Exhibit 10.1

 
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
 
BANK OF AMERICA, N.A.
Agent for
The Lenders Referenced Herein
BANC OF AMERICA SECURITIES LLC
as Sole Lead Arranger and Bookrunner
and
HASTINGS ENTERTAINMENT, INC.
The Borrower
 
 
July 22, 2010

 

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TABLE OF CONTENTS

         
ARTICLE 1 — Definitions
    1  
 
       
ARTICLE 2 — The Revolving Credit:
    27  
 
       
2-1. Establishment of Revolving Credit
    27  
2-2. Advances in Excess of Borrowing Base (OverLoans)
    28  
2-3. Risks of Value of Collateral
    28  
2-4. Commitment to Make Revolving Credit Loans and Support Letters of Credit
    28  
2-5. Revolving Credit Loan Requests
    28  
2-6. Making of Revolving Credit Loans
    30  
2-7. SwingLine Loans
    31  
2-8. The Loan Account
    31  
2-9. The Revolving Credit Notes
    32  
2-10. Payment of The Loan Account
    32  
2-11. Interest on Revolving Credit Loans
    33  
2-12. Revolving Credit Commitment Fee
    34  
2-13. Agent’s Fee
    34  
2-14. Unused Line Fee
    34  
2-15. Reserved
    34  
2-16. Concerning Fees
    34  
2-17. Agent’s and Revolving Credit Lenders’ Discretion
    35  
2-18. Procedures For Issuance of L/C’s
    36  
2-19. Fees For L/C’s
    37  
2-20. Concerning L/C’s
    38  
2-21. Changed Circumstances
    40  
2-22. Lenders’ Commitments
    41  
 
       
ARTICLE 3 — Conditions Precedent:
    42  
 
       
3-1. Corporate Due Diligence
    42  
3-2. Opinion
    42  
3-3. Additional Documents
    42  
3-4. Officers’ Certificates
    43  
3-5. Representations and Warranties
    43  
3-6. Minimum Day One Availability
    43  
3-7. All Fees and Expenses Paid
    43  
3-8. Borrower Not InDefault
    43  
3-9. No Adverse Change
    43  
3-10. Benefit of Conditions Precedent
    43  
 
       
ARTICLE 4 — General Representations, Covenants and Warranties:
    44  
 
       
4-1. Payment and Performance of Liabilities
    44  
4-2. Due Organization. Authorization. No Conflicts
    44  
4-3. Trade Names
    45  
4-4. Infrastructure
    45  
4-5. Locations
    46  
4-6. Title to Assets
    47  
4-7. Indebtedness
    48  
4-8. Insurance
    48  
4-9. Licenses
    49  

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4-10. Leases
    49  
4-11. Requirements of Law
    49  
4-12. Labor Relations
    50  
4-13. Maintain Properties
    50  
4-14. Taxes
    51  
4-15. No Margin Stock
    52  
4-16. ERISA
    52  
4-17. Hazardous Materials
    53  
4-18. Litigation
    53  
4-19. Dividends, Investments, Corporate Action
    53  
4-20. Loans
    54  
4-21. Protection of Assets
    54  
4-22. Line of Business
    55  
4-23. Affiliate Transactions
    55  
4-24. Further Assurances
    55  
4-25. Adequacy of Disclosure
    56  
4-26. No Restrictions on Liabilities
    56  
4-27. Other Covenants
    56  
 
       
ARTICLE 5 — Financial Reporting and Performance Covenants:
    57  
 
       
5-1. Maintain Records
    57  
5-2. Access to Records
    57  
5-3. Prompt Notice to Agent
    58  
5-4. Borrowing Base Certificate
    59  
5-5. Monthly Reports
    59  
5-6. Quarterly Reports
    61  
5-7. Annual Reports
    61  
5-8. Officers’ Certificates
    62  
5-9. Inventories, Appraisals, and Audits
    62  
5-10. Additional Financial Information
    64  
5-11. Financial Performance Covenant
    64  
 
       
ARTICLE 6 — Use of Collateral:
    64  
 
       
6-1. Use of Inventory Collateral
    64  
6-2. Inventory Quality
    65  
6-3. Adjustments and Allowances
    65  
6-4. Validity of Accounts
    65  
6-5. Notification to Account Debtors
    65  
 
       
ARTICLE 7 — Cash Management, Payment of Liabilities:
    65  
 
       
7-1. Depository Accounts
    65  
7-2. Credit Card Receipts
    66  
7-3. The Concentration, Blocked, and Operating Accounts
    66  
7-4. Proceeds and Collections
    67  
7-5. Payment of Liabilities
    67  
7-6. The Operating Account
    68  
 
       
ARTICLE 8 — Grant of Security Interest:
    69  
 
       
8-1. Grant of Security Interest
    69  
8-2. Extent and Duration of Security Interest
    70  

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ARTICLE 9 — Agent As Borrower’s Attorney-In-Fact:
    70  
 
       
9-1. Appointment as Attorney-In-Fact
    70  
9-2. No Obligation to Act
    71  
 
       
ARTICLE 10 — Events of Default:
    71  
 
       
10-1. Failure to Pay the Revolving Credit
    71  
10-2. Failure To Make Other Payments
    71  
10-3. Failure to Perform Covenant or Liability (No Grace Period)
    71  
10-4. Reporting Requirements
    72  
10-5. Failure to Perform Covenant or Liability (Grace Period)
    72  
10-6. Misrepresentation
    72  
10-7. Acceleration of Other Debt. Breach of Lease
    72  
10-8. Default Under Other Agreements
    72  
10-9. Uninsured Casualty Loss
    73  
10-10. Attachment. Judgment. Restraint of Business
    73  
10-11. Business Failure
    73  
10-12. Bankruptcy
    73  
10-13. Default by Guarantor
    74  
10-14. Indictment — Forfeiture
    74  
10-15. Termination of Guaranty
    74  
10-16. Challenge to Loan Documents
    74  
10-17. Change in Control
    74  
 
       
ARTICLE 11 — Rights and Remedies Upon Default:
    75  
 
       
11-1. Acceleration
    75  
11-2. Rights of Enforcement
    75  
11-3. Sale of Collateral
    75  
11-4. Occupation of Business Location
    76  
11-5. Grant of Nonexclusive License
    77  
11-6. Assembly of Collateral
    77  
11-7. Rights and Remedies
    77  
 
       
ARTICLE 12 — Revolving Credit Fundings and Distributions:
    77  
 
       
12-1. Revolving Credit Funding Procedures
    77  
12-2. SwingLine Loans
    78  
12-3. Agent’s Covering of Fundings
    78  
12-4. Ordinary Course Distributions
    80  
 
       
ARTICLE 13 — Acceleration and Liquidation:
    81  
 
       
13-1. Acceleration Notices
    81  
13-2. Acceleration
    82  
13-3. Initiation of Liquidation
    82  
13-4. Actions At and Following Initiation of Liquidation
    82  
13-5. Agent’s Conduct of Liquidation
    82  
13-6. Distribution of Liquidation Proceeds
    83  
13-7. Relative Priorities To Proceeds of Liquidation
    83  
 
       
ARTICLE 14 -The Agent:
    84  
 
       
14-1. Appointment of The Agent
    84  
14-2. Responsibilities of Agent
    84  
14-3. Concerning Distributions By the Agent
    85  

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14-4. Dispute Resolution
    86  
14-5. Distributions of Notices and of Documents
    86  
14-6. Confidential Information
    87  
14-7. Reliance by Agent
    87  
14-8. Non-Reliance on Agent and Other Revolving Credit Lenders
    87  
14-9. Indemnification
    88  
14-10. Resignation of Agent
    88  
 
       
ARTICLE 15 — Action By Agents — Consents — Amendments — Waivers:
    89  
 
       
15-1. Administration of Credit Facilities
    89  
15-2. Actions Requiring or On Direction of Majority Lenders
    90  
15-3. Actions Requiring or On Direction of SuperMajority Lenders
    90  
15-4. Actions Requiring Certain Consent
    90  
15-5. Actions Requiring or Directed By Unanimous Consent
    91  
15-6. Actions Requiring SwingLine Lender Consent
    92  
15-7. Actions Requiring Agent’s Consent
    92  
15-8. Miscellaneous Actions
    92  
15-9. Actions Requiring Borrower’s Consent
    93  
15-10. NonConsenting Revolving Credit Lender
    93  
 
       
ARTICLE 16 — Assignments By Revolving Credit Lenders:
    94  
 
       
16-1. Assignments and Assumptions
    94  
16-2. Assignment Procedures
    95  
16-3. Effect of Assignment
    96  
 
       
ARTICLE 17 — Notices:
    96  
 
       
17-1. Notice Addresses
    96  
17-2. Notice Given
    97  
 
       
ARTICLE 18 — Term:
    98  
 
       
18-1. Termination of Revolving Credit
    98  
18-2. Actions On Termination
    98  
 
       
ARTICLE 19 — General:
    99  
 
       
19-1. Protection of Collateral
    99  
19-2. Publicity
    99  
19-3. Successors and Assigns
    99  
19-4. Severability
    100  
19-5. Amendments
    100  
19-6. Application of Proceeds
    101  
19-7. Increased Costs
    101  
19-8. Costs and Expenses of the Agent
    102  
19-9. Copies and Facsimiles
    102  
19-10. Massachusetts Law
    103  
19-11. Consent to Jurisdiction
    103  
19-12. Indemnification
    103  
19-13. Rules of Construction
    104  
19-14. Intent
    105  
19-15. Participations
    105  
19-16. Right of Set-Off
    106  
19-17. Pledges To Federal Reserve Banks
    106  

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19-18. Maximum Interest Rate
    106  
19-19. Waivers
    107  
19-20. ENTIRE AGREEMENT
    108  
19-21. Foreign Asset Control Regulations
    108  
19-22. USA PATRIOT Act Notice
    109  
19-23. No Advisory or Fiduciary Responsibility
    109  
19-24. Original Credit Agreement Amended and Restated
    110  

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EXHIBITS

         
2-7(c)
  :   SwingLine Note
2-9
  :   Revolving Credit Note
2-22
  :   Revolving Credit Lenders’ Commitments
4-2
  :   Subsidiaries
4-3
  :   Trade Names
4-5
  :   Locations, Leases, and Landlords
4-6
  :   Encumbrances
4-7
  :   Indebtedness
4-8
  :   Insurance Policies
4-10
  :   Capital Leases
4-14
  :   Taxes
4-16(a)
  :   ERISA
4-18
  :   Litigation
5-4
  :   Borrowing Base Certificate
7-1
  :   DDAs
7-2
  :   Credit Card Arrangements
16-2
  :   Assignment / Assumption

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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
July 22, 2010
     THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is
made between
     Bank of America, N.A. (in such capacity, herein the “Agent”), a national
banking association with offices at 100 Federal Street, Boston, Massachusetts
02110, as agent for the ratable benefit of the “Revolving Credit Lenders”, who
are, at present, those financial institutions identified on the signature pages
of this Agreement and who in the future are those Persons (if any) who become
“Revolving Credit Lenders” in accordance with the provisions of Section 2-22,
below,
     and
     Hastings Entertainment, Inc. ( the “ Borrower”), a Texas corporation with
its principal executive offices at 3601 Plains Boulevard, Amarillo, Texas 79102
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
     WHEREAS, the Borrower has entered into a Loan and Security Agreement, dated
as of August 29, 2000 (as amended and in effect, the “Original Credit
Agreement”), among the Borrower, the “Revolving Credit Lenders” as defined
therein, and Bank of America, N.A., successor to Fleet Retail Finance Inc., as
Agent for the Revolving Credit Lenders; and
     WHEREAS, in accordance with Article 15 of the Original Credit Agreement,
the Borrower, the Revolving Credit Lender, and the Agent desire to amend and
restate the Original Credit Agreement as provided herein.
     NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the undersigned hereby agree that the
Original Credit Agreement shall be amended and restated in its entirety to read
as follows:
ARTICLE 1 — Definitions
     As used herein, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
“Acceleration”: The making of demand or declaration that any indebtedness, not
otherwise due and payable, is due and payable. Derivations of the word
“Acceleration” (such as “Accelerate”) are used with like meaning in this
Agreement.

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“Acceleration Notice”: Written notice as follows:
     (a) From the Agent to the Revolving Credit Lenders, as provided in Section
13-1(a).
     (b) From the SuperMajority Lenders to the Agent, as provided in Section
13-1(b).
“Account Debtor”: Has the meaning given that term in the UCC.
“Accounts” and “Accounts Receivable” include, without limitation, “accounts” as
defined in the UCC, and also all: accounts, accounts receivable, receivables,
and rights to payment (whether or not earned by performance) for: property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed of;
services rendered or to be rendered; a policy of insurance issued or to be
issued; a secondary obligation incurred or to be incurred; energy provided or to
be provided; for the use or hire of a vessel; arising out of the use of a credit
or charge card or information contained on or used with that card; winnings in a
lottery or other game of chance; and also all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right of stoppage
in transit; all reclaimed, returned, rejected or repossessed Inventory (if any)
the sale of which gave rise to any Account.
“ACH”: Automated clearing house.
“Affiliate”: The following:
     (a) With respect to any two Persons, a relationship in which (i) one holds,
directly or indirectly, not less than twenty five percent (25%) of the Voting
Stock, beneficial interests, partnership interests, or other equity interests of
the other; or (ii) one has, directly or indirectly, the right, under ordinary
circumstances, to vote for the election of a majority of the directors (or other
body or Person who has those powers customarily vested in a board of directors
of a corporation); or (iii) not less than twenty five percent (25%) of their
respective ownership is directly or indirectly held by the same third Person.
     (b) Any Person which has its tax returns or financial statements
consolidated with the Borrower’s; or is a member of the same controlled group of
corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the
Internal Revenue Code of 1986, as amended from time to time) of which the
Borrower is a member.
“Agent”: Is referred to in the Preamble.
“Agent’s Cover”: Is defined in Section 12-3(c)(i).
“Agent’s Fee”: Is defined in Section 2-13.

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“Agreement”: Is referred to in the Preamble.
“Agent’s Rights and Remedies”: Is defined in Section 11-7.
“Applicable Fee Rate”: For any period of calculation, (a) if the average daily
sum of the unpaid principal balance of the Loan Account and the undrawn Stated
Amount of L/C’s outstanding for the preceding three month period is greater than
or equal to $50,000,000, 0.30% per annum, or (ii) if the average daily sum of
the unpaid principal balance of the Loan Account and the undrawn Stated Amount
of L/C’s outstanding for the preceding three month period is less than
$50,000,000, 0.375% per annum.
“Applicable Law”: As to any Person: (i) All statutes, rules, regulations,
orders, or other requirements having the force of law and (ii) all court orders
and injunctions, arbitrator’s decisions, and/or similar rulings, in each
instance ((i) and (ii)) of or by any federal, state, municipal, and other
governmental authority, or court, tribunal, panel, or other body which has or
claims jurisdiction over such Person, or any property of such Person.
“Appraised Inventory Liquidation Value”: The net recovery (stated as a
percentage of the Cost of Borrower’s Inventory), as reflected on the then most
recent appraisal (which shall be undertaken by an independent appraiser engaged
by the Agent) of the Borrower’s Inventory, as recoverable on the Borrower’s
Inventory in the event of an in-store liquidation of that Inventory.
“Assignee Revolving Credit Lender”: Is defined in Section 16-1(a).
“Assigning Revolving Credit Lender”: Is defined in Section 16-1(a).
“Assignment and Acceptance”: Is defined in Section 16-2.
“Availability”: The lesser of (a) or (b), where:
     (a) is the result of

  (i)   The Revolving Credit Ceiling         Minus     (ii)   The aggregate
unpaid balance of the Loan Account         Minus     (iii)   The aggregate
undrawn Stated Amount of all then outstanding         L/C’s.

     (b) is the result of

  (i)   The Borrowing Base         Minus     (ii)   The aggregate unpaid balance
of the Loan Account

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      Minus     (iv)   The aggregate undrawn Stated Amount of all then
outstanding         L/C’s.

“Availability Reserves”: Such reserves as the Agent from time to time reasonably
determines in the Agent’s reasonable discretion as being appropriate to avoid
the Borrower’s breach of any financial covenant included herein or to reflect
the impediments to the Agent’s ability to realize upon the Collateral.
“Bank of America” means Bank of America, N.A. and its successors.
“Banker’s Acceptance” means a time draft or bill of exchange or other deferred
payment obligation relating to a documentary L/C which has been accepted by the
Issuer.
“Bank Products” means any services or facilities provided to the Borrower by the
Agent, any Lender, or any of their respective Affiliates, including, without
limitation, on account of Swap Contracts, but excluding Cash Management
Services.
“Bankruptcy Code”: Title 11, U.S.C., as amended from time to time.
“Base”: For any day a fluctuating rate per annum equal to the highest of (a) the
rate of interest in effect for such day as publicly announced from time to time
by Bank of America as its “prime rate”; (b) the Federal Funds Rate for such day,
plus 0.50%; and (c) the Libor Offer Rate for a 30 day interest period as
determined on such day, plus 1.0%. The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in Bank of America’ s prime rate, the Federal
Funds Rate or the Libor Offer Rate, respectively, shall take effect at the
opening of business on the day specified in the public announcement of such
change.
“Base Margin”: Initially, the rate set forth in Level I below. Commencing
November 1, 2010, and on the first day of each Fiscal quarter thereafter, the
Base Margin shall be the following percentages based upon the following
criteria:

          Level   Average Availability   Base Margin
I
  Greater than $55,000,000   1.00%  
II
  Greater than $40,000,000 and less than or equal to $55,000,000   1.25%
III
  Greater than $25,000,000 and less than or equal to $40,000,000   1.50%
IV
  Less than or equal to $25,000,000   1.75%

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On the first day of each Fiscal quarter, the Base Margin shall be adjusted based
upon the Borrower’s aggregate daily average Availability for the immediately
preceding Fiscal quarter divided by the total number of days in such immediately
preceding Fiscal quarter. provided, however, upon the occurrence of an Event of
Default, the Base Margin shall be immediately increased to the percentage set
forth in Level IV above (even if the average Availability requirements for
another Level have been met) and interest shall be determined in the manner set
forth in Section 2-11(f).
“Base Margin Loan”: Any Revolving Credit Loan which bears interest at the Base
Margin Rate.
“Base Margin Rate”: That rate per annum which is the aggregate of Base plus the
Base Margin.
“Blocked Account”: Is defined in Section 7-3(a)(ii).
“Blocked Account Agreement”: An Agreement, in form reasonably satisfactory to
the Agent, which Agreement recognizes the Agent’s Collateral Interest in the
contents of the DDA which is the subject of such Agreement and agrees that such
contents shall be transferred only to the Concentration Account or as otherwise
instructed by the Agent.
“Borrower”: Is defined in the Preamble.
“Borrowing Base”: At any time of calculation, the sum of (a) 85% of Eligible
Credit Card Receivables plus (b) (i) 85% multiplied by (ii) the Appraised
Inventory Liquidation Value multiplied by (iii) the Cost of the Borrower’s
Eligible Inventory (net of Inventory Reserves), less (c) Availability Reserves.
“Borrowing Base Certificate”: Is defined in Section 5-4.
“Business Day”: Any day other than (a) a Saturday or Sunday; (b) any day on
which banks in Boston, Massachusetts or in Amarillo, Texas generally are not
open to the general public for the purpose of conducting commercial banking
business; or (c) a day on which the principal office of the Agent is not open to
the general public to conduct business.
“Business Plan”: The Borrower’s business plan previously delivered to the Agent
for Fiscal year 2010, and any revision, amendment, or update of such business
plan.
“Capital Expenditures”: The expenditure of funds or the incurrence of
liabilities which is required to be capitalized in accordance with GAAP.
“Capital Lease”: Any lease which is required to be capitalized in accordance
with GAAP.
“Cash Dominion Event”: Either (i) the occurrence and continuance of any Event of
Default, or (ii) the failure of the Borrowers to maintain Availability equal to
at least twenty percent

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(20%) of the Borrowing Base at any time. For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing (i) so long as
such Event of Default has not been waived, and/or (ii) if the Cash Dominion
Event arises as a result of the Borrowers’ failure to achieve Availability as
required hereunder, until Availability has exceeded twenty percent (20%) of the
Borrowing Base for sixty (60) consecutive calendar days, in which case a Cash
Dominion Event shall no longer be deemed to be continuing for purposes of this
Agreement; provided that a Cash Dominion Event shall be deemed continuing (even
if an Event of Default is no longer continuing and/or Availability exceeds the
required amount for sixty (60) consecutive calendar days) at all times for the
remainder of such Fiscal year after a Cash Dominion Event has already occurred
and been discontinued once in the same Fiscal Year. The termination of a Cash
Dominion Event as provided herein shall in no way limit, waive or delay the
occurrence of a subsequent Cash Dominion Event in the event that the conditions
set forth in this definition again arise.
“Cash Management Services” means any one or more of the following types or
services or facilities provided to the Borrower by the Agent or any Lender or
any of their respective Affiliates: (a) ACH transactions, (b) cash management
services, including, without limitation, controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services,
(c) foreign exchange facilities, (d) credit card processing services, and
(e) purchase, credit, or debit cards or similar products.
“Change in Control”: The occurrence of any of the following:
     (a) The acquisition, by any group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended) or by any Person, other than the
Marmaduke Family or any member thereof, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission) of (i) 25% or
more of the issued and outstanding capital stock of the Borrower having the
right, under ordinary circumstances, to vote for the election of directors of
the Borrower, and (ii) issued and outstanding capital stock of the Borrower
having the right, under ordinary circumstances, to vote for the election of
directors of the Borrower in an amount greater than the Marmaduke Family.
     (b) More than half of the persons who were directors of the Borrower on the
first day of any period consisting of twelve (12) consecutive calendar months
(the first of which twelve (12) month periods commencing with the first day of
the month during

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which this Agreement was executed), cease, for any reason other than death,
disability, or retirement, to be directors of the Borrower.
“Chattel Paper”: Has the meaning given that term in the UCC.
“Collateral”: Is defined in Section 8-1.
“Collateral Interest”: Any interest in property to secure an obligation,
including, without limitation, a security interest, mortgage, and deed of trust.
“Commercial Tort Claim”: Has the meaning given that term in the UCC.
“Concentration Account”: Is defined in Section 7-3(a)(i).
“Consent”: Actual consent given by the Revolving Credit Lender from whom such
consent is sought; or the passage of seven (7) Business Days from receipt of
written notice to a Revolving Credit Lender from the Agent of a proposed course
of action to be followed by the Agent without such Revolving Credit Lender’s
giving the Agent written notice of that Revolving Credit Lender’s objection to
such course of action, provided that the Agent may rely on such passage of time
as consent by a Revolving Credit Lender only if such written notice states that
consent will be deemed effective if no objection is received within such time
period.
“Consolidated”: When used to modify a financial term, test, statement, or report
of a Person, the application or preparation of such term, test, statement or
report (as applicable) based upon the consolidation, in accordance with GAAP, of
the financial condition or operating results of such Person and its
Subsidiaries.
“Consolidated EBITDA”: At any date of determination, an amount equal to
Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated
basis for the most recently completed twelve Fiscal months, plus (a) the
following to the extent deducted in calculating such Consolidated Net Income:
(i) Consolidated Interest Charges, (ii) the provision for federal, state, local
and foreign income Taxes, (iii) depreciation and amortization expense,
(iv) stock-based compensation expenses and store asset impairment expenses which
do not represent a cash item in such period or any future period, and (v) other
non-recurring expenses and extraordinary losses reducing such Consolidated Net
Income which do not represent a cash item in such period or any future period,
minus (b) the following to the extent included in calculating such Consolidated
Net Income: (i) all extraordinary gains increasing such Consolidated Net Income
which do not represent a cash item in such period or any future period, and
(ii) all non-cash items increasing Consolidated Net Income, all as determined on
a Consolidated basis in accordance with GAAP.

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“Consolidated Fixed Charge Coverage Ratio”: At any date of determination, the
ratio of (a) (i) Consolidated EBITDA for such period minus (ii) Capital
Expenditures made during such period, minus (iii) the aggregate amount of
federal, state, local and foreign income taxes paid in cash during such period
to (b) the sum of (1) Debt Service Charges, plus (2) any ownership, redemption,
retirement, purchase, repurchase, or acquisition of any of the Borrower’s
capital stock made during such period, in each case, of or by Borrower and its
Subsidiaries for the most recently completed twelve Fiscal months, all as
determined on a Consolidated basis in accordance with GAAP.
“Consolidated Interest Charges” At any time of calculation, for the most
recently completed twelve (12) Fiscal months, the sum of (a) all interest,
premium payments, debt discount, fees, charges and related expenses in
connection with borrowed money (including capitalized interest) or in connection
with the deferred purchase price of assets, in each case to the extent treated
as interest in accordance with GAAP, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers’ acceptance financing and net costs under Swap Contracts,
and (b) the portion of rent expense with respect to such period under Capital
Leases that is treated as interest in accordance with GAAP, in each case of or
by the Borrower and its Subsidiaries, all as determined on a Consolidated basis
in accordance with GAAP.
“Consolidated Net Income” As of any date of determination, the net income of
Borrower and its Subsidiaries for the most recently completed twelve (12) Fiscal
months, all as determined on a Consolidated basis in accordance with GAAP.
“Contract Rate”: Is defined in Section 19-18(b).
“Cost”: Cost of purchases, based upon the Borrower’s accounting practices, known
to the Agent, which practices are in effect on the date on which this Agreement
was executed as such calculated cost is determined from: invoices received by
the Borrower; the Borrower’s purchase journal; or the Borrower’s By-Department
monthly report generated by the Borrower’s inventory control system. (“Cost”
does not include inventory capitalization costs or other non-purchase price
charges (such as freight) used in the Borrower’s calculation of cost of goods
sold).
“Costs of Collection”: Includes, without limitation, all attorneys’ reasonable
fees and reasonable out-of-pocket expenses incurred by the Agent’s attorneys,
and all reasonable out-of-pocket costs incurred by the Agent in the
administration of the Liabilities and/or the Loan Documents, including, without
limitation, reasonable costs and expenses associated with travel on behalf of
the Agent, where such costs and expenses are directly or indirectly

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related to or in respect of the Agent’s: administration and management of the
Liabilities; negotiation, documentation, and amendment of any Loan Document; or
efforts to preserve, protect, collect, or enforce the Collateral, the
Liabilities, and/or the Agent’s Rights and Remedies and/or any of the rights and
remedies of the Agent against or in respect of any guarantor or other person
liable in respect of the Liabilities (whether or not suit is instituted in
connection with such efforts). “Costs of Collection shall also include the
reasonable fees and expenses of Lenders’ Special Counsel. The Costs of
Collection are Liabilities, and at the Agent’s option may bear interest at the
then effective Base Margin Rate.
“Credit Card Receivables” Each Account, together with all income, payments and
proceeds thereof, owed by a major credit or debit card issuer (including, but
not limited to, Visa, MasterCard, American Express, and Discover and such other
issuers approved by the Agent) to the Borrower resulting from charges by a
customer of the Borrower on credit or debit cards issued by such issuer in
connection with the sale of goods by the Borrower, or services performed by the
Borrower, in each case in the ordinary course of its business.
“DDA”: Any checking or other demand daily depository account maintained by the
Borrower.
“Debt Service Charges”: At any time of calculation, for the most recently
completed twelve (12) Fiscal months, the sum of (a) Consolidated Interest
Charges paid or required to be paid for such period, plus (b) principal payments
made or required to be made on account of Indebtedness (excluding the
Liabilities but including, without limitation, obligations with respect to
Capital Leases) for such period, in each case determined on a Consolidated basis
in accordance with GAAP.
“Delinquent Revolving Credit Lender”: Is defined in Section 12-3(c).
“Deposit Account”: Has the meaning given that term in the UCC.
“Documents”: Has the meaning given that term in the UCC.
“Documents of Title”: Has the meaning given that term in the UCC.
“Eligible Assignee”: A bank, insurance company, or company engaged in the
business of making commercial loans having a combined capital and surplus in
excess of $300 Million or any Affiliate of any Revolving Credit Lender, or any
Person to whom a Revolving Credit Lender assigns its rights and obligations
under this Agreement as part of a programmed assignment and transfer of such
Revolving Credit Lender’s rights in and to a material portion of such Revolving
Credit Lender’s portfolio of asset based

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credit facilities, all of which assignees must be acceptable to the Borrower
pursuant to Section 2-22(e).
“Eligible Credit Card Receivables” means at the time of any determination
thereof, each Credit Card Receivable that satisfies the following criteria at
the time of creation and continues to meet the same at the time of such
determination: such Credit Card Receivable (i) has been earned by performance
and represents the bona fide amounts due to the Borrower from a credit card
payment processor and/or credit card issuer, and in each case originated in the
ordinary course of business of the Borrower, and (ii) in each case is acceptable
to the Agent in its discretion, and is not ineligible for inclusion in the
calculation of the Borrowing Base pursuant to any of clauses (a) through
(i) below. Without limiting the foregoing, to qualify as an Eligible Credit Card
Receivable, an Account shall indicate no Person other than the Borrower as payee
or remittance party. In determining the amount to be so included, the face
amount of an Account shall be reduced by, without duplication, to the extent not
reflected in such face amount, (i) the amount of all accrued and actual
discounts, claims, credits or credits pending, promotional program allowances,
price adjustments, finance charges or other allowances (including any amount
that the Borrower may be obligated to rebate to a customer, a credit card
payment processor, or credit card issuer pursuant to the terms of any agreement
or understanding (written or oral)) and (ii) the aggregate amount of all cash
received in respect of such Account but not yet applied by the Borrower to
reduce the amount of such Credit Card Receivable. Except as otherwise agreed by
the Administrative Agent, any Credit Card Receivable included within any of the
following categories shall not constitute an Eligible Credit Card Receivable:

  (a)   Credit Card Receivables that have been outstanding for more than five
(5) Business Days from the date of sale;     (b)   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 the Borrower does not have
good, valid and marketable title thereto, free and clear of any Encumbrance
(other than Encumbrances granted to the Agent);     (c)   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);

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  (d)   Credit Card Receivables as to which the processor has the right under
certain circumstances to require the Borrower to repurchase the Accounts from
such credit card processor;     (e)   Credit Card Receivables due from an issuer
or payment processor of the applicable credit card which is the subject of any
bankruptcy or insolvency proceedings;     (f)   Credit Card Receivables which
are not a valid, legally enforceable obligation of the applicable issuer with
respect thereto;     (g)   Credit Card Receivables which do not conform to all
representations, warranties or other provisions in the Loan Documents relating
to Credit Card Receivables;     (h)   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     (i)   Credit Card
Receivables which the Agent determines in its 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.

