Exhibit 10.1

 

EXECUTION COPY

 

 

 

CREDIT AGREEMENT

 

Dated as of September 19, 2014

 

among

 

CACHE, INC.,

 

as the Lead Borrower

 

For

 

The Borrowers Named Herein

 

The Guarantors Named Herein

 

SALUS CAPITAL PARTNERS, LLC

 

as Administrative Agent and Collateral Agent,

 

and

 

The Lenders Party Hereto

 

 

 

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Table of Contents

 

 

 

Page

Article I DEFINITIONS AND ACCOUNTING TERMS

1

1.01

Defined Terms

1

1.02

Other Interpretive Provisions

41

1.03

Accounting Terms Generally

42

1.04

Rounding

42

1.05

Times of Day

42

1.06

Letter of Credit Amounts

42

1.07

Currency Equivalents Generally

42

 

 

 

Article II THE COMMITMENTS AND CREDIT EXTENSIONS

43

2.01

Committed Loans; Reserves

43

2.02

Borrowings and Conversions of Committed Loans

43

2.03

Letters of Credit

44

2.04

Prepayments

50

2.05

Termination or Reduction of Commitments

51

2.06

Repayment of Loans

52

2.07

Interest

52

2.08

Fees

52

2.09

Computation of Interest and Fees; Application of Payments

52

2.10

Evidence of Debt

53

2.11

Payments Generally; Agent’s Clawback

53

2.12

Sharing of Payments by Lenders

55

2.13

Settlement Amongst Lenders

55

2.14

Defaulting Lenders

56

 

 

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

57

3.01

Taxes

57

3.02

Illegality

59

3.03

Inability to Determine Rates

59

3.04

Increased Costs; Reserves on LIBO Rate Loans

59

3.05

Mitigation Obligations; Replacement of Lenders

60

3.06

Survival

61

3.07

Designation of Lead Borrower as Borrowers’ Agent

61

 

 

Article IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

61

4.01

Conditions of Initial Credit Extension

61

4.02

Conditions to all Credit Extensions

64

 

 

Article V REPRESENTATIONS AND WARRANTIES

65

5.01

Existence, Qualification and Power

65

5.02

Authorization; No Contravention

65

5.03

Governmental Authorization; Other Consents

65

5.04

Binding Effect

66

5.05

Financial Statements; No Material Adverse Effect

66

5.06

Litigation

67

5.07

No Default

67

5.08

Ownership of Property; Liens

67

5.09

Environmental Compliance

68

5.10

Insurance

68

 

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Table of Contents

 

 

 

Page

5.11

Taxes

68

5.12

ERISA Compliance

69

5.13

Subsidiaries; Equity Interests

69

5.14

Margin Regulations; Investment Company Act

70

5.15

Disclosure

70

5.16

Compliance with Laws

70

5.17

Intellectual Property; Licenses, Etc.

70

5.18

Labor Matters

71

5.19

Security Documents

71

5.20

Solvency

72

5.21

Deposit Accounts; Credit Card Arrangements

72

5.22

Brokers

72

5.23

Customer and Trade Relations

72

5.24

Material Contracts

72

5.25

Casualty

73

5.26

Business Plan

73

5.27

Personally Identifiable Information

73

 

 

 

Article VI AFFIRMATIVE COVENANTS

73

6.01

Financial Statements

73

6.02

Certificates; Other Information

74

6.03

Notices

75

6.04

Payment of Obligations

76

6.05

Preservation of Existence, Etc.

77

6.06

Maintenance of Properties

77

6.07

Maintenance of Insurance

77

6.08

Compliance with Laws

78

6.09

Books and Records; Accountants

78

6.10

Inspection Rights

79

6.11

Use of Proceeds

80

6.12

Additional Loan Parties

80

6.13

Cash Management

80

6.14

Information Regarding the Collateral

82

6.15

Physical Inventories

83

6.16

Environmental Laws

83

6.17

Further Assurances

84

6.18

Compliance with Terms of Leaseholds

84

6.19

Material Contracts

84

6.20

Employee Benefit Plans

85

6.21

Post-Closing Obligation

85

 

 

 

Article VII NEGATIVE COVENANTS

86

7.01

Liens

86

7.02

Investments

86

7.03

Indebtedness; Disqualified Stock

86

7.04

Fundamental Changes

86

7.05

Dispositions

87

7.06

Restricted Payments

87

7.07

Prepayments of Indebtedness

88

7.08

Change in Nature of Business

88

7.09

Transactions with Affiliates

88

 

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Table of Contents

 

 

 

Page

7.10

Burdensome Agreements

88

7.11

Use of Proceeds

89

7.12

Amendment of Material Documents

89

7.13

Fiscal Year

89

7.14

Deposit Accounts; Credit Card Processors

89

 

 

 

Article VIII EVENTS OF DEFAULT AND REMEDIES

89

8.01

Events of Default

89

8.02

Remedies Upon Event of Default

92

8.03

Application of Funds

93

 

 

 

Article IX THE AGENT

94

9.01

Appointment and Authority

94

9.02

Rights as a Lender

95

9.03

Exculpatory Provisions

95

9.04

Reliance by Agent

96

9.05

Delegation of Duties

96

9.06

Resignation of Agent

96

9.07

Non-Reliance on Agent and Other Lenders

97

9.09

Agent May File Proofs of Claim

97

9.10

Collateral and Guaranty Matters

98

9.11

Notice of Transfer

98

9.12

Reports and Financial Statements

98

9.13

Agency for Perfection

99

9.14

Indemnification of Agent

99

9.15

Relation among Lenders

99

 

 

 

Article X MISCELLANEOUS

100

10.01

Amendments, Etc.

100

10.02

Notices; Effectiveness; Electronic Communications

101

10.03

No Waiver; Cumulative Remedies

102

10.04

Expenses; Indemnity; Damage Waiver

103

10.05

Payments Set Aside

104

10.06

Successors and Assigns

104

10.07

Treatment of Certain Information; Confidentiality

108

10.08

Right of Setoff

109

10.09

Interest Rate Limitation

110

10.10

Counterparts; Integration; Effectiveness

110

10.11

Survival

110

10.12

Severability

110

10.13

Replacement of Lenders

111

10.14

Governing Law; Jurisdiction; Etc.

111

10.15

Waiver of Jury Trial

112

10.16

No Advisory or Fiduciary Responsibility

112

10.17

USA PATRIOT Act Notice

113

10.18

Foreign Asset Control Regulations

113

10.19

Time of the Essence

113

10.20

Press Releases

114

10.21

Additional Waivers

114

10.22

No Strict Construction

116

10.23

Attachments

116

 

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Table of Contents

 

 

 

Page

10.24

Keepwell

116

 

iv

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SCHEDULES

 

1.01                                                                       
Borrowers

1.02                                                                       
Guarantors

2.01                                                                       
Commitments and Applicable Percentages

5.01                                                                        Loan
Parties Organizational Information

5.06                                                                       
Litigation

5.08(b)(1)                                          Owned Real Estate

5.08(b)(2)                                          Leased Real Estate

5.09                                                                       
Environmental Matters

5.10                                                                       
Insurance

5.13                                                                       
Subsidiaries; Other Equity Investments

5.17                                                                       
Intellectual Property Matters

5.18                                                                       
Collective Bargaining Agreements

5.21(a)                                                         DDAs

5.21(b)                                                         Credit Card
Arrangements

5.24                                                                       
Material Contracts

6.02                                                                       
Financial and Collateral Reporting

7.01                                                                       
Existing Liens

7.02                                                                       
Existing Investments

7.03                                                                       
Existing Indebtedness

10.02                                                                 Agent’s
Office; Certain Addresses for Notices

 

EXHIBITS

 

Form of

 

A                                       Committed Loan Notice

B                                       Note

C                                       Compliance Certificate

D                                       Assignment and Assumption

E                                        Borrowing Base Certificate

F                                         Credit Card Notification

G                                       DDA Notification

 

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CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of September 19, 2014,
among CACHE, INC., a Delaware corporation (the “Lead Borrower”), the Persons
named on Schedule 1.01 hereto (collectively with the Lead Borrower, the
“Borrowers”), the Persons named on Schedule 1.02 hereto (collectively, the
“Guarantors”), each Lender from time to time party hereto, and SALUS CAPITAL
PARTNERS, LLC, as Administrative Agent and Collateral Agent.

 

The Borrowers have requested that the Lenders provide a revolving credit
facility and certain other financial accommodations, and the Lenders have
indicated their willingness to lend and the L/C Issuers have indicated their
willingness to issue Letters of Credit, in each case on the terms and conditions
set forth herein.

 

All Obligations of the Loan Parties to the Agent and the Lenders hereunder and
under the other Loan Documents shall be full recourse to each of the Loan
Parties and secured by the Agent’s security interest in and liens on all or
substantially all of the assets of the Loan Parties included in the Collateral.

 

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

 

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“Acceptable Document of Title” means, with respect to any Inventory, a tangible,
negotiable bill of lading or other Document (as defined in the UCC) that (a) is
issued by a common carrier which is not an Affiliate of the Approved Foreign
Vendor or any Loan Party which is in actual possession of such Inventory, (b) is
issued to the order of a Loan Party or, if so requested by the Agent, to the
order of the Agent, (c) names the Agent as a notify party and bears a
conspicuous notation on its face of the Agent’s security interest therein,
(d) is not subject to any Lien (other than in favor of the Agent), and (e) is on
terms otherwise reasonably acceptable to the Agent. “ACH” means automated
clearing house transfers.

 

“Accommodation Payment” as defined in Section 10.21(d).

 

“Account” means “accounts” as defined in the UCC, and also means a right to
payment of a monetary obligation, whether or not earned by performance, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
policy of insurance issued or to be issued, (d) for a secondary obligation
incurred or to be incurred, (e) for energy provided or to be provided, (f) for
the use or hire of a vessel under a charter or other contract, (g) arising out
of the use of a credit or charge card or information contained on or for use
with the card, or (h) as winnings in a lottery or other game of chance operated
or sponsored by a state, governmental unit of a state, or person licensed or
authorized to operate the game by a state or governmental unit of a state.  The
term “Account” includes health-care-insurance receivables.

 

“Acquisition” means, with respect to any Person (a) an investment in, or a
purchase of, a Controlling interest in the Equity Interests of any other Person,
(b) a purchase or other acquisition of all or substantially all of the assets or
properties of, another Person or of any business unit, division or line of
business of another Person, (c) any merger or consolidation of such Person with
any other Person or other

 

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transaction or series of transactions resulting in the acquisition of all or
substantially all of the assets, or of any business unit, division or line of
business of another Person, or a Controlling interest in the Equity Interests,
of any other Person, or (d) any acquisition of any Store locations of any
Person, in each case for which the aggregate consideration payable in connection
with such transaction or group of transactions which are part of a common plan,
exceeds $500,000.

 

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

 

“Adjusted LIBO Rate” means an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of one percent) equal to (i) the LIBO Rate
multiplied by (ii) the Statutory Reserve Rate.  The Adjusted LIBO Rate will be
adjusted automatically as of the effective date of any change in the Statutory
Reserve Rate.

 

“Administrative Agent” means Salus in its capacity as administrative agent under
any of the Loan Documents, or any successor thereto in such capacities.

 

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

 

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

 

“Agent” means Salus in its capacity as Administrative Agent and Collateral Agent
under any of the Loan Documents, or any successor thereto in such capacities.

 

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

 

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

 

“Aggregate Commitments” means the Commitments of all the Lenders.  As of the
Closing Date, the Aggregate Commitments are $30,000,000.

 

“Agreement” means this Credit Agreement, as the same may be amended, restated,
supplemented or modified from time to time.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

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

 

“Applicable Margin” has the meaning specified in the Fee Letter.

 

“Applicable Percentage” means, with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time.  If the commitment of each
Lender to make Loans and the obligation of each

 

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L/C Issuer to make L/C Credit Extensions have been terminated pursuant to
Section 2.05 or Section 8.02 or if the Aggregate Commitments have expired, then
the Applicable Percentage of each Lender shall be determined based on the
Applicable Percentage of such Lender most recently in effect, giving effect to
any subsequent assignments.  The initial Applicable Percentage of each Lender is
set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment
and Assumption pursuant to which such Lender becomes a party hereto, as
applicable.

 

“Appraisal Percentage” means (a) one hundred and ten percent (110%) during the
months of February, March, April, September, October and November, and (b) one
hundred seven and one-half percent (107.5%) during the months of January, May,
June, July, August and December.

 

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

 

“Approved Foreign Vendor” means a Foreign Vendor which (a) is located in any
country acceptable to the Agent in its Permitted Discretion, (b) has received
timely payment (subject to any payment terms allowed by such Foreign Vendor) or
performance of all obligations owed to it by the Loan Parties, (c) has not
asserted and has no right to assert any reclamation, repossession, diversion,
stoppage in transit, Lien or title retention rights in respect of such
Inventory, and (d), if so requested by the Agent, has entered into and is in
full compliance with the terms of a Foreign Vendor Agreement.

 

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

 

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

 

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

 

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

 

“Audited Financial Statements” means the audited consolidated balance sheet of
the Lead Borrower and its Subsidiaries for the Fiscal Year ended December 28,
2013, and the related consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such Fiscal Year of the Lead Borrower
and its Subsidiaries, including the notes thereto.

 

3

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

 

“AV Sub” has the meaning specified in Section 6.21.

 

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

 

(a)                                 the Maximum Revolving Loan Amount

 

minus

 

(b)                                 the Total Outstandings.

 

In calculating Availability at any time and for any purpose under this
Agreement, the Lead Borrower shall certify to the Agent that all accounts
payable (including, without limitation, all rents) and Taxes are being paid on a
timely basis.

 

“Availability Block” means an amount equal to $900,000.

 

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.05, and (c) the date of termination
of the commitment of each Lender to make Committed Loans and of the obligation
of each L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Availability Reserves” means, without duplication of any other Reserves or
items to the extent such items are otherwise addressed or excluded through
eligibility criteria, such reserves as the Agent from time to time determines in
its Permitted Discretion as being appropriate (a) to reflect the impediments to
the Agent’s ability to realize upon the Collateral, (b) to reflect claims and
liabilities that the Agent determines will need to be satisfied in connection
with the realization upon the Collateral, (c) to reflect criteria, events,
conditions, contingencies or risks which adversely affect any component of the
Borrowing Base, or the assets, business, financial performance or financial
condition of any Loan Party, or (d) to reflect that a Default or an Event of
Default then exists. Without limiting the generality of the foregoing,
Availability Reserves may include, in the Agent’s Permitted Discretion, (but are
not limited to) reserves based on: (i) rent, provided, that rent Reserves for
locations leased by any Loan Party (A) shall not be taken for any such leased
locations covered by a Collateral Access Agreement and (B) for all other such
locations, shall be limited to three months’ rent for such leased location;
(ii) customs duties, and other costs to release Inventory which is being
imported into the United States; (iii) outstanding Taxes and other governmental
charges, including, without limitation, ad valorem, real estate, personal
property, sales, claims of the PBGC and other Taxes which may have priority over
the Liens of the Agent in the Collateral; (iv) salaries, wages and benefits due
to employees of any Borrower, (v) customer credit liabilities consisting of the
aggregate remaining value at such time of (a) outstanding gift certificates and
gift cards of the Borrowers entitling the holder thereof to use all or a portion
of the certificate or gift card to pay all or a portion of the purchase price
for any Inventory, (b) outstanding merchandise credits of the Borrowers, and
(c) liabilities in connection with frequent shopping programs of the Borrowers,
which Availability Reserves with respect to such customer credit liabilities
will on the Closing Date be in an amount equal to 50% of such customer credit
liabilities, and thereafter will be adjusted in the Agent’s Permitted Discretion
based on changes in the Loan Parties’ business practices regarding such customer
credit liabilities; (vi) deposits made by customers with respect to the purchase
of goods or the performance of services and layaway obligations of the
Borrowers; (vii) reserves for reasonably anticipated changes in the Appraised
Value of Eligible Inventory between appraisals; (viii) warehousemen’s or
bailee’s charges and other Permitted Encumbrances which may have priority over
the

 

4

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Lien of the Agent in the Collateral, provided, that Reserves for warehousemen’s
and bailee’s charges (A) shall not be taken for locations covered by a
Collateral Access Agreement and (B) for all other such locations, shall be
limited to three months’ charges for any such other location; (ix) amounts due
to vendors on account of consigned goods; (x) Cash Management Reserves;
(xi) Bank Products Reserves; (xii) royalties payable in respect of licensed
merchandise.

 

“Bank Products” means any services or facilities provided to any Loan Party by
the Agent or any of its Affiliates (but excluding Cash Management Services)
including, without limitation, on account of (a) Swap Contracts, (b) merchant
services constituting a line of credit, (c) leasing, (d) Factored Receivables,
and (e) supply chain finance services including, without limitation, trade
payable services and supplier accounts receivable purchases.

 

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

 

“Blocked Account” means a deposit account in which any funds of any of the Loan
Parties from one or more DDAs (other than Excluded Accounts) are concentrated. 
For the avoidance of doubt, no DDA with a balance of less than $7,500 shall be a
Blocked Account hereunder.

 

“Blocked Account Agreement” means with respect to any Blocked Account
established by a Loan Party, an agreement, in form and substance reasonably
satisfactory to the Agent, establishing control, pursuant to Section 9-104 of
the UCC or other applicable section of the UCC, of such Blocked Account by the
Agent and whereby the applicable Blocked Account Bank agrees, promptly after its
receipt of a notice of the occurrence and during the continuance of a Cash
Dominion Event, to comply only with the instructions originated by the Agent
without the further consent of any Loan Party.

 

“Blocked Account Bank” means each bank with whom a Blocked Account is maintained
and with whom a Blocked Account Agreement has been, or is required to be,
executed in accordance with the terms hereof.

 

“Bona Fide Debt Fund” means with respect to any Company Competitor, any debt
fund, investment vehicle, regulated bank entity or unregulated lending entity
that is (a) engaged in making, purchasing, holding or otherwise investing in
loans and similar extensions of credit in the ordinary course of business and
(b) managed, sponsored or advised by any Person that is controlling, controlled
by or under common control with such Company Competitor, but only to the extent
that no personnel involved with the investment in such Company Competitor,
(x) directly or indirectly makes, has the right to make or participates with
others in making investment decisions with respect to or otherwise causes the
direction of the investment policies of such debt fund, investment vehicle,
regulated bank entity or unregulated lending entity or (y) has access to any
information (other than information that is publicly available) relating to the
Lead Borrower or its Subsidiaries and/or any entity that forms a part of any of
its business (including any of its subsidiaries).

 

“Borrower Materials” means any Borrowing Base information, reports, financial
statements and other materials delivered by the Borrowers hereunder, as well as
other Reports and information provided by the Agent to the Lenders.

 

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

 

“Borrowing” means a borrowing consisting of simultaneous Committed Loans made by
each of the Lenders pursuant to Section 2.01.

 

5

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

 

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

 

plus

 

(b)                                 the Cost of Eligible Inventory, net of
Inventory Reserves, multiplied by the product of the Appraisal Percentage
multiplied by the Appraised Value of Eligible Inventory; provided, however, the
availability generated pursuant to this clause (b) and attributable to Eligible
In-Transit Inventory shall at no time exceed $5,000,000;

 

plus

 

(c)                                  the greater of (i) the Appraised Value of
the Eligible Intellectual Property, net of Intellectual Property Reserves,
multiplied by the Intellectual Property Advance Rate, and (ii) $1,250,000;
provided, however, the availability generated pursuant to this clause (c) and
attributable to Eligible Intellectual Property shall at no time exceed
$3,000,000;

 

minus

 

(d)                                 the Availability Block;

 

minus

 

(e)                                  the then amount of all Availability
Reserves.

 

Notwithstanding the foregoing, (1) for the period from the Closing Date until
the earlier of (i) 90 days following the Closing Date or (ii) receipt of an
inventory appraisal reasonably acceptable to the Agent, the Appraised Value of
Eligible Inventory shall be as set forth in the most recent inventory appraisal
conducted in connection with the Existing Credit Agreement, which the Lead
Borrower delivered to the Agent prior to the Closing Date, and (2) for the
period from the Closing Date until the earlier of (i) 120 days following the
Closing Date, or (ii) receipt of an intellectual property appraisal acceptable
to Agent, the availability generated pursuant to clause (c) above shall be
$1,250,000.

 

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

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Agent’s Office is located.

 

“Business Plan” means, with respect to any Fiscal Year, (i) a detailed forecast
prepared by management of the Borrowers for such Fiscal Year, which shall
include (without limitation) an Availability model, Consolidated income
statement, balance sheet, and statement of cash flow, by month, each prepared in
conformity with GAAP and consistent with the Borrowers’ then current practices,
the

 

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amount of any proposed distributions to be made pursuant to Section 7.06 and
such other information (financial or otherwise) as is reasonably requested by
the Agent, and (ii) any revisions to such forecast, in each case in form and
substance reasonably satisfactory to the Agent in its Permitted Discretion.  For
the avoidance of doubt, a draft or preliminary plan submitted by the Borrowers
to the Agent shall be deemed the “Business Plan” hereunder until it has been
finalized and accepted by the Borrowers and the Agent.

 

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

 

“Cash Collateral Account” means a non-interest bearing account established by
one or more of the Loan Parties with an L/C Issuer, in which deposits are
required to be made in accordance with Sections 2.03(f), Section 2.04 or
8.02(c).

 

“Cash Collateralize” means to pledge and deposit with or deliver to the
applicable L/C Issuer, for its benefit, as collateral for the applicable L/C
Obligations, cash or deposit account balances or, if the Agent and the
applicable L/C Issuer shall otherwise agree in their sole discretion, other
credit support, in each case pursuant to documentation in form and substance
satisfactory to the Agent and the applicable L/C Issuer (which documentation is
hereby Consented to by the Lenders).  “Cash Collateral” shall have a meaning
correlative to the foregoing and shall include the proceeds of such cash
collateral and other credit support.

 

“Cash Dominion Event” means either (i) the occurrence and continuance of any
Event of Default, or (ii) the failure of the Borrowers to maintain Availability
of at least $3,000,000.

 

“Cash Management Bank” means another institution as approved by Agent in its
sole discretion.

 

“Cash Equivalents” means any of the types of Permitted Investments permitted
pursuant to clauses (a) through (f) of the definition thereof.

 

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

 

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

 

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

 

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

 

“CFC” means (i) a Person that is a controlled foreign corporation under
Section 957 of the Code or (ii) a Person that is treated as disregarded as
separate from its owner which is deemed to own all interests in a “CFC” as
described in clause (i).

 

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

 

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

 

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

 

(b)                                 during any period of twelve (12) consecutive
months, a majority of the members of the board of directors or other equivalent
governing body of the Lead Borrower cease to be composed of individuals (i) who
were members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing
body was approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that board or
other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body; or

 

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

 

(d)                                 the Lead Borrower fails at any time to own,
directly or indirectly, one-hundred percent (100%) of the Equity Interests of
each other Loan Party free and clear of all Liens (other than the Liens in favor
of the Agent and other Permitted Encumbrances), except where such failure is as
a result of a transaction permitted by the Loan Documents.

 

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

 

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

 

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

 

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

 

“Collateral Agent” means Salus in its capacity as collateral agent under any of
the Loan Documents, or any successor thereto in such capacities.

 

“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 a Loan Party in the ordinary course of
business of such Loan Party.

 

“Commercial Letter of Credit Agreement” means the Commercial Letter of Credit
Agreement relating to the issuance of a Commercial Letter of Credit in the form
from time to time in use by the applicable L/C Issuer.

 

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

 

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

 

“Committed Loan Notice” means a notice of a Borrowing, pursuant to Section 2.02,
which, if in writing, shall be substantially in the form of Exhibit A.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

 

“Company Competitor” means competitors of the Lead Borrower and its Subsidiaries
reasonably identified by the Lead Borrower in writing to the Agent on or before
the Closing Date (as such list may be supplemented from time to time in
accordance with the terms hereof); provided, however, “Company Competitor”
shall, at no time, include any Lender or any Affiliate of a Lender, or any
Approved Fund of any Lender.

 

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

 

“Concentration Account” has the meaning provided in Section 6.13(c).

 

“Consent” means actual consent given by a Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice
to a Lender from the Agent of a

 

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proposed course of action to be followed by the Agent without such Lender giving
the Agent written notice of that Lender’s objection to such course of action.

 

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

 

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

 

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

 

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

 

“Credit Card Advance Rate” means one hundred percent (100%).

 

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

 

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

 

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

 

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

 

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

 

“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and
each of its Affiliates which issues Letters of Credit or provides Bank Products
or Cash Management Services to the Loan Parties, (ii) the Agent, (iii) each L/C
Issuer, (iv) each beneficiary of each indemnification obligation undertaken by
any Loan Party under any Loan Document, (v) any other Person to whom Obligations

 

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under this Agreement and other Loan Documents are owing, and (vi) the permitted
successors and assigns of each of the foregoing, and (b) collectively, all of
the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all reasonable and
documented out-of-pocket expenses incurred by the Agent and its Affiliates in
connection with this Agreement and the other Loan Documents, including without
limitation (i) the reasonable and documented fees, charges and disbursements of
(A) one primary counsel for the Agent and local counsel, if necessary,
(B) outside consultants for the Agent, (C) appraisers, (D) commercial finance
examinations, and (E) all such reasonable and documented out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of the
Obligations, and (ii) in connection with (A) the syndication or financing of the
credit facilities provided for herein, including any fees or expenses incurred
in connection with obtaining a rating for such credit facilities, (B) the
preparation, negotiation, management, execution and delivery of this Agreement
and the other Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (C) the administration of this Agreement and the
other Loan Documents,(D) the enforcement or protection of the rights of the
Credit Parties in connection with this Agreement or the Loan Documents or
efforts to monitor, preserve, protect, collect, or enforce the Collateral, or
(E) any workout, restructuring or negotiations in respect of any Obligations,
(b) with respect to any L/C Issuer and its Affiliates, all reasonable expenses
incurred in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder; (c) all reasonable and
customary fees and charges (as adjusted from time to time) of the Agent with
respect to access to online Loan information, the disbursement of funds (or the
receipt of funds) to or for the account of Loan Parties (whether by wire
transfer or otherwise), together with any reasonable and documented
out-of-pocket costs and expenses incurred in connection therewith; and (d) upon
the occurrence and during the continuance of an Event of Default or upon any
increase in the amount of Aggregate Commitments after the Closing Date, all
reasonable and documented out-of-pocket expenses incurred by the Credit Parties
who are not the Agent, a L/C Issuer or any Affiliate of any of them, provided
that such Credit Parties shall be entitled to reimbursement for no more than one
counsel representing all such Credit Parties (absent a conflict of interest in
which case the Credit Parties may engage and be reimbursed for additional
counsel).

 

“Customs Broker/Carrier Agreement” means an agreement in form and substance
reasonably satisfactory to the Agent among a Borrower, a customs broker, freight
forwarder, consolidator or carrier, and the Agent, in which the customs broker,
freight forwarder, consolidator or carrier acknowledges that it has control over
and holds the documents evidencing ownership of the subject Inventory for the
benefit of the Agent and agrees, upon notice from the Agent, to hold and dispose
of the subject Inventory solely as directed by the Agent.

 

“DDA” means each checking, savings or other demand deposit account maintained by
any of the Loan Parties.  All funds in each DDA shall be conclusively presumed
to be Collateral and proceeds of Collateral and the Agent and the Lenders shall
have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“DDA Notification” has the meaning provided therefor in Section 6.13(a)(iii).

 

“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.

 

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

 

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“Default Rate” means an interest rate equal to the interest rate (including any
Applicable Margin) otherwise applicable to such Loan plus three percent (3%) per
annum.

 

“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) has
failed to (i) fund all or any portion of its Committed Loans within two Business
Days of the date such Committed Loans were required to be funded hereunder, or
(ii) pay to the Agent or any other Lender any other amount required to be paid
by it hereunder within two Business Days of the date when due, (b) has notified
the Lead Borrower or the Agent in writing that it does not intend to comply with
its funding obligations hereunder, or has made a public statement to that
effect, (c) has failed, within three Business Days after written request by the
Agent or the Borrower, to confirm in writing to the Agent and the Borrower that
it will comply with its prospective funding obligations hereunder (provided that
such Lender shall cease to be a Defaulting Lender pursuant to this
clause (c) upon receipt of such written confirmation by the Agent and the Lead
Borrower), or (d) has, or has a direct or indirect parent company that has,
(i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had
appointed for it a receiver, custodian, conservator, trustee, administrator,
assignee for the benefit of creditors or similar Person charged with
reorganization or liquidation of its business or assets, including the Federal
Deposit Insurance Corporation or any other state or federal regulatory authority
acting in such a capacity; provided that a Lender shall not be a Defaulting
Lender solely by virtue of the ownership of acquisition of any Equity Interest
in that Lender or any direct or indirect parent company thereof by a
Governmental Authority so long as such ownership interest does not result in or
provide such Lender with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of attachment on its
assets or permit such Lender (or such Governmental Authority) to reject,
repudiate, disavow or disaffirm any contracts or agreements made with such
Lender.  Any determination by the Agent that a Lender is a Defaulting Lender
under any one or more of clauses (a) through (d) above, and of the effective
date of such status, shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender (subject to
Section 2.14(b)) as of the date established therefor by the Agent in a written
notice of such determination, which shall be delivered by the Agent to the Lead
Borrower and each other Lender promptly following such determination.

 

“Disposition” or “Dispose” means the sale, transfer, exclusive license, lease,
return of any Collateral to any vendor to offset an account payable or other
disposition including any sale and leaseback transaction and any sale, transfer,
license or other disposition of (whether in one transaction or in a series of
transactions) of any property (including, without limitation, any Equity
Interests other than Equity Interests of the Lead Borrower) by any Person (or
the granting of any option or other right to do any of the foregoing), including
any sale, assignment, transfer or other disposal, with or without recourse, of
any notes or accounts receivable or any rights and claims associated therewith.

 

“Disqualified Institution” means any Person that (a) is a Company Competitor
identified by the Lead Borrower to the Agent in writing on or prior to the
Closing Date (as such list may be updated from time to time with the written
consent of the Agent), or (b) is an Affiliate of the foregoing (other than any
such Affiliate that is a Bona Fide Debt Fund) that can be reasonably identified
as an Affiliate based on its name or other readily available information. The
specifying of a Company Competitor pursuant to foregoing clause (a) shall be
effective upon written confirmation of the Agent; provided, however, that such
supplement shall not apply to retroactively disqualify any Person that has
previously acquired an assignment or participation interest in any Loan in
accordance with the provisions of Sections 10.06(b) and 10.06(d).

