L/C Facilities
    51  
 
       
ARTICLE III Representations and Warranties
    51  
 
       
SECTION 3.01. Organization; Powers
    52  
SECTION 3.02. Authorization; Enforceability
    52  
SECTION 3.03. Governmental Approvals; No Conflicts
    52  
SECTION 3.04. Financial Condition
    52  

(i) 

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              Page  
SECTION 3.05. Properties
    52  
SECTION 3.06. Litigation and Environmental Matters
    53  
SECTION 3.07. Compliance with Laws and Agreements
    54  
SECTION 3.08. Investment and Holding Company Status
    54  
SECTION 3.09. Taxes
    54  
SECTION 3.10. ERISA
    54  
SECTION 3.11. Disclosure
    54  
SECTION 3.12. Subsidiaries
    54  
SECTION 3.13. Insurance
    55  
SECTION 3.14. Labor Matters
    55  
SECTION 3.15. Security Documents
    55  
SECTION 3.16. Federal Reserve Regulations
    55  
SECTION 3.17. Solvency
    56  
 
       
ARTICLE IV Conditions
    56  
 
       
SECTION 4.01. Closing Date
    56  
SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit
    57  
 
       
ARTICLE V Affirmative Covenants
    58  
 
       
SECTION 5.01. Financial Statements and Other Information
    58  
SECTION 5.02. Notices of Material Events
    60  
SECTION 5.03. Information Regarding Collateral
    61  
SECTION 5.04. Existence; Conduct of Business
    62  
SECTION 5.05. Payment of Obligations
    62  
SECTION 5.06. Maintenance of Properties
    62  
SECTION 5.07. Insurance
    62  
SECTION 5.08. Casualty and Condemnation
    63  
SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals
    63  
SECTION 5.10. Compliance with Laws
    64  
SECTION 5.11. Use of Proceeds and Letters of Credit
    64  
SECTION 5.12. Additional Subsidiaries
    64  
SECTION 5.13. Further Assurances
    64  
 
       
ARTICLE VI Negative Covenants
    65  
 
       
SECTION 6.01. Indebtedness and Other Obligations
    65  
SECTION 6.02. Liens
    66  
SECTION 6.03. Fundamental Changes
    68  
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions
    68  
SECTION 6.05. Asset Sales
    69  
SECTION 6.06. Restricted Payments; Certain Payments of Indebtedness
    70  
SECTION 6.07. Transactions with Affiliates
    71  
SECTION 6.08. Restrictive Agreements
    71  
SECTION 6.09. Amendment of Material Documents
    71  
SECTION 6.10. Additional Subsidiaries
    71  
SECTION 6.11. Minimum Excess Availability
    71  

(ii) 

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              Page  
ARTICLE VII Events of Default
    72  
 
       
SECTION 7.01. Events of Default
    72  
SECTION 7.02. When Continuing
    75  
SECTION 7.03. Remedies on Default
    75  
SECTION 7.04. Application of Proceeds
    75  
 
       
ARTICLE VIII The Agents
    75  
 
       
SECTION 8.01. Administration by Administrative Agent
    75  
SECTION 8.02. The Collateral Agent
    76  
SECTION 8.03. Sharing of Excess Payments
    76  
SECTION 8.04. Agreement of Required Lenders
    77  
SECTION 8.05. Liability of Agents
    77  
SECTION 8.06. Reimbursement and Indemnification
    78  
SECTION 8.07. Rights of Agents
    78  
SECTION 8.08. Independent Lenders and Issuing Bank
    79  
SECTION 8.09. Notice of Transfer
    79  
SECTION 8.10. Successor Agent
    79  
SECTION 8.11. Reports and Financial Statements
    79  
SECTION 8.12. Co-Agent, Syndication Agent and Arranger
    79  
 
       
ARTICLE IX Miscellaneous
    80  
 
       
SECTION 9.01. Notices
    80  
SECTION 9.02. Waivers; Amendments
    80  
SECTION 9.03. Expenses; Indemnity; Damage Waiver
    82  
SECTION 9.04. Designation of Lead Borrower as Borrowers’ Agent
    84  
SECTION 9.05. Successors and Assigns
    85  
SECTION 9.06. Survival
    87  
SECTION 9.07. Counterparts; Integration; Effectiveness
    88  
SECTION 9.08. Severability
    88  
SECTION 9.09. Right of Setoff
    88  
SECTION 9.10. Replacement of Lenders
    88  
SECTION 9.11. Governing Law; Jurisdiction; Consent to Service of Process
    89  
SECTION 9.12. WAIVER OF JURY TRIAL
    90  
SECTION 9.13. Headings
    90  
SECTION 9.14. Interest Rate Limitation
    90  
SECTION 9.15. Additional Waivers
    90  

(iii) 

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EXHIBITS

     
A.
  Assignment and Acceptance
B-1
  Notes
B-2
  Swingline Note
C
  Opinion of Counsel to Loan Parties
D
  Borrowing Base Certificate

(iv) 

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SCHEDULES

     
1.1
  Lenders and Commitments
1.2
  Facility Guarantors
1.3
  Investment Policy
2.22(a)
  DDAs
2.22(b)
  Credit Card Arrangements
2.22(c)
  Blocked Accounts
3.05(c)(i)
  Title to Properties; Real Estate Owned
3.05(c)(ii)
  Leased Properties
3.06
  Disclosed Matters
3.12
  Subsidiaries
3.13
  Insurance
5.01(c)
  Monthly Board Report
5.01(h)
  Financial Reporting Requirements
6.01
  Indebtedness
6.02
  Liens
6.04
  Investments

(v) 

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CREDIT AGREEMENT dated as of August 15, 2007 among
PETSMART, INC., a Delaware corporation, having a principal place of business at
19601 North 27th Avenue, Phoenix, Arizona 85027, as Lead Borrower for the
Borrowers, being
said PETSMART, INC., and
PETSMART STORE SUPPORT GROUP, INC., a Delaware corporation, having a principal
place of business at 19601 North 27th Avenue, Phoenix, Arizona 85027;
the LENDERS party hereto; and
BANK OF AMERICA, N.A., a national banking association having a place of business
at 100 Federal Street, Boston, Massachusetts 02110, as Issuing Bank; and
BANK OF AMERICA, N.A., a national banking association having its principal place
of business at 100 Federal Street, Boston, Massachusetts 02110, as
Administrative Agent and Collateral Agent for the Lenders; and
BANC OF AMERICA SECURITIES LLC, a Delaware limited liability company having its
principal place of business at 100 Federal Street, Boston, Massachusetts 02110,
as Sole Arranger and Sole Bookrunner.
     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 mean any right to payment for goods sold or leased or for
services rendered, whether or not earned by performance, or any right to payment
for credit extended for goods sold or leased or services rendered.
     “Additional Commitment Lender” has the meaning provided therefor in
Section 2.02(a).
     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

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     “Administrative Agent” means Bank of America, N.A., 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.
     “Alternate Base Rate” shall mean, for any day, the higher of (a) the rate
of interest in effect for such day as publicly announced from time to time by
Bank of America as its “prime rate” and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1% (0.50%) per annum. The “prime rate” is a rate
set by Bank of America based upon various factors including Bank of America’s
costs and desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate. Any change in such rate announced by Bank of
America shall take effect at the opening of business on the day specified in the
public announcement of such change. 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 Alternate
Base 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.
     “Applicable Margin” means initially, the rates for Base Rate Loans and
Eurodollar Loans, set forth in Level 2, below:

                      Level   Average Excess Availability   Base Rate Loans  
Eurodollar Loans 1  
Greater than or equal to 55% of the Borrowing Base
    0 %     0.875 %   2  
Greater than or equal to 20% of the Borrowing Base, but less than 55% of the
Borrowing Base
    0 %     1.000 %   3  
Less than or equal to 20% of the Borrowing Base
    0.250 %     1.250 %

     In no event shall the Applicable Margin be set at Level 3 prior to six
months following the Closing Date. On the first day of each February, May,
August and November, commencing February 1, 2008, the Applicable Margin shall be
adjusted based upon Average Excess

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Availability. Upon the occurrence of an Event of Default, the Applicable Margin
shall be immediately increased to the percentages set forth in Level 3 (even if
the Excess Availability requirements for another Level have been met) and
interest shall be determined in the manner set forth in Section 2.11.
     “Appraisal Percentage” shall mean ninety percent (90%).
     “Appraised Value” means the net appraised liquidation value of the
Borrowers’ and Canadian Operating Subsidiary’s Inventory as set forth in the
Borrowers’ stock ledger (expressed as a percentage of the Cost of such
Inventory) as determined from time to time by the Administrative Agent in
accordance with its standard procedures and with the assistance of an
independent appraiser satisfactory to the Administrative Agent.
     “Arranger” means BAS.
     “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 9.05), 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; (ii) Gift Certificates and Merchandise Credit Liability;
(iii) Frequent Shopper Programs; (iv) Layaways and Customer Deposits;
(v) customs, duties, and other costs to release Inventory which is being
imported into the United States; and (vi) outstanding taxes and other
governmental charges, including, ad valorem, real estate, personal property, and
other taxes which might have priority over the interests of the Collateral Agent
in the Collateral.
     “Average Excess Availability” shall mean the average daily Excess
Availability for the immediately preceding three month period.
     “BAS” means Banc of America Securities LLC, a Delaware limited liability
company.
     “Bank of America” means Bank of America, N.A. and its successors.
     “Bank Products” means any services or facilities provided to any Loan Party
by any Lender or any of its Affiliates (but excluding Cash Management Services)
on account of (a) credit cards, (b) Hedging Agreements, (c) purchase cards,
(d) merchant services constituting a line of credit, and/or (e) leasing.
     “Base Rate Loan” shall mean any Loan bearing interest at a rate determined
by reference to the Alternate Base Rate in accordance with the provisions of
Article II.
     “Blocked Account Agreements” has the meaning set forth in Section 2.22(c).

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     “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, PETsMART, Inc., a Delaware corporation and
PETsMART Store Support Group, Inc., a Delaware corporation.
     “Borrowers Security Agreement” means the Security Agreement dated as of
August ___, 2007 among the Borrowers and the Collateral Agent for the benefit of
the Secured Parties, as amended and in effect from time to time.
     “Borrowing” shall mean (a) the incurrence of Loans of a single Type, on a
single date and having, in the case of Eurodollar Loans, a single Interest
Period, or (b) a Swingline Loan.
     “Borrowing Base” means, at any time of calculation, an amount equal to
     (a) the Receivables Advance Rate of the face amount of Eligible Credit Card
Receivables; plus
     (b) the lesser of (i) Appraisal Percentage of the Appraised Value of
Eligible Inventory, or (ii) the Inventory Advance Rate of (A) the Cost of
Eligible Inventory minus (B) Inventory Reserves; plus
     (c) 100% of all Eligible Cash on Hand, provided that Eligible Cash on Hand
included in the Borrowing Base may not be withdrawn from the deposit account at
Bank of America, 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 on behalf of the
Borrowers for a Borrowing in accordance with Section 2.04.
     “Breakage Costs” shall have the meaning set forth in Section 2.20(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 Eurodollar
Loan, the term “Business Day” shall

4

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also exclude any day on which banks are not open for dealings in dollar deposits
in the London interbank market.
     “Canadian Operating Subsidiary” means 3003300 Nova Scotia Company.
     “Capital Expenditures” means, for any period, the additions to property,
plant and equipment and other capital expenditures of the Borrowers that are (or
would be) set forth in a consolidated statement of cash flows of the Borrowers
for such period prepared in accordance with GAAP.
     “Capital Lease Obligations” of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
     “Cash Collateral Account” shall mean an interest-bearing account
established by the Borrowers with the Collateral Agent at Bank of America under
the sole and exclusive dominion and control of the Collateral Agent designated
as the “PETsMART Cash Collateral Account”.
     “Cash Control Event” means that (a) an Event of Default has occurred and is
continuing, or (b) Excess Availability is less than the Threshold Amount. For
purposes of Section 2.22 hereof, (i) for the period ending on the date that is
six months after the Closing Date, the term “Cash Control Event” shall mean that
(a) an Event of Default has occurred and is continuing, or (b) Excess
Availability is less than ten percent (10%) of the Borrowing Base, and (ii) the
occurrence of a Cash Control Event shall be deemed continuing notwithstanding
that Excess Availability may thereafter exceed the Threshold Amount unless and
until Excess Availability exceeds the Threshold Amount for sixty
(60) consecutive days, in which case a Cash Control Event shall no longer be
deemed to be continuing; provided that a Cash Control Event shall be deemed
continuing (even if Excess Availability exceeds the Threshold Amount for sixty
consecutive days) if a Cash Control Event has occurred and been discontinued on
three (3) occasions in any twelve month period.
     “Cash Management Services” means any one or more of the following types or
services or facilities provided to any Loan Party by any Lender or any of its
Affiliates: (a) ACH transactions, (b) cash management services, including,
without limitation, controlled disbursement services, treasury, depository,
overdraft, and electronic funds transfer services, (c) foreign exchange
facilities, (d) credit or debit cards, or (e) merchant services not constituting
a Bank Product.
     “Cash Receipts” has the meaning provided therefor in Section 2.22(c).
     “CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9601 et seq.