“Eligible Inventory”: will be calculated in a manner consistent with current
tracking practices, based on the Borrower’s By-Department monthly report
generated by the Borrower’s inventory control system, which report reflects the
functional equivalent of a stock ledger inventory at cost, and shall consist of
the following: Such of the Borrower’s Inventory as to which the Agent has a
perfected security interest which is prior and superior to all security
interests, claims, and all Encumbrances other than Permitted Encumbrances.
(“Eligible Inventory” includes traditional rental videos and DVD’s and similar
items (net of accumulated depreciation) but does not include, nor, to the extent
such items may have been included at any time in the Agent’s discretion, is the
Agent under any obligation to continue to include: any revenue sharing video
tapes or DVD’s or similar items; non-merchandise inventory (such as labels,
bags, and packaging materials); damaged goods; packaways; consigned inventory;
inventory in-transit to the Borrower from a foreign location prior to such
inventory arriving at a domestic distribution center of the Borrower; and other
similar categories of Goods).
“Employee Benefit Plan”: As defined in ERISA.
“Encumbrance”: Each of the following:
     (a) A Collateral Interest or agreement to create or grant a Collateral
Interest; the interest of a lessor under a Capital Lease; conditional sale or
other title retention agreement; sale of accounts receivable or chattel paper;
or other arrangement pursuant to

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which any Person is entitled to any preference or priority with respect to the
property or assets of another Person or the income or profits of such other
Person; each of the foregoing whether consensual or non-consensual and whether
arising by way of agreement, operation of law, legal process or otherwise.
     (b) The filing of any financing statement under the UCC or comparable law
of any jurisdiction.
“End Date”: The date upon which both (a) all Liabilities have been paid in full
and (b) all obligations of any Revolving Credit Lender to make loans and
advances and to provide other financial accommodations to the Borrower hereunder
shall have been irrevocably terminated.
“Environmental Laws”: All of the following:
     (a) Applicable Law which regulates or relates to, or imposes any standard
of conduct or liability on account of or in respect to environmental protection
matters, including, without limitation, Hazardous Materials, as are now or
hereafter in effect.
     (b) The common law relating to damage to Persons or property from Hazardous
Materials.
“Equipment”: Includes, without limitation, “equipment” as defined in the UCC,
and also all furniture, store fixtures, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, and other goods, property, and
assets which are used and/or were purchased for use in the operation or
furtherance of the Borrower’s business, and any and all accessions or additions
thereto, and substitutions therefor, but does not include motor vehicles.
“ERISA”: The Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”: Any Person which is under common control with the Borrower
within the meaning of Section 4001 of ERISA or is part of a group which includes
the Borrower and which would be treated as a single employer under Section 414
of the Internal Revenue Code of 1986, as amended.
“Events of Default”: Is defined in Article 10. An “Event of Default” shall be
deemed to have occurred and to be continuing unless and until that Event of
Default has been duly waived by the requisite Lenders or by the Agent as
applicable (following which, and in the event of such waiver, that Event of
Default shall be deemed not to have occurred).
“Exempt Assets”: Revenue sharing videos, motor vehicles, and Leasehold
Interests.

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“Exempt DDA”: Depository Accounts maintained by the Borrower, the only contents
of which may be transfers from the Operating Account or the Payroll Account and
actually used solely (i) for petty cash purposes; (ii) for payroll; or
(iii) employee benefits.
“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 Bank of
America on such day on such transactions as determined by the Agent.
“Fee Letter”: That letter dated July 22, 2010 and styled “Revolving Credit
Facility Fee Letter” between the Borrower and the Agent, as such letter may from
time to time be amended.
“Fiscal”: When followed by “month”, “quarter” or “year”, the relevant fiscal
period based on the Borrower’s fiscal year and Borrower’s practices. (e.g. the
Borrower’s fiscal year ends in January 2010, reference to that year would be to
the Borrower’s “Fiscal 2009”).
“Fixtures”: Has the meaning given that term in the UCC.
“GAAP”: Generally accepted accounting principles in the United States which are
consistent with those promulgated or adopted by the Financial Accounting
Standards Board and its predecessors (or successors) in effect and applicable to
that accounting period in respect of which reference to GAAP is being made,
provided, however, in the event of a Material Accounting Change, then unless
otherwise specifically agreed to by the Agent, (a) the Borrower’s compliance
with the financial performance covenants imposed pursuant to Section 5-11 shall
be determined as if such Material Accounting Change had not taken place and
(b) the Borrower shall include, with its monthly, quarterly, and annual
financial statements a schedule, certified by the Borrower’s chief financial
officer, on which the effect of such Material Accounting Change on that
statement shall be described.
“General Intangibles”: Includes, without limitation, “general intangibles” as
defined in the UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Borrower; credit memoranda in favor of the
Borrower; warranty claims; tax refunds and abatements; insurance refunds and
premium rebates; all means and vehicles of

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investment or hedging, including, without limitation, options, warrants, and
futures contracts; records; customer lists; telephone numbers; goodwill; causes
of action; judgments; payments under any settlement or other agreement; literary
rights; rights to performance; royalties; license and/or franchise fees; rights
of admission; licenses; franchises; license agreements, including all rights of
the Borrower to enforce same; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority; patents,
patent applications, patents pending, and other intellectual property; internet
addresses and domain names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans, reports, and charts;
catalogs; manuals; technical data; computer software programs (including the
source and object codes therefor), computer records, computer software, rights
of access to computer record service bureaus, service bureau computer contracts,
and computer data; tapes, disks, semi-conductors chips and printouts; trade
secrets rights, copyrights, mask work rights and interests, and derivative works
and interests; user, technical reference, and other manuals and materials; trade
names, trademarks, service marks, and all goodwill relating thereto;
applications for registration of the foregoing; and all other general intangible
property of the Borrower in the nature of intellectual property; proposals; cost
estimates, and reproductions on paper, or otherwise, of any and all concepts or
ideas, and any matter related to, or connected with, the design, development,
manufacture, sale, marketing, leasing, or use of any or all property produced,
sold, or leased, or credit extended or services performed, by the Borrower,
whether intended for an individual customer or the general business of the
Borrower, or used or useful in connection with research by the Borrower.
“Goods”: Has the meaning given that term in the UCC, and also includes computer
programs embedded in goods and any supporting information provided in connection
with a transaction relating to the program if (i) the program is associated with
the goods in such manner that it customarily is considered part of the goods or
(ii) by becoming the owner of the goods, a Person acquires a right to use the
program in connection with the goods.
“Gross Margin”: With respect to the subject accounting period for which being
calculated, the decimal equivalent of the following (determined in accordance
with the cost method of accounting):
Sales (Minus) Cost of Goods Sold
Sales

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“Hazardous Materials”: Any substance which is defined or regulated as a
hazardous material or oil in or under any Environmental Law.
“Increased Reporting Event”: Either (i) the occurrence and continuance of any
Event of Default, or (ii) the failure of the Borrower to maintain Availability
at least equal to twenty percent (20%) of the Borrowing Base. For purposes of
this Agreement, the occurrence of an Increased Reporting Event shall be deemed
continuing (i) so long as such Event of Default has not been waived, and/or
(ii) if the Increased Reporting Event arises as a result of the Borrowers ’
failure to achieve Availability as required hereunder, until Availability has
exceeded twenty percent (20%) of the Borrowing Base for sixty (60) consecutive
calendar days, in which case an Increased Reporting Event shall no longer be
deemed to be continuing for purposes of this Agreement. The termination of an
Increased Reporting Event as provided herein shall in no way limit, waive or
delay the occurrence of a subsequent Increased Reporting Event in the event that
the conditions set forth in this definition again arise.
“Indebtedness”: All indebtedness and obligations of or assumed by any Person on
account of or in respect to any of the following:
     (a) In respect of money borrowed (including any indebtedness which is
non-recourse to the credit of such Person but which is secured by an Encumbrance
on any asset of such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
     (b) In connection with any letter of credit or acceptance transaction
(including, without limitation, the face amount of all letters of credit and
acceptances issued for the account of such Person or reimbursement on account of
which such Person would be obligated).
     (c) In connection with the sale or discount of accounts receivable or
chattel paper of such Person.
     (d) As lessee under Capital Leases.
     (e) In connection with any sale and leaseback transaction.
“Indebtedness” also includes:
     (x) Indebtedness of others secured by an Encumbrance on any asset of such
Person, whether or not such Indebtedness is assumed by such Person.

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     (y) Any guaranty, endorsement, suretyship or other undertaking pursuant to
which that Person may be liable on account of any obligation of any third party.
     (z) The Indebtedness of a partnership or joint venture for which such
Person is liable as a general partner or joint venturer.
“InDefault”: Any occurrence, circumstance, or state of facts with respect to the
Borrower which (a) is an Event of Default; or (b) would become an Event of
Default if any requisite notice were given and/or any requisite period of time
were to run and such occurrence, circumstance, or state of facts were not
absolutely cured within any applicable grace period.
“Indemnified Person”: Is defined in Section 19-12.
“Instruments”: Has the meaning given that term in the UCC.
“Interest Payment Date”: With reference to:
     Each Libor Loan: The last day of the Interest Period relating thereto (and
on the last day of month three for any such Libor Loan which has a six month
Interest Period); the Termination Date; and the End Date.
     Each Base Margin Loan: The first Business Day of each month; the
Termination Date; and the End Date.
“Interest Period”: The following:
     (a) With respect to each Libor Loan: Subject to Subsection (c) below, the
period commencing on the date of the making or continuation of, or conversion
to, the subject Libor Loan and ending one, two, three, or six months thereafter,
as the Borrower may elect by notice (pursuant to Section 2-5) to the Agent.
     (b) With respect to each Base Margin Loan: Subject to Subsection (c) below,
the period commencing on the date of the making or continuation of or conversion
to such Base Margin Loan and ending on that date (i) as of which the subject
Base Margin Loan is converted to a Libor Loan, as the Borrower may elect by
notice (pursuant to Section 2-5) to the Agent, or (ii) on which the subject Base
Margin Loan is paid by the Borrower.
     (c) The setting of Interest Periods is in all instances subject to the
following:
     (i) Any Interest Period for a Base Margin Loan which would otherwise end on
a day which is not a Business Day shall be extended to the next succeeding
Business Day.

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     (ii) Any Interest Period for a Libor Loan which would otherwise end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day, unless that succeeding Business Day is in the next calendar month, in which
event such Interest Period shall end on the last Business Day of the month
during which the Interest Period ends.
     (iii) Subject to Subsection (iv) below, any Interest Period applicable to a
Libor Loan, which Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such Interest
Period ends, shall end on the last Business Day of the month during which that
Interest Period ends.
     (iv) Any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
     (v) The number of Interest Periods in effect at any one time is subject to
Section 2-11(d) hereof.
“Inventory”: Includes, without limitation, “inventory” as defined in the UCC and
also all: (a) Goods which are leased by a Person as lessor; are held by a Person
for sale or lease or to be furnished under a contract of service; are furnished
by a Person under a contract of service; or 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 all returned,
repossessed and rejected; (d) packaging, advertising, and shipping materials
related to any of the foregoing; (e) all names, marks, and General Intangibles
affixed or to be affixed or associated thereto; and (f) Documents and Documents
of Title which represent any of the foregoing.
“Inventory Reserves”: Such Reserves as reasonably may be established from time
to time by the Agent in the Agent’s reasonable discretion with respect to the
determination of the saleability, at retail, of the Eligible Inventory or which
reflect such other factors as affect the market value of the Eligible Inventory.
“Investment Property”: Has the meaning given that term in the UCC.
“Issuance Conditions”: The satisfaction of each of the following conditions:
(a) no order, judgment or decree of any governmental authority or arbitrator
shall by its terms purport to enjoin or restrain the Issuer from issuing such
L/C, or any Applicable Law applicable to the Issuer or any request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over the Issuer shall not prohibit, or request that the Issuer
refrain from, the issuance of letters of credit generally

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or such L/C in particular or shall not impose upon the Issuer with respect to
such L/C any restriction, reserve or capital requirement (for which the Issuer
is not otherwise compensated hereunder) not in effect on the date hereof, or
shall not impose upon the Issuer any unreimbursed loss, cost or expense which
was not applicable on the date hereof and which the Issuer in good faith deems
material to it;
(b) the issuance of such L/C would not violate one or more policies of the
Issuer applicable to letters of credit generally;
(c) such L/C is not to be denominated in a currency other than Dollars; and
(d) such L/C does not contain any provisions for automatic reinstatement of the
Stated Amount after any drawing thereunder.
“Issuer”: The issuer of any L/C.
“L/C”: Any letter of credit, the issuance of which is procured by the Agent for
the account of the Borrower and any Banker’s Acceptance made on account of such
letter of credit.
“Lease”: Any lease or other agreement, no matter how styled or structured,
pursuant to which the Borrower is entitled to the use or occupancy of any space.
“Leasehold Interest”: Any interest of the Borrower as lessee under any Lease.
“Lenders’ Special Counsel”: A single counsel, selected by the Majority Lenders
following the occurrence of an Event of Default, to represent the interests of
the Revolving Credit Lenders in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as in connection with any “workout”, forbearance, or
restructuring of the credit facility contemplated hereby.
“Letter-of-Credit Right”: Has the meaning given that term in UCC and also refers
to any right to payment or performance under an L/C, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.
“Liabilities”: Includes, without limitation, the following:
          (a) All and each of the following, whether now existing or hereafter
arising under this Agreement or under any of the other Loan Documents:
     (i) Any and all direct and indirect liabilities, debts, and obligations of
the Borrower to the Agent or any Revolving Credit Lender, each of every kind,
nature, and description.
     (ii) Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the Borrower to the
Agent or any Revolving Credit Lender (including all future advances whether or
not made

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pursuant to a commitment by the Agent or any Revolving Credit Lender), whether
or not any of such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any other type, nature,
or description, or by reason of any cause of action which the Agent or any
Revolving Credit Lender may hold against the Borrower.
     (iii) All notes and other obligations of the Borrower now or hereafter
assigned to or held by the Agent or any Revolving Credit Lender, each of every
kind, nature, and description, including, without limitation, on account of Bank
Products and Cash Management Services.
     (iv) All interest, fees, and charges and other amounts which may be charged
by the Agent or any Revolving Credit Lender to the Borrower and which may be due
from the Borrower to the Agent or any Revolving Credit Lender from time to time.
     (v) All costs and expenses incurred or paid by the Agent or any Revolving
Credit Lender in respect of any Loan Document between the Borrower and the Agent
or any Revolving Credit Lender or Loan Document furnished by the Borrower to the
Agent or any Revolving Credit Lender (including, without limitation, Costs of
Collection, attorneys’ reasonable fees, and all court and litigation costs and
expenses) and which are required to be paid by the Borrower.
     (vi) Any and all covenants of the Borrower to or with the Agent or any
Revolving Credit Lender and any and all obligations of the Borrower to act or to
refrain from acting in accordance with any Loan Document between the Borrower
and the Agent or any Revolving Credit Lender or Loan Document furnished by the
Borrower to the Agent or any Revolving Credit Lender.
     (vii) Each of the foregoing as if each reference to the “the Agent or any
Revolving Credit Lender” were to each Affiliate of the Agent.
          (b) Any and all direct or indirect liabilities, debts, and obligations
of the Borrower to the Agent or any Affiliate of the Agent, each of every kind,
nature, and description owing on account of any service or accommodation
provided to, or for the account of the Borrower pursuant to this or any other
Loan Document, including Bank Products, Cash Management Services and the
issuances of L/C’s.
“Libor Business Day”: Any day which is both a Business Day and a day on which
the principal interbank market for Libor deposits in London in which Bank of
America participates is open for dealings in United States Dollar deposits.
“Libor Loan”: Any Revolving Credit Loan which bears interest at the Libor Margin
Rate.

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“Libor Offer Rate”: For any Interest Period with respect to a Libor Loan, the
rate per annum equal to the British Bankers Association Libor Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as designated by the Agent from time to time)
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the
“Libor Offer Rate” for such Interest Period shall be the rate per annum
determined by the Agent to be the rate at which deposits in dollars for delivery
on the first day of such Interest Period in same day funds in the approximate
amount of the Libor Loan being made, continued or converted by Bank of America
and with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch to major banks in the London interbank eurodollar market
at their request at approximately 11:00 a.m. (London time) two Business Days
prior to the commencement of such Interest Period.
“Libor Margin”: Initially, the rate set forth in Level I below. Commencing
November 1, 2010, and on the first day of each Fiscal quarter thereafter, the
Libor Margin shall be the following percentages based upon the following
criteria:

          Level   Average Availability   Libor Margin I  
Greater than $55,000,000
  2.00%   II  
Greater than $40,000,000 and less than or equal to $55,000,000
  2.25% III  
Greater than $25,000,000 and less than or equal to $40,000,000
  2.50% IV  
Less than or equal to $25,000,000
  2.75%

On the first day of each Fiscal quarter, the Libor Margin shall be adjusted
based upon the Borrower’s aggregate daily average Availability for the
immediately preceding Fiscal quarter divided by the total number of days in such
immediately preceding Fiscal quarter. provided, however, upon the occurrence of
an Event of Default, the Libor Margin shall be immediately increased to the
percentage set forth in Level IV above (even if the average Availability
requirements for another Level have been met) and interest shall be determined
in the manner set forth in Section 2-11(f).
“Libor Margin Rate”: The rate per annum which is the aggregate of the Libor Rate
plus the Libor Margin.

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“Libor Rate”: With respect to any Libor Loan for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one
percent (1%)) equal to the Libor Offer Rate for such Interest Period multiplied
by the Statutory Reserve Rate. The Libor Rate will be adjusted automatically as
to all Libor Loans then outstanding as of the effective date of any change in
the Statutory Reserve Rate.
“Liquidation”: The exercise, by the Agent, of those rights accorded to the Agent
under the Loan Documents as a creditor of the Borrower following and on account
of the occurrence of an Event of Default and Acceleration looking towards the
realization on the Collateral. Derivations of the word “Liquidation” (such as
“Liquidate”) are used with like meaning in this Agreement.
“Loan Account”: Is defined in Section 2-8(a).
“Loan Commitment”: With respect to each Revolving Credit Lender, that Revolving
Credit Lender’s Revolving Credit Dollar Commitment.
“Loan Documents”: This Agreement, each instrument and document executed and/or
delivered as contemplated by Article 3 below, and each other instrument or
document from time to time executed and/or delivered in connection with the
arrangements contemplated hereby or in connection with any transaction with the
Agent or any Affiliate of the Agent, including, without limitation, any Bank
Product, Cash Management Services, and any transaction which arises out of any
investment, letter of credit, interest rate protection, or equipment leasing
services provided by the Agent or any Affiliate of the Agent, as each may be
amended from time to time.
“Majority Lenders”: So long as there are only two (2) Revolving Credit Lenders
party to this Agreement, “Majority Lenders” shall mean both such Revolving
Credit Lenders (unless one of the Revolving Credit Lenders is a Delinquent
Revolving Credit Lender, in which case, “Majority Lenders shall mean the other
Revolving Credit Lender), and if there are more than two (2) Revolving Credit
Lenders party to this Agreement, “Majority Lenders” shall mean Revolving Credit
Lenders (other than Delinquent Revolving Credit Lenders) holding 51% or more of
the Revolving Credit Dollar Commitment (other than any Loan Commitments held by
Delinquent Revolving Credit Lenders).
“Marmaduke Family”: John Marmaduke, the Estate of Sam Marmaduke, the John H.
Marmaduke Family Limited Partnership, the Stephen S. Marmaduke Family Limited
Partnership, and members of the immediate families of John Marmaduke and Steve
Marmaduke.

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“Material Accounting Change”: Any change in GAAP applicable to accounting
periods subsequent to the Borrower’s Fiscal year most recently completed prior
to the execution of this Agreement, which change has a material effect on the
Borrower’s financial condition or operating results, as reflected on financial
statements and reports prepared by or for the Borrower, when compared with such
condition or results as if such change had not taken place or where preparation
of the Borrower’s statements and reports in compliance with such change results
in the breach of a financial performance covenant imposed pursuant to
Section 5-11 where such a breach would not have occurred if such change had not
taken place or visa versa.
“Maturity Date”: July 22, 2014.
“Maximum Rate”: The maximum nonusurious rate of interest permitted by applicable
law.
“Nominee”: A business entity (such as a corporation or limited partnership)
formed by the Agent to own or manage any Post Foreclosure Asset.
“NonConsenting Revolving Credit Lender”: Is defined in Section 15-10.
“Operating Account”: Is defined in Section 7-3(a)(iii).
“OverLoan”: A loan, advance, or providing of credit support (such as the
issuance of any L/C) to the extent that, immediately after its having been made,
Availability is less than zero.
“Participant”: Is defined in Section 19-15, hereof.
“Payment Conditions”: At the time of determination with respect to any specified
transaction or payment, that (a) no Event of Default then exists or would arise
as a result of entering into such transaction or the making of such payment, and
(b) after giving effect to such transaction or payment, the Pro Forma
Availability Condition has been satisfied and the Consolidated Fixed Charge
Coverage Ratio, on a pro-forma basis for the twelve Fiscal months preceding such
transaction or payment, is equal to or greater than 1.1:1.0. For the avoidance
of doubt, the Consolidated Fixed Charge Coverage Ratio will be calculated at the
end of each applicable calendar month (and not more frequently). Prior to
undertaking any transaction or payment which is subject to the Payment
Conditions, the Borrower shall deliver to the Agent evidence of satisfaction of
the conditions contained in clause (b) above on a basis (including, without
limitation, giving due consideration to results for prior periods) reasonably
satisfactory to the Agent.
“Payment Intangible”: Has the meaning given that term in UCC and also refers to
any general intangible under which the Account Debtor’s primary obligation is a
monetary obligation.
“Payroll Account”: Is defined in Section 7-3(a)(iv).

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“Permissible OverLoans”: Revolving Credit Loans which are OverLoans, but as to
which each of the following conditions is satisfied: (a) the Revolving Credit
Ceiling is not exceeded; and (b) when aggregated with all other Permissible
OverLoans, such Revolving Credit Loans do not aggregate more than 10% of the
aggregate of the Borrowing Base; and (c) such Revolving Credit Loans are made or
undertaken in the Agent’s discretion to protect and preserve the interests of
the Revolving Credit Lenders.
“Permitted Encumbrances”: Those Encumbrances permitted as provided in
Section 4-6(a) hereof.
“Person”: Any natural person, and any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise or entity.
“Post Foreclosure Asset”: All or any part of the Collateral, ownership of which
is acquired by the Agent or a Nominee on account of the “bidding in” at a
disposition as part of a Liquidation or by reason of a “deed in lieu” type of
transaction.
“Pro Forma Availability Condition”: For any date of calculation with respect to
any transaction or payment, the Pro Forma Availability following, and after
giving effect to, such transaction or payment, will be equal to or greater than
twenty-five percent (25%) of the lesser of the Revolving Credit Ceiling or the
Borrowing Base.
“Pro Forma Availability” For any date of calculation, after giving pro forma
effect to the transaction then to be consummated, (i) the projected average
daily Availability for each Fiscal month during any subsequent projected twelve
(12) Fiscal months, and (ii) average daily Availability for each of the three
(3) Fiscal months immediately preceding such transaction.
“Proceeds”: Includes, without limitation, “Proceeds” as defined in the UCC and
each type of property described in Section 8-1 hereof.
“Protective Advances”: The aggregate of Revolving Credit Loans and expenditures
and incurrences of obligations by the Agent respectively which are made or
undertaken in the Agents’ reasonable discretion to: protect or preserve the
Collateral Interests which secure the Liabilities and the Agent’s rights upon an
Event of Default or which the Agent determines in its reasonable discretion, are
appropriate to facilitate a Liquidation, provided, however, “Protective
Advances” shall not exceed $3.5 Million in the aggregate at any one time
outstanding.
“Receipts”: All cash, cash equivalents, checks, and credit card slips, receipts
and other Proceeds from any sale of the Collateral.

