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THIRD AMENDED AND RESTATED
CREDIT AGREEMENT

Dated as of February 20, 2007

By and Among

WHITEHALL JEWELLERS, INC.,

as Borrower,

THE LENDERS
Listed on Schedule 2.01 hereto,

LASALLE BANK NATIONAL ASSOCIATION,
as Administrative Agent and Collateral Agent,
for the Agents and the Lenders

BANK OF AMERICA, N.A.,
WELLS FARGO RETAIL FINANCE, LLC,
as Managing Agents
for the Agents and the Lenders

and

ABN AMRO BANK N.V.,
as Syndication Agent
for the Agents and the Lenders

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TABLE OF CONTENTS

 

 

 

ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS

1

 

 

1.01

Defined Terms

1

1.02

Other Interpretive Provisions

34

1.03

Accounting Terms

35

1.04

Rounding

35

1.05

Times of Day

35

1.06

Letter of Credit Amounts

35

 

 

 

ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS

35

 

 

2.01

Loans; Reserves

35

2.02

Borrowings, Conversions and Continuations of Loans

37

2.03

Letters of Credit

39

2.04

Prepayments

47

2.05

Termination or Reduction of Commitments

48

2.06

Repayment of Loans

48

2.07

Interest

48

2.08

Fees

49

2.09

Computation of Interest and Fees

50

2.10

Evidence of Debt

50

2.11

Payments Generally; Administrative Agent’s Clawback

50

2.12

Sharing of Payments by Lenders

52

2.13

Settlement Among Lenders

52

 

 

 

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

53

 

 

3.01

Taxes

53

3.02

Illegality

55

3.03

Inability to Determine Rates

55

3.04

Increased Costs; Reserves on LlBOR Loans

55

3.05

Compensation for Losses

57

3.06

Mitigation Obligations; Replacement of Lenders

57

3.07

Survival

58

 

 

 

ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

58

 

 

4.01

Conditions of Initial Credit Extension

58

4.02

Conditions to all Credit Extensions

60

 

 

 

ARTICLE V. REPRESENTATIONS AND WARRANTIES

61

 

 

5.01

Existence, Qualification and Power

61

5.02

Authorization; No Contravention

61

5.03

Governmental Authorization; Other Consents

62

5.04

Binding Effect

62

5.05

Financial Statements; No Material Adverse Effect

62

5.06

Litigation

63

5.07

No Default

63

5.08

Ownership of Property; Liens

63

5.09

Environmental Compliance

63

5.10

Insurance

64

 

 

 

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5.11

Taxes

64

5.12

ERISA Compliance

64

5.13

Subsidiaries; Equity Interests

65

5.14

Margin Regulations; Investment Company Act; Public Utility Holding Company Act

65

5.15

Disclosure

65

5.16

Compliance with Laws

66

5.17

Intellectual Property; Licenses, Etc

66

5.18

Labor Matters

66

5.19

Security Documents

66

5.20

Solvency

66

5.21

Deposit Accounts; Credit Card Arrangements

67

5.22

Brokers

67

5.23

Customer and Trade Relations

67

5.24

Material Contracts

67

5.25

Casualty

67

 

 

 

ARTICLE VI. AFFIRMATIVE COVENANTS

67

 

 

6.01

Financial Statements

67

6.02

Certificates; Other Information

68

6.03

Notices

69

6.04

Payment of Obligations

70

6.05

Preservation of Existence, Etc.

71

6.06

Maintenance of Properties

71

6.07

Maintenance of Insurance

71

6.08

Compliance with Laws

72

6.09

Books and Records; Accountants

72

6.10

Inspection Rights

72

6.11

Use of Proceeds

73

6.12

Additional Loan Parties; Additional Properties

73

6.13

Cash Management

74

6.14

Information Regarding the Collateral

75

6.15

Physical Inventories

76

6.16

Environmental Laws

76

6.17

Further Assurances

76

6.18

Compliance with Terms of Leaseholds

77

6.19

Material Contracts

77

 

 

 

ARTICLE VII. NEGATIVE COVENANTS

77

 

 

7.01

Liens

77

7.02

Investments

77

7.03

Indebtedness

77

7.04

Fundamental Changes

78

7.05

Dispositions

78

7.06

Restricted Payments

78

7.07

Prepayments of Indebtedness

78

7.08

Change in Nature of Business

79

7.09

Transactions with Affiliates

79

7.10

Burdensome Agreements

79

7.11

Use of Proceeds

79

7.12

Amendment of Material Documents

79

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7.13

Corporate Name; Fiscal Year

79

7.14

Deposit Accounts; Credit Card Processors

80

7.15

Excess Availability

80

 

 

 

ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES

80

 

 

8.01

Events of Default

80

8.02

Remedies Upon Event of Default

83

8.03

Application of Funds

83

 

 

 

ARTICLE IX. ADMINISTRATIVE AGENT

85

 

 

9.01

Appointment and Authority

85

9.02

Rights as a Lender

85

9.03

Exculpatory Provisions

86

9.04

Reliance by Agents

86

9.05

Delegation of Duties

87

9.06

Resignation of Agents

87

9.07

Non-Reliance on Administrative Agent and Other Lenders

88

9.08

No Other Duties, Etc

88

9.09

Administrative Agent May File Proofs of Claim

88

9.10

Collateral and Guaranty Matters

89

9.11

Notice of Transfer

89

9.12

Reports and Financial Statements

89

9.13

Agency for Perfection

90

9.14

Indemnification of Agents

90

9.15

Relation among Lenders

90

 

 

 

ARTICLE X. MISCELLANEOUS

90

 

 

10.01

Amendments, Etc

90

10.02

Notices; Effectiveness; Electronic Communications

93

10.03

No Waiver; Cumulative Remedies

95

10.04

Expenses; Indemnity; Damage Waiver

95

10.05

Payments Set Aside

97

10.06

Successors and Assigns

97

10.07

Treatment of Certain Information; Confidentiality

100

10.08

Right of Setoff

101

10.09

Interest Rate Limitation

101

10.10

Counterparts; Integration; Effectiveness

102

10.11

Survival

102

10.12

Severability

102

10.13

Replacement of Lenders

102

10.14

Governing Law; Jurisdiction; Etc

103

10.15

Waiver of Jury Trial

104

10.16

No Advisory or Fiduciary Responsibility

104

10.17

USA PATRIOT Act Notice

105

10.18

Time of the Essence

105

10.19

Existing Credit Agreement Amended and Restated

105

10.20

Press Releases

105

10.21

Additional Waivers

105

10.22

No Strict Construction

106

10.23

Attachments

107

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SIGNATURES

S-l

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SCHEDULES

 

 

1.01

Existing Letters of Credit

2.01

Commitments and Applicable Percentages

5.01

Loan Parties Organizational Information

5.05

Supplement to Interim Financial Statements

5.08

Owned and Leased Real Estate

5.10

Insurance

5.13

Subsidiaries; Other Equity Investments; Equity Interests in the Borrower

5.21

DDAs, Store Accounts and Credit Card Arrangements

5.24

Material Contracts

7.01

Existing Liens

7.02

Existing Investments

7.03

Existing Indebtedness

10.02

Administrative Agent’s Office; Certain Addresses for Notices

EXHIBITS

 

 

A

Loan Notice

C-l

Tranche A Note

C-2

Tranche A- 1 Note

D

Compliance Certificate

E

Assignment and Assumption

F

Form of Customs Broker Agreement

G

Joinder Agreement

H

Borrowing Base Report

I

DDA Notification

J

Credit Card Notification

v

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

          This THIRD AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is
entered into as of February 20, 2007, among

          WHITEHALL JEWELLERS, INC. (the “Borrower”), a Delaware corporation
having its principal place of business at 125 South Wacker, #2600, Chicago,
Illinois 60606;

          the lending institutions listed on Schedule 2.01 (collectively, the
“Lenders”);

          LASALLE BANK NATIONAL ASSOCIATION (“LaSalle”), as administrative agent
(in such capacity, the “Administrative Agent”) and as collateral agent (in such
capacity, the “Collateral Agent”) for the Agents (as hereinafter defined) and
the Lenders;

          ABN AMRO BANK N.V., as syndication agent for the Agents and the
Lenders (in such capacity, the “Syndication Agent”); and

          BANK OF AMERICA, N. A. and WELLS FARGO RETAIL FINANCE, LLC, as
co-managing agents (collectively, in such capacity, the “Managing Agents”).

RECITALS:

          A. Pursuant to a Second Amended and Restated Revolving Credit and Gold
Consignment Agreement dated as of July 29, 2003 (as amended to date, the
“Existing Credit Agreement”), by and among the Borrower, LaSalle as
administrative agent and collateral agent, and the lenders and agents party
thereto, the lenders party thereto made loans and other extensions of credit
available to the Borrower for, among other things, general corporate and working
capital purposes.

          B. The Borrower has requested that the Lenders and Agents agree to
amend and restate the Existing Credit Agreement to, among other things, extend
the Maturity Date (as defined herein), make modifications to certain financial
covenants and provide certain other financial accommodations to the Borrower.

          C. The Lenders are willing to amend and restate the Existing Credit
Agreement and to provide financing on the terms and conditions set forth herein.

          NOW THEREFORE, the Borrower, the Lenders and the Agents agree that on
and as of the Closing Date (as hereinafter defined), the Existing Credit
Agreement is hereby amended and restated in its entirety and shall remain in
full force and effect only as expressly set forth herein:

ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS

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

          “ACH” means automated clearing house transfers.

          “Account” means “accounts” as defined in the UCC, and also means a
right to payment of a monetary obligation, whether or not earned by performance,
(a) for property that has been or is to be sold,

1

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leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for
a secondary obligation incurred or to be incurred, (e) for energy provided or to
be provided, (f) for the use or hire of a vessel under a charter or other
contract, (g) arising out of the use of a credit or charge card or information
contained on or for use with the card, or (h) as winnings in a lottery or other
game of chance operated or sponsored by a state, governmental unit of a state,
or person licensed or authorized to operate the game by a state or governmental
unit of a state. The term “Account” includes health-care-insurance receivables.

          “Administrative Agent” has the meaning provided in the Recitals to
this Agreement.

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

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

          “Agent(s)” means, individually, the Administrative Agent, Collateral
Agent, Managing Agents or Syndication Agent, and collectively means all of them.

          “Aggregate Borrowing Base” means the sum of (a) the Tranche A
Borrowing Base with respect to, and for all purposes in connection with, Tranche
A Loans and (b) the Tranche A-l Borrowing Base with respect to, and for all
purposes in connection with, Tranche A-l Loans.

          “Aggregate Commitments” means the sum of the Aggregate Tranche A
Commitments of all the Tranche A Lenders and the Aggregate Tranche A-1
Commitments of all the Tranche A-l Lenders.

          “Aggregate Tranche A Commitments” means, at any time, the sum of the
Tranche A Commitments at such time. As of the Closing Date, the Aggregate
Tranche A Commitments are $115,000,000.00.

          “Aggregate Tranche A-l Commitments” means, at any time, the sum of the
Tranche A-l Commitments at such time. As of the Closing Date, the Aggregate
Tranche A Commitments are $10,000,000.00

          “Agreement” means this Agreement as in effect from time to time.

          “Applicable Margin” means:

          (a) The percentages set forth in Level I of the pricing grid below
from and after the Closing Date until June 1, 2007; and

          (b) From and after June 1, 2007, the Applicable Margin shall be
determined on any date from the following pricing grid based upon the aggregate
amount of Equity Proceeds and/or proceeds of Subordinated Indebtedness
(including, without limitation, the proceeds of the Subordinate Facility Second
Additional Term Loan and Subordinate Facility Third Additional Term Loan)
received by Borrower during the period from and including the Closing Date
through and including such date:

2

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Level

 

Equity/Debt
Proceeds

 

Tranche A
LIBOR
Margin

 

Tranche A
Base Rate
Margin

 

Tranche A-1
LIBOR
Margin

 

Tranche A-l
Base Rate
Margin

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I

 

 

 

1.50%

 

-0-%

 

3.25%

 

1.25%

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II

 

From
$10,000,000 to
$14,999,999

 

2.00%

 

0.50%

 

3.75%

 

1.75%

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III

 

From
$15,000,000 to
$24,999,999

 

1.75%

 

0.25%

 

3.50%

 

1.50%

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IV

 

$25,000,000 or
more

 

1.50%

 

-0-%

 

3.25%

 

1.25%

          “Applicable Percentage” means (a) with respect to each Credit
Extension under the Tranche A Commitments, the Tranche A Applicable Percentage,
(b) with respect to each Credit Extension under the Tranche A-1 Commitments, the
Tranche A-1 Applicable Percentage, and (c) with respect to each Lender, that
percentage of the Commitments of all Lenders hereunder to make Credit Extensions
to the Borrower, in each case as the context provides. If the commitment of each
Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02 or if the Aggregate
Commitments have expired, then the Applicable Percentage of each Lender shall be
determined based on the Applicable Percentage of such Lender most recently in
effect, giving effect to any subsequent assignments. The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on
Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable.

          “Approved Fund” means any Fund that is administered or managed by (a)
a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

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

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

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

          “Audited Financial Statements” means the audited consolidated balance
sheet of the Borrower and its Subsidiaries for the fiscal year ended January 31,
2007, and the related consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such fiscal year of the Borrower and its
Subsidiaries, including the notes thereto.

3

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          “Availability” means at any time of determination, the amount by which
the Aggregate Borrowing Base exceeds the aggregate of the then outstanding
Credit Extensions. In calculating Availability at any time and for any purpose
under this Agreement, the Borrower shall certify to the Administrative Agent
that all accounts payable and Taxes are being paid on a timely basis and
consistent with past practices or otherwise being contested in good faith
(absent which the Administrative Agent may in its reasonable credit discretion
establish a Reserve therefor).

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

          “Availability Reserves” means, without duplication of any other
Reserves or items that are otherwise addressed or excluded through eligibility
criteria, such reserves as the Administrative Agent from time to time determines
in its reasonable credit discretion as being appropriate (a) to reflect the
impediments to the Agents’ ability to realize upon the Collateral, and/or (b) to
reflect amounts reasonably expected to be incurred or payable in connection with
(i) the continuing operation of Borrower’s business, and/or (ii) the protection
and preservation of, or realization upon, the Collateral.

          “Bank Products” means any services of facilities provided to any Loan
Party by the Administrative Agent or any of its Affiliates (but excluding Cash
Management Services) on account of (a) credit cards, (b) Swap Contracts, (c)
purchase cards, (d) merchant services constituting a line of credit, and (e)
leasing.

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

          “Base Rate” means the higher of (a) the annual rate of interest
announced from time to time by LaSalle at its head office in Chicago, Illinois,
as its “prime rate” and (b) the Federal Funds Effective Rate plus 0.5% per
annum. “Prime Rate” shall mean on any day a fluctuating rate per annum equal to
the higher of (a) the rate of interest designated by the Agent from time to time
as its “Prime Rate,” and (b) a rate of interest equal to the sum of (i) the
Federal Funds Rate, plus (ii) 0.5%. The Prime Rate is not necessarily the lowest
rate of interest charged by the Agent in connection with extensions of credit.
Changes in the rate of interest on a Prime Rate Loan shall take effect
simultaneously with each change in the Prime Rate. The applicable Prime Rate
shall be determined by the Agent in its sole judgment, and such determination
shall be conclusive absent manifest error.

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

           “Blocked Account” has the meaning provided in Section 6.13(a)(iv).

          “Blocked Account Agreement” has the meaning provided in Section
6.13(a)(iv).

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

          “Borrower” has the meaning provided in the introductory paragraph
hereto.

4

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

          “Borrowing Base Report” has the meaning provided in Section 6.02(b).

          “Business” means the retail sale of jewelry.

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

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

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

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

          “Cash Collateralize” has the meaning provided in Section 2.03(l).

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

          “Cash Management Services” means any one or more of the following
types or services or facilities provided to any Loan Party by the Administrative
Agent or any of its Affiliates: (a) ACH transactions, (b) cash management
services, including, without limitation, controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services, (c)
foreign exchange facilities, (d) credit or debit cards, and (e) merchant
services not constituting a Bank Product.

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

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

5

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

          “Change in Law” means the occurrence, after the date of this
Agreement, of any of the following: (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, guideline
or directive (whether or not having the force of law) by any Governmental
Authority.

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

          (c) any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934), other than the Existing
Equity Holders, becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that a person or group
shall be deemed to have “beneficial ownership” of all securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time (such right, an “option right”)),
directly or indirectly, of 40% or more of the Equity Interests of WJ Holding
Corp. entitled to vote for members of the board of directors or equivalent
governing body of WJ Holding Corp. on a fully-diluted basis (and taking into
account all such Equity Interests that such “person” or “group” has the right to
acquire pursuant to any option right); or

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

          (e) any Person or two or more Persons, other than the Existing Equity
Holders, acting in concert shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power to exercise,
directly or indirectly, a controlling influence over the management or policies
of WJ Holding Corp. or the Borrower, or control over the Equity Interests of WJ
Holding Corp. or the Borrower entitled to vote for members of the board of
directors or equivalent governing body of WJ Holding Corp. or the Borrower on a
fully-diluted basis (and taking into account all such securities that such
Person or Persons have the right to acquire pursuant to any option right)
representing 40% or more of the combined voting power of such securities; or

          (f) the Existing Equity Holders shall at any time own less than 51 %
of the Equity Interests of WJ Holding Corp. entitled to vote for members of the
board of directors or equivalent governing body of WJ Holding Corp., on a
fully-diluted basis; or

          (g) WJ Holding Corp. shall any time fail to own 100% of the Equity
Interests of Borrower free and clear of all Liens; or

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          (h) any “change in control” or “sale” or “disposition” or similar
event as defined in any Organizational Document of any Loan Party or in any
Material Contract, or any document governing Material Indebtedness of any Loan
Party; or

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

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

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

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

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

          “Collateral Agent” has the meaning provided in the Recitals to this
Agreement.

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

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

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

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

          “Concentration Bank” means LaSalle or any other depository institution
which receives deposits directly, or indirectly (as a result of interim
concentration of depository accounts), from the retail stores of the Borrower
and its Subsidiaries.

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

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

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

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

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

          “Cost” means the calculated cost of purchases, based upon the
Borrower’s accounting practices, which practices are in effect on the Closing
Date or otherwise approved by the Administrative Agent, as such calculated cost
is determined from invoices received by the Borrower, the Borrower’s purchase
journals or the Borrower’s stock ledger. “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.

          “Credit Card Notifications” has the meaning provided in Section 6.13.

          “Credit Extensions” means each Borrowing and each L/C Credit
Extension.

          “Credit Party” or “Credit Parties” means (a) individually, (i) each
Lenders and its Affiliates, (ii) each Agents, (iii) each L/C Issuer, (iv) each
beneficiary of each indemnification obligation undertaken by any Loan Party
under any Loan Document, (v) any other Person to whom Obligations under this
Agreement and other Loan Documents are owing, and (vi) the successors and
assigns of each of the foregoing, and (b) collectively, all of the foregoing.