5

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     “Change in Control” means, at any time, (a) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Lead Borrower
by Persons who were neither (i) nominated by the board of directors of the Lead
Borrower nor (ii) appointed by directors so nominated; or (b) the acquisition of
thirty-five percent (35%) or more of the capital stock of the Lead Borrower by
any Person or group of Persons, or (c) the failure of the Lead Borrower to own,
directly or indirectly, 100% of the capital stock of the other Borrower and the
Canadian Operating Subsidiary.
     “Change in Law” means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change, after the date of this Agreement, in
any law, rule or regulation or in the interpretation or application thereof by
any Governmental Authority, 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 9.13.
     “Closing Date” means August ___, 2007.
     “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
     “Collateral” means any and all “Collateral” as defined in any applicable
Security Document.
     “Collateral Agent” means Bank of America, in its capacity as collateral
agent under the Security Documents.
     “Collateral Documents” means the Security Agreements and all other security
agreements, mortgages, pledge agreements, deeds of trust, and other instruments,
documents or agreements executed and delivered by any Loan Party to secure the
Obligations or the Guaranteed Obligations (as such term is defined in the
Facility Guarantee), including, without limitation, the Facility Guarantors
Collateral Documents, any Control Agreements, Blocked Account Agreements, and
Pledge Agreement.
     “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 (i) reduced from time to time pursuant to
Section 2.16 or (ii) increased from time to time pursuant to Section 2.02
hereof.
     “Commitment Fee” has the meaning provided therefor in Section 2.13.

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     “Commitment Increase” has the meaning provided therefor in Section 2.02(a).
     “Commitment Increase Date” has the meaning provided therefor in
Section 2.02(c).
     “Commitment Percentage” shall mean, with respect to each Lender, that
percentage equivalent to such Lender’s Commitment divided by the Total
Commitment hereunder; each Lender’s Commitment Percentage shall be 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 increased from time
to time pursuant to Section 2.02 hereof.
     “Concentration Account” shall have the meaning set forth in
Section 2.22(c).
     “Consolidated EBITDA” means, with respect to any Person for any period,
(i) the sum (without duplication) of (a) Consolidated Net Income for such
period, plus (b) depreciation, amortization, and all other non-cash charges that
were deducted in determining Consolidated Net Income for such period, plus
(c) provisions for Taxes based on income that were deducted in determining
Consolidated Net Income for such period, plus (d) Consolidated Interest Expense
that was deducted in determining Consolidated Net Income for such period, minus
(ii) the sum of (e) non-cash income that was included in determining
Consolidated Net Income for such period, plus (f) tax refunds or rebates
included in determining Consolidated Net Income for such period, plus
(g) non-recurring or extraordinary gains, revenues, or income, all as determined
on a consolidated basis in accordance with GAAP
     “Consolidated Fixed Charge Coverage Ratio” means, with respect to any
Person for any period, the ratio of (a) (i) Consolidated EBITDA for such period,
minus (ii) Capital Expenditures made during such period, minus (iii) Taxes paid
in cash during such period (net of any tax refunds or rebates received in cash
during such period), to (b) Debt Service Charges for such period, all as
determined on a consolidated basis in accordance with GAAP. “Consolidated Fixed
Charge Coverage Ratio” shall be calculated on a trailing twelve month basis.
     “Consolidated Interest Expense” means, with respect to any Person for any
period, total interest expense of such Person on a consolidated basis with
respect to all outstanding Indebtedness of such Person, including, without
limitation, the Obligations and all commissions, discounts and other fees and
charges owed with respect thereto and all net costs under Hedging Agreements,
but excluding any non-cash or deferred interest financing costs, all as
determined on a consolidated basis in accordance with GAAP.
     “Consolidated Net Income” means, with respect to any Person for any period,
the net income (or loss) of such Person on a consolidated basis for such period
taken as a single accounting period determined in accordance with GAAP;
provided, however, that there shall be excluded (i) the income (or loss) of such
Person in which any other Person has a joint interest, except to the extent of
the amount of dividends or other distributions actually paid to such Person
during such period, (ii) unless otherwise agreed by the Administrative Agent in
its sole discretion, the income (or loss) of such Person accrued prior to the
date it becomes a Subsidiary of a Person or any of such Person’s Subsidiaries or
is merged into or consolidated with a Person or any of its Subsidiaries or that
Person’s assets are acquired by such Person or any of its

7

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Subsidiaries, and (iii) the income of any direct or indirect Subsidiary of a
Person to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its organizational documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary.
     “Control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms “Controlling” and “Controlled” have meanings correlative thereto.
     “Control Agreement” means an agreement, on terms and conditions acceptable
to the Collateral Agent in its reasonable discretion, by and among any Loan
Party, the Collateral Agent, and a third party depository institution with
respect to one or more accounts of the Borrowers, and which provides that after
a Cash Dominion Event, the depository institution shall, without further consent
from the Borrowers, accept only the instructions of the Collateral Agent in
respect of the funds in those accounts, where such accounts and the investments
contained therein constitute Collateral, and in which such accounts and such
investments the Collateral Agent has been granted a first priority Lien. For the
purposes of the definition of “Eligible Cash on Hand,” the term “Control
Agreement” shall not include any Blocked Account Agreements.
     “Cost” means the average 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.
     “Coweta County Bond Financing Transaction” means collectively, (a) the sale
of certain equipment of the Lead Borrower to be used in connection with the Lead
Borrower’s distribution center in Coweta County, Georgia to the Coweta County,
Georgia development authority, where proceeds of such sale shall be subject to
the Lien of the Collateral Agent, (b) the issuance of taxable industrial
development revenue bonds in the maximum principal amount of $20,000,000 by said
development authority payable to the Lead Borrower, as bondholder, (c) the
leasing of the equipment described in clause (a) above by the development
authority to the Lead Borrower, and (d) the grant of a security interest in the
equipment and lease described herein to the bondholder.
     “Credit Card Notifications” 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.
     “DDA Notification” has the meaning provided therefor in Section 2.22(c).

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     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and
all other liquidation, conservatorship, bankruptcy, assignment for the benefit
of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.
     “Debt Service Charges” means for any period, the sum of (i) Consolidated
Interest Expense required to be paid or paid in cash, plus (ii) scheduled and
mandatory principal payments required to be made in cash (whether or not in fact
made) on account of Indebtedness for such period, in each case determined in
accordance with GAAP on a consolidated basis.
     “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.
     “Disbursement Accounts” has the meaning provided therefor in
Section 2.22(f).
     “dollars” or “$” refers to lawful money of the United States of America.
     “Eligible Cash On Hand” means cash of a Borrower or the Canadian Operating
Subsidiary from time to time deposited in a DDA in the name of a Borrower or the
Canadian Operating Subsidiary (excluding any amounts on deposit in the Cash
Collateral Account or in any other escrow, or special purpose or restricted
account, such as an account specifically designated for payroll or sales taxes),
which DDA is subject to a first perfected security interest in favor of the
Collateral Agent for the benefit of itself and the Secured Parties, either
maintained at Bank of America or maintained at another depository institution
pursuant to a Control Agreement.
     “Eligible Credit Card Receivables” means Accounts due to a Borrower or the
Canadian Operating Subsidiary on a non-recourse basis from Visa, Mastercard,
American Express Co., Discovercard, 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 seven (7) Business
Days from the date of sale;
     (b) Accounts with respect to which a Borrower or the Canadian Operating
Subsidiary 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.

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     (d) Accounts which are disputed, are with recourse, or with respect to
which a claim, counterclaim, offset or chargeback has been asserted (to the
extent of such claim, counterclaim, offset or chargeback); or
     (e) Accounts which the Administrative Agent determines in its reasonable
discretion to be uncertain of collection.
     “Eligible Inventory” shall mean, as of the date of determination thereof,
items of Inventory of the Borrowers and the Canadian Operating Subsidiary 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 the Borrowers or the Canadian
Operating Subsidiary, or is leased or on consignment or the Borrowers or the
Canadian Operating Subsidiary do not have good and valid title thereto;
     (b) Inventory (including any portion thereof in transit from vendors) that
is not located at property that is owned or leased by the Borrowers or the
Canadian Operating Subsidiary;
     (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) or Canada;
     (e) Inventory that is not subject to a perfected first-priority security
interest in favor of the Collateral Agent for the benefit of itself and the
Secured Parties;
     (f) Inventory which consists of samples, labels, bags, packaging, and other
similar non-merchandise categories;
     (g) Inventory as to which insurance in compliance with the provisions of
Section 5.07 hereof is not in effect;
     (h) Inventory which has been sold but not yet delivered or as to which any
Borrower or the Canadian Operating Subsidiary has accepted a deposit;
     (i) Inventory consisting of live stock, animals, fish and other similar
Inventory;
     (j) Inventory consisting of work-in-process; or

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     (k) Inventory consigned by the Borrowers or the Canadian Operating
Subsidiary to any other Person[, including without limitation, Webvan Group,
Inc.]
     “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 Borrower 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.
     “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 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.
     “Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar
Loans.

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     “Eurodollar 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.
     “Event of Default” has the meaning assigned to such term in Section 7.01.
     “Excess Availability” means, as of any date of determination, the excess,
if any, of (a) the lesser of the Borrowing Base or the Total Commitment, over
(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 any 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 2.29(b), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.27(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrowers with respect to such withholding tax pursuant to Section 2.27(a).
     “Existing Credit Agreement” shall mean that certain Amended and Restated
Credit Agreement dated as of November 21, 2003 (as amended, restated,
supplemented or otherwise modified) by and between, among others, the Borrowers,
Bank of America, N.A. (f/k/a Fleet National Bank), as Issuing Bank, Bank of
America (f/k/a Fleet Retail Finance Inc.), as Administrative Agent and
Collateral Agent for the Lenders party thereto, and the Lenders party thereto.
     “Existing Letter of Credit Agreement” shall mean that certain Letter of
Credit Agreement dated as of June 30, 2006 (as the same may have been, or
hereafter shall be, amended, restated, supplemented, or otherwise modified from
time to time), by and between the Lead Borrower and Bank of America, N.A., as
issuing bank.
     “Existing Letters of Credit” means each of the letters of credit issued
under the Existing Credit Agreement prior to the date hereof.
     “Facility Guarantee” means each Guaranty executed by any Facility Guarantor
in favor of the Agents, the Issuing Bank and the Lenders.
     “Facility Guarantors” means the Persons listed on Schedule 1.2 hereto and
all other Subsidiaries (other than Foreign Subsidiaries) of each Borrower now
existing or hereafter created, provided that PET WISE INC. shall cease to be a
Facility Guarantor upon its dissolution or merger in accordance with the
provisions of Section 6.03.

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     “Facility Guarantors Security Agreement” means the Security Agreement dated
as of August ___, 2007 among the Facility Guarantors and the Collateral Agent
for the benefit of the Secured Parties, as amended and in effect from time to
time.
     “Facility Guarantors Collateral Documents” means the Facility Guarantors
Security Agreement and all other 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.
     “Federal Funds Effective Rate” means, for any day, the rate per annum equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided that (a) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
(rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to
Bank of America on such day on such transactions as determined by the
Administrative Agent.
     “Fee Letter” means the letter entitled “Fee Letter” among the Lead
Borrower, the Administrative Agent, and BAS dated as of July 30, 2007, as such
letter may from time to time be amended.
     “Financial Officer” means, with respect to any Borrower, the chief
financial officer, vice president of treasury, chief accounting officer, vice
president of finance, treasurer, controller or assistant controller of such
Borrower.
     “Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America, any State thereof or the
District of Columbia.
     “Foreign Subsidiary” means any Subsidiary 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.
     “GAAP” means generally accepted accounting principles in the United States
of America.
     “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 and/or the Canadian Operating Subsidiary 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 and the Canadian Operating Subsidiary.
     “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

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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
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, foreign
currency exchange agreement, commodity price protection agreement, or other
interest or currency exchange rate or commodity price hedging arrangement.
     “Incremental Loan Commitment Requirements” means, with respect to any
request for a Commitment Increase made pursuant to Section 2.02 or any provision
of a Commitment Increase on a given Commitment Increase Date, the satisfaction
of each of the following conditions: (i) no Default or Event of Default then
exists, and (ii) the Borrower has not theretofore reduced the Commitments
pursuant to Section 2.16 hereof.
     “Indebtedness” of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (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, provided that if such Indebtedness of others
is non-recourse to the credit of such Person, then the amount of Indebtedness
ascribed to such Person shall not exceed the fair market

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value of the property securing such Indebtedness of others, (g) all Guarantees
by such Person of Indebtedness of others (including, without limitation, under
any Synthetic Leases), (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 credit, (j) all obligations, contingent or otherwise, of
such Person in respect of bankers’ acceptances, (k) all Hedging Agreements, 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 Base Rate Loan
(including a Swingline Loan), the last day of each calendar month, and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part, provided that if any Interest
Period for a Eurodollar Loan exceeds three (3) months, the Interest Payment Date
shall also mean the date which is three (3) months after the commencement of
such Interest Period.
     “Interest Period” means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Lead Borrower may elect, 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 of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period, and (c) any Interest Period which would otherwise
end after the Maturity Date shall end on the Maturity Date. 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
Agreements.
     “Inventory Advance Rate” means (i) initially, seventy percent (70%), and
(ii) from and after the date which is forty-five (45) days following the Closing
Date (so long as on or before such date, the Administrative Agent has received
an appraisal and a commercial finance examination reasonably satisfactory to the
Administrative Agent), one hundred percent (100%).