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or

 

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prior to the date that is ninety-one (91) days after the date on which the Loans
mature; provided, however, that (i) only the portion of such Equity Interests
which so matures or is mandatorily redeemable, is so convertible or exchangeable
or is so redeemable at the option of the holder thereof prior to such date shall
be deemed to be Disqualified Stock and (ii) with respect to any Equity Interests
issued to any employee or to any plan for the benefit of employees of the Loan
Parties or by any such plan to such employees, such Equity Interest shall not
constitute Disqualified Stock solely because it may be required to be
repurchased by the Loan Parties in order to satisfy applicable statutory or
regulatory obligations or as a result of such employee’s termination,
resignation, death or disability and if any class of Equity Interest of such
Person that by its terms authorizes such Person to satisfy its obligations
thereunder by delivery of an Equity Interest that is not Disqualified Stock,
such Equity Interests shall not be deemed to be Disqualified Stock.
Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Stock solely because the holders thereof have the right
to require a Loan Party to repurchase such Equity Interest upon the occurrence
of a change of control or an asset sale shall not constitute Disqualified
Stock.  The amount of Disqualified Stock deemed to be outstanding at any time
for purposes of this Agreement will be the maximum amount that the Loan Parties
may become obligated to pay upon maturity of, or pursuant to any mandatory
redemption provisions of, such Disqualified Stock or portion thereof, plus
accrued dividends.

 

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

 

“Early Termination Fee” has the meaning set forth in the Fee Letter.

 

“Eligible Assignee” means (a) a Credit Party or any of its Affiliates; (b) a
bank, insurance company, or other Person engaged in the business of making
commercial loans, which Person, together with its Affiliates, has a combined
capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any
Person to whom a Credit Party assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Credit Party’s rights in
and to a material portion of such Credit Party’s portfolio of asset based credit
facilities, and (e) any other Person (other than a natural person) approved by
(i) the Agent, and (ii) unless a Default or Event of Default has occurred and is
continuing, the Lead Borrower (each such approval not to be unreasonably
withheld or delayed); provided, however, that notwithstanding the foregoing to
the contrary, “Eligible Assignee” shall not include (x) a Loan Party or any of
the Loan Parties’ Affiliates or Subsidiaries, or (z) so long as no Event of
Default has occurred and is continuing, any Disqualified Institution.

 

“Eligible Credit Card Receivables” means at the time of any determination
thereof, each Credit Card Receivable that satisfies the following criteria, as
determined by the Agent in its Permitted Discretion: such Credit Card Receivable
(i) has been earned by performance and represents the bona fide amounts due to a
Loan Party from a Credit Card Issuer or Credit Card Processor, and in each case
originated in the ordinary course of business of such Loan Party, and (ii) in
each case is not ineligible for inclusion in the calculation of the Borrowing
Base pursuant to any of clauses (a) through (j) below.  Without limiting the
foregoing, to qualify as an Eligible Credit Card Receivable, such Credit Card
Receivable shall indicate no Person other than a Loan Party as payee or
remittance party.  In determining the amount to be so included, the face amount
of a Credit Card Receivable shall be reduced by, without duplication, to the
extent not reflected in such face amount, (i) the amount of all accrued and
actual discounts, claims, credits or credits pending, promotional program
allowances, price adjustments, finance charges or other allowances (including
any amount that a Loan Party may be obligated to rebate to a customer, a Credit
Card Issuer or Credit Card Processor pursuant to the terms of any written
agreement or understanding) and (ii) the aggregate amount of all cash received
in respect of such Credit Card Receivable but not yet applied by the Loan
Parties to reduce the amount of such Credit Card Receivable.  Except as
otherwise agreed to by the Agent in its Permitted Discretion, any Credit Card
Receivable included within any of the following categories shall not constitute
an Eligible Credit Card Receivable:

 

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(a)                                 any Credit Card Receivable which does not
constitute a “payment intangible” (as defined in the UCC);

 

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

 

(c)                                  Credit Card Receivables (i) that are not
subject to a perfected first priority security interest in favor of the Agent,
or (ii) with respect to which a Loan Party does not have good, valid and
marketable title thereto, free and clear of any Lien (other than Liens granted
to the Agent pursuant to the Security Documents and Permitted Encumbrances
arising by operation of Law);

 

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

 

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

 

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

 

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

 

(h)                                 Credit Card Receivables which do not conform
to all representations, warranties (subject to any qualifications made with
respect to such representations and warranties) or other provisions in the Loan
Documents relating to Credit Card Receivables;

 

(i)                                     Credit Card Receivables which are
evidenced by “chattel paper” or an “instrument” of any kind unless such “chattel
paper” or “instrument” is in the possession of the Agent, and to the extent
necessary or appropriate, endorsed to the Agent; or

 

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

 

“Eligible In-Transit Inventory” means, as of any date of determination thereof,
without duplication of other Eligible Inventory, In-Transit Inventory:

 

(a)                                 Which has been shipped from a foreign
location for receipt by a Loan Party, but which has not yet been delivered to
such Loan Party, which In-Transit Inventory has been in transit for forty-five
(45) days or less from the date of shipment of such Inventory;

 

(b)                                 For which the purchase order is in the name
of a Loan Party and title and risk of loss has passed to such Loan Party;

 

(c)                                  For which an Acceptable Document of Title
has been issued, and in each case as to which the Agent has control (as defined
in the UCC) over the documents of title which evidence ownership of the subject
Inventory pursuant to a Customs Broker/Carrier Agreement;

 

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(d)                                 Which is insured in compliance with the
provisions of Section 6.07 hereof (including, without limitation, marine cargo
insurance);

 

(e)                                  the Foreign Vendor with respect to such
In-Transit Inventory is an Approved Foreign Vendor;

 

(f)                                   For which payment of the purchase price
has been made by the Loan Party or the purchase price is supported by a
Commercial Letter of Credit; and

 

(g)                                  Which otherwise would constitute Eligible
Inventory;

 

provided that the Agent may, in its Permitted Discretion, exclude any particular
Inventory from the definition of “Eligible In-Transit Inventory” in the event
the Agent determines that such Inventory is subject to any Person’s right of
reclamation, repudiation, stoppage in transit or any event has occurred or is
reasonably anticipated by the Agent to arise which may otherwise adversely
impact in any material respect the ability of the Agent to realize upon such
Inventory.

 

“Eligible Intellectual Property” means Intellectual Property deemed by the Agent
in its Permitted Discretion to be eligible for inclusion in the calculation of
the Borrowing Base and which, except as otherwise agreed by the Agent in its
Permitted Discretion, satisfies all of the following conditions:

 

(a)                                 Such Intellectual Property is validly
registered with the U.S. Patent and Trademark Office or the U.S. Copyright
Office, as applicable;

 

(b)                                 A Loan Party owns such Intellectual Property
or exclusively licenses such Intellectual Property from a third party;

 

(c)                                  Such Loan Party is in compliance in all
material respects with the representations, warranties and covenants set forth
in the Security Agreement relating to such Intellectual Property;

 

(d)                                 The Agent shall have received evidence that
all actions that the Agent may reasonably deem necessary or appropriate in order
to create valid first and subsisting Liens (subject only to Permitted
Encumbrances (other than Encumbrances securing Indebtedness) which have priority
over the Lien of the Agent by operation of Law) on such Intellectual Property
(including, without limitation, filings at the U.S. Patent and Trademark Office
or the U.S. Copyright Office, as applicable) has been taken; and

 

(e)                                  The Agent shall have received an appraisal
of such Intellectual Property by a third party appraiser acceptable to the Agent
and otherwise in form and substance reasonably satisfactory to the Agent.

 

“Eligible Inventory” means, as of the date of determination thereof, without
duplication, (i) Eligible In-Transit Inventory, and (ii) items of Inventory of a
Loan Party that are finished goods, merchantable and readily saleable to the
public in the ordinary course of the Loan Parties’ business, in each case that,
except as otherwise agreed by the Agent in its Permitted Discretion,
(A) complies with each of the representations and warranties (subject to any
qualifications made with respect to such representations and warranties)
respecting Inventory made by the Loan Parties in the Loan Documents, and (B) is
not excluded as ineligible by virtue of one or more of the criteria set forth
below as determined by the Agent in its Permitted Discretion.  Except as
otherwise agreed by the Agent, in its Permitted Discretion, the following items
of Inventory shall not be included in Eligible Inventory:

 

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(a)                                 Inventory that is not solely owned by a Loan
Party or a Loan Party does not have good and valid title thereto;

 

(b)                                 Inventory that is leased by or is on
consignment to a Loan Party or which is consigned by a Loan Party to a Person
which is not a Loan Party;

 

(c)                                  Inventory (other than Eligible In-Transit
Inventory) that is not located in the United States of America (excluding
territories or possessions of the United States);

 

(d)                                 Inventory (other than Inventory covered by
clause (e) below) that is not located at a location that is owned or leased by a
Loan Party, except (i) Inventory in transit between such owned or leased
locations or locations which meet the criteria set forth in clause (ii) below,
or (ii) to the extent that the Loan Parties have furnished the Agent with
(A) any UCC financing statements or other documents that the Agent may determine
in its Permitted Discretion to be necessary to perfect its security interest in
such Inventory at such location, and (B) either (x) a Collateral Access
Agreement executed by the Person owning any such location has been delivered to
the Agent or (y) Availability Reserves have been established with respect
thereto;

 

(e)                                  Inventory that is located in a distribution
center or warehouse leased by a Loan Party unless either (x) the applicable
lessor has delivered to the Agent a Collateral Access Agreement or
(y) Availability Reserves have been established with respect thereto;

 

(f)                                   Inventory that is comprised of goods which
(i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to
be returned to the vendor, (iii) are obsolete or slow moving, or custom items,
work in process, raw materials, or that constitute samples, spare parts,
promotional, marketing, labels, bags and other packaging and shipping materials
or supplies used or consumed in a Loan Parties’ business, (iv) are seasonal in
nature and which have been packed away for sale in the subsequent season,
(v) not in compliance in all material respects with all standards imposed by any
Governmental Authority having regulatory authority over such Inventory, its use
or sale, or (vi) are bill and hold goods;

 

(g)                                  Inventory that is not subject to a
perfected first priority (subject to Permitted Encumbrances having priority by
operation of applicable Law) security interest in favor of the Agent;

 

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

 

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

 

(j)                                    Inventory that is subject to any
licensing, patent, royalty, trademark, trade name or copyright agreement with
any third party from which any Loan Party or any of its Subsidiaries has
received notice of a dispute in respect of any such agreement; or

 

(k)                                 Inventory deemed by the Agent in its
Permitted Discretion to be ineligible for inclusion in the calculation of the
Borrowing Base.

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the

 

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environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

 

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

 

“Equipment” has the meaning set forth in the UCC.

 

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

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with any Loan Party within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 and 4971 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate
from a Multiemployer Plan or notification to the Lead Borrower or any ERISA
Affiliate that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a plan amendment as a
termination of a Pension Plan or a Multiemployer Plan under Sections 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon a Borrower or
any ERISA Affiliate; or (g) the determination that any Pension Plan is
considered to be an “at-risk” plan or that any Multiemployer Plan is considered
to be in “endangered” or “critical” status within the meaning of Sections 430,
431 and 432 of the Code or Sections 303, 304 and 305 of ERISA.

 

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

 

“Excluded Account” means any DDAs which are petty cash, payroll, trust, escrow
or tax withholding accounts.

 

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the Guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the Guarantee of such Guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation. If a Swap Obligation arises under a master agreement governing more
than one swap, such exclusion shall apply only to the portion of such Swap
Obligation that is attributable to swaps for which such Guarantee or security
interest is or becomes illegal.

 

“Excluded Taxes” means, with respect to the Agent, any Lender, any L/C Issuer or
any other recipient of any payment to be made by or on account of any obligation
of the Loan Parties hereunder, (a) taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) pursuant to the laws of the
jurisdiction under 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 or
any similar tax imposed by any other jurisdiction in which any Loan Party is
located, (c) in the case of a Foreign Lender (other than an assignee pursuant to
a request by the Lead Borrower under Section 10.13), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new Lending Office) or is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with Section 3.01(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 Loan Parties with respect to such withholding tax pursuant to
Section 3.01(a), (d) any U.S. federal, state or local backup withholding tax,
and (e) any U.S. federal withholding tax imposed under FATCA.

 

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

 

“Existing Credit Agreement” means that certain Credit Agreement dated as of
July 25, 2013, by and among, among others, the Lead Borrower, Wells Fargo Bank,
National Association, as agent, and a syndicate of lenders.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation awards (and payments in lieu thereof), indemnity
payments and any purchase price adjustments.

 

“Facility Guaranty” means any Guarantee made by a Guarantor in favor of the
Agent and the other Credit Parties, in form and substance reasonably
satisfactory to the Agent, as the same now exists or may hereafter be amended,
modified, supplemented, renewed, restated or replaced.

 

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“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements
with respect thereto (together with any law implementing such agreements).

 

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

 

“Fee Letter” means the letter agreement, dated as of the Closing Date, between
the Lead Borrower and the Agent.

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall
generally end on the last Saturday of each calendar month in accordance with the
fiscal accounting calendar of the Loan Parties.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters
shall generally end on the last Saturday of each March, June, September and
December of such Fiscal Year in accordance with the fiscal accounting calendar
of the Loan Parties.

 

“Fiscal Year” means any period of twelve (12) consecutive Fiscal Months ending
on the Saturday closest to December 31 of any calendar year.

 

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

 

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

 

“Foreign Vendor” means a Person that sells In-Transit Inventory to a Borrower.

 

“Foreign Vendor Agreement” means an agreement between a Foreign Vendor and the
Agent in form and substance reasonably satisfactory to the Agent and pursuant to
which, among other things, the parties shall agree upon their relative rights
with respect to In-Transit Inventory of a Borrower purchased from such Foreign
Vendor.

 

“Fronting Fee” has the meaning assigned to such term in Section 2.03(h).

 

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

 

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

 

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

 

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

 

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

 

“Guarantor” has the meaning specified in the introductory paragraph hereto and
shall also refer to each other Subsidiary of the Lead Borrower that shall be
required to execute and deliver a Facility Guaranty pursuant to Section 6.12.

 

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

 

“Honor Date” means the date of any payment by the applicable L/C Issuer under a
Letter of Credit.

 

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

 

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

 

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

 

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

 

(d)                                 all obligations of such Person to pay the
deferred purchase price of property or services (other than (i) trade accounts
and accrued expenses payable in the ordinary course of business which are not
past due for more than sixty (60) days after their applicable due date or more
than one hundred and twenty (120) days after the date on which such trade
account payable was created or which are otherwise being disputed in accordance
with the provisions of Section 6.04 hereof and (ii) accruals for payroll and
other liabilities accrued in the ordinary course of business);

 

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

 

(f)                                   all Attributable Indebtedness of such
Person;

 

(g)                                  all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any Equity
Interest in such Person or any other Person (including, without limitation,
Disqualified Stock, or any warrant, right or option to acquire such Equity
Interest, valued, in the case of a redeemable preferred interest, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; and

 

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

 

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

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

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

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future:  trade secrets, know-how
and other proprietary information; trademarks, trademark applications, internet
domain names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and combinations
of the foregoing) indicia and other source and/or business identifiers, and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights and copyright
applications; (including copyrights for computer programs) and all tangible and
intangible property embodying the copyrights, unpatented inventions (whether or
not patentable); patents and patent applications; industrial design applications
and registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books,

 

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customer lists, records, writings, computer tapes or disks, flow diagrams,
specification sheets, computer software, source codes, object codes, executable
code, data, databases and other physical manifestations, embodiments or
incorporations of any of the foregoing; all other intellectual property; and all
common law and other rights throughout the world in and to all of the foregoing.

 

“Intellectual Property Advance Rate” mean fifty percent (50%).

 

“Intellectual Property Reserves” means such reserves as the Agent from time to
time determines in its Permitted Discretion as being appropriate to reflect the
impediments to the Agent’s ability to realize upon any Eligible Intellectual
Property or to reflect claims and liabilities that the Agent determines will
need to be satisfied in connection with the realization upon any Eligible
Intellectual Property.

 

“Interest Payment Date” means the first day after the end of each month and the
Maturity Date.

 

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

 

“In-Transit Inventory” means Inventory of a Borrower which is in the possession
of a common carrier and is in transit from a Foreign Vendor of a Borrower from a
location outside of the continental United States to a location of a Borrower
that is within the continental United States.

 

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

 

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

 

(a)                                 Obsolescence;

 

(b)                                 Seasonality;

 

(c)                                  Shrink;

 

(d)                                 Imbalance;

 

(e)                                  Change in Inventory character;

 

(f)                                   Change in Inventory composition;

 

(g)                                  Change in Inventory mix;

 

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(h)                                 Markdowns (both permanent and point of
sale);

 

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

 

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

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, (c) any
Acquisition, or (d) the purchase, acquisition or investment of or in any stocks,
bonds, mutual funds, notes, debentures or other securities, or any deposit
account, certificate of deposit or other investment of any kind.  For purposes
of covenant compliance, the amount of any Investment shall be the amount
actually invested, without adjustment for subsequent increases or decreases in
the value of such Investment net of any repayments thereof.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the International Standby
Practices 1998 (International Chamber of Commerce Publication No. 590) and any
subsequent revision thereof adopted by the International Chamber of Commerce on
the date such Letter of Credit is issued.

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit
Application, the Standby Letter of Credit Agreement or Commercial Letter of
Credit Agreement, as applicable, and any other document, agreement and
instrument entered into by the applicable L/C Issuer and a Borrower (or any
Subsidiary thereof) or in favor of the applicable L/C Issuer and relating to any
such Letter of Credit.

 

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

 

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent
may have priority over the Lien of the Agent in any of the Collateral.

 

“Laws” means each international, foreign, Federal, state and local statute,
treaty, rule, guideline, regulation, ordinance, code and administrative or
judicial precedent or authority, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and each applicable administrative
order, directed duty, request, license, authorization and permit of, and
agreement with, any Governmental Authority, in each case whether or not having
the force of law.

 

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

 

“L/C Issuer” means (a) Salus, (b) any other financial institution that, with the
consent of the Agent (and subject to such financial institution’s entry into
agreements reasonably satisfactory to the Agent), agrees to become an L/C Issuer
for the purpose of issuing Letters of Credit hereunder, and (c) any successor
issuer of Letters of Credit hereunder (which successor may only be a Lender
selected by the Agent in its Permitted Discretion).  Any L/C Issuer may, in its
Permitted Discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of such L/C Issuer and/or for such Affiliate to act as an

 

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advising, transferring, confirming and/or nominated bank in connection with the
issuance or administration of any such Letter of Credit, in which case the term
“L/C Issuer” shall include any such Affiliate with respect to Letters of Credit
issued by such Affiliate.

 

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

 

“Lead Borrower” has the meaning assigned to such term in the preamble of this
Agreement.

 

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

 

“Lender” means each Lender having a Commitment as set forth on Schedule 2.01
hereto or in the Assignment and Assumption by which such Person becomes a
Lender.

 

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

 

“Letter of Credit” means each Standby Letter of Credit and each Commercial
Letter of Credit issued hereunder.

 

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

 

“Letter of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day).

 

“Letter of Credit Sublimit” means an amount equal to $3,000,000.  The Letter of
Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. 
A permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less than
the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at Lead Borrower’s option, less than) the
Aggregate Commitments.

 

“LIBO Rate” means, as of any date of determination, the greater of
(a) one-quarter of one percent (0.25)% per annum, and (b) the rate per annum for
LIBOR,  as published by www.bankrate.com (or other commercially available source
providing quotations of LIBOR as designated by the Agent from time to time) for
an interest period of thirty (30) days.  If such rate is not available at such
time for any reason, then the “LIBO Rate” shall be the rate per annum determined
by the Agent to be the rate at which deposits in Dollars in the approximate
outstanding amount of the applicable Loans would be offered to major banks in
the London interbank eurodollar market in which Salus participates for an
interest period of thirty (30) days.

 

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

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment
for security, deposit arrangement, encumbrance, lien (statutory or other),
charge, or preference, priority or other security interest or preferential
arrangement in the nature of a security interest of any kind or nature
whatsoever (including any conditional sale, Capital Lease Obligation, Synthetic
Lease Obligation, or other title retention agreement, any easement, right of way
or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing) and (b) in the
case of securities, any purchase option, call or similar right of a third party
with respect to such securities.

 

“Loan” means any extension of credit by a Lender to the Borrowers under
Article II in the form of a Committed Loan or otherwise.

 

“Loan Account” has the meaning assigned to such term in Section 2.10(a).

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA
Notifications, the Credit Card Notifications, the Security Documents, each
Facility Guaranty, and any other instrument or agreement now or hereafter
executed and delivered in connection herewith, or in connection with any
transaction arising out of any Cash Management Services and Bank Products
provided by the Agent or any of its Affiliates, each as amended and in effect
from time to time.

 

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

 

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

 

“Material Contract” means, with respect to any Person, each contract to which
such Person is a party as to which the breach, nonperformance, or cancellation
by any party thereto would have a Material Adverse Effect.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the
Loan Parties in an aggregate principal amount exceeding $2,000,000.  For
purposes of determining the amount of Material Indebtedness at any time, (a) the
amount of the obligations in respect of any Swap Contract at such time shall be
calculated at the Swap Termination Value thereof, (b) undrawn committed or
available amounts shall be included, and (c) all amounts owing to all creditors
under any combined or syndicated credit arrangement shall be included.

 

“Maturity Date” means September 19, 2017.

 

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

 

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

 

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

 

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Lead Borrower or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan
years, has made or been obligated to make contributions.

 

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

 

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

 

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

 

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

 

“NPL” means the National Priorities List under CERCLA.

 

“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 Committed Loan or Letter of Credit (including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral therefor), whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest, fees,
costs, expenses and indemnities that accrue after the commencement by or against
any Loan Party or any Affiliate thereof of any proceeding under any Debtor
Relief Laws naming such Person as the debtor in such proceeding, regardless of
whether such interest, fees, costs, expenses and indemnities are allowed claims
in such proceeding, and (b) any Other Liabilities; provided that the Obligations
shall not include any Excluded Swap Obligations.

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection

 

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with its formation or organization with the applicable Governmental Authority in
the jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity, and (d) in
each case, all shareholder or other equity holder agreements, voting trusts and
similar arrangements to which such Person is a party or which is applicable to
its Equity Interests and all other arrangements relating to the Control or
management of such Person.

 

“Other Liabilities” means (a) any obligation on account of (i) any Cash
Management Services furnished to any of the Loan Parties or any of their
Subsidiaries and/or (ii) any transaction with the Agent or any of its
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 all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

 

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

 

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

 

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

 

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

 

“Payment Conditions” means, at the time of determination with respect to any
specified transaction or payment, that (a) no Default or Event of Default then
exists or would arise as a result of entering into such transaction or the
making of such payment, and (b) for any date of calculation with respect to any
transaction or payment, the Availability following, and after giving effect to,
such transaction or payment, will be equal to or greater than $5,000,000.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Lead Borrower
or any ERISA Affiliate or to which the Lead Borrower or any ERISA Affiliate
contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

 

“Perfection Certificate” means that certain perfection certificate dated as of
the date hereof, executed and delivered by the Loan Parties in favor of the
Agent, for the benefit of the Credit Parties, and each other Perfection
Certificate (which shall be in form and substance reasonably acceptable to the
Agent) executed and delivered by the applicable Borrower or Guarantor in favor
of the Agent for the

 

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benefit of the Credit Parties contemporaneously with the execution and delivery
of Joinder executed in accordance with Section 6.12, in each case, as the same
may be amended, restated, supplemented or otherwise modified from time to time
in accordance herewith.

 

“Permitted Discretion” means a determination by the Agent in the exercise of its
reasonable credit judgment, exercised in good faith in accordance with customary
business practices for comparable asset-based lending transactions in the retail
industry.

 

“Permitted Disposition” means any of the following:

 

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

 

(b)                                 bulk sales or other Dispositions of the
Inventory of a Loan Party not in the ordinary course of business in connection
with Store closings, at arm’s length; provided, that such Store closures and
related sales or other Inventory Dispositions shall not exceed (i) during the
period beginning on the Closing Date and ending on the first anniversary of the
Closing Date, forty (40) of the Loan Parties’ Stores as of the Closing Date (net
of new Store openings and Store relocations (A) occurring substantially
contemporaneously with the related Store closure date or (B) wherein a binding
lease has been entered into on or prior to the related Store closure date),
provided, that all sales of Inventory in connection with Store closings pursuant
to this clause (i) shall be in accordance with liquidation agreements and with
professional liquidators reasonably acceptable to the Agent; and (ii) in the
aggregate from and after the Closing Date, sixty (60) of the Loan Parties’
Stores in existence as of the Closing Date (net of new Store openings and Store
relocations (A) occurring substantially contemporaneously with the related Store
closure date or (B) wherein a binding lease has been entered into on or prior to
the related Store closure date); provided, further that all sales of Inventory
in connection with Store closings in a transaction or series of related
transactions which in the aggregate involve Inventory having a cost value
greater than $1,000,000 shall be in accordance with liquidation agreements and
with professional liquidators reasonably acceptable to the Agent; provided,
further that (1) all Net Proceeds received in connection therewith are applied
to the Obligations if then required in accordance with Section 2.04 hereof and
(2) no such liquidation agreement or professional liquidator shall be required
to the extent such sales or other Dispositions of Inventory are limited to a
single store;

 

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

 

(d)                                 licenses for the conduct of licensed
departments within the Loan Parties’ Stores in the ordinary course of business;
provided that, if requested by the Agent, the Agent shall have entered into an
intercreditor agreement with the Person operating such licensed department on
terms and conditions reasonably satisfactory to the Agent;

 

(e)                                  Dispositions of Equipment in the ordinary
course of business that is worn, damaged, obsolete or, in the judgment of a Loan
Party, no longer useful or necessary in its business or that of any Subsidiary
and is replaced with similar property having at least equivalent value;

 

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

 

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

 

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(h)                                 (i) the making of Permitted Investments,
(ii) the granting of or suffering to permit of Permitted Encumbrances,
(iii) transactions permitted under Section 7.04, (iv) the making of Restricted
Payments permitted under Section 7.06, (v) the payment of Indebtedness to the
extent not prohibited by Section 7.07, and (vi) any casualty event or
condemnation;

 

(i)                                     the sale or abandonment of Intellectual
Property of a Loan Party or any of its Subsidiaries in the ordinary course of
business that is not material and is no longer used or useful in the business of
any Loan Party;

 

(j)                                    leases, subleases, licenses or
sublicenses (including the provision of software under an open source license)
entered into by a Loan Party or any Subsidiary or terminated by a Loan Party or
any Subsidiary, in each case, in the ordinary course of business of such Person
and which do not materially interfere with the business of the Loan Parties,
taken as a whole;

 

(k)                                 so long as no Event of Default is
continuing, Dispositions of Cash Equivalents;

 

(l)                                     so long as no Change of Control would
result therefrom, the issuance and sale by the Lead Borrower of Equity Interests
of the Lead Borrower (including any purchase option, call or similar right of a
third party with respect to the Equity Interests of the Lead Borrower) after the
date hereof;

 

(m)                             the termination of Leases in the ordinary course
of business; and

 

(n)                                 other Dispositions of property (other than
assets included in the Borrowing Base) of the Loan Parties or their Subsidiaries
in an aggregate amount not to exceed $750,000 in any Fiscal Year.

 

“Permitted Encumbrances” means:

 

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

 

(b)                                 carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s and other like Liens imposed by applicable Law,
arising in the ordinary course of business and securing obligations that are not
overdue by more than sixty (60) days or are being contested in compliance with
Section 6.04;

 

(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, other than any Lien
imposed by ERISA;

 

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

 

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

 

(f)                                   easements, covenants, conditions,
restrictions, building code laws, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising

 

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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
materially interfere with the ordinary conduct of business of the Loan Parties,
taken as a whole and such other minor title defects or survey matters that are
disclosed by current surveys that, in each case, do not materially interfere
with the current use of the real property;

 

(g)                                  Liens existing on the Closing Date and
listed on Schedule 7.01 and any Permitted Refinancings thereof;

 

(h)                                 Liens on fixed or capital assets acquired by
any Loan Party which are permitted under clause (c) of the definition of
Permitted Indebtedness so long as (i) such Liens and the Indebtedness secured
thereby are incurred prior to or within one hundred and eighty (180) days after
such acquisition, (ii) the Indebtedness secured thereby does not exceed the cost
of acquisition of such fixed or capital assets and (iii) such Liens shall not
extend to any other property or assets of the Loan Parties (other than
Replacement Assets);

 

(i)                                     Liens in favor of the Agent;

 

(j)                                    Liens of landlords and lessors in respect
of rent not past due more than 15 days unless being contested in good faith
pursuant to the provisions of Section 6.04 hereof;

 

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

 

(l)                                     Liens arising solely by virtue of any
statutory or common law provisions relating to banker’s liens, liens in favor of
securities intermediaries, rights of setoff or similar rights and remedies as to
deposit accounts or securities accounts or other funds maintained with
depository institutions or securities intermediaries;

 

(m)                             Liens arising from precautionary UCC filings
regarding “true” operating leases or the consignment of goods to a Loan Party;

 

(n)                                 Liens in favor of customs and revenues
authorities imposed by applicable Law arising in the ordinary course of business
in connection with the importation of goods solely to the extent the following
conditions are satisfied: such Liens secure obligations that are (A) being
contested in good faith by appropriate proceedings, (B) the applicable Loan
Party or Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (C) such contest effectively suspends
collection of the contested obligation and enforcement of any Lien securing such
obligation;

 

(o)                                 Liens or rights of setoff against credit
balances of any Loan Party with Credit Card Issuers or Credit Card Processors or
amounts owing by such Credit Card Issuers or Credit Card Processors to such Loan
Party in the ordinary course of business;

 

(p)                                 Liens solely on any Cash deposits or Cash
Equivalents of any Loan Party in the ordinary course of business of the Loan
Parties to secure the performance of the Loan Parties’ obligations under the
terms of a lease;

 

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(q)                                 Liens on insurance policies owned by any
Loan Party and the proceeds thereof securing the financing of the premiums with
respect thereto;

 

(r)                                    Liens constituting interest or title of a
lessor, sublessor, licensor or sublicensor or secured by a lessor’s, sublessor’s
or sublicensor’s interest under a lease entered into by the Loan Parties in the
ordinary course of business; and

 

(s)                                   other Liens securing obligations (other
than for borrowed money) in an aggregate principal amount not exceeding $750,000
at any one time outstanding.