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“Receivables Collateral”: That portion of the Collateral which consists of the
Borrower’s Accounts, Accounts Receivable, General Intangibles, Chattel Paper,
Instruments, Documents of Title, Documents, Investment Property, Payment Rights,
Letter-of-Credit Rights, bankers’ acceptances held by the Borrower, and all
other rights to payment.
“Register”: Is defined in Section 16-2(c).
“Requirements of Law”: As to any Person:
     (a) Applicable Law.
     (b) That Person’s organizational documents, if any.
     (c) That Person’s by-laws and/or other instruments which deal with
corporate or similar governance, as applicable.
“Reserves”: The following: Availability Reserves and Inventory Reserves.
“Revolving Credit”: Is defined in Section 2-1(a).
“Revolving Credit Ceiling”: $100,000,000.00.
“Revolving Credit Commitment Fee”: Is defined in Section 2-12.
“Revolving Credit Dollar Commitment”: As set forth on EXHIBIT 2-22, annexed
hereto (as such amounts may change in accordance with the provisions of this
Agreement).
“Revolving Credit Lenders”: Each Revolving Credit Lender to which reference is
made in the Preamble of this Agreement and any other Person who becomes a
“Revolving Credit Lender” in accordance with the provisions of this Agreement.
“Revolving Credit Loans”: Loans made under the Revolving Credit, except that
where the term “Revolving Credit Loan” is used with reference to available
interest rates applicable to the loans under the Revolving Credit, it refers to
so much of the unpaid principal balance of the Loan Account as bears the same
rate of interest for the same Interest Period. (See Section 2-11(c)).
“Revolving Credit Note”: Is defined in Section 2-9.
“Revolving Credit Percentage Commitment”: As set forth on EXHIBIT 2-22, annexed
hereto (as such amounts may change in accordance with the provisions of this
Agreement).
“SEC”: The Securities and Exchange Commission.
“Specified Default” means the failure of the Borrower to comply with the terms
of Section 5-11 or Section 7-4, or the occurrence of any Event of Default
specified in Section 10-1, Section 10-2, Section 10-3, Section 10.6,
Section 10-11, or Section 10-12.
“Stated Amount”: The maximum amount for which an L/C may be honored.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of

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the maximum reserve percentages (including any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by the Board of
Governors of the Federal Reserve System of the United States (the “Board”) to
which the Agent is subject with respect to the Libor Offer Rate, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Libor 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.
“Subsidiary”: for any Person, any corporation or other entity of which at least
a majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other Persons having similar powers is at the time directly or indirectly owned
by such Person.
“SuperMajority Lenders”: Revolving Credit Lenders (other than Delinquent
Revolving Credit Lenders) holding 66-2/3% or more of the Revolving Credit Dollar
Commitment (other than Loan Commitments held by a Delinquent Revolving Credit
Lender), except that unless and until there are more than two Revolving Credit
Lenders, “SuperMajority Lenders shall refer to all Revolving Credit Lenders who
are not Delinquent Revolving Credit Lenders.
“Supporting Obligation”: Has the meaning given that term in UCC and also refers
to a Letter-of-Credit Right or secondary obligation which supports the payment
or performance of an Account, Chattel Paper, a Document, a General Intangible,
an Instrument, or Investment Property.
“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

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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.
“SwingLine”: The facility pursuant to which the SwingLine Lender may advance
Revolving Credit Loans aggregating up to the SwingLine Loan Ceiling.
“SwingLine Lender”: Bank of America and any successor thereto in the capacity of
lender of Swingline Loans.
“SwingLine Loan Ceiling”: $2.5 Million (subject to increase as provided in
Section 15-4(b)).
“SwingLine Loans”: Defined in Section 2-7(a).
“Termination Date”: The earliest of (a) the Maturity Date; or (b) the occurrence
of any event described in Section 10-12, below; or (c) the Agent’s notice to the
Borrower setting the Termination Date on account of the occurrence of any Event
of Default other than as described in Section 10-12, below; or (d) that date,
sixty (60) days irrevocable written notice of which is provided by the Borrower
to the Agent.
“Transfer”: Wire transfer pursuant to the wire transfer system maintained by the
Board of Governors of the Federal Reserve Board, or as otherwise may be agreed
to from time to time by the Agent making such transfer and the subject Revolving
Credit Lender. Wire instructions may be changed in the same manner that Notice
Addresses may be changed (Section 17-1), except that no change of the wire
instructions for Transfers to any Revolving Credit Lender shall be effective
without the consent of the Agent.
“UCC”: The Uniform Commercial Code as in effect from time to time in
Massachusetts.
“Unanimous Consent”: Consent of Revolving Credit Lenders (other than Delinquent
Revolving Credit Lenders) holding 100% or more of the Revolving Credit Dollar
Commitment (other than Loan Commitments held by a Delinquent Revolving Credit
Lender).
“Unused Line Fee”: Is defined in Section 2-14.
“Voting Stock”: shares of any class or classes (however designated) of any
corporation having ordinary voting power for the election of at least a majority
of the members of the board of directors (or other governing bodies) of such
corporation.

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  ARTICLE 2 — The Revolving Credit:
     2-1. Establishment of Revolving Credit.
          (a) The Revolving Credit Lenders hereby establish a revolving line of
credit (the “Revolving Credit”) in the Borrower’s favor pursuant to which each
Revolving Credit Lender, subject to, and in accordance with, this Agreement,
acting through the Agent, shall make loans and advances and otherwise provide
financial accommodations to and for the account of the Borrower as provided
herein.
          (b) Loans, advances, and financial accommodations under the Revolving
Credit shall be made with reference to the Borrowing Base and shall be subject
to Availability. The Borrowing Base and Availability shall be determined by the
Agent by reference to Borrowing Base Certificates furnished as provided in
Section 5-4, below, and shall be subject to the following:
          (i) Such determination shall take into account those Reserves as the
Agent may determine as being applicable thereto.
          (ii) The Cost of Eligible Inventory will be determined in a manner
consistent with current tracking practices, based on the Borrower’s
By-Department monthly report generated by the Borrower’s inventory control
system, which report reflects the functional equivalent of a stock ledger
inventory.
          (c) The commitment of each Revolving Credit Lender to provide such
loans, advances, and financial accommodations is subject to Section 2-22.
          (d) The proceeds of borrowings under the Revolving Credit shall be
used solely in accordance with the Business Plan for the Borrower’s working
capital and Capital Expenditures, all solely to the extent permitted by this
Agreement. No proceeds of a borrowing under the Revolving Credit may be used,
nor shall any be requested, with a view towards the accumulation of any general
fund or funded reserve of the Borrower other than in the ordinary course of the
Borrower’s business and consistent with the provisions of this Agreement.
Subject to the foregoing, the proceeds of borrowings under the Revolving Credit
Facility shall be used for the following purposes:
          (i) To provide on-going working capital requirements and capital
expenditure needs of the Borrower.
          (ii) To support issuance of letters of credit by the letter of credit
issuer for the account of the Borrower.
          (iii) To provide funds for the Borrower’s repurchase of its capital
stock as permitted herein.

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     2-2. Advances in Excess of Borrowing Base (OverLoans).
          (a) No Revolving Credit Lender has any obligation to make any loan or
advance, or otherwise to provide any credit to or for the benefit of the
Borrower where the result of such loan, advance, or credit is an OverLoan.
          (b) The Revolving Credit Lenders’ obligations, among themselves, are
subject to Section 12-3(a) (which relates to each Revolving Credit Lender’s
making amounts available to the Agent) and to Section 15-3(a) (which relates to
Permissible OverLoans).
          (c) The Revolving Credit Lenders’ providing of an OverLoan on any one
occasion does not affect the obligations of the Borrower hereunder (including
the Borrower’s obligation to immediately repay any amount which otherwise
constitutes an OverLoan) nor obligate the Revolving Credit Lenders to do so on
any other occasion.
     2-3. Risks of Value of Collateral. The Agent’s reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Agent or any Revolving Credit Lender relative to the actual value of the asset
in question. All risks concerning the value of the Collateral are and remain
upon the Borrower. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Agent in
connection with the making of loans, credits, and advances and the providing of
financial accommodations under the Revolving Credit.
     2-4. Commitment to Make Revolving Credit Loans and Support Letters of
Credit. Subject to the provisions of this Agreement, the Revolving Credit
Lenders shall make a loan or advance under the Revolving Credit and the Agent
shall have an L/C issued for the account of the Borrower, in each instance if
duly and timely requested by the Borrower as provided herein provided that:
          (a) Borrowing Base will not be exceeded.
          (b) The amount of the loan or advance or L/C so requested does not
exceed Availability.
          (c) The Borrower is not InDefault.
     2-5. Revolving Credit Loan Requests.
          (a) Requests for loans and advances under the Revolving Credit or for
the continuance or conversion of an interest rate applicable to a Revolving
Credit Loan may be requested by the Borrower in the manner set forth herein or
in such other manner as may from time to time be reasonably acceptable to the
Agent.

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          (b) Subject to the provisions of this Agreement, the Borrower may
request a Revolving Credit Loan and elect an interest rate and Interest Period
to be applicable to that Revolving Credit Loan by giving notice to the Agent by
no later than the following:
          (i) If such Revolving Credit Loan is to be or is to be converted to a
Base Margin Loan: By 11:30AM on the Business Day on which the subject Revolving
Credit Loan is to be made or is to be so converted. Base Margin Loans requested
by the Borrower, other than those resulting from the conversion of a Libor Loan,
shall not be less than $10,000.00.
          (ii) If such Revolving Credit Loan is to be, or is to be continued as,
or converted to, a Libor Loan: By 1:00PM three (3) Libor Business Days before
the commencement of any new Interest Period or the end of the then applicable
Interest Period. Libor Loans and conversions to Libor Loans shall each be not
less than $1,000,000.00 and in increments of $250,000.00 in excess of such
minimum.
          (iii) Any Libor Loan which matures while the Borrower is InDefault
shall be converted, at the option of the Agent, to a Base Margin Loan
notwithstanding any notice from the Borrower that such Loan is to be continued
as a Libor Loan.
          (c) Any request for a Revolving Credit Loan or for the continuance or
conversion of an interest rate applicable to a Revolving Credit Loan which is
made after the applicable deadline therefor, as set forth above, shall be deemed
to have been made at the opening of business on the then next Business Day or
Libor Business Day, as applicable.
          (d) The Borrower may request that the Agent cause the issuance by the
Issuer of L/C’s for the account of the Borrower as provided in Section 2-18.
          (e) The Agent may rely on any request for a loan or advance, or other
financial accommodation under the Revolving Credit which the Agent, in good
faith, believes to have been made by a Person duly authorized to act on behalf
of the Borrower and may decline to make any such requested loan or advance, or
issuance, or to provide any such financial accommodation pending the Agent’s
being furnished with such documentation concerning that Person’s authority to
act as may be reasonably satisfactory to the Agent.
          (f) A request by the Borrower for loan or advance, or other financial
accommodation under the Revolving Credit shall be irrevocable and shall
constitute certification by the Borrower that as of the date of such request,
each of the following is true and correct:
          (i) There has been no material adverse change in the Borrower’s
financial condition from the most recent financial information furnished Agent
pursuant to this Agreement.

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               (ii) Each representation which is made herein or in any of the
Loan Documents is then true and complete in all material respects as of and as
if made on the date of such request.
               (iii) The Borrower is not InDefault.
          (g) If, at any time or from time to time, the Borrower is InDefault:
               (i) The Agent may suspend the Revolving Credit immediately.
               (ii) Neither the Agent nor any Revolving Credit Lender shall be
obligated, during such suspension, to make any loans or advance, or to provide
any financial accommodation hereunder or to seek the issuance of any L/C.
               (iii) The Agent may suspend the right of the Borrower to request
any Libor Loan or to convert any Base Margin Loan to a Libor Loan.
     2-6. Making of Revolving Credit Loans.
          (a) A Revolving Credit Loan shall be made by the transfer of the
proceeds of such Revolving Credit Loan to the Operating Account or as otherwise
instructed by the Borrower.
          (b) A Revolving Credit Loan shall be deemed to have been made under
the Revolving Credit (and the Borrower shall be indebted to the Agent and the
Revolving Credit Lenders for the amount thereof immediately) at the following:
               (i) The Agent’s initiation of the transfer of the proceeds of
such Revolving Credit Loan in accordance with the Borrower’s instructions (if
such Revolving Credit Loan is of funds requested by the Borrower).
               (ii) The charging of the amount of such Revolving Credit Loan to
the Loan Account (in all other circumstances).
          (c) There shall not be any recourse to or liability of the Agent or
any Revolving Credit Lender, on account of any of the following which is beyond
the reasonable control of the Agent:
               (i) Any delay in the making of any loan or advance requested
under the Revolving Credit.
               (ii) Any delay by any bank or other depository institution in
treating the proceeds of any such loan or advance as collected funds.
               (iii) Any delay in the receipt, and/or any loss, of funds which
constitute a Revolving Credit Loan under the Revolving Credit, the wire transfer
of which was properly initiated by the Agent in accordance with wire
instructions provided to the Agent by the Borrower.

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     2-7. SwingLine Loans.
          (a) For ease of administration, Base Margin Loans may be made by the
SwingLine Lender (in the aggregate, the “SwingLine Loans”) in accordance with
the procedures set forth in this Agreement for the making of loans and advances
under the Revolving Credit. The unpaid principal balance of the SwingLine Loans
shall not at any one time be in excess of the SwingLine Loan Ceiling.
          (b) The aggregate unpaid principal balance of SwingLine Loans shall
bear interest at the rate applicable to Base Margin Loans and shall be repayable
as a Revolving Credit Loan.
          (c) The Borrower’s obligation to repay SwingLine Loans shall be
evidenced by a Note in the form of EXHIBIT 2-7(c), annexed hereto, executed by
the Borrower, and payable to the SwingLine Lender. Neither the original nor a
copy of that Note shall be required, however, to establish or prove any
Liability. The Borrower shall execute a replacement of any SwingLine Note which
has been lost, mutilated, or destroyed and deliver such replacement to the
SwingLine Lender.
          (d) For all purposes of this Loan Agreement, the SwingLine Loans and
the Borrower’s obligations to the SwingLine Lender constitute Revolving Credit
Loans and are secured as “Liabilities”.
          (e) SwingLine Loans may be subject to periodic settlement with the
Revolving Credit Lenders as provided in this Agreement.
     2-8. The Loan Account.
          (a) An account (“Loan Account”) shall be opened on the books of the
Agent in which a record shall be kept of all Revolving Credit Loans.
          (b) The Agent shall also keep a record (either in the Loan Account or
elsewhere, as the Agent may from time to time elect) of all interest, fees,
service charges, costs, expenses, and other debits owed to the Agent and each
Revolving Credit Lender on account of the Liabilities and of all credits against
such amounts so owed.
          (c) All credits against the Liabilities shall be conditional upon
final payment to the Agent for the account of each Revolving Credit Lender of
the items giving rise to such credits. The amount of any item credited against
the Liabilities which is charged back against the Agent or any Revolving Credit
Lender for any reason or is not so paid shall be a Liability and shall be added
to the Loan Account, whether or not the item so charged back or not so paid is
returned.
          (d) Except as otherwise provided herein, all fees, service charges,
costs, and expenses for which the Borrower is obligated hereunder are payable on
demand. In the determination of Availability, the Agent may deem fees, service
charges, accrued interest, and other payments which will be due and payable
between the date of such determination and the first day of the then next
succeeding

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month as having been advanced under the Revolving Credit whether or not such
amounts are then due and payable.
          (e) The Agent, without the request of the Borrower, may advance under
the Revolving Credit any interest, fee, service charge, or other payment to
which the Agent or any Revolving Credit Lender is entitled and which are due and
payable from the Borrower pursuant hereto and may charge the same to the Loan
Account notwithstanding that such amount so advanced may result in Borrowing
Base’s being exceeded. Such action on the part of the Agent shall not constitute
a waiver of the Agent’s rights and the Borrower’s obligations under
Section 2-10(b). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2-8(e) shall bear interest at the interest
rate then and thereafter applicable to Base Margin Loans.
          (f) Any statement rendered by the Agent or any Revolving Credit Lender
to the Borrower concerning the Liabilities shall be considered correct and
accepted by the Borrower and shall be conclusively binding upon the Borrower
unless the Borrower provides the Agent with written objection thereto within
twenty (20) days from the mailing of such statement, which written objection
shall indicate, with particularity, the reason for such objection. In the
absence of manifest error, the Loan Account and the Agent’s books and records
concerning the loan arrangement contemplated herein and the Liabilities shall be
prima facie evidence and proof of the items described therein.
     2-9. The Revolving Credit Notes. The Borrower’s obligation to repay loans
and advances under the Revolving Credit, with interest as provided herein, shall
be evidenced by Notes (each, a “Revolving Credit Note”) in the form of EXHIBIT
2-9, annexed hereto, executed by the Borrower, one payable to each Revolving
Credit Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. In the event
that any Revolving Credit Note is ever lost, mutilated, or destroyed, the
Borrower shall execute a replacement thereof and deliver such replacement to the
Agent.
     2-10. Payment of The Loan Account.
          (a) The Borrower may repay all or any portion of the principal balance
of the Loan Account from time to time until the Termination Date.
          (b) The Borrower, without notice or demand from the Agent or any
Revolving Credit Lender, shall pay the Agent that amount, from time to time,
which is necessary so that there is no OverLoan outstanding.
          (c) The Borrower shall repay the then entire unpaid balance of the
Loan Account and all other Liabilities on the Termination Date.

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          (d) The Agent shall endeavor to cause the application of payments (if
any), pursuant to Sections 2-10(a) and 2-10(b) against Libor Loans then
outstanding in such manner as results in the least cost to the Borrower, but
shall not have any affirmative obligation to do so nor liability on account of
the Agent’s failure to have done so. In no event shall action or inaction taken
by the Agent excuse the Borrower from any indemnification obligation under
Section 2-10(e).
          (e) Within ten (10) days from the date a Revolving Credit Lender or
the Agent (as the case may be) makes written demand therefor, the Borrower shall
indemnify the Agent and each Revolving Credit Lender and hold the Agent and each
Revolving Credit Lender harmless from and against any loss, cost or expense
(including loss of anticipated profits and amounts payable by the Agent or such
Revolving Credit Lender on account of “breakage fees” (so-called)) which the
Agent or such Revolving Credit Lender may sustain or incur (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:
          (i) Default by the Borrower in payment of the principal amount of or
any interest on any Libor Loan as and when due and payable, including any such
loss or expense arising from interest or fees payable by such Revolving Credit
Lender in order to maintain its Libor Loans.
          (ii) Default by the Borrower in making a borrowing or conversion after
the Borrower has given (or is deemed to have given) a request for a Revolving
Credit Loan or a request to convert a Revolving Credit Loan from one applicable
interest rate to another.
          (iii) The making of any payment on a Libor Loan or the making of any
conversion of any such Loan to a Base Margin Loan on a day that is not the last
day of the applicable Interest Period with respect thereto.
     2-11. Interest on Revolving Credit Loans.
          (a) Each Revolving Credit Loan shall be a Base Margin Loan and shall
bear interest at the Base Margin Rate unless timely notice is given (as provided
in Section 2-5) that the subject Revolving Credit Loan (or a portion thereof)
is, or is to be converted to, a Libor Loan.
          (b) Each Revolving Credit Loan which consists of a Libor Loan shall
bear interest at the applicable Libor Margin Rate.
          (c) Subject to, and in accordance with, the provisions of this
Agreement, the Borrower may cause all or a part of the unpaid principal balance
of the Loan Account to bear interest at the Base Margin Rate or the Libor Margin
Rate as specified from time to time by the Borrower.

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          (d) The Borrower shall not select, renew, or convert any interest rate
for a Revolving Credit Loan such that, in addition to interest at the Base
Margin Rate, there are more than six (6) Libor Margin Rates applicable to the
Revolving Credit Loans at any one time.
          (e) The Borrower shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears as follows:
          (i) On the applicable Interest Payment Date for that Revolving Credit
Loan.
          (ii) On the Termination Date and on the End Date.
          (iii) Following the occurrence of any Event of Default, with such
frequency as may be reasonably determined by the Agent.
          (f) Following the occurrence of any Specified Default (and whether or
not the Agent exercises the Agent’s rights on account thereof), each Revolving
Credit Loan shall bear interest, at the option of the Agent or at the
instruction of the SuperMajority Lenders at rate which is the rate then in
effect for such Revolving Credit Loan, plus two percent (2%) per annum.
     2-12. Revolving Credit Commitment Fee. In consideration of the commitment
to make loans and advances to the Borrower under the Revolving Credit, and to
maintain sufficient funds available for such purpose, there has been earned and
the Borrower shall pay the “Revolving Credit Commitment Fee” (so referred to
herein) in the amount and payable as provided in the Fee Letter.
     2-13. Agent’s Fee. In addition to any other fee or expense to be paid by
the Borrower on account of the Revolving Credit, the Borrower shall pay the
Agent the “Agent’s Fee” at the times and in the amounts as set forth the Fee
Letter.
     2-14. Unused Line Fee. In addition to any other fee to be paid by the
Borrower on account of the Revolving Credit, the Borrower shall pay the Agent
the “Unused Line Fee” (so referred to herein) equal to the Applicable Fee Rate
multiplied by the difference, during the quarter just ended (or relevant period
with respect to the payment being made on the Termination Date) between the
Revolving Credit Ceiling and the average of the unpaid principal balance of the
Loan Account and the undrawn Stated Amount of L/C’s outstanding during the
relevant period. The Unused Line Fee shall be paid in arrears, on the first day
of each quarter after the execution of this Agreement and on the Termination
Date.
     2-15. Reserved.
     2-16. Concerning Fees.
          (a) In addition to any other right to which the Agent is then entitled
on account thereof, the Agent may assess an additional fee payable by the
Borrower on account of the

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accommodation, from time to time, by the Agent of the Borrower’s request that
the Agent depart or dispense with one or more of the administrative provisions
of this Agreement and/or the Borrower’s failure to comply with any of such
provisions, which additional fee shall be reasonable.
          (i) By way of non-exclusive example, the Agent may assess a fee on
account of any of the following:
          (A) The Borrower’s failure to pay that amount which is necessary so
that no OverLoan is outstanding (as required under Section 2-10(b) hereof).
          (B) The providing of a loan or advance under the Revolving Credit or
charging of the Loan Account such that an OverLoan is made.
          (C) The foreshortening of any of the time frames with respect to the
making of Revolving Credit Loans as set forth in Section 2-5.
          (D) The Borrower’s failure to provide a financial statement or report
within the applicable time frame provided for such report under Article 5
hereof.
          (ii) The inclusion of the foregoing right on the part of the Agent to
assess a fee does not constitute an obligation, on the part of the Agent, to
waive any provision of this Agreement under any circumstances. The assessment of
any such fee in any particular circumstance shall not constitute the Agent’s
waiver of any breach of this Agreement on account of which such fee was assessed
nor a course of action on which the Borrower may rely.
          (b) The Borrower shall not be entitled to any credit, rebate or
repayment of any fee earned by the Agent or any Revolving Credit Lender pursuant
to this Agreement or any Loan Document notwithstanding any termination of this
Agreement pursuant to the terms hereof or suspension or termination pursuant to
the terms hereof of the Agent’s and any Revolving Credit Lender’s respective
obligation to make loans and advances hereunder.
     2-17. Agent’s and Revolving Credit Lenders’ Discretion.
          (a) Each reference in the Loan Documents to the exercise of discretion
or the like by the Agent or any Revolving Credit Lender shall be to such
Person’s exercise of its reasonable judgment, in good faith (which shall be
presumed), based upon such Person’s consideration of any such factors as the
Agent or that Revolving Credit Lender, taking into account information of which
that Person then has actual knowledge, reasonably believes:
          (i) Will or reasonably could be expected to adversely affect the value
of the Collateral, the enforceability of the Agent’s Collateral Interests
therein, or the amount which the Agent would likely realize therefrom (taking
into account delays which may possibly be encountered in the Agent’s realizing
upon the Collateral and likely Costs of Collection).

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          (ii) Indicates that any report or financial information delivered to
the Agent or any Revolving Credit Lender by or on behalf of the Borrower is
incomplete, inaccurate, or misleading in any material manner or was not prepared
in any material respect in accordance with the requirements of this Agreement.
          (iii) Suggests an increase in the likelihood that the Borrower will
become the subject of a bankruptcy or insolvency proceeding.
          (iv) Suggests that the Borrower is InDefault.
          (b) In the exercise of such judgment, the Agent and each Revolving
Credit Lender also may take into account any of the following factors:
          (i) Those included in, or tested by, the definitions of “Eligible
Inventory” and “Cost”.
          (ii) The current financial and business climate of the industry in
which the Borrower competes (having regard for the Borrower’s position in that
industry).
          (iii) General macroeconomic conditions which have a material effect on
the Borrower’s cost structure.
          (iv) Material changes in or to the mix of the Borrower’s Inventory.
          (v) Seasonality with respect to the Borrower’s Inventory and patterns
of retail sales.
          (vi) Such other factors as the Agent and each Revolving Credit Lender
reasonably determines as having a material bearing on credit risks associated
with the providing of loans and financial accommodations to the Borrower.
          (c) The burden of establishing the failure of the Agent or any
Revolving Credit Lender to have acted in a reasonable manner in such Person’s
exercise of such discretion shall be the Borrower’s.
     2-18. Procedures For Issuance of L/C’s.
          (a) The Borrower may request that the Agent cause the issuance by the
Issuer of L/C’s for the account of the Borrower, and the Issuer shall, if so
requested, issue one or more L/C’s for the account of the Borrower from time to
time pursuant to the terms hereof. Each such request shall be in the manner set
forth herein or in such other manner as may from time to time be reasonably
acceptable to the Agent.
          (b) The Agent shall cause the issuance of any L/C so requested by the
Borrower, provided that, at the time that the request is made, both the Issuance
Conditions are satisfied and Revolving Credit has not been suspended as provided
in Section 2-5(g) and if so issued:

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          (i) The aggregate Stated Amount of all L/C’s then outstanding, does
not exceed $20,000,000.00
          (ii) The expiry of the L/C is not later than the earlier of thirty
(30) days prior to the Maturity Date or the following:
          (A) Standby L/Cs: One (1) year from initial issuance.
          (B) Documentary L/Cs: Sixty (60) days from issuance.
          (iii) An OverLoan will not result from the issuance of the subject
L/C.
          (c) The Borrower shall execute such documentation to apply for and
support the issuance of an L/C as may be required by the Issuer.
          (d) Unless within the control of the Agent or a Revolving Credit
Lender, there shall not be any recourse to, nor liability of, the Agent or any
Revolving Credit Lender on account of
          (i) Any delay or refusal by an Issuer to issue an L/C;
          (ii) Any action or inaction of an Issuer on account of or in respect
to, any L/C.
          (e) The Borrower shall reimburse the Issuer for the amount of any
honoring of a drawing under an L/C on the same day on which such honoring takes
place. The Agent, without the request of the Borrower, may advance under the
Revolving Credit (and charge to the Loan Account) the amount of any honoring of
any L/C and other amount for which the Borrower, the Issuer, or the Revolving
Credit Lenders become obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not the Borrower is InDefault or such advance
would result in an OverLoan. Such action shall not constitute a waiver of the
Agent’s rights under Section 2-10(b) hereof.
     2-19. Fees For L/C’s.
          (a) The Borrower shall pay to the Agent a fee, on account of L/C’s,
monthly in arrears, and on the Termination Date and on the End Date, determined
at the following per annum rate of the weighted average Stated Amount of all
L/C’s outstanding during the period in respect of which such fee is being paid
except that, following the occurrence of any Event of Default, such fee shall be
increased by two percent (2%) per annum:
          (i) Standby L/Cs:       200 basis points.
          (ii) Documentary L/Cs:       150 basis points.
          (b) In addition to the fee to be paid as provided in Subsection
2-19(a) above, the Borrower shall pay to the Agent (or to the Issuer, if so
requested by Agent), on demand, all customary issuance, processing, negotiation,
amendment, and administrative fees and other amounts customarily charged by the
Issuer on account of, or in respect to, any L/C.

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          (c) If any change in Applicable Law after the date of this Agreement
shall either:
          (i) impose, modify or deem applicable any reserve, special deposit or
similar requirements against letters of credit heretofore or hereafter issued by
any Issuer or with respect to which any Revolving Credit Lender or any Issuer
has an obligation to lend to fund drawings under any L/C; or
          (ii) impose on any Issuer any other condition or requirements relating
to any such letters of credit;
and the result of any event referred to in Section 2-19(c)(i) or 2-19(c)(ii),
above, shall be to increase the cost to any Revolving Credit Lender or to any
Issuer of issuing or maintaining any L/C (which increase in cost shall be the
result of such Issuer’s reasonable allocation among that Revolving Credit
Lender’s or Issuer’s letter of credit customers of the aggregate of such cost
increases resulting from such events), then within ten (10) days after demand by
the Agent and delivery by the Agent to the Borrower of a certificate of an
officer of the subject Revolving Credit Lender or the subject Issuer describing,
with reasonable particularity, such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Revolving Credit Lender
or such Issuer, and the basis for determining such increased costs and their
allocation, the Borrower shall immediately pay to the Agent, from time to time
as specified by the Agent, such amounts as shall be sufficient to compensate the
subject Revolving Credit Lender or the subject Issuer for such increased cost.
In the absence of manifest error, any Revolving Credit Lender’s or any Issuer’s
determination of costs incurred under Section 2-19(c)(i) or 2-19(c)(ii), above,
and the allocation, if any, of such costs among the Borrower and other letter of
credit customers of such Revolving Credit Lender or such Issuer, if done in good
faith and made on an equitable basis and in accordance with such officer’s
certificate, shall be conclusive and binding on the Borrower. Notwithstanding
the foregoing, any demand for such increased letter of credit costs shall not
include any increased letter of credit costs of which the Issuer, any Revolving
Credit Lender, or the Agent making demand therefor had knowledge more than
90 days prior to the date that the Issuer, any Revolving Credit Lender or the
Agent makes demand therefor.
     2-20. Concerning L/C’s.
          (a) None of the Issuer, the Issuer’s correspondents, any Revolving
Credit Lender, the Agent, or any advising, negotiating, or paying bank with
respect to any L/C shall be responsible in any way for:
          (i) The performance by any beneficiary under any L/C of that
beneficiary’s obligations to the Borrower.