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     “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 (i) obsolescence; (ii) seasonality; (iii) Shrink; (iv) imbalance;
(v) change in Inventory character; (vi) change in Inventory composition;
(vii) change in Inventory mix; (viii) markdowns (both permanent and point of
sale); (ix) retail markons and markups inconsistent with prior period practice
and performance; industry standards; current business plans; or advertising
calendar and planned advertising events.
     “Investment Policy” means the investment policy of the Lead Borrower
adopted by the board of directors of the Lead Borrower and annexed hereto as
Schedule 1.3, as such policy may be modified from time to time, with the prior
written consent of the Administrative Agent.
     “Issuing Bank” means Bank of America, in its capacity as the issuer of
Letters of Credit hereunder, and any successor to Bank of America in such
capacity as selected by the Administrative Agent. 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.
     “L/C Facility” means one or more letter of credit facilities from time to
time established by any of the Borrowers with a financial institution providing
for the issuance of letters of credit (other than Letters of Credit issued under
this Agreement).
     “L/C Facility Cash Collateral” means cash, cash equivalents, and/or
marketable securities of a Borrower from time to time deposited or maintained
with the financial institution party to an L/C Facility which are subject to a
first perfected security interest in favor of such financial institution to
secure such Borrower’s obligations under such L/C Facility. The parties
acknowledge and agree that Cash and Cash Equivalents and Additional Collateral,
each as defined in the Existing Letter of Credit Agreement, constitute L/C
Facility Cash Collateral under this Agreement.
     “Lead Borrower” means PETsMART, Inc., a Delaware corporation.
     “Lenders” shall mean the Persons identified on Schedule 1.1 hereto as
modified to include any Additional Commitment Lender and each assignee that
becomes a party to this Agreement as set forth in Section 9.05(b).
     “Letter of Credit” shall mean a letter of credit, in form and substance
reasonably satisfactory to the Issuing Bank, that is issued pursuant to this
Agreement for the account of any Borrower, and shall include, without
limitation, a Standby Letter of Credit or Commercial Letter of Credit issued in
connection with the purchase of Inventory by any Borrower, and for other

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purposes for which a Borrower has historically obtained letters of credit, or
for any other purpose that is reasonably acceptable to the Administrative Agent.
     “Letter of Credit Fees” shall mean the fees payable in respect of Letters
of Credit pursuant to Section 2.14.
     “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 Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate per annum equal to the British Bankers Association
LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR as designated by the
Administrative Agent from time to time) at approximately 11:00 a.m., London
time, not less than two Business Days prior to the commencement of such Interest
Period, for dollar deposits (for delivery on the first day of such Interest
Period) with a term equivalent to such Interest Period. If such rate is not
available at such time for any reason, then the “LIBO Rate” for such Interest
Period shall be the rate per annum determined by the Administrative Agent to be
the rate at which deposits in dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the LIBO Rate
Loan being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their request
at approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
     “Loan Documents” means this Agreement, the Notes, the Letters of Credit,
the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements,
the DDA Notifications, the Credit Card Notifications, the Security Documents,
the Facility Guarantee, and any other instrument or agreement executed and
delivered in connection herewith or therewith.
     “Loan Party or Loan Parties” means the Borrowers and the Facility
Guarantors.
     “Loans” shall mean all loans (including, without limitation, Swingline
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.

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     “Material Adverse Effect” means a material adverse effect on (a) the
business, operations, property, assets, or financial condition of the Lead
Borrower and its Subsidiaries taken as a whole, or (b) 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.
     “Material Indebtedness” means Indebtedness (other than the Loans, Letters
of Credit, or Indebtedness arising under the Coweta County Bond Financing
Transaction) or obligations in respect of one or more Hedging Agreements of any
one or more of the Borrowers in an aggregate principal amount exceeding
$10,000,000. 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.
     “Maturity Date” means August 15, 2012.
     “Maximum Rate” has the meaning provided therefor in Section 9.13.
     “Minority Lenders” has the meaning provided therefor in Section 9.02(d).
     “Moody’s” means Moody’s Investors Service, Inc.
     “Mortgages” means the Mortgages/Deeds of Trust, Security Agreements and
Assignments between the Loan Party owning any real estate encumbered thereby and
the Collateral Agent for the benefit of the Secured Parties.
     “Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
     “Net Proceeds” means, with respect to any event, (a) the cash proceeds
received in respect of such event, including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, in each case net of (b) the sum
of (i) all reasonable fees and out-of-pocket expenses (including appraisals, and
brokerage, legal, title and recording tax expenses and commissions) paid by any
Borrower to third parties (other than Affiliates) in connection with such event,
and (ii) in the case of a sale or other disposition of an asset (including
pursuant to a casualty or condemnation), the amount of all payments required to
be made by any Borrower as a result of such event to repay (or to establish an
escrow for the repayment of) Indebtedness (other than Loans) which is secured by
such asset and constitutes a Permitted Encumbrance that is senior to the Lien of
the Collateral Agent.
     “Non-Consenting Lender” has the meaning provided therefor in
Section 9.02(e).
     “Noncompliance Notice” has the meaning provided therefor in
Section 2.06(b).

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     “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 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) all advances to, and debts (including principal,
interest, fees, costs, and expenses), liabilities, obligations, covenants,
indemnities, and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to any Loan or Letter of Credit (including payments in
respect of reimbursement of disbursements, interest thereon and obligations to
provide cash collateral therefor), whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that accrue after
the commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, (b) each obligation to repay any loan, advance, indebtedness,
note, obligation, overdraft, or amount now or hereafter owing by the Loan
Parties to any Agent or any Lender or any Affiliate of any Agent or any Lender
(including all future advances whether or not made pursuant to a commitment by
such Agent, such Lender, or such Affiliate), whether or not any of such are
liquidated, unliquidated, primary, secondary, secured, unsecured, direct,
indirect, absolute, contingent, or of any other type, nature, or description, or
by reason of any cause of action which any Agent or any Lender or any Affiliate
of any Agent or any Lender may hold against any Loan Party, (c) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Loan Parties under or pursuant to this Agreement and the other Loan
Documents, and (d) any Other Liabilities.
     “Other Liabilities” means (a) any Cash Management Services furnished to any
of the Loan Parties or any of their Subsidiaries and/or (b) any transaction with
any Agent, any Lender or any of their respective Affiliates, which arises out of
any Bank Product entered into with any Loan Party and any such Person, as each
may be amended from time to time.
     “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 Total Commitment 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.
     “Payment Conditions” means, at the time of determination, that (a) no
Default or Event of Default then exists or would arise as a result of the making
of the subject payment, and (b) prior to, and immediately after giving effect
to, the subject payment, and on a pro forma twelve months basis thereafter,
Excess Availability shall be equal to or greater than the Threshold Amount.

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     “Perfection Certificate” means a certificate in the form of Annex 1 to the
Security Agreements or any other form approved by the Collateral Agent.
     “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 60 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 clause (k) of Article VII;
     (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 the Borrowers or any Subsidiary;
     (g) leases and subleases and licenses and sublicenses of property which do
not materially interfere with the ordinary conduct of the business of the Lead
Borrower and its Subsidiaries; and
     (h) Liens arising solely by virtue of any statutory or common law
provisions relating to banker’s liens, liens in favor of securities
intermediaries, rights of set-off or similar rights and remedies as to deposit
accounts or securities accounts or other funds maintained with depository
institutions or securities intermediaries.
provided that, except as provided in any one or more of clauses (a) through
(f) 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

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States of America), in each case maturing within one year from the date of
acquisition thereof;
     (b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody’s;
     (c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days 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 domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof
that has a combined capital and surplus and undivided profits of not less than
$500,000,000;
     (d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above (without regard to the
limitation on maturity contained in such clause) and entered into with a
financial institution satisfying the criteria described in clause (c) above or
with any primary dealer; and
     (e) Investments made pursuant to the Investment Policy.
     “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 five percent (5%) 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
either case the Required Supermajority Lenders otherwise agree; and provided
further that the foregoing shall not (1) modify or abrogate any of the
provisions of Section 2.07(f) hereof regarding the Lender’s obligations with
respect to L/C Disbursements, or (2) result in any claim or liability against
the Administrative Agent (regardless of the amount of any Overadvance) for
“inadvertent Overadvances” (i.e. where an Overadvance results from changed
circumstances beyond the control of the Administrative Agent (such as a
reduction in the collateral value)), 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 would exceed the Total Commitment.
     “Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
     “Plan” means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Lead Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

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     “Pledge Agreement” means the Pledge Agreement dated as of August ___, 2007
between, among others, the Borrowers, certain Facility Guarantors, and the
Collateral Agent for the benefit of the Secured Parties, as amended and in
effect from time to time.
     “Prepayment Event” means any of the following events:
     (a) any sale, transfer or other disposition (including pursuant to a sale
and leaseback transaction) of any property or asset of a Borrower;
     (b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any property or
asset of a Borrower;
     (c) the issuance by a Borrower of any equity securities, other than any
such issuance of equity securities to another Borrower; or
     (d) the incurrence by a Borrower of any Indebtedness of the type described
in clause (a), (b) or (c) of the definition of the term “Indebtedness”.
     “Real Estate” means all land, together with the buildings, structures,
parking areas, and other improvements thereon, now or hereafter owned or leased
by any Borrower, including all easements, rights-of-way, and similar rights
relating thereto and all leases, tenancies, and occupancies thereof.
     “Receivables Advance Rate” means ninety percent (90%).
     “Register” has the meaning set forth in Section 9.05(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.
     “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, at any time, Lenders having Commitments at
least equal to 51% of the Total Commitment, 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 51% of all such Obligations.
     “Required Supermajority Lenders” shall mean, at any time, Lenders having
Commitments outstanding representing at least 66 2/3% of the Total Commitment or
if the

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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.
     “Responsible Officer” of any Person shall mean the chief executive officer
or president of such Person or any other officer having substantially the same
authority and responsibility as a chief executive officer or president, or a
Financial Officer.
     “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 or membership interests of any Borrower or any Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of (a) any such shares of capital stock
or membership interests of any Borrower or any Subsidiary or (b) any option,
warrant or other right to acquire any such shares of capital stock or membership
interests of any Borrower or any Subsidiary.
     “S&P” means Standard & Poor’s.
     “Secured Parties” has the meaning assigned to such term in the Security
Agreements.
     “Security Agreements” means, collectively, the Borrowers Security Agreement
and the Facility Guarantors Security Agreement. The term “Security Agreement”
shall mean either the Borrowers Security Agreement or the Facility Guarantors
Security Agreement, as the context may require.
     “Security Documents” means the Security Agreements, the Pledge Agreement,
the Facility Guarantors Collateral Documents, the Mortgages, and each other
security agreement or other instrument or document executed and delivered
pursuant to Section 5.12 to secure any of the Obligations.
     “Settlement Date” has the meaning provided in Section 2.08(b) hereof.
     “Shrink” means Inventory which has been lost, misplaced, stolen, or is
otherwise unaccounted for.
     “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

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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.
     “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.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
     “Stock Repurchase” shall mean the repurchase by the Lead Borrower of its
own capital stock pursuant to a Confirmation of Transaction dated August ___,
2007 among the Lead Borrower, Lehman Brothers, Inc. and Lehman Brothers OTC
Derivatives, Inc., in the form presented to the Administrative Agent on the
Closing Date.
     “Subsidiary” means, with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
     “Swingline Lender” means Bank of America, 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 2.06 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.

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     “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 is accelerated and the
Commitments are terminated, or (iii) the date of the occurrence of any Event of
Default pursuant to Section 7.01(h) or 7.01(i) hereof.
     “Threshold Amount” shall mean, at any time of measurement, the lesser of
fifteen percent (15%) of (a) the Borrowing Base, or (b) the Total Commitment.
     “Total Commitment” shall mean, at any time, the sum of the Commitments at
such time.
     “Transfer Notice” has the meaning set forth in Section 2.07(k).
     “Type”, when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
     “Unused Commitment” shall mean, on any day, (a) the then Total Commitment
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.
     “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.

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     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 from time to time.
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 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:
     (i) The aggregate outstanding amount of the Loans and Letters of Credit
Outstandings shall not at any time exceed the lower of (i) $350,000,000 or, in
each case, any other amount to which the Commitments have then been increased or
reduced by the Borrowers pursuant to Sections 2.02 or 2.16, and (ii) the then
amount of the Borrowing Base.
     (ii) 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 2.07. The
Borrowers will not at any time permit the aggregate Letter of Credit
Outstandings to exceed $100,000,000.