          “Credit Party Expenses” means, without limitation:

          (a) all reasonable out-of-pocket expenses incurred by the Agents in
connection with this Agreement and the other Loan Documents, including without
limitation

 

 

 

          (i) the reasonable fees, charges and disbursements of (A) counsel for
the Agents, (B) outside consultants for the Agents, (C) appraisers, (D)
commercial finance examinations, and (E) all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of the
Obligations;

 

 

 

          (ii) in connection with (A) the preparation, negotiation,
administration, management, execution and delivery of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (B) the enforcement or protection of their rights
in connection with this Agreement or the Loan Documents or efforts to preserve,
protect, collect, or enforce the Collateral, or (C) any workout, restructuring
or negotiations in respect of any Obligations;

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          (b) with respect to the L/C Issuer, all reasonable out-of-pocket
expenses incurred in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder; and

          (c) all reasonable out-of-pocket expenses incurred by the Credit
Parties who are not the Agents or the L/C Issuer, after the occurrence and
during the continuance of an Event of Default, provided that such Credit Parties
shall be entitled to reimbursement for no more than one counsel representing all
such Credit Parties.

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

          “Customs Broker Agreement” means an agreement in substantially the
form attached hereto as Exhibit F among a Borrower, a customs broker or other
carrier, and the Collateral Agent, in which the customs broker or other carrier
acknowledges that it has control over and holds the documents evidencing
ownership of the subject Inventory for the benefit of the Collateral Agent and
agrees, upon notice from the Collateral Agent, to hold and dispose of the
subject Inventory solely as directed by the Collateral Agent.

          “DDA” means each checking or other demand deposit account maintained
by any of the Loan Parties.

          “DDA Notification” has the meaning provided therefor in Section 6.13.

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

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

          “Default Rate” means:

          (a) with respect to a LIBOR Loan, an interest rate equal to the
interest rate (including any Applicable Margin) otherwise applicable to such
LIBOR Loan plus 2% per annum;

          (b) with respect to a Base Rate Loan, an interest rate equal to the
interest rate (including any Applicable Margin) otherwise applicable to such
Base Rate Loan, plus (iii) 2% per annum;

          (c) with respect to Letter of Credit Fees, a rate equal to the
applicable Letter of Credit Fee, plus 2% per annum; and

          (d) with respect to all Obligations other than those specified above,
an interest rate equal to (i) the Base Rate plus (ii) the highest Applicable
Margin, if any, applicable to Base Rate Loans, plus (iii) 2% per annum.

          “Defaulting Lender” means any Lender that (a) has failed to fund any
portion of the Loans, participations in L/C Obligations required to be funded by
it hereunder within one Business Day of the

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date required to be funded by it hereunder, (b) has otherwise failed to pay over
to the Administrative Agent or any other Lender any other amount required to be
paid by it hereunder within one Business Day of the date when due, unless the
subject of a good faith dispute, or (c) has been deemed insolvent or become the
subject of a bankruptcy or insolvency proceeding.

          “Disposition” or “Dispose” means the sale, transfer, license, lease or
other disposition (including any sale and leaseback transaction and any sale,
transfer, license or other disposition of (whether in one transaction or in a
series of transactions) all or substantially all of its assets) to or in favor
of any Person) of any property (including, without limitation, any Equity
Interests) by any Person (or the granting of any option or other right to do any
of the foregoing), including any sale, assignment, transfer or other disposal,
with or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

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

          “Domestic Subsidiary” means any Subsidiary that is organized under the
laws of any political subdivision of the United States.

          “Early Termination Fee” has the meaning set forth in Section 2.08(b).

          “Eligible Assignee” means (a) a Credit Party or any of its Affiliates;
(b) a bank, insurance company, or company engaged in the business of making
commercial loans, which Person, together with its Affiliates, has a combined
capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any
Person to whom a Credit Party assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Credit Party’s rights in
and to a material portion of such Credit Party’s portfolio of asset based credit
facilities, and (e) any other Person (other than a natural person) approved by
(i) the Administrative Agent and the L/C Issuer, and (ii) unless an Event of
Default has occurred and is continuing, the Borrower (each such approval not to
be unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include a Loan Party or any of the Loan
Parties’ Affiliates or Subsidiaries.

          “Eligible Credit Card Receivables” means Accounts due to the Borrower
on a non recourse basis from Visa, Mastercard, American Express Co.,
Discovercard, Diners Club, GECC Whitehall and other private label credit cards,
and other major credit card processors, or from debit card and Telecheck, in
each case reasonably acceptable to the Administrative Agent, as arise in the
ordinary course of Borrower’s business, which have been earned by performance
and are deemed by the Administrative Agent in its reasonable credit discretion
to be eligible for inclusion in the calculation of the Tranche A Borrowing Base.
Without limiting the foregoing, none of the following shall be deemed to be
Eligible Credit Card Receivables:

          (a) Accounts from Visa, Mastercard, American Express Co.,
Discovercard, Diners Club, and other major credit card processors that remain
outstanding past five (5) Business Days from the date of sale;

          (b) Accounts 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 Collateral Agent and Permitted Encumbrances);

          (c) Accounts that are not subject to a perfected first priority
security interest in favor of the Collateral Agent;

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          (d) Accounts which are disputed, are with recourse, or with respect to
which a claim, counterclaim, offset or chargeback has been asserted (but only to
the extent of such dispute, claim, counterclaim, offset or chargeback); or

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

          “Eligible Inventory” means with respect to the Borrower, finished
goods, fabricated but unfinished goods, and precious stone (whether or not
placed in findings) inventory owned by the Borrower, provided that Eligible
Inventory shall not include, without duplication, any inventory

          (a) held on consignment, or not otherwise owned by the Borrower, or of
a type no longer sold by the Borrower;

          (b) which is damaged or not immediately saleable or subject to any
legal encumbrance other than Permitted Liens;

          (c) as to which appropriate Uniform Commercial Code financing
statements showing the Borrower as debtor and the Collateral Agent as secured
party have not been filed in the proper filing office or offices in order to
perfect the Collateral Agent’s security interest therein;

          (d) which has been shipped to a customer of the Borrower regardless of
whether such shipment is on a consignment basis;

          (e) which is not either (A) located at a Permitted Inventory Location
within the United States of America or (B) in transit from one Permitted
Inventory Location within the United States of America to another Permitted
Inventory Location within the United States of America;

          (f) which the Administrative Agent reasonably deems to be obsolete or
not marketable;

          (g) which is designated as “return-to-vendor” inventory (other than
“return-to-vendor” inventory in the amount of up to $3,000,000 at any time); or

          (h) up to 25% of the Inventory in vault 503, and any Inventory in
vaults 505, 506, 507, 511, 512 and 513 (as determined in each case from the
Borrower’s general stock ledger).

          “Eligible Inventory” may include inventory, not to exceed
$3,500,000.00 in the aggregate, located at locations other than as specified in
clause (e) above, provided that such inventory is subject to a third party
bailment agreement acceptable to the Administrative Agent, in the Administrative
Agent’s sole discretion, pursuant to which the applicable bailee has
acknowledged the existence and priority (as against such bailee) of the security
interest of the Collateral Agent in such inventory and has waived any right of
setoff against such inventory, such as, by example, inventory located in the
possession of P & J Manufacturing, Inc. for repair.

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

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

          “Equipment” has the meaning set forth in the Security Agreement.

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

          “Equity Proceeds” means proceeds received by the Borrower from the
issuance or sale of its Equity Interests or capital contributions from the
holders of its Equity Interests, in each case on terms and conditions acceptable
to Administrative Agent in its reasonable credit discretion.

          “ERISA” means the Employee Retirement Income Security Act of 1974.

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

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

          “Event of Default” has the meaning provided in Section 8.01. An Event
of Default shall be deemed to be continuing unless and until that Event of
Default has been duly waived as provided in Section 10.03 hereof.

          “Excess Availability” means, as of any date of determination thereof
by the Administrative Agent in its reasonable credit discretion, the result, if
a positive number, of (a) the sum of Tranche A Excess Availability and Tranche
A-l Excess Availability, minus (b) the sum of: (i) all then held checks; (ii)

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accounts payable which are aged in excess of historical practices; and (iii)
overdrafts in excess of historical practices.

          “Excluded Taxes” means, with respect to the Administrative Agent, any
Lender, the L/C Issuer or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) taxes imposed on or
measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located, (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 10.13), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.01(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 3.01(a).

          “Existing Credit Agreement” has the meaning provided in the Recitals
to this Agreement.

          “Existing Equity Holders” means Prentice Capital Management, L.P.,
Holtzman Opportunity Fund, L.P. and their respective Affiliates.

          “Existing Letters of Credit” means the Letters of Credit set forth on
Schedule 1.01.

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

          “Federal Funds Effective Rate” means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor publication, “H.15(519)”) on the preceding Business Day opposite
the caption “Federal Funds (Effective)”; or, if for any relevant day such rate
is not so published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Administrative Agent of the
rates for the last transaction in overnight Federal funds arranged prior to 9:00
a.m. (New York, New York time) on that day by each of three leading brokers of
Federal funds transactions in New York, New York selected by the Administrative
Agent.

          “FIRREA” means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time.

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

          “Fiscal Quarter” means any fiscal quarter of any Fiscal Year in
accordance with the fiscal accounting calendar of the Loan Parties.

          “Fiscal Year” means any period of twelve consecutive months ending on
the Saturday closest to January 31 of any calendar year.

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

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

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

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

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

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

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

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

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

 

 

 

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

 

 

 

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

 

 

 

          (d) all obligations of such Person to pay the deferred purchase price
of property or services (other than trade accounts payable in the ordinary
course of business and, in each case, which are not aged in excess of historical
practices or which are being contested in good faith);

 

 

 

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

 

 

 

          (f) All Attributable Indebtedness in respect of Capital Lease
Obligations and Synthetic Lease Obligations of such Person;

 

 

 

          (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any Equity Interest in such
Person or any other Person, or any warrant, right or option to acquire such
Equity Interest, valued, in the case of a redeemable preferred interest, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends; and

 

 

 

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

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

          “Indemnified Taxes” means Taxes other than Excluded Taxes.

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

          “Information” has the meaning provided in Section 10.07.

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

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codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; all other
intellectual property; and all common law and other rights throughout the world
in and to all of the foregoing.

          “Intellectual Property Security Agreement” means the Intellectual
Property Security Agreement dated as of the Closing Date among the Loan Parties
and the Collateral Agent, granting a Lien in the Intellectual Property and
certain other assets of the Loan Parties, as amended and in effect from time to
time.

          “Intercreditor Agreement” means the Second Amended and Restated
Intercreditor and Lien Subordination Agreement date as of the Closing Date
between the Administrative Agent, on behalf of the Lenders and the Agents, PWJ
Lending LLC, as agent for the lenders under the Subordinate Facility, certain
other parties thereto, and acknowledged by the Borrower, as amended, modified or
supplemented from time to time.

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

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

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

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

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

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

          “Inventory” has the meaning given that term in the UCC, and shall also
include, without limitation, all: (a) goods which (i) are leased by a Person as
lessor, (ii) are held by a Person for sale or lease or to be furnished under a
contract of service, (iii) are furnished by a Person under a contract of
service, or (iv) consist of raw materials, work in process, or materials used or
consumed in a business; (b)

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goods of said description in transit; (c) goods of said description which are
returned, repossessed or rejected; and (d) packaging, advertising, and shipping
materials related to any of the foregoing.

          “Inventory Reserves” means such reserves as may be established from
time to time by the Administrative Agent in the Administrative Agent’s
reasonable credit 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” means, as to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition Equity Interests of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) any
acquisition, or (d) any other investment of money or capital in order to obtain
a profitable return. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

          “IRS” means the United States Internal Revenue Service.

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

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

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

          “LaSalle” means LaSalle, N.A. and its successors.

          “Layaway Reserve” means as of any date, a reserve in an amount equal
to the aggregate amount of layaway deposits received by the Borrower for
Inventory held on layaway for the Borrower’s customers.

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

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

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

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

          “L/C Issuer” means (a) LaSalle in its capacity as issuer of Letters of
Credit hereunder, or any successor issuer of Letters of Credit hereunder (which
successor may only be a Lender selected by the Administrative Agent in its
discretion), (b) LaSalle with respect to the Existing Letters of Credit and
until such Existing Letters of Credit expire or are return undrawn, and (c) any
other Lender selected by the Administrative Agent in its discretion. The L/C
Issuer may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of the L/C Issuer, in which case the term “L/C Issuer”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.

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

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

          “Lender” has the meaning provided in the introductory paragraph hereto
and, and, as the context requires, includes the Tranche A Lenders and Tranche
A-l Lenders.

          “Lending Office” means, as to any Lender, the office or offices of
which such Lender may from time to time notify the Borrower and the
Administrative Agent.

          “Letter of Credit” means each Standby Letter of Credit and each
Commercial Letter of Credit issued hereunder and shall include the Existing
Letters of Credit.

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

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

          “Letter of Credit Fee” has the meaning provided in Section 2.03(n).

          “Letter of Credit Sublimit” means an amount equal to $12,000,000. The
Letter of Credit Sublimit is part of, and not in addition to, the Aggregate
Commitments. A permanent reduction of the Aggregate Commitments or the Tranche A
Commitments shall not require a corresponding pro rata reduction in the Letter
of Credit Sublimit; provided, however, that if the Aggregate Commitments are
reduced to an amount less than the Letter of Credit Sublimit, then the Letter of
Credit Sublimit shall be reduced to an amount equal to (or, at Borrower’s
option, less than) the Aggregate Commitments.

          “LIBOR” means a rate of interest determined by Administrative Agent
equal to the offered rate for deposits in US Dollars for the applicable Interest
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the
second full LIBOR Business Day next preceding the first day of such

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Interest Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used). If such interest rates shall cease to be
available from Telerate News Service, LIBOR shall be determined from such
financial reporting service or other information as shall be acceptable to
Administrative Agent.

          “LIBOR Business Day” means a Business Day on which banks in the City
of London are generally open for interbank or foreign exchange transactions.

          “LIBOR Loan” means a Revolving Loan or any portion thereof bearing
interest by reference to LIBOR.

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

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

          “Loan” means an extension of credit by a Lender to the Borrower in the
form of a Tranche A Loan or Tranche A-1 Loan.

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

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

          “Loan Notice” means a notice of (a) a Borrowing, (b) a conversion of
Loans from one Type to the other, or (c) a continuation of LIBOR Loans, which,
if in writing, shall be substantially in the form of Exhibit A.

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

          “Majority Lenders” means, as of any date of determination, Lenders
holding 51 % or more of the Aggregate Commitments or, if the commitment of each
Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02, Lenders holding in the
aggregate 51 % or more of the Total Outstandings (with the aggregate amount of
each Lender’s risk participation and funded participation in L/C Obligations
being deemed “held” by such Lender for purposes of this definition); provided
that the Commitment of, and the portion of the Total

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Outstandings held or deemed held by, any Defaulting Lender shall be excluded for
purposes of making a determination of Majority Lenders.

          “Managing Agents” shall have the meaning provided in the Recitals to
this Agreement.

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

          “Material Contract” means, with respect to any Person, each contract
to which such Person is a party material to the business, assets, properties, or
financial condition of such Person.

          “Material Indebtedness” means Indebtedness (other than the Obligations
and obligations in respect of any Swap Contract) of the Loan Parties in an
aggregate principal amount exceeding $2,000,000.00.

          “Maturity Date” means February 20, 2011.

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

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

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

          “Net Proceeds” means with respect to any sale or other disposition of
any asset by any Person or any issuance of Indebtedness or equity securities of
such Person, the excess of

          (a) the gross cash proceeds received by such Person from such sale or
disposition or, as the case may be, such issuance, plus, as and when received,
all cash payments received subsequent to such sale or disposition or such
issuance representing:

 

 

 

 

 

(i) any deferred purchase price therefor; or

 

 

 

 

 

(ii) the amount of:

 

 

 

 

 

 

          (A) any cash proceeds from the sale or other disposition of any cash
equivalents (or any deferred purchase price obligations) received therefor

 

 

 

 

 

 

          (B) minus the sum of

 

 

 

 

 

 

(1) a reasonable reserve for any liabilities payable incident to such sale or
disposition or such issuance,

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(2) reasonable direct costs and expenses incurred by such Person in connection
with such sale or disposition or such issuance (including, without limitation,
reasonable brokerage, legal, investment banking, accounting, consulting, survey,
title and recording fees and commissions),

 

 

 

 

 

 

 

(3) all payments actually made on any Indebtedness (other than the Obligations)
or other obligations which are secured by any assets subject to such sale or
disposition which are required to be repaid out of the proceeds from such
transaction and

 

 

 

 

 

 

 

(4) actual tax payments made or to be made in connection therewith; and

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

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

          “Note” means (i) Tranche A Notes, and (ii) the Tranche A-1 Notes, as
each may be amended, supplemented or modified from time to time.

          “NPL” means the National Priorities List under CERCLA.

          “NRLV” means that percentage, as determined by the Administrative
Agent and the Managing Agents from the then most recent appraisal of the
Borrower’s inventory undertaken at the request of the Agents, reflecting the
estimate of the net recovery on the Borrower’s Inventory in the event of an
in-store liquidation of that inventory.

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

          “Organization Documents” means, (a) with respect to any corporation,
the certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and (d) in each case, all shareholder or other
equity holder agreements, voting trusts and

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similar arrangements to which such Person is a party or which is applicable to
its Equity Interests and all other arrangements relating to the Control or
management of such Person.

          “Other Liabilities” means (a) any Cash Management Services furnished
to any of the Loan Parties or any of their Subsidiaries and/or (b) any
transaction with any Agent, any Lender or any of their respective Affiliates,
which arises out of any Bank Product entered into with any Loan Party and any
such Person, as each may be amended from time to time

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

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

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

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

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

          “Patent, Trademark and License Assignment” means the Amended and
Restated Patent, Trademark and License Assignment of even date herewith made by
the Borrower in favor of the Collateral Agent as may be amended, modified or
restated from time to time.

          “PBGC” means the Pension Benefit Guaranty Corporation.

          “PCAOB” means the Public Company Accounting Oversight Board.

          “Pension Plan” means any “employee pension benefit plan” (as such term
is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute.

          “Permitted Disposition” means any of the following:

          (a) dispositions of inventory in the ordinary course of business
consistent with past practices;

          (b) non-exclusive licenses of Intellectual Property (or, in the case
of Intellectual Property used outside the United States, exclusive licenses) of
a Loan Party or any of its Subsidiaries in the ordinary course of business;

          (c) licenses for the conduct of licensed departments within the Loan
Parties’ Stores in the ordinary course of business;

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          (d) dispositions of Equipment in the ordinary course of business that
is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no
longer useful or necessary in its business or that of any Subsidiary and is not
replaced with similar property having at least equivalent value provided that
such assets shall not have an aggregate value in excess of $750,000.00 for all
such sales occurring in any Fiscal Year;

          (e) Sales, transfers and dispositions among the Loan Parties or by any
Subsidiary to a Loan Party;

          (f) Sales, transfers and dispositions of by any Subsidiary which is
not a Loan Party to another Subsidiary that is not a Loan Party;

          (g) closures of any Stores at which the Loan Parties maintain, offer
for sale or store any Inventory or other Collateral, up to a maximum in any 12
month period of 10% of the Stores existing on the Closing Date (excluding the
closure of any store at the expiration of the applicable lease therefor), and
the sale of inventory, equipment, fixtures and leasehold interests of the
Borrower in connection with any such closure; provided, however, that the
closure of more than 15 stores in any 12 month period shall require the consent
of the Administrative Agent; and provided further that any such closure
requiring the consent of the Administrative Agent shall be conducted in a manner
acceptable to the Administrative Agent in its reasonable credit discretion;

          (h) inventory, equipment, fixtures and leasehold interests of the
Borrower in connection with the sale by the Borrower in the ordinary course of
business of any retail store locations and

          (i) dispositions of other assets pursuant to sale transactions or sale
and leaseback transactions provided that (i) the Borrower receives cash proceeds
from such transactions equal to the fair market value of such assets, (ii) such
disposition shall be deemed a Prepayment Event and the Net Proceeds from such
transactions shall be applied in accordance with Section 2.04 and (iii) no
Default or Event of Default has occurred and is continuing at the time any such
transaction is consummated and none would exist after giving effect thereto.