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          (ii) The form, sufficiency, correctness, genuineness, authority of any
person signing; falsification; or the legal effect of any documents called for
under any L/C if (with respect to the foregoing) such documents on their face
appear to be in order.
          (b) The Issuer may honor, as complying with the terms of any L/C and
of any drawing thereunder, any drafts or other documents otherwise in order, but
signed or issued by an administrator, executor, conservator, trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
          (c) Unless otherwise agreed to, in the particular instance, the
Borrower hereby authorizes any Issuer to:
          (i) Select an advising bank, if any.
          (ii) Select a paying bank, if any.
          (iii) Select a negotiating bank.
          (d) All directions, correspondence, and funds transfers relating to
any L/C are at the risk of the Borrower. The Issuer shall have discharged the
Issuer’s obligations under any L/C which, or the drawing under which, includes
payment instructions, by the initiation of the method of payment called for in,
and in accordance with, such instructions (or by any other commercially
reasonable and comparable method). None of the Agent, any Revolving Credit
Lender, or the Issuer shall have any responsibility for any inaccuracy,
interruption, error, or delay in transmission or delivery by post, telegraph or
cable, or for any inaccuracy of translation, except through its gross negligence
or willful misconduct.
          (e) The Agent’s, each Revolving Credit Lender’s, and the Issuer’s
rights, powers, privileges and immunities specified in or arising under this
Agreement are in addition to any heretofore or at any time hereafter otherwise
created or arising, whether by statute or rule of law or contract.
          (f) Except to the extent otherwise expressly provided hereunder or
agreed to in writing by the Issuer and the Borrower, documentary L/C’s will be
governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and standby L/C’s will
be governed by International Standby Practices ISP98 (adopted by the
International Chamber of Commerce on April 6, 1998) and any respective
subsequent revisions thereof.
          (g) The obligations of the Borrower under this Agreement with respect
to L/C’s are absolute, unconditional, and irrevocable and shall be performed
strictly in accordance with the terms hereof under all circumstances, whatsoever
including, without limitation, the following:

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          (i) Any lack of validity or enforceability or restriction, restraint,
or stay in the enforcement of this Agreement, any L/C, or any other agreement or
instrument relating thereto.
          (ii) The Borrower’s consent to any amendment or waiver of, or consent
to the departure from, any L/C.
          (iii) The existence of any claim, set-off, defense, or other right
which the Borrower may have at any time against the beneficiary of any L/C.
          (iv) Any good faith honoring of a drawing under any L/C, which drawing
possibly could have been dishonored based upon a strict construction of the
terms of the L/C.
     2-21. Changed Circumstances.
          (a) The Agent may advise the Borrower that the Agent has made the good
faith determination (which determination shall be final and conclusive) of any
of the following:
          (i) Adequate and fair means do not exist for ascertaining the rate for
Libor Loans.
          (ii) The continuation of or conversion of any Revolving Credit Loan to
a Libor Loan has been made impossible or unlawful by the occurrence after the
date of this Agreement of a contingency that materially and adversely affects
the applicable market or the compliance by the Agent or any Revolving Credit
Lender in good faith with any Applicable Law.
          (iii) The indices on which the interest rates for Libor Loans are
based shall no longer fairly and adequately represent the effective cost to the
Agent or any Revolving Credit Lender for U.S. dollar deposits in the interbank
market for deposits in which it regularly participates.
          (b) In the event that the Agent advises the Borrower of an occurrence
described in Section 2-21(a), then, until the Agent notifies the Borrower that
the circumstances giving rise to such notice no longer apply:
          (i) The obligation of the Agent or each Revolving Credit Lender to
make loans of the type affected by such changed circumstances or to permit the
Borrower to select the affected interest rate as otherwise applicable to any
Revolving Credit Loans shall be suspended.
          (ii) Any notice which the Borrower had given the Agent with respect to
any Libor Loan, the time for action with respect to which has not occurred prior
to the Agent’s having given notice pursuant to Section 2-21(a) above, shall be
deemed to be given for a Base Margin Loan.

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     2-22. Lenders’ Commitments.
          (a) Subject to Section 16-1 (which provides for assignments and
assumptions of commitments), each Revolving Credit Lender’s “Revolving Credit
Percentage Commitment” and “Revolving Credit Dollar Commitment” (respectively so
referred to herein) are set forth on EXHIBIT 2-22, annexed hereto.
          (b) The obligations of each Revolving Credit Lender are several and
not joint. No Revolving Credit Lender shall have any obligation to make any loan
or advance under the Revolving Credit in excess of the lesser of the following:
          (i) That Revolving Credit Lender’s Revolving Credit Commitment
Percentage of the subject loan or advance or of Availability.
          (ii) that Revolving Credit Lender’s Revolving Credit Dollar
Commitment.
          (c) No Revolving Credit Lender shall have any liability to the
Borrower on account of the failure of any other Revolving Credit Lender to
provide any loan or advance under the Revolving Credit nor any obligation to
make up any shortfall which may be created by such failure.
          (d) In the event of the Borrower’s exercise of its right to reduce the
Revolving Credit Ceiling, the effect of such reduction shall be distributed, pro
rata, amongst the Revolving Credit Lenders based on their then respective
Revolving Credit Dollar Commitments.
          (e) The Revolving Credit Dollar Commitments, Revolving Credit
Commitment Percentages, and identities of the Revolving Credit Lenders may be
changed, from time to time by the reallocation or assignment of Revolving Credit
Dollar Commitments and Revolving Credit Commitment Percentages amongst the
Revolving Credit Lenders or with other Persons who determine to become
“Revolving Credit Lenders”, provided, however unless an Event of Default has
occurred (in which event, no consent of the Borrower is required) any assignment
to a Person not then a Revolving Credit Lender shall be subject to the prior
written consent of the Borrower (not to be unreasonably withheld), which consent
will be deemed given unless the Borrower provides the Agent with written
objection, not more than five (5) Business Days after the Agent shall have given
the Borrower written notice of a proposed assignment).
          (f) Upon written notice given the Borrower from time to time by the
Agent, of any assignment or allocation referenced in Section 2-22(e):
          (i) The Borrower shall execute one or more replacement Revolving
Credit Notes to reflect such changed Revolving Credit Dollar Commitments,
Revolving Credit Commitment Percentages, and identities and shall deliver such
replacement Revolving Credit Notes to the Agent (which promptly thereafter shall
deliver to the Borrower the Revolving Credit Notes so replaced) provided
however, in the event that a Revolving Credit Note is to be

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exchanged following its acceleration or the entry of an order for relief under
the Bankruptcy Code with respect to the Borrower, the Agent, in lieu of causing
the Borrower to execute one or more new Revolving Credit Notes, may issue the
Agent’s Certificate confirming the resulting Revolving Credit Dollar Commitments
and Revolving Credit Percentage Commitments.
          (ii) Such change shall be effective from the effective date specified
in such written notice and any Person added as a Revolving Credit Lender shall
have all rights and privileges of a Revolving Credit Lender hereunder thereafter
as if such Person had been a signatory to this Agreement and any other Loan
Document to which a Revolving Credit Lender is a signatory and any Person
removed as a Revolving Credit Lender shall be relieved of any obligations or
responsibilities of a Revolving Credit Lender hereunder thereafter.
ARTICLE 3 — Conditions Precedent:
     As a condition to the effectiveness of this Agreement, the establishment of
the Revolving Credit, and the making of the first loan under the Revolving
Credit, each of the documents respectively described in Sections 3-1 through and
including 3-4, (each in form and substance reasonably satisfactory to the Agent)
shall have been delivered to the Agent, and the conditions respectively
described in Sections 3-5 through and including 3-9, shall have been satisfied:
     3-1. Corporate Due Diligence.
          (a) A Certificate of corporate good standing issued by the Secretary
of State of Texas.
          (b) Certificates of due qualification, in good standing, issued by the
Secretary(ies) of State of each State in which the nature of the Borrower’s
business conducted or assets owned could require such qualification.
          (c) A Certificate of the Borrower’s Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.
     3-2. Opinion. An opinion of counsel to the Borrower in form and substance
reasonably satisfactory to the Agent.
     3-3. Additional Documents. Such additional instruments and documents as the
Agent or its counsel reasonably may require or request.

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     3-4. Officers’ Certificates. Certificates executed by the President and the
Chief Financial Officer or Vice President — Finance of the Borrower and stating
that the representations and warranties made by the Borrower to the Agent and
the Revolving Credit Lenders in the Loan Documents are true and complete in all
material respects as of the date of such Certificate (other than those
representations and warranties which are qualified by “materiality”, each of
which are true and correct in all respects), and that no event has occurred
which is or which, solely with the giving of notice or passage of time (or both)
would be an Event of Default.
     3-5. Representations and Warranties. Each of the representations made by or
on behalf of the Borrower in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrower shall be true and complete in all material respects as
of the date as of which such representation or warranty was made.
     3-6. Minimum Day One Availability. After giving effect to the first funding
under the Revolving Credit; Availability shall not be less than $50 Million.
     3-7. All Fees and Expenses Paid.
     All reasonable fees due at or immediately after the first funding under the
Revolving Credit and all reasonable costs and expenses incurred by the Agent in
connection with the amendment and restatement of the credit facility
contemplated hereby (including the reasonable fees and expenses of counsel to
the Agent) shall have been paid in full.
     3-8. Borrower Not InDefault. The Borrower is not InDefault.
     3-9. No Adverse Change. No event shall have occurred or failed to occur,
which occurrence or failure is or could have a materially adverse effect upon
the Borrower’s financial condition when compared with such financial condition
at April 30, 2010.
     3-10. Benefit of Conditions Precedent. The conditions set forth in this
Article 3 are for the sole benefit of the Agent and the Revolving Credit Lenders
and may be waived by the Agent in whole or in part without prejudice to the
Agent or any Revolving Credit Lender.
No document shall be deemed delivered to the Agent or any Revolving Credit
Lender until received and accepted by the Agent or its counsel at its offices in
Boston, Massachusetts. Under no circumstances shall this Agreement take effect
until executed and accepted by the Agent at said offices.

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ARTICLE 4 — General Representations, Covenants and Warranties:
     To induce each Revolving Credit Lender to establish the credit facility
contemplated herein and to induce the Revolving Credit Lenders to provide
Revolving Credit Loans (each of which Revolving Credit Loans shall be deemed to
have been made in reliance thereupon) the Borrower, in addition to all other
representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included
in this Agreement.
     4-1. Payment and Performance of Liabilities. The Borrower shall pay each
payment Liability when due (or when demanded, if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
     4-2. Due Organization. Authorization. No Conflicts.
          (a) The Borrower presently is and shall hereafter remain in good
standing as a Texas corporation and is and shall hereafter remain duly qualified
and in good standing in every other State in which, by reason of the nature or
location of the Borrower’s assets or operation of the Borrower’s business, such
qualification may be necessary, except where the failure to so qualify would not
have a material adverse effect on the business or assets of the Borrower.
          (b) The Borrower’s organizational identification number assigned to it
by the State of Texas is 306162-0 and its federal employer identification number
is 75-1386375.
          (c) The Borrower shall not change its State of organization; any
organizational identification number assigned to the Borrower by that State; or
the Borrower’s federal employer identification number without giving the Agent
thirty (30) days prior written notice thereof.
          (d) Each Subsidiary is listed on EXHIBIT 4-2, annexed hereto. The
Borrower shall provide the Agent with prior written notice of any entity’s
becoming or ceasing to be a Subsidiary.
          (e) The Borrower has all requisite power and authority to execute and
deliver all Loan Documents to which the Borrower is a party and has and will
hereafter retain all requisite power to perform all Liabilities.
          (f) The execution and delivery by the Borrower of each Loan Document
to which it is a party; the Borrower’s consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of Collateral Interests by the Borrower to secure the Liabilities); the
Borrower’s performance under those of the Loan Documents to which it is a party;
the borrowings hereunder; and the use of the proceeds thereof:
          (i) Have been duly authorized by all necessary action.

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          (ii) Do not, and will not, contravene in any material respect any
provision of any Requirement of Law or obligation of the Borrower, except to the
extent such contravention would not have a material adverse effect on the
business or assets of the Borrower.
          (iii) Will not result in the creation or imposition of, or the
obligation to create or impose, any Encumbrance upon any assets of the Borrower
pursuant to any Requirement of Law or obligation, except pursuant to the Loan
Documents.
          (g) The Loan Documents have been duly executed and delivered by the
Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms
except as such enforceability may be limited by the effect of bankruptcy,
insolvency, or similar laws affecting creditors’ rights generally or by general
equitable principles.
     4-3. Trade Names.
          (a) EXHIBIT 4-3, annexed hereto, is a listing of:
          (i) All names under which the Borrower ever conducted its business
since June 1, 2005.
          (ii) All Persons with whom the Borrower, since June 1, 2005,
consolidated or merged, or from whom the Borrower ever acquired in a single
transaction or in a series of related transactions substantially all of such
Person’s assets.
          (b) The Borrower will provide the Agent with not less than twenty-one
(21) days prior written notice (with reasonable particularity) of any change to
the Borrower’s name from that under which the Borrower is conducting its
business at the execution of this Agreement and will not effect such change
unless the Borrower is then in compliance in all material respects with all
provisions of this Agreement.
     4-4. Infrastructure.
          (a) The Borrower owns and possesses, or has the right to use (and will
hereafter own, possess, or have such right to use) all patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, and other
intellectual or proprietary property of any third Person necessary for the
Borrower’s conduct of the Borrower’s business, except where the failure to do so
would not have a material adverse effect on the business or assets of the
Borrower.
          (b) The conduct by the Borrower of the Borrower’s business does not
presently infringe (nor will the Borrower conduct its business in the future so
as to infringe) the patents, industrial designs, trademarks, trade names, trade
styles, brand names, service marks, logos, copyrights, trade

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secrets, know-how, confidential information, or other intellectual or
proprietary property of any third Person.
     4-5. Locations.
          (a) The Collateral, and the books, records, and papers of Borrower’s
pertaining thereto, are kept and maintained solely at the following locations:
          (i) The Borrower’s chief executive offices which are at 3601 Plains
Boulevard, Amarillo, Texas 79102.
          (ii) Those locations which are listed on EXHIBIT 4-5, annexed hereto,
which EXHIBIT includes, with respect to each such location, the name and address
of the landlord on the Lease which covers such location (or an indication that
the Borrower owns the subject location) and of all service bureaus with which
any such records are maintained.
          (b) The Borrower shall not remove any of the Collateral from said
chief executive office or those locations listed on EXHIBIT 4-5 except for the
following purposes:
          (i) To accomplish sales or rentals of Inventory in the ordinary course
of business.
          (ii) To move Inventory from one such location to another such
location.
          (iii) To utilize such of the Collateral as is removed from such
locations in the ordinary course of business.
          (iv) To accomplish other sales and dispositions as are permitted
hereunder.
          (c) The Borrower will not:
          (i) Execute, alter, modify, or amend any Lease after the occurrence of
any Event of Default.
          (ii) Commit to, or open or close any location at which the Borrower
maintains, offers for sale, or stores any of the Collateral, except that upon
notice to and consent of the Agent and provided that no Event of Default then
exists, the Borrower may:
          (A) Acquire one or more new store locations.
          (B) Close one or more store locations.
          (d) Except as otherwise disclosed pursuant to, or permitted by, this
Section 4-5, no tangible personal property of the Borrower is in the care or
custody of any third party or stored or entrusted with a bailee or other third
party and none shall hereafter be placed under such care, custody, storage, or
entrustment.

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     4-6. Title to Assets.
          (a) The Borrower is, and shall hereafter remain, the owner of the
Collateral free and clear of all Encumbrances with the exceptions of the
following (the “Permitted Encumbrances”):
          (i) Encumbrances in favor of the Agent.
          (ii) Liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings and provided that no lien has been filed in respect thereof.
          (iii) Non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of the Borrower’s business to
the extent: such liens secure obligations which are not overdue or such liens
secure obligations relating to claims or liabilities which are fully insured
(subject to commercially reasonable deductibles) and are being defended at the
sole cost and expense and at the sole risk of the insurer or are being contested
in good faith by appropriate proceedings diligently pursued and available to the
Borrower, in each instance prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on the Borrower’s books.
          (iv) Carriers’, warehousemen’s, materialmen’s, mechanics, repairmen’s
or similar liens incurred in the ordinary course of business.
          (v) Purchase money security interests in equipment securing
obligations not in excess of $10 Million unpaid principal balance outstanding at
any one time on account of the purchase of new equipment.
          (vi) Zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property.
          (vii) Deposits under workmen’s compensation, unemployment insurance,
pensions, and other employee benefits, and social security laws, or to secure
the performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations or surety or
appeal bonds, or to secure indemnity, performance or other similar bonds arising
in the ordinary course of business.
          (viii) Landlord’s liens by operation of law where waivers thereof have
not been obtained.
          (ix) Interests of lessors under Capital Leases.
          (x) Liens consisting of security deposits made by the Borrower.
          (xi) Those Encumbrances (if any) listed on EXHIBIT 4-6, annexed
hereto.
          (b) The Borrower does not, and shall not, have possession of any
property on consignment to the Borrower having a Cost aggregating more than
$600,000.00 at any one time.

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          (c) The Borrower shall not acquire or obtain the right to use any
Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an interest,
except for:
          (i) Equipment which is merely incidental to the conduct of the
Borrower’s business.
          (ii) Equipment, the acquisition or right to use of which has been
consented to by the Agent, which consent may be conditioned upon the Agent’s
receipt of such agreement with the third party which has an interest in such
Equipment as is satisfactory to the Agent.
     4-7. Indebtedness. The Borrower does not and shall not hereafter have any
Indebtedness with the exceptions of:
          (a) Any Indebtedness on account of the Liabilities.
          (b) The Indebtedness (if any) listed on EXHIBIT 4-7, annexed hereto
and all renewals, extensions, refinancings, and modifications (but not
increases) thereof.
          (c) Current liabilities for taxes incurred in the ordinary course of
business which are not yet due and payable or which are being contested in good
faith by appropriate proceedings for which adequate reserves, if required by
GAAP, have been established.
          (d) Trade payables arising in the ordinary course of business (i) that
are paid within the earlier of (A) 60 days of the date when payment thereof is
due and payable and (B) 180 days of the date the respective goods are delivered
or services are rendered or (ii) which are being contested in good faith by
appropriate proceedings for which adequate reserves, if required by GAAP, have
been established.
          (e) Purchase money Indebtedness for equipment purchases which does not
exceed, in aggregate, $10,000,000 principal outstanding at any one time.
     4-8. Insurance.
          (a) EXHIBIT 4-8, annexed hereto, is a schedule of all insurance
policies owned by the Borrower or under which the Borrower is the named insured.
Each of such policies is in full force and effect. Neither the Borrower nor, to
the Borrower’s knowledge, the issuer of any such policy is in default or
violation of any such policy.
          (b) The Borrower shall have and maintain at all times from responsible
companies insurance covering such risks, in such amounts, containing such terms,
in such form, for such periods, and written by such companies as may be
reasonably satisfactory to the Agent.
          (c) All insurance carried by the Borrower shall provide for a minimum
of thirty (30) days’ written notice of cancellation to the Agent and all such
insurance which covers the Collateral shall

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include an endorsement in favor of the Agent, which endorsement shall provide
that the insurance, to the extent of the Agent’s interest therein, shall not be
impaired or invalidated, in whole or in part, by reason of any act or neglect of
the Borrower or by the failure of the Borrower to comply with any warranty or
condition of the policy.
          (d) The coverage reflected on EXHIBIT 4-8 presently satisfies the
foregoing requirements, it being recognized by the Borrower, however, that such
requirements may change hereafter to reflect changing circumstances.
          (e) The Borrower shall furnish the Agent from time to time with
certificates or other evidence reasonably satisfactory to the Agent regarding
compliance by the Borrower with the foregoing requirements.
          (f) In the event of the failure by the Borrower to maintain insurance
as required herein, the Agent, at its option, may obtain such insurance,
provided, however, the Agent’s obtaining of such insurance shall not constitute
a cure or waiver of any Event of Default occasioned by the Borrower’s failure to
have maintained such insurance.
     4-9. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect, except where the failure to do so would not have a material adverse
effect on the business or assets of the Borrower. To the Borrower’s knowledge,
no party to any such license or agreement is in default or violation thereof.
The Borrower has not received any notice or threat of cancellation of any such
license or agreement.
     4-10. Leases. EXHIBIT 4-10, annexed hereto, is a schedule of all presently
effective Capital Leases. To the Borrower’s knowledge, each of such Capital
Leases is in full force and effect. To the Borrower’s knowledge, no party to any
Lease or Capital Lease is in default or violation of any such Lease or Capital
Lease. The Borrower has not received any notice or threat of cancellation of any
such Lease or Capital Lease. The Borrower hereby authorizes the Agent at any
time and from time to time, after the occurrence of an Event of Default, to
contact any of the Borrower’s landlords in order to confirm the Borrower’s
continued compliance with the terms and conditions of the Lease(s) between the
Borrower and that landlord and to discuss such issues, concerning the Borrower’s
occupancy under such Lease(s), as the Agent may determine.
     4-11. Requirements of Law. The Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all Requirements of
Law except where the failure of such compliance would not have a material
adverse effect on the Borrower’s business or assets. The Borrower has not
received any notice of any violation of any Requirement of Law (other than of a
violation which

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would not have a material adverse effect on the Borrower’s business or assets),
which violation has not been cured or otherwise remedied.
     4-12. Labor Relations.
          (a) The Borrower has not been and is not presently a party to any
collective bargaining or other labor contract.
          (b) There is not presently pending and, to the Borrower’s knowledge,
there is not threatened any of the following:
          (i) Any strike, slowdown, picketing, work stoppage, or employee
grievance process.
          (ii) Any proceeding against or affecting the Borrower relating to the
alleged violation of any Applicable Law pertaining to labor relations or before
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable governmental body, organizational activity, or other labor or
employment dispute against or affecting the Borrower, which, if determined
adversely to the Borrower could reasonably be expected to have a material
adverse effect on the business or assets of the Borrower.
          (iii) Any lockout of any employees by the Borrower (and no such action
is contemplated by the Borrower).
          (iv) Any application for the certification of a collective bargaining
agent.
          (c) No event has occurred or circumstance exists which could
reasonably be expected to provide the basis for any work stoppage or other labor
dispute.
          (d) The Borrower:
          (i) Has complied in all material respects with all Applicable Law
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing.
          (ii) Is not liable for the payment of compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for the Borrower’s
failure to comply with any Applicable Law referenced in Section 4-12(d)(i), the
amount of which would have a material adverse effect on the business or assets
of the Borrower.
     4-13. Maintain Properties. The Borrower shall:
          (a) Keep the Collateral in good order and repair (ordinary reasonable
wear and tear and insured casualty excepted).
          (b) Not suffer or cause the waste or destruction of any material part
of the Collateral.

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          (c) Not use any of the Collateral in violation of any policy of
insurance thereon.
          (d) Not sell, lease, or otherwise dispose of any of the Collateral,
other than the following:
          (i) The sale or rental of Inventory in compliance with this Agreement.
          (ii) The disposal of Equipment which is obsolete, worn out, or damaged
beyond repair, which Equipment is replaced to the extent necessary to preserve
or improve the operating efficiency of the Borrower.
          (iii) The turning over to the Agent of all Receipts as provided
herein.
          (iv) The sales of previously viewed movies and games.
          (v) The sales of fixed assets (which shall not include sale of
previously viewed movies and games) during each Fiscal year which have an
aggregate book value not in excess of 10% of the book value of the Borrower’s
total fixed assets as of the beginning of such Fiscal year.
     4-14. Taxes.
          (a) With respect to the Borrower’s federal, state, and local tax
liability and obligations:
          (i) The Borrower, in compliance with all Applicable Law, has properly
filed all returns due to be filed up to the date of this Agreement, except to
the extent any failure to file would not have a material adverse effect on the
business or assets of the Borrower.
          (ii) Except as described on EXHIBIT 4-14:
          (A) The Borrower has not received from any taxing authority any
request to perform any examination of or with respect to the Borrower nor any
other written or verbal notice in any way relating to any claimed failure by the
Borrower to comply with all Applicable Law concerning payment of any taxes or
other amounts in the nature of taxes, in each case that has not been resolved.
          (B) No agreement is extant which waives or extends any statute of
limitations applicable to the right of any taxing authority to assert a
deficiency or make any other claim for or in respect to federal income taxes.
          (C) No issue has been raised in any tax examination of the Borrower
which, by application of similar principles, reasonably could be expected to
result in the assertion by any taxing authority of a material deficiency for any
Fiscal year open for examination, assessment, or claim.

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          (b) The Borrower has, and hereafter shall: pay, as they become due and
payable, all taxes and unemployment contributions and other charges of any kind
or nature levied, assessed or claimed against the Borrower or the Collateral by
any person or entity, except those taxes, contributions and charges that are
being contested in good faith by appropriate proceedings for which adequate
reserves, if required by GAAP, have been established, and provided that no lien
has been filed in respect thereto, properly exercise any trust responsibilities
imposed upon the Borrower by reason of withholding from employees’ pay or by
reason of the Borrower’s receipt of sales tax or other funds for the account of
any third party; timely make all contributions and other payments as may be
required pursuant to any Employee Benefit Plan now or hereafter established by
the Borrower; and timely file all tax and other returns and other reports with
each governmental authority to whom the Borrower is obligated to so file, except
where the failure to file would not have a material adverse effect on the
business or assets of the Borrower.
     4-15. No Margin Stock. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
     4-16. ERISA.
          (a) Except as disclosed on EXHIBIT 4-16(a), annexed hereto, neither
the Borrower nor any ERISA Affiliate is aware of or has knowingly:
          (i) Violated or failed to be in full compliance with the Borrower’s
Employee Benefit Plan.
          (ii) Failed timely to file all reports and filings required by ERISA
to be filed by the Borrower.
          (iii) Engaged in any nonexempt “prohibited transactions” or
“reportable events” (respectively as described in ERISA).
          (iv) Engaged in, or committed, any act such that a tax or penalty
reasonably could be imposed upon the Borrower on account thereof pursuant to
ERISA, which tax or penalty would have a material adverse effect on the business
or assets of the Borrower.
          (v) Accumulated any material cumulative funding deficiency within the
meaning of ERISA.
          (vi) Terminated any Employee Benefit Plan such that a lien could be
asserted against any assets of the Borrower on account thereof pursuant to
ERISA.