 

“Permitted Indebtedness” means each of the following:

 

(a)                                 Indebtedness outstanding on the Closing Date
and listed on Schedule 7.03 and any Permitted Refinancing thereof;

 

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

 

(c)                                  purchase money Indebtedness of any Loan
Party to finance the acquisition of any personal property consisting solely of
fixed or capital assets, including Capital Lease Obligations, and any
Indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof, and
Permitted Refinancings thereof; provided, however, that the aggregate principal
amount of Indebtedness permitted by this clause (c) shall not exceed $2,000,000
at any time outstanding and further provided that, if requested by the Agent,
the Loan Parties shall use commercially reasonable efforts to cause the holders
of such Indebtedness to enter into a Collateral Access Agreement on terms
reasonably satisfactory to the Agent;

 

(d)                                 obligations (contingent or otherwise) of any
Loan Party or any Subsidiary thereof existing or arising under any Swap
Contract, provided that such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly mitigating
risks associated with fluctuations in interest rates or foreign exchange rates,
and not for purposes of speculation or taking a “market view”;

 

(e)                                  contingent liabilities under export or
import indemnities, customs and revenue bonds, performance, bid, appeal and
surety bonds and performance and completion guarantees or similar obligations or
obligations incurred in respect of letters of credit, bank guarantees or similar
instruments related thereto, in each case, incurred in the ordinary course of
business, including in respect of workers compensation claims, health,
disability or other employee benefits or property, casualty or liability
insurance or self-insurance or other Indebtedness with respect to
reimbursement-type obligations regarding worker compensation claims;

 

(f)                                   Indebtedness constituting customary
indemnification, adjustment of purchase price or similar obligations or deferred
purchase price (including earn-outs or similar obligations), in each case, with
respect to any Permitted Disposition, provided that any such Indebtedness in an
original principal amount in excess of $250,000 individually or $500,000 in the
aggregate with respect to a deferred purchase price (including earn-outs or
similar obligations but excluding customary indemnification obligations) has a
maturity which extends beyond the Maturity Date and is otherwise on terms
reasonably acceptable to the Agent, and is subordinated to the Obligations on
terms reasonably acceptable to the Agent;

 

(g)                                  the Obligations;

 

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(h)                                 unsecured Indebtedness in the aggregate
principal amount of up to $250,000 at any time outstanding (but excluding the
issuance, redemption or repurchase of Disqualified Stock), provided that, as to
any such Indebtedness (i) such Indebtedness shall be on commercially reasonable
terms and conditions with market rate pricing and shall have a maturity date
that is at least ninety-one (91) days after the Maturity Date and (ii) as of the
date of the incurrence of any such Indebtedness and after giving effect thereto,
no Event of Default shall exist or have occurred and be continuing;

 

(i)                                     unsecured guarantees made by any Loan
Party in the ordinary course of business of the obligations of suppliers,
customers, franchisees and licensees of the Loan Parties;

 

(j)                                    guarantees by any Loan Party of
Indebtedness of any other Loan Party with respect to Indebtedness otherwise
permitted to be incurred pursuant to Section 7.03;

 

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

 

(l)                                     Indebtedness representing deferred
compensation to employees of the Loan Parties incurred in the ordinary course of
business;

 

(m)                             cash management obligations and other
Indebtedness in respect of netting services, automatic clearinghouse
arrangements, overdraft protections, employee credit card programs and other
cash management and similar arrangements in the ordinary course of business;

 

(n)                                 to the extent constituting
Indebtedness, Investments permitted under Section 7.02;

 

(o)                                 Unsecured Subordinated Indebtedness not
otherwise specifically described herein in an aggregate principal amount not to
exceed $1,000,000 at any time outstanding, provided that (i) the terms of such
Indebtedness are reasonably acceptable to the Agent, (ii) the maturity date of
such Indebtedness shall be at least 91 days after the Maturity Date and
(iii) the amount of any fees and expenses associated with such Indebtedness
shall be reasonably acceptable to the Agent; and

 

(p)                                 other unsecured Indebtedness in an aggregate
amount not to exceed $750,000 at any time outstanding.

 

“Permitted Investments” means each of the following:

 

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

 

(b)                                 marketable direct obligations issued by any
state of the United States or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, a rating of at least
A-1 from S&P or at least P-1 from Moody’s;

 

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(c)                                  commercial paper issued by any Person
organized under the laws of any state of the United States of America and rated
at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1”
(or the then equivalent grade) by S&P at the time of acquisition of such
commercial paper, in each case with maturities of not more than 270 days from
the date of acquisition thereof;

 

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

 

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

 

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

 

(g)                                  Investments existing on the Closing Date
and any modifications, replacements, renewals, reinvestments or extensions
thereof, and set forth on Schedule 7.02, but not any increase in the amount
thereof;

 

(h)                                 (i) Investments by any Loan Party and its
Subsidiaries in their respective Subsidiaries outstanding on the Closing Date
and (ii) additional Investments by any Loan Party and its Subsidiaries in Loan
Parties;

 

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

 

(j)                                    Guarantees constituting Permitted
Indebtedness;

 

(k)                                 as long as no Event of Default exists or
would arise from the making of such Investment, Investments by any Loan Party in
Swap Contracts entered into in the ordinary course of business and for bona fide
business (and not speculative) purposes to protect against fluctuations in
interest rates in respect of the Obligations;

 

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(l)                                     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;

 

(m)                             as long as no Event of Default exists or would
arise from the making of such Investment, advances, loans or extensions of
credit to officers, directors and employees of the Loan Parties and Subsidiaries
in the ordinary course of business in an amount not to exceed $100,000 to any
individual at any time or in an aggregate amount not to exceed $250,000 at any
time outstanding, for travel, entertainment, relocation and analogous ordinary
business purposes;

 

(n)                                 Capital contributions, loans or advances
made by any Loan Party to another Loan Party;

 

(o)                                 guarantees by any Loan Party of leases
(other than Capitalized Leases) or of other obligations that do not constitute
Indebtedness;

 

(p)                                 promissory notes and other noncash
consideration permitted to be received in connection with Permitted
Dispositions;

 

(q)                                 Investments in the ordinary course of
business consisting of endorsements for collection or deposit and customary
trade arrangements with customers;

 

(r)                                    advances of payroll payments to employees
in the ordinary course of business;

 

(s)                                   so long as no Change of Control would
result therefrom, Investments to the extent that payment for such Investments is
made solely with Equity Interests (other than Disqualified Stock) of the Lead
Borrower;

 

(t)                                    deposits, rebates, prepayments and other
credits to suppliers made in the ordinary course of business; and

 

(u)                                 deposits for leases, utilities and letters
of credit in the ordinary course of business.

 

provided, however, that notwithstanding the foregoing, after the occurrence and
during the continuance of a Cash Dominion Event, no such Investments specified
in clauses (a) through (f) and clause (v) shall be permitted unless (i) no
Loans, or, if then required to be Cash Collateralized, Letters of Credit are
then outstanding, and (ii) such Investments shall be pledged to the Agent as
additional collateral for the Obligations pursuant to such agreements as may be
reasonably required by the Agent.

 

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

 

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

 

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

 

(c)                                  Is made to pay any other amount chargeable
to any Loan Party hereunder.

 

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provided however, that the foregoing shall not result in any claim or liability
against the Agent (regardless of the amount of any Overadvance) for
Unintentional Overadvances and such Unintentional Overadvances shall not reduce
the amount of Permitted Overadvances allowed hereunder; provided further that in
no event shall the Agent make an Overadvance, if after giving effect thereto,
the principal amount of the Credit Extensions would exceed the Aggregate
Commitments (as in effect prior to any termination of the Commitments pursuant
to Sections 2.05 or 8.02 hereof).

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund (collectively, to “Refinance”), the
Indebtedness being Refinanced (or previous refinancings thereof constituting a
Permitted Refinancing); provided, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
Refinanced (plus unpaid accrued interest and premiums thereon and underwriting
discounts, defeasance costs, fees, commissions and expenses), (b) the weighted
average life to maturity of such Permitted Refinancing is greater than or equal
to the weighted average life to maturity of the Indebtedness being Refinanced
(c) such Permitted Refinancing shall not require any scheduled principal
payments due prior to the Maturity Date in excess of, or prior to, the scheduled
principal payments due prior to such Maturity Date for the Indebtedness being
Refinanced, (d) if the Indebtedness being Refinanced is subordinated in right of
payment to the Obligations under this Agreement, such Permitted Refinancing
shall be subordinated in right of payment to such Obligations on terms at least
as favorable (taken as a whole in all material respects) to the Credit Parties
as those contained in the documentation governing the Indebtedness being
Refinanced, (e) no Permitted Refinancing shall have direct or indirect obligors
who were not also obligors of the Indebtedness being Refinanced, or greater
guarantees or security, than the Indebtedness being Refinanced, (f) such
Permitted Refinancing shall either be unsecured or secured by liens having the
same priority, and subject to any applicable subordination terms, as existing
liens securing the Indebtedness being Refinanced, (g) such Permitted Refinancing
shall be otherwise on terms not materially less favorable to the Credit Parties
than those contained in the documentation governing the Indebtedness being
Refinanced, including, without limitation, with respect to financial and other
covenants and events of default, (h) the interest rate applicable to any such
Permitted Refinancing shall not exceed the greater of (x) the then applicable
market interest rate and (y) the interest rate on the Indebtedness being
refinanced, and (i) at the time thereof, no Default or Event of Default shall
have occurred and be continuing.

 

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

 

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Lead Borrower or, with respect to any
such plan that is subject to Section 412 of the Code or Title IV of ERISA, any
ERISA Affiliate.

 

“Prepayment Event” means:

 

(a)                                 any Disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of a Loan Party (other
than prior to the occurrence of a Cash Dominion Event, a Permitted Disposition);

 

(b)                                 any casualty or other insured damage to, or
any taking under power of eminent domain or by condemnation or similar
proceeding of (and payments in lieu thereof), any property or asset of a Loan
Party, unless (i) the proceeds therefrom are required to be paid to the holder
of a Lien on such property or asset having priority over the Lien of the Agent
or (ii) prior to the occurrence of a Cash Dominion Event, the proceeds therefrom
either (x) do not exceed $500,000

 

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or (y) are deposited into a segregated account and utilized for purposes of
replacing or repairing the assets in respect of which such proceeds, awards or
payments were received within 180 days of the occurrence of the damage to or
loss of the assets being repaired or replaced;

 

(c)                                  the issuance by a Loan Party of any Equity
Interests, other than any such issuance of Equity Interests (i) to a Loan Party,
or (ii) as a compensatory issuance to any employee, director, or consultant
(including under any option plan);

 

(d)                                 the incurrence by a Loan Party of any
Indebtedness for borrowed money other than Permitted Indebtedness; or

 

(e)                                  the receipt by any Loan Party of any
Extraordinary Receipts; provided, that so long as no Cash Dominion Event has
occurred and is continuing, only the receipt of Extraordinary Receipts in an
amount greater than $50,000 shall constitute a Prepayment Event hereunder.

 

“Put Notice” means a written notice delivered to the Lead Borrower by the Agent,
within thirty (30) days following a Change of Control, notifying the Lead
Borrower of the Termination Date, which notice shall be delivered solely in the
Permitted Discretion of the Agent.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan
Party that has total assets exceeding $10,000,000 at the time the relevant
Guarantee or grant of the relevant security interest becomes effective with
respect to such Swap Obligation or such other person as constitutes an “eligible
contract participant” under the Commodity Exchange Act or any regulations
promulgated thereunder and can cause another person to qualify as an “eligible
contract participant” at such time by entering into a keepwell under
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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

 

“Receipts and Collections” has the meaning specified in Section 6.13(c).

 

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

 

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

 

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

 

“Replacement Assets” means, with respect to any properties or assets subject to
an existing Lien, any replacements, substitutions, attachments and accessions of
or to such properties or assets subject to such Lien under the terms of the
documentation creating such Lien at the time such properties or assets are
acquired (or, with respect to the acquisition of a Person that owns such assets,
the time such Person becomes a Subsidiary) and proceeds and products of the
properties or assets subject to such Lien.

 

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

 

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“Reports” has the meaning provided in Section 9.11(b).

 

“Request for Credit Extension” means (a) with respect to a Borrowing, a
Committed Loan Notice, and (b) with respect to an L/C Credit Extension, a Letter
of Credit Application and, if required by the applicable L/C Issuer, a Standby
Letter of Credit Agreement or Commercial Letter of Credit Agreement, as
applicable.

 

“Required Lenders” means, as of any date of determination, Lenders holding more
than fifty percent (50%) of the sum of the Aggregate Commitments or, if the
Aggregate Commitments and the obligation of each L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02, Lenders holding in the
aggregate more than fifty percent (50%) of the Total Outstandings; provided that
the Commitment of, and the portion in the aggregate of the Total Outstandings
held or deemed held by, any Defaulting Lender shall be excluded for purposes of
making a determination of Required Lenders.

 

“Reserves” means all Inventory Reserves, Availability Reserves, and Intellectual
Property Reserves.

 

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

 

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

 

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

 

“Salus” means Salus Capital Partners, LLC and its successors.

 

“Salus Entity” has the meaning provided in Section 10.06(i).

 

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

 

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

 

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

 

“Security Agreement” means the Security Agreement dated as of the Closing Date
among the Loan Parties and the Agent, as the same now exists or may hereafter be
amended, modified, supplemented, renewed, restated or replaced.

 

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

 

“Settlement Date” has the meaning provided in Section 2.13(a).

 

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

 

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

 

“Solvent” and “Solvency” means, with respect to any Person as of any date of
determination, that (a) at fair valuations, the sum of such Person’s debts
(including contingent liabilities) is less than all of such Person’s assets,
(b) such Person is not engaged or about to engage in a business or transaction
for which the remaining assets of such Person are unreasonably small in relation
to the business or transaction or for which the property remaining with such
Person is an unreasonably small capital, and (c) such Person has not incurred
and does not intend to incur, or reasonably believe that it will incur, debts
beyond its ability to pay such debts as they become due (whether at maturity or
otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable
within the meaning given those terms and similar terms under applicable laws
relating to fraudulent transfers and conveyances.  For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability (irrespective of whether such contingent liabilities
meet the criteria for accrual under Statement of Financial Accounting Standard
No. 5).

 

“Spot Rate” has the meaning given to such term in Section 1.07 hereof.

 

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

 

“Standby Letter of Credit Agreement” means the Standby Letter of Credit
Agreement relating to the issuance of a Standby Letter of Credit in the form
from time to time in use by the applicable L/C Issuer.

 

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

 

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

 

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

 

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

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
Equity Interests having ordinary voting power for the election of directors or
other governing body are at the time beneficially owned, or the management of
which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.  Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of a Loan Party.  Notwithstanding the foregoing, AV
Sub shall not be deemed a Subsidiary.

 

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

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

 

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

 

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provided by any recognized dealer in such Swap Contracts (which may include a
Lender or any Affiliate of a Lender).

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment).

 

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

 

“Termination Date” means the earliest to occur of (i) the Maturity Date,
(ii) the date on which the maturity of the Obligations is accelerated (or deemed
accelerated) and the Commitments are irrevocably terminated (or deemed
terminated) in accordance with Article VIII, (iii) the date on which the Agent
delivers a Put Notice to the Lead Borrower, or (iv) the termination of the
Commitments in accordance with the provisions of Section 2.05(a) hereof.

 

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

 

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

 

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

 

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and
Practice for Documentary Credits 2007 Revision, International Chamber of
Commerce Publication No. 600 and any subsequent revision thereof adopted by the
International Chamber of Commerce on the date such Letter of Credit is issued.

 

“UFCA” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

 

“Unintentional Overadvance” means an Overadvance which, to the Agent’s
knowledge, did not constitute an Overadvance when made but which has become an
Overadvance resulting from changed

 

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circumstances beyond the control of the Credit Parties, including, without
limitation, a reduction in the Appraised Value of property or assets included in
the Borrowing Base, increase in Reserves or misrepresentation by the Loan
Parties.

 

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

 

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

 

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

 

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

 

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

 

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

 

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1.03                        Accounting Terms Generally.

 

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

 

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

 

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

 

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

 

1.06                        Letter of Credit Amounts.  Unless otherwise
specified, all references herein to the amount of a Letter of Credit at any time
shall be deemed to be the Stated Amount of such Letter of Credit in effect at
such time; provided, however, that with respect to any Letter of Credit that, by
its terms or the terms of any Issuer Documents related thereto, provides for one
or more automatic increases in the Stated Amount thereof, the amount of such
Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter
of Credit after giving effect to all such increases, whether or not such maximum
Stated Amount is in effect at such time.

 

1.07                        Currency Equivalents Generally.  Any amount
specified in this Agreement (other than in Article II, Article IX and Article X)
or any of the other Loan Documents to be in Dollars shall also include the
equivalent of such amount in any currency other than Dollars, such equivalent
amount thereof in the applicable currency to be determined by the Agent at such
time on the basis of the Spot Rate (as defined below) for the purchase of such
currency with Dollars.  For purposes of this Section 1.07, the “Spot Rate” for a
currency means the rate determined by the Agent to be the rate quoted by the
Person acting in such capacity as the spot rate for the purchase by such Person
of such currency with another currency through its principal foreign exchange
trading office at approximately 11:00 a.m. on the date two Business Days prior
to the date of such determination; provided that the Agent may obtain such spot
rate from another financial institution designated by the Agent if the Person
acting in such capacity does not have as of the date of determination a spot
buying rate for any such currency.

 

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ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01                        Committed Loans; Reserves.

 

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

 

(i)                                     after giving effect to any Borrowing,
the Total Outstandings shall not exceed the Maximum Revolving Loan Amount;

 

(ii)                                  after giving effect to any Borrowing, the
aggregate Outstanding Amount of the Committed Loans of any Lender shall not
exceed the lesser of (A) such Lender’s Commitment and (B) such Lender’s
Applicable Percentage of the Borrowing Base; and

 

(iii)                               the Outstanding Amount of all L/C
Obligations shall not at any time exceed the Letter of Credit Sublimit

 

Within the limits of each Lender’s Commitment, and subject to the other terms
and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay
under Section 2.04, and reborrow Committed Loans under this Section 2.01.

 

(b)               The Inventory Reserves and Availability Reserves as of the
Closing Date are set forth in the Borrowing Base Certificate delivered pursuant
to Section 4.01(c) hereof.

 

(c)                The Agent shall have the right, at any time and from time to
time after the Closing Date in its Permitted Discretion to establish, modify or
eliminate Reserves.

 

2.02                        Borrowings and Conversions of Committed Loans.

 

(a)               Each Borrowing shall be made upon the Lead Borrower’s
irrevocable written notice to the Agent.  Each such notice must be received by
the Agent in writing not later than 12:00 p.m. or such earlier time as Agent may
designate from time to time by written notice to the Lead Borrower on the same
Business Day of the requested date of any Borrowing of LIBO Rate Loans.  Each
notice by the Lead Borrower pursuant to this Section 2.02(a) must be confirmed
promptly by delivery to the Agent of a written Committed Loan Notice (or, if the
Agent so requests, by electronic submission by the Lead Borrower), appropriately
completed and signed by a Responsible Officer of the Lead Borrower.  Unless
otherwise agreed to by the Agent, each Borrowing of LIBO Rate Loans shall be
with respect to any Committed Loan, in a principal amount of $100,000.  Each
Committed Loan Notice shall specify (i) whether the Lead Borrower is requesting
a Borrowing, (ii) the requested date of the Borrowing (which shall be a Business
Day), and (iii) the principal amount of Committed Loans to be borrowed.

 

(b)               Following receipt of a Request for Credit Extension, the Agent
shall promptly notify each Lender of the amount of its Applicable Percentage of
the applicable Committed Loans.  In the case of a Committed Revolving Borrowing,
each Lender shall make the amount of its Committed Loan available to the Agent
in immediately available funds at the Agent’s Office not later than 1:00

 

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p.m. on the Business Day specified in the applicable Committed Loan Notice. 
Upon satisfaction of the applicable conditions set forth in Section 4.02 (and,
if such Borrowing is the initial Credit Extension, Section 4.01), the Agent
shall use reasonable efforts to make all funds so received available to the
Borrowers in like funds by no later than 4:00 p.m. on the day of receipt by the
Agent by wire transfer of such funds in accordance with instructions provided to
(and reasonably acceptable to) the Agent by the Lead Borrower.

 

(c)                The Agent, without the request of the Lead Borrower, may
advance as a Revolving Loan any interest, fee, service charge (including direct
wire fees), Credit Party Expenses, or other payment to which any Credit Party is
entitled from the Loan Parties pursuant hereto or any other Loan Document and
may charge the same to the Loan Account notwithstanding that an Overadvance may
result thereby.  The Agent shall advise the Lead Borrower of any such advance or
charge promptly after the making thereof.  Such action on the part of the Agent
shall not constitute a waiver of the Agent’s rights and the Borrowers’
obligations under Section 2.04(b).  Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.02(b) shall bear
interest at the interest rate then and thereafter applicable to Loans.

 

(d)               Each Borrowing of Committed Loans shall be made by the Lenders
pro rata in accordance with their respective Applicable Percentage.  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.

 

(e)                At any time that Loans are outstanding, the Agent shall
notify the Lead Borrower and the Lenders of any change in the LIBO Rate used in
determining the applicable interest rate.

 

(f)                 The Agent, the Lenders and the L/C Issuers shall have no
obligation to make any Loan or to provide any Letter of Credit if an Overadvance
would result.  The Agent may, in its Permitted Discretion, make Permitted
Overadvances without the consent of the Borrowers, the Lenders and the L/C
Issuers and the Borrowers and each Lender and L/C Issuer shall be bound
thereby.  A Permitted Overadvance is for the account of the Borrowers and shall
constitute a Loan and an Obligation and shall be repaid by the Borrowers in
accordance with the provisions of Section 2.04(b).  The making of any such
Permitted Overadvance on any one occasion shall not obligate the Agent or any
Lender to make or permit any Permitted Overadvance on any other occasion or to
permit such Permitted Overadvances to remain outstanding. The Agent shall have
no liability for, and no Loan Party or Credit Party shall have the right to, or
shall, bring any claim of any kind whatsoever against the Agent with respect to
Unintentional Overadvances regardless of the amount of any such Overadvance(s).

 

2.03                        Letters of Credit.

 

(a)               The Letter of Credit Commitment.

 

(i)                                     Subject to the terms and conditions set
forth herein, each L/C Issuer shall (A) from time to time on any Business Day
during the period from the Closing Date until the Letter of Credit Expiration
Date, issue Letters of Credit for the account of the Borrowers, and amend or
extend Letters of Credit previously issued by it, in accordance with
Section 2.03(b) below, and (B) honor drawings under the Letters of Credit;
provided, that after giving effect to any L/C Credit Extension with respect to
any Letter of Credit, (x) the Total Outstandings shall not exceed Maximum
Revolving Loan Amount, (y) the aggregate Outstanding Amount of the Committed
Loans of any Lender shall not exceed such Lender’s Commitment, and (z) the
Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit
Sublimit.  Each

 

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request by the Lead Borrower for the issuance or amendment of a Letter of Credit
shall be deemed to be a representation by the Borrowers that the L/C Credit
Extension so requested complies with the conditions set forth in the proviso to
the preceding sentence.  Within the foregoing limits, and subject to the terms
and conditions hereof, the Borrowers’ ability to obtain Letters of Credit shall
be fully revolving, and accordingly the Borrowers may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit that have expired
or that have been drawn upon and reimbursed.

 

(ii)                                  No Letter of Credit shall be issued if:

 

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

 

(B)                               subject to Section (b)(ii), the expiry date of
such requested Commercial Letter of Credit would occur more than 120 days after
the date of issuance or last extension, unless the Required Lenders have
approved such expiry date; or

 

(C)                               the expiry date of such requested Letter of
Credit would occur after the Letter of Credit Expiration Date, unless all the
Lenders have approved such expiry date.

 

(iii)                               No Letter of Credit shall be issued without
the prior consent of the Agent if:

 

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

 

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

 

(C)                               except as otherwise agreed by the Agent and
the applicable L/C Issuer, such Letter of Credit is in an initial Stated Amount
less than $100,000, in the case of a Commercial Letter of Credit, or $500,000,
in the case of a Standby Letter of Credit;

 

(D)                               such Letter of Credit is to be denominated in
a currency other than Dollars; provided that if the applicable L/C Issuer, in
its Permitted Discretion, issues a Letter of Credit denominated in a currency
other than Dollars, all reimbursements by the Borrowers of the honoring of any
drawing under such Letter of Credit shall be paid in Dollars based on the Spot
Rate; or

 

(E)                                such Letter of Credit contains any provisions
for automatic reinstatement of the Stated Amount after any drawing thereunder.

 

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

 

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

 

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

 

(i)                                     Each Letter of Credit shall be issued or
amended, as the case may be, upon the request of the Lead Borrower delivered to
the applicable L/C Issuer (with a copy to the Agent) in the form of a Letter of
Credit Application, appropriately completed and signed by a Responsible Officer
of the Lead Borrower.  Such Letter of Credit Application must be received by
such L/C Issuer and the Agent not later than 11:00 a.m. at least two Business
Days (or such other date and time as the Agent and such L/C Issuer may agree in
a particular instance in their Permitted Discretion) prior to the proposed
issuance date or date of amendment, as the case may be.  In the case of a
request for an initial issuance of a Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the Agent and such
L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit
(which shall be a Business Day); (B) the amount thereof; (C) the expiry date
thereof; (D) the name and address of the beneficiary thereof; (E) the documents
to be presented by such beneficiary in case of any drawing thereunder; (F) the
full text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (G) such other matters as the Agent or such L/C Issuer
may require.  In the case of a request for an amendment of any outstanding
Letter of Credit, such Letter of Credit Application shall specify in form and
detail satisfactory to the Agent and the applicable L/C Issuer (A) the Letter of
Credit to be amended; (B) the proposed date of amendment thereof (which shall be
a Business Day); (C) the nature of the proposed amendment; and (D) such other
matters as the Agent or such L/C Issuer may require.  Additionally, the Lead
Borrower shall furnish to the applicable L/C Issuer and the Agent such other
documents and information pertaining to such requested Letter of Credit issuance
or amendment, and any Issuer Documents (including, if requested by the
applicable L/C Issuer, a Standby Letter of Credit Agreement or Commercial Letter
of Credit Agreement, as applicable), as the applicable L/C Issuer or the Agent
may require.

 

(ii)                                  Promptly after receipt of any Letter of
Credit Application, the applicable L/C Issuer will confirm with the Agent (in
writing) that the Agent has received a copy of such Letter of Credit Application
from the Lead Borrower and, if not, such L/C Issuer will provide the Agent with
a copy thereof.  Unless the applicable L/C Issuer has received written notice
from any Lender, the Agent or any Loan Party, at least one Business Day prior to
the requested date of issuance or amendment of the applicable Letter of Credit,
that one or more applicable conditions contained in Article IV shall not then be
satisfied or unless the applicable L/C Issuer would not be permitted, or would
have no obligation, at such time to issue such Letter of Credit under the terms
hereof (by reason of the provisions of clause (ii) or (iii) of
Section 2.03(a) or otherwise), then, subject to the terms and conditions hereof,
the applicable L/C Issuer shall, on the requested date, issue a Letter of Credit
for the account of the applicable Borrower or enter into the applicable

 

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amendment, as the case may be, in each case in accordance with such L/C Issuer’s
usual and customary business practices.

 

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

 

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

 

(c)                Drawings.  Upon receipt from the beneficiary of any Letter of
Credit of any notice of a drawing under such Letter of Credit, the applicable
L/C Issuer shall notify the Lead Borrower and the Agent thereof not less than
two (2) Business Days prior to the Honor Date (as defined below); provided,
however, that any failure to give or delay in giving such notice shall not
relieve the Borrowers of their obligation to reimburse the applicable L/C Issuer
with respect to any such payment.  Any notice given by the applicable L/C Issuer
or the Agent pursuant to this Section 2.03(c) must be confirmed in writing.

 

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

 

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

 

(ii)                                  the existence of any claim, counterclaim,
setoff, defense or other right that the Borrowers or any Subsidiary may have at
any time against any beneficiary or any transferee of such Letter of Credit (or
any Person for whom any such beneficiary or any such

 

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transferee may be acting), the applicable L/C Issuer or any other Person,
whether in connection with this Agreement, the transactions contemplated hereby
or by such Letter of Credit or any agreement or instrument relating thereto, or
any unrelated transaction;

 

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

 

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

 

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

 

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

 

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

 

(e)                Role of L/C Issuer.  Each Lender and the Borrowers agree
that, in paying any drawing under a Letter of Credit, the applicable L/C Issuer
shall not have any responsibility to obtain any document (other than any sight
draft, certificates and documents expressly required by the Letter of Credit) or
to ascertain or inquire as to the validity or accuracy of any such document or
the authority of the Person executing or delivering any such document.  None of
the applicable L/C Issuer, the Agent, any of their respective Related Parties
nor any correspondent, participant or assignee of the applicable L/C Issuer
shall be liable to any Lender for (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders or the Required
Lenders, as applicable; (ii) any action taken or omitted in the absence of gross
negligence or willful misconduct; (iii) any error, omission, interruption, loss
or delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit or any error in interpretation of
technical terms; or (iv) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Issuer Document.  The Borrowers hereby assume all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrowers’ pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement.  None
of the applicable L/C Issuer, the Agent, any of their respective Related Parties
nor any correspondent, participant or assignee of the applicable L/C Issuer
shall be liable or responsible for any of the matters described in clauses
(i) through (v) of Section 2.03(d) or for any action, neglect or omission under
or in connection with any Letter of Credit or Issuer Documents,

 

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including, without limitation, the issuance or any amendment of any Letter of
Credit, the failure to issue or amend any Letter of Credit, or the honoring or
dishonoring of any demand under any Letter of Credit, and such action or neglect
or omission will bind the Borrowers; provided, however, that anything in such
clauses to the contrary notwithstanding, the Borrowers may have a claim against
the applicable L/C Issuer, and the applicable L/C Issuer may be liable to the
Borrowers, to the extent, but only to the extent, of any direct, as opposed to
consequential, exemplary or punitive damages suffered by the Borrowers which the
Borrowers prove were caused by the applicable L/C Issuer’s willful misconduct or
gross negligence or the applicable L/C Issuer’s willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of a
Letter of Credit; provided, further, that any claim against the applicable L/C
Issuer by the Borrowers for any loss suffered or incurred by the Borrowers shall
be reduced by an amount equal to the sum of (i) the amount (if any) saved by the
Borrowers as a result of the breach or other wrongful conduct that allegedly
caused such loss, and (ii) the amount (if any) of the loss that would have been
avoided had the Borrowers taken all reasonable steps to mitigate such loss,
including, without limitation, by enforcing their rights against any beneficiary
and, in case of a claim of wrongful dishonor, by specifically and timely
authorizing the applicable L/C Issuer to cure such dishonor.  In furtherance and
not in limitation of the foregoing, the applicable L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary
(or the applicable L/C Issuer may 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 and may disregard any requirement in a Letter of Credit that
notice of dishonor be given in a particular manner and any requirement that
presentation be made at a particular place or by a particular time of day), and
the applicable L/C Issuer shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.  The applicable L/C Issuer shall not be responsible
for the wording of any Letter of Credit (including, without limitation, any
drawing conditions or any terms or conditions that are ineffective, ambiguous,
inconsistent, unduly complicated or reasonably impossible to satisfy),
notwithstanding any assistance the applicable L/C Issuer may provide to the
Borrowers with drafting or recommending text for any Letter of Credit
Application or with the structuring of any transaction related to any Letter of
Credit, and the Borrowers hereby acknowledge and agree that any such assistance
will not constitute legal or other advice by the applicable L/C Issuer or any
representation or warranty by the applicable L/C Issuer that any such wording or
such Letter of Credit will be effective.  Without limiting the foregoing, the
applicable L/C Issuer may, as it deems appropriate, modify or alter and use in
any Letter of Credit the terminology contained on the Letter of Credit
Application for such Letter of Credit.