          “Permitted Encumbrances” means:

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

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

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

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

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

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

          (g) Liens existing on the date hereof and listed on Schedule 7.01 and
any renewals or extensions thereof, provided that (i) the property covered
thereby is not changed, (ii) the amount secured or benefited thereby is not
increased, (iii) the direct or any contingent obligor with respect thereto is
not changed, and (iv) any renewal or extension of the obligations secured or
benefited thereby is otherwise permitted hereunder);

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

          (i) Liens in favor the Collateral Agent;

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

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

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

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

          (n) Liens in favor of customs and revenues authorities imposed by
applicable Law arising in the ordinary course of business in connection with the
importation of goods and securing obligations (i) that are not overdue by more
than thirty (30) days, or (ii)(A) that are being contested in good faith by
appropriate proceedings, (B) the applicable Loan Party or Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (C) such contest effectively suspends collection of the contested
obligation and enforcement of any Lien securing such obligation;

          (o) liens in connection with and to secure Indebtedness pursuant to
the Subordinate Facility; and

          (p) liens on Inventory and proceeds thereof (up to the cost thereof to
the Borrower or any Subsidiary thereof) held on consignment from trade vendors
securing obligations to return or pay the purchase price of such inventory;

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

          “Permitted Indebtedness” means:

          (a) Indebtedness outstanding on the date hereof and listed on Schedule
7.03 and any refinancings, refundings, renewals or extensions thereof; provided
that (i) the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to a
reasonable premium or other reasonable amount paid, and fees and expenses
reasonably incurred, in connection with such refinancing and by an amount equal
to any existing commitments unutilized thereunder, and the direct or contingent
obligor with respect thereto is not changed as a result of or in connection with
such refinancing, refunding, renewal or extension, (ii) the result of such
extension, renewal or replacement shall not be an earlier maturity date or
decreased weighted average life of such Indebtedness, and (iii) the terms
relating to principal amount, amortization, maturity, collateral (if any) and
subordination (if any), and other material terms taken as a whole, of any such
refinancing, refunding, renewing or extending Indebtedness, and of any agreement
entered into and of any instrument issued in connection therewith, are no less
favorable in any material respect to the Loan Parties or the Lenders than the
terms of any agreement or instrument governing the Indebtedness being
refinanced, refunded, renewed or extended and the interest rate applicable to
any such refinancing, refunding, renewing or extending Indebtedness does not
exceed the then applicable market interest rate;

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

          (c) Without duplication of Indebtedness described in clause (f) of
this definition, purchase money Indebtedness of any Loan Party to finance the
acquisition of any fixed or capital assets, including Capital Lease Obligations,
and any Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition thereof,
and extensions, renewals and replacements of any such Indebtedness; provided,
however, that the aggregate principal amount of Indebtedness permitted by this
clause (b) shall not exceed $2,000,000.00 at any time outstanding and further
provided that, if requested by the Collateral Agent, the Loan Parties shall use
commercially reasonable efforts to cause the holders of such Indebtedness to
enter into a Collateral Access Agreement on terms reasonably satisfactory to the
Collateral Agent;

          (d) obligations (contingent or otherwise) of any Loan Party or any
Subsidiary thereof existing or arising under any Swap Contract, provided that
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
fluctuations in interest rates or foreign exchange rates, and not for purposes
of speculation or taking a “market view;” provided that the aggregate Swap
Termination Value thereof shall not exceed $1,000,000.00 at any time
outstanding;

          (e) Contingent liabilities under surety bonds or similar instruments
incurred in the ordinary course of business in connection with the construction
or improvement of retail stores; and

          (f) The Obligations.

          (g) Indebtedness of the Borrower and its Subsidiaries other than that
permitted elsewhere in this definition in an aggregate principal amount not to
exceed $2,000,000 at any time outstanding; provided that (i) the receipt of the
Net Proceeds from such Indebtedness shall be deemed a Prepayment Event and shall
be applied in accordance with Section 2.04 hereof and (ii) no Default or Event
of Default has occurred and is continuing at the time such Indebtedness is
incurred and none would exist after giving effect thereto;

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          (h) Indebtedness pursuant to the Subordinate Facility;

          (i) Indebtedness pursuant to the Trade Vendor Agreement;

          (j) Subordinated Indebtedness the proceeds of which are used to prepay
Indebtedness under the Subordinate Facility as permitted under the Intercreditor
Agreement;

          (k) current liabilities of the Borrower or a Subsidiary thereof
incurred in the ordinary course of business not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an open
account basis customarily extended and in fact extended in connection with
normal purchases of goods and services;

          (l) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in accordance
with the provisions of Section 6.04;

          (m) Indebtedness in respect of judgments or awards so long as it would
not cause an Event of Default under Section 8.0l(h);

          (n) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business; and

          (o) Indebtedness owed by the Borrower or any of its Subsidiaries to
trade vendors, in the amount of the cost to the Borrower or such Subsidiary of
inventory held on consignment from such trade vendors.

          “Permitted Investments” means:

          (a) readily marketable obligations issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition thereof;

          (b) commercial paper issued by any Person organized under the laws of
any state of the United States of America and rated at least “Prime-1” (or the
then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent
grade) by S&P;

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

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

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

          (f) Investments existing on the Closing Date, and set forth on
Schedule 7.02, but not any increase in the amount thereof or any other
modification of the terms thereof;

          (g) Investments by any Loan Party and its Subsidiaries in their
respective Subsidiaries outstanding on the date hereof;

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

          (i) Guarantees constituting Permitted Indebtedness;

          (j) Investments by any Loan Party in Swap Contracts permitted
hereunder;

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

          (l) advances to officers, directors and employees of the Loan Parties
and Subsidiaries in the ordinary course of business in an aggregate amount not
to exceed $250,000.00 at any time outstanding.

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

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

          (d) Together with all other Permitted Overadvances then outstanding,
shall not remain outstanding for more than forty-five (45) consecutive Business
Days or be made more than twice in any twelve month period, unless in each case,
the Majority Lenders otherwise agree.

provided however, that the foregoing shall not (i) modify or abrogate any of the
provisions of Section 2.03 regarding the Lender’s obligations with respect to
Letters of Credit, or (ii) result in any claim or liability against the
Administrative Agent (regardless of the amount of any Overadvance) for
“inadvertent Overadvances” (i.e. where an Overadvance results from changed
circumstances beyond the control of the Administrative Agent (such as a
reduction in the collateral value)), and such “inadvertent Overadvances” shall
not reduce the amount of Permitted Overadvances allowed hereunder, and further
provided that in no event shall the Administrative Agent make an Overadvance, if
after giving effect thereto, the principal

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amount of the Credit Extensions would exceed the Aggregate Commitments (as in
effect prior to any termination of the Commitments pursuant to Section 2.05
hereof).

          “Permitted Restricted Subordinated Debt Payments” has the meaning
provided in the Intercreditor Agreement.

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

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

          “Prepayment Event” means:

          (a) Any sale, transfer or other disposition of any property or assets
of any Loan Party (other than a Permitted Disposition, unless the proceeds of
such Permitted Disposition are specifically required to be applied to the
Obligations in accordance with the terms of this Agreement);

          (b) Any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of, any property or
asset of a Loan Party, unless (i) the proceeds therefrom are required to be paid
to the holder of a Lien on such property or asset having priority over the Lien
of the Collateral Agent or (ii) if no Default or Event of Default shall have
occurred and be continuing, the proceeds therefrom are utilized for purposes of
replacing or repairing the assets in respect of which such proceeds, awards or
payments were received within 180 days of the occurrence of the damage to or
loss of the assets being repaired or replaced;

          (c) The issuance by a Loan Party of any Equity Interests, other than
any such issuance of Equity Interests (i) to a Loan Party, (ii) as otherwise
specifically provided in this Agreement or (iii) the proceeds of which are used
to prepay Indebtedness under the Subordinate Facility in accordance with the
Intercreditor Agreement;

          (d) The incurrence by a Loan Party of any Indebtedness for borrowed
money other than Permitted Indebtedness (including, without limitation,
Subordinated Indebtedness the proceeds of which are used to prepay Indebtedness
under the Subordinate Facility in accordance with the Intercreditor Agreement);
or

          (e) The receipt by any Loan Party of any Extraordinary Receipts
(except to the extent comprised of monies applied in accordance with clause (b)
above).

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

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

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

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

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

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

          “Reserves” means, as determined by the Administrative Agent in
accordance with its reasonable credit discretion, including such amounts as the
Administrative Agent may from time to time establish and revise (a) to reflect
events, conditions, contingencies or risks which do or may (i) materially
adversely affect either (A) any Collateral, the rights of the Collateral Agent,
any of the other Agents or any of the Lenders in any Collateral or its value or
(B) the security interest and other rights of the Collateral Agent, any of the
other Agents or any of the Lenders in the Collateral (including the
enforceability, perfection and priority thereof) or (ii) materially adversely
affect the assets (other than any Collateral) or business or financial condition
of the Borrower or any of its Subsidiaries or (b) to reflect the belief of the
Administrative Agent that any Borrowing Base Report or other collateral report
or financial information furnished by or on behalf of the Borrower to any of the
Agents or any of the Lenders is or may have been incomplete, inaccurate or
misleading in any material respect.

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

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

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

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

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

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

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

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

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

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

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

          “Shrink Reserve” means an amount reasonably estimated by the Agents to
be equal to that amount which is required in order that the Shrink reflected in
Borrower’s stock ledger would be reasonably equivalent to the Shrink calculated
as part of the Borrower’s most recent physical inventory.

          “Solvent” and “Solvency” means, with respect to any Person on a
particular date, that on such date (a) at fair valuation, all of the properties
and assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair saleable value of
the properties and assets of such Person is not less than the amount that would
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person’s ability to pay as such debts mature, and (e)
such Person is not engaged in a business or a transaction, and is not about to
engage in a business or transaction, for which such Person’s properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. The amount of all guarantees at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time,
can reasonably be expected to become an actual or matured liability.

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

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

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

          “Store Accounts” means DDAs in depository institutions for, or on
behalf of, the Borrower or any of its Subsidiaries and listed on Schedule 5.21.

          “Subordinate Facility” means that certain Second Amended and Restated
Term Loan Credit Agreement dated as of February 20, 2007 by and among the
Borrower, PWJ Lending LLC, as agent, and the lenders from time to time party
thereto, as amended, modified or supplemented from time to time.

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          “Subordinate Facility Second Additional Term Loan” shall mean the term
loan in the amount of $12,500,000 made on the Closing Date to the Borrower under
the Subordinate Facility.

          “Subordinate Facility Third Additional Term Loan” shall mean the term
loan in the amount of $12,500,000 made on or before March 30, 2007 to the
Borrower under the Subordinate Facility.

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

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

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

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

          “Syndication Agent” shall have the meaning provided in the Recitals to
this Agreement.

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

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

          “Termination Date” means the earliest to occur of (i) the Maturity
Date, (ii) the date on which the maturity of the Obligations is accelerated (or
deemed accelerated) and the Commitments are irrevocably terminated (or deemed
terminated) in accordance with Article VII.

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

          “Trade Vendor Agreement” means that certain Amended Trade Vendor
Extension Agreement dated as of November 15, 2006 among the Borrower, Prentice
Capital Management, LP and the suppliers named therein, as amended, modified or
supplemented from time to time.

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

          “Tranche A Borrowing Base” means at the relevant time of reference
thereto, an amount determined by the Administrative Agent and the Managing
Agents by reference to the most recent Borrowing Base Report delivered to the
Lenders and the Agents pursuant to Section 6.02(b) which is equal to the sum of
(a) up to 90% of Eligible Credit Card Receivables, plus (b) up to 90% of the
NRLV of Eligible Inventory, minus (c) such Reserves as may be established by the
Administrative Agent and the Managing Agents in their reasonable credit
discretion, but without duplication of Reserves established under the Tranche
A-1 Borrowing Base.

          “Tranche A Commitment” means, with respect to each Tranche A Lender,
the commitment of such Lender hereunder set forth as its Tranche A Commitment
opposite its name on Schedule 2.01 or as may subsequently be set forth in the
Register from time to time, as the same may be reduced from time to time
pursuant to the terms of this Agreement.

          “Tranche A Excess Availability” means, as of any date of
determination, the lesser of (i) the Aggregate Tranche A Commitments and (ii)
the Tranche A Borrowing Base (calculated with reference to the Borrowing Base
Certificate most recently delivered pursuant to this Agreement), in each case,
less all Tranche A Credit Extensions outstanding as of such date.

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

          “Tranche A Loans” means, collectively, the loans made by the Tranche A
Lenders pursuant to Section 2.02.

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          “Tranche A Notes” means the amended and restated promissory notes of
the Borrower substantially in the form of Exhibit C-l, each payable to the order
of a Tranche A Lender, evidencing the Tranche A Loans made by the Tranche A
Lenders.

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

          “Tranche A-l Borrowing Base” means at the relevant time of reference
thereto, an amount determined by the Administrative Agent and the Managing
Agents by reference to the Borrowing Base Report most recently delivered to the
Lenders and the Agents pursuant to Section 6.02(b) which is equal to (a) up to
10% of the NRLV of Eligible Inventory, minus (b) such Reserves as may be
established by the Administrative Agent and the Managing Agents in their
reasonable credit discretion, but without duplication of Reserves established
under the Tranche A Borrowing Base.

          “Tranche A-l Commitment” shall mean, with respect to each Tranche A-l
Lender, the commitment of such Tranche A-l Lender hereunder set forth as its
Tranche A-l Commitment opposite its name on Schedule 2.01 or as may subsequently
be set forth in the Register from time to time, as the same may be reduced from
time to time pursuant to this Agreement.

          “Tranche A-l Excess Availability” means, as of any date of
determination, the lesser of (i) the Aggregate Tranche A-l Commitments and (ii)
the Tranche A-l Borrowing Base (calculated with reference to the Borrowing Base
Certificate most recently delivered pursuant to this Agreement), in each case,
less all Tranche A-l Credit Extensions outstanding as of such date.

          “Tranche A-l Lender” means each Lender having a Tranche A-l Commitment
as set forth on Schedule 2.01 or in the Assignment and Assumption by which it
becomes a Tranche A-l Lender.

          “Tranche A-l Loans” means, collectively, the loans made by the Tranche
A-l Lenders pursuant to Section 2.02.

          “Tranche A-l Notes” means the amended and restated promissory notes of
the Borrower substantially in the form of Exhibit C-2, each payable to the order
of a Tranche A-l Lender, evidencing the Tranche A-l Loans made by the Tranche
A-l Lenders.

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

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

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such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection or availability of such
remedy, as the case may be.

          “Unanimous Lenders” means, as of any date of determination, Lenders
holding 100% of the Aggregate Commitments or, if the commitment of each Lender
to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated pursuant to Section 8.02, Lenders holding in the aggregate
100% of the Total Outstandings (with the aggregate amount of each Lender’s risk
participation and funded participation in L/C Obligations being deemed “held” by
such Lender for purposes of this definition); provided that the Commitment of,
and the portion of the Total Outstandings held or deemed held by, any Defaulting
Lender shall be excluded for purposes of making a determination of Unanimous
Lenders.

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

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

          “Unreimbursed Amount” has the meaning provided in Section 2.03(g)(i).

          “Unused Line Fee” has the meaning provided in Section 2.08(a)

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

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

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

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

          1.03 Accounting Terms

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

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

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

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

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

ARTICLE II.
THE COMMITMENTS AND CREDIT EXTENSIONS

          2.01 Loans; Reserves.

          (a) Subject to the terms and conditions set forth herein, each Lender
severally agrees to make loans (each such loan, a “Loan”) to the Borrower from
time to time, on any Business Day during the Availability Period; Loans shall be
either Tranche A Loans made by the Tranche A Lenders under the Tranche A
Commitments or Tranche A-l Loans made by the Tranche A-l Lenders under the
Tranche A-1 Commitments, as provided herein. The failure of any Lender to make
any Loan shall neither relieve any other Lender of its obligation to fund its
Loan in accordance with the provisions of this Agreement nor

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increase the obligation of any such other Lender. The obligations of each Lender
hereunder shall be several and not joint.

          (b) Until the Termination Date, the Borrower may from time to time
borrow, repay and reborrow under this Section 2.01, subject to the following:

 

 

 

          (i) Tranche A Loans shall be made with reference to the Tranche A
Borrowing Base, and Tranche A-l Loans shall be made with reference to the
Tranche A-l Borrowing Base;

 

 

 

          (ii) the aggregate outstanding amount of the Tranche A Credit
Extensions shall not at any time exceed the Aggregate Tranche A Commitments;

 

 

 

          (iii) the aggregate outstanding amount of the Tranche A-l Credit
Extensions shall not exceed the lesser of the Aggregate Tranche A-l Commitments
and the Tranche A-l Borrowing Base;

 

 

 

          (iv) after giving effect to any Loan, the Total Outstandings shall not
exceed the lesser of (A) the Aggregate Commitments, or (B) the Aggregate
Borrowing Base;

 

 

 

          (v) after giving effect to any Loan, the aggregate Outstanding Amount
of the Loans of any Lender, plus such Lender’s Applicable Percentage of the
Outstanding Amount of all L/C Obligations, shall not exceed the lesser of (A)
such Lender’s Commitment, or (B) such Lender’s Applicable Percentage of the
Tranche A Borrowing Base or Tranche A-l Borrowing Base, as applicable; and

 

 

 

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

          (c) Each Tranche A Lender shall make its Tranche A Loans in accordance
with its Applicable Percentage of the Tranche A Commitment, and each Tranche A-l
Lender shall make its Tranche A-l Loans in accordance with its Applicable
Percentage of the Tranche A-l Commitment. Notwithstanding anything to the
contrary in this Agreement, the Borrower shall not request, and the Tranche A
Lenders shall be under no obligation to fund, any Tranche A Loan unless the
Borrower shall have borrowed the full amount of the lesser of (x) the Tranche
A-l Commitment or (y) the Tranche A-l Borrowing Base. If any Tranche A-l Loan is
prepaid in whole or part pursuant to Section 2.04, or at any time there is any
Tranche A-l Excess Availability, any Loan to the Borrower thereafter requested
shall be a Tranche A-l Loan, and the Borrower shall be deemed to have requested
a Tranche A-l Loan, until the maximum principal amount of Tranche A-l Loans
outstanding equals the lesser of (x) the Tranche A-l Commitment or (y) the
Tranche A-l Borrowing Base and thereafter shall be Tranche A Loans. Thereafter,
Loans shall be Tranche A Loans. Except as otherwise provided in Section 2.03,
all Letters of Credit shall constitute solely Tranche A Loans.