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     (iii) Subject to all of the other provisions of this Agreement, 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 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. Increase in Total Commitment.
     (a) So long as the Incremental Loan Commitment Requirements are satisfied,
the Borrower shall have the right at any time, and from time to time, to request
an increase of the Total Commitment to an amount not to exceed $425,000,000. Any
such requested increase shall be first proposed in writing to all existing
Lenders on a pro rata basis. In the event that any existing Lender does not
notify the Administrative Agent within twenty-one (21) Business Days from the
receipt of the requested increase that the existing Lender will increase its
Commitment and of the amount of its increase, the existing Lender shall be
deemed to have declined the requested increase of its Commitment. To the extent
that one or more existing Lenders decline to increase their respective
Commitments, or decline to increase their Commitments to the amount requested by
the Borrower, the Arranger may arrange for other Persons to become Lenders
hereunder and to issue commitments in an amount equal to the amount of the
increase in the Total Commitment requested by the Borrower and not accepted by
the existing Lenders (each such increase by either a Lender or another Person, a
“Commitment Increase,” and each such Person issuing, or Lender increasing, its
Commitment, an “Additional Commitment Lender”); provided, however, that (i) no
Lender shall be obligated to provide a Commitment Increase as a result of any
such request by the Borrower, and (ii) any Additional Commitment Lender which is
not an existing Lender shall be subject to the approval of the Administrative
Agent, the Issuing Bank, and the Swingline Lender (which approval shall not be
unreasonably withheld), and (iii) nothing contained herein shall constitute the
unconditional obligation of the Arranger to provide or obtain commitments for
such requested Commitment Increase, as the Arranger only is agreeing hereby to
use its best efforts to arrange for Additional Commitment Lenders. Each
Commitment Increase shall be in a minimum aggregate amount of at least
$10,000,000 and in integral multiples of $10,000,000 in excess thereof.
     (b) No Commitment Increase shall become effective unless and until each of
the following conditions have been satisfied:
     (i) the Borrower, the Administrative Agent, and any Additional Commitment
Lender shall have executed and delivered a joinder to the Loan Documents in such
form as the Administrative Agent may reasonably require;
     (ii) the Incremental Loan Commitment Requirements shall have been
satisfied;

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     (iii) the Borrower shall have paid such fees and other compensation to the
Additional Commitment Lenders as the Borrower and each such Additional
Commitment Lenders may agree;
     (iv) the Borrower shall have paid such arrangement fees to the
Administrative Agent and/or the Arranger as the Borrower and such Persons may
agree;
     (v) the Borrower shall deliver to the Administrative Agent and the Lenders
an opinion or opinions, in form and substance reasonably satisfactory to the
Administrative Agent, from counsel to the Borrower reasonably satisfactory to
the Administrative Agent and dated such date of effectiveness;
     (vi) to the extent requested by any Additional Commitment Lender, a Note
will be issued at the Borrower’s expense, to each such Additional Commitment
Lender, in conformity with requirements of Section 2.09 hereof (with appropriate
modification to the extent necessary to reflect the new Commitment of such
Additional Commitment Lender); and
     (vii) the Borrower and the Additional Commitment Lenders shall have
delivered such other instruments, documents and agreements as the Administrative
Agent may reasonably have requested.
     (c) The Administrative Agent shall promptly notify each Lender as to the
effectiveness of each Commitment Increase (with each date of such effectiveness
being referred to herein as a “Commitment Increase Date”), and at such time
(i) the Total Commitment under, and for all purposes of, this Agreement shall be
increased by the aggregate amount of such Commitment Increases, (ii)
Schedule 1.1 shall be deemed modified, without further action, to reflect the
revised Commitments and Commitment Percentages of the Lenders, and (iii) this
Agreement shall be deemed amended, without further action, to the extent
necessary to reflect such increased Total Commitment (including, without
limitation, Section 2.01(a)(i)).
     (d) In connection with Commitment Increases hereunder, the Lenders and the
Borrower agree that, notwithstanding anything to the contrary in this Agreement,
(i) the Borrower shall, in coordination with the Administrative Agent, (x) repay
outstanding Loans of certain Lenders, and obtain Loans from certain other
Lenders (including the Additional Commitment Lenders), but in no event in excess
of each such Lender’s Commitment, or (y) take such other actions as reasonably
may be required by the Administrative Agent, in each case to the extent
necessary so that all of the Lenders have advanced Loans in an amount equal to
their Commitment Percentages (determined after giving effect to any increase in
the Total Commitment pursuant to this Section 2.02) of the Loans (other than
Swingline Loans), and (ii) the Borrower shall pay to the Lenders any costs of
the type referred to in Section 2.20 in connection with any repayment and/or
Loans required pursuant to preceding clause (i).
     SECTION 2.03. Reserves; Changes to Reserves.
     (a) The initial Inventory and Availability Reserves as of the date of this
Agreement are the following:

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     (i) Rent (an Availability Reserve): An amount equal to two months base
rents for a leased premises located in Canada, in the states of Washington,
Virginia, Pennsylvania and any other state which grants a landlord a priority
lien for unpaid rent.
     (ii) Shrink (an Inventory Reserve): An amount equal to one percent (1%) of
the gross sales from each of the Borrowers’ and the Canadian Operating
Subsidiary’s stores since the date of the last physical inventory at each such
store.
     (iii) Gift Certificate and Merchandise Credit Liability (an Availability
Reserve): An amount equal to fifty percent of the Borrowers’ and the Canadian
Operating Subsidiary’s Gift Certificate and Merchandise Credit Liability
outstanding from time to time.
     (iv) Canadian Provincial and Governmental Sales Taxes (an Availability
Reserve): An amount equal to 100% of the outstanding amount accrued and unpaid
for such taxes.
     (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 2.04. 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 Base Rate Loans or Eurodollar
Loans as the Lead Borrower on behalf of the Borrowers may request subject to and
in accordance with this Section 2.04, provided that all Swingline Loans shall be
only Base 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 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 2.24. Subject to the other
provisions of this Section 2.04 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 ten (10) Borrowings of Eurodollar 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 Eurodollar Loans and one Business Day’s prior notice of each
Borrowing of Base Rate Loans. Any such notice, to be effective, must be received
by the Administrative Agent not later than 2:00 p.m., Boston time, on the third
Business Day in the case of Eurodollar Loans prior to, and on the first Business
Day in the case of Base Rate Loans prior to, the date on which such Borrowing is
to be made. Such notice shall be irrevocable and shall specify the amount of the
proposed Borrowing (which shall be in an integral multiple of $500,000, but not
less than $3,000,000 in the case of Eurodollar

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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 Base Rate Loans or Eurodollar Loans and,
if Eurodollar Loans, the Interest Period with respect thereto. If no election of
Interest Period is specified in any such notice for a Borrowing of Eurodollar
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 Base 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 the Administrative Agent at 100 Federal
Street, 9th Floor, 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 Base Rate Loans. If such Lender pays such amount
to the Administrative 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, the Administrative Agent shall disburse such
funds 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.
     SECTION 2.05. 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 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 2.06. Swingline Loans
     (a) The Swingline Lender is authorized by the Lenders, but is not
obligated, to make Swingline Loans up to $35,000,000 plus the Permitted
Overadvance in the aggregate outstanding at any time, consisting only of Base
Rate Loans, upon a notice of Borrowing received by the

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Administrative Agent and the Swingline Lender (which notice, at the Swingline
Lender’s discretion, may be submitted prior to 2:00 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 2.08 below.
     (b) Swingline Loans 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, or (C) if the
conditions for borrowing under Section 4.02 cannot be fulfilled, the Lead
Borrower shall give immediate notice thereof to the Administrative Agent and the
Swingline Lender (a “Noncompliance Notice”), and the Administrative Agent shall
promptly provide each Lender with a copy of the Noncompliance Notice. 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 Lender, the
Swingline Lender may, but is not obligated to, continue to make Swingline Loans
beginning one Business Day after the Non-Compliance Notice is furnished to the
Lenders. Notwithstanding the foregoing, no Swingline Loans shall be made
pursuant to this subsection (b) (other than Permitted Overadvances) if the
aggregate outstanding amount of the Loans and Letter of Credit Outstandings
would exceed the lower of (i) $350,000,000 or any other amount to which the
Commitments have then been increased or reduced by the Borrowers pursuant to
Sections 2.02 or 2.16, and (ii) the then amount of the Borrowing Base.
     SECTION 2.07. Letters of Credit.
     (a) Upon the terms and subject to the conditions herein set forth, the Lead
Borrower on behalf of the Borrowers 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
$100,000,000, or (ii) the aggregate Loans and Letter of Credit Outstandings
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

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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 by paying to the Administrative Agent an amount equal to
such drawing not later than 2:00 p.m., Boston time, on (i) the date that the
Borrowers shall have received notice of such payment, 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 Borrowers receive such notice, if such
notice is received after 10:00 a.m., Boston time on the day of receipt, provided
that the Lead Borrower may, subject to the conditions to borrowing set forth
herein, request in accordance with Section 2.04 that such payment be financed
with a Base 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 Base Rate Loan or Swingline Loan. The
Issuing Bank shall, promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment under a Letter of Credit.
The Issuing Bank shall promptly notify the Administrative Agent and the
Borrowers by telephone (confirmed by telecopy, e-mail, .pdf or other electronic
means) 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 Base Rate Loans, provided that, if the Borrowers fail to reimburse
such Issuing Bank when due pursuant to paragraph (d) of this Section, then
Section 2.11 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 9.05, 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

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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 2.07, 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. 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 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 Federal Funds Effective Rate. 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
2.07, 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 Borrowers 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 (it being

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understood that any such payment by the Borrowers shall be without prejudice to,
and shall not constitute a waiver of, any rights the Borrowers might have or
might acquire as a result of the payment by the Issuing Bank of any draft or the
reimbursement by the Borrowers thereof): (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 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; (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 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. Nothing in this Section 2.07(i)
shall 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, 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.
     (j) If any Event of Default shall occur and be continuing, on the Business
Day that the Borrowers receive 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

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the option and sole discretion of the Collateral Agent at the request of the
Borrowers 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 for the satisfaction of the
reimbursement obligations of the Borrowers for the Letter of Credit Outstandings
at such time or, if the Loans have matured or the maturity of the Loans has been
accelerated, be applied to satisfy other Obligations of the Borrowers under this
Agreement.
     (k) The Borrowers may, upon three (3) Business Days written notice (a
“Transfer Notice”) to the Issuing Bank and the Administrative Agent, request
that any or all of the letters of credit issued under any L/C Facility entered
into with a Lender hereunder (or any of such Lender’s Affiliates) be transferred
to, and deemed issued by, the Issuing Bank under this Agreement. As long as the
issuance of such Letters of Credit would be permitted under this Agreement and
all conditions precedent to such issuance would be satisfied (as if such Letters
of Credit were newly issued on the date set forth in the Transfer Notice) and
such issuance would not result in the occurrence of a Default or Event of
Default, the Issuing Bank and such Lender shall promptly take such action, at
the expense of the Borrowers, as may be reasonably required to cause such
letters of credit to become Letters of Credit hereunder.
     (l) The Borrowers, the Administrative Agent and the Lenders agree that the
Existing Letters of Credit shall be deemed Letters of Credit hereunder as if
issued by the Issuing Bank under this Agreement.
     SECTION 2.08. Settlements Amongst Lenders
     (a) The Swingline Lender may (but shall not be obligated to), at any time,
on behalf of the Borrowers (which hereby authorize the Swingline Lender to act
in their behalf in that regard) request the Administrative Agent to cause the
Lenders to make a Loan (which shall be an Base Rate Loan) in an amount equal to
such Lender’s Commitment Percentage of the outstanding amount of Swingline Loans
made in accordance with Section 2.06, 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 Loan which proceeds shall be paid to the Swingline Lender to be
applied in reduction of the Swingline Loans. If the Swingline Lender requires a
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 Federal
Funds Effective Rate.

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     (b) The amount of each Lender’s Commitment Percentage of outstanding 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 Loans (excluding Swingline Loans) and repayments of 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”).
     (c) The Administrative Agent shall deliver to each of the Lenders promptly
after the Settlement Date a summary statement of the amount of outstanding Loans
(excluding Swingline Loans) for the period and the amount of repayments received
for the period. As reflected on the summary statement: (x) the Administrative
Agent shall transfer to each Lender its applicable Commitment Percentage of
repayments, and (y) 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 Loans made by each Lender with respect to Loans
(excluding Swingline Loans) shall be equal to such Lender’s applicable
Commitment Percentage of 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 4:00 p.m., Boston time, that day; and, if received
after 12:00 Noon, Boston time, then no later than 4:00 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 Federal Funds Effective Rate.
     SECTION 2.09. Notes; Repayment of Loans.
     (a) The Loans outstanding to each Lender (and to 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, $35,000,000).
     (b) 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 2.08(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

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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.
     SECTION 2.10. Interest on Loans.
     (a) Subject to Section 2.11, each Base Rate Loan (including, without
limitation, each Swingline Loan) shall bear interest (computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as applicable)
at a rate per annum that shall be equal to the then Alternate Base Rate, plus
the Applicable Margin for Base Rate Loans.
     (b) Subject to Section 2.11, each Eurodollar 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 Eurodollar 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 Eurodollar
Loans) upon any repayment or prepayment thereof (on the amount prepaid).
     SECTION 2.11. 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 2.12. 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 2.13. Commitment Fee.
     The Borrowers shall pay to the Administrative Agent for the account of the
Lenders, a commitment fee (the “Commitment Fee”) equal to 0.20% per annum (on
the basis of actual days elapsed in a year of 365 or 366 days, as applicable) 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

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Date. The Administrative Agent shall pay the Commitment Fee (and any amounts
payable by the Swingline Lender hereunder) to the Lenders based upon their pro
rata share of the aggregate Commitment Fee due to all Lenders; provided that for
purposes of calculating the pro rata share of any Person which is both the
Swingline Lender and a Lender, such Person’s share shall be equal to the
difference between (i) the sum of such Person’s Commitment, and (ii) the sum of
(A) such Person’s Commitment Percentage of the principal amount of Loans then
outstanding (including the principal amount of Swingline Loans then
outstanding), and (B) such Person’s Commitment Percentage of the then Letter of
Credit Outstandings.
     SECTION 2.14. Letter of Credit Fees.
     (a) The Borrowers shall pay the Administrative Agent, for the account of
the Lenders, on the last 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:
     (i) Standby Letters of Credit: The Applicable Margin for Eurodollar Loans.
     (ii) Commercial Letters of Credit: Fifty percent (50%) of the Applicable
Margin for Eurodollar Loans.
     (iii) 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 two percent (2%) 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, such fronting fees and 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 to account parties of comparable credit quality from time to
time in connection with letter of credit transactions.
     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 provided herein. Once paid, all
fees shall be fully earned (absent manifest error) and shall not be refundable
under any circumstances.
     SECTION 2.16. Termination or Reduction of Commitments.
     (a) Upon at least two 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 amount of $5,000,000 or any integral
multiple 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