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          (vii) Been a member of, contributed to, or have any obligation under
any Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.
          (b) Neither the Borrower nor any ERISA Affiliate shall ever knowingly
or intentionally engage in any action of the type described in Section 4-16(a).
     4-17. Hazardous Materials.
          (a) To the best of the Borrower’s knowledge the Borrower has never:
(i) been legally responsible for any release or threat of release of any
Hazardous Material or (ii) received notification of the incurrence of any
material expense in connection with the assessment, containment, or removal of
any Hazardous Material for which the Borrower would be responsible.
          (b) The Borrower shall: (i) dispose of any Hazardous Material only in
compliance with all Environmental Laws and (ii) have possession of any Hazardous
Material only in the ordinary course of the Borrower’s business and in
compliance with all Environmental Laws.
     4-18. Litigation. Except as described in EXHIBIT 4-18, annexed hereto,
there is not presently pending or, to the knowledge of the Borrower, threatened
by or against the Borrower any suit, action, proceeding, or investigation which,
if determined adversely to the Borrower, would have a material adverse effect
upon the Borrower’s financial condition or ability to conduct its business as
such business is presently conducted or is contemplated to be conducted in the
foreseeable future.
     4-19. Dividends, Investments, Corporate Action. The Borrower shall not:
          (a) Pay any cash dividend or make any other distribution in respect of
any class of the Borrower’s capital stock.
          (b) (i) Own, redeem, retire, purchase, repurchase, or acquire any of
the Borrower’s capital stock, provided that (A) if, after giving effect to each
such transaction, the Pro Forma Availability Condition is satisfied, the
Borrower may redeem, retire, purchase, repurchase, or acquire the Borrower’s
capital stock provided that the amount of consideration paid for all such
transactions after the date hereof shall not exceed $10,000,000 in the aggregate
unless the provisions of subsection (B) of this clause (b)(i) are satisfied, or
(B) if, after giving effect to each such transaction, the Payment Conditions are
satisfied, the Borrower may redeem, retire, purchase, repurchase, or acquire the
Borrower’s capital stock without any limitation on the aggregate consideration
paid; and
          (ii) Borrower may repurchase stock options issued under the Borrower’s
employee stock option plan for non-cash consideration consisting of restricted
stock of the Borrower.

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          (c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any Person.
          (d) Merge or consolidate or be merged or consolidated with or into any
other corporation or other entity, provided, that a subsidiary of the Borrower
may merge or consolidate into the Borrower.
          (e) Consolidate any of the Borrower’s operations with those of any
other Person, other than a subsidiary of the Borrower.
          (f) Organize or create any Subsidiary, without notifying the Agent,
and contemporaneously with such formation, causing such Subsidiary to execute
(i) an Unconditional and Unlimited Guaranty of all of the Borrower’s
Liabilities, substantially in the form of the guaranty agreement executed on
August 29, 2000 by the Borrower’s existing Subsidiary, and (ii) a Security
Agreement granting to the Agent a first perfected interest in its business
assets, substantially in the form of the security agreement executed on
August 17, 2006 by the Borrower’s existing Subsidiary.
          (g) Subordinate any debts or obligations owed to the Borrower by any
third party to any other debts owed by such third party to any other Person.
          (h) Acquire any assets other than in the ordinary course and conduct
of the Borrower’s business as conducted at the execution of this Agreement.
     4-20. Loans. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
          (a) Advance payments made to the Borrower’s suppliers in the ordinary
course.
          (b) Advances to the Borrower’s officers, employees, and salespersons
with respect to reasonable expenses to be incurred by such officers, employees,
and salespersons for the benefit of the Borrower, which expenses are properly
substantiated by the person seeking such advance and properly reimbursable by
the Borrower.
          (c) Advances and loans to the Borrower’s Subsidiaries.
     4-21. Protection of Assets The Agent, in the Agent’s reasonable discretion,
and from time to time, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action which the Agent may deem reasonably
necessary to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Agent has had an opportunity to be heard), from which finding no further appeal
is available, that the Agent had acted in actual bad faith or in a grossly
negligent manner.

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The Borrower shall pay to the Agent, on demand, or the Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Agent pursuant
to this Section 4-21.
     4-22. Line of Business. The Borrower shall not engage in any business other
than the business in which it is currently engaged or a business reasonably
related thereto (the conduct of which reasonably related business is reflected
in the Business Plan).
     4-23. Affiliate Transactions. The Borrower shall not enter into any
transaction with any Affiliate, other then transactions in the ordinary course
of business which are on fair and reasonable terms, no less favorable to the
Borrower than those which would have been imposed in a comparable arms length
transaction with a person who is not an Affiliate.
     4-24. Further Assurances.
          (a) The Borrower is not the owner of, nor has it any interest in, any
property or asset (other than any Exempt Asset) which, immediately upon the
satisfaction of the conditions precedent to the effectiveness of the credit
facility contemplated hereby (Article 3) will not be subject to a perfected
Collateral Interest in favor of the Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.
          (b) The Borrower will not hereafter acquire any asset or any interest
in property (other than any Exempt Asset) which is not, immediately upon such
acquisition, subject to such a perfected Collateral Interest in favor of the
Agent to secure the Liabilities (subject only to Permitted Encumbrances).
          (c) The Borrower shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agent may reasonably request to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent’s
Collateral Interests in the Collateral; and to facilitate the collection of the
Receivables Collateral. The Borrower shall execute all such instruments as may
be reasonably required by the Agent with respect to the recordation and/or
perfection of the Collateral Interests created or contemplated herein.
          (d) The Borrower hereby designates the Agent as and for the Borrower’s
true and lawful attorney, with full power of substitution, to sign and file any
financing statements in order to perfect the Agent’s Collateral Interests in the
Collateral.
          (e) The Borrower hereby authorizes the Agent to file such financing
statements as the Agent determines as appropriate to perfect or protect the
Agent’s Collateral Interests in the Collateral.

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          (f) A carbon, photographic, or other reproduction of this Agreement or
of any financing statement or other instrument executed pursuant to this
Section 4-24 shall be sufficient for filing to perfect the security interests
granted herein.
     4-25. Adequacy of Disclosure.
          (a) All financial statements furnished to the Agent and to each
Revolving Credit Lender by the Borrower have been prepared in accordance with
GAAP consistently applied and present fairly in all material respects the
financial condition of the Borrower at the date(s) thereof and the results of
operations and cash flows for the period(s) covered (provided however, that
unaudited financial statements are subject to normal year end adjustments and to
the absence of footnotes). There has been no change in the financial condition,
results of operations, or cash flows of the Borrower since the date(s) of such
financial statements, other than changes in the ordinary course of business,
which changes have not been materially adverse, either singularly or in the
aggregate.
          (b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease which is required to be reflected in
financial statements prepared in accordance with GAAP and that is not noted in
the Borrower’s financial statements furnished to the Agent prior to the
execution of this Agreement.
          (c) To the Borrower’s knowledge, no document, instrument, agreement,
or paper now or hereafter given to the Agent and to each Revolving Credit Lender
by or on behalf of the Borrower or any guarantor of the Liabilities in
connection with the execution of this Agreement by the Agent and to each
Revolving Credit Lender contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Borrower which has, or which, in the foreseeable future could reasonably be
expected to have, a material adverse effect on the financial condition of the
Borrower or any such guarantor which has not been disclosed in writing to the
Agent and to each Revolving Credit Lender.
     4-26. No Restrictions on Liabilities. The Borrower shall not enter into or
directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, the Borrower’s:
          (a) Creation of, and granting of Collateral Interests in favor of the
Agent.
          (b) Incurrence of Liabilities.
     4-27. Other Covenants. The Borrower shall not indirectly do or cause to be
done any act which, if done directly by the Borrower, would breach any covenant
contained in this Agreement.

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ARTICLE 5 — Financial Reporting and Performance Covenants:
     5-1. Maintain Records. The Borrower shall:
          (a) At all times, keep proper books of account, in which full, true,
and accurate entries shall be made of all of the Borrower’s financial
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect in all material respects the financial condition of
the Borrower at the close of, and its results of operations for, the periods in
question.
          (b) Timely provide the Agent with those financial reports, statements,
and schedules required by this Article 5 or otherwise, each of which reports,
statements and schedules shall be prepared, to the extent applicable, in
accordance with GAAP applied consistently with prior periods to fairly reflect
in all material respects the financial condition of the Borrower at the close
of, and the results of operations for, the period(s) covered therein.
          (c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales records
of its Inventory, accurately and sufficiently itemizing and describing the
kinds, types, and quantities of Inventory and the cost and selling prices
thereof.
          (d) At all times, retain an independent registered public accounting
firm which is reasonably satisfactory to the Agent and instruct such accountants
to discuss with the Agent the Borrower’s financial performance, financial
condition, operating results, controls, and such other matters, within the scope
of the retention of such accountants (and subject to work product and
accountant/client privileged information), as may be requested by the Agent.
          (e) Not change the Borrower’s Fiscal year.
     5-2. Access to Records.
          (a) The Borrower shall accord the Agent with access from time to time
as the Agent may require to all properties owned by or over which the Borrower
has control. The Agent shall have the right, and the Borrower will permit the
Agent from time to time as Agent may reasonably request, to examine, inspect,
copy, and make extracts from any and all of the Borrower’s books, records,
electronically stored data, papers, and files. The Borrower shall make all of
the Borrower’s copying facilities available to the Agent.
          (b) The Borrower hereby authorizes the Agent to:
          (i) Inspect, copy, duplicate, review, cause to be reduced to hard
copy, run off, draw off, and otherwise use any and all computer or
electronically stored information or data which relates to the Borrower, of the
Borrower, or any service bureau, contractor, accountant, or

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other person, and directs any such service bureau, contractor, accountant, or
other person fully to cooperate with the Agent with respect thereto.
          (ii) Verify at any time the Collateral or any portion thereof,
including verification with Account Debtors, and/or with the Borrower’s computer
billing companies, collection agencies, and accountants and to sign the name of
the Borrower on any notice to the Borrower’s Account Debtors or verification of
the Collateral. .
          (c) The Agent from time to time may designate one or more
representatives to exercise the Agent’s rights under this Section 5-2 as fully
as if the Agent were doing so.
     5-3. Prompt Notice to Agent.
          (a) The Borrower shall provide the Agent with written notice promptly
upon the occurrence of any of the following events, which written notice shall
be with reasonable particularity as to the facts and circumstances in respect of
which such notice is being given:
          (i) Any change in the Borrower’s President and chief financial
officer.
          (ii) Any ceasing of the Borrower’s making of payment, in the ordinary
course, to any of its creditors (other than its ceasing of making of such
payments on account of a de minimis dispute).
          (iii) Any failure by the Borrower to pay rent at any of the Borrower’s
locations, which failure continues for more than three (3) days following the
last day on which such rent was payable (including any grace periods therefor)
without more than a de minimis adverse effect to the Borrower.
          (iv) Any material adverse change in the business, operations, or
financial condition of the Borrower.
          (v) The Borrower’s becoming InDefault.
          (vi) Any intention on the part of the Borrower to discharge the
Borrower’s present independent registered public accounting firm or any
withdrawal or resignation by such independent registered public accounting firm
from their acting in such capacity (as to which, see Subsection 5-1(d)).
          (vii) Any litigation which, if determined adversely to the Borrower,
might reasonably be expected to have a material adverse effect on the financial
condition of the Borrower.
          (b) The Borrower shall:
          (i) Provide the Agent, when so distributed, with copies of any
materials distributed to the shareholders of the Borrower (qua such
shareholders).

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          (ii) Provide the Agent:
          (A) When filed, copies of the Borrower’s Form 10-K, Form 8-K, Form
10-Q and Form 14A filed with the SEC.
          (B) When received, copies of all correspondence from the SEC, other
than routine non-substantive general communications from the SEC.
          (iii) Provide the Agent, when received by the Borrower, with a copy of
any management letter or similar communications from any accountant of the
Borrower.
     5-4. Borrowing Base Certificate. The Borrower shall provide the Agent by
11:30 a.m. Central time, on the fifteenth day of each Fiscal month, with a
Borrowing Base Certificate (in the form of EXHIBIT 5-4 annexed hereto, as such
form may be revised from time to time by the Agent (the “Borrowing Base
Certificate”)). Notwithstanding the foregoing, if an Increased Reporting Event
has occurred and is continuing, instead of providing the Agent with a Borrowing
Base Certificate on a monthly basis, the Borrower shall provide the Agent with a
Borrowing Base Certificate on a weekly basis, on Wednesday of each week (as of
the immediately preceding Saturday), commencing with the week in which the
Increased Reporting Event occurs. The Agent acknowledges that so long as the
Borrower is required to provide such information to the Agent on a weekly basis,
the Borrower will be providing such weekly information based upon its good faith
estimates of its Inventory (except for the information provided for the final
week of each Fiscal month, which shall not be based upon estimates); provided,
however, the Borrower acknowledges and agrees with the Agent that the Borrower
shall use its best efforts and good faith to provide the Agent with as accurate
information as possible for such weekly Borrowing Base Certificates. Such
Certificate may be sent to the Agent by facsimile transmission, electronic mail
transmission, or may otherwise be posted on a secure Internet or intranet
website, if any, to which the Agent and Lenders have access, provided that the
original thereof is forwarded to the Agent on the date of such transmission.
     5-5. Monthly Reports.
          (a) Monthly, the Borrower shall provide the Agent with original
counterparts of the following (each in such form as the Agent from time to time
may reasonably specify):
          (i) Within fifteen (15) days of the end of the previous Fiscal month:
          (A) A report generated by the Borrower’s inventory control system,
which report reflects the functional equivalent of a stock ledger inventory.
          (B) An Inventory Certificate (signed by the Borrower’s President or
Chief Financial Officer or Vice President-Finance).
          (C) By Department Inventory Report

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          (D) Distribution Center Inventory Report (By Department).
          (E) Return Center Inventory Report (By Department).
          (F) Notwithstanding the foregoing, if an Increased Reporting Event has
occurred and is continuing, instead of providing the Agent with the information
required by this subsection 5-5(a)(i)(A),(B), (C),(D) and (E) on a monthly
basis, the Borrower shall provide the Agent with such information on a weekly
basis, on Wednesday of each week (as of the immediately preceding Saturday ),
commencing with the week in which the Increased Reporting Event occurs. The
Agent acknowledges that so long as the Borrower is required to provide such
information to the Agent on a weekly basis, the Borrower will be providing such
weekly information based upon its good faith estimates (except for the
information provided for the final week of each Fiscal month, which shall not be
based upon estimates); provided, however, the Borrower acknowledges and agrees
with the Agent that the Borrower shall use its best efforts and good faith to
provide the Agent with as accurate information as possible for such weekly
reports. The weekly report required to be delivered by the Borrower to the Agent
for the final week of each Fiscal month while the provisions of this paragraph
are in effect shall provide, in addition to the information required by this
subsection 5-5(a)(i)(A), (B), (C), (D) and (E), a reconciliation of any
discrepancies in the information which was previously provided to the Agent in
the prior weekly reports for such Fiscal month.
          (ii) Within thirty (30) days of the end of the previous Fiscal month:
          (A) Reconciliation of the above described Report and Inventory
Certificate (Section 5-5(a)(i)(A)) to Availability and to the general ledger as
of the end of the subject month.
          (B) A schedule of purchases from the Borrower’s twenty largest vendors
(in terms of year to date purchases), which schedule shall be in such form as
may be satisfactory to the Agent and shall include year to date cumulative
purchases.
          (C) A summary aging of the Borrower’s accounts payable by vendor type.
          (D) A Store Activity Report.
          (E) The officer’s compliance certificate described in Section 5-8.
          (F) An internally prepared consolidated financial statement of the
financial condition of the Borrower and its Subsidiaries and the results of
operations for, the period ending with the end of the subject month, which
financial statement shall include, at a minimum, a balance sheet, income
statement, cash flow and comparison of

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total same store sales detailed by merchandise and rental for the corresponding
month of the then immediately previous year, as well as to the Business Plan.
          (b) For purposes of Sections 5-5(a)(i), above, and 5-5(a)(ii), above,
the first “previous month” in respect of which the items respectively required
by those Sections shall be the month prior to that which dates this Agreement,
except that the first group of items required to be provided pursuant to
Section 5-5(a)(i) shall be included with those provided pursuant to Section
5-5(a)(ii); thereafter, those items shall be provided in accordance with the
requirements of Section 5-5(a)(i).
     5-6. Quarterly Reports. Quarterly, within forty-five (45) days following
the end of each of the Borrower’s Fiscal quarters, the Borrower shall provide
the Agent with the following:
          (a) A copy of the management prepared consolidated financial statement
of the Borrower and its Subsidiaries for the period from the beginning of the
Borrower’s then current Fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous Fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement,
statement of changes in shareholders’ equity, and cash flows and comparisons for
the corresponding quarter of the then immediately previous year, as well as to
the Business Plan.
          (b) The officer’s compliance certificate described in Section 5-8
          (c) Store specific EBITDA.
          (d) A schedule of any DDAs that have been opened in the previous
Fiscal quarter, which shall include, with respect to each depository: (i) the
name and address of that depository; (ii) the account number(s) of the
account(s) maintained with such depository; and (iii) a contact person at such
depository.
     5-7. Annual Reports.
     Annually, within ninety (90) days following the end of the Borrower’s
Fiscal year, the Borrower shall furnish the Agent with the following:
          (i) A copy of the annual consolidated financial statement for the
Borrower and its Subsidiaries, which statement shall have been prepared by, and
bear the unqualified opinion of, the Borrower’s independent registered public
accounting firm (i.e. said statement shall be “certified” by such accountants)
and shall include, at a minimum (with comparative information for the then prior
Fiscal year) a balance sheet, income statement, statement of changes in
shareholders’ equity, and cash flows.
          (ii) The officer’s compliance certificate described in Section 5-8.

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     5-8. Officers’ Certificates. The Borrower shall cause either the Borrower’s
President or its Chief Financial Officer or Vice President-Finance, in each
instance, to provide a Certificate with those monthly statements required
pursuant to Section 5-5(a)(ii), quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
          (a) Indicate that the subject statement was prepared in accordance
with GAAP consistently applied and presents fairly in all material respects the
consolidated financial condition of the Borrower and its Subsidiaries at the
close of, and the consolidated results of the Borrower’s and its Subsidiaries’
operations and cash flows for, the period(s) covered, subject, however to the
following:
          (i) Usual year end adjustments (this exception shall not be included
in the Certificate which accompanies such annual statement).
          (ii) Material Accounting Changes (in which event, such Certificate
shall include a schedule (in reasonable detail) of the effect of each such
Material Accounting Change) not previously specifically taken into account in
the determination of the financial performance covenant imposed pursuant to
Section 5-11.
          (b) Indicate either that (i) the Borrower is not InDefault, or (ii) if
such an event has occurred, its nature (in reasonable detail) and the steps (if
any) being taken or contemplated by the Borrower to be taken on account thereof.
          (c) Include calculations concerning the Borrower’s compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-11 hereof.
     5-9. Inventories, Appraisals, and Audits.
          (a) The Agent, at the expense of the Borrower, may participate in
and/or observe each internal cycle count and/or inventory of so much of the
Collateral as consists of Inventory which is undertaken on behalf of the
Borrower.
          (b) The Borrower, at its own expense, shall conduct regular cycle
inventory counts that determine total inventory value at least twice at each of
its locations in each twelve (12) month period during which this Agreement is in
effect (the spacing of the scheduling of which inventories shall be subject to
the Agent’s discretion) conducted by such inventory takers as are satisfactory
to the Agent and following such methodology as may be satisfactory to the Agent.
          (i) The Borrower shall provide the Agent with a copy of the
preliminary results of each such inventory (as well as of any other physical
inventory undertaken by the Borrower) within ten (10) days following the
completion of such inventory.

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          (ii) The Borrower, within thirty (30) days following the completion of
such inventory, shall provide the Agent with a reconciliation of the results of
each such inventory (as well as of any other physical inventory undertaken by
the Borrower) and shall post such results to the Borrower’s By-Department
monthly report generated by the Borrower’s inventory control system and, as
applicable to the Borrower’s other financial books and records.
          (iii) The Agent, in its discretion, if the Borrower is InDefault, may
cause such additional inventories to be taken as the Agent determines (each, at
the expense of the Borrower).
          (c) Upon the request of the Agent after reasonable prior notice, the
Borrower shall permit, and cooperate with, 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
Borrower shall pay the fees and expenses of the Agent and such professionals
with respect to such appraisals. Without limiting the foregoing, the Borrower
acknowledges that the Agent may, in its discretion, undertake up to two
(2) appraisals in any Fiscal year at the Borrower’s expense, provided that
during the continuance of an Increased Reporting Event arising as a result of
the Borrower’s failure to maintain the required Availability, the Agent may
undertake up to three (3) appraisals in any Fiscal year at the Borrower’s
expense Notwithstanding the foregoing, the Agent may cause additional appraisals
to be undertaken (i) as it in its discretion deems necessary or appropriate, at
its own expense or, (ii) if required by Applicable Law or if the Borrower is
InDefault, at the expense of the Borrower.
          (d) Upon the request of the Agent after reasonable prior notice, the
Borrower shall permit, and cooperate with, the Agent or professionals (including
investment bankers, consultants, accountants, and lawyers) retained by the Agent
to conduct commercial finance examinations and other evaluations, including,
without limitation, of (i) the 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. The Borrower shall pay the fees and expenses of
the Agent and such professionals with respect to such examinations and
evaluations. Without limiting the foregoing, the Borrower acknowledges that the
Agent may, in its discretion, undertake up to two (2) commercial finance
examinations in any Fiscal year at the Borrower’s expense, provided that during
the continuance of an Increased Reporting Event arising as a result of the
Borrower’s failure to maintain the required Availability, the Agent may
undertake up to three (3) commercial finance examinations in any Fiscal year at
the Borrower’s expense. Notwithstanding the foregoing, the Agent may cause
additional commercial finance examinations to be undertaken (i) as it in its
discretion deems necessary or appropriate, at its own expense or, (ii) if
required by Applicable Law or if the Borrower is InDefault, at the expense of
the Borrower.

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          (e) The Agent from time to time (in all events, at the Borrower’s
expense) may undertake “mystery shopping” (so-called) visits to all or any of
the Borrower’s business premises.
     5-10. Additional Financial Information.
          (a) In addition to all other information required to be provided
pursuant to this Article 5, the Borrower promptly shall provide the Agent with
such other and additional information concerning the Borrower, the Collateral,
the operation of the Borrower’s business, and the Borrower’s financial
condition, including original counterparts of financial reports and statements,
as the Agent may from time to time reasonably request from the Borrower.
          (b) The Borrower may provide the Agent, from time to time hereafter,
with updated forecasts of the Borrower’s anticipated performance and operating
results.
          (c) In all events, the Borrower, no sooner than ninety (90) nor later
than sixty (60) days prior to the end of each of the Borrower’s Fiscal years,
shall provide the Agent with an updated and extended forecast which shall go out
at least through the end of the then next Fiscal year and shall include an
income statement, balance sheet, and statement of cash flow, by month, each
prepared in conformity with GAAP and consistent with the Borrower’s then current
practices.
          (d) The Borrower recognizes that all appraisals, inventories,
analysis, financial information, and other materials which the Agent may obtain,
develop, or receive with respect to the Borrower are confidential to the Agent
and that, except as otherwise provided herein, the Borrower is not entitled to
receipt of any of such appraisals, inventories, analysis, financial information,
and other materials, nor copies or extracts thereof or therefrom.
          (e) The Borrower’s Business Plan has been delivered to the Agent.
     5-11. Financial Performance Covenant. The Borrower shall maintain
Availability of not less than $10 Million at all times.
  ARTICLE 6 — Use of Collateral:
     6-1. Use of Inventory Collateral.
          (a) The Borrower shall not engage
          (i) In any sale of the Inventory other than for fair consideration in
the conduct of the Borrower’s business in the ordinary course.
          (ii) Sales or other dispositions to creditors.
          (iii) Sales or other dispositions in bulk.
          (iv) Sales of any Collateral in breach of any provision of this
Agreement.

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          (b) No sale of Inventory shall be on consignment, approval, or under
any other circumstances such that, with the exception of the Borrower’s
customary return policy applicable to the return of inventory purchased by the
Borrower’s retail customers in the ordinary course, such Inventory may be
returned to the Borrower without the consent of the Agent.
     6-2. Inventory Quality. All Inventory now owned or hereafter acquired by
the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
     6-3. Adjustments and Allowances. The Borrower may grant such allowances or
other adjustments to the Borrower’s Account Debtors as the Borrower may
reasonably deem to accord with sound business practice, provided, however, the
authority granted the Borrower pursuant to this Section 6-3 may be limited or
terminated by the Agent at any time after the occurrence of an Event of Default
in the Agent’s discretion.
     6-4. Validity of Accounts.
          (a) The amount of each Account shown on the books, records, and
invoices of the Borrower represented as owing by each Account Debtor is and will
be the correct amount actually owing by such Account Debtor and shall have been
fully earned by performance by the Borrower.
          (b) The Borrower has no knowledge of any impairment of the validity or
collectibility of any of the Accounts. The Borrower shall notify the Agent of
any such impairment immediately after the Borrower becomes aware of any such
impairment.
     6-5. Notification to Account Debtors. The Agent shall have the right after
the occurrence of an Event of Default to notify any of the Borrower’s Account
Debtors to make payment directly to the Agent and to collect all amounts due on
account of the Collateral.
  ARTICLE 7 — Cash Management, Payment of Liabilities:
     7-1. Depository Accounts.
          (a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present DDA’s,
which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
          (b) The Borrower shall deliver to the Agent, as a condition to the
effectiveness of this Agreement, Blocked Account Agreements with Amarillo
National Bank and Bank of America, N.A..

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          (c) Upon the request of the Agent after the occurrence and during the
continuance of a Cash Dominion Event, to the extent not previously provided, the
Borrower shall deliver to the Agent notifications, executed on behalf of the
Borrower, to each depository institution with which any DDA is maintained (other
than any Exempt DDA and the Blocked Account), in form reasonably satisfactory to
the Agent of the Agent’s interest in such DDA.
     7-2. Credit Card Receipts.
          (a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes all
arrangements to which the Borrower is a party with respect to the payment to the
Borrower of the proceeds of credit card charges for sales by the Borrower.
          (b) To the extent not previously delivered, the Borrower shall deliver
to the Agent, as a condition to the effectiveness of this Agreement,
notification, executed on behalf of the Borrower, to each of the Borrower’s
credit card clearinghouses and processors of notice (in form reasonably
satisfactory to the Agent), which notice provides that payment of all credit
card charges submitted by the Borrower to that clearinghouse or other processor
and any other amount payable to the Borrower by such clearinghouse or other
processor shall be directed to the Blocked Account (or if the Borrower prefers
to so specify in such notice, to the Concentration Account). The Borrower shall
not change such direction or designation except upon and with the prior written
consent of the Agent.
     7-3. The Concentration, Blocked, and Operating Accounts.
          (a) The following checking accounts have been or will be established
(and are so referred to herein):
          (i) The “Concentration Account” (so referred to herein): Established
by the Borrower with Bank of America.
          (ii) The “Blocked Account” (so referred to herein): Established by the
Borrower with Amarillo National Bank.
          (iii) The “Operating Account” (so referred to herein): Established by
the Borrower with Amarillo National Bank.
          (iv) The “Payroll Account” (so referred to herein) and established by
the Borrower with Amarillo National Bank.
          (b) The contents of each DDA (other than the Operating Account and the
Payroll Account) and of the Blocked Account constitutes Collateral and Proceeds
of Collateral.
          (c) The Borrower shall pay all fees and charges of, and maintain such
impressed balances as may be required by the depository in which any account is
opened as required hereby (even if such account is opened by and/or is the
property of the Agent).