          (d) The Administrative Agent shall have the right, at any time and
from time to time after the Closing Date in its reasonable credit discretion to
establish, modify or eliminate Reserves (but shall not establish duplicate
Reserves). The following are the Inventory Reserves and Availability Reserves as
of the Closing Date:

 

 

 

          (i) Shrink (an Inventory Reserve): An amount equal to 0.80% of the
gross sales of the Borrower for the Fiscal Year to date;

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          (ii) Rent (an Availability Reserve): An amount equal to one (1)
month’s rent for all of the Borrower’s leased locations in each of Pennsylvania,
Virginia and Washington, other than leased locations with respect to which the
Collateral Agent has received a Collateral Access Agreement;

 

 

 

          (iii) Layaways (an Availability Reserve): An amount equal to 100% of
the customer deposits made for layaway goods; and

 

 

 

          (iv) Customer Credit Liabilities (an Availability Reserve): An amount
equal to 50% of the Customer Credit Liabilities as reflected in the Borrower’s
books and records.

          2.02 Borrowings, Conversions and Continuations of Loans.

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

          (b) Each Loan, each conversion of Loans from one Type to the other,
and each continuation of LIBOR Loans shall be made upon the Borrower’s
irrevocable notice to the Administrative Agent, which may be given by telephone.
Each such notice must be received by the Administrative Agent not later than
12:00 noon. (i) three (3) Business Days prior to the requested date of any Loan
of, conversion to or continuation of LIBOR Loans or of any conversion of LIBOR
Loans to Base Rate Loans, and (ii) one (1) Business Day prior to the requested
date of any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower
pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the
Administrative Agent of a written Loan Notice, appropriately completed and
signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion
to or continuation of LIBOR Loans shall be in a principal amount of $1,000,000
or a whole multiple of $100,000 in excess thereof. Each Loan Notice (whether
telephonic or written) shall specify (i) whether the Borrower is requesting a
Loan, a conversion of Loans from one Type to the other, or a continuation of
LIBOR Loans, (ii) the requested date of the Loan, conversion or continuation, as
the case may be (which shall be a Business Day), (iii) the principal amount of
Loans to be borrowed, converted or continued, (iv) the Type of Loans to be
borrowed or to which existing Loans are to be converted, and (v) if applicable,
the duration of the Interest Period with respect thereto. If the Borrower fails
to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a
timely notice requesting a conversion or continuation, then the applicable Loans
shall be made as, or converted to, Base Rate Loans. Any such automatic
conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable LIBOR Loans. If
the Borrower requests a Borrowing of, conversion to, or continuation of LIBOR
Loans in any such Loan Notice, but fails to specify an Interest Period, it will
be deemed to have specified an Interest Period of one month.

          (c) Following receipt of a Loan Notice, the Administrative Agent shall
promptly notify each Lender of the amount of its Applicable Percentage of the
applicable Loans, and if no timely notice of a conversion or continuation is
provided by the Borrower, the Administrative Agent shall notify each Lender of
the details of any automatic conversion to Base Rate Loans described in Section
2.02(b). In the case of a Loan, each Lender shall make the amount of its Loan
available to the Administrative Agent in immediately available funds at the
Administrative Agent’s Office not later than 12:00 noon on the Business Day
specified in the applicable Loan Notice. Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Borrowing is the initial
Credit Extension, Section 4.01), the Administrative Agent shall use reasonable
efforts to make all funds so received available to the Borrower in like funds by
no later than 3:00 p.m. on the day of receipt by the Administrative Agent either
by (i) crediting the account of the Borrower on the books of the Administrative
Agent with the amount of such

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funds or (ii) wire transfer of such funds, in each case in accordance with
instructions provided to (and reasonably acceptable to) the Administrative Agent
by the Borrower; provided, however, that if, on the date the Loan Notice with
respect to such Borrowing is given by the Borrower, there are L/C Borrowings
outstanding, then the proceeds of such Loan, first, shall be applied to the
payment in full of any such L/C Borrowings, and second, shall be made available
to the Borrower as provided above.

          (d) The failure of any Lender to make any Loan shall neither relieve
any other Lender of its obligation to fund its Loan in accordance with the
provisions of this Agreement nor increase the obligation of any such other
Lender.

          (e) The Administrative Agent, without the request of the Borrower, may
advance any interest, fee, service charge, Credit Party Expense, or other amount
then due and payable to any Credit Party from the Loan Parties pursuant hereto
or any other Loan Document and may charge the same to the Loan Account
notwithstanding that an Overadvance may result thereby. The Administrative Agent
shall advise the Borrower of any such advance or charge promptly after the
making thereof. Such action on the part of the Administrative Agent shall not
constitute a waiver of the Administrative Agent’s rights and the Borrower’s
obligations under Section 2.04(d). Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.02(e) shall initially
bear interest at the interest rate then applicable to Base Rate Loans.

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

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

          (h) After giving effect to all Borrowings, all conversions of Loans
from one Type to the other, and all continuations of Loans as the same Type,
there shall not be more than five (5) Interest Periods in effect with respect to
LIBOR Loans.

          (i) The Administrative Agent, the Lenders and the L/C Issuer shall
have no obligation to make any Loan or to provide any Letter of Credit if an
Overadvance would result. The Administrative Agent may, in its discretion, make
Permitted Overadvances without the consent of the Lenders and the L/C Issuer and
each Lender shall be bound thereby. A Permitted Overadvance is for the account
of the Borrower and shall constitute a Loan and an Obligation and shall be
repaid by the Borrower in accordance with the provisions of Section 2.04(c). The
making of any such Permitted Overadvance on any one occasion shall not obligate
the Administrative Agent or any Lender to make or permit any Permitted
Overadvance on any other occasion or to permit such Permitted Overadvances to
remain outstanding. The making by the Administrative Agent of a Permitted
Overadvance shall not modify or abrogate any of the provisions of Section 2.03
regarding the Lenders’ obligations to purchase participations with respect to
Letter of Credits. The Administrative Agent shall have no liability for, and no
Loan Party or Credit Party shall have the right to, or shall, bring any claim of
any kind whatsoever against the Administrative Agent with respect to
“inadvertent Overadvances” (i.e. where an Overadvance results from changed
circumstances beyond the control of the Administrative Agent (such as a
reduction in the collateral value)) regardless of the amount of any such
Overadvance(s).

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          2.03 Letters of Credit.

          (a) Subject to the terms and conditions set forth herein, (i) the L/C
Issuer agrees, in reliance upon the agreements of the Lenders set forth in this
Section 2.03, (A) from time to time on any Business Day during the period from
the Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit for the account of the Borrower, and to amend or extend Letters of Credit
previously issued by it, in accordance with Section 2.03(f), and (B) to honor
drawings under the Letters of Credit; and (ii) the Lenders severally agree to
participate in Letters of Credit issued for the account of the Borrower and any
drawings thereunder; provided that after giving effect to any L/C Credit
Extension with respect to any Letter of Credit, (x) the Total Outstandings shall
not exceed the lesser of (i) the Aggregate Commitments or (ii) the Aggregate
Borrowing Base, (y) the aggregate Outstanding Amount of the Loans of any Lender,
plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C
Obligations shall not exceed such Lender’s Commitment, and (z) the Outstanding
Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.
Within the foregoing limits, and subject to the terms and conditions hereof, the
Borrower’s ability to obtain Letters of Credit shall be fully revolving, and
accordingly the Borrower may, during the foregoing period, obtain Letters of
Credit to replace Letters of Credit that have expired or that have been drawn
upon and reimbursed. All Existing Letters of Credit shall be deemed to have been
issued pursuant hereto, and from and after the Closing Date shall be subject to
and governed by the terms and conditions hereof.

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

 

 

 

          (i) subject to Section 2.03(f)(vii), the expiry date of such requested
Standby Letter of Credit would occur more than 12 months after the date of
issuance or last extension, unless the Majority Lenders have approved such
expiry date; or

 

 

 

          (ii) subject to Section 2.03(f)(vii), the expiry date of such
requested Commercial Letter of Credit would occur more than 120 days after the
date of issuance or last extension, unless the Majority Lenders have approved
such expiry date; or

 

 

 

          (iii) the expiry date of such requested Letter of Credit would occur
after the Letter of Credit Expiration Date, unless either such Letter of Credit
is Cash Collateralized on or prior to the Letter of Credit Expiration Date or
all the Lenders have approved such expiry date.

          (c) The L/C Issuer shall not issue any Letter of Credit without the
prior consent of the Administrative Agent if:

 

 

 

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

 

 

 

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

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

 

 

 

          (iv) such Letter of Credit is to be denominated in a currency other
than Dollars; provided that if the L/C Issuer, in its discretion, issues a
Letter of Credit denominated in a currency other than Dollars, all
reimbursements by the Borrower of the honoring of any drawing under such Letter
of Credit shall be paid in the currency in which such Letter of Credit was
denominated; or

 

 

 

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

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

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

          (f) The following are the procedures for the issuance and amendment of
Letters of Credit:

 

 

 

          (i) Each Letter of Credit shall be issued or amended, as the case may
be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to
the Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the Borrower.
Such Letter of Credit Application must be received by the L/C Issuer and the
Administrative Agent not later than 11:00 a.m. at least two Business Days (or
such other date and time as the Administrative Agent and the L/C Issuer may
agree in a particular instance in their sole discretion) prior to the proposed
issuance date or date of amendment, as the case may be.

 

 

 

          (ii) In the case of a request for an initial issuance of a Letter of
Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to the L/C Issuer:

 

 

 

          (A) the proposed issuance date of the requested Letter of Credit
(which shall be a Business Day);

 

 

 

          (B) the amount thereof;

 

 

 

          (C) the expiry date thereof;

 

 

 

          (D) the name and address of the beneficiary thereof;

 

 

 

          (E) the documents to be presented by such beneficiary in case of any
drawing thereunder;

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          (F) the full text of any certificate to be presented by such
beneficiary in case of any drawing thereunder; and

 

 

 

          (G) such other matters as the L/C Issuer may require.

 

 

 

          (iii) In the case of a request for an amendment of any outstanding
Letter of Credit, such Letter of Credit Application shall specify in form and
detail satisfactory to the L/C Issuer:

 

 

 

          (A) the Letter of Credit to be amended;

 

 

 

          (B) the proposed date of amendment thereof (which shall be a Business
Day);

 

 

 

          (C) the nature of the proposed amendment; and

 

 

 

          (D) such other matters as the L/C Issuer may require.

 

 

 

          (iv) Additionally, the Borrower shall furnish to the L/C Issuer and
the Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may reasonably require.

 

 

 

          (v) Promptly after receipt of any Letter of Credit Application, the
L/C Issuer will confirm with the Administrative Agent (by telephone or in
writing) that the Administrative Agent has received a copy of such Letter of
Credit Application from the Borrower and, if not, the L/C Issuer will provide
the Administrative Agent with a copy thereof. Unless the L/C Issuer has received
written notice from any Lender, the Administrative Agent or any Loan Party, at
least one Business Day prior to the requested date of issuance or amendment of
the applicable Letter of Credit, that one or more applicable conditions
contained in Article IV shall not then be satisfied, then, subject to the terms
and conditions hereof, the L/C Issuer shall, on the requested date, issue a
Letter of Credit for the account of the Borrower or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. Immediately upon the issuance or
amendment of each Letter of Credit, each Lender shall be deemed to (without any
further action), and hereby irrevocably and unconditionally agrees to, purchase
from the L/C Issuer, without recourse or warranty, a risk participation in such
Letter of Credit in an amount equal to the product of such Lender’s Applicable
Percentage times the amount of such Letter of Credit. Upon any change in the
Commitments under this Agreement, it is hereby agreed that with respect to all
L/C Obligations, there shall be an automatic adjustment to the participations
hereby created to reflect the new Applicable Percentages of the assigning and
assignee Lenders.

 

 

 

          (vi) Notwithstanding the terms of Section 2.03(a), if any Letters of
Credit remain outstanding upon the termination of the Aggregate Commitments, to
the extent the lesser of (i) Tranche A-1 Commitments or (ii) the Tranche A-1
Borrowing Base, exceeds (iii) the then outstanding balance of the Tranche A-1
Credit Extensions (the“Excess Amount”), upon such termination of the
Commitments, the Tranche A Lenders shall be deemed to have sold to each Tranche
A-1 Lender, and each Tranche A-1 Lender shall be deemed unconditionally and
irrevocably to have so purchased from the Tranche A Lenders, without recourse or
warranty, an undivided interest and participation, to the extent of such Tranche
A-1 Lender’s Tranche

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A-l Applicable Percentage in the lesser of such Excess Amount or such undivided
interest and participation of each Tranche A Lender in the Letter of Credit
Extensions, each drawing thereunder and the obligations of the Borrower under
this Agreement and the other Loan Documents with respect thereto.

 

 

 

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

 

 

 

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

          (g) The following shall apply to all drawings, reimbursements of, and
funding of participations in, Letters of Credit:.

 

 

 

          (i) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the
Borrower and the Administrative Agent thereof; provided, however, that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse the L/C Issuer and the Lenders with respect to any
such payment upon receipt of such notice. Not later than 11:00 a.m. on the date
of any payment by the L/C Issuer under a Letter of Credit, or if such payment
shall be received later than 11:00 a.m., on the next Business Day (each such
date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the
Administrative Agent in an amount equal to the amount of such drawing. If the
Borrower fails to so reimburse the L/C Issuer by such time, the Administrative
Agent shall promptly notify each Lender of the Honor Date, the amount of the
unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such
Lender’s Applicable Percentage thereof. In such event, the Borrower shall be
deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the
Honor Date in an amount equal to the Unreimbursed Amount, without regard to the
minimum and multiples specified in Section 2.02 for the principal amount of

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Base Rate Loans, but subject to the amount of the unutilized portion of the
Aggregate Commitments and the conditions set forth in Section 4.02 (other than
the delivery of a Loan Notice). Any notice given by the L/C Issuer or the
Administrative Agent pursuant to this Section 2.03(g)(i) may be given by
telephone if immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

          (vi) If any Tranche A Lender fails to make available to the
Administrative Agent for the account of the L/C Issuer any amount required to be
paid by such Tranche A Lender pursuant to the foregoing provisions of this
Section 2.03(g) by the time specified in Section 2.03(g)(ii), the L/C Issuer
shall be entitled to recover from such Tranche A Lender (acting through the
Administrative Agent), on demand, such amount with interest thereon for the

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period from the date such payment is required to the date on which such payment
is immediately available to the L/C Issuer at a rate per annum equal to the
greater of the Federal Funds Effective Rate and a rate determined by the L/C
Issuer in accordance with banking industry rules on interbank compensation plus
any administrative, processing or similar fees customarily charged by the L/C
Issuer in connection with the foregoing. If such Tranche A Lender pays such
amount (with interest and fees as aforesaid), the amount so paid shall
constitute such Tranche A Lender’s Loan included in the relevant Borrowing or
L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A
certificate of the L/C Issuer submitted to any Tranche A Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (vi)
shall be conclusive absent manifest error.

          (h) At any time after the L/C Issuer has made a payment under any
Letter of Credit and has received from any Tranche A Lender such Tranche A
Lender’s L/C Advance in respect of such payment in accordance with Section
2.03(g), if the Administrative Agent receives for the account of the L/C Issuer
any payment in respect of the related Unreimbursed Amount or interest thereon
(whether directly from the Borrower or otherwise, including proceeds of Cash
Collateral applied thereto by the Administrative Agent), the Administrative
Agent will distribute to such Tranche A Lender its Applicable Percentage thereof
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Tranche A Lender’s L/C Advance was outstanding) in the
same funds as those received by the Administrative Agent. If any payment
received by the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(g)(i) is required to be returned under any of the circumstances
described in Section 10.05 (including pursuant to any settlement entered into by
the L/C Issuer in its discretion), each Tranche A Lender shall pay to the
Administrative Agent for the account of the L/C Issuer its Applicable Percentage
thereof on demand of the Administrative Agent, plus interest thereon from the
date of such demand to the date such amount is returned by such Tranche A
Lender, at a rate per annum equal to the Federal Funds Effective Rate from time
to time in effect. The obligations of the Tranche A Lenders under this clause
shall survive the payment in full of the Obligations and the termination of this
Agreement.

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

 

 

 

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

 

 

 

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

 

 

 

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

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

 

 

 

          (v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrower or
any of their Subsidiaries (other than any circumstance constituting the gross
negligence or willful misconduct of the L/C Issuer or any other Credit Party);
or

 

 

 

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

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

          (k) Each Lender and the Borrower agree that, in paying any drawing
under a Letter of Credit, the L/C Issuer shall not have any responsibility to
obtain any document (other than any sight draft, certificates and documents
expressly required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document. None of the L/C Issuer, the
Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable to any
Lender for (i) any action taken or omitted in connection herewith at the request
or with the approval of the Lenders or the Majority Lenders, as applicable; (ii)
any action taken or omitted in the absence of gross negligence or willful
misconduct; (iii) any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit or any error in interpretation of technical
terms; or (iv) the due execution, effectiveness, validity or enforceability of
any document or instrument related to any Letter of Credit or Issuer Document.
The Borrower hereby assume all risks of the acts or omissions of any beneficiary
or transferee with respect to its use of any Letter of Credit; provided,
however, that this assumption is not intended to, and shall not, preclude the
Borrower’s pursuing such rights and remedies as it may have against the
beneficiary or transferee at law or under any other agreement. None of the L/C
Issuer, the Administrative Agent, any of their respective Related Parties nor
any correspondent, participant or assignee of the L/C Issuer shall be liable or
responsible for any of the matters described in clauses (i) through (v) of
Section 2.03(i); provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrower may have a claim against the L/C Issuer,
and the L/C Issuer may be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrower which the Borrower prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary (or the L/C Issuer may refuse to
accept and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit), and the L/C Issuer shall
not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting

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to transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.

          (l) Upon the request of the Administrative Agent, (i) if the L/C
Issuer has honored any full or partial drawing request under any Letter of
Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the
Letter of Credit Expiration Date, any L/C Obligation for any reason remains
outstanding, the Borrower shall, in each case, promptly Cash Collateralize the
then Outstanding Amount of all L/C Obligations. Sections 2.04 and 8.02(c) set
forth certain additional requirements to deliver Cash Collateral hereunder. For
purposes of this Section 2.03‚ Section 2.04 and Section 8.02(c)‚ “Cash
Collateralize” means to pledge and deposit with or deliver to the Administrative
Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the
L/C Obligations, cash or deposit account balances in an amount equal to 103% of
the Outstanding Amount of all L/C Obligations, pursuant to documentation in form
and substance reasonably satisfactory to the Administrative Agent and the L/C
Issuer (which documents are hereby Consented to by the Lenders). Derivatives of
such term have corresponding meanings. The Borrower hereby grants to the
Collateral Agent a security interest in all such cash, deposit accounts and all
balances therein and all proceeds of the foregoing. Cash Collateral shall be
maintained in blocked, non-interest bearing deposit accounts at LaSalle. If at
any time the Administrative Agent determines that any funds held as Cash
Collateral are subject to any right or claim of any Person other than the
Administrative Agent or that the total amount of such funds is less than the
aggregate Outstanding Amount of all L/C Obligations, the Borrower will, promptly
upon demand by the Administrative Agent, pay to the Administrative Agent, as
additional funds to be deposited as Cash Collateral, an amount equal to the
excess of (x) such aggregate Outstanding Amount over (y) the total amount of
funds, if any, then held as Cash Collateral that the Administrative Agent
determines to be free and clear of any such right and claim. Upon the drawing of
any Letter of Credit for which funds are on deposit as Cash Collateral, such
funds shall be applied, to the extent permitted under applicable Laws, to
reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be
applied to satisfy other Obligations. Upon the expiration or termination of any
Letter of Credit for which funds are on deposit as Cash Collateral,
Administrative Agent shall release any Cash Collateral held by it in respect of
such Letter of Credit.