 

(f)                 Cash Collateral.  The Borrowers shall immediately Cash
Collateralize, with the proceeds of Committed Loans, the Outstanding Amount of
all L/C Obligations with respect to all Letters of Credit upon the issuance
thereof in an amount equal to one hundred percent (100%) of the Outstanding
Amount of such L/C Obligations (other than L/C Obligations with respect to
Letters of Credit denominated in a currency other than Dollars, which L/C
Obligations shall be Cash Collateralized in an amount equal to one hundred five
percent (105%) of the Outstanding Amount of such L/C Obligations).  In
furtherance thereof, on the date of issuance of each Letter of Credit hereunder,
the Borrowers shall request a Borrowing to be disbursed on such date in order to
Cash Collateralize the Outstanding Amount of all L/C Obligations with respect to
such Letter of Credit in accordance with this Section 2.03(f).  Cash Collateral
shall be maintained in a Cash Collateral Account with the applicable L/C
Issuer.  If at any time the Agent or the applicable L/C Issuer determines that
any funds held as Cash Collateral are subject to any right or claim of any
Person other than the Agent or the applicable L/C Issuer or that the total
amount of such funds is less than the aggregate Outstanding Amount of all L/C
Obligations, the Borrowers will, forthwith upon demand by the Agent,

 

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pay to the Agent, as additional funds to be deposited as Cash Collateral, an
amount equal to the excess of (x) such aggregate Outstanding Amount over (y) the
total amount of funds, if any, then held as Cash Collateral that the Agent
determines to be free and clear of any such right and claim.  Upon the drawing
of any Letter of Credit for which funds are on deposit as Cash Collateral, such
funds shall be applied, to the extent permitted under applicable Laws, to
reimburse the applicable L/C Issuer and, to the extent not so applied, shall
thereafter be applied to satisfy other Obligations.

 

(g)                Applicability of ISP and UCP.  Unless otherwise expressly
agreed by the applicable L/C Issuer and the Lead Borrower when a Letter of
Credit is issued, (i) the rules of the ISP and the UCP shall apply to each
Standby Letter of Credit, and (ii) the rules of the UCP shall apply to each
Commercial Letter of Credit.

 

(h)               Fronting Fee and Documentary and Processing Charges Payable to
L/C Issuer.  The Borrowers shall pay directly to the applicable L/C Issuer, for
its own account, a customary fronting fee (the “Fronting Fee”) computed on the
daily amount available to be drawn under each Letter of Credit issued by such
L/C Issuer and payable on a monthly basis in arrears.  Such Fronting Fees shall
be due and payable on the first day after the end of each month, commencing with
the first such date to occur after the issuance of such Letter of Credit, on the
Letter of Credit Expiration Date and thereafter on demand.   For purposes of
computing the daily amount available to be drawn under any Letter of Credit, the
amount of the Letter of Credit shall be determined in accordance with
Section 1.06.  In addition, the Borrowers shall pay directly to the applicable
L/C Issuer, for its own account, the customary issuance, presentation, amendment
and other processing fees, and other standard costs and charges, of such L/C
Issuer relating to letters of credit as from time to time in effect.  Such
customary fees and standard costs and charges are due and payable on demand and
are nonrefundable.

 

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

 

2.04                        Prepayments.

 

(a)               Subject to the payment of any Early Termination Fee required
under the Fee Letter, the Borrowers may, upon notice from the Lead Borrower to
the Agent, at any time or from time to time voluntarily prepay Loans in whole or
in part without premium or penalty; provided that (i) such notice must be
received by the Agent not later than 11:00 a.m. three Business Days prior to any
date of prepayment of LIBO Rate Loans; and (ii) any prepayment of LIBO Rate
Loans shall be in a principal amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof or, in each case, if less, the entire principal
amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment.  The Agent will promptly notify each Lender of its
receipt of each such notice, and of the amount of such Lender’s Applicable
Percentage of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any
prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on
the amount prepaid.  Each such prepayment shall be applied to the Loans of the
Lenders in accordance with their respective Applicable Percentages.

 

(b)               If for any reason the Total Outstandings at any time exceed
the Maximum Revolving Loan Amount as then in effect, the Borrowers shall
immediately prepay the Committed Loans in an aggregate amount equal to such
excess.

 

(c)                After the occurrence and during the continuance of a Cash
Dominion Event, the Borrower shall prepay the Loans and Cash Collateralize the
L/C Obligations (to the extent that any

 

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such L/C Obligations are not already Cash Collateralized) with proceeds and
collections received by the Loan Parties to the extent so required under the
provisions of Section 6.13 hereof.

 

(d)               The Borrowers shall prepay the Loans and Cash Collateralize
the L/C Obligations (to the extent that any such L/C Obligations are not already
Cash Collateralized) in an amount equal to the Net Proceeds received by a Loan
Party on account of a Prepayment Event, irrespective of whether a Cash Dominion
Event then exists and is continuing.

 

(e)                Upon the expiration of any Letter of Credit, or any reduction
in the amount of any Letter of Credit, the Borrowers shall immediately prepay
the Loans then outstanding with the cash collateral held by the applicable L/C
Issuer on account of such Letter of Credit in an amount equal to (i) in the case
of the expiration of such Letter of Credit, the aggregate amount of Cash
Collateral held by the applicable L/C Issuer on account of such Letter of Credit
prior to giving effect to such prepayment, and (ii) in the case of any reduction
in the amount of such Letter of Credit, (A) the aggregate amount of Cash
Collateral held by the applicable L/C Issuer on account of such Letter of Credit
prior to giving effect to such prepayment minus (ii) the amount of cash
collateral required to Cash Collateralize the aggregate undrawn amount available
to be drawn on such Letter of Credit, after giving effect to the reduction
thereof, in accordance with Section 2.03(f).

 

(f)                 Prepayments made pursuant to Section (c), (d) and (e) above,
first, shall be applied ratably to the outstanding Committed Loans; second,
shall be used to Cash Collateralize the remaining L/C Obligations (to the extent
that any such L/C Obligations are not already Cash Collateralized); and, fourth,
the amount remaining, if any, after the prepayment in full of all Committed
Loans outstanding at such time and the Cash Collateralization of the remaining
L/C Obligations in full may be retained by the Borrowers for use in the ordinary
course of its business.  Upon the drawing of any Letter of Credit that has been
Cash Collateralized, the funds held as Cash Collateral shall be applied (without
any further action by or notice to or from the Borrowers or any other Loan
Party) to reimburse the applicable L/C Issuer.

 

2.05                        Termination or Reduction of Commitments.

 

(a)               Subject to the payment of any Early Termination Fee required
under the Fee Letter, the Borrowers may, upon notice from the Lead Borrower to
the Agent, terminate the Aggregate Commitments or the Letter of Credit Sublimit
or from time to time permanently reduce the Aggregate Commitments or the Letter
of Credit Sublimit; provided that (i) any such notice shall be received by the
Agent not later than 11:00 a.m. five Business Days prior to the date of
termination or reduction, (ii) any such partial reduction shall be in an
aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess
thereof, (iii) any such notice may provide that it is conditioned upon the
consummation of a refinancing of the Obligations, in which case, such notice may
be revoked or extended by the Lead Borrower if any such refinancing shall not be
consummated or shall otherwise be delayed prior to the date provided in such
notice of termination or reduction of the Aggregate Commitments or Letters of
Credit Sublimit, (iv) the Borrowers shall not terminate or reduce (A) the
Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments, or (B) the Letter of Credit Sublimit if, after giving effect
thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized
hereunder would exceed the Letter of Credit Sublimit.

 

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

 

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(c)                The Agent will promptly notify the Lenders of any termination
or reduction of the Letter of Credit Sublimit or the Aggregate Commitments under
this Section 2.05.  Upon any reduction of the Aggregate Commitments, the
Commitment of each Lender shall be reduced by such Lender’s Applicable
Percentage of such reduction amount.  All fees (including, without limitation,
commitment fees, Early Termination Fees, and Letter of Credit Fees) and interest
in respect of the Aggregate Commitments accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of
such termination.

 

2.06                        Repayment of Loans.  The Borrowers shall repay to
the Lenders on the Termination Date the aggregate principal amount of Committed
Loans outstanding on such date.

 

2.07                        Interest.

 

(a)               Subject to the provisions of Section 2.07(b) below, each
Committed Loan which is a LIBO Rate Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the Adjusted LIBO Rate
plus the Applicable Margin.

 

(b)               (i)                                     If any amount payable
under any Loan Document is not paid when due (without regard to any applicable
grace periods), whether at stated maturity, by acceleration or otherwise, such
amount shall thereafter bear interest at a fluctuating interest rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

 

(ii)                                  If any other Event of Default exists, then
the Agent may, and upon the request of the Required Lenders shall, notify the
Lead Borrower that all outstanding Obligations shall thereafter bear interest at
a fluctuating interest rate per annum at all times equal to the Default Rate and
thereafter such Obligations shall bear interest at the Default Rate to the
fullest extent permitted by applicable Laws.

 

(iii)                               Accrued and unpaid interest on past due
amounts (including interest on past due interest) shall be due and payable upon
demand.

 

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

 

2.08                        Fees.  In addition to certain fees described in
Section 2.03(h), the Borrower shall pay to the Agent for its accounts fees in
the amounts and at the times specified in the Fee Letter.  Such fees shall be
fully earned when paid and shall not be refundable for any reason whatsoever.

 

2.09                        Computation of Interest and Fees; Application of
Payments.  All computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed.  Interest shall accrue on each Loan for
the day on which the Loan is made.  For purposes of the calculation of the
Outstanding Amount and interest on the Loans, all payments made by or on account
of the Borrowers shall be deemed to have been applied to the Loans one
(1) Business Day after receipt of such payments by the Agent (as such receipt is
determined pursuant to Section 2.11).  Each determination by the Agent of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

 

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2.10                        Evidence of Debt.

 

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

 

(b)               Agent shall render monthly statements regarding the Loan
Account to the Lead Borrower including principal, interest, fees, and including
an itemization of all charges and expenses constituting Credit Party Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrowers and the Credit Parties unless, within thirty (30) days after receipt
thereof by the Lead Borrower, the Lead Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.

 

2.11                        Payments Generally; Agent’s Clawback.

 

(a)               General.  All payments to be made by the Borrowers shall be
made without condition or deduction for any counterclaim, defense, recoupment or
setoff.  Except as otherwise expressly provided herein, all payments by the
Borrowers hereunder shall be made to the Agent, for the account of the
respective Lenders to which such payment is owed, at the Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the date
specified herein.  Subject to Section 2.13 hereof, the Agent will promptly
distribute to each Lender its Applicable Percentage (or other applicable share
as provided herein) of such payment in like funds as received by wire transfer
to such Lender’s Lending Office.  All payments received by the Agent (i) prior
to or at 2:00 p.m., shall be deemed received on the same Business Day and
(ii) after 2:00 p.m., shall be deemed received on the next succeeding Business
Day; any applicable interest or fee shall continue to accrue and shall be
calculated pursuant to Section 2.09.  If any payment to be made by the Borrowers
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.

 

(b)               (i)                                     Funding by Lenders;
Presumption by Agent.  Unless the Agent shall have received notice from a Lender
prior to 12:00 noon on the date of such Borrowing that such Lender will not make
available to the Agent such Lender’s share of such Borrowing, the Agent may
assume that such Lender has made such share available on such date in accordance
with Section 2.02 and may, in reliance upon such assumption, make available to
the Borrowers a corresponding amount. 

 

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In such event, if a Lender has not in fact made its share of the applicable
Borrowing available to the Agent, then the applicable Lender and the Borrowers
severally agree to pay to the Agent forthwith on demand such corresponding
amount in immediately available funds with interest thereon, for each day from
and including the date such amount is made available to the Borrowers to but
excluding the date of payment to the Agent, at (A) in the case of a payment to
be made by such Lender, the greater of the Federal Funds Rate and a rate
determined by the Agent in accordance with banking industry rules on interbank
compensation plus any administrative processing or similar fees customarily
charged by the Agent in connection with the foregoing, and (B) in the case of a
payment to be made by the Borrowers, the interest rate applicable to Committed
Loans.  If the Borrowers and such Lender shall pay such interest to the Agent
for the same or an overlapping period, the Agent shall promptly remit to the
Borrowers the amount of such interest paid by the Borrowers for such period.  If
such Lender pays its share of the applicable Revolving Credit Borrower to the
Agent, then the amount so paid shall constitute such Lender’s Committed Loan
included in such Borrowing.  Any payment by the Borrowers shall be without
prejudice to any claim the Borrowers may have against a Lender that shall have
failed to make such payment to the Agent.

 

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

 

A notice of the Agent to any Lender or the Lead Borrower with respect to any
amount owing under this subsection (b) shall be conclusive, absent manifest
error.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.13                        Settlement Amongst Lenders.

 

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

 

(b)               The Agent shall deliver to each of the Lenders promptly after
a Settlement Date a summary statement of the amount of outstanding Committed
Loans for the period and the amount of repayments received for the period.  As
reflected on the summary statement, (i) the Agent shall transfer to each Lender
its Applicable Percentage of repayments, and (ii) each Lender shall transfer to
the Agent (as provided below) or the Agent shall transfer to each Lender, such
amounts as are necessary to insure that, after giving effect to all such
transfers, the amount of Committed Loans made by each Lender shall be equal to
such Lender’s Applicable Percentage of all Committed Loans outstanding as of
such Settlement Date.  If the summary statement requires transfers to be made to
the Agent by the Lenders and is received prior to 12:00 p.m. on a Business Day,
such transfers shall be made in immediately available funds no later than
3:00 p.m. that day; and, if received after 1:00 p.m., then no later than
12:00 p.m. on the next Business Day.  The obligation of each Lender to transfer
such funds is irrevocable, unconditional and without recourse to or warranty by
the Agent.  If and to the extent any Lender shall not have so made its transfer
to the Agent, such Lender agrees to pay to the Agent, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Agent, equal to the greater of the Federal Funds
Rate and a

 

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rate determined by the Agent in accordance with banking industry rules on
interbank compensation plus any administrative, processing, or similar fees
customarily charged by the Agent in connection with the foregoing.

 

2.14                        Defaulting Lenders.

 

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

 

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

 

(ii)                                  Defaulting Lender Waterfall.  Any payment
of principal, interest, fees or other amounts received by the Agent for the
account of such Defaulting Lender (whether voluntary or mandatory, at maturity,
pursuant to Article VIII or otherwise) or received by the Agent from a
Defaulting Lender pursuant to Section 10.08 shall be applied at such time or
times as may be determined by the Agent as follows:  first, to the payment of
any amounts owing by such Defaulting Lender to the Agent hereunder; second, as
the Lead Borrower may request (so long as no Default or Event of Default
exists), to the funding of any Committed Loan in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by the Agent; third, if so determined by the Agent and
the Lead Borrower, to be held in a deposit account and released pro rata in
order to satisfy such Defaulting Lender’s potential future funding obligations
with respect to Committed Loans under this Agreement; fourth, to the payment of
any amounts owing to the Lenders as a result of any judgment of a court of
competent jurisdiction obtained by any Lender against such Defaulting Lender as
a result of such Defaulting Lender’s breach of its obligations under this
Agreement; fifth, so long as no Default or Event of Default exists, to the
payment of any amounts owing to the Borrowers as a result of any judgment of a
court of competent jurisdiction obtained by the Borrowers against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement; and sixth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided that if
(x) such payment is a payment of the principal amount of any Committed Loans in
respect of which such Defaulting Lender has not fully funded its appropriate
share, and (y) such Committed Loans were made at a time when the conditions set
forth in Section 4.02 were satisfied or waived, such payment shall be applied
solely to pay the Committed Loans of all Non-Defaulting Lenders on a pro rata
basis prior to being applied to the payment of any Committed Loans of such
Defaulting Lender until such time as all Committed Loans are held by the Lenders
pro rata in accordance with the Commitments hereunder.  Any payments,
prepayments or other amounts paid or payable to a Defaulting Lender that are
applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed
paid to and redirected by such Defaulting Lender, and each Lender irrevocably
consents hereto.

 

(iii)                               Certain Fees.  No Defaulting Lender shall be
entitled to receive any fee payable under Section 2.08 or the Fee Letter for any
period during which that Lender is a Defaulting Lender (and the Borrowers shall
not be required to pay any such fee that otherwise would have been required to
have been paid to that Defaulting Lender).

 

(b)               Defaulting Lender Cure.  If the Lead Borrower and the Agent
agree in writing that a Lender is no longer a Defaulting Lender, the Agent will
so notify the parties hereto, whereupon as of the effective date specified in
such notice and subject to any conditions set forth therein (which

 

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may include arrangements with respect to any Cash Collateral), that Lender will,
to the extent applicable, purchase at par that portion of outstanding Committed
Loans of the other Lenders or take such other actions as the Agent may determine
to be necessary to cause the Committed Loans to be held on a pro rata basis by
the Lenders in accordance with their Applicable Percentages, whereupon such
Lender will cease to be a Defaulting Lender; provided that no adjustments will
be made retroactively with respect to fees accrued or payments made by or on
behalf of the Borrowers while that Lender was a Defaulting Lender; and provided,
further, that except to the extent otherwise expressly agreed by the affected
parties, no change hereunder from Defaulting Lender to Lender will constitute a
waiver or release of any claim of any party hereunder arising from that Lenders
having been a Defaulting Lender.

 

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

 

3.01                        Taxes.

 

(a)               Payments Free of Taxes.  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 reduction or withholding for any
Indemnified Taxes or Other Taxes, provided that if the Borrowers shall be
required by applicable law to deduct any Indemnified Taxes (including any 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 Agent, the Lender
or the applicable L/C Issuer, 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 timely pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.

 

(b)               Payment of Other Taxes by the Borrowers.  Without limiting the
provisions of subsection (a) above, the Borrowers shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)                Indemnification by the Loan Parties.  The Loan Parties shall
indemnify the Agent, each Lender and each L/C Issuer, within ten (10) days after
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Agent, such
Lender or such L/C Issuer, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate as to the amount
of such payment or liability delivered to the Lead Borrower by a Lender or a L/C
Issuer (with a copy to the Agent), or by the Agent on its own behalf or on
behalf of the Agent, a Lender or a L/C Issuer, shall be conclusive absent
manifest error.

 

(d)               Evidence of Payments.  As soon as practicable after any
payment of Indemnified Taxes or Other Taxes by the Borrowers to a Governmental
Authority, the Lead Borrower shall deliver to the 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 Agent.

 

(e)                Status of Lenders.  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which any Borrower is resident for tax

 

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purposes, or any treaty to which such jurisdiction is a party, with respect to
payments hereunder or under any other Loan Document shall deliver to the Lead
Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law or reasonably requested by the Lead Borrower or the Agent, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate of
withholding. Such delivery shall be provided on the Closing Date and on or
before such documentation expires or becomes obsolete or after the occurrence of
an event requiring a change in the documentation most recently delivered.  In
addition, any Lender, if requested by the Lead Borrower or the Agent, shall
deliver such other documentation prescribed by applicable law or reasonably
requested by the Lead Borrower or the Agent as will enable the Lead Borrower or
the Agent to determine whether or not such Lender is subject to backup
withholding or information reporting requirements.

 

Without limiting the generality of the foregoing, in the event that any Borrower
is resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Lead Borrower and the Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Lead Borrower or the Agent, but only if such Foreign Lender is
legally entitled to do so), whichever of the following is applicable:

 

(i)                                     duly completed copies of Internal
Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax
treaty to which the United States is a party,

 

(ii)                                  duly completed copies of Internal Revenue
Service Form W-8ECI,

 

(iii)                               in the case of a Foreign Lender claiming the
benefits of the exemption for portfolio interest under section 881(c) of the
Code, (x) a certificate to the effect that such Foreign Lender is not (A) a
“bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent
shareholder” of the Borrowers within the meaning of section 881(c)(3)(B) of the
Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue
Service Form W-8BEN, or

 

(iv)                              any other form prescribed by applicable law as
a basis for claiming exemption from or a reduction in United States Federal
withholding tax duly completed together with such supplementary documentation as
may be prescribed by applicable law to permit the Lead Borrower to determine the
withholding or deduction required to be made.

 

(f)                 Treatment of Certain Refunds.  If the Agent, any Lender or
any L/C Issuer determines, in its sole discretion, that it has received a refund
of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers
or with respect to which the Borrowers have paid additional amounts pursuant to
this Section, it shall pay to the Borrowers an amount equal to such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrowers under this Section with respect to the Taxes or Other Taxes giving
rise to such refund), net of all out-of-pocket expenses of the Agent, such
Lender or such L/C Issuer, as the case may be, and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrowers, upon the request of the Agent, such Lender
or such L/C Issuer, agree to repay the amount paid over to the Borrowers (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent, such Lender or such L/C Issuer in the event the Agent,
such Lender or such L/C Issuer is required to repay such refund to such
Governmental Authority.  This subsection shall not be construed to require the
Agent, any Lender or any L/C Issuer to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to the
Borrowers or any other Person.

 

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3.02                        Illegality.  If any Lender determines that any Law
has made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund LIBO Rate Loans, or to determine or charge interest rates based upon the
LIBO Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to the Lead Borrower through the Agent, any obligation of such Lender to make or
continue LIBO Rate Loans shall be suspended until such Lender notifies the Agent
and the Lead Borrower that the circumstances giving rise to such determination
no longer exist.  Upon receipt of such notice, the Borrowers shall, upon demand
from such Lender (with a copy to the Agent), prepay all LIBO Rate Loans of such
Lender immediately.  Upon any such prepayment, the Borrowers shall also pay
accrued interest on the amount so prepaid.

 

3.03                        Inability to Determine Rates.  If the Required
Lenders determine that for any reason in connection with any request for a LIBO
Rate Loan that (a) adequate and reasonable means do not exist for determining
the LIBO Rate for with respect to a proposed LIBO Rate Loan, or (b) the LIBO
Rate with respect to a proposed LIBO Rate Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, the Agent will promptly
so notify the Lead Borrower and each Lender.  Thereafter, the obligation of the
Lenders to make or maintain LIBO Rate Loans shall be suspended until the Agent
(upon the instruction of the Required Lenders) revokes such notice.  Upon
receipt of such notice, the Lead Borrower may revoke any pending request for a
Borrowing of LIBO Rate Loans.

 

3.04                        Increased Costs; Reserves on LIBO Rate Loans.

 

(a)               Increased Costs Generally.  If any Change in Law shall:

 

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

 

(ii)                                  subject any Lender or any L/C Issuer to
any tax of any kind whatsoever with respect to this Agreement, any Letter of
Credit or any LIBO Rate Loan made by it, or change the basis of taxation of
payments to such Lender or such L/C Issuer in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of,
or any change in the rate of, any Excluded Tax payable by such Lender or such
L/C Issuer); or

 

(iii)                               impose on any Lender or any L/C Issuer any
other condition, cost or expense affecting this Agreement or LIBO Rate Loans
made by such Lender or any Letter of Credit;

 

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

 

(b)               Capital Requirements.  If any Lender or any L/C Issuer
determines that any Change in Law affecting such Lender or such L/C Issuer or
any Lending Office of such Lender or such

 

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

 

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

 

(d)               Delay in Requests.  Failure or delay on the part of any Lender
or any L/C Issuer to demand compensation pursuant to the foregoing provisions of
this Section shall not constitute a waiver of such Lender’s or such L/C Issuer’s
right to demand such compensation, provided that the Borrowers shall not be
required to compensate a Lender or a L/C Issuer pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than nine months prior to the date that such Lender or such L/C
Issuer, as the case may be, notifies the Lead Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or such
L/C Issuer’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the nine-month period referred to above shall be extended to include the
period of retroactive effect thereof).

 

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

 

3.05                        Mitigation Obligations; Replacement of Lenders.

 

(a)               Designation of a Different Lending Office.  If any Lender
requests compensation under Section 3.04, or 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 3.01, or if any Lender gives a notice
pursuant to Section 3.02, 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 3.01 or 3.04, as the case may be, in the future, or eliminate the need
for the notice pursuant to Section 3.02, as

 

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applicable, and (ii) in each case, 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.

 

(b)               Replacement of Lenders.  If any Lender requests compensation
under Section 3.04, 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 3.01, the Borrowers may replace such Lender in accordance
with Section 10.13.

 

3.06                        Survival.  All of the Borrowers’ obligations under
this Article III shall survive termination of the Aggregate Commitments and
repayment of the Committed Loans and all other Obligations hereunder.

 

3.07                        Designation of Lead Borrower as Borrowers’ Agent.

 

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

 

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

 

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

 

ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

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

 

(a)               The Agent’s receipt of the following, each of which shall be
originals, telecopies or other electronic image scan transmission (e.g., “pdf”
or “tif “ via e-mail) (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party or the Lenders, as applicable, each dated the Closing Date (or, in the
case of certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance reasonably satisfactory to the Agent:

 

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(i)                                     executed counterparts of this Agreement
sufficient in number for distribution to the Agent, each Lender and the Lead
Borrower;

 

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

 

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

 

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

 

(v)                                 a favorable opinion of Nixon Peabody LLP,
counsel to the Loan Parties, addressed to the Agent and each Lender, as to such
matters concerning the Loan Parties and the Loan Documents as the Agent may
reasonably request;

 

(vi)                              a certificate signed by a Responsible Officer
of the Lead Borrower certifying (A) that the conditions specified in
Sections 4.02(a) and 4.02(b) have been satisfied, (B) that there has been no
event or circumstance since the date of the Audited Financial Statements that
has had or could be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect, (C) to the Solvency of the Loan Parties,
on a consolidated basis, as of the Closing Date after giving effect to the
transactions contemplated hereby, and (D) either that (1) no consents, licenses
or approvals are required in connection with the execution, delivery and
performance by such Loan Party and the validity against such Loan Party of the
Loan Documents to which it is a party, or (2) that all such consents, licenses
and approvals have been obtained and are in full force and effect other than
those, the failure of which to obtain, would not reasonably be expected to
result in a Material Adverse Effect;

 

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

 

(viii)                        a payoff letter from the agent for the lenders
under the Existing Credit Agreement satisfactory in form and substance to the
Agent evidencing that the Existing Credit Agreement has been or concurrently
with the Closing Date is being terminated, all obligations thereunder are being
paid in full, and all Liens securing obligations under the Existing Credit
Agreement have been or concurrently with the Closing Date are being released;

 

(ix)                              the Security Documents and certificates
evidencing any stock being pledged thereunder, together with undated stock
powers executed in blank, each duly executed by the applicable Loan Parties;

 

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(x)                                 all other Loan Documents, each duly executed
by the applicable Loan Parties;

 

(xi)                              a written report regarding the results of a
commercial finance examination of the Loan Parties, which shall be satisfactory
to the Agent;

 

(xii)                           results of searches or other evidence reasonably
satisfactory to the Agent (in each case dated as of a date reasonably
satisfactory to the Agent) indicating the absence of Liens on the assets of the
Loan Parties, except for Permitted Encumbrances and Liens for which termination
statements and releases, satisfactions and discharges of any mortgages, and
releases or subordination agreements reasonably satisfactory to the Agent are
being tendered concurrently with such extension of credit or other arrangements
reasonably satisfactory to the Agent for the delivery of such termination
statements and releases, satisfactions and discharges have been made;

 

(xiii)                        (A)                               all documents
and instruments, including Uniform Commercial Code financing statements,
required by law or reasonably requested by the Agent to be filed, registered or
recorded to create or perfect the first priority Liens intended to be created
under the Loan Documents and all such documents and instruments shall have been
so filed, registered or recorded to the satisfaction of the Agent, (B) the DDA
Notifications, Credit Card Notifications, and Blocked Account Agreements
required pursuant to Section 6.13 hereof, (C) control agreements with respect to
the Loan Parties’ securities and investment accounts, and (D) Collateral Access
Agreements as required by the Agent; and

 

(xiv)                       such other assurances, certificates, documents,
consents or opinions as the Agent or its counsel reasonably may require.

 

(b)               After giving effect to (i) the first funding under the Loans,
(ii) any charges to the Loan Account made in connection with the establishment
of the credit facility contemplated hereby and (iii) all Letters of Credit to be
issued at, or immediately subsequent to, such establishment, Availability shall
be not less than $7,000,000.

 

(c)                The Agent shall have received a Borrowing Base Certificate
dated the Closing Date, relating to the week ended on September 13, 2014, and
executed by a Responsible Officer of the Lead Borrower.

 

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

 

(e)                The Agent shall have received and be satisfied with the
Borrower’s Business Plan and such other information (financial or otherwise)
reasonably requested by the Agent.

 

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

 

(g)               The consummation of the transactions contemplated hereby shall
not violate any applicable Law or any Organization Document.

 

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(h)               All fees and expenses required to be paid to the Agent on or
before the Closing Date shall have been paid in full (or substantially
contemporaneously with the initial funding will pay), and all fees and expenses
required to be paid to the Lenders on or before the Closing Date shall have been
paid in full (or substantially contemporaneously with the initial funding will
pay).