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     7-4. Proceeds and Collections.
          (a) All Receipts and all cash proceeds of any sale or other
disposition of any of the Borrower’s assets constitute Collateral and proceeds
of Collateral. After the occurrence and during the continuance of a Cash
Dominion Event, all Receipts and all cash proceeds of any sale or other
disposition of any of the Borrower’s assets shall be held in trust by the
Borrower for the Agent; shall not be commingled with any of the Borrower’s other
funds, and shall be deposited and/or transferred only to the Blocked Account or
the Concentration Account.
          (b) After the occurrence and during the continuance of a Cash Dominion
Event, the Borrower shall cause the ACH or wire transfer to the Blocked Account,
no less frequently than daily (and whether or not there is then an outstanding
balance in the Loan Account) of the following:
          (i) The then contents of each DDA (other than any Exempt DDA), each
such transfer to be net of any minimum balance, not to exceed $1,500.00 as may
be required to be maintained in the subject DDA by the bank at which such DDA is
maintained).
          (ii) The proceeds of all credit card charges not otherwise provided
for pursuant hereto.
          (c) Whether or not any Liabilities are then outstanding, after the
occurrence and during the continuance of a Cash Dominion Event, the Borrower
shall cause the ACH or wire transfer to the Concentration Account, no less
frequently than daily, of the entire ledger balance of the Blocked Account, net
of such minimum balance, not to exceed $1,000.00 as may be required to be
maintained in the Blocked Account by the depository with which the Blocked
Account is maintained. Telephone advice (confirmed by written notice) shall be
provided to the Agent on each Business Day on which any such transfer is made.
          (d) In the event that, notwithstanding the provisions of this
Section 7-4, after the occurrence and during the continuance of a Cash Dominion
Event, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the Agent
and shall not be commingled with any of the Borrower’s other funds or deposited
in any account of the Borrower other than the Blocked Account.
     7-5. Payment of Liabilities.
          (a) On each Business Day during the continuance of a Cash Dominion
Event, the Agent shall apply the then collected balance of the Concentration
Account (net of fees charged, and of such impressed balances as may be required
by the bank at which the Concentration Account is maintained, not to exceed
$1,500.00) First, towards the SwingLine Loans and Second, towards the unpaid

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balance of the Loan Account and all other Liabilities, provided, however, for
purposes of the calculation of interest on the unpaid principal balance of the
Loan Account, such payment shall be deemed to have been made one (1) Business
Day after such transfer.
          (b) The following rules shall apply to deposits and payments under and
pursuant to this Agreement:
          (i) Funds shall be deemed to have been deposited to the Concentration
Account on the Business Day on which deposited, provided that notice of such
deposit is available to the Agent by 2:00PM (Boston time) on that Business Day.
          (ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on the Business Day
when they are good and collected funds, provided that notice of such payment is
available to the Agent by 2:00PM (Boston time) on that Business Day.
          (iii) If notice of a deposit to the Concentration Account
(Section 7-5(b)(i)) or payment (Section 7-5(b)(ii)) is not available to the
Agent until after 2:00PM (Boston time) on a Business Day, such deposit or
payment shall be deemed to have been made at 9:00AM on the then next Business
Day.
          (iv) All deposits to the Concentration Account and other payments to
the Agent are subject to clearance and collection.
          (c) The Agent shall transfer to the Operating Account any surplus in
the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7-5(a), above, on a daily basis (less those
amounts which are to be netted out, as provided therein) provided, however, in
the event that
          (i) the Borrower is InDefault; and
          (ii) one or more L/C’s are then outstanding,
then the Agent may establish a funded reserve of up to 110% of the aggregate
Stated Amounts of such L/C’s. Such funded reserve shall either be (i) returned
to the Borrower provided that the Borrower is not InDefault or (ii) applied
towards the Liabilities following the occurrence of any Event of Default
described in Section 10-12 or acceleration following the occurrence of any other
Event of Default.
     7-6. The Operating Account. Except as otherwise specifically provided in,
or permitted by, this Agreement, all checks shall be drawn by the Borrower upon,
and other disbursements shall be made by the Borrower solely from, the Operating
Account or the Payroll Account.

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  ARTICLE 8 - Grant of Security Interest:
     8-1. Grant of Security Interest. To secure the Borrower’s prompt, punctual,
and faithful performance of all and each of the Liabilities, the Borrower hereby
grants to the Agent, for the ratable benefit of the Revolving Credit Lenders, a
continuing security interest in and to, and assigns to the Agent, for the
ratable benefit of the Revolving Credit Lenders, the following, and each item
thereof, whether now owned or now due, or in which the Borrower has an interest,
or hereafter acquired, arising, or to become due, or in which the Borrower
obtains an interest, and all products, Proceeds, substitutions, and accessions
of or to any of the following (all of which, together with any other property in
which the Agent may in the future be granted a security interest, is referred to
herein as the “Collateral”):
          (a) All Accounts and accounts receivable.
          (b) All Inventory.
          (c) All General Intangibles.
          (d) All Equipment.
          (e) All Goods.
          (f) All Fixtures.
          (g) All Chattel Paper.
          (h) All Letter-of-Credit Rights.
          (i) All Payment Intangibles.
          (j) All Supporting Obligations.
          (k) All Commercial Tort Claims.
          (l) All books, records, and information relating to the Collateral
and/or to the operation of the Borrower’s business, and all rights of access to
such books, records, and information, and all property in which such books,
records, and information are stored, recorded, and maintained.
          (m) All Investment Property, Instruments, Documents, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.
          (n) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing ((a)
through (m)) or otherwise.
          (o) All liens, guaranties, rights, remedies, and privileges pertaining
to any of the foregoing ((a) through (n)), including the right of stoppage in
transit.

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     8-2. Extent and Duration of Security Interest.
          (a) The security interest created and granted herein is in addition
to, and supplemental of, any security interest previously granted by the
Borrower to the Agent and shall continue in full force and effect applicable to
all Liabilities until both (a) all Liabilities have been paid and/or satisfied
in full and (b) the Revolving Credit Dollar Commitment of each Revolving Credit
Lender is terminated.
          (b) It is intended that the Collateral Interests created herein extend
to and cover all assets of the Borrower, other than Exempt Assets.
  ARTICLE 9 — Agent As Borrower’s Attorney-In-Fact:
     9-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Agent as the Borrower’s true and lawful attorney,
with full power of substitution, following the occurrence and during the
continuance of an Event of Default, to convert the Collateral into cash at the
sole risk, cost, and expense of the Borrower, but for the sole benefit of the
Agent and the Revolving Credit Lenders. The rights and powers granted the Agent
by this appointment, following the occurrence and during the continuance of an
Event of Default, include but are not limited to the right and power to:
          (a) Prosecute, defend, compromise, or release any action relating to
the Collateral.
          (b) Sign change of address forms to change the address to which the
Borrower’s mail is to be sent to such address as the Agent shall designate;
receive and open the Borrower’s mail; remove any Receivables Collateral and
Proceeds of Collateral therefrom and turn over the balance of such mail either
to the Borrower or to any trustee in bankruptcy or receiver of the Borrower, or
other legal representative of the Borrower whom the Agent determines to be the
appropriate person to whom to so turn over such mail.
          (c) Endorse the name of the Borrower in favor of the Agent upon any
and all checks, drafts, notes, acceptances, or other items or instruments; sign
and endorse the name of the Borrower on, and receive as secured party, any of
the Collateral, any invoices, schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title respectively relating to the Collateral.
          (d) Sign the name of the Borrower on any notice to the Borrower’s
Account Debtors or verification of the Receivables Collateral; sign the
Borrower’s name on any proof of claim in bankruptcy against Account Debtors, and
on notices of lien, claims of mechanic’s liens, or assignments or releases of
mechanic’s liens securing the Accounts.
          (e) Take all such action as may be necessary to obtain the payment of
any letter of credit and/or banker’s acceptance of which the Borrower is a
beneficiary.

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          (f) Repair, manufacture, assemble, complete, package, deliver, alter
or supply goods, if any, necessary to fulfill in whole or in part the purchase
order of any customer of the Borrower.
          (g) Use, license or transfer any or all General Intangibles of the
Borrower.
     9-2. No Obligation to Act. The Agent shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 9-1 herein, but
if the Agent elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of such
exercise of power, and shall not be responsible to the Borrower for any act or
omission to act except for any act or omission to act as to which there is a
final determination made in a judicial proceeding (in which proceeding the Agent
has had an opportunity to be heard), which determination includes a specific
finding that the subject act or omission to act had been grossly negligent or in
actual bad faith.
  ARTICLE 10 — Events of Default:
     The occurrence of any event described in this Article 10 respectively shall
constitute an “Event of Default” herein. Upon the occurrence of any Event of
Default described in Section 10-12, any and all Liabilities shall become due and
payable without any further act on the part of the Agent. Upon the occurrence of
any other Event of Default, the Agent may, and on the instruction of the
SuperMajority Lenders as provided in Section 13-1(b) shall, declare any and all
Liabilities immediately due and payable. The occurrence of any Event of Default
shall also constitute, without notice or demand, a default under all other
agreements between the Agent or any Revolving Credit Lender and the Borrower and
instruments and papers heretofore, now, or hereafter given the Agent or any
Revolving Credit Lender by the Borrower.
     10-1. Failure to Pay the Revolving Credit. The failure by the Borrower to
pay when due any principal of, interest on, or fees in respect of, the Revolving
Credit.
     10-2. Failure To Make Other Payments. The failure by the Borrower to pay
when due (or upon demand, if payable on demand) any payment Liability other than
any payment liability on account of the principal of, or interest on, or fees in
respect of, the Revolving Credit.
     10-3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability included in any of the
following provisions hereof:

      Section   Relates to:
4-7
  Indebtedness

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      Section   Relates to:
4-14
  Pay taxes
4-19
  Dividends, Investments, Other Corporate Actions
4-23
  Affiliate Transactions
5-11
  Financial Performance Covenant
Article 7
  Cash Management

     10-4. Reporting Requirements. The failure by the Borrower to promptly,
punctually, faithfully and timely perform, discharge, or comply with the
financial reporting requirements included in the following Section of this
Agreement, subject, however, to the following limited number of grace periods
applicable to certain of those requirements:

                  REQUIRED       NUMBER OF GRACE REPORT / STATEMENT   BY SECTION
  GRACE PERIOD   PERIODS
Borrowing Base Certificate
  5-4   Two Business Days   Three in any 12 months
 
           
Monthly Report (15 Days) -
  5-5(a)(i)   Three Business Days   Two in any 12 months
 
           
Monthly Reports (30 Days)
  5-5(a)(ii)   Three Business Days   Two in any 12 months

     10-5. Failure to Perform Covenant or Liability (Grace Period). The failure
by the Borrower, within ten (10) Business Days following the earlier of the
Borrower’s knowledge of a breach of any covenant or Liability not described in
any of Sections 10-1, 10-2, or 10-3 or of its receipt of written notice from the
Agent of the breach of any of such covenants or Liabilities to cure such breach.
     10-6. Misrepresentation. The determination by the Agent that any
representation or warranty at any time made by the Borrower to the Agent or any
Revolving Credit Lender was not true or complete in all material respects when
given.
     10-7. Acceleration of Other Debt. Breach of Lease. The occurrence of any
event such that any Indebtedness of the Borrower in excess of $500,000 to any
creditor other than the Agent or any Revolving Credit Lender is accelerated or,
without the consent of the Borrower, any Lease with annual rentals in excess of
$500,000 is terminated.
     10-8. Default Under Other Agreements. The occurrence of any breach of any
covenant or Liability imposed by, or of any default under, any agreement
(including any Loan Document) between the Agent or any Revolving Credit Lender
and the Borrower or instrument given by the Borrower to the Agent or any
Revolving Credit Lender and the expiry, without cure, of any applicable grace
period

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(notwithstanding that the subject Agent or Revolving Credit Lender may not have
exercised all or any of its rights on account of such breach or default).
     10-9. Uninsured Casualty Loss. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any material portion of the Collateral.
     10-10. Attachment. Judgment. Restraint of Business.
          (a) The service of process upon the Agent or any Revolving Credit
Lender or any Participant seeking to attach, by trustee, mesne, or other
process, any funds of the Borrower, in an amount in excess of $200,000, on
deposit with, or assets of the Borrower in the possession of, the Agent or that
Revolving Credit Lender or such Participant.
          (b) The entry of any judgment against the Borrower for the payment of
money in excess of $500,000, which judgment is not satisfied (if a money
judgment) or appealed from (with execution or similar process stayed) within
thirty (30) days of its entry.
          (c) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in any material way
the conduct by the Borrower of its business in the ordinary course and such
order or imposition is not dismissed or appealed from within thirty (30) days of
its entry.
     10-11. Business Failure. Any act by, against, or relating to the Borrower,
or its property or assets, which act constitutes the determination, by the
Borrower, to initiate a program of partial or total self-liquidation;
application for, consent to, or sufferance of the appointment of a receiver,
trustee, or other person, pursuant to court action or otherwise, over all, or
any part of the Borrower’s property; the granting of any trust mortgage or
execution of an assignment for the benefit of the creditors of the Borrower, or
the occurrence of any other voluntary liquidation or extension of debt agreement
for the Borrower; the offering by or entering into by the Borrower of any
composition, extension, or any other arrangement seeking relief from or
extension of the debts of the Borrower; or the initiation of any judicial or
non-judicial proceeding or agreement by, the Borrower which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the initiation
by the Borrower of the liquidation or winding up of all or any part of the
Borrower’s business or operations.
     10-12. Bankruptcy. The failure by the Borrower to generally pay the debts
of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower

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initiating any matter in which the Borrower is or may be granted any relief from
the debts of the Borrower pursuant to the Bankruptcy Code or any other
insolvency statute or procedure; the filing of any complaint, application, or
petition against the Borrower initiating any matter in which the Borrower is or
may be granted any relief from the debts of the Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure, which complaint,
application, or petition is not timely contested in good faith by the Borrower
by appropriate proceedings or, if so contested, is not dismissed within
forty-five (45) days of when filed.
     10-13. Default by Guarantor. The occurrence of any of the foregoing Events
of Default with respect to any guarantor of the Liabilities, as if such
guarantor were the “Borrower” described therein.
     10-14. Indictment — Forfeiture. The indictment of, or institution of any
legal process or proceeding against, the Borrower, under any Applicable Law
where the relief, penalties, or remedies sought or available include the
forfeiture of any material property of the Borrower and/or the imposition of any
stay or other order, the effect of which could be to restrain in any material
way the conduct by the Borrower of its business in the ordinary course, which is
not dismissed or appealed from within thirty (30) days when instituted or
imposed.
     10-15. Termination of Guaranty. The termination or attempted termination of
any guaranty by any guarantor of the Liabilities.
     10-16. Challenge to Loan Documents.
          (a) Any challenge by or on behalf of the Borrower or any guarantor of
the Liabilities to the validity of any Loan Document or the applicability or
enforceability of any Loan Document strictly in accordance with the subject Loan
Document’s terms or which seeks to void, avoid, limit, or otherwise adversely
affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.
          (b) Any determination by any court or any other judicial or government
authority that any Loan Document is not enforceable in accordance in all
material respects with the subject Loan Document’s terms or which voids, avoids,
limits, or otherwise adversely affects in any material way any security interest
created by any Loan Document or any payment made pursuant thereto.
     10-17. Change in Control. Any Change in Control.

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  ARTICLE 11 — Rights and Remedies Upon Default:
     11-1. Acceleration. Upon the occurrence of any Event of Default as
described in Section 10-12, all Indebtedness of the Borrower to the Revolving
Credit Lenders shall be immediately due and payable. Upon the occurrence of any
Event of Default other than as described in Section 10-12, the Agent may (and on
the issuance of Acceleration Notice(s) requisite to the causing of Acceleration,
the Agent shall) declare all Indebtedness of the Borrower to the Revolving
Credit Lenders to be immediately due and payable and may exercise all of the
Agent’s Rights and Remedies as the Agent from time to time thereafter determines
as appropriate.
     11-2. Rights of Enforcement. The Agent shall have all of the rights and
remedies of a secured party upon default then available to the Agent under the
UCC, in addition to which the Agent shall have all and each of the following
rights and remedies upon an Event of Default and Acceleration:
          (a) To give notice to any bank at which any DDA or Blocked Account is
maintained and in which Proceeds of Collateral are deposited, to turn over such
Proceeds directly to the Agent.
          (b) To give notice to any of the Borrower’s customs brokers to follow
the instructions of the Agent as provided in any written agreement or
undertaking of such broker in favor of the Agent.
          (c) To collect the Receivables Collateral with or without the taking
of possession of any of the Collateral.
          (d) To take possession of all or any portion of the Collateral.
          (e) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Agent deems advisable and with or without the taking of possession of any of
the Collateral.
          (f) To conduct one or more going out of business sales which include
the sale or other disposition of the Collateral.
          (g) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
          (h) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
     11-3. Sale of Collateral.
          (a) Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Agent deems advisable,
having due regard to compliance with any statute or regulation which might
affect, limit, or apply to the Agent’s disposition of the Collateral.

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          (b) The Agent, in the exercise of the Agent’s rights and remedies upon
an Event of Default, may conduct one or more going out of business sales, in the
Agent’s own right or by one or more agents and contractors. Such sale(s) may be
conducted upon any premises owned, leased, or occupied by the Borrower. The
Agent and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods (all of which other goods shall remain
the sole property of the Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Agent or such agent or contractor
and neither the Borrower nor any Person claiming under or in right of the
Borrower shall have any interest therein.
          (c) Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Agent shall provide the Borrower such notice as may be
practicable under the circumstances), the Agent shall give the Borrower at least
ten (10) days prior written notice of the date, time, and place of any proposed
public sale, and of the date after which any private sale or other disposition
of the Collateral may be made. The Borrower agrees that such written notice
shall satisfy all requirements for notice to the Borrower which are imposed
under the UCC or other applicable law with respect to the exercise of the
Agent’s rights and remedies upon default.
          (d) The Agent and any Revolving Credit Lender may purchase the
Collateral, or any portion of it at any sale held under this Article.
          (e) If any of the Collateral is sold, leased, or otherwise disposed of
by the Agent on credit, the Liabilities shall not be deemed to have been reduced
as a result thereof unless and until payment is finally received thereon by the
Agent.
          (f) The Agent shall apply the proceeds of the Agent’s exercise of its
rights and remedies upon default pursuant to this Article 11 in accordance with
Sections 13-6 and 13-7.
     11-4. Occupation of Business Location. In connection with the Agent’s
exercise of the Agent’s rights under this Article 11, the Agent may enter upon,
occupy, and use any premises owned or occupied by the Borrower, and may exclude
the Borrower from such premises or portion thereof as may have been so entered
upon, occupied, or used by the Agent. The Agent shall not be required to remove
any of the Collateral from any such premises upon the Agent’s taking possession
thereof, and may render any Collateral unusable to the Borrower. In no event
shall the Agent be liable to the Borrower for use or occupancy by the Agent of
any premises pursuant to this Article 11, nor for any charge (such as wages for
the Borrower’s employees and utilities) incurred in connection with the Agent’s
exercise of the Agent’s Rights and Remedies.

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     11-5. Grant of Nonexclusive License. The Borrower hereby grants to the
Agent a royalty free nonexclusive irrevocable license, after the occurrence and
during the continuance of an Event of Default to use, apply, and affix any
trademark, trade name, logo, or the like in which the Borrower now or hereafter
has rights, such license being with respect to the Agent’s exercise of the
rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
     11-6. Assembly of Collateral. The Agent may require the Borrower to
assemble the Collateral and make it available to the Agent at the Borrower’s
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and the Borrower.
     11-7. Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Agent hereunder (herein, the “Agent’s Rights and Remedies”)
shall be cumulative and not exclusive of any rights or remedies which it would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agent’s Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Agent’s
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Agent and any person, at any time,
shall preclude the other or further exercise of the Agent’s Rights and Remedies.
No waiver by the Agent of any of the Agent’s Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it be
deemed a continuing waiver. The Agent’s Rights and Remedies may be exercised at
such time or times and in such order of preference as the Agent may determine.
The Agent’s Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.
  ARTICLE 12 — Revolving Credit Fundings and Distributions:
     12-1. Revolving Credit Funding Procedures. Subject to Section 12-2:
          (a) The Agent shall advise each Revolving Credit Lender, no later than
2:00PM (Boston Time) on a date on which any Revolving Credit Loan (other than a
SwingLine Loan) is to be made on that date. Such advice, in each instance, may
be by telephone or facsimile transmission, provided that if such advice is by
telephone, it shall be confirmed in writing. Advice of a Revolving Credit Loan
shall include the amount of and interest rate applicable to the subject
Revolving Credit Loan.
          (b) Subject to that Revolving Credit Lender’s Revolving Credit Dollar
Commitment, each Revolving Credit Lender, by no later than the end of business
on the day on which the subject

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Revolving Credit Loan is to be made, shall Transfer that Revolving Credit
Lender’s Revolving Credit Percentage Commitment of the subject Revolving Credit
Loan to the Agent.
     12-2. SwingLine Loans.
          (a) In the event that, when a Revolving Credit Loan is requested, the
aggregate unpaid balance of the SwingLine Loan is less than the SwingLine Loan
Ceiling, then the SwingLine Lender may advise the Agent that the SwingLine
Lender has determined to include up to the amount of the requested Revolving
Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender
shall Transfer the amount of the requested Revolving Credit Loan to the Agent.
          (b) The SwingLine Loan shall be converted to a Revolving Credit Loan
in which all Revolving Credit Lenders participate as follows:
          (i) At any time and from time to time, the SwingLine Lender may advise
the Agent that all, or any part of the SwingLine Loan is to be converted to a
Revolving Credit Loan in which all Revolving Credit Lenders participate.
          (ii) At the initiation of a Liquidation, the then entire unpaid
principal balance of the SwingLine Loan shall be converted to a Revolving Credit
Loan in which all Revolving Credit Lenders participate.
In either such event, the Agent shall advise each Revolving Credit Lender of
such conversion as if, and with the same effect as if such conversion were the
making of a Revolving Credit Loan as provided in Section 12-1.
          (c) The SwingLine Lender, in separate capacities, may also be the
Agent and a Revolving Credit Lender.
          (d) The SwingLine Lender, in its capacity as SwingLine Lender, is not
a “Revolving Credit Lender” for any of the following purposes:
          (i) Except as otherwise specifically provided in the relevant Section,
any distribution pursuant to Section 13-6.
          (ii) Determination of whether the requisite Loan Commitments have
Consented to action requiring such Consent.
     12-3. Agent’s Covering of Fundings.
          (a) Each Revolving Credit Lender shall make available to the Agent, as
provided herein, that Revolving Credit Lender’s Revolving Credit Percentage
Commitment of the following:
          (i) Each Revolving Credit Loan, up to the maximum amount of that
Revolving Credit Lender’s Revolving Credit Dollar Commitment of the Revolving
Credit Loans.

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          (ii) Up to the maximum amount of that Revolving Credit Lender’s
Revolving Credit Dollar Commitment of each L/C Drawing (to the extent that such
L/C Drawing is not “covered” by a Revolving Credit Loan as provided herein).
          (b) In all circumstances, the Agent may:
          (i) Assume that each Revolving Credit Lender, subject to
Section 12-3(a), timely shall make available to the Agent that Revolving Credit
Lender’s Revolving Credit Percentage Commitment of each Revolving Credit Loan,
notice of which is provided pursuant to Section 12-1.
          (ii) In reliance upon such assumption, make available the
corresponding amount to the Borrower.
          (iii) Assume that each Revolving Credit Lender timely shall pay, and
shall make available, to the Agent all other amounts which that Revolving Credit
Lender is obligated to so pay and/or make available hereunder or under any of
the Loan Documents.
          (c) In the event that, in reliance upon any of such assumptions, the
Agent makes available, a Revolving Credit Lender’s Revolving Credit Percentage
Commitment of one or more Revolving Credit Loans, or any other amount to be made
available hereunder or under any of the Loan Documents, which amount a Revolving
Credit Lender (a “Delinquent Revolving Credit Lender”) fails to provide to the
Agent within one (1) Business Day of written notice of such failure, then:
          (i) The amount which had been made available by the Agent is an
“Agent’s Cover” (and is so referred to herein).
          (ii) All interest paid by the Borrower on account of the Revolving
Credit Loan or coverage of the subject L/C Drawing which consist of the Agent’s
Cover shall be retained by the Agent until the Agent’s Cover, with interest, has
been paid by the Delinquent Revolving Credit Lender.
          (iii) The Delinquent Revolving Credit Lender shall pay to the Agent,
on demand, interest at a rate equal to the prevailing Federal Funds Rate on any
Agent’s Cover in respect of that Delinquent Revolving Credit Lender.
          (iv) The Agent shall have succeeded to all rights to payment to which
the Delinquent Revolving Credit Lender otherwise would have been entitled
hereunder in respect of those amounts paid by or in respect of the Borrower on
account of the Agent’s Cover together with interest until it is repaid. Such
payments shall be deemed made first towards the amounts in respect of which the
Agent’s Cover was provided and only then towards amounts in which the Delinquent
Revolving Credit Lender is then participating. For purposes of distributions to
be made pursuant to Section 12-4(a) (which relates to ordinary course
distributions) or Section 13-6

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(which relates to distributions of proceeds of a Liquidation) below, amounts
shall be deemed distributable to a Delinquent Revolving Credit Lender (and
consequently, to the Agent to the extent to which the Agent is then entitled) at
the highest level of distribution (if applicable) at which the Delinquent
Revolving Credit Lender would otherwise have been entitled to a distribution.
                    (v) Subject to Subsection 12-3(c)(iv), the Delinquent
Revolving Credit Lender shall be entitled to receive any payments from the
Borrower to which the Delinquent Revolving Credit Lender is then entitled,
provided however there shall be deducted from such amount and retained by the
Agent any interest to which the Agent is then entitled on account of Section
12-3(c)(ii), above.
          (d) A Delinquent Revolving Credit Lender shall not be relieved of any
obligation of such Delinquent Revolving Credit Lender hereunder (all and each of
which shall constitute continuing obligations on the part of any Delinquent
Revolving Credit Lender).
          (e) A Delinquent Revolving Credit Lender may cure its status as a
Delinquent Revolving Credit Lender by paying the Agent the aggregate of the
following:
                    (i) The Agent’s Cover (to the extent not previously repaid
by the Borrower and retained by the Agent in accordance with Subsection
12-3(c)(iv), above) with respect to that Delinquent Revolving Credit Lender.
                    Plus
                    (ii) The aggregate of the amount payable under Subsection
12-3(c)(iii), above (which relates to interest to be paid by that Delinquent
Revolving Credit Lender).
                    Plus
                    (iii) All such costs and expenses as may be incurred by the
Agent in the enforcement of the Agent’s rights against such Delinquent Revolving
Credit Lender.
     12-4. Ordinary Course Distributions. (This Section 12-4 applies unless the
provisions of Section 13-6 (which relates to distributions in the event of a
Liquidation) becomes operative).
          (a) Weekly, on such day as may be set from time to time by the Agent
(or more frequently at the Agent’s option) the Agent and each Revolving Credit
Lender shall settle up on amounts advanced under the Revolving Credit and
collected funds received in the Concentration Account.
          (b) The Agent shall distribute to the SwingLine Lender and to each
Revolving Credit Lender, such Person’s respective pro-rata share of interest
payments on the Revolving Credit Loans when actually received and collected by
the Agent (excluding the one (1) Business Day for settlement provided for in
Section 7-5(a), which shall be for the account of the Agent only). For purposes
of calculating

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interest due to a Revolving Credit Lender, that Revolving Credit Lender shall be
entitled to receive interest on the actual amount contributed by that Revolving
Credit Lender towards the principal balance of the Revolving Credit Loans
outstanding during the applicable period covered by the interest payment made by
the Borrower. Any net principal reductions to the Revolving Credit Loans
received by the Agent in accordance with the Loan Documents during such period
shall not reduce such actual amount so contributed, for purposes of calculation
of interest due to that Revolving Credit Lender, until the Agent has distributed
to that Revolving Credit Lender its pro-rata share thereof.
          (c) The Agent shall distribute the Unused Line Fee and the fees for
L/C’s provided for in Section 2-19(a) pro rata to the Revolving Credit Lenders
and shall distribute the L/C issuance fee provided for in Section 2-19(b) to the
Issuer.
          (d) No Revolving Credit Lender shall have any interest in, or right to
receive any part of any interest which reflects “float” as described in the
proviso included in Section 7-5(a). Any such float shall be for the account of
the Agent only.
          (e) No Revolving Credit Lender shall have any interest in, or right to
receive any part of, the Agent’s Fee to be paid by the Borrower to the Agent
pursuant to this Agreement.
          (f) Any amount received by the Agent as reimbursement for any cost or
expense (including without limitation, attorneys’ reasonable fees) shall be
distributed by the Agent to that Person which is entitled to such reimbursement
as provided in this Agreement (and if such Person(s) is (are) the Revolving
Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment
Percentages at the date on which the expense, in respect of which such
reimbursement is being made, was incurred).
          (g) Each distribution pursuant to this Section 12-4 is subject to
Section 12-3(c), above.
  ARTICLE 13 — Acceleration and Liquidation:
     13-1. Acceleration Notices.
          (a) The Agent may give the Revolving Credit Lenders an Acceleration
Notice at any time following the occurrence of an Event of Default.
          (b) The SuperMajority Lenders may give the Agent an Acceleration
Notice at any time following the occurrence of an Event of Default. Such notice
may be by multiple counterparts, provided that counterparts executed by the
requisite Revolving Credit Lenders are received by the Agent within a period of
five (5) consecutive Business Days.