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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, and (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.
     SECTION 2.17. Alternate Rate of Interest.
     If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:
     (a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
     (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 (or Lender) of making or maintaining their
Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrowers and the
Lenders by telephone or telecopy (or by e-mail, .pdf or other electronic means)
as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrowers 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
Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request
requests a Eurodollar Borrowing, such Borrowing shall be made as a Borrowing of
Base Rate Loans.
     SECTION 2.18. Conversion and Continuation of Loans.
     The Lead Borrower on behalf of 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 2:00 p.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 Eurodollar Loans for an additional Interest Period, subject to the following:
     (a) no Borrowing of Loans may be converted into, or continued as,
Eurodollar Loans at any time when an Event of Default has occurred and is
continuing (nothing contained herein being deemed to obligate the Borrowers to
incur Breakage Costs upon the occurrence of an Event of Default unless the
Obligations are accelerated);
     (b) if less than a full Borrowing of Loans is converted, such conversion
shall be made pro rata among the Lenders, as applicable, in accordance with the
respective principal amounts of the Loans comprising such Borrowing held by such
Lenders immediately prior to such refinancing;

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     (c) the aggregate principal amount of Loans being converted into or
continued as Eurodollar Loans shall be in an integral of $500,000 and at least
$3,000,000;
     (d) each Lender shall effect each conversion by applying the proceeds of
its new Eurodollar Loan or Base Rate Loan, as the case may be, to its Loan being
so converted;
     (e) the Interest Period with respect to a Borrowing of Eurodollar Loans
effected by a conversion or in respect to the Borrowing of Eurodollar Loans
being continued as Eurodollar 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 Eurodollar Loans may be converted only on the last day
of an Interest Period applicable thereto;
     (g) each request for a conversion or continuation of a Borrowing of
Eurodollar 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 ten (10) Borrowings of Eurodollar Loans may be outstanding
at any time.
     If the Lead Borrower does not give notice to convert any Borrowing of
Eurodollar Loans, or does not give notice to continue, or does not have the
right to continue, any Borrowing as Eurodollar Loans, in each case as provided
above, such Borrowing shall automatically be converted to a Borrowing of Base
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 Commitment 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 103% of the Letters of Credit
Outstanding.
     (b) The Loans shall be repaid daily in accordance with the provisions of
Sections 2.22(h) and 2.23 hereof.
     (c) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid
before outstanding Eurodollar Loans are prepaid. Each partial prepayment of
Eurodollar Loans shall be in an integral multiple of $500,000. No prepayment of
Eurodollar Loans shall be permitted pursuant to this Section 2.19 other than on
the last day of an Interest Period applicable thereto,

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unless the Borrowers simultaneously reimburse the Lenders for all “Breakage
Costs” (as defined 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 Eurodollar Loans in the Cash Collateral Account and
will apply such funds to the applicable Eurodollar Loans at the end of the then
pending Interest Period therefor (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 Eurodollar Loans shall
result in the aggregate principal amount of the Eurodollar Loans remaining
outstanding pursuant to such Borrowing being less than $3,000,000. Any
prepayment of the Loans shall not permanently reduce the Commitments.
     (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 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 Eurodollar
Loans, upon at least two Business Days’ prior written, telex or facsimile notice
to the Administrative Agent prior to 2:00 p.m., Boston time, and (y) with
respect to Base Rate Loans, on the same Business Day if written, telex or
facsimile notice is received by the Administrative Agent prior to 2:00 p.m.,
Boston time, subject to the following limitations:
     (i) 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.
     (ii) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid
before outstanding Eurodollar Loans are prepaid. Each partial prepayment of
Eurodollar Loans shall be in an integral multiple of $500,000. No prepayment of
Eurodollar Loans shall be permitted pursuant to this Section 2.20 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 below)
associated therewith. No partial prepayment of a Borrowing of Eurodollar Loans
shall result in the aggregate principal amount of the Eurodollar Loans remaining
outstanding pursuant to such Borrowing being less than $3,000,000.
     (iii) 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
Eurodollar Loans, the

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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 Borrowers 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 by it in the reemployment of the funds released (i) resulting from any
prepayment (for any reason whatsoever, including, without limitation, conversion
to Base Rate Loans or acceleration by virtue of, and after, the occurrence of an
Event of Default) of any Eurodollar 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 2.04 in respect of Eurodollar 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 or the delivery of any notice pursuant to Section 2.17.
Such loss of any Lender shall be reimbursed by the Borrowers in the amount as
reasonably determined by such Lender equal to 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 and
excluding the last day (x) in the case of a payment or refinancing with Base
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 placing such amount on
deposit for a comparable period with leading banks in the London interbank
market (collectively, “Breakage Costs”). Any Lender demanding reimbursement for
such loss shall deliver to the Borrowers 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 Borrowers 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 is to be applied to Eurodollar
Loans, such Eurodollar Loans shall be prepaid in the chronological order of
their Interest Payment Dates.

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     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 and all loans and advances made by the Lenders to the Borrowers or for the
Borrowers’ account, including the Loans, (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 from others for the Borrowers’
account, including all amounts received in the Concentration Account from the
Blocked Account Banks, and the amounts so credited shall be applied as set forth
in Sections 2.23(a) and (b). After the end of each month, the Administrative
Agent shall send to the Borrowers a statement accounting for the charges, loans,
advances, prepayments, 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 an account stated, which is
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 any
Borrower of the proceeds of all credit card charges for sales by any Borrower.
     (c) The Borrowers shall (i) upon request of the Administrative Agent,
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”), and (ii) deliver to the
Administrative Agent notifications executed on behalf of the Borrowers to each
of the Borrower’s credit card clearinghouses and processors of notice in form
satisfactory to the Administrative Agent, (each, a “Credit Card Notification”),
and (iii) entered 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 Notifications and Blocked Account Agreements shall require, after
the occurrence and during the continuance of a Cash Control 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 the Borrowers from any Person or from any source or on account of any sale or
other transaction or event, including, without limitation, any Prepayment Event
(all such cash receipts and collections, “Cash Receipts”), to a concentration
account maintained by the Collateral Agent at Bank of America (the
“Concentration Account”). In that

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regard, after the occurrence, and during the continuance, of a Cash Control
Event, the Borrowers shall cause the ACH or wire transfer to a Blocked Account
or to the 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 $50,000, 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, and (C) all other Cash
Receipts. Further, after the occurrence and during the continuance of a Cash
Control Event, the Borrowers shall cause the ACH or wire transfer to the
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
$50,000, 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 2.22, after the occurrence and
during the continuance of a Cash Control Event, the Borrowers receive or
otherwise have dominion and control of any such proceeds or collections, such
proceeds and collections shall be held in trust by the Borrowers for the
Administrative Agent and shall not be commingled with any of the Borrowers’
other funds or deposited in any account of any Borrower other than as instructed
by the Administrative Agent.
     (d) The Borrowers shall, after the occurrence and during the continuance of
a Cash Control Event, accurately report to the Administrative Agent all amounts
deposited in the Blocked Accounts 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 the Borrowers 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 the Borrowers
to close such account and have all funds therein transferred to an account
maintained by the Administrative Agent at Bank of America and all future
deposits made to a Blocked Account which is subject to a Blocked Account
Agreement.
     (e) The Borrowers may (i) 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, and (ii) enter into any agreements with credit card
processors subject to the execution and delivery to the Administrative Agent of
appropriate Credit Card Notifications (unless expressly waived by the
Administrative Agent) consistent with the provisions of this Section 2.22 and
otherwise satisfactory to the Administrative Agent. Unless the Lead Borrower
shall have notified the Administrative Agent and complied with the provisions of
the immediately preceding sentence, the Borrowers may not maintain any bank
accounts or enter into any agreements with credit card processors other than the
ones expressly contemplated herein.
     (f) The Borrowers may also maintain with the Administrative Agent at Bank
of America one or more disbursement accounts (the “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.

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     (g) The Concentration Account is, and shall remain, under the sole dominion
and control of the Collateral Agent. Each Borrower acknowledges and agrees that
(i) such Borrower has no right of withdrawal from the Concentration Account,
(ii) the funds on deposit in the Concentration Account shall continue to be
collateral security for all of the Obligations and (iii) the funds on deposit in
the Concentration Account shall be applied as provided in Section 2.23(a).
     (h) So long as no Cash Control Event has occurred and is continuing, daily,
the Borrowers may direct, and shall have sole control over, the manner of
disposition of its funds in the DDA Accounts and Blocked Accounts. Effective
upon notice to the Lead Borrower from the Collateral Agent in the event of a
Cash Control Event and during the continuance thereof (which notice may be given
by telephone if promptly confirmed in writing), the Concentration Account will,
without any further action on the part of any Borrower or the Collateral Agent
convert into a closed account under the exclusive dominion and control of the
Collateral Agent in which funds are held subject to the rights of the Collateral
Agent hereunder. In such event, all amounts in the Concentration Account and all
other Cash Receipts from time to time may be applied to the Obligations in such
order and manner as provided in Section 2.23 hereof, and the Administrative
Agent may, in its discretion, but shall not be obligated to, transfer any
amounts in the Concentration Account to the Disbursement Accounts.
     (i) Notwithstanding anything to the contrary in this Section 2.22, in the
event that a Cash Control Event has occurred but Excess Availability is greater
than ten percent (10%) of the lesser of the Borrowing Base or the Total
Commitment, the Administrative Agent reserves the right, confirmed upon delivery
of written notice thereof to the Lead Borrower, to suspend the implementation of
the foregoing provisions of this Section 2.22, and such provisions shall not be
implemented. The Administrative Agent further reserves the right to thereafter
cause the implementation of the foregoing provisions as a result of the
occurrence of the Cash Control Event, confirmed upon delivery of written notice
thereof to the Lead Borrower. For purposes of clarity, the foregoing provisions
of this Section 2.22 shall always be implemented automatically when a Cash
Control Event has occurred and Excess Availability is less than or equal to ten
percent (10%) of the lesser of the Borrowing Base or the Total Commitment.
     SECTION 2.23. Application of Payments.
     (a) Subject to the provisions of Section 2.22, all amounts received in the
Concentration Account from any source, including the Blocked Account Banks,
shall be applied, on the day immediately following receipt, 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, BAS, the Issuing Bank, the Collateral Agent, and the
Lenders; second to repay outstanding Swingline Loans; third, to repay other
outstanding Loans that are Base Rate Loans and all outstanding reimbursement
obligations under Letters of Credit; fourth, to repay outstanding Loans that are
Eurodollar Loans and all Breakage Costs due in respect of such repayment
pursuant to Section 2.20(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 Eurodollar Loans on the last day of the then-pending Interest Period
therefor; fifth if any Event

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of Default has occurred and is continuing, to fund a cash collateral deposit in
the Cash Collateral Account in an amount equal to 103% of all Letter of Credit
Outstandings; sixth, to pay all other Obligations that are then outstanding and
payable. 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 promptly released to the Borrowers and shall be utilized by the
Borrowers prior to any further 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 2.23.
     (b) All credits against the Obligations shall be conditioned upon final
payment to the Administrative Agent of the items giving rise to such credits and
shall be subject to one (1) Business Day’s clearance and collection. If any item
deposited to the 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.
     SECTION 2.24. Increased Costs.
     (a) If any Change in Law shall:
     (i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender or any holding company of any Lender (except any
such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing
Bank; or
     (ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans made by
such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make 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 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

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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 Borrowers 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 Lender or Issuing Bank shall be entitled to such compensation in
connection with matters that arose more than 90 days prior to the date such
Lender or Issuing Bank notifies the Lead Borrower of such matters.
     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 Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to a Eurodollar Loan or (y) at any time any
Lender determines that the making or continuance of any of its Eurodollar 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
Borrowers, such Lender may (i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon any request by the Borrowers for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an
Base Rate Loan unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be converted to
Base Rate Loans, in which event all such Eurodollar Loans shall be automatically
converted to Base 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 Eurodollar Loans
that would have been made by such Lender or the converted Eurodollar Loans of
such Lender shall instead be applied to repay the Base Rate Loans made by such
Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.
     (b) For purposes of this Section 2.25, a notice to the Borrowers by any
Lender pursuant to paragraph (a) above shall be effective, if lawful, and if any
Eurodollar Loans shall then be outstanding, on the last day of the then-current
Interest Period; and otherwise, if lawful, such notice shall be effective on the
date of receipt by the Borrowers.

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     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 2.25, or otherwise) prior to 2:00 p.m., 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 its offices at 100
Federal Street, 9th Floor, 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 Eurodollar 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 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 Agreements, as
applicable, ratably among the parties entitled thereto in accordance with the
amounts of principal, unreimbursed drawings under Letters of Credit, interest,
and fees then due to such respective parties. If at any time insufficient funds
are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed drawings under Letters of Credit, interest
and fees then due hereunder, such funds shall be applied (i) first, towards
payment of interest and fees then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of interest and fees then due to
such parties, and (ii) second, towards payment of principal and unreimbursed
drawings under Letters of Credit then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed
drawings under Letters of Credit then due to such parties.
     (c) If any Lender shall, by exercising any right of setoff or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Loans or participations in drawings under Letters of Credit or Swingline
Loans resulting in such Lender’s receiving payment of a greater proportion of
the aggregate amount of its Loans and participations in drawings under Letters
of Credit and Swingline Loans and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Loans and
participations in drawings under Letters of Credit and Swingline Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans and participations
in drawings under Letters of Credit and Swingline Loans, provided that (i) if
any such

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participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrowers pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in drawings under Letters of Credit to any assignee or participant, other than
to the Borrowers or any Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrowers consent to the foregoing and agree, to the
extent they may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrowers rights of setoff and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrowers
in the amount of such participation.
     (d) Unless the Administrative Agent shall have received notice from the
Borrowers 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 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.
     (e) 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 this Agreement 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 or Other Taxes,
provided that if the Borrowers shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or 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.