 

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

 

(j)                  The Agent and the Lenders shall have completed background
checks of the Loan Parties’ owners, shareholders and management and shall have
received all documentation and other information required by regulatory
authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the USA PATRIOT Act, in each
case, the results of which are satisfactory to the Agent.

 

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

 

4.02                        Conditions to all Credit Extensions.  The obligation
of each Lender to honor any Request for Credit Extension and each L/C Issuer to
issue each Letter of Credit is subject to the following conditions precedent:

 

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

 

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

 

(c)                The Agent and, if applicable, the applicable L/C Issuer shall
have received a Request for Credit Extension in accordance with the requirements
hereof;

 

(d)               No event or circumstance which could reasonably be expected to
result in a Material Adverse Effect shall have occurred; and

 

(e)                No Overadvance shall result from such Credit Extension.

 

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

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans and
to issue Letters of Credit hereunder, each Loan Party represents and warrants to
the Agent and the other Credit Parties that:

 

5.01                        Existence, Qualification and Power.  Each Loan Party
and each Subsidiary thereof (a) is a corporation, limited liability company,
partnership or limited partnership, duly incorporated, organized or formed,
validly existing and, where applicable, in good standing under the Laws of the
jurisdiction of its incorporation, organization, or formation, (b) has all
requisite power and authority and all requisite governmental licenses, permits,
authorizations, consents and approvals to (i) own or lease its assets and carry
on its business and (ii) execute, deliver and perform its obligations under the
Loan Documents to which it is a party, and (c) is duly qualified and is licensed
and, where applicable, in good standing under the Laws of each jurisdiction
where its ownership, lease or operation of properties or the conduct of its
business requires such qualification or license; except in each case referred to
in clause (b)(i) or (c), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed
hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears
in official filings in its state of incorporation or organization, its state of
incorporation or organization, organization type, organization number, if any,
issued by its state of incorporation or organization, and its federal employer
identification number.

 

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

 

5.03                        Governmental Authorization; Other Consents.  No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document, except for (a) the

 

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perfection or maintenance of the Liens created under the Security Documents
(including the first priority nature thereof), (b) such as have been obtained or
made and are in full force and effect, and (c) those approvals, consents,
exemptions, authorizations or other actions, notices or filings, the failure of
which to obtain could reasonably be expected to have a Material Adverse Effect.

 

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

 

5.05                        Financial Statements; No Material Adverse Effect.

 

(a)               The Audited Financial Statements (i) were prepared in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein; (ii) fairly present in all material
respects the financial condition of the Lead Borrower and its Subsidiaries as of
the date thereof and their results of operations for the period covered thereby
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (iii) show all
Material Indebtedness and other liabilities, direct or contingent, of the Lead
Borrower and its Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Indebtedness.

 

(b)               The unaudited Consolidated balance sheet of the Lead Borrower
and its Subsidiaries dated July 26, 2014, and the related Consolidated
statements of income or operations, Shareholders’ Equity and cash flows for the
Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present in all material respects the
financial condition of the Lead Borrower and its Subsidiaries as of the date
thereof and their results of operations for the period covered thereby, subject,
in the case of clauses (i) and (ii), to the absence of footnotes and to normal
year-end audit adjustments.

 

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

 

(d)               To the best knowledge of the Lead Borrower, no Internal
Control Event exists or has occurred since the date of the Audited Financial
Statements that has resulted in or could reasonably be expected to result in a
misstatement in any material respect, (i) in any financial information delivered
or to be delivered to the Agent or the Lenders, (ii) of the Borrowing Base,
(iii) of covenant compliance calculations provided hereunder or (iv) of the
assets, liabilities, financial condition or results of operations of the Lead
Borrower and its Subsidiaries on a Consolidated basis.

 

(e)                The Consolidated forecasted balance sheet and statements of
income and cash flows of the Lead Borrower and its Subsidiaries delivered
pursuant to Section 6.01(c) and the Business Plan were prepared in good faith on
the basis of the assumptions stated therein, which assumptions were fair in
light of the conditions existing at the time of delivery of such forecasts, and
represented, at the time of delivery, the Loan Parties’ best estimate of its
future financial performance, it being understood that forecasts are estimates
and such forecasts are not facts, and that actual results may differ materially
from such forecasts.

 

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5.06                        Litigation.  There are no actions, suits,
proceedings, claims or disputes pending or, to the knowledge of the Loan
Parties, threatened in writing, at law, in equity, in arbitration or before any
Governmental Authority, by or against any Loan Party or any of its Subsidiaries
or against any of its properties or revenues that (a) purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby, or (b) except as disclosed in Schedule 5.06, either
individually or in the aggregate, if determined adversely, could reasonably be
expected to have a Material Adverse Effect.

 

5.07                        No Default.  No Loan Party or any Subsidiary is in
default under or with respect to any Material Contract or any Material
Indebtedness.  No Default or Event of Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.

 

5.08                        Ownership of Property; Liens.

 

(a)               Each of the Loan Parties and each Subsidiary thereof has good
record and valid title in fee simple to or valid leasehold interests in, all
Real Estate necessary or used in the ordinary conduct of its business, except
for Permitted Encumbrances and such defects in title as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect. 
Each of the Loan Parties and each Subsidiary has good and valid title to, valid
leasehold interests in, or valid licenses to use all personal property and
assets material to the ordinary conduct of its business (subject to Permitted
Encumbrances).

 

(b)               Schedule 5.08(b)(1) sets forth the address (including street
address, county and state) of all Real Estate that is owned by the Loan Parties
and each of their Subsidiaries, together with a list of the holders of any
mortgage or other Lien thereon as of the Closing Date.  Each Loan Party and each
of its Subsidiaries has good, valid and insurable fee simple title to the Real
Estate owned by such Loan Party or such Subsidiary, free and clear of all Liens,
other than Permitted Encumbrances.  Schedule 5.08(b)(2) sets forth the address
(including street address, county and state) of all Leases of the Loan Parties,
together with a list of the lessor and its contact information with respect to
each such Lease as of the Closing Date.  As of the Closing Date, each of such
Leases is in full force and effect and to the knowledge of the Loan Parties, the
Loan Parties are not in default of the terms thereof, except, in each case, for
any deficiency or defect as could not reasonably be expected to have a Material
Adverse Effect.

 

(c)                Schedule 7.01 sets forth a complete and accurate list of all
Liens on the property or assets of each Loan Party and each of its Subsidiaries,
showing as of the Closing Date the lienholder thereof, the principal amount of
the obligations secured thereby and the property or assets of such Loan Party or
such Subsidiary subject thereto.  The property of each Loan Party and each of
its Subsidiaries is subject to no Liens, other than Permitted Encumbrances.

 

(d)               Schedule 7.02 sets forth a complete and accurate list of all
Investments held by any Loan Party or any Subsidiary of a Loan Party on the
Closing Date, showing as of the Closing Date the amount, obligor or issuer and
maturity, if any, thereof.

 

(e)                Schedule 7.03 sets forth a complete and accurate list of all
Indebtedness, the principal amount of which is equal to or greater than $50,000,
of each Loan Party or any Subsidiary of a Loan Party on the Closing Date,
showing as of the Closing Date the amount, obligor or issuer and maturity
thereof.

 

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5.09                        Environmental Compliance.

 

(a)               Except as specifically disclosed in Schedule 5.09, no Loan
Party or any Subsidiary thereof (i) is in violation of any Environmental Law or
to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) to the knowledge of the Loan Parties,
has become subject to any Environmental Liability, (iii) has received written
notice of any claim with respect to any Environmental Liability or (iv) knows of
any basis for any Environmental Liability, except, in each case, as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(b)               Except as otherwise set forth in Schedule 5.09, none of the
properties currently or formerly owned or operated by any Loan Party or any
Subsidiary thereof is listed or proposed for listing on the NPL or on the
CERCLIS or any analogous foreign, state or local list or is adjacent to any such
property; there are no and never have been any underground or above-ground
storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons
in which Hazardous Materials are being or have been treated, stored or disposed
on any property currently owned or operated by any Loan Party or any Subsidiary
thereof or, to the best of the knowledge of the Loan Parties, on any property
formerly owned or operated by any Loan Party or Subsidiary thereof; there is no
asbestos or asbestos-containing material on any property currently owned or
operated by any Loan Party or Subsidiary thereof; and Hazardous Materials have
not been released, discharged or disposed of on any property currently or
formerly owned or operated by any Loan Party or any Subsidiary thereof, except,
in each case, as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(c)                Except as otherwise set forth on Schedule 5,09, no Loan Party
or any Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary
thereof has completed, either individually or together with other potentially
responsible parties, any investigation or assessment or remedial or response
action relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at any site, location or operation, either voluntarily or
pursuant to the order of any Governmental Authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated, handled
or stored at, or transported to or from, any property currently or formerly
owned or operated by any Loan Party or any Subsidiary thereof have been disposed
of in a manner not reasonably expected to have a Material Adverse Effect.

 

5.10                        Insurance.  The properties of the Loan Parties and
their Subsidiaries are insured with financially sound and reputable insurance
companies which are not Affiliates of the Loan Parties, in such amounts (after
giving effect to any self-insurance), with such deductibles and covering such
risks (including, without limitation, workmen’s compensation, public liability,
business interruption and property damage insurance) as are customarily carried
by companies similarly situated, engaged in similar businesses and owning
similar properties in localities where the Loan Parties or the applicable
Subsidiary operates.  Schedule 5.10 sets forth a description of all insurance
maintained by or on behalf of the Loan Parties as of the Closing Date. As of the
Closing Date, each insurance policy listed on Schedule 5.10 is in full force and
effect and all premiums in respect thereof that are due and payable have been
paid.

 

5.11                        Taxes.  The Loan Parties and their Subsidiaries have
filed all Federal, state and other material tax returns and reports required to
be filed, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except (i) those
which are being contested in good faith by appropriate proceedings being
diligently conducted, for which adequate reserves have been provided in
accordance with GAAP, as to which Taxes no Lien has been filed and which contest
effectively suspends the collection of the contested obligation and the
enforcement of any Lien securing such obligation, or (ii) 

 

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to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.  There is no proposed tax assessment
against any Loan Party or any Subsidiary that would, if made, have a Material
Adverse Effect.  No Loan Party or any Subsidiary thereof is a party to any tax
sharing agreement.

 

5.12                        ERISA Compliance.

 

(a)               Except as could not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, the Lead
Borrower, each of its ERISA Affiliates and each Plan is with respect to each
Plan in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws.  Except as could not reasonably
be expected to have a Material Adverse Effect, each Plan that is intended to
qualify under Section 401(a) of the Code has received a favorable determination
or opinion letter from the IRS or an application for such a letter is currently
being processed by the IRS with respect thereto and, to the best knowledge of
the Lead Borrower, nothing has occurred which would prevent, or cause the loss
of, such qualification.  The Loan Parties and each ERISA Affiliate have made all
required contributions to each Plan subject to Sections 412 or 430 of the Code
and to each Multiemployer Plan, and no application for a funding waiver or an
extension of any amortization period pursuant to Sections 412 or 430 of the Code
has been made with respect to any Plan, except to the extent such failure or
such application could not reasonably be expected to have a Material Adverse
Effect.  No Lien imposed under the Code or ERISA exists or is likely to arise on
account of any Plan or any Multiemployer Plan, except as could not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

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

 

(c)                (i)                                     Except as could not
reasonably be expected to have a Material Adverse Effect, no ERISA Event has
occurred or is reasonably expected to occur; (ii) no Pension Plan has any
Unfunded Pension Liability; (iii) neither any Loan Party nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (iv) neither any Loan Party nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and
to the knowledge of the Loan Parties, no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction
that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13                        Subsidiaries; Equity Interests.  As of the Closing
Date, the Loan Parties have no Subsidiaries other than those specifically
disclosed in Part (a) of Schedule 5.13, which Schedule sets forth, as of the
Closing Date, the legal name, jurisdiction of incorporation or formation and
authorized Equity Interests of each such Subsidiary.  All of the outstanding
Equity Interests in such Subsidiaries have been validly issued, are fully paid
and non-assessable and as of the Closing Date are owned by a Loan Party (or a
Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule
5.13 free and clear of all Liens except for those created under the Security
Documents and Permitted Encumbrances.  Except as set forth in Schedule 5.13, as
of the Closing Date, there are no outstanding rights to purchase any Equity
Interests in any Subsidiary.  As of the Closing Date, the Loan Parties have no
equity investments in any other corporation or entity other than those
specifically disclosed in Part(b) of

 

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Schedule 5.13.  All of the outstanding Equity Interests in the Loan Parties have
been validly issued, and are fully paid and non-assessable and as of the Closing
Date are owned in the amounts specified on Part (c) of Schedule 5.13 free and
clear of all Liens except for those created under the Security Documents and
Permitted Encumbrances.  The copies of the Organization Documents of each Loan
Party and each amendment thereto provided pursuant to Section 4.01 are true and
correct copies of each such document, each of which is valid and in full force
and effect.

 

5.14                        Margin Regulations; Investment Company Act.

 

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

 

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

 

5.15                        Disclosure.  Each Loan Party has disclosed to the
Agent and the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.  No report, financial
statement, certificate or other information  (other than any projections, any
information of a forward looking nature and any general economic or specific
industry information developed by, and obtained from, third party sources)
furnished in writing by or on behalf of any Loan Party to the Agent or any
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case, as modified or supplemented by other reports,
certificates and other information so furnished) when taken as a whole 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 in any material respect; provided that, with
respect to projected financial information and any other forward looking
information, the Loan Parties represent only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.

 

5.16                        Compliance with Laws.  Each of the Loan Parties and
each Subsidiary is in compliance (a) in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its properties, except in such instances in which
(i) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or
(ii) the failure to comply therewith, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, and (b) with
Sections 10.17 and 10.18 hereof.

 

5.17                        Intellectual Property; Licenses, Etc.  The Loan
Parties and their Subsidiaries own, or possess the right to use, all of the
Intellectual Property, licenses, permits and other authorizations that are
reasonably necessary for the operation of their respective businesses as
currently conducted, without conflict with the rights of any other Person.  To
the best knowledge of the Lead Borrower, (i) no slogan or other advertising
device, product, process, method, substance, part or other material now employed
by any Loan Party or any Subsidiary infringes upon any rights held by any other
Person and (ii) except as specifically disclosed in Schedule 5.17, no claim or
litigation regarding any of the foregoing is pending

 

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or, to the best knowledge of the Lead Borrower, threatened in writing against
any Loan Party, which in any case in respect of clause (i) or (ii), which,
either individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

5.18                        Labor Matters.  There are no strikes, lockouts,
slowdowns or other material labor disputes against any Loan Party or any
Subsidiary thereof pending or, to the knowledge of any Loan Party, threatened.
The hours worked by and payments made to employees of the Loan Parties comply
with the Fair Labor Standards Act and any other applicable federal, state, local
or foreign Law dealing with such matters except to the extent that any such
violation could not reasonably be expected to have a Material Adverse Effect. No
Loan Party or any of its Subsidiaries has incurred any liability or obligation
under the Worker Adjustment and Retraining Act or similar state Law except as
could not reasonably be expected to have a Material Adverse Effect.  All
payments due from any Loan Party and its Subsidiaries, or for which any claim
may be made against any Loan Party or any of its Subsidiaries, on account of
wages and employee health and welfare insurance and other benefits, have been
paid or properly accrued in all material respects in accordance with GAAP as a
liability on the books of such Loan Party. Except as set forth on Schedule 5.18,
as of the Closing Date, no Loan Party or any Subsidiary is a party to or bound
by any collective bargaining agreement, management agreement, employment
agreement, bonus, restricted stock, stock option, or stock appreciation plan or
agreement or any similar plan, agreement or arrangement which constitutes a
Material Contract. There are no representation proceedings pending or, to any
Loan Party’s knowledge, threatened to be filed with the National Labor Relations
Board, and no labor organization or group of employees of any Loan Party or any
Subsidiary has made a pending demand for recognition, in any case that could
reasonably be expected to have a Material Adverse Effect. There are no
complaints, unfair labor practice charges, grievances, arbitrations, unfair
employment practices charges or any other claims or complaints against any Loan
Party or any Subsidiary pending or, to the knowledge of any Loan Party,
threatened to be filed with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any employee of any Loan Party or any of its
Subsidiaries, in any case that could reasonably be expected to have a Material
Adverse Effect. The consummation of the transactions contemplated by the Loan
Documents will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which any Loan Party or any of its Subsidiaries is bound.

 

5.19                        Security Documents.

 

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

 

(b)               When the Security Agreement (or a short form thereof) is filed
in the United States Patent and Trademark Office and the United States Copyright
Office and when financing

 

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statements, releases and other filings in appropriate form are filed in the
offices specified in Schedule II of the Security Agreement, the Agent shall have
a fully perfected Lien on, and security interest in, all right, title and
interest of the applicable Loan Parties in the Intellectual Property (as defined
in the Security Agreement) in which a security interest may be perfected by
filing, recording or registering a security agreement, financing statement or
analogous document in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, in each case prior and superior
in right to any other Person, subject to Permitted Encumbrances having priority
by operation of law (it being understood that subsequent recordings in the
United States Patent and Trademark Office and the United States Copyright Office
may be necessary to perfect a Lien on registered trademarks, trademark
applications and copyrights acquired by the Loan Parties after the Closing
Date).

 

Notwithstanding anything herein to the contrary, at no time shall (i) an asset
of a CFC serve as Collateral for any obligation hereunder, (ii) a CFC be a
Guarantor hereunder and (iii) a Person be required to pledge any interest
possessing more than 65% of the voting power or control of all classes of
interests entitled to vote of any CFC to the extent such pledge would result in
an adverse tax consequence to such Person.

 

5.20                        Solvency.  After giving effect to the transactions
contemplated by this Agreement, and before and after giving effect to each
Credit Extension, the Loan Parties, on a Consolidated basis, are Solvent. No
transfer of property has been or will be made by any Loan Party and no
obligation has been or will be 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.

 

5.21                        Deposit Accounts; Credit Card Arrangements.

 

(a)               Annexed hereto as Schedule 5.21(a) is a list of all DDAs
maintained by the Loan Parties as of the Closing Date, which Schedule includes,
with respect to each DDA (i) the name and address of the depository; (ii) the
account number(s) maintained with such depository; (iii) a contact person at
such depository, and (iv) the identification of each Blocked Account Bank.

 

(b)               Annexed hereto as Schedule 5.21(b) is a list describing all
arrangements as of the Closing Date to which any Loan Party is a party with
respect to the processing and/or payment to such Loan Party of the proceeds of
any credit card charges and debit card charges for sales made by such Loan
Party.

 

5.22                        Brokers.  No broker or finder brought about the
obtaining, making or closing of the Loans or transactions contemplated by the
Loan Documents, and no Loan Party or Affiliate thereof has any obligation to any
Person in respect of any finder’s or brokerage fees in connection therewith.

 

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

 

5.24                        Material Contracts.  Schedule 5.24 sets forth all
Material Contracts to which any Loan Party is a party or is bound as of the
Closing Date.  The Loan Parties have delivered true, correct and complete copies
of such Material Contracts to the Agent on or before the Closing Date.  The Loan
Parties are not in breach or in default in any material respect of or under any
Material Contract and have not received any notice of default under, or of the
intention of any other party thereto to terminate, any Material Contract.

 

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

 

5.26                        Business Plan.  The Borrowers are operating their
business in all material respects in a manner consistent with the Business Plan
most recently delivered pursuant to Section 6.01(b) and accepted by the Agent in
its Permitted Discretion.

 

5.27                        Personally Identifiable Information.  Borrowers
maintain a policy for the treatment, handling and storage of consumer
information and personally identifiable information in accordance with
applicable Laws and a true, accurate and complete copy of the current version
thereof has been provided to the Agent.

 

ARTICLE VI
AFFIRMATIVE COVENANTS

 

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

 

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

 

(a)               as soon as available, but in any event within 95 days after
the end of each Fiscal Year of the Lead Borrower (commencing with the Fiscal
Year ended December 27, 2014), a Consolidated balance sheet of the Lead Borrower
and its Subsidiaries as at the end of such Fiscal Year, and the related
consolidated statements of income or operations, Shareholders’ Equity and cash
flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all in reasonable detail and prepared in
accordance with GAAP, audited and accompanied by (i) a report and unqualified
opinion of a Registered Public Accounting Firm of nationally recognized standing
reasonably acceptable to the Agent, which report and opinion shall be prepared
in accordance with generally accepted auditing standards and shall not be
subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit (other than any
qualification that is expressly with respect to, or expressly resulting from, an
upcoming maturity date of Indebtedness that is schedule to occur within 15
months from the time that such report is delivered) and (ii) if required by the
SEC or otherwise pursuant to the Securities Laws, an opinion of such Registered
Public Accounting Firm independently assessing the Loan Parties’ internal
controls over financial reporting in accordance with Item 308 of SEC Regulation
S-K, PCAOB Auditing Standard No. 2, and Section 404 of Sarbanes-Oxley expressing
a conclusion that contains no statement that there is a material weakness in
such internal controls, except for such material weaknesses as to which the
Required Lenders do not object;

 

(b)               as soon as available, but in any event within 35 days after
the end of each of the Fiscal Months of each Fiscal Year of the Lead Borrower
(commencing with the Fiscal Month ended September 28, 2014), a consolidated
balance sheet of the Lead Borrower and its Subsidiaries as at the end of such
Fiscal Month, and the related consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such Fiscal Month, and for the portion
of the Lead Borrower’s

 

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Fiscal Year then ended, setting forth in each case in comparative form the
figures for (A) such period set forth in the projections delivered pursuant to
Section 6.01(c) hereof, (B) the corresponding Fiscal Month of the previous
Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all
in reasonable detail, certified by a Responsible Officer of the Lead Borrower as
fairly presenting in all material respects the financial condition, results of
operations, Shareholders’ Equity and cash flows of the Lead Borrower and its
Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject
only to customary year-end audit adjustments and the absence of footnotes;

 

(c)                as soon as available, but in any event at least 30 days
before the end of each Fiscal Year of the Lead Borrower, the Business Plan of
the Lead Borrower and its Subsidiaries on a monthly basis for the immediately
following Fiscal Year (including the Fiscal Year in which the Maturity Date
occurs), and as soon as available, any significant revisions to the Business
Plan with respect to such Fiscal Year.

 

6.02                        Certificates; Other Information.  Deliver to the
Agent, in form and detail reasonably satisfactory to the Agent:

 

(a)               concurrently with the delivery of the financial statements
referred to in Sections 6.01(a)  and 6.01(b) (commencing with the delivery of
the financial statements for the Fiscal Month ended September 28, 2014), a duly
completed Compliance Certificate signed by a Responsible Officer of the Lead
Borrower, and in the event of any change in generally accepted accounting
principles used in the preparation of such financial statements, the Lead
Borrower shall also provide a statement of reconciliation conforming such
financial statements to GAAP and (ii) a copy of management’s discussion and
analysis with respect to such financial statements;

 

(b)               on the Wednesday of each week (or, if such day is not a
Business Day, on the next succeeding Business Day), a Borrowing Base Certificate
showing the Borrowing Base as of the close of business as of the last day of the
immediately preceding week (provided that the Appraised Value percentage applied
to the Eligible Inventory set forth in each Borrowing Base Certificate shall be
the percentage set forth in the most recent appraisal obtained by the Agent
pursuant to Section 6.10 hereof for the applicable period to which such
Borrowing Base Certificate relates), each Borrowing Base Certificate to be
certified as complete and correct by a Responsible Officer of the Lead Borrower
and accompanied by all applicable system generated documentation supporting the
information contained within the Borrowing Base Certificate, including but not
limited to inventory reporting inclusive of inventory mix by category and/or
department and, where applicable, accounts receivable detail documentation,
screen shots of the Loan Parties’ bank accounts requested by the Agent as of the
date of such Borrowing Base Certificate, and any additional documentation
reasonably requested by the Agent;

 

(c)                promptly upon receipt, copies of any detailed audit reports,
management letters or recommendations submitted to the board of directors (or
the audit committee of the board of directors) of any Loan Party by its
Registered Public Accounting Firm in connection with the accounts or books of
the Loan Parties or any Subsidiary, or any audit of any of them, including,
without limitation, specifying any Internal Control Event;

 

(d)               promptly after the same are available, copies of each annual
report, proxy or financial statement or other material report or material
communication sent to the stockholders of the Lead Borrower, and copies of all
annual, regular, periodic and special reports and registration statements which
any Loan Party may file or be required to file with the SEC under Section 13 or
15(d) of the Securities Exchange Act of 1934 or with any national securities
exchange, and in any case not otherwise required to be delivered to the Agent
pursuant hereto;

 

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

 

(f)                 as soon as available, but in any event on or before
November of each calendar year, a report summarizing the insurance coverage
(specifying type, amount and carrier) in effect for each Loan Party and its
Subsidiaries and containing such additional information as the Agent, or any
Lender through the Agent, may reasonably specify;

 

(g)                promptly after the Agent’s request therefor, copies of all
Material Contracts and documents evidencing Material Indebtedness not previously
provided;

 

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

 

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

 

Documents and notices required to be delivered pursuant to Sections 6.01(a) or
6.01(b) or Section 6.02(c) (to the extent any such documents are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
the Lead Borrower posts such documents or notices, or provides a link thereto on
the Lead Borrower’s website on the Internet at the website address listed on
Schedule 10.02; or (ii) on which such documents or notices are posted on the
Lead Borrower’s behalf on an Internet or intranet website, if any, to which each
Lender and the Agent have access (whether a commercial, third-party website or
whether sponsored by the Agent); provided that: (i) the Lead Borrower shall
deliver paper copies of such documents or notices to the Agent if the Agent
requests the Lead Borrower to deliver such paper copies until a written request
to cease delivering paper copies is given by the Agent and (ii) the Lead
Borrower shall notify the Agent (by telecopier or electronic mail) of the
posting of any such documents and provide to the Agent by electronic mail
electronic versions (i.e., soft copies) of such documents.  Notwithstanding
anything contained herein, in every instance the Lead Borrower shall be required
to provide paper copies of the Compliance Certificates required by
Section 6.02(a) to the Agent.  The Agent shall have no obligation to request the
delivery or to maintain copies of the documents or notices referred to above,
and in any event shall have no responsibility to monitor compliance by the Loan
Parties with any such request for delivery, and each Lender shall be solely
responsible for requesting delivery to it or maintaining its copies of such
documents or notices.

 

6.03                        Notices.  Promptly after any Responsible Officer or
the Lead Borrower obtains actual or constructive notice thereof, notify the
Agent:

 

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

 

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

 

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

 

(d)               of any material dispute, litigation, investigation, proceeding
or suspension between any Loan Party or any Subsidiary thereof and any
Governmental Authority or the commencement of, or any material development in,
any material litigation or proceeding affecting any Loan Party or any Subsidiary
thereof, including pursuant to any applicable Environmental Laws;

 

(e)                of the occurrence of any ERISA Event that could reasonably be
expected to result in a material liability to any Loan Party;

 

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

 

(g)                of any change in the president, chief executive officer, or
chief financial officer of the Lead Borrower;

 

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

 

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

 

(j)                  of the filing of any Lien for unpaid Taxes against any Loan
Party in excess of $250,000;

 

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

 

(l)                   of any material variance of the Loan Parties’ actual
performance from the projected results in the Business Plan or of any plan of
the Loan Parties to deviate materially from operating in the ordinary course of
business; and

 

(m)           of any failure by any Loan Party to pay rent or such other amounts
due at (i) any distribution centers or warehouses; (ii) ten percent (10)% or
more of such Loan Party’s locations; or (iii) any of a Loan Party’s locations if
such failure continues for more than ten (10) days following the day on which
such rent first came due and such failure would be reasonably likely to result
in a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Lead Borrower setting forth details of the occurrence
referred to therein and stating what action the Lead Borrower has taken and
proposes to take with respect thereto.  Each notice pursuant to
Section 6.03(a) shall describe with particularity any and all provisions of this
Agreement and any other Loan Document that have been breached.

 

6.04                        Payment of Obligations.  Pay and discharge as the
same shall become due and payable, all its obligations and liabilities,
including (a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, (b) all lawful claims (including,
without limitation, claims of

 

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landlords, warehousemen, customs brokers, freight forwarders, consolidators and
carriers) which, if unpaid, would by law become a Lien upon its property; and
(c) all Indebtedness that, if not paid, would constitute an Event of Default
under Section 8.01(e), as and when due and payable, but subject to any grace
periods and subordination provisions contained in any instrument or agreement
evidencing such Indebtedness, except, in each case, where the validity or amount
thereof is being contested in good faith by appropriate proceedings and either
(x)(i) such Loan Party has set aside on its books adequate reserves with respect
thereto in accordance with GAAP, (ii) such contest effectively suspends
collection of the contested obligation and enforcement of any Lien securing such
obligation, and (iii) no Lien has been filed with respect thereto, or (y) 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 Agent with respect to determining Reserves in its
Permitted Discretion pursuant to this Agreement.

 

6.05                        Preservation of Existence, Etc.  Preserve, renew and
maintain in full force and effect its legal existence and good standing under
the Laws of the jurisdiction of its organization or formation except in a
transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its Intellectual Property, except to
the extent such Intellectual Property is no longer used or useful in the conduct
of the business of the Loan Parties.

 

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

 

6.07                        Maintenance of Insurance.

 

(a)               Maintain with financially sound and reputable insurance
companies which are not Affiliates of the Loan Parties, insurance with respect
to its properties and business of such types and in such amounts (after giving
effect to any self-insurance for health care and/or workers compensation)
against loss or damage, in each case, are customarily insured against by Persons
similarly situated, engaged in the same or similar business and operating in the
same or similar locations or as is required by applicable Law, of such types and
in such amounts as are customarily carried under similar circumstances by such
other Persons and as are reasonably acceptable to the Agent, and delivery to the
Agent a copy of all renewal or replacement policies (or other evidence of
renewal of a policy previously delivered to the Agent, including an insurance
binder) together with evidence reasonably satisfactory to the Agent of payment
of the premium therefor.

 

(b)               Cause fire and extended coverage policies maintained with
respect to any Collateral to be endorsed or otherwise amended to include a
lenders’ loss payable clause (regarding personal property), in form and
substance reasonably satisfactory to the Agent, which endorsements or amendments
shall provide that the insurer shall pay all proceeds otherwise payable to the
Loan Parties under the policies directly to the Agent.

 

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

 

(d)               Cause business interruption policies to name the Agent as a
loss payee and to be endorsed or amended to include (i) a provision that, from
and after the Closing Date, the insurer shall

 

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pay all proceeds otherwise payable to the Loan Parties under the policies
directly to the Agent and (ii) a provision to the effect that none of the Loan
Parties, the Agent, any Lender or any other Credit Party shall be a co insurer.