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     13-2. Acceleration. Unless stayed by judicial or statutory process, the
Agent shall Accelerate the Revolving Credit Obligations within a commercially
reasonable time following:
          (a) The Agent’s giving of an Acceleration Notice to the Revolving
Credit Lenders as provided in Section 13-1(a).
          (b) The Agent’s receipt of an Acceleration Notice from the
SuperMajority Lenders, in compliance with Section 13-1(b) .
     13-3. Initiation of Liquidation. Unless stayed by judicial or statutory
process, a Liquidation shall be initiated by the Agent within a commercially
reasonable time following Acceleration of the Revolving Credit Obligations.
     13-4. Actions At and Following Initiation of Liquidation
          (a) At the initiation of a Liquidation:
          (i) The unpaid principal balance of the SwingLine Loan (if any) shall
be converted, pursuant to Section 12-2(b)(ii), to a Revolving Credit Loan in
which all Revolving Credit Lenders participate.
          (ii) The Agent and the Revolving Credit Lenders shall “net out” each
Revolving Credit Lender’s respective contributions towards the Revolving Credit
Loans, so that each Revolving Credit Lender holds that Revolving Credit Lender’s
Revolving Credit Percentage Commitment of the Revolving Credit Loans and
advances.
          (b) Following the initiation of a Liquidation, each Revolving Credit
Lender shall contribute, towards any L/C thereafter honored and not immediately
reimbursed by the Borrower, that Revolving Credit Lender’s Revolving Credit
Percentage Commitment of such honoring.
     13-5. Agent’s Conduct of Liquidation
          (a) Any Liquidation shall be conducted by the Agent, with the advice
and assistance of the Revolving Credit Lenders.
          (b) The Agent may establish one or more Nominees to “bid in” or
otherwise acquire ownership to any Post Foreclosure Asset.
          (c) The Agent shall manage the Nominee and manage and dispose of any
Post Foreclosure Assets with a view towards the realization of the economic
benefits of the ownership of the Post Foreclosure Assets and in such regard, the
Agent and/or the Nominee may operate, repair, manage, maintain, develop, and
dispose of any Post Foreclosure Asset in such manner as the Agent determines as
appropriate under the circumstances.

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          (d) The Agent may decline to undertake or to continue taking a course
of action or to execute an action plan (whether proposed by the Agent or any
Revolving Credit Lender) unless indemnified to the Agent’s satisfaction by the
Revolving Credit Lenders against any and all liability and expense which may be
incurred by the Agent by reason of taking or continuing to take that course of
action or action plan.
          (e) Each Revolving Credit Lender shall execute all such instruments
and documents not inconsistent with the provisions of this Agreement as the
Agent and/or the Nominee reasonably may request with respect to the creation and
governance of any Nominee, the conduct of the Liquidation, and the management
and disposition of any Post Foreclosure Asset.
     13-6. Distribution of Liquidation Proceeds.
          (a) The Agent may establish one or more reasonably funded reserve
accounts into which proceeds of the conduct of any Liquidation may be deposited
in anticipation of future expenses which may be incurred by the Agent in the
exercise of rights as a secured creditor of the Borrower and prior claims which
the Agent anticipates may need to be paid.
          (b) The Agent shall distribute the net proceeds of Liquidation in
accordance with the relative priorities set forth in Section 13-7.
          (c) Each Revolving Credit Lender, on the written request of the Agent
and/or any Nominee, not more frequently than once each month, shall reimburse
the Agent and/or any Nominee, Pro-Rata, for any cost or expense reasonably
incurred by the Agent and/or the Nominee in the conduct of a Liquidation, which
amount is not covered out of current proceeds of the Liquidation, which
reimbursement shall be paid over to and distributed by the Agent.
     13-7. Relative Priorities To Proceeds of Liquidation. The relative
priorities to the proceeds of a Liquidation are as follows:
          (a) To the Agent as reimbursement for all reasonable third party costs
and expenses incurred by the Agent and to Lenders’ Special Counsel in accordance
with this Agreement and to any funded reserve established pursuant to
Section 13-6(a) and to each Revolving Credit Lender to the extent of
contributions made to the Agent pursuant to Section 13-6(c) not previously
reimbursed to that Revolving Credit Lender; and then
          (b) To the SwingLine Lender, on account of any SwingLine loans not
converted to Revolving Credit Loans pursuant to Section 13-4(a)(i); and then
          (c) To the Revolving Credit Lenders (other than any Delinquent
Revolving Credit Lender), pro-rata, to the unpaid principal balance of the
Revolving Credit; and then

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          (d) To the Revolving Credit Lenders (other than any Delinquent
Revolving Credit Lender), pro-rata, to accrued interest on the Revolving Credit;
and then
          (e) To the Revolving Credit Lenders (other than any Delinquent
Revolving Credit Lender), pro-rata, to those fees distributable hereunder to the
Revolving Credit Lenders; and then
          (f) To any Delinquent Revolving Credit Lenders, pro-rata to amounts to
which such Revolving Credit Lenders otherwise would have been entitled pursuant
to Sections 13-7(c), 13-7(d), 13-7(e); and then
          (g) To any other Liabilities; and then
          (h) To The Borrower.
ARTICLE 14 — The Agent:
     14-1. Appointment of The Agent.
          (a) Each Lender appoints and designates Bank of America as the “Agent”
hereunder and under the Loan Documents.
          (b) Each Revolving Credit Lender authorizes the Agent:
          (i) To execute those of the Loan Documents and all other instruments
relating thereto to which the Agent is a party.
          (ii) To take such action on behalf of the Revolving Credit Lenders and
to exercise all such powers as are expressly delegated to the Agent hereunder
and in the Loan Documents and all related documents, together with such other
powers as are reasonably incident thereto.
     14-2. Responsibilities of Agent.
          (a) The Agent shall not have any duties or responsibilities to, or any
fiduciary relationship with, any Revolving Credit Lender except for those
expressly set forth in this Agreement.
          (b) Neither the Agent nor any of its Affiliates shall be responsible
to any Revolving Credit Lender for any of the following:
          (i) Any recitals, statements, representations or warranties made by
the Borrower or any other Person.
          (ii) Any appraisals or other assessments of the assets of the Borrower
or of any other Person responsible for or on account of the Liabilities.
          (iii) The value, validity, effectiveness, genuineness, enforceability,
or sufficiency of the Loan Agreement, the Loan Documents or any other document
referred to or provided for therein.

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          (iv) Any failure by the Borrower or any other Person (other than the
Agent) to perform its obligations under the Loan Documents.
          (c) The Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the Agent with
reasonable care. No such attorney, accountant, other professional, agent, or
attorney-in-fact shall be responsible for any action taken or omitted to be
taken by any other such Person.
          (d) Neither the Agent, nor any of its directors, officers, or
employees shall be responsible for any action taken or omitted to be taken or
omitted to be taken by any other of them in connection herewith in reliance upon
advice of its counsel nor, in any other event except for any action taken or
omitted to be taken as to which a final judicial determination has been or is
made (in a proceeding in which such Person has had an opportunity to be heard)
that such Person had acted in a grossly negligent manner, in actual bad faith,
or in willful misconduct.
          (e) The Agent shall not have any responsibility in any event for more
funds than the Agent actually receives and collects.
          (f) The Agent in its capacity as a Lender, shall have the same rights
and powers hereunder as any other Revolving Credit Lender.
     14-3. Concerning Distributions By the Agent.
          (a) The Agent in the Agent’s reasonable discretion based upon the
Agent’s determination of the likelihood that additional payments will be
received, expenses incurred, and/or claims made by third parties to all or a
portion of such proceeds, may delay the distribution of any payment received on
account of the Liabilities.
          (b) The Agent may disburse funds prior to determining that the sums
which the Agent expects to receive have been finally and unconditionally paid to
the Agent. If and to the extent that the Agent does disburse funds and it later
becomes apparent that the Agent did not then receive a payment in an amount
equal to the sum paid out, then any Revolving Credit Lender to whom the Agent
made the funds available, on demand from the Agent, shall refund to the Agent
the sum paid to that person.
          (c) If, in the opinion of the Agent, the distribution of any amount
received by the Agent might involve the Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then the Agent may
refrain from making distribution until the Agent’s right to make distribution
has been adjudicated by a court of competent jurisdiction.
          (d) The proceeds of any Revolving Credit Lender’s exercise of any
right of, or in the nature of, set-off shall be deemed, First, to the extent
that a Revolving Credit Lender is entitled to any

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distribution hereunder, to constitute such distribution and Second, shall be
shared with the other Revolving Credit Lenders as if distributed pursuant to
(and shall be deemed as distributions under) Section 13-7.
          (e) Each Revolving Credit Lender recognizes that the crediting of the
Borrower with the “proceeds” of any transaction in which a Post Foreclosure
Asset is acquired is a non-cash transaction and that, in consequence, no
distribution of such “proceeds” will be made by the Agent to any Lender.
          (f) In the event that (x) a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid or
disgorged or (y) the SuperMajority Lenders determine to effect such repayment or
disgorgement, then each Revolving Credit Lender to which any such distribution
shall have been made shall repay, to the Agent which had made such distribution,
that Revolving Credit Lender’s Pro-Rata share of the amount so adjudged or
determined to be repaid or disgorged.
     14-4. Dispute Resolution. Any dispute among the Revolving Credit Lenders
and/or the Agent concerning the interpretation, administration, or enforcement
of the financing arrangements contemplated by this or any other Loan Document or
the interpretation or administration of this or any other Loan Document which
cannot be resolved amicably shall be resolved in the United States District
Court for the District of Massachusetts, sitting in Boston or in the Superior
Court of Suffolk County, Massachusetts, to the jurisdiction of which courts each
Revolving Credit Lender hereto hereby submits.
     14-5. Distributions of Notices and of Documents. The Agent shall distribute
to each Revolving Credit Lender those periodic reports which the Agent
customarily distributes in like credits in which it is acting as Agent and will
forward to each Revolving Credit Lender, promptly after the Agent’s receipt
thereof, a copy of each notice or other document furnished to the Agent pursuant
to this Agreement, including monthly, quarterly, and annual financial statements
received from the Borrower pursuant to Article 5 of this Agreement, other than
any of the following:
          (a) Routine communications associated with requests for Revolving
Credit Loans and/or the issuance of L/C’s.
          (b) Routine or nonmaterial communications.
          (c) Any notice or document required by any of the Loan Documents to be
furnished to the Revolving Credit Lenders by the Borrower.
          (d) Any notice or document of which the Agent has knowledge that such
notice or document had been forwarded to the Revolving Credit Lenders other than
by the Agent.

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     14-6. Confidential Information.
          (a) Each Revolving Credit Lender will maintain, as confidential, all
of the following:
          (i) Proprietary approaches, techniques, and methods of analysis which
are applied by the Agent in the administration of the credit facility
contemplated by this Agreement.
          (ii) Proprietary forms and formats utilized by the Agent in providing
reports to the Revolving Credit Lenders pursuant hereto, which forms or formats
are not of general currency.
          (b) Nothing included herein shall prohibit the disclosure of any such
information as may be required to be provided by judicial process or by
regulatory authorities having jurisdiction over any party to this Agreement.
     14-7. Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telex, or
facsimile) reasonably believed by the Agent to be genuine and correct and to
have been signed or sent by or on behalf of the proper person or persons, and
upon advice and statements of attorneys, accountants and other experts selected
by the AgentAs to any matters not expressly provided for in this Agreement, any
Loan Document, or in any other document referred to therein, the Agent shall in
all events be fully protected in acting, or in refraining from acting, in
accordance with the applicable Consent required by this Agreement. Instructions
given with the requisite Consent shall be binding on all Revolving Credit
Lenders.
     14-8. Non-Reliance on Agent and Other Revolving Credit Lenders.
          (a) Each Revolving Credit Lender represents to all other Revolving
Credit Lenders and to the Agent that such Revolving Credit Lender:
          (i) Independently and without reliance on any representation or act by
Agent or by any other Revolving Credit Lender, and based on such documents and
information as that Revolving Credit Lender has deemed appropriate, has made
such Revolving Credit Lender’s own appraisal of the financial condition and
affairs of the Borrower and decision to enter into this Agreement.
          (ii) Has relied upon that Revolving Credit Lender’s review of the Loan
Documents by that Revolving Credit Lender and by counsel to that Revolving
Credit Lender as that Revolving Credit Lender deemed appropriate under the
circumstances.
          (b) Each Revolving Credit Lender agrees that such Revolving Credit
Lender, independently and without reliance upon Agent or any other Revolving
Credit Lender, and based upon such documents and information as such Revolving
Credit Lender shall deem appropriate at the time, will continue to make such
Revolving Credit Lender’s own appraisals of the financial condition and affairs
of

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the Borrower when determining whether to take or not to take any discretionary
action under this Agreement.
          (c) The Agent, in the discharge of that Agent’s duties hereunder,
shall not be required to make inquiry of, or to inspect the properties or books
of, any Person.
          (d) Except for notices, reports, and other documents and information
expressly required to be furnished to the Revolving Credit Lenders by the Agent
hereunder (as to which, see Section 14-5), the Agent shall not have any
affirmative duty or responsibility to provide any Lender with any credit or
other information concerning any Person, which information may come into the
possession of Agent or any Affiliate of the Agent.
          (e) Each Revolving Credit Lender, at such Revolving Credit Lender’s
request, shall have reasonable access to all nonprivileged documents in the
possession of the Agent, which documents relate to the Agent’s performance of
its duties hereunder.
     14-9. Indemnification. Without limiting the Liabilities of the Borrower
under this or any of the other Loan Documents, each Revolving Credit Lender
shall indemnify the Agent, pro-rata for any and all Liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including attorney’s reasonable
fees and expenses and other out-of-pocket expenditures) which may at any time be
imposed on, incurred by, or asserted against the Agent and in any way relating
to or arising out of this Agreement or any other Loan Document or any documents
contemplated by or referred to therein or the transactions contemplated thereby
or the enforcement of any of terms hereof or thereof or of any such other
documents, provided, however, no Revolving Credit Lender shall be liable for any
of the foregoing to the extent that any of the foregoing arises from any action
taken or omitted to be taken by the Agent as to which a final judicial
determination has been or is made (in a proceeding in which the agent has had an
opportunity to be heard) that the Agent had acted in a grossly negligent manner,
or in actual bad faith, or engaged in willful misconduct.
     14-10. Resignation of Agent.
          (a) The Agent may resign at any time by giving 60 days prior written
notice thereof to the Revolving Credit Lenders. Upon receipt of any such notice
of resignation, the SuperMajority Lenders shall have the right to appoint a
successor to such Agent (and if no Event of Default has occurred, with the
consent of the Borrower, not to be unreasonably withheld and, in any event,
deemed given by the Borrower if no written objection is provided by the Borrower
to the (resigning) Agent within seven (7) Business Days notice of such proposed
appointment). If a successor Agent shall not have been so appointed and accepted
such appointment within 30 days after the giving of notice by the resigning
Agent, then the resigning Agent may appoint a successor Agent, which shall be a
financial institution

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having a combined capital and surplus in excess of $1,000,000,000.00. The
consent of the Borrower otherwise required by this Section 14-10(a) shall not be
required if an Event of Default has occurred.
          (b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor shall thereupon succeed to, and become vested
with, all the rights, powers, privileges, and duties of the (resigning) Agent so
replaced, and the (resigning) Agent shall be discharged from the
(resigning) Agent’s duties and obligations hereunder, other than on account of
any responsibility for any action taken or omitted to be taken by the
(resigning) Agent as to which a final judicial determination has been or is made
(in a proceeding in which the (resigning) Person has had an opportunity to be
heard) that such Person had acted in a grossly negligent manner or in bad faith.
          (c) After any retiring Agent’s resignation, the provisions of this
Agreement and of all other Loan Documents shall continue in effect for the
retiring Person’s benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.
ARTICLE 15 — Action By Agents — Consents — Amendments — Waivers:
     15-1. Administration of Credit Facilities.
          (a) Except as otherwise specifically provided in this Agreement, the
Agent may take any action with respect to the credit facility contemplated by
the Loan Documents as the Agent determines to be appropriate, provided, however,
the Agent is not under any affirmative obligation to take any action which it is
not required by this Agreement or the Loan Documents specifically to so take.
          (b) Except as specifically provided in the following Sections of this
Agreement, whenever a Loan Document or this Agreement provides that action may
be taken or omitted to be taken in an Agent’s discretion, the Agent shall have
the sole right to take, or refrain from taking, such action without, and
notwithstanding, any vote of the Revolving Credit Lenders:

      Actions Described in Section   Type of Consent Required
15-2
  Majority Lenders
15-3
  SuperMajority Lenders
15-4
  Certain Consent
15-5
  Unanimous Consent
15-6
  Consent of SwingLine Lender
15-7
  Consent of the Agent

          (c) The rights granted to the Revolving Credit Lenders in those
sections referenced in Section 15-1(b) shall not otherwise limit or impair the
Agent’s exercise of its discretion under the Loan Documents.

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     15-2. Actions Requiring or On Direction of Majority Lenders. Except as
otherwise provided in this Agreement, the Consent or direction of the Majority
Lenders is required for any amendment, waiver, or modification of any Loan
Document.
     15-3. Actions Requiring or On Direction of SuperMajority Lenders. The
Consent or direction of the SuperMajority Lenders is required as follows:
          (a) The Revolving Credit Lenders agree that any loan or advance under
the Revolving Credit which results in a Permissible OverLoan may be made by the
Agent in its discretion without the Consent of the Revolving Credit Lenders and
that each Revolving Credit Lender shall be bound thereby, provided, however, the
Consent or direction of the SuperMajority Lenders is required to permit a
Permissible OverLoan (other than any Permissible OverLoan to the extent that it
is also a Protective Advance as to which no such Consent or direction is so
required) to be outstanding for more than 45 consecutive Business Days or more
than twice in any twelve month period.
          (b) If the Borrower is then InDefault, the SuperMajority Lenders may
direct the Agent to suspend the Revolving Credit (including the making of any
Permissible OverLoans), whereupon, as long as the Borrower is InDefault, the
only Revolving Credit Loans which may be made are either
          (i) Revolving Credit Loans made or undertaken in the Agent’s
discretion to protect and preserve the interests of the Revolving Credit
Lenders; or
          (ii) Revolving Credit Loans made with Consent of the SuperMajority
Lenders.
          (c) If an Event of Default has occurred and not been duly waived, the
SuperMajority Lenders may:
          (i) Give the Agent an Acceleration Notice in accordance with
Section 13-1(b).
          (ii) Direct the Agent to increase the rate of interest to the default
rate of interest as provided in, and to the extent permitted by, this Agreement.
     15-4. Actions Requiring Certain Consent.
          (a) The Consent of the Revolving Credit Lender whose Revolving Credit
Lender’s Revolving Credit Dollar Commitment or Revolving Credit Percentage
Commitment is to be so increased is required for any increase in any Revolving
Credit Lender’s Revolving Credit Dollar Commitment or Revolving Credit
Percentage Commitment (other than by reason of the application of Section 15-10
(which deals with NonConsenting Revolving Credit Lenders) or Section 16-1 (which
deals with assignments and participations).

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          (b) The consent of the SwingLine Lender and the Consent of the
SuperMajority Lenders shall be required to increase the SwingLine Loan Ceiling.
     15-5. Actions Requiring or Directed By Unanimous Consent. None of the
following may take place except with the Consent of each Revolving Credit Lender
adversely affected thereby or with Unanimous Consent:
          (a) Any decrease in any interest rate or fee payable to the Revolving
Credit Lenders on account of the Revolving Credit Loans.
          (b) Any extension of the Maturity Date.
          (c) Any forgiveness of all or any portion of any payment Liability.
          (d) Any decrease in any interest rate or fee payable under any of the
Loan Documents (other than any Agent’s Fee (for which the consent of only the
Agent shall be required)) and of any fee payable to the Revolving Credit Lenders
provided for by the Fee Letter (which may be amended by written agreement
between the Borrower on the one hand, and the Agent on the other).
          (e) Any release of a material portion of the Collateral not otherwise
required or provided for in the Loan Documents or to facilitate a Liquidation.
          (f) Any amendment of the definition of the terms “Borrowing Base” or
“Availability” or of any Definition of any component thereof, such that more
credit would be available to the Borrower, based on the same assets, as would
have been available to the Borrower immediately prior to such amendment , it
being understood, however, that:
          (i) The foregoing shall not limit the adjustment by the Agent of any
Reserve in the Agent’s administration of the Revolving Credit as otherwise
permitted by this Agreement.
          (ii) The foregoing shall not prevent the Agent, in its administration
of the Revolving Credit, from restoring any component of Borrowing Base which
had been lowered by the Agent back to the value of such component, as stated in
this Agreement or to an intermediate value.
          (g) Any release of any Person obligated on account of the Liabilities.
          (h) The making of any Revolving Credit Loan which, when made, exceeds
Availability and is not a Permissible OverLoan, provided, however,
          (i) no Consent shall be required in connection with the making of any
Revolving Credit Loan to “cover” any honoring of a drawing under any L/C; and
          (ii) each Lender recognizes that subsequent to the making of a
Revolving Credit Loan which does not constitute a Permissible OverLoan, the
unpaid principal balance of

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the Loan Account may exceed Borrowing Base on account of changed circumstances
beyond the control of the Agent (such as a drop in collateral value).
          (i) The waiver of the obligation of the Borrower to reduce the unpaid
principal balance of loans under the Revolving Credit to an amount which does
not exceed a Permissible OverLoan or, subject to the time limits included in
Section 15-3(a) (which places time and frequency limits on Permissible
OverLoans), to eliminate an OverLoan.
          (j) Any amendment of this Article 15.
          (k) Amendment of any of the following Definitions:
“Appraised Inventory Liquidation Value”
“Majority Lender”
“Permissible OverLoan”
“Protective Advances”
“SuperMajority Lenders
“Unanimous Consent”
     15-6. Actions Requiring SwingLine Lender Consent. No action, amendment, or
waiver of compliance with, any provision of the Loan Documents or of this
Agreement which affects the SwingLine Lender may be undertaken without the
Consent of the SwingLine Lender.
     15-7. Actions Requiring Agent’s Consent.
          (a) No action, amendment, or waiver of compliance with, any provision
of the Loan Documents or of this Agreement which affects the Agent in its
capacity as Agent may be undertaken without the written consent of the Agent.
          (b) No action referenced herein which affects the rights, duties,
obligations, or liabilities of the Agent shall be effective without the written
consent of the Agent.
     15-8. Miscellaneous Actions.
          (a) Notwithstanding any other provision of this Agreement, no single
Revolving Credit Lender independently may exercise any right of action or
enforcement against or with respect to the Borrower.
          (b) The Agent shall be fully justified in failing or refusing to take
action under this Agreement or any Loan Document on behalf of any Revolving
Credit Lender unless the Agent shall first
          (i) receive such clear, unambiguous, written instructions as the Agent
deems appropriate; and

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          (ii) be indemnified to the Agent’s satisfaction by the Revolving
Credit Lenders against any and all liability and expense which may be incurred
by the Agent by reason of taking or continuing to take any such action, unless
such action had been grossly negligent, in willful misconduct, or in bad faith.
          (c) The Agent may establish reasonable procedures for the providing of
direction and instructions from the Revolving Credit Lenders to the Agent,
including its reliance on multiple counterparts, facsimile transmissions, and
time limits within which such direction and instructions must be received in
order to be included in a determination of whether the requisite Loan
Commitments has provided its direction, Consent, or instructions.
     15-9. Actions Requiring Borrower’s Consent. The Borrower’s consent is
required for any amendment of this Agreement.
     15-10. NonConsenting Revolving Credit Lender.
          (a) In the event that a Revolving Credit Lender (in this
Section 15-10, a “NonConsenting Revolving Credit Lender”) does not provide its
Consent to a proposal by the Agent to take action which requires consent under
this Article 15, then one or more Revolving Credit Lenders who provided Consent
to such action may require the assignment, without recourse and in accordance
with the procedures outlined in Section 16-1, below, of the NonConsenting
Revolving Credit Lender’s commitment hereunder on fifteen (15) days written
notice to the Agent and to the NonConsenting Revolving Credit Lender.
          (b) At the end of such fifteen (15) days, and provided that the
NonConsenting Revolving Credit Lender delivers the Revolving Credit Note held by
the NonConsenting Revolving Credit Lender to the Agent, the Revolving Credit
Lenders who have given such written notice shall Transfer the following to the
NonConsenting Revolving Credit Lender:
          (i) Such NonConsenting Revolving Credit Lender’s Pro-Rata share of the
principal and interest of the Revolving Credit Loans to the date of such
assignment.
          (ii) All fees distributable hereunder to the NonConsenting Revolving
Credit Lender to the date of such assignment.
          (iii) Any reasonable out-of-pocket costs and expenses for which the
NonConsenting Revolving Credit Lender is entitled to reimbursement from the
Borrower.
          (c) In the event that the NonConsenting Revolving Credit Lender fails
to deliver to the Agent the Revolving Credit Note held by the NonConsenting
Revolving Credit Lender as provided in Section 15-10(b), then:

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          (i) The amount otherwise to be Transferred to the NonConsenting
Revolving Credit Lender shall be Transferred to the Agent and held by the Agent,
without interest, to be turned over to the NonConsenting Revolving Credit Lender
upon delivery of the Revolving Credit Note held by that NonConsenting Revolving
Credit Lender.
          (ii) The Revolving Credit Note held by the NonConsenting Revolving
Credit Lender shall have no force or effect whatsoever.
          (iii) The NonConsenting Revolving Credit Lender shall cease to be a
“Revolving Credit Lender”.
          (iv) The Revolving Credit Lender(s) which have Transferred the amount
to the Agent as described above shall have succeeded to all rights and become
subject to all of the obligations of the NonConsenting Revolving Credit Lender
as “Revolving Credit Lender”.
          (d) In the event that more than one (1) Revolving Credit Lender wishes
to require such assignment, the NonConsenting Revolving Credit Lender’s
commitment hereunder shall be divided among such Revolving Credit Lenders,
pro-rata based upon their respective Revolving Credit Percentage Commitments,
with the Agent coordinating such transaction.
          (e) The Agent shall coordinate the retirement of the Revolving Credit
Note held by the NonConsenting Revolving Credit Lender and the issuance of
Revolving Credit Notes to those Revolving Credit Lenders which “take-out” such
NonConsenting Revolving Credit Lender, provided, however, no processing fee
otherwise to be paid as provided in Section 16-2(b) shall be due under such
circumstances.
ARTICLE 16 — Assignments By Revolving Credit Lenders:
     16-1. Assignments and Assumptions.
          (a) Except as provided herein, each Revolving Credit Lender (in this
Section 16-1(a), an “Assigning Revolving Credit Lender”) may assign to one or
more Eligible Assignees (in this Section 16-1(a), each an “Assignee Revolving
Credit Lender”) all or a portion of that Revolving Credit Lender’s interests,
rights and obligations under this Agreement and the Loan Documents (including
all or a portion of its Commitment) and the same portion of the Revolving Credit
Loans at the time owing to it, and of the Revolving Credit Note held by the
Assigning Revolving Credit Lender, provided that:
          (i) The Agent shall have given its prior written consent to such
assignment, which consent shall not be unreasonably withheld, but need not be
given if the proposed assignment would result in Bank of America’s holding a
Revolving Credit Dollar Commitment of less than $15 Million.