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     (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 Administrative Agent, each Lender and
the Issuing Bank, within 10 Business Days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, 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
Borrowers by a Lender or the Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of 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.
     (e) Any Foreign Lender that is entitled to an exemption from or reduction
in withholding tax shall deliver to the Borrowers and the Administrative Agent
two copies of either United States Internal Revenue Service Form W8-BEN, or, in
the case of a Foreign Lender’s claiming exemption from or reduction in U.S.
Federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of “portfolio interest”, a Form W-8ECI, or any subsequent versions
thereof or successors thereto (and, if such Foreign Lender delivers a Form
W-8ECI, a certificate representing that such Foreign Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrowers and is not a
controlled foreign corporation related to the Borrowers (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Foreign Lender claiming 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. 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 2.27(e), a Foreign Lender shall not be required to
deliver any form pursuant to this Section 2.27(e) that such Foreign Lender is
not legally able to deliver.
     (f) The Borrowers shall not be required to indemnify any Foreign Lender or
to pay any additional amounts to any Foreign Lender in respect of U.S. Federal
withholding tax

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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 Foreign
Lender to comply with the provisions of paragraph (e) 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.
     SECTION 2.28. Security Interests in Collateral.
     To secure their Obligations under this Agreement and the other Loan
Documents, the Borrowers 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 hereto and to the Security Documents
(subject to Liens on L/C Facility Cash Collateral to secure Indebtedness
permitted by Section 6.01(g) and Permitted Encumbrances having priority over the
Lien of the Collateral Agent by operation of law).
     SECTION 2.29. Mitigation Obligations.
     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.
     SECTION 2.30. Acknowledgments Regarding L/C Facilities.
     The parties acknowledge and agree that no obligation of any Loan Party
under any L/C Facility shall be deemed to be an obligation under this Agreement
or any other Loan Document, notwithstanding anything to the contrary herein or
therein. The parties further acknowledge and agree that the grant by any Loan
Party of a first-priority security interest in L/C Facility Cash Collateral to
any financial institution party to an L/C Facility shall not constitute a
Default or Event or Default, or otherwise constitute a breach of this Agreement
or any other Loan Document, notwithstanding anything to the contrary herein or
therein.
ARTICLE III
Representations and Warranties
     Each Loan Party represents and warrants to the Agents and the Lenders that:

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     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 powers 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 pursuant to 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 regulation or the charter, by-laws or other 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 financial statements for the Lead Borrower and its
Subsidiaries pursuant to the requirements of Section 5.01(a) and 5.01(c),
certified by a Financial Officer of the Borrowers. 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 the
dates and for the periods specified in such Sections in accordance with GAAP,
subject to year end audit adjustments and the absence of footnotes. Since the
date of such financial statements, there have been no changes in the assets,
liabilities, financial condition, or business of the Borrowers other than
changes in the ordinary course of business, the effect of which could not
reasonably be expected to have 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.

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     (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.
     (c) Schedule 3.05(c)(i) sets forth the address (including county) of all
Real Estate that is owned by the Loan Parties as of the Closing Date, together
with a list of the holders of any mortgage or other Lien thereon.
Schedule 3.05(c)(ii) sets forth the address (including county) of all Real
Estate that is leased by the Loan Parties as of the Closing Date, together with
a list of the holders of any mortgage or other Lien thereon. The information on
such Schedule shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.03 hereof.
     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 any Borrower, threatened
against or affecting any Loan Party (i) which could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than those set forth on Schedule 3.06) or (ii) that involve any of the Loan
Documents. The information on such Schedule 3.06 shall be updated and
supplemented from time to time as required pursuant to the provisions of
Section 5.02 hereof.
     (b) Except for the matters set forth on Schedule 3.06 and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, 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.

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     SECTION 3.07. Compliance with Laws and Agreements. Each Loan Party is in
compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, material agreements and
other instruments binding upon it or its property, 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. 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. Each Loan Party has timely filed or caused to be filed
all tax returns and reports required to have been filed and has paid or caused
to be paid all taxes required to have been paid by it, 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
arisen, or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
     SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $2,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $2,000,000 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 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. Schedule 3.12 sets forth the name of, and the
ownership interest of each Loan Party in each Subsidiary as of the Closing Date.
The Loan Parties are not party to any joint venture, general or limited partners
of a general or limited partnership, or members of a limited liability company,
or any other similar business ventures or entities. The

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information on such Schedule shall be updated and supplemented from time to time
as required pursuant to the provisions of Section 5.12 hereof.
     SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all
insurance maintained by or on behalf of the Borrowers and their Subsidiaries as
of the Closing Date. As of the Closing Date, all premiums in respect of such
insurance that are due and payable have been paid. The information on such
Schedule shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.07 hereof.
     SECTION 3.14. Labor Matters. As of the Closing Date, 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 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. The
representations set forth herein shall be updated and supplemented from time to
time as required pursuant to the provisions of Section 5.02 hereof.
     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, as applicable, 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 (subject to Liens on L/C Facility Cash Collateral
to secure Indebtedness permitted by Section 6.01(g) and Permitted Encumbrances
having priority over the Lien of the Collateral Agent by operation of 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.
     (c) Less than 25% of the assets of the Borrowers on a consolidated basis
consist of Margin Stock.

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     SECTION 3.17. Solvency. Each of the Loan Parties is 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 L/C Issuer and each
Lender to make its initial Credit Extension hereunder is subject to satisfaction
(or waiver by the Administrative Agent) of the following conditions precedent:
     (a) The Agents (or their counsel) shall have received from each party
hereto other than the Lenders either (i) a counterpart of this Agreement and all
other Loan Documents signed on behalf of such party or (ii) written evidence
satisfactory to the Agents (which may include telecopy, e-mail or .pdf
transmission of a signed signature page of this Agreement) that such party has
signed a counterpart of this Agreement and all other Loan Documents.
     (b) The Agents shall have received a favorable written opinion (addressed
to each Agent and the Lenders and dated the Closing Date) of Cooley Godward
Kronish LLP, counsel for the Loan Parties substantially in the form of
Exhibit C, and covering such other 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 Borrowers, the Facility Guarantors, the Loan Documents or the
transactions contemplated thereby, all in form and substance satisfactory to the
Agents and their counsel.
     (d) The Agents shall have received a certificate, reasonably satisfactory
in form and substance to the Agents, with respect to the solvency of the Lead
Borrower and its Subsidiaries on a consolidated basis as of the Closing Date.
     (e) The consummation of the transactions contemplated hereby shall not
(a) violate any applicable law, statute, rule or regulation or (b) conflict
with, or result in a default or event of default under, and as defined in, any
material agreement of any Loan Party.
     (f) All necessary consents and approvals to the transactions contemplated
hereby shall have been obtained and shall be satisfactory to the Agents.
     (g) There shall not be pending any litigation or other proceeding, the
result of which could reasonably be expected to have a Material Adverse Effect.

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     (h) There shall not have occurred any default of any material contract or
agreement of any Loan Party.
     (i) The Agents shall have completed satisfactory review of the terms and
conditions of the Stock Repurchase.
     (j) The Collateral Agent shall have received 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 (subject to Permitted Encumbrances having priority over the Lien
of the Collateral Agent pursuant to operation of law) and all such documents and
instruments shall have been so filed (or provision made therefor), registered or
recorded to the satisfaction of the Collateral Agent.
     (k) All fees due at or immediately after 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.
     (l) The Borrowers shall have Excess Availability, immediately after giving
effect to (i) that portion of the Stock Repurchase to be consummated on or about
the Closing Date, and (ii) any Credit Extensions made on the Closing Date, of at
least $75,000,000.
     (m) 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 Borrowers 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 pursuant to Section 9.02) at
or prior to 12:00 noon, Boston time, on August ___, 2007, (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.
     The obligation of the Lenders to make each 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

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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, the Loan Parties shall be in compliance with all of the
terms and provisions set forth herein and in the other Loan Documents to be
observed or performed and 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 herein by the Administrative Agent.
     The request by the Borrowers 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 the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and 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 Borrowers
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 (in the case only of such consolidated statements) 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 consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;
     (b) within forty-five (45) days after the end of each of the first three
fiscal quarters of the Lead Borrower, (i) its consolidated balance sheet and
related statements of operations and cash flows as of the end of and for such
fiscal quarter and the elapsed portion of the fiscal year,

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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 consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year end audit adjustments and the
absence of footnotes, and (ii) the separate balance sheet and related statements
of operations, stockholders’ equity and cash flows, and a summary of all Capital
Expenditures, as of the end of and for such fiscal quarter and the elapsed
portion of the fiscal year, for the Lead Borrower, all certified by one of its
Financial Officers as presenting in all material respects the financial
condition and results of operations of such Persons in accordance with GAAP
consistently applied, subject to normal year end audit adjustments and the
absence of footnotes;
     (c) at any time that a Cash Control Event exists, within 30 days after the
end of each fiscal month of the Lead Borrower, (i) the financial report
customarily delivered by the Lead Borrower to its board of directors entitled
“Monthly Board Report”, substantially in the form annexed hereto as
Schedule 5.01(c) and containing, at a minimum, a consolidated balance sheet and
related statements of operations, as of the end of and for such fiscal month and
the elapsed portion of the fiscal year, and (ii) a statement of cash flows for
(A) the Lead Borrower and its consolidated Subsidiaries, and (B) the Lead
Borrower for such month and the elapsed portion of the fiscal year;
     (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 (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 financial statements delivered pursuant to
Section 5.01(c), above, a calculation of the average Excess Availability for
purposes of determining the “Applicable Margin”, 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 sixty (60) days after the commencement of each fiscal year of
the Lead Borrower, a consolidated budget by quarter 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)
and, promptly when available, any significant revisions of such budget; provided
that if a Cash Control Event exists prior to delivery of such budget, such
budget shall be prepared by month;
     (f) within five (5) Business Days after the end of each fiscal month, a
certificate in the form of Exhibit D (a “Borrowing Base Certificate”) showing
the Borrowing Base as of the close of business on the last day of the
immediately preceding fiscal month, each such Certificate to be certified as
complete and correct on behalf of the Borrowers by a Financial Officer of the
Lead Borrower, provided, however, that as long as no Loans are outstanding and
the Letter of Credit Outstandings are less than $100,000,000, such Borrowing
Base Certificate shall be required to be furnished within five (5) Business Days
after the end of each fiscal quarter (unless

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the Lead Borrower requests a Loan during such fiscal quarter, in which event a
Borrowing Base Certificate, as of the last day of the fiscal month immediately
preceding such request shall be furnished prior to such Loan being made); and
provided, further however, if and so long as Excess Availability is less than
ten percent (10%) of the lesser of the Borrowing Base or the Total Commitment,
such Borrowing Base Certificate (showing the Borrowing Base as of the close of
business on the last day of the immediately preceding week) shall be furnished
weekly on Wednesday of each week;
     (g) 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;
     (h) the financial and collateral reports described on Schedule 5.01(h)
hereto, at the times set forth in such Schedule;
     (i) notice of any intended sale or other disposition of assets of any Loan
Party not in the ordinary course of business or incurrence of any Indebtedness
permitted hereunder, in either case, to the extent the proceeds therefrom would
exceed $20,000,000, at least fifteen (15) days prior to the date of consummation
such sale or disposition or incurrence of such Indebtedness; and
     (j) 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 may reasonably request.
     SECTION 5.02. Notices of Material Events. The Borrowers will furnish to the
Administrative Agent, the Issuing Bank, the Collateral Agent, and each Lender
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 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; and
     (d) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
     (e) any change in any Borrower’s chief executive officer, president, or
chief financial officer.

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     (f) 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.
     (g) the discharge by any Borrower of its present independent accountants or
any withdrawal or resignation by such independent accountants.
     (h) any material change in the business, operations, or financial affairs
of the Loan Parties taken as a whole.
     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.
     SECTION 5.03. Information Regarding Collateral. (a) The Lead Borrower will
furnish to the Agents prompt 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), provided that,
notwithstanding the foregoing, the Lead Borrower shall only be obligated to
furnish a store listing quarterly within 45 days of the end of each fiscal
quarter; (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 Lead Borrower also agrees promptly to notify the
Agents if any material portion of the Collateral is damaged or destroyed.
     (b) Each year, at the time of delivery of annual financial statements with
respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the
Lead Borrower shall deliver to the Agents a certificate of a Financial Officer
of the Lead Borrower setting forth the information required pursuant to
Section 2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of the Perfection Certificate
delivered on the Closing Date or the date of the most recent certificate
delivered pursuant to this Section.