 

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

 

(f)                 Deliver to the Agent, prior to the cancellation,
modification or non-renewal 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 Agent, including an insurance binder), together with evidence
reasonably satisfactory to the Agent of payment of the premium therefor.

 

(g)                Maintain for themselves and their Subsidiaries, a Directors
and Officers insurance policy, and a “Blanket Crime” policy including employee
dishonesty, forgery or alteration, theft, disappearance and destruction, robbery
and safe burglary, property, and computer fraud coverage with responsible
companies in such amounts as are customarily carried by business entities
engaged in similar businesses similarly situated, and will upon request by the
Agent furnish the Agent certificates evidencing renewal of each such policy.

 

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

 

6.08                        Compliance with Laws.  Comply (a) in all material
respects with the requirements of all Laws and all orders, writs, injunctions
and decrees applicable to it or to its business or property, except in such
instances in which (i)(x) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently
conducted, (y) and with respect to which adequate reserves have been set aside
and maintained by the Loan Parties in accordance with GAAP and (z) such contest
effectively suspends enforcement of the contested Laws, or (ii) the failure to
comply therewith could not reasonably be expected to have a Material Adverse
Effect, and (b) with Sections 10.17 and 10.18 in all material respects.

 

6.09                        Books and Records; Accountants.

 

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

 

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(b)               At all times retain a Registered Public Accounting Firm which
is reasonably satisfactory to the Agent and shall instruct such Registered
Public Accounting Firm to cooperate with, and be available to, the Agent or its
representatives to discuss the Loan Parties’ financial performance, financial
condition, operating results, controls, and such other matters, within the scope
of the retention of such Registered Public Accounting Firm, as may be raised by
the Agent; provided, that the Lead Borrower or such Subsidiary, as the case may
be, (i) if no Event of Default has occurred and is continuing, shall have
received reasonable advance notice thereof and a reasonable opportunity to
participate therein and (ii) such discussions shall be subject to the execution
of any indemnity, non-reliance letter or similar letter requested by such
accountants.

 

6.10                        Inspection Rights.

 

(a)               Permit representatives and independent contractors of the
Agent to visit and inspect any of its properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with its directors, officers,
and Registered Public Accounting Firm, and permit the Agent or its professionals
(including investment bankers, consultants, accountants, and lawyers) retained
by the Agent to conduct evaluations of the Business Plan, forecasts and cash
flows, all at the expense of the Loan Parties and at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Lead Borrower; provided, however, that so long
as no Default or Event of Default exists, there shall be no more than one
(1) such inspection in any twelve-month period, and, provided, further, that
when a Default or Event of Default exists the Agent (or any of its
representatives or independent contractors) may do any of the foregoing at the
expense of the Loan Parties at any time during normal business hours and without
advance notice.  Notwithstanding the foregoing or anything to the contrary
contained herein, neither the Lead Borrower nor any of its Subsidiaries will be
required to disclose, discuss, permit the inspection, examination or making
copies or abstracts of any document, record, information or other matter (A) the
disclosure, inspection, examination, copying or discussion of which is
prohibited by Law or (B) that is subject to a bona fide attorney client or
similar privilege or constitutes bona fide attorney work product.

 

(b)               Upon the request of the Agent after reasonable prior notice,
permit the Agent or professionals (including investment bankers, consultants,
accountants, and lawyers) retained by the Agent to conduct commercial finance
examinations, quality of earnings, and other evaluations, including, without
limitation, of (i) the Lead Borrower’s 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 (ii) the Business Plan.  The Loan Parties
shall pay the fees and expenses of the Agent and such professionals with respect
to such examinations and evaluations.  Without limiting the foregoing, the Loan
Parties acknowledge that the Agent may, in its Permitted Discretion, undertake
up to three (3) commercial finance examinations each Fiscal Year at the Loan
Parties’ expense.  Notwithstanding the foregoing, the Agent may cause additional
commercial finance examinations to be undertaken (i) as it deems necessary or
appropriate, at its own expense or, (ii) if a Default or Event of Default shall
have occurred and be continuing, at the expense of the Loan Parties.

 

(c)                Upon the request of the Agent after reasonable prior notice,
permit the Agent or professionals (including appraisers) retained by the Agent
to conduct appraisals of the Collateral, including, without limitation, the
assets included in the Borrowing Base.  The Loan Parties shall pay the fees and
expenses of the Agent and such professionals with respect to such appraisals. 
Without limiting the foregoing, the Loan Parties acknowledge that the Agent may,
in its Permitted Discretion, undertake up to three (3) inventory appraisals, in
each case in each Fiscal Year at the Loan Parties’ expense.  Notwithstanding the
foregoing, the Agent may cause additional appraisals to be undertaken

 

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(i) as it deems necessary or appropriate, at its own expense or, (ii) if a
Default or Event of Default shall have occurred and be continuing, at the
expense of the Loan Parties.

 

(d)               Upon the request of the Agent after reasonable prior notice,
deliver completed (or, if applicable, updated) background checks on any of the
Loan Parties’ officers, directors, employees or agents, from a service or
source, and in form and with such detail as may be, reasonably satisfactory to
the Agent; provided, however, that so long as no Event of Default exists, there
shall be no more than one (1) background check on each such officer, director,
employee or agent in any twelve-month period.

 

(e)                Upon the request of Salus after reasonable prior notice, use
commercially reasonable efforts to assist Salus and any other Salus Entity (and
any of their lending or funding sources) in obtaining ratings for the credit
facilities provided for herein from one or more national rating agencies. 
Without limiting the foregoing, senior management members of the Loan Parties
shall attend or host one or more meetings with such rating agencies and Salus
upon reasonable prior notice.

 

6.11                        Use of Proceeds.  Use the proceeds of the Credit
Extensions (a) to repay certain Indebtedness owed in connection with the
Existing Credit Agreement, (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, and (c) for general corporate or
organizational purposes of the Loan Parties, in each case to the extent not
prohibited under applicable Law and the Loan Documents.

 

6.12                        Additional Loan Parties.  Notify the Agent at the
time that any Person becomes a Subsidiary and promptly thereafter (and in any
event within twenty (20) days, which deadline may be extended by the Agent in
its discretion), cause any such Person (a) which is not a CFC, to (i) become a
Loan Party by executing and delivering to the Agent a Joinder to this Agreement
or a Joinder to the Facility Guaranty or such other documents as the Agent shall
deem reasonably appropriate for such purpose, (ii) grant a Lien to the Agent on
such Person’s assets of the same type that constitute Collateral to secure the
Obligations, and (iii) deliver to the Agent documents of the types referred to
in clauses (iii) and (iv) of Section 4.01(a) and, upon the request of the Agent,
customary favorable opinions of counsel to such Person (which shall cover, among
other things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), and (b) if any Equity Interests or
Indebtedness of such Person are owned by or on behalf of any Loan Party, to
pledge such Equity Interests and promissory notes evidencing such Indebtedness
(except that, if such Subsidiary is a CFC, the Equity Interests of such
Subsidiary to be pledged will be limited to sixty-five percent (65%) of the
outstanding voting Equity Interests of such Subsidiary and one hundred percent
(100%) of the non-voting Equity Interests of such Subsidiary and such time
period may be extended based on local law or practice), in each case in form,
content and scope reasonably satisfactory to the Agent.  In no event shall
compliance with this Section 6.12 waive or be deemed a waiver or Consent to any
transaction giving rise to the need to comply with this Section 6.12 if such
transaction was not otherwise expressly permitted by this Agreement or
constitute or be deemed to constitute, with respect to any Subsidiary, an
approval of such Person as a Borrower or permit the inclusion of any acquired
assets in the computation of the Borrowing Base.

 

6.13                        Cash Management.

 

(a)               On or prior to the Closing Date:

 

(i)                                     deliver to the Agent copies of
notifications (each, a “Credit Card Notification”) substantially in the form
attached hereto as Exhibit F which have been executed on

 

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behalf of such Loan Party and delivered to such Loan Party’s Credit Card Issuers
and Credit Card Processors listed on Schedule 5.21(b); and

 

(ii)                                  enter into a Blocked Account Agreement
reasonably satisfactory in form and substance to the Agent with each Blocked
Account Bank; and

 

(iii)                               at the request of the Agent, deliver to the
Agent copies of notifications (each, a “DDA Notification”) substantially in the
form attached hereto as Exhibit G which have been executed on behalf of such
Loan Party and delivered to each depository institution listed on Schedule
5.21(a).

 

(b)               From and after the Closing Date, the Loan Parties shall cause
to be sent via ACH or wire transfer no less frequently than daily (and whether
or not there are then any outstanding Obligations) to a Blocked Account all of
the following:

 

(i)                                     all amounts on deposit in each DDA (net
of any minimum balance, not to exceed $7,500, as may be required to be kept in
the subject DDA by the depository institution at which such DDA is maintained);

 

(ii)                                  all payments due from Credit Card
Processors and Credit Card Issuers and proceeds of all credit card charges;

 

(iii)                               all cash receipts from the Disposition of
Inventory and other assets (whether or not constituting Collateral);

 

(iv)                              all proceeds of Accounts; and

 

(v)                                 all Net Proceeds, and all other cash
payments received by a Loan Party from any Person or from any source or on
account of any Disposition or other transaction or event, including, without
limitation, any Prepayment Event.

 

(c)                Each Blocked Account Agreement shall require upon notice from
Agent which notice shall be delivered only after the occurrence and during the
continuance of a Cash Dominion Event the ACH or wire transfer no less frequently
than daily (and whether or not there are then any outstanding Obligations) to
the concentration account controlled by the Agent at Wells Fargo Bank, National
Association (the “Concentration Account”), of all cash receipts and collections
received by each Loan Party from all sources (the “Receipts and Collections”),
including, without limitation, the following:

 

(i)                                     the then entire ledger balance of each
Blocked Account (net of any minimum balance, not to exceed $7,500, as may be
required to be kept in the subject Blocked Account by the Blocked Account Bank);

 

(ii)                                  all amounts required to be deposited into
the Blocked Accounts pursuant to clause (b) above; and

 

(iii)                               any other cash amounts received by any Loan
Party from any other source, on account of any type of transaction or event;

 

provided, however, the Agent may, in its sole discretion, permit the Loan
Parties to have one or more “intermediate” Blocked Account Agreements, whereby
such agreements would provide, upon notice from

 

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the Agent which notice shall be delivered only after the occurrence and during
the continuance of a Cash Dominion Event, the ACH or wire transfer no less
frequently than daily (and whether or not there are then any outstanding
Obligations) all Receipts and Collections to another Blocked Account, as opposed
to the Concentration Account.

 

(d)               The Concentration Account shall at all times be under the sole
dominion and control of the Agent and after the occurrence and during the
continuance of a Cash Dominion Event, all funds therein shall be wired to an
account specified by Agent no less frequently than daily.  The Agent shall cause
all funds on deposit in the Concentration Account to be applied to the
Obligations, which amounts shall be applied to the Obligations in the order
proscribed in either Section 2.04(f) or Section 8.03 of this Agreement, as
applicable.  The Loan Parties hereby acknowledge and agree that (i) the Loan
Parties have no right of withdrawal from the Concentration Account, and (ii) the
funds on deposit in the Concentration Account shall at all times be collateral
security for all of the Obligations.  In the event that, notwithstanding the
provisions of this Section 6.13, any Loan Party receives or otherwise has
dominion and control of any such cash receipts or collections, such receipts and
collections shall be held in trust by such Loan Party for the Agent, shall not
be commingled with any of such Loan Party’s other funds or deposited in any
account of such Loan Party and shall, not later than the Business Day after
receipt thereof, be deposited into the Concentration Account or dealt with in
such other fashion as such Loan Party may be instructed by the Agent.

 

(e)                Upon the written request of the Agent, the Loan Parties shall
cause bank statements and/or other reports to be delivered to the Agent not less
often than monthly, accurately setting forth all amounts deposited in each
Blocked Account to ensure the proper transfer of funds as set forth above and
provide the Agent with “view-only” access to each of the Loan Parties bank
accounts identified by the Agent.

 

(f)                 If the Agent does not require DDA Notifications to be
delivered on the Closing Date in accordance with Section 6.13(a) above, then the
Loan Parties shall, upon the request of the Agent at any time after the Closing
Date, deliver to the Agent copies of DDA Notifications, which have been executed
on behalf of the applicable Loan Party and delivered to each depository
institution listed on Schedule 5.21(a).

 

6.14                        Information Regarding the Collateral.

 

(a)               Furnish to the Agent (i) at least fifteen (15) days’ prior
written notice of any change in any Loan Party’s name; (ii) at least ten
(10) days’ prior written notice of (x) 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 and having a book value of more than
$250,000 is located (including the establishment of any such new office or
facility), excluding Store locations, any location disclosed to the Agent in the
Perfection Certificate, Collateral in-transit in the ordinary course of
business, equipment in connection with the repair or refurbishment thereof in
the ordinary course of business, or Collateral in the possession of employees in
the ordinary course of business; (y) any Loan Party’s organizational structure
or jurisdiction of incorporation or formation; or (z) any Loan Party’s Federal
Taxpayer Identification Number or organizational identification number assigned
to it by its state of organization. The Loan Parties agree not to effect or
permit any change referred to in the preceding sentence unless all filings have
been made under the UCC or otherwise that are required in order for the Agent to
continue at all times following such change to have a valid, legal and perfected
first priority security interest in all the Collateral subject to Permitted
Encumbrances having priority by operation of applicable Law for its own benefit
and the benefit of the other Credit Parties.

 

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(b)               Should any of the information on any of the Schedules hereto
which are not limited to being true only as of the Closing Date become
inaccurate or misleading in any material respect as a result of changes after
the Closing Date, the Lead Borrower shall advise the Agent in writing quarterly
of such revisions or updates as may be necessary or appropriate to update or
correct the same.  As may reasonably be requested by the Agent (which request
shall not be made more than two (2) times in any Fiscal Year), the Lead Borrower
shall supplement each Schedule hereto, or any representation herein or in any
other Loan Document, with respect to any matter arising after the Closing Date
that, if existing or occurring on the Closing Date, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or that is necessary to correct any information in such Schedule
or representation which has been rendered materially inaccurate thereby (and, in
the case of any supplements to any Schedule, such Schedule shall be
appropriately marked to show the changes made therein).  Notwithstanding the
foregoing, no supplement or revision to any Schedule or representation shall be
deemed the Credit Parties’ consent to the matters reflected in such updated
Schedules or revised representations nor permit the Loan Parties to undertake
any actions otherwise prohibited hereunder or fail to undertake any action
required hereunder from the restrictions and requirements in existence prior to
the delivery of such updated Schedules or such revision of a representation; nor
shall any such supplement or revision to any Schedule or representation be
deemed the Credit Parties’ waiver of any Default or Event of Default resulting
from the matters disclosed therein.

 

6.15                        Physical Inventories.

 

(a)               Cause not less than one (1) physical inventory to be
undertaken, at the expense of the Loan Parties, in each twelve (12) month period
and periodic cycle counts, in each case consistent with past practices,
conducted by such inventory takers as are reasonably satisfactory to the Agent
and following such methodology as is consistent with the methodology used in the
immediately preceding inventory or as otherwise may be satisfactory to the
Agent. The Agent, at the expense of the Loan Parties, may participate in and/or
observe each scheduled physical count of Inventory which is undertaken on behalf
of any Loan Party.  The Lead Borrower, within thirty (30) days following the
completion of such inventory, shall provide the Agent with a reconciliation of
the results of such inventory (as well as of any other physical inventory or
cycle counts undertaken by a Loan Party) and shall post such results to the Loan
Parties’ stock ledgers and general ledgers, as applicable.

 

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

 

6.16                        Environmental Laws.  Except to the extent the
failure to do so could not reasonably be expected to have a Material Adverse
Effect: (a) Conduct its operations and keep and maintain its Real Estate in
material compliance with all Environmental Laws; (b) obtain and renew all
environmental permits necessary for its operations and properties; and
(c) implement any and all investigation, remediation, removal and response
actions that are necessary to maintain the value and marketability of the Real
Estate or to otherwise comply with Environmental Laws pertaining to the
presence, generation, treatment, storage, use, disposal, transportation or
release of any Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, provided, however, that neither a Loan Party nor any of
its Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and adequate reserves have
been set aside and are being maintained by the Loan Parties with respect to such
circumstances in accordance with GAAP.

 

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6.17                        Further Assurances.

 

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

 

(b)               If any material assets (other than Excluded Collateral (as
defined in the Security Agreement)) are acquired by any Loan Party after the
Closing Date (other than assets constituting Collateral under the Security
Documents that become subject to the perfected first-priority Lien under the
Security Documents upon acquisition thereof), notify the Agent thereof, and the
Loan Parties will cause such assets to be subjected to a Lien securing the
Obligations and will take such actions as shall be necessary to grant and
perfect such Liens, including actions described in paragraph (a) of this
Section 6.17, all at the expense of the Loan Parties. In no event shall
compliance with this Section 6.17 waive or be deemed a waiver or Consent to any
transaction giving rise to the need to comply with this Section 6.17 if such
transaction was not otherwise expressly permitted by this Agreement or
constitute or be deemed to constitute Consent to the inclusion of any acquired
assets in the computation of the Borrowing Base.

 

(c)                Upon the request of the Agent, use commercially reasonable
efforts to cause each of its customs brokers, freight forwarders, consolidators
and/or carriers in possession of Eligible In-Transit Inventory to deliver an
agreement (including, without limitation, a Customs Broker/Carrier Agreement) to
the Agent covering such matters and in such form as the Agent may reasonably
require.

 

(d)               Upon the request of the Agent, use commercially reasonable
efforts to cause each of its landlords to deliver a Collateral Access Agreement
to the Agent (in such form as the Agent may reasonably require) for each leased
location (other than Stores) of such Loan Party or Subsidiary at which
Collateral included in the Borrowing Base with a book value in excess of
$500,000 is located; provided, that nothing herein shall affect the Agent’s
ability to impose Reserves as set forth herein.

 

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

 

6.19                        Material Contracts.  (a) Perform and observe all the
terms and provisions of each Material Contract to be performed or observed by
it, (b) maintain each such Material Contract in full force and effect, except to
the extent such Material Contract is no longer used or useful in the conduct of
the business of the Loan Parties in the ordinary course of business and
consistent with past practices, (c) enforce each such Material Contract in
accordance with its terms, and (d) cause each of its Subsidiaries to

 

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do the foregoing, except, in any case, where the failure to do so, either
individually or in the aggregate, could not be reasonably likely to have a
Material Adverse Effect.

 

6.20                        Employee Benefit Plans.

 

(a)               Maintain, and cause each ERISA Affiliate to maintain, each
Pension Plan in substantial compliance with all applicable Laws.

 

(b)               Make, and cause each ERISA Affiliate to make, on a timely
basis, all required contributions to any Multiemployer Plan.

 

(c)                Not, and not permit any ERISA Affiliate to (i) seek a waiver
of the minimum funding standards of ERISA, (ii) terminate or withdraw from any
Pension Plan or Multiemployer Plan or (iii) take any other action with respect
to any Pension Plan that would, or could reasonably be expected to, entitle the
PBGC to terminate, impose liability in respect of, or cause a trustee to be
appointed to administer, any Pension Plan, unless the actions or events
described in clauses (i), (ii) and (iii) above individually or in the aggregate
would not have or could not reasonably be expected to have a Material Adverse
Effect.

 

6.21                        Post-Closing Obligation.  The Lead Borrower
covenants that:

 

(a)               on or before October 3, 2014, it shall deliver, or cause to be
delivered, to the Agent the original stock certificates evidencing all of the
issued and outstanding capital stock of each of Cache of Las Vegas, Inc. and
Cache of Virginia, Inc., along with stock powers executed in blank;

 

(b)               on or before October 17, 2014, it shall deliver, or cause to
be delivered, to the Agent, in form and substance satisfactory to the Agent, a
duly executed Collateral Access Agreement with respect to 256 West 38th Street,
New York, NY.

 

(c)                it will dissolve, or cause to be dissolved, Adrienne
Victoria, LLC, a Delaware limited liability company (“AV Sub”) owned by the Lead
Borrower, no later than October 17, 2014.  The Loan Parties will not permit AV
Sub to hold any assets, conduct any operations or business or receive any loan
proceeds.  No Loan Party will make any investment in, or make any loan, advance,
capital contribution or other payment to AV Sub;

 

(d)               it will obtain by no later than October 17, 2014, from the
Virginia State Corporation Commission a certificate of corporate good standing
for Cache of Virginia, Inc. as of a recent date;

 

(e)                on or before October 17, 2014, it shall deliver, or cause to
be delivered, to the Agent, in form and substance satisfactory to the Agent,
evidence of an additional insured endorsement with respect to the Loan Parties’
general liability and marine cargo policies, a lenders loss payee policy with
respect to the Loan Parties’ property policy and notice endorsements with
respect to each of the Loan Parties’ general liability and property policies;
and

 

(f)                 on or before December 31, 2014, the Lead Borrower shall
provide evidence to the Agent, in form and substance satisfactory to the Agent,
that the Lead Borrower’s system-generated stock ledger includes in-transit and
warehouse inventory reporting.

 

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ARTICLE VII
NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (other than contingent indemnification obligations for
which a claim has not been asserted), no Loan Party shall, nor shall it permit
any Subsidiary to, directly or indirectly:

 

7.01                        Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired or sign or file or authorize to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any
security agreement authorizing any Person thereunder to file such financing
statement; sell any of its property or assets subject to an understanding or
agreement (contingent or otherwise) to repurchase such property or assets with
recourse to it or any of its Subsidiaries; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances.

 

7.02                        Investments.  Make any Investments, except Permitted
Investments; provided, that no new Investments shall be made if any Default or
Event of Default has occurred and is continuing, or would arise from the making
of such Investment.

 

7.03                        Indebtedness; Disqualified Stock.  (a) Create,
incur, assume, guarantee, suffer to exist or otherwise become or remain liable
with respect to, any Indebtedness, except Permitted Indebtedness; (b) issue
Disqualified Stock, or (c) issue and sell any other Equity Interests if a Change
of Control or other Event of Default would result therefrom.

 

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

 

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

 

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

 

(c)               in connection with a Permitted Investment, any Subsidiary of a
Loan Party may merge with or into or consolidate with any other Person or permit
any other Person to merge with or into or consolidate with it; provided that
(i) the Person surviving such merger shall be a wholly-owned Subsidiary of a
Loan Party and such Person shall become a Loan Party in accordance with the
provisions of Section 6.12 hereof, and (ii) in the case of any such merger to
which any Loan Party is a party, such Loan Party is the surviving Person;

 

(d)               any Loan Party or any of its Subsidiaries (other than the Lead
Borrower) may liquidate, wind up or dissolve or change its legal form, provided,
that promptly upon the commencement of the winding up, any action to dissolve or
change such Loan Party or such Subsidiary, as the case may be, any assets of
such Loan Party which constitute Collateral are either (i)

 

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transferred to any other Loan Party and are subject to the valid perfected
security interests of the Agent or (ii) are subject to a Disposition which is a
Permitted Disposition; and

 

(e)                any Loan Party or any of its Subsidiaries (other than the
Lead Borrower) may consummate a merger, dissolution, liquidation, consolidation
or Disposition, the purpose of which is to effect a Disposition permitted
pursuant to Section 7.05.

 

7.05                        Dispositions.  Make any Disposition or enter into
any agreement to make any Disposition, except Permitted Dispositions.

 

7.06                        Restricted Payments.  Declare or make, directly or
indirectly, any Restricted Payment, except:

 

(a)               each Subsidiary of a Loan Party may make Restricted Payments
to any Loan Party;

 

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

 

(c)                so long as no Event of Default shall have occurred and be
continuing prior to or immediately after giving effect thereto or would result
therefrom, the Loan Parties and their Subsidiaries may make payments (or make
Restricted Payments to the Lead Borrower to pay) for the repurchase, retirement
or other acquisition or retirement for value of Equity Interests of the Lead
Borrower held by any future, present or former employee, director, advisor,
consultant or distributor (or any spouses, former spouses, domestic partners,
executors, administrators, heirs, legatees or distributes of any of the
foregoing) of the Loan Parties upon the death, disability, retirement or
termination of employment of any such Person or otherwise pursuant to any
exercise of a stock option, stock appreciation rights or other equity incentive
or equity based incentives or any employee or director equity plan, employee or
director stock option plan or any other employee or director benefit plan or any
agreement (including any stock subscription or shareholder agreement) with any
employee, director, consultant or distributor of the Loan Parties in an
aggregate amount after the Closing Date not to exceed $500,000 in any Fiscal
Year of the Lead Borrower, a written notice of such Restricted Payment shall be
delivered by the Lead Borrower to the Agent promptly following such Restricted
Payment;

 

(d)               the Loan Parties and their Subsidiaries may acquire Equity
Interests arising from cashless repurchases of Equity Interests deemed to occur
upon the exercise of stock options if such stock represents a portion of the
exercise price thereof;

 

(e)                the Loan Parties and their Subsidiaries may purchase, redeem
or acquire fractional shares of Equity Interests arising out of stock dividends,
splits or combinations or business combinations;

 

(f)                 to the extent constituting Restricted Payments, the Loan
Parties and Restricted Subsidiaries may enter into and consummate transactions
expressly permitted by any provision of Section 7.02, 7.04 or 7.09 so long as
such Restricted Payment is otherwise permitted to be made pursuant to this
Section 7.06; and

 

(g)                if the Payment Conditions are satisfied, and in addition to
the cash dividends permitted to be paid pursuant to the other subsections of
this Section 7.06, the Lead Borrower may

 

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declare and pay regularly scheduled cash dividends and cash distributions to
holders of its Equity Interests, from legally available funds therefore, in an
aggregate amount not to exceed $500,000 in any Fiscal Year, a written notice of
such Restricted Payment shall be delivered by the Lead Borrower to the Agent
promptly following such Restricted Payment.

 

7.07                        Prepayments of Indebtedness.  Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner any Indebtedness, or make any payment in violation of any
subordination terms of any Subordinated Indebtedness, except (a) as long as no
Default or Event of Default then exists, regularly scheduled or mandatory
repayments, repurchases, redemptions or defeasances of (i) Permitted
Indebtedness (other than Subordinated Indebtedness), and (ii) Subordinated
Indebtedness in accordance with the subordination terms thereof or the
applicable subordination agreement relating thereto, (b) voluntary prepayments,
repurchases, redemptions or defeasances of (i) Permitted Indebtedness (but
excluding on account of any Subordinated Indebtedness) as long as the Payment
Conditions are satisfied, and (ii) Subordinated Indebtedness in accordance with
the subordination terms thereof or the applicable subordination agreement
relating thereto, and as long as the Payment Conditions are satisfied, and
(c) Permitted Refinancings of any such Indebtedness.

 

7.08                        Change in Nature of Business.  Engage in any line of
business substantially different from the business conducted by the Loan Parties
and their Subsidiaries on the Closing Date other than businesses that are a
reasonable extension of, or are reasonably related, ancillary, supplementary or
complementary to the business line or lines of business, or a reasonable
expansion or extension thereof, of the Loan Parties and their Subsidiaries.

 

7.09                        Transactions with Affiliates.  Enter into, renew,
extend or be a party to any transaction of any kind with any Affiliate of any
Loan Party, whether or not in the ordinary course of business, on terms less
favorable to the Loan Parties or such Subsidiary as would reasonably be expected
to be obtained by the Loan Parties or such Subsidiary at the time in a
comparable arm’s length transaction with a Person other than an Affiliate,
provided that the foregoing restriction shall not apply to (a) a transaction
between or among the Loan Parties, including any entity that becomes a Loan
Party as a result of such transactions, (b) advances for commissions, travel and
other similar purposes in the ordinary course of business to directors, officers
and employees, (c) the issuance of Equity Interests in the Lead Borrower to any
officer, director, employee or consultant of the Lead Borrower or any of its
Subsidiaries, (d) the payment of customary fees and out-of-pocket costs to
directors, and compensation (including bonuses) and employee benefit
arrangements paid to, and indemnities provided for the benefit of, directors,
officers or employees of the Lead Borrower or any of its Subsidiaries, (e) any
issuances of securities of the Lead Borrower (other than Disqualified Stock) or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of, employment agreements, employee benefit plans, stock options
and stock ownership plans, including restricted stock plans, stock grants,
directed share programs, profits interest plans and other equity-based plans,
and the granting of registration rights and other stockholder rights approved by
the Lead Borrower’s Board of Directors (in each case in respect of Equity
Interests in the Lead Borrower), (f) employment and severance arrangements
between the Loan Parties and their respective officers and employees in the
ordinary course of business, (g) any transaction with and Affiliate where the
only consideration paid by any Loan Party is Equity Interests of the Lead
Borrower, and (h) transactions permitted pursuant to Section 7.02, Section 7.03,
Section 7.04, Section 7.05 and Section 7.06.

 

7.10                        Burdensome Agreements.  Enter into or permit to
exist any Contractual Obligation (other than this Agreement or any other Loan
Document) that (a) limits the ability (i) of any Subsidiary to make Restricted
Payments or other distributions to any Loan Party or to otherwise transfer
property to or invest in a Loan Party, (ii) of any Subsidiary to Guarantee the
Obligations, (iii) of any Subsidiary to make or repay loans to a Loan Party, or
(iv) of the Loan Parties or any Subsidiary to create, incur, assume or

 

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suffer to exist Liens on property of such Person in favor of the Agent;
provided, however, that this clause (iv) shall not prohibit any negative pledge
(A) incurred or provided in favor of any holder of Indebtedness permitted under
clauses (c) of the definition of Permitted Indebtedness solely to the extent any
such negative pledge relates to the property financed by or the subject of such
Indebtedness or any replacement costs, (B) that constitutes customary
restrictions set forth in software or other end user license agreements or in
leases or subleases with respect to real estate fixtures, (C) that constitutes
customary provisions restricting assignment of any agreements permitted
hereunder, (D) that constitutes restrictions on cash or other deposits made by
customers under contracts entered into in the ordinary course of business, or
(E) that is part of customary provisions in joint venture agreements and other
similar agreements applicable to joint ventures permitted under Section 7.02; or
(b) requires the grant of a Lien to secure an obligation of such Person if a
Lien is granted to secure another obligation of such Person.

 

7.11                        Use of Proceeds.  Use the proceeds of any Credit
Extension, whether directly or indirectly, and whether immediately, incidentally
or ultimately, (a) to purchase or carry margin stock (within the meaning of
Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund Indebtedness originally
incurred for such purpose, in each case in violation of Regulations T, U or X
promulgated by the Board of Governors of the Federal Reserve System; or (b) for
purposes other than those permitted under this Agreement.