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          (ii) Unless an Event of Default has occurred, any assignment to a
person not then a Revolving Credit Lender shall be subject to the prior written
consent of the Borrower (not to be unreasonably withheld).
               (iii) Each such assignment shall be of a constant, and not a
varying, percentage of all the Assigning Revolving Credit Lender’s rights and
obligations under this Agreement.
               (iv) Such assignment shall not result in Bank of America holding
a Loan Commitment of less than $15,000,000.00, provided, however, Bank of
America shall be relieved of any “minimum hold” obligation following the
occurrence of any Event of Default.
     16-2. Assignment Procedures. (This Section 16-2 describes the procedures to
be followed in connection with an assignment effected pursuant to this
Article 16 and permitted by Section 16-1).
          (a) The parties to such an assignment shall execute and deliver to the
Agent, for recording in the Register, an Assignment and Acceptance substantially
in the form of EXHIBIT 16-1, annexed hereto (an “Assignment and Acceptance”).
          (b) The Assigning Revolving Credit Lender shall deliver to the Agent,
with such Assignment and Acceptance, the Revolving Credit Note held by the
subject Assigning Revolving Credit Lender and the Agent’s processing fee of
$3,500.00, provided, however, no such processing fee shall be due where the
Assigning Revolving Credit Lender is one of the Revolving Credit Lenders at the
initial execution of this Agreement.
          (c) The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it and a register or similar list (the “Register”) for the
recordation of the names and addresses of the Revolving Credit Lenders and of
the Revolving Credit Percentage Commitment and Revolving Credit Percentage
Commitment of each Revolving Credit Lender. The Register shall be available for
inspection by the Revolving Credit Lenders and the Borrower at any reasonable
time and from time to time upon reasonable prior notice. In the absence of
manifest error, the entries in the Register shall be conclusive and binding on
all Revolving Credit Lenders. The Agent and the Revolving Credit Lenders may
treat each Person whose name is recorded in the Register as a “Revolving Credit
Lender” hereunder for all purposes of this Agreement.
          (d) The Assigning Revolving Credit Lender and Assignee Revolving
Credit Lender, directly between themselves, shall make all appropriate
adjustments in payments for periods prior to the effective date of an Assignment
and Assumption.

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     16-3. Effect of Assignment.
          (a) From and after the effective date specified in an Assignment and
Acceptance which has been executed, delivered, and recorded (which effective
date the Agent may delay by up to five (5) Business Days after the delivery of
such Assignment and Acceptance):
          (i) The Assignee Revolving Credit Lender:
          (A) Shall be a party to this Agreement and the Loan Documents (and to
any amendments thereof) as fully as if the Assignee Revolving Credit Lender had
executed each.
          (B) Shall have the rights of a Revolving Credit Lender hereunder to
the extent of the Revolving Credit Percentage Commitment and Revolving Credit
Percentage Commitment assigned by such Assignment and Acceptance.
          (ii) The Assigning Revolving Credit Lender shall be released from the
Assigning Revolving Credit Lender’s obligations under this Agreement and the
Loan Documents to the extent of the Commitment assigned by such Assignment and
Acceptance.
          (iii) The Agent shall undertake to obtain and distribute replacement
Revolving Credit Notes to the subject Assigning Revolving Credit Lender and
Assignee Revolving Credit Lender.
          (b) By executing and delivering an Assignment and Acceptance, the
parties thereto confirm to and agree with each other and with all parties to
this Agreement as to those matters which are set forth in the subject Assignment
and Acceptance.
     ARTICLE 17 — Notices:
     17-1. Notice Addresses. All notices, demands, and other communications made
in respect of any Loan Document (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
If to the Agent:

                  Bank of America, N.A.         100 Federal Street        
Boston, Massachusetts 02110    
 
  Attention   : James Ward    
 
        Managing Director    
 
  Fax   : 617 434-4312     
 
  E-mail   : james.ward@baml.com    

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     With a copy to (which shall not constitute notice):

                  Riemer & Braunstein LLP         Three Center Plaza        
Boston, Massachusetts 02108    
 
  Attention   : David S. Berman, Esquire    
 
  Fax   : 617 880 3456     
 
  Email   : dberman@riemerlaw.com    

If to the Borrower:

                  Hastings Entertainment, Inc.         3601 Plains Boulevard    
    Amarillo, Texas 79102    
 
  Attention   : Dan Crow    
 
  Fax   : 806 351 2424     
 
  Email   : Danny.Crow@goHastings.com    

     With a copy to (which shall not constitute notice):

                  Kelly Hart & Hallman LLP         201 Main Street, Suite 2500  
      Fort Worth, Texas 76102    
 
  Attention   : F. Richard Bernasek, Esquire    
 
  Fax:   : 817 878 9709     
 
  Email   : dick.bernasek@kellyhart.com    

     17-2. Notice Given.
          (a) Except as otherwise specifically provided herein, notices shall be
deemed made and correspondence received, as follows (all times being local to
the place of delivery or receipt):
          (i) By mail: the sooner of when actually received or three (3) days
following deposit in the United States mail, postage prepaid.
          (ii) By recognized overnight express delivery: the Business Day
following the day when sent.
          (iii) By Hand: If delivered on a Business Day after 9:00 AM and no
later than three (3) hours prior to the close of customary business hours of the
recipient, when delivered. Otherwise, at the opening of the then next Business
Day.
          (iv) By Facsimile transmission (which must include a header on which
the party sending such transmission is indicated): If sent on a Business Day
after 9:00 AM and no later than three (3) hours prior to the close of customary
business hours of the recipient, one (1) hour after being sent. Otherwise, at
the opening of the then next Business Day.
          (v) By electronic mail transmission (which must include a header on
which the party sending such transmission is indicated): Upon receipt of a
return e-mail from the recipient confirming such notice has been received, or
upon receipt of an automatically generated

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e-mail confirmation that such communication has been delivered, i.e. by the
“return receipt requested” function).
          (b) Rejection or refusal to accept delivery and inability to deliver
because of a changed address or Facsimile Number for which no due notice was
given shall each be deemed receipt of the notice sent.
ARTICLE 18 — Term:
     18-1. Termination of Revolving Credit. The Revolving Credit shall remain in
effect (subject to suspension as provided in Section 2-5(g) hereof) until the
Termination Date.
     18-2. Actions On Termination.
          (a) On the Termination Date, the Borrower shall pay the Agent (whether
or not then due), in immediately available funds, all then Liabilities
including, without limitation: the following:
          (i) The entire balance of the Loan Account (including the unpaid
principal balance of the Revolving Credit Loans, and the SwingLine Loan ).
          (ii) Any then remaining installments of the Revolving Credit
Commitment Fee.
          (iii) Any then remaining installments of the Agent’s Fee.
          (iv) Any payments due on account of the indemnification obligations
included in Section 2-10(e).
          (v) Any accrued and unpaid Unused Line Fee.
          (vi) All unreimbursed costs and expenses of the Agent and of Lenders’
Special Counsel for which the Borrower is responsible.
          (b) On the Termination Date, the Borrower shall also make such
arrangements concerning any L/C’s then outstanding as are reasonably
satisfactory to the Agent.
          (c) Until such payment (Section 18-2(a)) and arrangements concerning
L/C’s (Section 18-2(b)), all provisions of this Agreement, other than those
included in Article 2 which place any obligation on the Agent or any Revolving
Credit Lender to make any loans or advances or to provide any financial
accommodations to the Borrower shall remain in full force and effect until all
Liabilities shall have been paid in full.
          (d) The release by the Agent of the Collateral Interests granted the
Agent by the Borrower hereunder may be upon such conditions and indemnifications
as the Agent may require. Without limiting the foregoing, 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

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collateral security as it shall reasonably deem necessary or appropriate to
protect the Agent and the Lenders against (x) loss on account of credits
previously applied to the Liabilities that may subsequently be reversed or
revoked, (y) any obligations that may thereafter arise with respect to Bank
Products and Cash Management Services, and (z) any Liabilities that may
thereafter arise under Section 19-12 hereof.
     ARTICLE 19 — General:
     19-1. Protection of Collateral. The Agent has no duty as to the collection
or protection of the Collateral beyond the safe custody of such of the
Collateral as may come into the possession of the Agent.
     19-2. Publicity. (a) The Agent may issue a “tombstone” notice of the
establishment of the credit facility contemplated by this Agreement and may make
reference to the Borrower (and may utilize any logo or other distinctive symbol
associated with the Borrower) in connection with any advertising, promotion, or
marketing undertaken by the Agent.
          (b) Each Revolving Credit Lender, the Issuer and the Agent agrees to
use reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrower pursuant to this Agreement which is identified by
the Borrower as being confidential at the time the same is delivered to the
Revolving Credit Lenders, the Issuer or the Agent, provided that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any Revolving
Credit Lender, the Issuer or the Agent, (iii) to bank examiners, auditors or
accountants of any Revolving Credit Lender, the Issuer or the Agent (iv) to any
other Revolving Credit Lender, the Issuer or the Agent, (v) in connection with
any litigation to which any Revolving Credit Lender, the Issuer or the Agent is
a party, provided, further, that, unless specifically prohibited by applicable
Law or court order, each Revolving Credit Lender, the Issuer and the Agent shall
use best efforts to notify the Borrower of any request for disclosure of any
such non-public information (A) by any governmental agency or representative
thereof (other than any such request in connection with an examination of such
Revolving Credit Lender’s financial condition by such governmental agency) or
(B) pursuant to a legal process, (vi) to any Eligible Assignee (or prospective
Eligible Assignee) so long as such Eligible Assignee (or prospective Assignee)
agrees in writing to be bound by this confidentiality provision in all material
respects, or (vii) to the extent necessary in connection with any right or
remedy under this Agreement or any other Loan Document.
     19-3. Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Borrower’s representatives, successors, and assigns and shall
enure to the benefit of the Agent and each

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Revolving Credit Lender and their respective successors and assigns, provided,
however, no trustee or other fiduciary appointed with respect to the Borrower
shall have any rights hereunder. In the event that the Agent or any Revolving
Credit Lender assigns or transfers its rights under this Agreement, in
accordance with this Agreement the assignee shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of such assignor
hereunder and such assignor shall thereupon be discharged and relieved from its
duties and obligations hereunder.
     19-4. Severability. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
     19-5. Amendments.
          (a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrower and the Agent and each
Revolving Credit Lender, either express or implied, concerning the matters
included herein and in such other instruments, any custom, usage, or course of
dealings to the contrary notwithstanding. No such discussions, negotiations,
custom, usage, or course of dealings shall limit, modify, or otherwise affect
the provisions thereof. No failure by the Agent or any Revolving Credit Lender
to give notice to the Borrower of the Borrower’s having failed to observe and
comply with any warranty or covenant included in any Loan Document shall
constitute a waiver of such warranty or covenant or the amendment of the subject
Loan Document. No change made by the Agent to the manner by which Borrowing Base
is determined shall obligate the Agent to continue to determine Borrowing Base
in that manner.
          (b) The Borrower may undertake any action otherwise prohibited hereby,
and may omit to take any action otherwise required hereby, upon and with the
express prior written consent of the Agent. Subject to Article 15, no consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Agent then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Agent shall be in reliance upon all representations
and warranties theretofore made to the Agent by or on behalf of the Borrower
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.

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     19-6. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion, consistent, however, with Sections 13-6 and
13-7 and any other applicable provisions of this Agreement. The Borrower shall
remain liable for any deficiency remaining following such application.
     19-7. Increased Costs. If, as a result of any adoption of, or change in,
any requirement of law, or of the interpretation or application thereof by any
court or by any governmental or other authority or entity charged with the
administration thereof, whether or not having the force of law, which:
          (a) subjects any Revolving Credit Lender to any taxes or changes the
basis of taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Agent or any Revolving
Credit Lender under this Agreement (except for taxes on the Agent or any
Revolving Credit Lender based on net income or capital imposed by the
jurisdiction in which the principal or lending offices of the Agent or that
Revolving Credit Lender are located);
          (b) imposes, modifies or deems applicable any reserve, cash margin,
special deposit or similar requirements against assets held by, or deposits in
or for the account of or loans by or any other acquisition of funds by the
relevant funding office of any Revolving Credit Lender;
          (c) imposes on any Revolving Credit Lender any other condition with
respect to any Loan Document; or
          (d) imposes on any Revolving Credit Lender a requirement to maintain
or allocate capital in relation to the Liabilities; and the result of any of the
foregoing, in such Revolving Credit Lender’s reasonable opinion, is to increase
the cost to that Revolving Credit Lender of making or maintaining any loan,
advance or financial accommodation or to reduce the income receivable by that
Revolving Credit Lender in respect of any loan, advance or financial
accommodation by an amount which that Revolving Credit Lender deems to be
material, then upon written notice from the Agent, from time to time, to the
Borrower (such notice to set out in reasonable detail the facts giving rise to
and a summary calculation of such increased cost or reduced income), the
Borrower shall forthwith pay to the Agent, for the benefit of the subject
Revolving Credit Lender, within 30 days after receipt of such notice, that
amount which shall compensate the subject Revolving Credit Lender for such
additional cost or reduction in income. Each Revolving Credit Lender shall, in
accordance with its internal policy, use reasonable efforts to designate a
different lending office for funding or booking its Revolving Credit Dollar
Commitment hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Revolving Credit Lender, such designation or assignment: (i) would eliminate or
reduce such amounts

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due (with respect to additional costs or reduction in income), and (ii) would
not subject such Revolving Credit Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Revolving Credit Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Revolving Credit Lender in connection with any such designation or assignment.
     19-8. Costs and Expenses of the Agent.
          (a) The Borrower shall pay from time to time on demand all Costs of
Collection and all reasonable costs, expenses, and disbursements (including
attorneys’ reasonable fees and expenses) which are incurred by the Agent in
connection with the preparation, negotiation, execution, and delivery of this
Agreement and of any other Loan Documents, and all other reasonable costs,
expenses, and disbursements which may be incurred by the Agent in connection
with or in respect to the credit facility contemplated hereby or which otherwise
are incurred with respect to the Liabilities.
          (b) The Borrower shall pay from time to time on demand all reasonable
costs and expenses (including attorneys’ reasonable fees and expenses) incurred,
following the occurrence of any Event of Default, by the Revolving Credit
Lenders to Lenders’ Special Counsel.
          (c) The Borrower authorizes the Agent to pay all such fees and
expenses and in the Agent’s discretion, to add such fees and expenses to the
Loan Account.
          (d) The undertaking on the part of the Borrower in this Section 19-8
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by the Agent in favor of the Borrower, other than a
termination, release, or discharge which makes specific reference to this
Section 19-8.
     19-9. Copies and Facsimiles. Each Loan Document and all documents and
papers which relate thereto which have been or may be hereinafter furnished the
Agent or any Revolving Credit Lender may be reproduced by that Revolving Credit
Lender or by the Agent by any photographic, microfilm, xerographic, digital
imaging, or other process, and such Person making such reproduction may destroy
any document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.

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     19-10. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the law of the Commonwealth of Massachusetts.
     19-11. Consent to Jurisdiction.
          (a) Each of the parties hereto agree that any legal action,
proceeding, case, or controversy against it with respect to any Loan Document
may be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent’s sole discretion. By
execution and delivery of this Agreement, each of the parties hereto, for itself
and in respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
          (b) Each of the parties hereto WAIVES personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to it at its address for
notices as specified herein, such service to become effective five (5) Business
Days after such mailing.
          (c) Each of the parties hereto WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
          (d) Nothing herein shall affect the right of the Agent to bring legal
actions or proceedings in any other competent jurisdiction.
          (e) The Borrower agrees that any action commenced by the Borrower
asserting any claim arising under or in connection with this Agreement or any
other Loan Document shall be brought solely in the Superior Court of Suffolk
County Massachusetts or in the United States District Court, District of
Massachusetts, sitting in Boston, Massachusetts, and that such Courts shall have
exclusive jurisdiction with respect to any such action.
     19-12. Indemnification. The Borrower shall indemnify, defend, and hold the
Agent and each Revolving Credit Lender and any of their respective employees,
officers, or agents (each, an “Indemnified Person”) harmless of and from any
claim brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the liabilities, or any other Person (as well as from
attorneys’ reasonable fees, expenses, and disbursements in connection therewith)
on account of the relationship between the Agent and Revolving Credit Lenders,
on the one hand, and the Borrower or of any other guarantor or endorser of the
Liabilities, on the other hand (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender’s selection, but at

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the expense of the Borrower) other than any claim as to which a final
determination is made in a judicial proceeding (in which the Agent and the other
Indemnified Person has had an opportunity to be heard) which determination
includes a specific finding that the Indemnified Person seeking indemnification
had acted in a grossly negligent manner or in actual bad faith. This
indemnification shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrower, other than
a termination, release, or discharge duly executed on behalf of the Agent which
makes specific reference to this Section 19-12.
     19-13. Rules of Construction. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement
and of the other Loan Documents:
          (a) Unless otherwise specifically provided for herein, interest and
any fee or charge which is stated as a per annum percentage shall be calculated
based on a 360 day year and actual days elapsed.
          (b) Words in the singular include the plural and words in the plural
include the singular.
          (c) Titles, headings (indicated by being underlined or shown in Small
Capitals) and any Table of Contents are solely for convenience of reference; do
not constitute a part of the instrument in which included; and do not affect
such instrument’s meaning, construction, or effect.
          (d) The words “includes” and “including” are not limiting.
          (e) Text which follows the words “including, without limitation” (or
similar words) is illustrative and not limitational.
          (f) Text which is shown in italics (other than italicized text in
parenthesis), shown in bold, shown IN ALL CAPITAL LETTERS, or in any combination
of the foregoing, shall be deemed to be conspicuous.
          (g) The words “may not” are prohibitive and not permissive.
          (h) Any reference to a Person’s “knowledge” (or words of similar
import) are to such Person’s knowledge assuming that such Person has undertaken
reasonable and diligent investigation with respect to the subject of such
“knowledge” (whether or not such investigation has actually been undertaken).
          (i) Terms which are defined in one section of any Loan Document are
used with such definition throughout the instrument in which so defined.
          (j) The symbol “$” refers to United States Dollars.
          (k) Unless limited by reference to a particular Section or provision,
any reference to “herein”, “hereof”, or “within” is to the entire Loan Document
in which such reference is made.

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          (l) References to “this Agreement” or to any other Loan Document is to
the subject instrument as amended to the date on which application of such
reference is being made.
          (m) Except as otherwise specifically provided, all references to time
are to Boston time.
          (n) In the determination of any notice, grace, or other period of time
prescribed or allowed hereunder:
          (i) Unless otherwise provided (I) the day of the act, event, or
default from which the designated period of time begins to run shall not be
included and the last day of the period so computed shall be included unless
such last day is not a Business Day, in which event the last day of the relevant
period shall be the then next Business Day and (II) the period so computed shall
end at 5:00 PM on the relevant Business Day.
          (ii) The word “from” means “from and including”.
          (iii) The words “to” and “until” each mean “to, but excluding”.
          (iv) The word “through” means “to and including”.
          (o) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 19-14
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.
     19-14. Intent. It is intended that:
          (a) This Agreement take effect as a sealed instrument.
          (b) The scope of all Collateral Interests created by the Borrower to
secure the Liabilities be broadly construed in favor of the Agent and that they
cover all assets of the Borrower, other than Exempt Assets.
          (c) All Collateral Interests created in favor of the Agent at any time
and from time to time by any the secure all Liabilities, whether now existing or
contemplated or hereafter arising.
          (d) All reasonable costs, expenses, and disbursements incurred by the
Agent and, to the extent provide in Section 19-8 each Revolving Credit Lender,
in connection with such Person’s relationship(s) with the Borrower shall be
borne by the Borrower.
          (e) Unless otherwise explicitly provided herein, the Agent’s consent
to any action of the Borrower which is prohibited unless such consent is given
may be given or refused by the Agent in its sole discretion and without
reference to Section 2-17 hereof.
     19-15. Participations. Each Revolving Credit Lender may sell participations
to one or more financial institutions (each, a “Participant”) in that Revolving
Credit Lender’s interests herein provided

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that no such participation shall include any provision which accords that
Participant with any rights, vis a vis the Agent, with respect to any
requirement herein for approval by a requisite number or proportion of the
Revolving Credit Lenders. No such sale of a participation shall relieve a
Revolving Credit Lender from that Revolving Credit Lender’s obligations
hereunder nor obligate the Agent to any Person other than a Revolving Credit
Lender.
     19-16. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to the Borrower from the Agent or any Revolving Credit
Lender, and any cash, securities, instruments or other property of the Borrower
in the possession of any of the foregoing, whether for safekeeping or otherwise
(regardless of the reason such Person had received the same) shall at all times
constitute security for all Liabilities and for any and all obligations of the
Borrower to the Agent and such Revolving Credit Lender and may be applied or set
off against the Liabilities and against such obligations at any time after the
occurrence of an Event of Default, whether or not other collateral is then
available to the Agent or that Revolving Credit Lender.
     19-17. Pledges To Federal Reserve Banks. Nothing included in this Agreement
shall prevent or limit any Revolving Credit Lender, to the extent that such
Revolving Credit Lender is subject to any of the twelve Federal Reserve Banks
organized under §4 of the Federal Reserve Act (12 U.S.C. §341) from pledging all
or any portion of that Lender’s interest and rights under this Agreement,
provided, however, neither such pledge nor the enforcement thereof shall release
the pledging Revolving Credit Lender from any of its obligations hereunder or
under any of the Loan Documents.
     19-18. Maximum Interest Rate.
          (a) No interest rate specified in this Agreement or any other Loan
Document shall at any time exceed the Maximum Rate.
          (b) If at any time the interest rate (the “Contract Rate”) for any
Liability shall exceed the Maximum Rate, so that, as provided in
Section 19-18(a), interest accruing on such Liability is limited to the Maximum
Rate, then any subsequent reduction in the Contract Rate for such Liability
shall not reduce the rate of interest on such Liability below the Maximum Rate
until the aggregate amount of interest accrued on such Liability equals the
aggregate amount of interest which would have accrued on such Liability if the
Contract Rate for such Liability had at all times been in effect.
          (c) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, none of the terms and provisions of this
Agreement or the other Loan Documents shall ever be construed to create a
contract or obligation to pay interest at a rate in excess of the Maximum Rate;
and neither the Agent nor any Revolving Credit Lender shall ever charge,
receive, take, collect, reserve or apply, as interest on the Liabilities, any
amount in excess of the Maximum Rate. The Agent, each Revolving Credit Lender
and the Borrower each agrees that any interest, charge, fee, expense or other
Liability provided for in this Agreement or in the other Loan Documents which
constitutes interest under applicable law, ipso facto and under any and all
circumstances, shall be limited or reduced to an amount equal to the lesser of
(x) the amount of such interest, charge, fee, expense or other Liability that
would be payable in the absence of this Section 19-18, or (y) an amount, which
when added to all other interest payable under this Agreement and the other Loan
Documents, equals the Maximum Rate. If, notwithstanding the foregoing, the Agent
or any Revolving Credit Lender ever contracts for, charges, receives, takes,

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collects, reserves or applies as interest any amount in excess of the Maximum
Rate, such amount which would be deemed excessive interest shall be deemed a
partial payment or prepayment of principal of the Liabilities and treated
hereunder as such; and if the Liabilities, or applicable portions thereof, are
paid in full, any remaining excess shall promptly be paid to the Borrower. In
determining whether the interest paid or payable, under any specific
contingency, exceeds the Maximum Rate, the Agent, each Revolving Credit Lender
and the Borrower, to the maximum extent permitted by Applicable Law, shall
(i) characterize any non-principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate and spread in equal or unequal parts the
total amount of interest throughout the actual term of the Liabilities, or
applicable portions thereof, so that the interest rate does not exceed the
Maximum Rate at any time during the term of the Liabilities.
     19-19. Waivers.
          (a) The Borrower (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Section 19-19(b), below,
knowingly, voluntarily, and intentionally, and understands that Agent and each
Revolving Credit Lender, in establishing the facilities contemplated hereby and
in providing loans and other financial accommodations to or for the account of
the Borrower as provided herein, whether not or in the future, is relying on
such waivers.
          (b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER,
AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:
          (i) Except as otherwise specifically required hereby, notice of
non-payment, demand, presentment, protest and all forms of demand and notice,
both with respect to the Liabilities and the Collateral.
          (ii) Except as otherwise specifically required hereby, the right to
notice and/or hearing prior to the Agent’s exercising of the Agent’s rights upon
default.

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          (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR ANY REVOLVING
CREDIT LENDER OR IN WHICH THE AGENT OR ANY REVOLVING CREDIT LENDER IS JOINED AS
A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON (AND THE
AGENT OR EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY
TRIAL OF ANY SUCH CASE OR CONTROVERSY).
          (iv) The benefits or availability of any stay, limitation, hindrance,
delay, or restriction (including, without limitation, any automatic stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code) with
respect to any action which the Agent may or may become entitled to take
hereunder.
          (v) Any defense, counterclaim, set-off, recoupment, or other basis on
which the amount of any Liability, as stated on the books and records of the
Agent, could be reduced or claimed to be paid otherwise than in accordance with
the tenor of and written terms of such Liability.
          (vi) Any claim to consequential, special, or punitive damages.
     19-20. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND ALL OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER COVERED HEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
     19-21. Foreign Asset Control Regulations. Neither the advance of the
Revolving Credit 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, neither the Borrower nor any of its
Affiliates (a) is or will

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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.
     19-22. USA PATRIOT Act Notice. Each Revolving Credit Lender that is subject
to the Act (as hereinafter defined) and the Agent (for itself and not on behalf
of any Revolving Credit Lender) hereby notifies the Borrower and Guarantors 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 the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Revolving Credit Lender or the Agent, as applicable, to identify the
Borrower in accordance with the Act. The Borrower is in compliance, in all
material respects, with the Patriot Act. No part of the proceeds of the
Revolving Credit Loans will be used by the Borrower, 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.
     19-23. No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby, the Borrower acknowledges and
agrees 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 Borrower, on
the one hand, and the Agent and the Revolving Credit Lenders, on the other hand,
and the Borrower 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 Revolving Credit Lender is and has been acting solely as
a principal and is not the financial advisor, agent or fiduciary, for the
Borrower or any of its Affiliates, stockholders, creditors or employees or any
other Person; (iii) none of the Agent or the Revolving Credit Lenders has
assumed or will assume an advisory, agency or fiduciary responsibility in favor
of the Borrower 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 Agent or Revolving Credit Lenders has advised or is currently
advising the Borrower or any of its Affiliates on other matters) and none of the
Agent or Revolving Credit Lenders has any obligation to the Borrower or any of
its Affiliates with respect to the transactions contemplated hereby except those
obligations

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expressly set forth herein and in the other Loan Documents; (iv) the Agent and
the Revolving Credit Lenders and their respective Affiliates may be engaged in a
broad range of transactions that involve interests that differ from those of the
Borrower and its Affiliates, and none of the Agent or the Revolving Credit
Lenders has any obligation to disclose any of such interests by virtue of any
advisory, agency or fiduciary relationship; and (v) the Agent and the Revolving
Credit Lenders 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 the Borrower has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate. The
Borrower hereby waives and releases, to the fullest extent permitted by law, any
claims that it may have against each of the Agent and Revolving Credit Lenders
with respect to any breach or alleged breach of agency or fiduciary duty.
     19-24. Original Credit Agreement Amended and Restated. Upon satisfaction of
the conditions precedent to the effectiveness of this Agreement, (a) this
Agreement shall amend and restate the Original Credit Agreement in its entirety,
and (b) the rights and obligations of the parties under the Original Credit
Agreement shall be subsumed within, and be governed by , this Agreement;
provided, however, that the Borrower hereby agrees that (i) the L/Cs
outstandings under the Original Credit Agreement on the effective date hereof
shall be L/Cs hereunder, and (ii) all outstanding Liabilities of the Borrower
under the Original Credit Agreement shall remain outstanding, shall constitute
continuing Liabilities secured by the Collateral, and this Agreement shall not
be deemed to evidence or result in a novation or repayment and reborrowing of
such obligations and other liabilities.
[Signature Pages Follow]

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HASTINGS ENTERTAINMENT, INC.,
As Borrower

         
By
  /s/ Dan Crow
 
    Print Name: Dan Crow     Title: CFO and Vice President    

BANK OF AMERICA, N.A.,
As Agent and Revolving Credit Lender

         
By
  /s/ Matthew Potter
 
    Print Name: Matthew Potter     Title: Vice President    

Signature Page to Loan and Security Agreement