          (m) Unless otherwise expressly agreed by the L/C Issuer and the
Borrower when a Letter of Credit is issued (including any such agreement
applicable to an Existing Letter of Credit), (i) the rules of the ISP shall
apply to each Standby Letter of Credit, and (ii) the rules of the Uniform
Customs and Practice for Documentary Credits, as most recently published by the
International Chamber of Commerce at the time of issuance shall apply to each
Commercial Letter of Credit.

          (n) The Borrower shall pay to the Administrative Agent for the account
of each Lender in accordance with its Applicable Percentage, a Letter of Credit
fee (the “Letter of Credit Fee”) (i) for each Commercial Letter of Credit at a
per annum rate equal to 50% of the then applicable Tranche A LIBOR Margin, and
(ii) for each Standby Letter of Credit, at a per annum rate equal to the then
applicable Tranche A LIBOR Margin, in each case times the daily Stated Amount
under such Letter of Credit. For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of the Letter of
Credit shall be determined in accordance with Section 1.06. Letter of Credit
Fees shall be (i) due and payable on the last Business Day of each month,
commencing with the first such date to occur after the issuance of such Letter
of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and
(ii) computed on a monthly basis in arrears. Notwithstanding anything to the
contrary contained herein, while any Event of Default exists, the Administrative
Agent may, and upon the request of the Majority Lenders shall, notify the
Borrower that all Letter of Credit Fees shall accrue at the Default Rate and
thereafter such Letter of Credit Fees shall accrue at the Default Rate to the
fullest extent permitted by applicable Laws. In addition, the Borrower shall pay
directly to the L/C Issuer for its own account the customary issuance,
presentation, amendment and other processing fees, and other standard

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costs and charges, of the L/C Issuer relating to letters of credit as from time
to time in effect. Such customary fees and standard costs and charges are due
and payable on demand and are nonrefundable.

          (o) In the event of any conflict between the terms hereof and the
terms of any Issuer Document, the terms hereof shall control.

          2.04 Prepayments.

          (a) The Borrower may, upon irrevocable notice from the Borrower to the
Administrative Agent, at any time or from time to time voluntarily prepay Loans
in whole or in part without premium or penalty; provided that (i) such notice
must be received by the Administrative Agent not later than 11:00 a.m. (A) three
Business Days prior to any date of prepayment of LIBOR Loans and (B) on the date
of prepayment of Base Rate Loans; (ii) any prepayment of LIBOR Loans shall be in
a principal amount of $1,000,000 or a whole multiple of $100,000 in excess
thereof, and (iii) any prepayment of Base Rate Loans shall be in a principal
amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each
case, if less, the entire principal amount thereof then outstanding. All
payments shall be first applied to Tranche A Loans, and upon payment of Tranche
A Loans in full, to Tranche A-l Loans. Each such notice shall specify the date
and amount of such prepayment and the Type(s) of Loans to be prepaid and, if
LIBOR Loans, the Interest Period(s) of such Loans. The Administrative Agent will
promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment. If such notice
is given by the Borrower, the Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein. Any prepayment of a LIBOR Loan shall be accompanied by all
accrued interest on the amount prepaid, together with any additional amounts
required pursuant to Section 3.05. Each such prepayment shall be applied to the
Loans of the Lenders in accordance with their respective Applicable Percentages.

          (b) Notwithstanding the provisions of Section 2.04(a) which permit
voluntary prepayments of the Loans, except as provided in Section 2.04(f), only
if all Tranche A Loans are repaid in full may the Borrower prepay amounts owed
with respect to the Tranche A-l Loans, provided, however, that any such
prepayment shall not reduce or terminate the Tranche A-l Commitments.

          (c) If for any reason the Total Outstandings at any time exceed the
lesser of the Aggregate Commitments or the Aggregate Borrowing Base, each as
then in effect, the Borrower shall immediately prepay Loans and L/C Borrowings
and/or Cash Collateralize the L/C Obligations (other than L/C Borrowings) in an
aggregate amount equal to such excess; provided, however, that the Borrower
shall not be required to Cash Collateralize the L/C Obligations pursuant to this
Section 2.04(c) unless after the prepayment in full of the Loans, the Total
Outstandings exceed the lesser of the Aggregate Commitments or Aggregate
Borrowing Base, each as then in effect.

          (d) The Borrower shall prepay the Loans in an amount equal to the Net
Proceeds received by any Loan Party on account of a Prepayment Event. In no
event shall inclusion of this prepayment requirement waive or be deemed a waiver
or Consent to any transaction giving rise to the need to comply with this
Section 2.04(d) if such transaction was not otherwise expressly permitted by
this Agreement.

          (e) At the time of the delivery of each Borrowing Base Report, unless
the conditions precedent to the making of any Tranche A Loan have not been
satisfied or a Liquidation has commenced, a Tranche A Loan shall be made by the
Tranche A Lenders to repay the Tranche A-l Loans to the extent that the Tranche
A-1 Loans exceed the Tranche A-l Borrowing Base as reflected in such Borrowing
Base Report.

          (f) Prepayments made pursuant to this Section 2.04, shall be applied
as follows:

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          (i) to the L/C Borrowings; and then

 

 

 

          (ii) ratably to the outstanding Tranche A Loans; and then

 

 

 

          (iii) if an Event of Default has occurred and is continuing, used to
Cash Collateralize the remaining L/C Obligations; and then

 

 

 

          (iv) ratably to the outstanding Tranche A-l Loans; and then

 

 

 

          (v) the amount remaining, if any, after the prepayment in full of all
L/C Borrowings and Loans outstanding at such time may be retained by the
Borrower for use in the ordinary course of its business.

          2.05 Termination or Reduction of Commitments.

          (a) The Borrower may, upon irrevocable notice from the Borrower to the
Administrative Agent, from time to time permanently reduce the Tranche A
Commitments or the Letter of Credit Sublimit; provided that (i) any such notice
shall be received by the Administrative Agent not later than 11:00 a.m. three
(3) Business Days prior to the date of reduction, (ii) any such partial
reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of
$100,000 in excess thereof, (iii) the Borrower shall not reduce (A) the Tranche
A Commitments if, after giving effect thereto and to any concurrent prepayments
hereunder, the Total Outstandings would exceed the Aggregate Commitments, and
(B) the Letter of Credit Sublimit if, after giving effect thereto, the
Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder
would exceed the Letter of Credit Sublimit.

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

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

          2.06 Repayment of Loans. The Borrower shall repay to the
Administrative Agent, for the benefit of the Lenders, on the Termination Date
the aggregate principal amount of Loans outstanding on such date.

          2.07 Interest.

          (a) Subject to the provisions of Section 2.07(b), (i) each LIBOR Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to LIBOR for such Interest Period plus
the Applicable Margin; and (ii) each Base Rate Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Margin.

          (b) (i) If any amount payable under any Loan Document is not paid when
due (without regard to any applicable grace periods), whether at stated
maturity, by acceleration or otherwise, such

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amount shall thereafter bear interest at a fluctuating interest rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

 

 

 

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

 

 

 

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

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

          2.08 Fees. In addition to certain fees described in Section 2.03:

          (a) The Borrower shall pay the Administrative Agent for the ratable
benefit of each Lender a fee (the “Unused Line Fee”) of .375% per annum of the
average difference, during the month just ended (or relevant period with respect
to the payment being made on the Maturity Date) between (i) the lesser of (x)
the Aggregate Borrowing Base and (y) the Aggregate Commitments and (ii) Total
Outstandings. The Unused Line Fee shall be paid in arrears, on the last day of
each calendar month and on the Maturity Date. The Administrative Agent is hereby
authorized by the Borrower to make a Tranche A-l Loan (unless there is no
Tranche A-l Excess Availability in which case Administrative Agent may make a
Tranche A Loan) to timely pay the Unused Line Fee as and when due set forth
herein.

          (b) In the event that the Termination Date occurs, for any reason,
prior to the Maturity Date, the Borrower shall pay to the Administrative Agent,
for the ratable benefit of the Lenders, a fee (the “Early Termination Fee”) in
respect of amounts which are or become payable by reason thereof equal to the
following: (i) one percent (1.00%) of the Aggregate Commitments then in effect
if the Termination Date shall occur at any time before February 20, 2008; and
(ii) one-half of one percent (0.50%) of the Aggregate Commitments then in effect
if the Termination Date shall occur at any time on or after February 16, 2008
but prior to February 20, 2009. All parties to this Agreement agree and
acknowledge that the Lenders will have suffered damages on account of the early
termination of this Agreement and that, in view of the difficulty in
ascertaining the amount of such damages, the Early Termination Fee constitutes
reasonable compensation and liquidated damages to compensate the Lenders on
account thereof. Notwithstanding the foregoing, in the event that the Borrower
repays the Obligations in full and terminates the Commitments with the proceeds
of (i) a refinancing provided by LaSalle or any of its Affiliates, or by a
syndicate of lenders as to which LaSalle or any of its Affiliates is the lead
agent, (ii) the Borrower’s consummation of an underwritten public equity
offering, (iii) a merger, consolidation or amalgamation of the Borrower with and
into another Person or of another Person with and into the Borrower, or (iv) the
sale of all or substantially all of the Equity Interests of the Borrower or all
or substantially all of the Borrower’s and its Subsidiaries’ assets, then, in
each case, the Early Termination Fee shall be zero.

          (c) On the Closing Date, the Borrower shall pay the Administrative
Agent for the ratable benefit of the Tranche A-l Lenders, a commitment fee (the
“Commitment Fee”) in the amount of $50,000.00.

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          (d) On the Closing Date, the Borrower shall pay the Administrative
Agent for the ratable benefit of the Tranche A Lenders, an amendment fee (the
“Amendment Fee”) in the amount of $50,000.00.

          2.09 Computation of Interest and Fees. All computations of interest
for Base Rate Loans when the Base Rate is determined by LaSalle’s “prime rate”
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
fees or interest, as applicable, being paid than if computed on the basis of a
365-day year). Interest shall accrue on each Loan for the day on which the Loan
is made, and shall not accrue on a Loan, or any portion thereof, for the day on
which the Loan or such portion is paid, provided that any Loan that is repaid on
the same day on which it is made shall, subject to Section 2.11(a), bear
interest for one day. Each determination by the Administrative Agent of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

          2.10 Evidence of Debt.

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

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

          2.11 Payments Generally; Administrative Agent’s Clawback.

          (a) All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by the Borrower
hereunder shall be made to the Administrative Agent, for the account of the
respective Lenders to which such payment is owed, at the Administrative Agent’s
Office in Dollars and in immediately available funds not later than 2:00 p.m. on
the date specified herein. The Administrative

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Agent will promptly distribute to each Lender its Applicable Percentage (or
other applicable share as provided herein) of such payment in like funds as
received by wire transfer to such Lender’s Lending Office. All payments received
by the Administrative Agent after 2:00 p.m. shall be deemed received on the next
Business Day and any applicable interest or fee shall continue to accrue. If any
payment to be made by the Borrower shall come due on a day other than a Business
Day, payment shall be made on the next Business Day, and such extension of time
shall be reflected in computing interest or fees, as the case may be.

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

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

          (d) A notice of the Administrative Agent to any Lender or the Borrower
with respect to any amount owing under this Section 2.11 shall be conclusive,
absent manifest error.

          (e) If any Lender makes available to the Administrative Agent funds
for any Loan to be made by such Lender as provided in the foregoing provisions
of this Article II, and such funds are not made available to the Borrower by the
Administrative Agent because the conditions to the applicable

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Credit Extension set forth in Article IV are not satisfied or waived in
accordance with the terms hereof (subject to the provisions of the last
paragraph of Section 4.02), the Administrative Agent shall return such funds (in
like funds as received from such Lender) to such Lender, without interest.

          (f) The obligations of the Lenders hereunder to make Loans, to fund
participations in Letters of Credit and to make payments pursuant to Section
10.04(c) are several and not joint. The failure of any Lender to make any Loan,
to fund any such participation or to make any payment under Section 10.04(c) on
any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan, to purchase
its participation or to make its payment under Section 10.04(c).

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

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

 

 

 

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

 

 

 

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

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

          2.13 Settlement Among Lenders.

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

          (b) The Administrative Agent shall deliver to each of the Lenders
promptly after a Settlement Date a summary statement of the amount of
outstanding Loans for the period and the amount

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

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

          3.01 Taxes.

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

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

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

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

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original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other
evidence of such payment reasonably satisfactory to the Administrative Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which Borrower
is resident for tax purposes, or any treaty to which such jurisdiction is a
party, with respect to payments hereunder or under any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law or reasonably requested by the Borrower or
the Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, any Lender, if
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

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

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

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

 

 

          (f) If the Administrative Agent, any Lender or the L/C Issuer
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to this
Section, it shall pay to the Borrower an amount equal to such refund (but only
to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise
to such refund), net of all out-of-pocket expenses of the Administrative Agent,
such Lender or the L/C Issuer, as the case may be, and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund), provided that the Borrower, upon the request of the Administrative
Agent, such Lender or the L/C Issuer, agree to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent, such Lender or the L/C
Issuer in the event the Administrative

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Agent, such Lender or the L/C Issuer is required to repay such refund to such
Governmental Authority. This subsection shall not be construed to require the
Administrative Agent, any Lender or the L/C Issuer to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to the Borrower or any other Person.

          3.02 Illegality. If any Lender determines that any Law at any time
after the Closing Date has made it unlawful, or that any Governmental Authority
has at any time after the Closing Date asserted that it is unlawful, for any
Lender or its applicable Lending Office to make, maintain or fund LIBOR Loans,
or to determine or charge interest rates based upon LIBOR, or any Governmental
Authority has at any time after the Closing Date imposed material restrictions
on the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to the Borrower through the Administrative Agent, any obligation of such Lender
to make or continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans
shall be suspended until such Lender notifies the Administrative Agent and the
Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, the Borrower shall, upon demand from such
Lender (with a copy to the Administrative Agent), prepay or, if applicable,
convert all LIBOR Loans of such Lender to Base Rate Loans, either on the last
day of the Interest Period therefor, if such Lender may lawfully continue to
maintain such LIBOR Loans to such day, or immediately, if such Lender may not
lawfully continue to maintain such LIBOR Loans. Upon any such prepayment or
conversion, the Borrower shall also pay accrued interest on the amount so
prepaid or converted.

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

          3.04 Increased Costs; Reserves on LIBOR Loans.

          (a) If any Change in Law shall:

 

 

 

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

 

 

 

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

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

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation
to make any such Loan), or to increase the cost to such Lender or the L/C Issuer
of participating in, issuing or maintaining any Letter of Credit (or of
maintaining its obligation to participate in or to issue any Letter of Credit),
or to reduce the amount of any sum received or receivable by such Lender or the
L/C Issuer hereunder (whether of principal, interest or any other amount) then,
upon request of such Lender or the L/C Issuer within 180 days of the date of
such Change in Law, the Borrower will pay to such Lender or the L/C Issuer, as
the case may be, such additional amount or amounts as will compensate such
Lender or the L/C Issuer, as the case may be, for such additional costs incurred
or reduction suffered.

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

          (c) A certificate of a Lender or the L/C Issuer setting forth the
amount or amounts necessary to compensate such Lender or the L/C Issuer or its
holding company, as the case may be, as specified in subsection (a) or (b) of
this Section and delivered to the Borrower shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the L/C Issuer, as the case may be,
the amount shown as due on any such certificate within 30 days after receipt
thereof.

          (d) Failure or delay on the part of any Lender or the L/C Issuer to
demand compensation pursuant to the foregoing provisions of this Section shall
not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand
such compensation, provided that the Borrower shall not be required to
compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of
this Section for any increased costs incurred or reductions suffered more than
180 days prior to the date that such Lender or the L/C Issuer, as the case may
be, notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180 day period referred
to above shall be extended to include the period of retroactive effect thereof).

          (e) The Borrower shall pay to each Lender, as long as such Lender
shall be required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
“Eurocurrency liabilities”), additional interest on the unpaid principal amount
of each LIBOR Loan equal to the actual costs of such reserves allocated to such
Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive), which shall be due and payable on each date
on which interest is payable on such Loan, provided the Borrower

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shall have received at least 15 days’ prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender. If a Lender
fails to give notice 15 days prior to the relevant Interest Payment Date, such
additional interest shall be due and payable 15 days from receipt of such
notice.

          3.05 Compensation for Losses.

          (a) Upon demand of any Lender (with a copy to the Administrative
Agent) from time to time, the Borrower shall promptly compensate such Lender for
and hold such Lender harmless from any loss, cost or expense incurred by it as a
result of:

 

 

 

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

 

 

 

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

 

 

 

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

          including any loss of anticipated profits and any loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
such Loan or from fees payable to terminate the deposits from which such funds
were obtained. The Borrower shall also pay any customary administrative fees
charged by such Lender in connection with the foregoing. Any payments or
prepayments of (i) Tranche A Loans shall be applied to outstanding Tranche A
Base Rate Loans up to the full amount thereof before they are applied to
outstanding Tranche A LIBOR Loans and (ii) Tranche A-l Loans shall be applied to
outstanding Tranche A-l Base Rate Loans up to the full amount thereof before
they are applied to outstanding Tranche A-l LIBOR Loans.

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

          3.06 Mitigation Obligations; Replacement of Lenders.

          (a) If any Lender requests compensation under Section 3.04, or the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall
use reasonable efforts to designate a different Lending Office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or
eliminate the need for the notice pursuant to Section 3.02, as applicable, and
(ii) in each case, would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

          (b) If any Lender requests compensation under Section 3.04, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender

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pursuant to Section 3.01, or any Lender gives notice pursuant to Section 3.02,
the Borrower may replace such Lender in accordance with Section 10.13.

          3.07 Survival. All of the parties obligations under this Article III
shall survive termination of the Aggregate Commitments and repayment of all
other Obligations hereunder.