 

7.12                        Amendment of Material Documents.  Amend, modify or
waive any of a Loan Party’s rights under (a) its Organization Documents in a
manner materially adverse to the Credit Parties, or (b) any Material Contract or
Material Indebtedness (other than on account of any refinancing thereof
otherwise permitted hereunder), in each case to the extent that such amendment,
modification or waiver would result in a Default or Event of Default under any
of the Loan Documents, would be materially adverse to the Credit Parties or
otherwise would be reasonably likely to have a Material Adverse Effect.

 

7.13                        Fiscal Year.  Change the Fiscal Year of any Loan
Party, or the accounting policies or reporting practices of the Loan Parties,
except as permitted by GAAP.

 

7.14                        Deposit Accounts; Credit Card Processors.  Open new
DDAs or Blocked Accounts unless the Loan Parties shall have delivered to the
Agent appropriate DDA Notifications (to the extent requested by Agent pursuant
to the provisions of Section 6.13(a)(iii) hereof) or Blocked Account Agreements
consistent with the provisions of and to the extent required by Section 6.13 and
otherwise reasonably satisfactory to the Agent.  No Loan Party shall maintain
any bank accounts or enter into any agreements with Credit Card Issuers or
Credit Card Processors other than the ones expressly contemplated herein or in
Section 6.13 hereof unless the Loan Parties shall have delivered to the Agent
appropriate Credit Card Notifications consistent with the provisions of
Section 6.13 hereof.

 

ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES

 

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

 

(a)               Non-Payment.  The Borrowers or any other Loan Party fails to
pay when and as required to be paid herein, including, without limitation, any
amount due following the occurrence of the Termination Date, (i) any amount of
principal of any Loan or any L/C Obligation, or deposit any funds as Cash
Collateral in respect of L/C Obligations, or (ii) within one (1) Business Day
after the same is due, any interest on any Loan, or any fee due hereunder, or
any other amount payable hereunder or under any other Loan Document; or

 

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(b)               Specific Covenants.  (i) Any Loan Party fails to perform or
observe any term, covenant or agreement contained in any of Section 6.01, 6.02,
6.03(a), 6.03(b), 6.03(c), 6.03(d), 6.03(e), 6.03(g), 6.03(j), 6.03(m), 6.05,
6.07, 6.10, 6.11, 6.12, 6.13, 6.14, 6.21 or Article VII; or (ii) any Guarantor
fails to perform or observe any payment or other material term, covenant or
agreement contained in the Facility Guaranty; or (iii) any of the Loan Parties
fails to perform or observe any term, covenant or agreement contained in the
Security Agreement to which it is a party; or

 

(c)                Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for thirty (30) days; or

 

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

 

(e)                Cross-Default.  (i) Any Loan Party or any Subsidiary thereof
(A) fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any Material
Indebtedness (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Material
Indebtedness, or (B) fails to observe or perform any other agreement or
condition relating to any such Material Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event occurs and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Material
Indebtedness, the effect of which default or other event is to cause, or to
permit the holder or holders of such Material Indebtedness or the beneficiary or
beneficiaries of any Guarantee thereof that constitutes Material Indebtedness
(or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any event
of default under such Swap Contract as to which a Loan Party or any Subsidiary
thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as so defined) under such Swap Contract as to which a Loan
Party or any Subsidiary thereof is an Affected Party (as so defined) and, in
either event, the Swap Termination Value owed by the Loan Party or such
Subsidiary as a result thereof is greater than $2,000,000; or

 

(f)                 Insolvency Proceedings, Etc.  Any Loan Party or any of its
Subsidiaries institutes, consents to the institution of or declares its
intention to institute any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or substantially all of its
property; or a proceeding shall be commenced or a petition filed, without the
application or consent of such Person, seeking or requesting the appointment of
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed and the appointment continues undischarged,
undismissed or unstayed for thirty (30) calendar days or an order or decree
approving or ordering any of the foregoing shall be entered; or any proceeding
under any Debtor Relief Law relating to any such Person or to all or any
material part of its property is

 

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instituted without the consent of such Person and continues undismissed or
unstayed for thirty (30) calendar days, or an order for relief is entered in any
such proceeding; or

 

(g)                Inability to Pay Debts; Attachment.  (i) Any Loan Party or
any Subsidiary thereof becomes unable or admits in writing its inability or
fails generally to pay its debts as they become due in the ordinary course of
business, or (ii) any writ or warrant of attachment or execution or similar
process is issued or levied against all or any material part of the property of
any such Person and is not released, vacated or fully bonded within thirty (30)
days after its issuance or levy; or

 

(h)               Judgments.  There is entered against any Loan Party or any
Subsidiary thereof (i) one or more judgments or orders for the payment of money
in an aggregate amount (as to all such judgments and orders) exceeding
$2,000,000 (to the extent not covered by independent third-party insurance as to
which the insurer is rated at least “A” by A.M. Best Company, has been notified
of the potential claim and does not dispute coverage), or (ii) any one or more
non-monetary judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case
with respect to clauses (i) and (ii) above, (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) there is a period
of thirty (30) consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, is not in effect;
or

 

(i)                   ERISA.  (i) An ERISA Event occurs with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of any Loan Party or any ERISA Affiliate under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an
aggregate amount in excess of $2,000,000 or which would reasonably likely result
in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$2,000,000 or which would reasonably likely result in a Material Adverse Effect;
or

 

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

 

(k)               Cessation of Business.  Except with respect to Permitted
Dispositions or as otherwise expressly permitted hereunder, any Loan Party shall
take any action, or shall make a determination, whether or not formally approved
by any Loan Party’s board of directors, to suspend the operation of its business
in the ordinary course, liquidate all or a material portion of its assets or
Store locations, or employ an agent or other third party to conduct a program of
closings, liquidations or “Going-Out-Of-Business” sales of any material portion
of its business; or

 

(l)                   Loss of Collateral.  There occurs any uninsured loss to
any material portion of the Collateral; or

 

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(m)           Breach of Contractual Obligation.  Any Loan Party or any
Subsidiary thereof fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect of
any Material Contract or fails to observe or perform any other agreement or
condition relating to any such Material Contract or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
occurs, the effect of which default or other event is to cause, or to permit the
counterparty to such Material Contract to terminate such Material Contract; or

 

(n)               Indictment.  The indictment or institution of any legal
process or proceeding against, any Loan Party or any Subsidiary thereof, under
any federal, state, municipal, or other criminal statute, rule, regulation,
order, or other requirement having the force of law for a felony and such action
or proceeding would reasonably be expected to have a Material Adverse Effect,
which indictment or proceeding remains undismissed or undischarged for a period
of sixty (60) days; or

 

(o)               Guaranty.  The termination or attempted termination of any
Facility Guaranty except as expressly permitted hereunder or under any other
Loan Document;

 

(p)               Subordination.  (i)  The subordination provisions of the
documents evidencing or governing any Subordinated Indebtedness (the
“Subordination Provisions”) shall, in whole or in part, terminate, cease to be
effective or cease to be legally valid, binding and enforceable against any
holder of the applicable Subordinated Indebtedness; or (ii) any Borrower or any
other Loan Party shall, directly or indirectly, disavow or contest in any manner
(A) the effectiveness, validity or enforceability of any of the Subordination
Provisions, (B) that the Subordination Provisions exist for the benefit of the
Credit Parties, or (C) that all payments of principal of or premium and interest
on the applicable Subordinated Indebtedness, or realized from the liquidation of
any property of any Loan Party, shall be subject to any of the Subordination
Provisions; or

 

(q)               Material Adverse Effect.  A Material Adverse Effect shall
occur.

 

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

 

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

 

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

 

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

 

(d)               capitalize any accrued and unpaid interest by adding such
amount to the outstanding principal balance of the Loans, at which time such
capitalized amount shall bear interest at the Default Rate;

 

(e)                whether or not the maturity of the Obligations shall have
been accelerated pursuant hereto, proceed to protect, enforce and exercise all
rights and remedies of the Credit Parties under this Agreement, any of the other
Loan Documents or applicable Law, including, but not limited to, by suit in
equity, action at law or other appropriate proceeding, whether for the specific

 

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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 Credit Parties; and/or

 

(f)                 Credit Bidding.  The Agent may purchase, in any public or
private sale conducted under the provision of the UCC (including pursuant
section 9-610 and 9-620 of the UCC), the provisions of the Bankruptcy Code
(including pursuant to section 363 of the Bankruptcy Code) or at any sale or
foreclosure conducted by the Agent (whether by judicial action or otherwise) in
accordance with Applicable Law, all or any portion of the Collateral.  The
Lenders hereby irrevocably authorize the Agent, upon written consent of the
Required Lenders, to Credit Bid (in an amount and on such terms as may be
directed by the Required Lenders) and purchase at any such sale (either directly
or through one or more acquisition vehicles) all or any portion of the
Collateral on behalf of and for the benefit of the Lenders;

 

provided, however, that upon the occurrence of any Event of Default with respect
to any Loan Party or any Subsidiary thereof under Section 8.01(f), the
obligation of each Lender to make Loans and any obligation of each L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, and the obligation of the Loan
Parties to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the Agent or
any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of Law.

 

8.03                        Application of Funds.  After the exercise of
remedies provided for in Section 8.02 (or after the Loans have automatically
become immediately due and payable and the L/C Obligations have automatically
been required to be Cash Collateralized as set forth in the proviso to
Section 8.02), any amounts received on account of the Obligations shall be
applied by the Agent in the following order, in each case whether or not such
Obligations are allowed or allowable in any bankruptcy or insolvency proceeding
or under any Debtor Relief Law:

 

First, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting fees, indemnities, Credit Party Expenses and other
amounts (including fees, charges and disbursements of counsel to the Agent and
amounts payable under Article III) payable to the Agent;

 

Second, to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting indemnities, Credit Party Expenses, and other amounts
(other than principal, interest and fees) payable to the Lenders and the L/C
Issuers (including fees, charges and disbursements of counsel to the respective
Lenders and the L/C Issuers and amounts payable under Article III), ratably
among them in proportion to the amounts described in this clause Second payable
to them;

 

Third, to the extent not previously reimbursed by the Lenders, to payment to the
Agent of that portion of the Obligations constituting principal and accrued and
unpaid interest on any Permitted Overadvances;

 

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Fourth, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Committed Loans and other Obligations, and fees
(including Letter of Credit Fees but excluding any Early Termination Fees),
ratably among the Lenders and the L/C Issuers in proportion to the respective
amounts described in this clause Fourth payable to them;

 

Fifth, to payment of that portion of the Obligations constituting unpaid
principal of the Committed Loans, ratably among the Lenders in proportion to the
respective amounts described in this clause Fifth held by them;

 

Sixth, to the Agent for the account of the L/C Issuers, to Cash Collateralize
that portion of L/C Obligations (to the extent not already Cash Collateralized)
comprised of the aggregate undrawn amount of Letters of Credit;

 

Seventh, to payment of all other Obligations (including without limitation the
cash collateralization of unliquidated indemnification obligations, but
excluding any Other Liabilities), ratably among the Credit Parties in proportion
to the respective amounts described in this clause Seventh held by them

 

Eighth, to payment of that portion of the Obligations arising from Cash
Management Services to the extent secured under the Security Documents, ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Eighth held by them;

 

Ninth, to payment of all other Obligations arising from Bank Products to the
extent secured under the Security Documents, ratably among the Credit Parties in
proportion to the respective amounts described in this clause Ninth held by
them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Loan Parties or as otherwise required by Law.

 

Amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Sixth above shall be applied to satisfy drawings under
such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE IX
THE AGENT

 

9.01                        Appointment and Authority.  Each of the Lenders
hereby irrevocably appoints Salus to act on its behalf as the Agent hereunder
and under the other Loan Documents and authorizes the Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Agent by the
terms hereof or thereof (including, without limitation, acquiring, holding and
enforcing any and all Liens on Collateral granted by any of the Loan Parties to
secure any of the Obligations), together with such actions and powers as are
reasonably incidental thereto.  The provisions of this Article are solely for
the benefit of the Agent, the Lenders and the L/C Issuers, and no Loan Party or
any Subsidiary thereof shall have rights as a third party beneficiary of any of
such provisions.  It is understood and agreed that the use of the terms “agent”
herein or in any other Loan Documents (or any other similar term) with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law. 
Instead such term is used as a matter of market custom, and is intended to
create or reflect only an administrative relationship between contracting
parties.

 

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9.02                        Rights as a Lender.  The Person serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though they were not the Agent and
the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or
unless the context otherwise requires, include the Person serving as the Agent
hereunder in its individual capacity.  Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the Loan
Parties or any Subsidiary or other Affiliate thereof as if such Person were not
the Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03                        Exculpatory Provisions.  The Agent shall not have
any duties or obligations except those expressly set forth herein and in the
other Loan Documents.  Without limiting the generality of the foregoing, the
Agent:

 

(a)               shall not be subject to any fiduciary or other implied duties,
regardless of whether a Default or Event of Default has occurred and is
continuing;

 

(b)               shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Agent is
required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Agent shall not be
required to take any action that, in its opinion or the opinion of its counsel,
may expose the Agent to liability or that is contrary to any Loan Document or
applicable law, including for the avoidance of doubt any action that may be in
violation of the automatic stay under any Debtor Relief Law or that may affect a
forfeiture, modification or termination of property of a Defaulting Lender in
violation of any Debtor Relief Law; and

 

(c)                shall not, except as expressly set forth herein and in the
other Loan Documents, have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Loan Parties or any of its
Affiliates that is communicated to or obtained by the Person serving as the
Agent or any of its Affiliates in any capacity.

 

The Agent shall not be liable for any action taken or not taken by it (i) with
the Consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Agent shall believe
in good faith shall be necessary, under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction.

 

The Agent shall not be deemed to have knowledge of any Default or Event of
Default unless and until notice describing such Default or Event of Default is
given to the Agent by the Loan Parties, a Lender or a L/C Issuer. Upon the
occurrence of a Default or Event of Default, the Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Applicable Lenders.  Unless and until the Agent shall have received such
direction, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to any such Default or Event of
Default as it shall deem advisable in the best interest of the Credit Parties. 
In no event shall the Agent be required to comply with any such directions to
the extent that the Agent believes that its compliance with such directions
would be unlawful.

 

The Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with
this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder

 

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or in connection herewith or therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth herein
or therein or the occurrence of any Default or Event of Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or the
creation, perfection or priority of any Lien purported to be created by the
Security Documents, (v) the value or the sufficiency of any Collateral, or
(vi) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Agent.

 

9.04                        Reliance by Agent.  The Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including, but not limited to, any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper Person.  The Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to have been made by the proper Person, and shall not incur any liability
for relying thereon.  In determining compliance with any condition hereunder to
the making of a Loan, or the issuance of a Letter of Credit, that by its terms
must be fulfilled to the satisfaction of a Lender or a L/C Issuer, the Agent may
presume that such condition is satisfactory to such Lender or such L/C Issuer
unless the Agent shall have received written notice to the contrary from such
Lender or such L/C Issuer prior to the making of such Loan or the issuance of
such Letter of Credit.  The Agent may consult with legal counsel (who may be
counsel for any Loan Party), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.

 

9.05                        Delegation of Duties.  The Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub agents appointed by the
Agent.  The Agent and any such sub agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related
Parties.  The exculpatory provisions of this Article shall apply to any such sub
agent and to the Related Parties of the Agent and any such sub agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as the Agent.  The
Agent shall not be responsible for the negligence or misconduct of any
sub-agents except to the extent that a court of competent jurisdiction
determines in a final and non-appealable judgment that the Agent acted with
gross negligence or willful misconduct in the selection of such sub-agents.

 

9.06                        Resignation of Agent.  The Agent may at any time
give written notice of its resignation to the Lenders and the Lead Borrower. 
Upon receipt of any such notice of resignation, the Required Lenders shall have
the right, after delivering prior written notice to and consulting with the Lead
Borrower, to appoint a successor, which shall be a bank with an office in the
United States, or an Affiliate of any such bank with an office in the United
States and which (unless an Event of Default has occurred and is continuing) is
not an Disqualified Institution.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may on behalf of the Lenders and the L/C Issuers, appoint a
successor Agent that (unless an Event of Default has occurred and is continuing)
is not a Disqualified Institution meeting the qualifications set forth above;
provided that if the Agent shall notify the Lead Borrower and the Lenders that
no qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (1) the retiring
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents (except that in the case of any Collateral held by the
Agent on behalf of the Lenders or the L/C Issuers under any of the Loan
Documents, the retiring Agent shall continue to hold such collateral security
until such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Agent shall instead be made by or to each Lender and each L/C

 

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Issuer directly, until such time as the Required Lenders appoint a successor
Agent (which (unless an Event of Default has occurred and is continuing) shall
not be a Disqualified Institution) as provided for above in this Section.  Upon
the acceptance of a successor’s appointment as Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring (or retired) Agent, and the retiring Agent shall be
discharged from all of its duties and obligations hereunder or under the other
Loan Documents (if not already discharged therefrom as provided above in this
Section).  The fees payable by the Borrowers to a successor Agent shall be the
same as those payable to its predecessor unless otherwise agreed between the
Lead Borrower and such successor.  After the retiring Agent’s resignation
hereunder and under the other Loan Documents, the provisions of this Article and
Section 10.04 shall continue in effect for the benefit of such retiring Agent,
its sub agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Agent was acting
as Agent hereunder.

 

9.07                        Non-Reliance on Agent and Other Lenders.  Each
Lender and each L/C Issuer acknowledges that it has, independently and without
reliance upon the Agent or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.  Each Lender and
each L/C Issuer also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender or any of their Related Parties and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder.  Except as provided
in Section 9.11, the Agent shall not have any duty or responsibility to provide
any Credit Party with any other credit or other information concerning the
affairs, financial condition or business of any Loan Party that may come into
the possession of the Agent.

 

9.08                        Agent May File Proofs of Claim.  In case of the
pendency of any proceeding under any Debtor Relief Law or any other judicial
proceeding relative to any Loan Party, the Agent (irrespective of whether the
principal of any Loan shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Agent shall have made
any demand on the Loan Parties) shall be entitled and empowered, by intervention
in such proceeding or otherwise:

 

(a)               to file and prove a claim for the whole amount of the
principal and interest owing and unpaid in respect of the Loans, L/C Obligations
and all other Obligations that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of the
Lenders, the L/C Issuers, the Agent and the other Credit Parties (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Lenders, the L/C Issuers, the Agent, such Credit Parties and their
respective agents and counsel and all other amounts due the Lenders, the L/C
Issuers, the Agent and such Credit Parties under Sections 2.03(h), 2.08 and
10.04 of this Agreement or under the Fee Letter) allowed in such judicial
proceeding; and

 

(b)               to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and each L/C Issuer to make such payments to the Agent and, if the
Agent shall consent to the making of such payments directly to the Lenders and
the L/C Issuers, to pay to the Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agent and its agents
and counsel, and any other amounts due the Agent under Sections 2.08 and 10.04
of this Agreement or under the Fee Letter.

 

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Nothing contained herein shall be deemed to authorize the Agent to authorize or
consent to or accept or adopt on behalf of any Lender or any L/C Issuer any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or any L/C Issuer or to authorize the
Agent to vote in respect of the claim of any Lender or any L/C Issuer in any
such proceeding.

 

9.09                        Collateral and Guaranty Matters.  The Credit Parties
irrevocably authorize the Agent, at its option and in its Permitted Discretion,

 

(a)               to release any Lien on any property granted to or held by the
Agent under any Loan Document (i) upon termination of the Aggregate Commitments
and payment in full of all Obligations (other than contingent indemnification
obligations for which no claim has been asserted), and the expiration,
termination or Cash Collateralization of all Letters of Credit, (ii) that is
sold or to be sold as part of or in connection with any sale permitted hereunder
or under any other Loan Document, or (iii) if approved, authorized or ratified
in writing by the Applicable Lenders in accordance with Section 10.01;

 

(b)              to subordinate any Lien on any property granted to or held by
the Agent under any Loan Document to the holder of any Lien on such property
that is permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)                to release any Guarantor from its obligations under the
Facility Guaranty if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder.

 

Upon request by the Agent at any time, the Applicable Lenders will confirm in
writing the Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Facility Guaranty pursuant to this Section 9.09.  In each
case as specified in this Section 9.09, the Agent will, at the Loan Parties’
expense, execute and deliver to the applicable Loan Party such documents as such
Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Security
Documents or to subordinate its interest in such item, or to release such
Guarantor from its obligations under the Facility Guaranty, in each case in
accordance with the terms of the Loan Documents and this Section 9.09.

 

9.10                        Notice of Transfer.  The Agent may deem and treat a
Lender party to this Agreement as the owner of such Lender’s portion of the
Obligations for all purposes, unless and until, and except to the extent, an
Assignment and Assumption shall have become effective as set forth in
Section 10.06.

 

9.11                        Reports and Financial Statements.  By signing this
Agreement, each Lender:

 

(a)               agrees to furnish the Agent after the occurrence and during
the continuance of a Cash Dominion Event (and thereafter at such frequency as
the Agent may reasonably request) with a summary of all Other Liabilities due or
to become due to such Lender. In connection with any distributions to be made
hereunder, the Agent shall be entitled to assume that no amounts are due to any
Lender on account of Other Liabilities unless the Agent has received written
notice thereof from such Lender and, if such notice is received, the Agent shall
be entitled to assume that the only amounts due to such Lender on account of
Other Liabilities is the amount set forth in such notice;

 

(b)               is deemed to have requested that the Agent furnish such
Lender, promptly after they become available, copies of all Borrowing Base
Certificates, financial statements and other Borrower Materials required to be
delivered by the Lead Borrower hereunder and all commercial

 

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finance examinations and appraisals of the Collateral received by the Agent
(collectively, the “Reports”);

 

(c)                expressly agrees and acknowledges that the Agent makes no
representation or warranty as to the accuracy or completeness of any Borrower
Materials, and shall not be liable for any information contained in any Borrower
Materials (including any Report);

 

(d)               expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or any other party
performing any audit or examination will inspect only specific information
regarding the Loan Parties and will rely significantly upon the Loan Parties’
books and records, as well as on representations of the Loan Parties’ personnel;

 

(e)                agrees to keep all Reports and other Borrower Materials
confidential in accordance with the provisions of Section 10.07 hereof; and

 

(f)                 without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Agent and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report and other Borrower Materials in connection with any Credit Extensions
that the indemnifying Lender has made or may make to the Borrowers, or the
indemnifying Lender’s participation in, or the indemnifying Lender’s purchase
of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend, and
hold the Agent and any such other Lender preparing a Report harmless from and
against, the claims, actions, proceedings, damages, costs, expenses, and other
amounts (including attorney costs) incurred by the Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.

 

9.12                        Agency for Perfection.  Each Lender hereby appoints
each other Lender as agent for the purpose of perfecting Liens for the benefit
of the Agent and the Lenders in assets which, in accordance with Article 9 of
the UCC or any other applicable Law of the United States, can be perfected only
by possession.  Should any Lender (other than the Agent) obtain possession of
any such Collateral, such Lender shall notify the Agent thereof, and, promptly
upon the Agent’s request therefor shall deliver such Collateral to the Agent or
otherwise deal with such Collateral in accordance with the Agent’s instructions.

 

9.13                        Indemnification of Agent.  Without limiting the
obligations of the Loan Parties hereunder, the Lenders hereby agree to indemnify
the Agent, each L/C Issuer and any Related Party, as the case may be, ratably
according to their Applicable Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent, such L/C Issuer and
their Related Parties in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted to be taken by the Agent,
such L/C Issuer and their Related Parties in connection therewith; provided,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent’s, such L/C Issuer’s and their Related
Parties’ gross negligence or willful misconduct as determined by a final and
nonappealable judgment of a court of competent jurisdiction.

 

9.14                        Relation among Lenders.  The Lenders are not
partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agent)
authorized to act for, any other Lender.

 

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ARTICLE X
MISCELLANEOUS

 

10.01                 Amendments, Etc.  No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no Consent to any departure by
any Loan Party therefrom, shall be effective unless in writing signed by the
Agent, with the Consent of the Required Lenders, and the Lead Borrower or the
applicable Loan Party, as the case may be, and acknowledged by the Agent, and
each such waiver or Consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)               increase the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 8.02) without the written Consent of
such Lender;

 

(b)               as to any Lender, postpone any date fixed by this Agreement or
any other Loan Document for (i) any scheduled payment (including the Maturity
Date) or mandatory prepayment of principal, interest, fees or other amounts due
hereunder or under any of the other Loan Documents without the written Consent
of such Lender entitled to such payment, or (ii) any scheduled or mandatory
reduction or termination of the Aggregate Commitments hereunder or under any
other Loan Document without the written Consent of such Lender;

 

(c)                as to any Lender, reduce the principal of, or the rate of
interest specified herein on, any Loan held by such Lender, or (subject to
clause (iv) of the second proviso to this Section 10.01) any fees or other
amounts payable hereunder or under any other Loan Document to or for the account
of such Lender, without the written Consent of each Lender entitled to such
amount; provided, however, that only the Consent of the Required Lenders shall
be necessary to amend the definition of “Default Rate” or to waive any
obligation of the Borrowers to pay interest or Letter of Credit Fees at the
Default Rate;

 

(d)               as to any Lender, change Section 2.12 or Section 8.03 in a
manner that would alter the pro rata sharing of payments required thereby
without the written Consent of such Lender;

 

(e)                change any provision of this Section or the definition of
“Applicable Lenders”, or “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written Consent of each Lender;

 

(f)                 except as expressly permitted hereunder or under any other
Loan Document, release, or limit the liability of, any Loan Party without the
written Consent of each Lender;

 

(g)                except for Permitted Dispositions, release all or
substantially all of the Collateral from the Liens of the Security Documents
without the written Consent of each Lender;

 

(h)               modify the definition of Permitted Overadvance so as to
increase the amount thereof or, except as provided in such definition, the time
period for which a Permitted Overadvance may remain outstanding without the
written Consent of each Lender; and

 

(i)                   except as expressly permitted herein or in any other Loan
Document, 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 written Consent of each Lender;

 

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and, provided further, that (i) no amendment, waiver or Consent shall, unless in
writing and signed by the applicable L/C Issuer in addition to the Lenders
required above, affect the rights or duties of such L/C Issuer under this
Agreement or any Issuer Document relating to any Letter of Credit issued or to
be issued by it; (ii) no amendment, waiver or Consent shall, unless in writing
and signed by the Agent in addition to the Lenders required above, affect the
rights or duties of the Agent under this Agreement or any other Loan Document;
and (iii) the Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed only by the parties thereto.  Notwithstanding
anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder (and any
amendment, waiver or consent which by its terms requires the consent of all
Lenders or each affected Lender may be effected with the consent of the
applicable Lenders other than Defaulting Lenders), except that (x) the
Commitment of any Defaulting Lender may not be increased or extended without the
consent of such Lender and (y) any waiver, amendment or modification requiring
the consent of all Lenders or each affected Lender that by its terms affects any
Defaulting Lender disproportionately adversely relative to other affected
Lenders shall require the consent of such Defaulting Lender.

 

Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, (x) no provider or holder of any Bank Products or Cash Management
Services shall have any voting or approval rights hereunder (or be deemed a
Lender) solely by virtue of its status as the provider or holder of such
agreements or products or the Obligations owing thereunder, nor shall the
consent of any such provider or holder be required (other than in their
capacities as Lenders, to the extent applicable) for any matter hereunder or
under any of the other Loan Documents, including as to any matter relating to
the Collateral or the release of Collateral or any Loan Party and (y) any Loan
Document may be amended and waived with the written consent of the Agent at the
request of the Borrowers without the need to obtain the consent of any Lender if
such amendment or waiver is delivered in order (i) to comply with local law or
advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause
any Loan Document to be consistent with this Agreement and the other Loan
Documents.

 

10.02                 Notices; Effectiveness; Electronic Communications.

 

(a)               Notices Generally.  Except as provided in subsection
(b) below, all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopier as follows, and all notices
and other communications expressly permitted hereunder to be given by telephone
shall be made to the applicable telephone number, as follows:

 

(i)                                     if to the Loan Parties or the Agent, to
the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.02; and

 

(ii)                                  if to any Lender or any L/C Issuer, to the
address, telecopier number, electronic mail address or telephone number
specified in its Administrative Questionnaire.

 

(iii)                               Notices sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next Business Day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).

 

(b)               Electronic Communications.  Notices and other communications
to the Loan Parties, the Lenders and the L/C Issuers hereunder may be delivered
or furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved

 

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by the Agent, provided that the foregoing shall not apply to notices to any
Lender or any L/C Issuer pursuant to Article II if such Lender or such L/C
Issuer, as applicable, has notified the Agent that it is incapable of receiving
notices under such Article by electronic communication.  The Agent may, in its
Permitted Discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications.

 

Unless the Agent otherwise prescribes, (i) notices and other communications sent
to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c)                The Internet.  In no event shall the Agent or any of its
Related Parties (each, an “Agent Party”) have any liability to any Loan Party,
any Lender, any L/C Issuer or any other Person for losses, claims, damages,
liabilities or expenses of any kind (whether in tort, contract or otherwise)
arising out of the Loan Parties’ or the Agent’s transmission of Borrower
Materials through the internet.

 

(d)               Change of Address, Etc.  Each of the Loan Parties and the
Agent may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the other parties hereto.  Each
Lender and each L/C Issuer may change its address, telecopier or telephone
number for notices and other communications hereunder by notice to the Lead
Borrower and the Agent.  In addition, each Lender agrees to notify the Agent
from time to time to ensure that the Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

(e)                Reliance by Agent, L/C Issuers and Lenders.  The Agent, the
L/C Issuers and the Lenders shall be entitled to rely and act upon any notices
purportedly given by or on behalf of the Loan Parties even if (i) such notices
were not made in a manner specified herein, were incomplete or were not preceded
or followed by any other form of notice specified herein, or (ii) the terms
thereof, as understood by the recipient, varied from any confirmation thereof. 
The Loan Parties shall indemnify the Agent, each L/C Issuer, each Lender and the
Related Parties of each of them from all losses, costs, expenses and liabilities
resulting from the reliance by such Person on each notice purportedly given by
or on behalf of the Loan Parties.  All telephonic communications with the Agent
may be recorded by the Agent, and each of the parties hereto hereby consents to
such recording.

 

10.03                 No Waiver; Cumulative Remedies.  No failure by any Credit
Party to exercise, and no delay by any such Person in exercising, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or under any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges provided herein and in
the other Loan Documents are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default or Event of Default,
regardless of whether any Credit Party may have had notice or knowledge of such
Default or Event of Default at the time.