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     SECTION 5.04. Existence; Conduct of Business. Each Loan Party will, and
will cause each of the Subsidiaries to, do or cause to be done all things
necessary to comply with its respective charter, certificate of incorporation,
articles of organization, and/or other organizational documents, as applicable;
and by-laws and/or other instruments which deal with corporate governance, and
to preserve, renew and keep in full force and effect its legal existence and,
except such as could not reasonably be expected to have a Material Adverse
Effect, 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, 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 and (d) 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 approved by the Administrative Agent) 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.
     (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 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

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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, (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 45 days’ prior written notice thereof by the insurer to the Collateral
Agent. The Borrowers 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) together with evidence
satisfactory to the Collateral Agent of payment of the premium therefor.
     SECTION 5.08. Casualty and Condemnation. The Lead Borrower will furnish to
the Agents and the Lenders prompt written notice of any casualty or other
insured damage to any material portion of any Collateral or the commencement of
any action or proceeding for the taking of any material portion of the
Collateral or any part thereof or interest therein under power of eminent domain
or by condemnation or similar proceeding.
     SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals.
(a) Each Loan Party will, and will cause each of the Subsidiaries to, keep
proper books of record and account 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 during
normal business hours and as often as reasonably requested.
     (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, permit any Agent or professionals (including
investment bankers, consultants, accountants, lawyers and appraisers) retained
by the Agents, upon reasonable prior notice and during normal business hours, 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, provided that (x) if at any time there are no Loans (exclusive
of any Letters of Credit) outstanding, the Borrowers shall not be required to
pay for any such commercial finance examinations and appraisals undertaken
except as set forth below, (y) if at any time there are any Loans outstanding,
the Collateral Agent shall have the right, in its

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discretion, to undertake one (1) commercial finance examination and one
(1) appraisal in any twelve (12) month period at the Borrowers’ expense, and
(z) after the occurrence and during the continuance of a Cash Control Event, the
Collateral Agent shall have the right, in its discretion, to undertake two
(2) commercial finance examinations and two (2) appraisals in any twelve
(12) month period at the Borrowers’ expense, and provided further that, as long
as a Default has occurred and is continuing, the Borrowers shall be required to
pay for all commercial finance examinations and appraisals undertaken.
Notwithstanding the foregoing limitations on the Loan Parties’ obligation to pay
the expenses for appraisals and commercial finance examinations prior to the
occurrence and during the continuance of an Event of Default, any Agent may
undertake such additional appraisals and commercials finance examinations prior
to the occurrence of an Event of Default as it, in its reasonable discretion,
deems necessary, at the expense of the Lenders.
     SECTION 5.10. Compliance with Laws. Each Loan Party will, and will cause
each of the Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
     SECTION 5.11. 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 outstanding Indebtedness, (b) to finance the acquisition of working
capital assets of the Borrowers, including the purchase of inventory and
equipment, in each case in the ordinary course of business, (c) to finance
Capital Expenditures of the Borrowers, and (d) for general corporate purposes,
including the Stock Repurchase, other stock and bond repurchases and the
issuance of Letters of Credit. 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 5.12. Additional Subsidiaries. If any additional Subsidiary 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 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 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 5.13. 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, to effectuate
the transactions contemplated by the Loan Documents or to grant, preserve,
protect or perfect the Liens created or intended to be created by the Security

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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 a Security Agreement that
become subject to the Lien of a Security Agreement upon acquisition thereof),
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. Without limiting the foregoing, if a Loan Party acquires
title to any real property with, in whole or in part, the proceeds of any Credit
Extension hereunder, the Loan Party shall execute a Mortgage and such other
documents as the Collateral Agent may reasonably request in order to perfect the
Lien of the Collateral Agent therein and in the assets and rights associated
therewith.
     (c) Upon the request of the Administrative Agent, the Borrowers 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 the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and 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;
     (c) Indebtedness of any Loan Party to any other Loan Party;
     (d) Guarantees by any Loan Party of Indebtedness of any other Loan Party or
Subsidiary provided that Guarantees by any Borrower of Indebtedness shall be
subject to Section 6.04;
     (e) Indebtedness of any Loan Party to finance the acquisition, construction
or improvement of any fixed or capital assets or software, including Capital
Lease Obligations and any Indebtedness assumed in connection with the
acquisition of any such assets or secured by a

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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 thereof, provided that for purposes of this
Section 6.01, no real estate lease shall be deemed a Capital Lease, and provided
further that the aggregate principal amount of Indebtedness permitted by this
clause (e) shall not exceed $100,000,000 at any time outstanding;
     (f) Indebtedness incurred to refinance any Real Estate owned by any Loan
Party or incurred in connection with sale-leaseback transactions permitted
hereunder, provided that the terms of such Indebtedness are reasonably
acceptable to the Administrative Agent;
     (g) Indebtedness incurred under the Coweta County Bond Financing
Transaction;
     (h) Indebtedness of Foreign Subsidiaries (other than the Canadian Operating
Subsidiary) in an aggregate principal amount not exceeding $25,000,000 at any
time outstanding;
     (i) other unsecured Indebtedness or subordinated Indebtedness, provided
that the terms of such Indebtedness are customary for the applicable type of
financing;
     (j) Indebtedness with respect to any L/C Facility, provided that the
maximum principal amount of all L/C Facilities shall not exceed $100,000,000 as
may be permitted under such L/C Facilities; and
     (k) any refinancing of the Indebtedness described in any of the foregoing
clauses (b), (c), (d), (e), (g), (h), (i), or (j) as long as the principal
balance thereof is not increased, the other limitations set forth in those
clauses are fulfilled and no Default or Event of Default exists or would arise
after giving effect thereto.
     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 receivable) or rights in respect of any thereof,
except:
     (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 or software acquired, constructed or
improved by any Loan Party, provided that (i) such Liens secure Indebtedness
permitted by Section 6.01(e), (ii) such Liens and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness

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secured thereby does not exceed 100% of the cost of acquiring, constructing or
improving such fixed or capital assets or software, and (iv) such Liens shall
not apply to any other property or assets of the Loan Parties;
     (e) Liens to secure Indebtedness permitted by Section 6.01(f) provided that
such Liens shall not apply to any property or assets of the Loan Parties other
than the Real Estate so refinanced or which is the subject of a sale-leaseback
transaction;
     (f) Liens to secure leases held by any Lender or any of its Affiliates;
     (g) Liens to secure Indebtedness permitted by Section 6.01(h), provided
that such Liens shall attach only to the property and assets of the Foreign
Subsidiary obligated on such Indebtedness and not to the property of any Loan
Party;
     (h) Liens existing on fixed or capital assets or software of a Person
immediately prior to its being consolidated with or merged into the Lead
Borrower or a Subsidiary or its becoming a Subsidiary, or a Lien existing on any
fixed or capital assets or software acquired by the Lead Borrower or any
Subsidiary at the time such property is so acquired (whether or not the
Indebtedness secured thereby shall have been assumed);
     (i) Precautionary filings in respect of true leases;
     (j) Liens on L/C Facility Cash Collateral to secure Indebtedness permitted
by Section 6.01(g);
     (k) Liens to secure Indebtedness permitted by Section 6.01(g) provided that
such Liens shall not apply to any property or assets of the Loan Parties other
than the equipment which is the subject of the Coweta County Bond Financing
Transaction; and
     (l) Refinancings, renewals and replacements of Liens permitted under this
Section 6.02 provided that (A) the amount of Indebtedness secured thereby is not
increased, (B) such Liens do not extend to any property or assets of the Loan
Parties which immediately prior to such refinancing, renewal or replacement were
not subject to a Lien permitted hereunder, and (C) no Default or Event of
Default exists or would arise after giving effect thereto.

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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 liquidiate or dissolve, except that if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing, (A) PET WISE INC. may be dissolved, provided that
(x) at the time of dissolution, PET WISE INC. shall have no substantial assets
and shall not conduct any material business, and (y) the Loan Parties provide
written notice to the Agents of such dissolution concurrently therewith; and (B)
(i) any Subsidiary may merge into a Borrower in a transaction in which a
Borrower is the surviving corporation, and (ii) any Subsidiary that is not a
Borrower may merge into any Subsidiary that is not a Borrower, provided that any
such merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by
Section 6.04.
     (b) The Loan Parties will not engage to any material extent 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 purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances (other than accounts
receivable created, and extensions of credit made, in the ordinary course of
business) to, guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:
     (a) Permitted Investments;
     (b) investments existing on the Closing Date, and set forth on
Schedule 6.04, to the extent such investments would not be permitted under any
other clause of this Section;
     (c) equity investments, loans or advances made by any Loan Party to any
other Loan Party, provided that any such loans and advances made by a Loan Party
shall be evidenced by a promissory note pledged pursuant to the Pledge
Agreement;
     (d) Guarantees constituting Indebtedness permitted by Section 6.01,
provided that such Guarantees by the Borrowers, other than Guarantees of
Indebtedness permitted under Section 6.01(g) or 6.01(i), shall not exceed
$20,000,000 in the aggregate at any time outstanding;
     (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
$1,000,000 to any employee or $7,500,000 in the aggregate at any time
outstanding;

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     (g) acquisitions of the capital stock or assets of any other Person,
provided that (i) no Cash Control Event exists immediately prior to, or after
giving effect to, the acquisition, and (ii) the provisions of Section 5.12 are
satisfied, or if the transaction is an asset acquisition, reasonably promptly
after such acquisition, the applicable Loan Parties shall have executed such
documents and agreements as the Collateral Agent shall have reasonably requested
in order to create and perfect the Collateral Agent’s Lien on the assets so
acquired.
     (h) equity investments, loans or advances made by any Loan Party to any
Foreign Subsidiary in an aggregate amount not to exceed $10,000,000 outstanding
at any time provided that (i) the Borrowers shall be in compliance with the
provisions of Section 6.11 hereof, immediately prior to, and immediately after
giving effect to, such investment, loan or advance, and on a twelve month pro
forma basis thereafter, and (ii) no Default or Event of Default exists
immediately prior to, or after giving effect, to any such investment, loan or
advance;
     (i) working capital advances to veterinarians who are tenants of properties
owned by or leased by a Loan Party in an aggregate amount not to exceed
$15,000,000 outstanding at any time, provided that no Default or Event of
Default exists immediately prior to, or after giving effect, to any such
advance;
     (j) loans to, or guarantees of obligations of, officers of any Loan Party
to exercise incentive stock options of the Lead Borrower, to purchase capital
stock of the Lead Borrower or to pay alternative minimum tax obligations of such
officers, provided that no Default or Event of Default exists immediately prior
to, or after giving effect, to any such loan or guarantee, and provided further
that such loans or guarantees shall not exceed an amount equal to $7,500,000 in
the aggregate at any time outstanding;
     (k) Investments consisting of the purchase of industrial revenue
development bonds in connection with the Coweta County Bond Financing
Transaction; and
     (l) investments in capital stock of PETsMART, Inc. or its Subsidiaries
permitted under Section 6.06(a).
     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 their capital stock or other
ownership interest in such Subsidiary, except:
     (a) (i) sales of Inventory and licensing of intellectual property in the
ordinary course of business, or (ii) sales or disposals of used or surplus
equipment or software, 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;
     (c) sale-leaseback transactions (i) involving any Real Estate, and (ii) in
connection with the Coweta County Bond Financing Transaction; and

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     (d) Provided that no Overadvance shall result after giving effect thereto,
bulk sales or dispositions of the Borrowers’ Inventory or Equipment not in the
ordinary course of business in an amount not to exceed, in the aggregate from
and after the Closing Date, fifteen percent (15%) of the Cost of the Borrowers’
Eligible Inventory or Equipment, as applicable, as of the Closing Date;
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than sales, transfers and other dispositions permitted under
clause (b)) shall be made at arm’s length and for fair value; and further
provided that the authority granted under clauses (b) through (d) hereof may be
terminated in whole or in part by the Agents upon the occurrence and during the
continuance of any Event of Default.
     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 as long as no Default or Event of Default exists or would arise therefrom
(i) the Loan Parties may declare and pay dividends with respect to their capital
stock payable solely in additional shares of their common stock, (ii) the
Subsidiaries of the Lead Borrower may declare and pay dividends ratably with
respect to their capital stock, (iii) the Lead Borrower may effect the initial
Stock Repurchase on the Closing Date, and (iv) the Lead Borrower may repurchase
its capital stock (including any Stock Purchase occurring after the Closing
Date) or declare and pay cash dividends or other distributions if the Payment
Conditions are then satisfied.
     (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:
     (i) payment of regularly scheduled interest and principal payments as and
when due in respect of any permitted Indebtedness; and
     (ii) payments under any L/C Facility, as and when due; and
     (iii) refinancings of Indebtedness described in clause (i) or (ii), above,
to the extent permitted by Section 6.01.

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     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 (a) 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, (b) investments permitted under clauses (f), (j), or (k) of
Section 6.04, and (c) transactions between or among the Borrowers not involving
any other Affiliate.
     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 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
(b) shall not apply to customary restrictions set forth in agreements of Foreign
Subsidiaries or the Lead Borrower related to their Indebtedness or leases on the
ability to pay dividends, and (iv) clause (a) of the foregoing shall not apply
to customary provisions in leases, licenses and other agreement restricting the
assignment, sublicensing, 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 any leases or subleases relating to real estate, including, without
limitation, the Real Estate, or under the Coweta County Bond Financing
Transaction, 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 the
requirements of Section 5.12 are satisfied contemporaneously therewith.
     SECTION 6.11. Minimum Excess Availability. If at any time, Excess
Availability is less than ten percent (10%) of the Total Commitment, the Loan
Parties shall maintain a Consolidated Fixed Charge Coverage Ratio, calculated on
a monthly basis, equal to or greater than 1.1: 1.0. Such Consolidated Fixed
Charge Coverage Ratio shall be first tested as of the fiscal month ending
immediately prior to the date that Excess Availability is less than ten percent
(10%) of the Total Commitment for which financial statements have been delivered
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) the Loan Parties shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, within five
(5) Business Days of the date when the same shall become due and payable;
     (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 Section 2.22, in Sections 5.1, 5.4, 5.7,
5.9(b), 5.11 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 30 days after notice thereof from the Administrative
Agent to the Lead Borrower (which notice will be given at the request of any
Lender);
     (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 (with or
without the giving of notice, the lapse of time or both) 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

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debts, or of a substantial part of its assets, under any federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for 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;
     (i) any Loan Party shall (i) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (h) of this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for 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 to the extent not
covered by insurance (coverage for which has not been disaffirmed or reserved by
the insurer) in an aggregate amount in excess of $25,000,000 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 $5,000,000;
     (m) (i) any challenge 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 challenge by or on behalf of any other Person 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, in each case,
as to which an order or judgment has been entered adverse to the Agents and the
Lenders.