ARTICLE IV.
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

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

          (a) The Administrative Agent’s receipt of the following, each of which
shall be originals or telecopies (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of the
signing Loan Party, each dated the Closing Date (or, in the case of certificates
of governmental officials, a recent date before the Closing Date) and each in
form and substance satisfactory to the Administrative Agent:

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

          (iv) a favorable opinion of Holland & Knight, counsel to the Loan
Parties, addressed to the Administrative Agent and each Lender, as to such
matters concerning the Loan Parties and the Loan Documents as the Administrative
Agent may reasonably request;

 

 

 

          (v) a certificate signed by a Responsible Officer of the Borrower
certifying (A) that the conditions specified in Sections 4.02(a) and 4.02(b)
have been satisfied, (B) that there has been no event or circumstance since the
date of the Audited Financial Statements that has had or could be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect and (C) either that (1) no consents, licenses or approvals are required
in connection with the execution, delivery and performance by such Loan Party
and the validity against such Loan Party of the Loan Documents to which it is a
party, or (2) that all such consents, licenses and approvals have been obtained
and are in full force and effect;

 

 

 

          (vi) a certificate from the chief financial officer of the Borrower,
satisfactory in form and substance to the Administrative Agent, attesting to the
Solvency of the Loan Parties as of the Closing Date after giving effect to the
transactions contemplated hereby;

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

 

 

 

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

 

 

 

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

 

 

 

          (x) (A) all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by the
Collateral Agent to be filed, registered or recorded to create or perfect the
first priority Liens intended to be created under the Loan Documents and all
such documents and instruments shall have been so filed, registered or recorded
to the satisfaction of the Collateral Agent and (B) the DDA Notifications,
Credit Card Notifications, and Blocked Account Agreements required pursuant to
Section 6.13; and

 

 

 

          (xi) such other assurances, certificates, documents, consents or
opinions as the Agents reasonably may require.

          (b) After giving effect to (i) the first funding under the Loans, (ii)
any charges to the Loan Account made in connection with the establishment of the
credit facility contemplated hereby and (iii) all Letters of Credit to be issued
at, or immediately subsequent to, such establishment, Excess Availability shall
be not less than $5,000,000.

          (c) The Administrative Agent shall have received a Borrowing Base
Report dated the Closing Date, relating to the week ended on Friday, February
16, 2007, and executed by a Responsible Officer of the Borrower.

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

          (e) The Administrative Agent shall have received and be satisfied with
(i) a detailed forecast for the period commencing on the Closing Date and ending
with January 31, 2008, which shall include an Availability model, Consolidated
income statement, balance sheet, and statement of cash flow, by month, each
prepared in conformity with GAAP and consistent with the Loan Parties’ then
current practices and (b) such other information (financial or otherwise)
reasonably requested by the Administrative Agent.

          (f) The Administrative Agent shall have received and found
satisfactory (i) copies of the fully executed Second Amended and Restated Term
Loan Credit Agreement, Second Amended and Restated Note and such other documents
and instruments as shall evidence the Subordinate Facility, which shall provide,
among other things, for the commitment by the lenders thereunder to make term
loans to the Borrower in an aggregate amount of not less than $25,000,000, (ii)
copy of the fully executed

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Intercreditor Agreement and (iii) evidence of the receipt by the Borrower of not
less than $12,500,000 (net of fees and expenses payable in connection therewith)
comprising the Subordinate Facility Second Additional Term Loan.

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

          (h) There shall not have occurred any default of any Material Contract
of any Loan Party which could reasonably be expected to have a Material Adverse
Effect.

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

          (j) All fees required to be paid to the Agents on or before the
Closing Date shall have been paid in full or charged to the Loan Account, and
all fees required to be paid to the Lenders on or before the Closing Date shall
have been paid in full or charged to the Loan Account.

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

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

          4.02 Conditions to all Credit Extensions. The obligation of each
Lender to honor any Request for Credit Extension (other than a Loan Notice
requesting only a conversion of Loans to the other Type, or a continuation of
LIBOR Loans) is subject to the following conditions precedent:

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

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

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

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

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

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

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

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

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

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          5.03 Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, any Loan Party of
this Agreement or any other Loan Document, except for (a) the perfection or
maintenance of the Liens created under the Security Documents (including the
first priority nature thereof), (b) such as have been obtained or made and are
in full force and effect, or (c) such as the failure to obtain or make could not
reasonably be expected to have a Material Adverse Effect.

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

          5.05 Financial Statements; No Material Adverse Effect.

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

          (b) The unaudited Consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries dated October 31, 2006 and the related
Consolidated and consolidating statements of income or operations, Shareholders’
Equity and cash flows for the fiscal quarter ended on that date (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein, and (ii) fairly
present in all material respects, the financial condition of the Borrower and
its Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to the
absence of footnotes and to normal year-end audit adjustments. Schedule 5.05
sets forth all Material Indebtedness, direct or contingent, of the Loan Parties
and their Consolidated Subsidiaries as of the date of such financial statements.

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

          (d) To the Borrower’s knowledge, no Internal Control Event exists or
has occurred since the date of the Audited Financial Statements that has
resulted in or could reasonably be expected to result in a misstatement in any
material respect, in (i) any financial information delivered or to be delivered
to the Administrative Agent or the Lenders, or (ii) any financial covenant
compliance calculations provided hereunder.

          (e) The Consolidated and consolidating forecasted balance sheet and
statements of income and cash flows of the Borrower and its Subsidiaries
delivered pursuant to Section 4.0l(e) were prepared in good faith on the basis
of the assumptions stated therein, which assumptions were fair in light of the
conditions existing at me time of delivery of such forecasts, and represented,
at the time of delivery, the Loan Parties’ commercially reasonable estimate of
its future financial performance.

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

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

          5.08 Ownership of Property; Liens.

          (a) Each of the Loan Parties and each Subsidiary thereof has good
record and marketable title in fee simple to or valid leasehold interests in,
all real property material to the ordinary conduct of its business. Each of the
Loan Parties and each Subsidiary has good and marketable title to, valid
leasehold interests in, or valid licenses to use all personal property and
assets material to the ordinary conduct of its business.

          (b) Schedule 5.08 sets forth the address (including street address,
county and state) of all Real Estate that is owned by the Loan Parties, together
with a list of the holders of any mortgage or other Lien thereon as of the
Closing Date. Schedule 5.08 also sets forth the address (including street
address, county and state) of all Leases of the Loan Parties, together with a
list of the lessor and its contact information with respect to each such Lease
as of the Closing Date.

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

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

          5.09 Environmental Compliance.

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

          (b) None of the properties currently or, to the Borrower’s knowledge,
formerly owned or operated by any Loan Party or any Subsidiary thereof is listed
or proposed for listing on the NPL or on the CERCLIS or any analogous foreign,
state or local list or, to the Borrower’s knowledge, is adjacent to any such
property; there are no and, to the Borrower’s knowledge, never have been any
underground or above-ground storage tanks or any surface impoundments, septic
tanks, pits, sumps or lagoons in which

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Hazardous Materials are being or have been treated, stored or disposed on any
property currently owned or, to the Borrower’s knowledge, operated by any Loan
Party or any Subsidiary thereof or, to the knowledge of the Loan Parties, on any
property formerly owned or operated by any Loan Party or Subsidiary thereof;
there is no asbestos or asbestos-containing material on any property currently
owned or, to the Borrower’s knowledge, operated by any Loan Party or Subsidiary
thereof; and Hazardous Materials have not been released, discharged or disposed
of on any property currently or, to the Borrower’s knowledge, formerly owned or
operated by any Loan Party or any Subsidiary thereof.

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

          5.11 Taxes. The Loan Parties and their Subsidiaries have filed all
Federal, state and other tax returns and reports required to be filed, and have
paid all Federal, and all material state and other Taxes levied or imposed upon
them or their properties, income or assets otherwise due and payable, except
those which are being contested in good faith by appropriate proceedings being
diligently conducted, for which adequate reserves have been provided in
accordance with GAAP, as to which Taxes no Lien has been filed and which contest
effectively suspends the collection of the contested obligation and the
enforcement of any Lien securing such obligation. There is no proposed tax
assessment against any Loan Party or any Subsidiary that could reasonably be
expected to have a Material Adverse Effect. No Loan Party or any Subsidiary
thereof is a party to any tax sharing agreement.

          5.12 ERISA Compliance.

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

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

          (c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any

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

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

          5.14 Margin Regulations; Investment Company Act; Public Utility
Holding Company Act.

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

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

          5.15 Disclosure. Each Loan Party has disclosed to the Administrative
Agent and the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. No report, financial statement,
certificate or other information furnished (whether in writing or orally) by or
on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder or under any other Loan Document (in each case,
as modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, taken as a whole, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Loan Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

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          5.16 Compliance with Laws. Each of the Loan Parties and each
Subsidiary is in compliance in all material respects with the requirements of
all Laws (other than Environmental Laws, which representation and warranty with
respect to which shall be governed by Section 5.09) and all orders, writs,
injunctions and decrees applicable to it or to its properties, except in such
instances in which (a) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently
conducted or (b) the failure to comply therewith, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

          5.17 Intellectual Property; Licenses, Etc. The Loan Parties and their
Subsidiaries own, or possess the right to use, all of the Intellectual Property,
licenses, permits and other authorizations that are material to the operation of
their businesses, taken as a whole, without conflict with the rights of any
other Person. To the knowledge of the Borrower, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by any Loan Party or any
Subsidiary infringes in any material respect upon any rights held by any other
Person. No claim or litigation regarding any of the foregoing is pending or, to
the knowledge of the Borrower, threatened, which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

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

          5.19 Security Documents. The Security Documents create in favor of the
Collateral Agent a legal, valid and enforceable security interest in the
Collateral, and the Security Documents constitute, or will upon the filing of
financing statements and/or the obtaining of “control”, in each case with
respect to the relevant Collateral as required under the applicable UCC, the
creation of a fully perfected first priority Lien on, and security interest in,
all right, title and interest of the Loan Parties there under in such
Collateral, in each case prior and superior in right to any other Person, except
for Permitted Encumbrances having priority under applicable Law.

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

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contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of any Loan Party.

          5.21 Deposit Accounts; Credit Card Arrangements.

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

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

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

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

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

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

ARTICLE VI.
AFFIRMATIVE COVENANTS

          So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, the Loan Parties shall, and shall (except in
the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each
Subsidiary to:

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

          (a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each Fiscal Year of the Borrower, the Consolidated
balance sheet of the Borrower and its Subsidiaries and the consolidating balance
sheet of the Borrower and its Subsidiaries, each as at the end of such year, and
the related Consolidated statement of income and Consolidated statement of cash
flow and consolidating

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statement of income and consolidating statement of cash flow for such year, each
setting forth in comparative form the Figures for the previous Fiscal Year and
all such Consolidated and consolidating statements to be in reasonable detail,
prepared in accordance with GAAP, and certified without qualification by
independent certified public accountants reasonably satisfactory to the
Administrative Agent (“Accountants”);

          (b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the Fiscal Quarters of the Borrower, copies
of the unaudited Consolidated balance sheet of the Borrower and its Subsidiaries
and the unaudited consolidating balance sheet of the Borrower and its
Subsidiaries, each as at the end of such Fiscal Quarter, and the related
Consolidated statement of income and Consolidated statement of cash flow and
consolidating statement of income and consolidating statement of cash flow for
the portion of the Borrower’s Fiscal Year then elapsed, all in reasonable detail
and prepared in accordance with GAAP, together with a certification by the
principal financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents in all material respects,
the financial position of the Borrower and its Subsidiaries on the date thereof
(subject to year-end adjustments and the absence of footnotes);

          (c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each Fiscal Year of the Borrower, unaudited
monthly Consolidated financial statements of the Borrower and its Subsidiaries
for such month and unaudited monthly consolidating financial statements of the
Borrower and its Subsidiaries for such month, each prepared in accordance with
GAAP, together with a certification by the Controller, Senior Vice President of
Finance or other principal financial or accounting officer of the Borrower that
the information contained in such financial statements fairly presents in all
material respects, he financial condition of the Borrower and its Subsidiaries
on the date thereof (subject to quarterly and year-end adjustments and the
absence of footnotes);

          (d) within thirty (30) Business Days after the end of each calendar
month, an accounts payable aging report;

          (e) on or prior to April 30 of each calendar year, projections of the
Borrower and its Subsidiaries updating those projections previously delivered to
the Lenders, in form reasonably satisfactory to the Administrative Agent, on a
monthly basis for the immediately following Fiscal Year (including the Fiscal
Year in which the Maturity Date occurs);

          (f) prior to the opening by the Borrower of any new retail store or
distribution center at which Eligible Inventory is to be located, a supplement
to Schedule 5.08 listing any additions or deletions to the list of retail stores
and distribution centers of the Borrower and its Subsidiaries located in the
United States, which supplement, together with Schedule 5.08 and any prior
supplements, shall be deemed to constitute Schedule 5.08 for all purposes of
this Credit Agreement; and

          (g) within forty-five (45) days after the completion of each of the
Borrower’s semi-annual central warehouse inventory counts (which inventory
counts may be observed by the Agents or by an independent party acceptable to
the Agents) (i) a report with respect to the results of such inventory count and
(ii) a report with respect to the results of the Borrower’s inventory counts
with respect to its retail store locations conducted since the last such report
delivered to the Agents and the Lenders, each in form and detail reasonably
satisfactory to the Agents and the Lenders.

          6.02 Certificates; Other Information. Deliver to the Administrative
Agent and each Lender, in form and detail reasonably satisfactory to the
Administrative Agent and the Majority Lenders:

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          (a) concurrently with the delivery of the financial statements
referred to in Sections 6.01 (a) and (b) and (c), a duly completed Compliance
Certificate signed by a Responsible Officer of the Borrower, and in the event of
any change in GAAP used in the preparation of such financial statements, the
Borrower shall also provide a statement of reconciliation conforming such
financial statements to GAAP, and (ii) a copy of management’s discussion and
analysis with respect to such financial statements;

          (b) on or before 3:00 p.m. each Wednesday, a report in the form of
Exhibit H (a “Borrowing Base Report”) showing the Tranche A Borrowing Base and
the Tranche A-l Borrowing Base as of the close of business as of the last day of
the immediately preceding week, each Borrowing Base Report to be certified as
complete and correct by a Responsible Officer of the Borrower. The Borrowing
Base shall be determined by the Administrative Agent and the Managing Agents by
reference to the most recent Borrowing Base Report delivered to the
Administrative Agent by the Borrower, which shall be delivered weekly, at or
before 11:00 AM each Wednesday, and which may, in the Borrower’s discretion, be
submitted more frequently, including daily, via facsimile or by e-mail, with the
original submitted thereafter by first class mail;

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

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

          (e) promptly after the furnishing thereof, copies of any statement or
report furnished to any holder of Material Indebtedness of any Loan Party or any
Subsidiary thereof pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Lenders
pursuant to Section 6.01 or any other clause of this Section 6.02;

          (f) promptly, and in any event within five (5) Business Days after
receipt thereof by any Loan Party or any Subsidiary thereof, copies of each
notice or other correspondence received from any Governmental Authority
(including, without limitation, the SEC (or comparable agency in any applicable
non-U.S. jurisdiction)) concerning any proceeding with, or investigation or
possible investigation or other inquiry by such Governmental Authority regarding
financial or other operational results of any Loan Party or any Subsidiary
thereof or any other matter which could reasonably expected to have a Material
Adverse Effect; and

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

          6.03 Notices. Promptly notify the Administrative Agent:

          (a) of the occurrence of any Default;

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          (b) of any (i) breach or non-performance of, or any default under, a
Material Contract or with respect to Material Indebtedness of any Loan Party or
any Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding
or suspension between any Loan Party or any Subsidiary thereof and any
Governmental Authority; or (iii) commencement of, or any material development
in, any litigation or proceeding affecting any Loan Party or any Subsidiary
thereof, including pursuant to any applicable Environmental Laws in each case,
which could reasonably be expected to have a Material Adverse Effect.;

          (c) of the occurrence of any ERISA Event, which could reasonably be
expected to have a Material Adverse Effect;

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

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

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

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

          (h) of the filing of any Lien for unpaid Taxes against any Loan Party;

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

          (j) of any failure by any Loan Party to pay rent at any of such Loan
Party’s locations if such failure continues for more than ten (10) days
following the day on which such rent first came due and such failure could
reasonably be expected to have a Material Adverse Effect.

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

          6.04 Payment of Obligations. Pay and discharge as the same shall
become due and payable, all its material obligations and liabilities, including
(a) all material Taxes upon it or its properties or assets, (b) all material
Taxes lawful claims (including, without limitation, claims of landlords,
warehousemen, customs brokers, and carriers) which, if unpaid, would by law
become a Lien upon its property; and (c) all material Indebtedness, as and when
due and payable, but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness, except, in each case,
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) such Loan Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, (c) such contest
effectively suspends collection of the contested obligation and enforcement of
any Lien securing such obligation, (d) no Lien has been filed with respect
thereto and (e) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.

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

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

          6.07 Maintenance of Insurance. Maintain with financially sound and
reputable insurance companies reasonably acceptable to the Administrative Agent,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business and operating in the same or similar locations or as is required by
applicable Law, of such types and in such amounts as are customarily carried
under similar circumstances by such other Persons and comply with the following:

          (a) Fire and extended coverage policies maintained with respect to any
Collateral shall be endorsed or otherwise amended to include (i) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders’ loss payable clause (regarding personal property), in form and
substance reasonably satisfactory to the Collateral Agent, which endorsements or
amendments shall provide that the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies directly to the Collateral Agent,
(ii) a provision to the effect that none of the Loan Parties, Credit Parties or
any other Person shall be a co-insurer and (iii) such other provisions as the
Collateral Agent may reasonably require from time to time to protect the
interests of the Credit Parties. Commercial general liability policies shall be
endorsed to name the Collateral Agent as an additional insured. Business
interruption policies shall name the Collateral Agent as a loss payee and shall
be endorsed or amended to include (i) a provision that, from and after the
Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan
Parties under the policies directly to the Collateral Agent, (ii) a provision to
the effect that none of the Loan Parties, the Administrative Agent, the
Collateral Agent or any other party shall be a co-insurer and (iii) such other
provisions as the Collateral Agent may reasonably require from time to time to
protect the interests of the Credit Parties. Each such policy referred to in
this Section 6.07 shall also provide that it shall not be canceled, modified or
not renewed (i) by reason of nonpayment of premium except upon not less than
thirty (30) days’ prior written notice thereof by the insurer to the Collateral
Agent (giving the Collateral Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason except upon not less than thirty (30)
days’ prior written notice thereof by the insurer to the Collateral Agent. The
Borrower shall deliver to the Collateral Agent, prior to the cancellation,
modification or non-renewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Collateral Agent, including an insurance binder) together with
evidence satisfactory to the Collateral Agent of payment of the premium
therefor.

          (b) None of the Credit Parties, or their agents or employees shall be
liable for any loss or damage insured by the insurance policies required to be
maintained under this Section 6.07. Each Loan Party shall look solely to its
insurance companies or any other parties other than the Credit Parties for the
recovery of such loss or damage and such insurance companies shall have no
rights of subrogation against

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any Credit Party or its agents or employees. If, however, the insurance policies
do not provide waiver of subrogation rights against such parties, as required
above, then the Loan Parties hereby agree, to the extent permitted by law, to
waive their right of recovery, if any, against the Credit Parties and their
agents and employees until the payment in full of the Obligations and the
termination of the Commitments. The designation of any form, type or amount of
insurance coverage by the any Credit Party under this Section 6.07 shall in no
event be deemed a representation, warranty or advice by such Credit Party that
such insurance is adequate for the purposes of the business of the Loan Parties
or the protection of their properties.

          (c) The Borrower shall permit any representatives that are designated
by the Collateral Agent to inspect the insurance policies maintained by or on
behalf of the Loan Parties and to inspect books and records related thereto and
any properties covered thereby. The Loan Parties shall pay the reasonable fees
and expenses of any representatives retained by the Collateral Agent to conduct
any such inspection.