 

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10.04                 Expenses; Indemnity; Damage Waiver.

 

(a)               Costs and Expenses.  The Borrowers shall pay all Credit Party
Expenses.

 

(b)               Indemnification by the Loan Parties.  The Loan Parties shall
indemnify the Agent (and any sub-agent thereof), each other Credit Party, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after
tax basis) from, any and all losses, claims, causes of action, damages,
liabilities, settlement payments, costs, and related expenses (including the
fees, charges and disbursements of counsel to the Indemnitees, limited to one
primary counsel for all Indemnitees, or in the case of a conflict of interest,
separate counsel for such Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by any Borrower or any other Loan
Party arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, or, in the case of the Agent
(and any sub-agents thereof) and their Related Parties only, the administration
of this Agreement and the other Loan Documents, (ii) any Loan or Letter of
Credit or the use or proposed use of the proceeds therefrom (including any
refusal by any L/C Issuer to honor a demand for payment under a Letter of Credit
if the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit, any bank advising or confirming a
Letter of Credit or any other nominated person with respect to a Letter of
Credit seeking to be reimbursed or indemnified or compensated, and any third
party seeking to enforce the rights of a Borrower, beneficiary, nominated
person, transferee, assignee of Letter of Credit proceeds, or holder of an
instrument or document related to any Letter of Credit), (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by any Loan Party or any of its Subsidiaries, or any Environmental
Liability related in any way to any Loan Party or any of its Subsidiaries,
(iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account
Bank or other Person which has entered into a control agreement with any Credit
Party hereunder, or (v) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Borrower or any other Loan Party or any of the Loan Parties’ directors,
shareholders or creditors, and regardless of whether any Indemnitee is a party
thereto, in all cases, whether or not caused by or arising, in whole or in part,
out of the comparative, contributory or sole negligence of the Indemnitee;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
(x) are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee (y) arising out of any litigation that does not
involve an act or omission of any of the Loan parties or their Affiliates or
that is brought by an Indemnitee against another Indemnitee (except when one of
the parties to such action was acting in its capacity as agent, an arranger, a
bookrunner or other agency capacity) or (z) result from a claim brought by a
Borrower or any other Loan Party against an Indemnitee for breach in bad faith
of such Indemnitee’s obligations hereunder or under any other Loan Document, if
the Borrowers or such Loan Party has obtained a final and nonappealable judgment
in its favor on such claim as determined by a court of competent jurisdiction. 
For the avoidance of doubt, this Section 10.04 shall not apply to Taxes, except
any Taxes that represent liabilities, obligations, losses, damages, penalties,
claims, demands, actions, prepayments, suits, costs, expenses and disbursements
arising from any non-Tax claims.

 

(c)                Reimbursement by Lenders.  Without limiting their obligations
under Section 9.13 hereof, to the extent that the Loan Parties for any reason
fail to indefeasibly pay any amount required under subsection (a) or (b) of this
Section to be paid by it, each Lender severally agrees to pay to the Agent (or
any such sub-agent), the applicable L/C Issuer or such Related Party, as

 

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the case may be, such Lender’s Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agent (or any such sub-agent) or such L/C Issuer in its
capacity as such, or against any Related Party of any of the foregoing acting
for the Agent (or any such sub-agent) or such L/C Issuer in connection with such
capacity.  The obligations of the Lenders under this subsection (c) are subject
to the provisions of Section 2.11(d).

 

(d)               Waiver of Consequential Damages, Etc.  To the fullest extent
permitted by applicable Law, the Loan Parties shall not assert, and hereby
waive, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed to such unintended recipients by such Indemnitee
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual
damages resulting from the gross negligence or willful misconduct of such
Indemnitee as determined by a final and nonappealable judgment of a court of
competent jurisdiction.

 

(e)                Payments.  All amounts due under this Section shall be
payable on demand therefor (accompanied by a reasonably detailed invoice
(redacted if necessary to protect any applicable privilege) or other back up
documentation).

 

(f)                 Survival.  The agreements in this Section shall survive the
resignation of any Agent and any L/C Issuer, the assignment of any Commitment or
Loan by any Lender, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations.

 

10.05                 Payments Set Aside.  To the extent that any payment by or
on behalf of the Loan Parties is made to any Credit Party, or any Credit Party
exercises its right of setoff, and such payment or the proceeds of such setoff
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by such Credit Party in its Permitted Discretion) to be repaid to a
trustee, receiver or any other party, in connection with any proceeding under
any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such setoff had not occurred, and (b) each Lender and each L/C Issuer severally
agrees to pay to the Agent upon demand its Applicable Percentage (without
duplication) of any amount so recovered from or repaid by the Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Rate from time to time in
effect.  The obligations of the Lenders and the L/C Issuers under clause (b) of
the preceding sentence shall survive the payment in full of the Obligations and
the termination of this Agreement.

 

10.06                 Successors and Assigns.

 

(a)               Successors and Assigns Generally.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that no
Loan Party may assign or otherwise transfer any of its rights or obligations
hereunder or under any other Loan Document without the prior written Consent of
the

 

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Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance
with the provisions of Section 10.06(b), (ii) by way of participation in
accordance with the provisions of Section 10.06(d), or (iii) by way of a pledge
or assignment of a security interest subject to the restrictions of
Section 10.06(f) (and any other attempted assignment or transfer by any party
hereto shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in subsection (d) of this Section and, to the extent
expressly contemplated hereby, the Related Parties of each of the Credit
Parties) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)               Assignments by Lenders.  Any Lender may at any time assign to
one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment(s) and the
Loans at the time owing to it); provided that any such assignment shall be
subject to the following conditions:

 

(i)                                     Minimum Amounts

 

(A)                               in the case of an assignment of the entire
remaining amount of the assigning Lender’s Commitment and the Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of a
Lender or an Approved Fund with respect to a Lender, no minimum amount need be
assigned; and

 

(B)                               in any case not described in subsection
(b)(i)(A) of this Section, the aggregate amount of the Commitment (which for
this purpose includes Loans outstanding thereunder) or, if the Commitment is not
then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the Agent or, if
“Trade Date” is specified in the Assignment and Assumption, as of the Trade
Date, shall not be less than $10,000,000 unless each of the Agent and, so long
as no Default or Event of Default has occurred and is continuing, the Lead
Borrower otherwise consents (each such consent not to be unreasonably withheld
or delayed); provided, however, that concurrent assignments to members of an
Assignee Group and concurrent assignments from members of an Assignee Group to a
single Eligible Assignee (or to an Eligible Assignee and members of its Assignee
Group) will be treated as a single assignment for purposes of determining
whether such minimum amount has been met;

 

(ii)                                  Proportionate Amounts.  Each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to
the Loans or the Commitment assigned;

 

(iii)                               Required Consents.  No consent shall be
required for any assignment except to the extent required by subsection
(b)(i)(B) of this Section and, in addition, the consent of the Agent (such
consent not to be unreasonably withheld or delayed) shall be required for
assignments in respect of any Commitment if such assignment is to a Person that
is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to
such Lender.

 

(iv)                              Assignment and Assumption.  The parties to
each assignment shall execute and deliver to the Agent an Assignment and
Assumption, together with a processing and recordation fee of $3,500, provided,
however, that the Agent may, in its sole discretion, elect to

 

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waive such processing and recordation fee in the case of any assignment. The
assignee, if it shall not be a Lender, shall deliver to the Agent an
Administrative Questionnaire.

 

(v)                                 Certain Additional Payments.  In connection
with any assignment of rights and obligations of any Defaulting Lender
hereunder, no such assignment shall be effective unless and until, in addition
to the other conditions thereto set forth herein, the parties to the assignment
shall make such additional payments to the Agent in an aggregate amount
sufficient, upon distribution thereof as appropriate (which may be outright
payment, purchases by the assignee of participations or subparticipations, or
other compensating actions, including funding, with the consent of the Lead
Borrower and the Agent, the applicable pro rata share of Committed Loans
previously requested but not funded by the Defaulting Lender, to each of which
the applicable assignee and assignor hereby irrevocably consent), to (x) pay and
satisfy in full all payment liabilities then owed by such Defaulting Lender to
the Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire
(and fund as appropriate) its full pro rata share of all Committed Loans in
accordance with its Applicable Percentage.  Notwithstanding the foregoing, in
the event that any assignment of rights and obligations of any Defaulting Lender
hereunder shall become effective under applicable law without compliance with
the provisions of this paragraph, then the assignee of such interest shall be
deemed to be a Defaulting Lender for all purposes of this Agreement until such
compliance occurs.

 

Subject to acceptance and recording thereof by the Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each
Assignment and Assumption, the Eligible Assignee thereunder shall be a party to
this Agreement and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 3.01, 3.04 and 10.04 with respect to
facts and circumstances occurring prior to the effective date of such
assignment; provided, that except to the extent otherwise expressly agreed by
the affected parties, no assignment by a Defaulting Lender will constitute a
waiver or release of any claim of any party hereunder arising from the Lenders
having been a Defaulting Lender.  Upon request, the Borrowers (at their expense)
shall execute and deliver a Note to the assignee Lender.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this subsection shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 10.06(d).

 

(c)                Register.  The Agent, acting solely for this purpose as an
agent of the Borrowers (and such agency being solely for tax purposes), shall
maintain at the Agent’s Office a copy of each Assignment and Assumption
delivered to it (or the equivalent thereof in electronic form) and a register
for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in
the Register shall be conclusive, absent manifest error, and the Loan Parties,
the Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  The Register shall be
available for inspection by the Lead Borrower and any Lender at any reasonable
time and from time to time upon reasonable prior notice.

 

(d)               Participations.  Any Lender may at any time, without the
consent of, or notice to, the Loan Parties or the Agent, sell participations to
any Person (other than a natural person or (unless an Event of Default has
occurred and is continuing), a Disqualified Institution, or the Loan Parties or

 

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any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in
all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Loan Parties, the
Agent, the Lenders and the L/C Issuers shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any Participant shall agree in writing to
comply with all confidentiality obligations set forth in Section 10.07 as if
such Participant was a Lender hereunder.  Any agreement or instrument pursuant
to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not, without
the consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.01 that affects such
Participant.  Subject to subsection (e) of this Section, the Loan Parties agree
that each Participant shall be entitled to the benefits of Sections 3.01 and
3.04 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section (b).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08 as though it
were a Lender, provided such Participant agrees to be subject to Section 2.12 as
though it were a Lender.  Each Lender, acting for this purpose as an agent of
the Loan Parties, shall maintain at its offices a record of each agreement or
instrument effecting any participation and a register for the recordation of the
names and addresses of its Participants and their rights with respect to
principal amounts and other Obligations from time to time (each a “Participation
Register”); provided that no Lender shall have any obligation to disclose all or
any portion of the Participation Register (including the identity of any
Participant or any information relating to a Participant’s interest in any
commitments, loans, letters of credit or its other obligations under any Loan
Document) to any Person except to the extent that such disclosure is necessary
to establish that such commitment, loan, letter of credit or other obligation is
in registered form under Section 5f.103-1(c) of the United States Treasury
Regulations.  The entries in each Participation Register shall be conclusive
absent manifest error and the Loan Parties, the Administrative Agent, the L/C
Issuers and the Lenders may treat each Person whose name is recorded in a
Participant Register as a Participant for all purposes of this Agreement
(including, for the avoidance of doubt, for purposes of entitlement to benefits
under Section 3.01, Section 3.04 and Section 10.08).  The Participation Register
shall be available for inspection by the Lead Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.

 

(e)                Limitations upon Participant Rights.  A Participant shall not
be entitled to receive any greater payment under Section 3.01 or 3.04 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Lead Borrower’s prior written consent.  A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 3.01 unless the Lead Borrower is notified of
the participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a
Lender.

 

(f)                 Certain Pledges.  Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement (including under its Note, if any) to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank; but excluding any such pledge or grant (unless an Event of Default
has occurred and is continuing) to any Disqualified Institution; provided that
no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

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(g)                Electronic Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Assumption
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

 

(h)               Resignation as L/C Issuer after Assignment.  Notwithstanding
anything to the contrary contained herein, if at any time Salus assigns all of
its Commitment and Committed Loans pursuant to subsection (b) above, Salus may,
upon thirty (30) days’ notice to the Lead Borrower and the Lenders, resign as a
L/C Issuer.  In the event of any such resignation as a L/C Issuer, the Lead
Borrower shall be entitled to appoint from among the Lenders a successor L/C
Issuer hereunder; provided, however, that no failure by the Lead Borrower to
appoint any such successor shall affect the resignation of Salus as a L/C
Issuer.  If Salus resigns as a L/C Issuer, it shall retain all the rights,
powers, privileges and duties of a L/C Issuer hereunder with respect to all
Letters of Credit outstanding as of the effective date of its resignation as a
L/C Issuer and all L/C Obligations with respect thereto.  Upon the appointment
of a successor L/C Issuer, (a) such successor shall succeed to and become vested
with all of the rights, powers, privileges and duties of such retiring L/C
Issuer, and (b) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit, if any, issued by such retiring L/C
Issuer and outstanding at the time of such succession or make other arrangements
satisfactory to Salus to effectively assume the obligations of Salus with
respect to such Letters of Credit.

 

(i)                   Transactions by Salus Entity.  Notwithstanding anything in
this Agreement or any other Loan Document to the contrary, (A) neither Salus nor
any Affiliate thereof (each, a “Salus Entity”) shall be required to comply with
this Section 10.06 in connection with any transaction involving any other Salus
Entity or any of its or their lenders or funding or financing sources, and no
Salus Entity shall have any obligation to disclose any such transaction to any
Person, and (B) there shall be no limitation or restriction on (i) the ability
of any Salus Entity to assign or otherwise transfer its rights and/or
obligations under this Agreement or any other Loan Document, any Commitment, any
Loan, or any other Obligation to any other Salus Entity or any lender or
financing or funding source of a Salus Entity or (ii) any such lender’s or
funding or financing source’s ability to assign or otherwise transfer its rights
and/or obligations under this Agreement or any other Loan Document, any
Commitment, any Loan, or any other Obligation; provided, however, that in each
case (A) Salus shall continue to be liable as a “Lender” under this Agreement
and the other Loan Documents unless such other Person complies with the
provisions of this Agreement to become a “Lender;” and (B) so long as no Event
of Default has occurred and is continuing, neither Salus nor any Affiliate
thereof may assign any or all of its Commitment and Committed Loans to any
Disqualified Institution.

 

10.07                 Treatment of Certain Information; Confidentiality.  Each
of the Credit Parties agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, funding sources, attorneys, advisors and
representatives, in each case, that are not a Disqualified Institution (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by applicable Laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any

 

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other Loan Document or any action or proceeding relating to this Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to any Loan Party and
its obligations, (g) with the consent of the Lead Borrower or (h) to the extent
such Information (x) becomes publicly available other than as a result of a
breach of this Section or (y) becomes available to any Credit Party or any of
their respective Affiliates on a non-confidential basis from a source other than
the Loan Parties.

 

For purposes of this Section, “Information” means all information received from
the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof, provided
that, in the case of information received from any Loan Party or any Subsidiary
after the Closing Date, such information is clearly identified at the time of
delivery as confidential.  Any Person required to maintain the confidentiality
of Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of
material non-public information and (c) it will handle such material non-public
information in accordance with applicable Law, including Federal and state
securities Laws.

 

10.08                 Right of Setoff.  If an Event of Default shall have
occurred and be continuing or if any Lender shall have been served with a
trustee process or similar attachment relating to property of a Loan Party, each
Lender, each L/C Issuer and each of their respective Affiliates is hereby
authorized at any time and from time to time, after obtaining the prior written
consent of the Agent or the Required Lenders, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender, such
L/C Issuer or any such Affiliate to or for the credit or the account of the
Borrowers or any other Loan Party against any and all of the Obligations now or
hereafter existing under this Agreement or any other Loan Document to such
Lender or such L/C Issuer, regardless of the adequacy of the Collateral, and
irrespective of whether or not such Lender or such L/C Issuer shall have made
any demand under this Agreement or any other Loan Document and although such
obligations of the Borrowers or such Loan Party may be contingent or unmatured
or are owed to a branch or office of such Lender or such L/C Issuer different
from the branch or office holding such deposit or obligated on such
indebtedness; provided, that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Agent for further application in accordance with the
provisions of Section 2.14 and, pending such payment, shall be segregated by
such Defaulting Lender from its other funds and deemed held in trust for the
benefit of the Agent and the Lenders, and (y) the Defaulting Lender shall
provide promptly to the Agent a statement describing in reasonable detail the
Obligations owing to such Defaulting Lender as to which it exercised such right
of setoff.  The rights of each Lender, each L/C Issuer and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender, such L/C Issuer or their
respective Affiliates may have.  Each Lender and each L/C Issuer agrees to
notify the Lead Borrower and the Agent promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application.

 

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10.09                 Interest Rate Limitation.  Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable Law (the “Maximum Rate”).  If the Agent or any
Lender shall receive interest in an amount that exceeds the Maximum Rate, the
excess interest shall be applied to the principal of the Loans or, if it exceeds
such unpaid principal, refunded to the Borrowers.  In determining whether the
interest contracted for, charged, or received by the Agent or a Lender exceeds
the Maximum Rate, such Person may, to the extent permitted by applicable Law,
(a) characterize any payment that is not principal as an expense, fee, or
premium rather than interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the contemplated term of the
Obligations hereunder.

 

10.10                 Counterparts; Integration; Effectiveness.  This Agreement
may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agent and when the Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an executed counterpart of a signature
page of this Agreement by telecopy, pdf., or other electronic transmission shall
be as effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11                 Survival.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof.  Such representations and warranties
have been or will be relied upon by the Credit Parties, regardless of any
investigation made by any Credit Party or on their behalf and notwithstanding
that any Credit Party may have had notice or knowledge of any Default or Event
of Default at the time of any Credit Extension, and shall continue in full force
and effect as long as any Loan or any other Obligation hereunder shall remain
unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 
Further, the provisions of Sections 3.01, 3.04, and 10.04 and Article IX shall
survive and remain in full force and effect regardless of the repayment of the
Obligations, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.  In
connection with the termination of this Agreement and the release and
termination of the security interests in the Collateral, the Agent may require
such indemnities and collateral security as it shall reasonably deem necessary
or appropriate to protect the Credit Parties against (x) loss on account of
credits previously applied to the Obligations that may subsequently be reversed
or revoked, (y) any obligations that may thereafter arise with respect to the
Other Liabilities and (z) any Obligations that may thereafter arise under
Section 10.04.

 

10.12                 Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  Without limiting the foregoing provisions of this
Section 10.12, if and to the extent that the enforceability of any provisions in
this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief
Laws, as determined in good faith by the Agent, then such provisions shall be
deemed to be in effect only to the extent not so limited.

 

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10.13                 Replacement of Lenders.  If any Lender requests
compensation under Section 3.04, 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 3.01, or if any Lender is a Defaulting Lender,
then the Borrowers may, at their sole expense and effort, upon notice to such
Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), 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:

 

(a)               the Borrowers shall have paid to the Agent the assignment fee
specified in Section 10.06(b);

 

(b)               such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder and under the other Loan Documents
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 3.04 or payments required to be made pursuant to
Section 3.01, such assignment will result in a reduction in such compensation or
payments thereafter; and

 

(d)               such assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

10.14                 Governing Law; Jurisdiction; Etc.

 

(a)               GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)               SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT
OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. 
EACH OF THE LOAN 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 IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS

 

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AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN
THE COURTS OF ANY JURISDICTION.

 

(c)                WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE
LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)               SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)                ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES
THAT ANY ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK
COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE AGENT MAY ELECT IN ITS SOLE
DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH
RESPECT TO ANY SUCH ACTION.

 

10.15                 Waiver of Jury Trial.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16                 No Advisory or Fiduciary Responsibility.  In connection
with all aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, each Credit Party is and has been acting solely as a principal
and is not the financial advisor, agent or fiduciary, for the Loan Parties or
any of their

 

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respective Affiliates, stockholders, creditors or employees or any other Person;
(iii) none of the Credit Parties has assumed or will assume an advisory, agency
or fiduciary responsibility in favor of the Loan Parties with respect to any of
the transactions contemplated hereby or the process leading thereto, including
with respect to any amendment, waiver or other modification hereof or of any
other Loan Document (irrespective of whether any of the Credit Parties has
advised or is currently advising any Loan Party or any of its Affiliates on
other matters) and none of the Credit Parties has any obligation to any Loan
Party or any of its Affiliates with respect to the transactions contemplated
hereby except those obligations expressly set forth herein and in the other Loan
Documents; (iv) the Credit Parties and their respective Affiliates may be
engaged in a broad range of transactions that involve interests that differ from
those of the Loan Parties and their respective Affiliates, and none of the
Credit Parties has any obligation to disclose any of such interests by virtue of
any advisory, agency or fiduciary relationship; and (v) the Credit Parties have
not provided and will not provide any legal, accounting, regulatory or tax
advice with respect to any of the transactions contemplated hereby (including
any amendment, waiver or other modification hereof or of any other Loan
Document) and each of the Loan Parties has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate.  Each of
the Loan Parties hereby waives and releases, to the fullest extent permitted by
law, any claims that it may have against each of the Credit Parties with respect
to any breach or alleged breach of agency or fiduciary duty.

 

10.17                 USA PATRIOT Act Notice.  Each Lender that is subject to
the Act (as hereinafter defined) and the Agent (for itself and not on behalf of
any Lender) hereby notifies the Loan Parties that pursuant to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that
identifies each Loan Party, which information includes the name and address of
each Loan Party and other information that will allow such Lender or the Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each Loan
Party is in compliance, in all material respects, with the Act.  No part of the
proceeds of the Loans will be used by the Loan Parties, directly or indirectly,
for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended.  The Loan Parties shall, promptly following a
request by the Agent or any Lender, provide all documentation and other
information that the Agent or such Lender requests in order to comply with its
ongoing obligations under applicable “know you customer” and anti-money
laundering rules and regulations, including the Act.

 

10.18                 Foreign Asset Control Regulations.  Neither of the advance
of the Loans nor the use of the proceeds of any thereof will violate the Trading
With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the
Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the
“Foreign Assets Control Regulations”) or any enabling legislation or executive
order relating thereto (which for the avoidance of doubt shall include, but
shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”)
and (b) the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). 
Furthermore, none of the Borrowers or their Affiliates (a) is or will become a
“blocked person” as described in the Executive Order, the Trading With the Enemy
Act or the Foreign Assets Control Regulations or (b) engages or will engage in
any dealings or transactions, or be otherwise associated, with any such “blocked
person” or in any manner violative of any such order.

 

10.19                 Time of the Essence.  Time is of the essence of the Loan
Documents.

 

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10.20                 Press Releases.

 

(a)               Each Credit Party executing this Agreement agrees that neither
it nor its Affiliates will in the future issue any press releases or other
public disclosure using the name of the Agent or its Affiliates or referring to
this Agreement or the other Loan Documents without at least two (2) Business
Days’ prior notice to the Agent and without the prior written consent of the
Agent unless (and only to the extent that) such Credit Party or Affiliate is
required to do so under applicable Law and then, in any event, such Credit Party
or Affiliate will consult with the Agent before issuing such press release or
other public disclosure.

 

(b)               Each Loan Party consents to the publication by the Agent or
any Lender of advertising material, including any “tombstone” or comparable
advertising, on its website or in other marketing materials of Agent, relating
to the financing transactions contemplated by this Agreement using any Loan
Party’s name, product photographs, logo, trademark or other insignia.  The Agent
or such Lender shall provide a draft reasonably in advance of any advertising
material to the Lead Borrower for review and comment prior to the publication
thereof.  The Agent reserves the right to provide to industry trade
organizations and loan syndication and pricing reporting services information
necessary and customary for inclusion in league table measurements. 
Notwithstanding the foregoing or anything in the Loan Documents to the contrary,
the Agent and each Lender consents to the disclosure by the Loan Parties of all
information required to be disclosed in accordance with the applicable
Securities Laws, as reasonably determined in good faith by the Lead Borrower.

 

(c)                Subject to the provisions of Section 10.20(d) of this
Agreement, each Loan Party agrees to maintain the confidentiality of this
Agreement and the other Loan Documents and the terms hereof and thereof, and
agrees that it will not disclose (pursuant to any press release or otherwise)
the name of the Agent or its Affiliates or this Agreement or the other Loan
Documents or the terms hereof or thereof, in each case without the prior written
consent of the Agent, except that such information may be disclosed: (i) to such
Loan Party’s directors, officers, employees, attorneys and advisors (it being
understood that the persons to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential), (ii) to the extent required by applicable Laws or
regulations (including without limitation, as may be required by the rules,
regulations, schedules, and forms of the SEC in connection with any filings made
with the SEC) or by an subpoena or similar legal process, or (iii) to the extent
such information becomes publicly available other than as a result of a breach
of this section.

 

(d)               Notwithstanding any provision contained in this Agreement or
any of the other Loan Documents to the contrary, and without limiting the
provisions of Section 10.20(c)(ii) above, each of the Agent and Lenders hereby
acknowledges and consents to the disclosure of this Agreement (including all of
the schedules and exhibits attached hereto), each Note, the Security Documents
and each Facility Guaranty, in each case, together with any and all amendments,
modifications or supplements thereto, in connection with any filings now or
hereafter required to be made, from time to time, by the Lead Borrower with the
SEC.

 

10.21                 Additional Waivers.

 

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

 

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perfect any security interest in, or the release of, any of the Collateral or
other security held by or on behalf of the Agent or any other Credit Party.

 

(b)               The obligations of each Loan Party shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations after the termination of
the Commitments), including any claim of waiver, release, surrender, alteration
or compromise of any of the Obligations, and shall not be subject to any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of any 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 the Agent or any other Credit 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, any default, failure or delay, willful or otherwise, in the
performance of any of the Obligations, or by any other act or omission that may
or might in any manner or to any extent vary the risk of any Loan Party or that
would otherwise operate as a discharge of any Loan Party as a matter of law or
equity (other than the indefeasible payment in full in cash of all the
Obligations after the termination of the Commitments).

 

(c)                To the fullest extent permitted by applicable Law, each Loan
Party waives any defense based on or arising out of any defense of any other
Loan Party or the unenforceability of the Obligations or any part thereof from
any cause, or the cessation from any cause of the liability of any other Loan
Party, other than the indefeasible payment in full in cash of all the
Obligations and the termination of the Commitments. The Agent and the other
Credit Parties may, at their election, foreclose on any security held by one or
more of them by one or more judicial or non-judicial 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 indefeasibly
paid in full in cash and the Commitments have been terminated.  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)               Each Borrower is obligated to repay the Obligations as joint
and several obligors under this Agreement.  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 indefeasible payment in full in cash of
all the Obligations and the termination of the Commitments. 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 indefeasible payment in
full of the Obligations and no Loan Party 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 (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Agent to be credited against the
payment of the Obligations, whether matured or unmatured, in accordance with the
terms of this Agreement and the other Loan Documents.  Subject to the foregoing,
to the extent that any Borrower shall, under this Agreement as a joint and
several obligor, repay any of the Obligations constituting Loans made to another
Borrower hereunder or other Obligations incurred directly and primarily by any
other Borrower (an “Accommodation Payment”), then the Borrower making such
Accommodation Payment shall be entitled to contribution and indemnification
from, and be reimbursed by, each of the other Borrowers in an amount, for each

 

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of such other Borrowers, equal to a fraction of such Accommodation Payment, the
numerator of which fraction is such other Borrower’s Allocable Amount and the
denominator of which is the sum of the Allocable Amounts of all of the
Borrowers.  As of any date of determination, the “Allocable Amount” of each
Borrower shall be equal to the maximum amount of liability for Accommodation
Payments which could be asserted against such Borrower hereunder without
(a) rendering such Borrower “insolvent” within the meaning of Section 101 (31)
of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act
(“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”),
(b) leaving such Borrower with unreasonably small capital or assets, within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or
Section 5 of the UFCA, or (c) leaving such Borrower unable to pay its debts as
they become due within the meaning of Section 548 of the Bankruptcy Code or
Section 4 of the UFTA, or Section 5 of the UFCA.

 

10.22                 No Strict Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

10.23                 Attachments.  The exhibits, schedules and annexes attached
to this Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.

 

10.24                 Keepwell.  Each Qualified ECP Guarantor hereby jointly and
severally absolutely, unconditionally and irrevocably undertakes to provide such
funds or other support as may be needed from time to time by each other Loan
Party to honor all of its obligations under the Facility Guaranty in respect of
Swap Obligations (provided, however, that each Qualified ECP Guarantor shall
only be liable under this Section 10.24 for the maximum amount of such liability
that can be hereby incurred without rendering its obligations under this
Section 10.24, or otherwise under the Facility Guaranty, voidable under
applicable Law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount). The obligations of each Qualified ECP Guarantor under
this Section shall remain in full force and effect until payment in full of the
Obligations. Each Qualified ECP Guarantor intends that this Section 10.24
constitute, and this Section 10.24 shall be deemed to constitute, a “keepwell,
support, or other agreement” for the benefit of each other Loan Party for all
purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.

 

 

CACHE, INC., as Lead Borrower

 

 

 

 

 

By:

/s/ Anthony DiPippa

 

Name: Anthony DiPippa

 

Title: Chief Financial Officer

 

 

 

CACHE OF LAS VEGAS, INC., as Borrower

 

 

 

 

 

By:

/s/ Anthony DiPippa

 

Name: Anthony DiPippa

 

Title: Chief Financial Officer

 

 

 

CACHE OF VIRGINIA, INC., as Borrower

 

 

 

 

 

By:

/s/ Anthony DiPippa

 

Name: Anthony DiPippa

 

Title: Chief Financial Officer

 

[Signature Page to Credit Agreement]

 

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SALUS CAPITAL PARTNERS, LLC, as
Administrative Agent and as Collateral Agent

 

 

 

 

 

 

 

By:

/s/ Kyle C. Shonak

 

Name: Kyle C. Shonak

 

Title: Executive Vice President

 

 

 

 

 

 

 

By:

/s/ Jonas D.L. McCray

 

Name: Jonas D.L. McCray

 

Title: Senior Vice President

 

[Signature Page to Credit Agreement]

 

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SALUS CLO 2012-1, LTD., as a Lender

 

 

 

By: Salus Capital Partners II, LLC

 

Its: Collateral Manager

 

 

 

 

 

 

 

By:

/s/ Rob Kuppens

 

Rob Kuppens, Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ Kyle C. Shonak

 

Kyle C. Shonak, Authorized Signatory

 

[Signature Page to Credit Agreement]

 

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