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          (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 (subject to the first priority of Liens on L/C Facility Cash
Collateral to secure Indebtedness permitted by Section 6.01(g), notwithstanding
anything to the contrary in any Security Document), except as a result of the
sale or other disposition of the applicable Collateral in a transaction
permitted under the Loan Documents;
     (n) a Change in Control shall occur;
     (o) the occurrence of any uninsured loss to the Collateral in excess of
$10,000,000;
     (p) 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 property of any Loan Party with an aggregate value equal to or
greater than $5,000,000 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;
     (q) any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any L/C Facility 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); or any event or condition has
occurred that has resulted in any Indebtedness with respect to any L/C Facility
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any such Indebtedness to cause any such Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; or
     (r) except to the extent otherwise permitted in this Agreement, the
determination by any Borrower, whether by vote of such Borrower’s board of
directors or otherwise to: suspend the operation of such Borrower’s business in
the ordinary course, liquidate all or a material portion of such Borrower’s
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;
then, and in every such event (other than an event with respect to any Loan
Party described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the 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;

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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. When Continuing.
     For all purposes under this Agreement, each Default and Event of Default
that has occurred shall be deemed to be continuing at all times thereafter
unless it either (a) is cured or corrected to the reasonable written
satisfaction of the Lenders in accordance with Section 9.02, or (b) is waived in
writing by the Lenders in accordance with Section 9.02.
     SECTION 7.03. Remedies on Default
     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 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.
     SECTION 7.04. 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 or, without limiting the foregoing, on account of any Prepayment
Event shall be applied in the manner set forth in Section 6.02 of a 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.
     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

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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.
     SECTION 8.02. The Collateral Agent.
     Each Lender, the Administrative Agent and the Issuing Bank hereby
irrevocably (i) designate Bank of America 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 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.
     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 2.23, 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 2.23 pro rata
in proportion to its Commitment; provided, that if any such excess payment is
thereafter recovered or otherwise set aside such purchase of participations
shall be correspondingly rescinded (without interest), and provided further that
the foregoing provisions shall not apply to any L/C Facility Cash Collateral
(which shall be retained by the financial institution party to such L/C
Facility). 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

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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.
     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
(A) within a reasonable time after obtaining actual knowledge thereof, notify
the Lenders thereof, and (B) (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
they 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 or commercially unreasonable.
     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 any of the Lenders or the Issuing Bank for any action taken or omitted
to be taken in good faith, or be responsible to any of the Lenders or the
Issuing Bank 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 any of the Lenders or the Issuing Bank 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 the Agents. Without limiting the foregoing,
none of the Agents, nor any of their respective directors, officers, employees,
or agents shall be responsible to any Lender or the Issuing Bank for the due
execution, validity, genuineness, effectiveness, sufficiency, or enforceability
of, or for any statement, warranty or representation in, this Agreement, any
Loan Document or any related agreement, document or order, or 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.

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     (ii) 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.
     (iii) The Administrative Agent and the Collateral Agent, in such capacities
hereunder, shall be entitled to rely on any communication, instrument, or
document reasonably believed by such Agent to be genuine or correct and to have
been signed or sent by a Person or Persons believed by such Agent to be the
proper Person or Persons, and, such Agent shall be entitled to rely on advice of
legal counsel, independent public accountants, and other professional advisers
and experts selected by such Agent.
     SECTION 8.06. 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).
     SECTION 8.07. Rights of Agents.
     It is understood and agreed that Bank of America shall 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 the Borrowers, as though it were not the
Administrative Agent or the Collateral Agent, respectively, of the Lenders under
this Agreement.

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     SECTION 8.08. 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 agree that the Agents shall
bear no responsibility therefor.
     SECTION 8.09. 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 9.05(b).
     SECTION 8.10. Successor Agent
     Any Agent may resign at any time by giving thirty (30) Business Days’
written notice thereof to the Lenders, the Issuing Bank, the other Agent 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 Agent and the Issuing Bank, appoint a successor Agent which shall be (i) a
commercial bank (or affiliate thereof) organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of a least $100,000,000, or (ii) a Lender 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, in the case of (i) and (ii) above, 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). 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 8.11. Reports and Financial Statements.
     Promptly after receipt thereof from the Borrowers, 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 8.12. Co-Agent, Syndication Agent and Arranger. Notwithstanding the
provisions of this Agreement or any of the other Loan Documents, the Co-Agent,
the Syndication Agent and, except as provided in the commitment letter for this
transaction, the

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Arranger shall have no powers, rights, duties, responsibilities or liabilities
with respect to this Agreement and the other 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 or by .pdf, as follows:
     (a) if to any Loan Party, to it at 19601 North 27th Avenue, Phoenix,
Arizona 85027, Attention of Chief Financial Officer and General Counsel
(Telecopy No.: (623) 580-6513; e-mail address: scrozier@ssg.petsmart.com) with a
copy to Cooley Godward Kronish LLP, 101 California Street, 5th Floor, San
Francisco, CA 94111 (Telecopy No.: (415) 693-2222; e-mail address:
jscherer@cooley.com), Attention of Joseph Scherer, Esquire;
     (b) if to the Administrative Agent or the Collateral Agent, or the
Swingline Lender to Bank of America, N.A., 100 Federal Street, 9th Floor,
Boston, Massachusetts 02110, Attention of Stephen J. Garvin (Telecopy No.
(617) 434-4339; e-mail address stephen.garvin@bankofamerica.com), with a copy to
Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108,
Attention: David S. Berman, Esquire (Telecopy No.: (617) 880-3456; e-mail:
dberman@riemerlaw.com);
     (c) if to any other Lender, to it at its address (or telecopy number or
e-mail address) set forth on the signature pages hereto or on any Assignment and
Acceptance for such Lender.
     Any party hereto may change its address, telecopy number or e-mail address
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.
     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

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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
Borrowers 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 written 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 written
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 written consent of each Lender
affected thereby, (iv) change Sections 2.19, 2.22, or 2.23 or Section 6.02 of a
Security Agreement, without the written 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 written 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 written 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 written consent of each Lender, (viii) change
the definition of the term “Borrowing Base” or any component definition thereof
if as a result thereof the amounts available to be borrowed by the Borrowers
would be increased, without the written consent of each Lender, provided that
the foregoing shall not limit the discretion of the Administrative Agent to
change, establish or eliminate any Reserves, (ix) increase the Permitted
Overadvance, without the written 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 written 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 $35,000,000 (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 written 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

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Sections 9.02(b) or 9.02(c) and such amendment is approved by the Required
Lenders, but not by the requisite percentage of the Lenders, 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”) to provide 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, 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) If any Lender does not consent (a “Non-Consenting Lender”) to a
proposed amendment, waiver, consent or release with respect to any Loan Document
that requires the consent of such Lender pursuant to this Section 9.02 and that
has been approved by the Required Lenders, the Lead Borrower may replace such
Non-Consenting Lender in accordance with Section 9.10; provided that such
amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by such Section (together with all other such
assignments required by the Lead Borrower to be made pursuant to this
paragraph).
     (f) 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 shall be effective against the Borrowers unless
signed by the Borrowers.
     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, 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 or their rights in
connection with the Loan Documents, including its or their rights under this
Section, or

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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 or any Affiliate of such Indemnitee (or of any
officer, director, employee, advisor or agent of such Indemnitee or any such
Indemnitee’s Affiliates).
     (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 pro rata share (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agents or the Issuing Bank. For purposes hereof, a
Lender’s “pro rata share” shall be determined based upon its share of the Total
Commitment at the time.
     (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.

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     (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 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 other
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 the other Borrower. Consequently, each
Borrower hereby assumes and agrees to discharge all Obligations of the other
Borrower as if the Borrower so assuming were the 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.
     (i) 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.
     (ii) If, for any reason, and at any time during the term of this Agreement,
     (A) 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
     (B) the Administrative Agent deems it inexpedient (in the Administrative
Agent’s sole and 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.
     (d) 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

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fulfill the financial and other reporting requirements otherwise imposed herein
upon the Lead Borrower.
     (e) 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.
     (f) 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
     (i) 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 Presidents of each Borrower (other than the President of the Lead
Borrower being replaced) then eligible for borrowing under this Agreement; and
     (ii) written notice from such successive Lead Borrower (i) accepting such
appointment; (ii) acknowledging that such removal and appointment has been
effected by the respective Presidents 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 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.
     (b) Any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it), provided that (i) except in
the case of an assignment to a Lender or an Affiliate of a Lender, each of the
Lead Borrower (but only if no Default then exists), the Agents and the Issuing
Bank must give their prior written consent to such assignment (which consent
shall not be unreasonably withheld or delayed), (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

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Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than (A) $10,000,000 prior to the occurrence of an
Event of Default and (B) $5,000,000 after the occurrence and during the
continuance of an Event of Default, unless in each case the Administrative Agent
and (only if no Event of Default has occurred and is continuing) the Lead
Borrower otherwise consent (in the case of the Borrowers, such consent not to be
unreasonably withheld or delayed), (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.
     (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

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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 the first proviso to Section 9.02(b) 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 9.09 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(f) 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(f).
     (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 a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest, provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
     SECTION 9.06. 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 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

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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, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Agents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the 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, e-mail, .pdf or other electronic means 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 and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final, but not any L/C Facility Cash Collateral) 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.
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. Replacement of Lenders. 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
the Loans, or if any Lender is a Non-Consenting Lender, then the Lead Borrower
may, at the Borrowers’ sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 9.05), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:

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     (a) the Borrowers shall have paid to the Administrative Agent the
assignment fee specified in Section 9.05(b);
     (b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and L/C Advances, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other
Loan Documents (including any amounts under Sections 2.20(b) or 2.20(c)) 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);
     (c) 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 thereafter; and
     (d) such assignment does not conflict with applicable laws.
     SECTION 9.11. Governing Law; Jurisdiction; Consent to Service of Process.
     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
     (b) Each Loan Party hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the state courts of
the State of New York sitting in New York County and of the United States
District Court, Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to any Loan
Document, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
state courts of the State of New York or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right that
the Agents, the Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document
against any Loan Party or their properties in the courts of any jurisdiction.
     (c) Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of any suit, action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in paragraph (b) of this
Section.
     (d) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

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     SECTION 9.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
     SECTION 9.13. 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 9.14. 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, 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 9.15. 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) except for
amendments and waivers entered into in accordance with the provisions of
Section 9.02 hereof, 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, including with respect to any other Borrower of the Obligations
under this Agreement, 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.

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     (b) The obligations of each Loan Party hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason (other than
the final payment in full in cash of the Obligations or amendments and waivers
entered into in accordance with the provisions of Section 9.02 hereof),
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, wilful 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 final 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 final 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 finally paid in full in cash. Pursuant to
applicable law, each Loan Party waives any defense arising out of any such
election even 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 final
payment in full in cash of all the Obligations, as more particularly set forth
in an Indemnity, Subrogation and Contribution Agreement to be entered into
amongst the Loan Parties. 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. 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.

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[signature pages follow]

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

                  PETSMART, INC., as Lead Borrower and as a         Borrower    
 
           
 
  By:
Name:   /s/ Philip L. Francis
 
Philip L. Francis    
 
  Title:   Chief Executive Officer    
 
                PETSMART STORE SUPPORT GROUP, INC., as a         Borrower    
 
           
 
  By:
Name:   /s/ Philip L. Francis
 
Philip L. Francis    
 
  Title:   Chief Executive Officer    

Signature Page to Credit Agreement

 

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                  BANK OF AMERICA, N.A.,         as Administrative Agent, as
Collateral Agent,         as Swingline Lender, and as a Lender    
 
           
 
  By:   /s/ Stephen J. Garvin    
 
  Name:  
 
Stephen J. Garvin    
 
  Title:   Managing Director    
 
                Address:         100 Federal Street, 9th Floor         Boston,
Massachusetts 02110         Attn: Stephen J. Garvin         Telephone:
(617) 434-9399         Telecopy: (617) 434-4339         E-mail address:        
          stephen.garvin@bankofamerica.com    
 
                BANK OF AMERICA, N.A.,         as Issuing Bank    
 
           
 
  By:   /s/ Stephen J. Garvin    
 
  Name:  
 
Stephen J. Garvin    
 
  Title:   Managing Director    
 
                Address:         100 Federal Street, 9th Floor         Boston,
Massachusetts 02110         Attention: Stephen J. Garvin         Telephone:
(617) 434-9399         Telecopy: (617) 434-4339         E-mail address:        
          stephen.garvin@bankofamerica.com    

Signature Page to Credit Agreement