          6.08 Compliance with Laws. Comply in all material respects with the
requirements of all Laws (other than Environmental Laws, compliance with respect
to which shall be governed by Section 6.16) and all orders, writs, injunctions
and decrees applicable to it or to its business or property, except in such
instances in which (a) such requirement of Law or order, writ, injunction or
decree is being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves have been set aside and
maintained by the Loan Parties in accordance with GAAP; (b) such contest
effectively suspends enforcement of the contested Laws, and (c) the failure to
comply therewith could not reasonably be expected to have a Material Adverse
Effect.

          6.09 Books and Records; Accountants.

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

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

          6.10 Inspection Rights.

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

          (b) The Agents shall obtain such appraisals of the Collateral at the
times, and with such frequency, as the Agents, in their sole and exclusive
discretion, may determine, to be conducted by such

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appraisers as are satisfactory to the Agents. Notwithstanding the foregoing, (i)
prior to the occurrence and continuance of any Event of Default, the Borrower
shall only be obligated to reimburse the Agents for three (3) appraisals of the
Collateral in any 12 month period, and (ii) from and after the occurrence and
continuance of any Event of Default, the Agents may cause such additional
appraisals to be undertaken as the Agents, in their sole and exclusive
discretion, deem necessary or appropriate, each of which shall be at the
Borrower’s expense.

          (c) The Agents shall conduct such commercial finance field
examinations of the Borrower’s books and records at the times, and with such
frequency, as the Agents, in their sole and exclusive discretion, may determine,
to be conducted by such examiners as are satisfactory to the Agents.
Notwithstanding the foregoing, (i) prior to the occurrence and continuance of
any Event of Default, the Borrower shall only be obligated to reimburse the
Agents for three (3) commercial finance field examinations in any 12 month
period, and (ii) from and after the occurrence and continuance of any Event of
Default, the Agents may cause such additional commercial finance field
examinations to be undertaken as the Agents, in their sole and exclusive
discretion, deem necessary or appropriate, each of which shall be at the
Borrower’s expense.

          6.11 Use of Proceeds. Use the proceeds of the Credit Extensions (a) to
finance the acquisition of working capital assets of the Borrower, including the
purchase of inventory and equipment, in each case in the ordinary course of
business, (b) to finance Capital Expenditures of the Borrower, and (c) for
general corporate purposes of the Loan Parties, in each case to the extent not
prohibited under applicable Law and the Loan Document.

          6.12 Additional Loan Parties; Additional Properties

          (a) Promptly after any Investment in a new Subsidiary permitted under
this Agreement, pledge to the Collateral Agent, for the benefit of the Lenders
and the Agents, the capital stock of each new Subsidiary in which the Borrower
invests pursuant to a stock pledge agreement in form and substance reasonably
satisfactory to the Agents, and such new Subsidiary shall grant to the
Collateral Agent a perfected first priority security interest (subject only to
Permitted Encumbrances entitled to priority under applicable law) in
substantially all of its personal property assets (with such exceptions are as
acceptable to the Majority Lenders) pursuant to a Joinder Agreement to the
Security Agreement in form and substance reasonably satisfactory to the Agents.
In addition, the Borrower shall promptly after such Investment, revise Schedule
5.17 to reflect the acquisition of each new Subsidiary. Each new Subsidiary in
which the Borrower invests shall, promptly after such Investment, execute and
deliver to the Collateral Agent, for the benefit of the Lenders and the Agents,
a guaranty of the payment and performance of all of the Obligations, in form and
substance satisfactory to the Agents, together with acceptable security
documents including without limitation, the aforementioned Joinder Agreement to
the Security Agreement, legal opinions, and other documents and instruments
necessary to demonstrate the due authorization, execution and delivery by such
new Subsidiary of such guaranty and such security documents and to perfect the
Collateral Agent’s security interest in all of such new Subsidiary’s assets,
including (i) the resolutions of the Board of Directors or equivalent body of
such new Subsidiary and the charter and by laws (or the equivalent thereof) of
such new Subsidiary, certified by an officer of such new Subsidiary, (ii) a good
standing certificate of such new Subsidiary in its jurisdiction of
incorporation, (iii) a certificate of the secretary or an assistant secretary of
such new Subsidiary certifying the names and true signatures of the officers of
such new Subsidiary authorized to sign such guaranty and such security
documents, (iv) UCC 1 financing statements, and (v) such other documents as the
Collateral Agent may reasonably request. Upon delivery of the aforementioned
documents, such new Subsidiary shall become a guarantor of the Obligations
hereunder and, except as otherwise agreed to by the Majority Lenders, shall
comply with and be bound by all of the terms and conditions of the Loan
Documents as a Subsidiary of the Borrower thereunder, and the Borrower shall
cause such new Subsidiary to take all actions which it

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would have been required to make or take had it been a Subsidiary of the
Borrower on the Closing Date, including making all representations and
warranties as a guarantor under each of the Loan Documents. Notwithstanding
anything contained in this Section 6.12 to the contrary, if such Subsidiary is a
CFC, the Equity Interests of such Subsidiary to be pledged may be limited to 65%
of the outstanding Equity Interests of such Subsidiary. In no event shall
compliance with this Section 6.12 waive or be deemed a waiver or Consent to any
transaction giving rise to the need to comply with this Section 6.12 if such
transaction was not otherwise expressly permitted by this Agreement or
constitute or be deemed to constitute, with respect to any Subsidiary, an
approval of such Person as a Borrower or permit the inclusion of any acquired
assets in the computation of the Borrowing Base.

          (b) If, after the Closing Date, the Borrower or any of its
Subsidiaries acquires or leases for a term in excess of five (5) years real
estate used as a manufacturing or warehouse facility, the Borrower shall notify
the Agents promptly thereof, and upon the request of the Agents, the Borrower
shall, or shall cause such Subsidiary to, within sixty (60) days of such
request, deliver to the Collateral Agent a fully executed mortgage or deed of
trust over such real estate, and use commercially reasonable efforts to obtain
such mortgage with respect to such leasehold interests, as applicable, in form
and substance reasonably satisfactory to the Agents, together with title
insurance policies, surveys, evidences of insurances with the Collateral Agent
named as loss payee and additional insured, legal opinions and other documents
and certificates with respect to such real estate as shall be reasonably
satisfactory to the Agents. The Borrower further agrees that, following the
taking of such actions with respect to such real estate or such leases, as
applicable, the Collateral Agent shall have for the benefit of the Lenders and
the Agents a valid and enforceable first priority mortgage or deed of trust over
such real estate or, if obtained, such leasehold interests, as applicable, free
and clear of all defects and encumbrances except for Permitted Encumbrances.

          6.13 Cash Management.

          (a) On or prior to the Closing Date, the Borrower will, and will cause
each of its Subsidiaries to:

 

 

 

          (i) establish DDAs under the control of the Collateral Agent for the
benefit of the Lenders and the Agents, in the name of the Borrower and deliver
to the Administrative Agent copies of notifications (each, a “DDA Notification”)
substantially in the form attached hereto as Exhibit I which have been executed
on behalf of such Loan Party and delivered to each depository institution listed
on Schedule 5.21. All funds in each DDA shall be conclusively presumed to be
Collateral and proceeds of Collateral, and the Agents and the Lenders shall have
no duty to inquire as to the source of the amounts on deposit in any DDA;

 

 

 

          (ii) direct all depository institutions with Store Accounts to cause
all funds in excess of $1,000.00 held in each such Store Account to be
transferred no less frequently than twice each week, and in any event within one
(1) Business Day following any day during which the Borrower has knowledge that
the amounts in any such Store Account are in excess $10,000, to, and only to
Concentration Banks;

 

 

 

          (iii) direct all Concentration Banks (other than LaSalle) to cause all
funds of the Borrower and its Subsidiaries held in such Concentration Banks to
be transferred daily to, and only to, the account (the “Concentration Account”)
maintained at LaSalle or such other location as the Administrative Agent shall
designate;

 

 

 

          (iv) cause all proceeds of Accounts (including, without limitation,
the proceeds of all credit card charges) of the Borrower to be deposited only
into depository accounts

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(collectively, the “Blocked Accounts”) with a Blocked Account Bank which has
entered into a blocked account agreement with Collateral Agent (each, a “Blocked
Account Agreement”) reasonably satisfactory in form and substance to the Agents;

 

 

 

          (v) except for amounts in any Store Account which are less than
$1,000.00, at all times ensure that, within five (5) days following the
Borrower’s or any of its Subsidiaries’ receipt of any cash or cash equivalents
or any other proceeds of Collateral, all such amounts shall have been deposited
in a Blocked Account; and

 

 

 

          (vi) deliver to the Administrative Agent copies of notifications
(each, a “Credit Card Notification”) substantially in the form attached hereto
as Exhibit J which have been executed on behalf of such Loan Party and delivered
to such Loan Party’s credit card clearinghouses and processors listed on
Schedule 5.21.

          (b) The Concentration Account shall at all times be under the sole
dominion and control of the Collateral Agent. The Loan Parties hereby
acknowledge and agree that (i) the Loan Parties have no right of withdrawal from
the Concentration Account, (ii) the funds on deposit in the Concentration
Account shall at all times be collateral security for all of the Obligations and
(iii) the funds on deposit in the Concentration Account shall be applied as
provided in this Agreement. In the event that, notwithstanding the provisions of
this Section 6.13, any Loan Party receives or otherwise has dominion and control
of any such proceeds or collections, such proceeds and collections shall be held
in trust by such Loan Party for the Collateral Agent, shall not be commingled
with any of such Loan Party’s other funds or deposited in any account of such
Loan Party and shall, not later than the Business Day after receipt thereof, be
deposited into the Concentration Account or dealt with in such other fashion as
such Loan Party may be instructed by the Collateral Agent.

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

          6.14 Information Regarding the Collateral

          (a) Furnish to the Administrative Agent at least thirty (30) days
prior written notice of any change in: (i) any Loan Party’s name or in any trade
name used to identify it in the conduct of its business or in the ownership of
its properties; (ii) the location of any Loan Party’s chief executive office,
its principal place of business, any office in which it maintains books or
records relating to Collateral owned by it or any office or facility at which
Collateral owned by it is located (including the establishment of any such new
office or facility); (iii) any Loan Party’s organizational structure or
jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal
Taxpayer Identification Number or organizational identification number assigned
to it by its state of organization. The Loan Parties agree not to effect or
permit any change referred to in the preceding sentence unless all filings have
been made under the UCC or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral for
its own benefit and the benefit of the other Credit Parties.

          (b) Should any of the information on any of the Schedules hereto
become inaccurate or misleading in any material respect as a result of changes
after the Closing Date, the Borrower shall advise the Administrative Agent in
writing of such revisions or updates as may be necessary or appropriate to
update or correct the same. From time to time as may be reasonably requested by
the Administrative Agent, the Borrower shall supplement each Schedule hereto, or
any representation herein or in any other

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Loan Document, with respect to any matter arising after the Closing Date that,
if existing or occurring on the Closing Date, would have been required to be set
forth or described in such Schedule or as an exception to such representation or
that is necessary to correct any information in such Schedule or representation
which has been rendered inaccurate thereby (and, in the case of any supplements
to any Schedule, such Schedule shall be appropriately marked to show the changes
made therein). Notwithstanding the foregoing, no supplement or revision to any
Schedule or representation shall be deemed the Credit Parties’ consent to the
matters reflected in such updated Schedules or revised representations nor
permit the Loan Parties to undertake any actions otherwise prohibited hereunder
or fail to undertake any action required hereunder from the restrictions and
requirements in existence prior to the delivery of such updated Schedules or
such revision of a representation; nor shall any such supplement or revision to
any Schedule or representation be deemed the Credit Parties’ waiver of any
Default resulting from the matters disclosed therein.

          6.15 Physical Inventories.

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

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

          6.16 Environmental Laws.

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

          6.17 Further Assurances.

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

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provide to the Agents, from time to time upon reasonable request, evidence
satisfactory to the Agents as to the perfection and priority of the Liens
created or intended to be created by the Security Documents.

          (b) Upon the request of the Collateral Agent, use commercially
reasonable effort to cause each of its customs brokers to deliver a Customs
Broker Agreement to the Collateral Agent.

          6.18 Compliance with Terms of Leaseholds. Except as otherwise
expressly permitted hereunder, make all payments and otherwise perform all
obligations in respect of all Leases of real property to which any Loan Party or
any of its Subsidiaries is a party, keep such Leases in full force and effect
and not allow such Leases to lapse or be terminated or any rights to renew such
leases to be forfeited or cancelled, notify the Administrative Agent of any
default by any party with respect to such Leases and cooperate with the
Administrative Agent in all respects to cure any such default, and cause each of
its Subsidiaries to do so, except, in any case, where the failure to do so,
either individually or in the aggregate, could not be reasonably likely to have
a Material Adverse Effect.

          6.19 Material Contracts. Perform and observe all the terms and
provisions of each Material Contract to be performed or observed by it, maintain
each such Material Contract in full force and effect, enforce each such Material
Contract in accordance with its terms, take all such action to such end as may
be from time to time requested by the Administrative Agent and, upon request of
the Administrative Agent, make to each other party to each such Material
Contract such demands and requests for information and reports or for action as
any Loan Party or any of its Subsidiaries is entitled to make under such
Material Contract, and cause each of its Subsidiaries to do so, except, in any
case, where the failure to do so, either individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

          6.20 Trade Vendor Agreement. In no event shall the proceeds of any
Credit Extensions be applied to any payments under the Trade Vendor Agreement
including, without limitation, the Final Payment, without the consent of the
Administrative Agent.

ARTICLE VII.
NEGATIVE COVENANTS

          So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, no Loan Party shall, nor shall it permit any
Subsidiary to, directly or indirectly:

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

          7.02 Investments. Make any Investments, except Permitted Investments.

          7.03 Indebtedness. Create, incur, assume, guarantee, suffer to exist
or otherwise become or remain liable with respect to, any Indebtedness, except
Permitted Indebtedness.

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          7.04 Fundamental Changes. Merge, dissolve, liquidate, consolidate with
or into another Person, (or agree to do any of the foregoing), except that, so
long as no Default shall have occurred and be continuing prior to or immediately
after giving effect to any action described below or would result therefrom any
Subsidiary may merge with (i) a Loan Party, provided that the Loan Party shall
be the continuing or surviving Person, or (ii) any one or more other
Subsidiaries, provided that when any wholly-owned Subsidiary is merging with
another Subsidiary, the wholly-owned Subsidiary shall be the continuing or
surviving Person. The Borrower will not, and will not permit any of its
Subsidiaries to, agree to or effect any asset acquisition or stock acquisition
without the prior written consent of the Majority Lenders.

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

          7.06 Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
or issue or sell any Equity Interests or accept any capital contribution, except
that, so long as no Default shall have occurred and be continuing prior to or
immediately after giving effect to any action described below or would result
therefrom:

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

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

          (c) the Loan Parties may issue and sell Equity Interests provided that
(i) (A) with respect to any Equity Interests, all dividends in respect of which
are to be paid (and all other payments in respect of which are to be made) shall
be in additional shares of such Equity Interests, in lieu of cash, (B) such
Equity Interests shall not be subject to redemption other than redemption at the
option of the Loan Party issuing such Equity Interests, (C) all payments in
respect of such Equity Interests are expressly subordinated to the Obligations
and (D) the proceeds of such sale shall be applied to the Obligations or as
otherwise provided in this Agreement, and (ii) no Loan Party shall issue any
additional Equity Interests in a Subsidiary;

          (d) the Borrower may issue and sell Equity Interests and make payments
under the Trade Vendor Agreement with the Equity Proceeds thereof or with the
proceeds of Subordinated Indebtedness or as otherwise permitted under Section
6.20;

          (e) the Loan Parties may issue and sell Equity Interests and make
Permitted Restricted Subordinated Debt Payments with the Equity Proceeds thereof
or with the proceeds of Subordinated Indebtedness; and

          (f) the Loan Parties may pay management fees to one or more of the
Existing Equity Holders or any of their respective Affiliates in an aggregate
amount not to exceed $1,000,000 in any Fiscal Year.

          7.07 Prepayments of Indebtedness. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner any
Indebtedness, or make any payment in violation of any subordination terms of any
Subordinated Indebtedness, except:

          (a) as long as no Event of Default then exists, regularly scheduled or
mandatory repayments or redemptions, or payments at the stated maturity of,
Permitted Indebtedness; and

          (b) Permitted Restricted Subordinated Debt Payments.

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          7.08 Change in Nature of Business.

          (a) In the case of the Borrower and its Subsidiaries, engage in any
line of business substantially different from the Business conducted by the Loan
Parties and their Subsidiaries on the date hereof or any business substantially
related or incidental thereto.

          (b) In the case of WJ Holding Corp., engage in any business or
activity other than (i) the direct or indirect ownership of all outstanding
Equity Interests in the other Loan Parties, (ii) maintaining its corporate
existence, (iii) participating in tax, accounting and other administrative
activities as the parent of the Consolidated group of companies, including the
Loan Parties, and (iv) activities incidental to the businesses or activities
described in clauses (i) through (iii) of this Section 7.08(b).

          7.09 Transactions with Affiliates. Enter into, renew, extend or be a
party to any transaction of any kind with any Affiliate of any Loan Party,
whether or not in the ordinary course of business, other than on fair and
reasonable terms substantially as favorable to the Loan Parties or such
Subsidiary as would be obtainable by the Loan Parties or such Subsidiary at the
time in a comparable arm’s length transaction with a Person other than an
Affiliate, provided that the foregoing restriction shall not apply to (a) a
transaction between or among the Loan Parties or (b) transactions permitted by
Section 7.06 or Section 7.07.

          7.10 Burdensome Agreements. Enter into or permit to exist any
Contractual Obligation (other than this Agreement or any other Loan Document or
the Subordinate Facility) that (a) limits the ability (i) of any Subsidiary to
make Restricted Payments or other distributions to any Loan Party or to
otherwise transfer property to or invest in a Loan Party, (ii) of any Subsidiary
to Guarantee the Obligations, (iii) of any Subsidiary to make or repay loans to
a Loan Party, or (iv) of the Loan Parties or any Subsidiary to create, incur,
assume or suffer to exist Liens on property of such Person in favor of the
Collateral Agent; provided, however, that this clause (iv) shall not prohibit
any negative pledge incurred or provided in favor of any holder of Indebtedness
permitted under Section 7.01 solely to the extent any such negative pledge
relates to the property financed by or the subject of such Indebtedness; or (b)
requires the grant of a Lien to secure an obligation of such Person if a Lien is
granted to secure another obligation of such Person.

          7.11 Use of Proceeds. Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of Regulation
U of the FRB) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund Indebtedness originally incurred for such
purpose.

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

          7.13 Corporate Name; Fiscal Year.

          (a) Change the Fiscal Year of any Loan Party, or the accounting
policies or reporting practices of the Loan Parties, except as required by GAAP.

          (b) Change its name as it appears in official filings in the state of
its incorporation or other organization (b) change its chief executive office,
principal place of business, corporate offices or warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, (c) change the type of entity that it is, (d) change its
organization identification number, if any,

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issued by its state of incorporation or other organization, or (e) change its
state of incorporation or organization, in each case without at least thirty
(30) days prior written notice to the Collateral Agent (it being understood that
such actions may be taken immediately upon receipt of the Collateral Agent’s
written acknowledgment, which acknowledgment shall not be unreasonably withheld
or delayed, that any reasonable action requested by the Collateral Agent in
connection therewith, including to continue the perfection of any Liens in favor
of the Collateral Agent, in any Collateral, has been completed or taken), and
provided that any such new location shall be in the continental United States.

          7.14 Deposit Accounts; Credit Card Processors. Not open new DDAs or
Blocked Accounts unless the Loan Parties shall have delivered to the Collateral
Agent appropriate DDA Notifications or Blocked Account Agreements consistent
with the provisions of Section 6.13 and otherwise satisfactory to the Collateral
Agent. No Loan Party shall maintain any bank accounts or enter into any
agreements with credit card processors other than the ones expressly
contemplated herein or in Section 6.13.

          7.15 Excess Availability. Permit Excess Availability at any time to be
less than $5,000,000.

ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES

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

          (a) Non-Payment. The Borrower or any other Loan Party fails to pay
when and as required to be paid herein, (i) any amount of principal of any Loan
or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C
Obligations, or (ii) any interest on any Loan or on any L/C Obligation, within
one (1) day following the date when the same shall become due and payable, other
than at the stated date of maturity or any accelerated date of maturity, or
(iii) any fee due hereunder, or (iv) any other amount payable hereunder or under
any other Loan Document; or

          (b) Specific Covenants. Any Loan Party fails to perform or observe any
term, covenant or agreement contained in any of Section 6.01 (Financial
Statements), 6.02 (Certificates; Other Information), 6.03 (Notices), 6.05(a)
(Preservation of Existence), 6.07 (Insurance; solely with respect to the
maintenance of insurance required thereby), 6.10 (Inspection Rights), 6.11 (Use
of Proceeds) 6.13 (Cash Management) or 6.15 (Physical Inventories) or Article
VII; or

          (c) Other Defaults. Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 15 days; or

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

          (e) Cross-Default. The Borrower or any of its Subsidiaries shall (i)
fail to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received or in respect of any
Capitalized Leases, or (ii) fail to observe or perform any material term,
covenant, or agreement contained in any agreement by which it is bound,
evidencing or securing borrowed money or credit received, or in respect of any
Capitalized Leases, in each case under this subparagraph (e) in excess of
$1,000,000.00, including without limitation, under the Subordinate Facility or
under the Trade Vendor

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Agreement, for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof, whether or not
any such acceleration has taken place; or

          (f) Insolvency Proceedings, Etc. Any Loan Party or any of its
Subsidiaries institutes or consents to the institution of any proceeding under
any Debtor Relief Law, or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or
any material part of its property; or a proceeding shall be commenced or a
petition filed, without the application or consent of such Person, seeking or
requesting the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed and the appointment
continues undischarged, undismissed or unstayed for 60 calendar days or an order
or decree approving or ordering any of the foregoing shall be entered; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or

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

          (h) Judgments. There is entered against any Loan Party or any
Subsidiary thereof (i) one or more judgments or orders for the payment of money
in an aggregate amount (as to all such judgments and orders) exceeding
$1,500,000.00 (to the extent not covered by independent third-party insurance as
to which the insurer is rated at least “A” by A.M. Best Company, has been
notified of the potential claim and does not dispute coverage), or (ii) any one
or more non-monetary judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either
case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 30 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, is not in effect; or

          (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of any Loan Party under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of
$1,500,000.00, or (ii) a Loan Party or any ERISA Affiliate fails to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan in an aggregate amount in excess of $1,500,000.00; or

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

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

          (1) Cessation of Business. Except as otherwise expressly permitted
hereunder, any Loan Party shall take any action to suspend the operation of its
business in the ordinary course, liquidate all or a material portion of its
assets or Store locations, or employ an agent or other third party to conduct a
program of closings, liquidations or “Going-Out-Of-Business” sales of any
material portion of its business or the Borrower or any of its Subsidiaries
shall be enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty (30)
days; or

          (m) Loss of Collateral. There shall occur any material damage to, or
loss, theft or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than ten (10)
consecutive days, the cessation or substantial curtailment of revenue producing
activities at retail locations of the Borrower or any of its Subsidiaries
constituting twenty-five percent (25%) or more of the Borrower’s and its
Subsidiaries retail locations if such event or circumstance is not covered by
business interruption insurance; or

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

          (o) Indictment. The Borrower or any of its Subsidiaries shall be
indicted for a state or federal crime, or any civil or criminal action shall
otherwise have been brought against the Borrower or any of its Subsidiaries, a
punishment for which in any such case could include the forfeiture of any assets
of the Borrower or such Subsidiary included in the Aggregate Borrowing Base or
any assets of the Borrower or such Subsidiary not included in the Aggregate
Borrowing Base but having a fair market value in excess of $1,500,000.00; or

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

          (q) Additional Subordinated Indebtedness. After the Closing Date and
prior to March 30, 2007, the Borrower shall not receive at least $12,500,000 in
Equity Proceeds or the proceeds of Subordinated Indebtedness (including under
the Subordinate Facility);

          (r) Additional Equity. After the Closing Date and prior to May 31,
2007, the Borrower shall not receive, in addition to the monies referred to in
Section 8.01(q), at least $10,000,000 in Equity Proceeds or the proceeds of
Subordinated Indebtedness; or

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          (s) Extension of Subordinate Facility. If on or prior to December 15,
2008, the Administrative Agent shall not have been provided with a copy of an
executed amendment or other modification to the Subordinate Facility extending
its maturity date to February 20, 2011 or later.

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

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

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

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

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

provided, however, that upon the entry of an order for relief with respect to
any Loan Party or any Subsidiary thereof under the Bankruptcy Code of the United
States, the obligation of each Lender to make Loans and any obligation of the
L/C Issuer to make L/C Credit Extensions shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable, and the
obligation of the Loan Parties to Cash Collateralize the L/C Obligations as
aforesaid shall automatically become effective, in each case without further act
of the Administrative Agent or any Lender.

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

          8.03 Application of Funds. After the exercise of remedies provided for
in Section 8.02 (or after the Loans have automatically become immediately due
and payable and the L/C Obligations have automatically been required to be Cash
Collateralized as set forth in the proviso to Section 8.02), any amounts
received on account of the Obligations shall be applied by the Administrative
Agent in the following order:

 

 

 

          (i) to payment of that portion of the Obligations (excluding the Other
Liabilities) constituting fees, indemnities, Credit Party Expenses and other
amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and the Collateral Agent and amounts payable under Article
III) payable to the Administrative Agent and the Collateral Agent, each in its
capacity as such; and then

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          (ii) to payment of that portion of the Obligations (excluding the
Other Liabilities) constituting indemnities, Credit Party Expenses, and other
amounts (other than principal, interest and fees) payable to the Lenders and the
L/C Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the L/C Issuer and amounts payable under Article II),
ratably among them in proportion to the amounts described in this clause payable
to them (other than any amounts owing to Tranche A-1 Lenders); and then

 

 

 

          (iii) to the extent not previously reimbursed by the Lenders, to
payment to the Lenders of that portion of the Obligations constituting principal
and accrued and unpaid interest on any Permitted Overadvances, ratably among the
Lenders in proportion to the amounts described in this clause payable to them;
and then

 

 

 

          (iv) to payment of that portion of the Obligations constituting
accrued and unpaid interest on the Loans, L/C Borrowings and other Obligations,
and fees (including Letter of Credit Fees but excluding any Early Termination
Fees), ratably among the Tranche A Lenders and the L/C Issuer in proportion to
the respective amounts described in this clause payable to them (other than any
interest and fees owing to Tranche A-1 Lenders); and then

 

 

 

          (v) to payment of that portion of the Obligations constituting unpaid
principal of the Loans (other than Tranche A-1 Loans) and L/C Borrowings,
ratably among the Tranche A Lenders and the L/C Issuer in proportion to the
respective amounts described in this clause held by them; and then

 

 

 

          (vi) to the Administrative Agent for the account of the L/C Issuer, to
Cash Collateralize that portion of L/C Obligations comprised of the aggregate
undrawn amount of Letters of Credit (other than those in which the Tranche A-1
Lenders participate); and then

 

 

 

          (vii) ratably to pay any fees (excluding any Early Termination Fees)
then due to the Tranche A-1 Lenders until paid in full; and then

 

 

 

          (viii) ratably to pay interest accrued in respect of the Tranche A-1
Loans until paid in full; and then

 

 

 

          (ix) ratably to pay principal due in respect of Tranche A-1 Loans
until paid in full; and then

 

 

 

          (x) to the Administrative Agent for the account of the L/C Issuer, to
Cash Collateralize that portion of L/C Obligations comprised of the aggregate
undrawn amount of Letters of Credit in which the Tranche A-1 Lenders
participate; and then

 

 

 

          (xi) to payment of all other Obligations (including without limitation
the cash collateralization of unliquidated indemnification obligations as
provided in Section 10.04, but excluding any Other Liabilities), ratably among
the Credit Parties in proportion to the respective amounts described in this
clause held by them; and then

 

 

 

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

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

 

 

 

          (xiv) to payment to the Tranche A Lenders of Early Termination Fees,
if any; and then

 

 

 

          (xv) to payment to the Tranche A-1 Lenders of Early Termination Fees,
if any; and then

 

 

 

          (xvi) to payment of all Other Liabilities not paid under any of the
preceding clauses; and then, lastly

 

 

 

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

          Subject to Section 2.03(g), amounts used to Cash Collateralize the
aggregate undrawn amount of Letters of Credit pursuant to clauses (vi) and (x)
above shall be applied to satisfy drawings under such Letters of Credit as they
occur. If any amount remains on deposit as Cash Collateral after all Letters of
Credit have either been fully drawn or expired, such remaining amount shall be
applied to the other Obligations, if any, in the order set forth above.

ARTICLE IX.
ADMINISTRATIVE AGENT

          9.01 Appointment and Authority.

          (a) Each of the Lenders and the L/C Issuer hereby irrevocably appoints
LaSalle to act on its behalf as the Administrative Agent hereunder and under the
other Loan Documents and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions of this Article
are solely for the benefit of the Administrative Agent, the Lenders and the L/C
Issuer, and no Loan Party or any Subsidiary thereof shall have rights as a third
party beneficiary of any of such provisions.

          (b) Each of the Lenders (in its capacities as a Lender) and the L/C
Issuer hereby irrevocably appoints LaSalle as Collateral Agent and authorizes
the Collateral Agent to act as the agent of such Lender and the L/C Issuer for
purposes of acquiring, holding and enforcing any and all Liens on Collateral
granted by any of the Loan Parties to secure any of the Obligations, together
with such powers and discretion as are reasonably incidental thereto. In this
connection, the Collateral Agent, as “collateral agent” and any co-agents,
sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to
Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or
any portion thereof) granted under the Collateral Documents, or for exercising
any rights and remedies thereunder at the direction of the Collateral Agent),
shall be entitled to the benefits of all provisions of this Article IX and
Article X (including Section 10.04(c)), as though such co-agents, sub-agents and
attorneys-in-fact were the “collateral agent” under the Loan Documents, as if
set forth in full herein with respect thereto.

          9.02 Rights as a Lender. The Persons serving as the Agents hereunder
shall have the same rights and powers in their capacity as a Lender as any other
Lender and may exercise the same as though they were not the Administrative
Agent or the Collateral Agent and the term “Lender” or “Lenders” shall,

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unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as the Administrative Agent or the Collateral Agent
hereunder in its individual capacity. Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the Loan
Parties or any Subsidiary or other Affiliate thereof as if such Person were not
the Administrative Agent or the Collateral Agent hereunder and without any duty
to account therefor to the Lenders.

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

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

          (b) shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the
Administrative Agent or the Collateral Agent, as applicable, is required to
exercise as directed in writing by the Majority Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in the
other Loan Documents), provided that no Agent shall be required to take any
action that, in its respective opinion or the opinion of its counsel, may expose
such Agent to liability or that is contrary to any Loan Document or applicable
law; and

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

No Agent shall be liable for any action taken or not taken by it (i) with the
Consent or at the request of the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as such Agent shall believe
in good faith shall be necessary, under the circumstances as provided in
Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a
court of competent jurisdiction. The Agents shall not be deemed to have
knowledge of any Default unless and until notice describing such Default is
given to such Agent by the Loan Parties, a Lender or the L/C Issuer.

          The Agents shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of
any certificate, report or other document delivered hereunder or thereunder or
in connection herewith or therewith, (iii) the performance or observance of any
of the covenants, agreements or other terms or conditions set forth herein or
therein or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or the creation, perfection or priority
of any Lien purported to be created by the Security Documents, (v) the value or
the sufficiency of any Collateral, or (vi) the satisfaction of any condition set
forth in Article IV or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Agents.

          9.04 Reliance by Agents.

          Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including, but not limited to,
any electronic message, Internet or intranet website posting or other
distribution) believed by it

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

          9.05 Delegation of Duties. Each Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub-agents appointed by such Agent. Each
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to
the Related Parties of the Agents and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as such Agent.

          9.06 Resignation of Agents. Either Agent may at any time give written
notice of its resignation to the Lenders, the L/C Issuer and the Borrower. Upon
receipt of any such notice of resignation, the Majority Lenders shall have the
right, with the consent of the Borrower, to appoint a successor, which shall be
a bank with an office in the United States, or an Affiliate of any such bank
with an office in the United States. If no such successor shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a
successor Administrative Agent or Collateral Agent, as applicable, meeting the
qualifications set forth above; provided that if the Administrative Agent or the
Collateral Agent shall notify the Borrower and the Lenders that no qualifying
Person has accepted such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (1) the retiring Agent shall
be discharged from its duties and obligations hereunder and under the other Loan
Documents (except that in the case of any Collateral held by the Collateral
Agent on behalf of the Lenders or the L/C Issuer under any of the Loan
Documents, the retiring Collateral Agent shall continue to hold such collateral
security until such time as a successor Collateral Agent is appointed) and (2)
all payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
the L/C Issuer directly, until such time as the Majority Lenders appoint a
successor Administrative Agent as provided for above in this Section. Upon the
acceptance of a successor’s appointment as Administrative Agent or Collateral
Agent, as applicable, hereunder, such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring (or
retired) Agent, and the retiring Agent shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents (if not
already discharged therefrom as provided above in this Section). The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the retiring Agent’s resignation hereunder and under
the other Loan Documents, the provisions of this Article and Section 10.04 shall
continue in effect for the benefit of such retiring Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while the retiring Agent was acting as Administrative
Agent or Collateral Agent hereunder.

          Any resignation by LaSalle as Administrative Agent pursuant to this
Section shall also constitute its resignation as L/C Issuer. Upon the acceptance
of a successor’s appointment as Administrative Agent

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hereunder, (a) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring L/C Issuer, (b) the
retiring L/C Issuer shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents, and (c) the successor L/C Issuer
shall issue letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to the retiring L/C Issuer to effectively assume the obligations of
the retiring L/C Issuer with respect to such Letters of Credit.

          9.07 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender and the L/C Issuer acknowledges that it has, independently and without
reliance upon the Agents or any other Lender or any of their Related Parties and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender and
the L/C Issuer also acknowledges that it will, independently and without
reliance upon the Agents or any other Lender or any of their Related Parties and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder. Except as provided
in Section 9.12, the Agents shall not have any duty or responsibility to provide
any Credit Party with any other credit or other information concerning the
affairs, financial condition or business of any Loan Party that may come into
the possession of the Agents.

          9.08 No Other Duties, Etc. Anything herein to the contrary
notwithstanding, the Syndication Agent shall not have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except
in its capacity, as applicable, as the Administrative Agent, Collateral Agent, a
Lender or the L/C Issuer hereunder.

          9.09 Administrative Agent May File Proofs of Claim.

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

 

 

 

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

 

 

 

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

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to the Administrative Agent
and, if the Administrative Agent shall consent to the making of such payments
directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent
any amount due for the

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reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 2.08 and 10.04.

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

          9.10 Collateral and Guaranty Matters. The Credit Parties irrevocably
authorize the Agents, at their option and in their discretion,

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

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

          (c) to release any Guarantor from its obligations under any Guaranty
if such Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder.

Upon request by any Agent at any time, the Majority Lenders will confirm in
writing such Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under any Guaranty pursuant to this Section 9.10. In each case as
specified in this Section 9.10, the Agents will, at the Loan Parties’ expense,
execute and deliver to the applicable Loan Party such documents as such Loan
Party may reasonably request to evidence the release of such item of Collateral
from the assignment and security interest granted under the Security Documents
or to subordinate its interest in such item, or to release such Guarantor from
its obligations under any Guaranty, in each case in accordance with the terms of
the Loan Documents and this Section 9.10.

          9.11 Notice of Transfer. The Agents may deem and treat a Lender party
to this Agreement as the owner of such Lender’s portion of the Obligations for
all purposes, unless and until, and except to the extent, an Assignment and
Acceptance shall have become effective as set forth in Section 10.06.

          9.12 Reports and Financial Statements. By signing this Agreement, each
Lender:

          (a) agrees to furnish the Administrative Agent on the first day of
each month with a summary of all Other Liabilities due or to become due to such
Lender;

          (b) is deemed to have requested that the Administrative Agent furnish
such Lender, promptly after they become available, copies of all financial
statements required to be delivered by the Borrower hereunder and all commercial
finance examinations and appraisals of the Collateral received by the Agents
(collectively, the “Reports”);

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          (c) expressly agrees and acknowledges that the Administrative Agent
makes no representation or warranty as to the accuracy of the Reports, and shall
not be liable for any information contained in any Report;

          (d) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agents or any other party
performing any audit or examination will inspect only specific information
regarding the Loan Parties and will rely significantly upon the Loan Parties’
books and records, as well as on representations of the Loan Parties’ personnel;

          (e) agrees to keep all Reports confidential in accordance with the
provisions of Section 10.07; and

          (f) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Agents and any
such other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw from any
Report in connection with any Credit Extensions that the indemnifying Lender has
made or may make to the Borrower, or the indemnifying Lender’s participation in,
or the indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay and
protect, and indemnify, defend, and hold the Agents and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings,
damages, costs, expenses, and other amounts (including attorney costs) incurred
by the Agents and any such other Lender preparing a Report as the direct or
indirect result of any third parties who might obtain all or part of any Report
through the indemnifying Lender.

          9.13 Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting Liens for the benefit of the
Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC
or any other Applicable Law of the United States can be perfected only by
possession. Should any Lender (other than the Agents) obtain possession of any
such Collateral, such Lender shall notify the Agents thereof, and, promptly upon
the Collateral Agent’s request therefor shall deliver such Collateral to the
Collateral Agent or otherwise deal with such Collateral in accordance with the
Collateral Agent’s instructions.

          9.14 Indemnification of Agents. The Lenders agree to indemnify the
Agents (to the extent not reimbursed by the Loan Parties and without limiting
the obligations of Loan Parties hereunder), ratably according to their
respective pro rata shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against any Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
to be taken by any Agent in connection therewith; provided, that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent’s gross negligence or willful misconduct as determined by a
final and nonappealable judgment of a court of competent jurisdiction.

          9.15 Relation among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agents) authorized to act
for, any other Lender.

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ARTICLE X.
MISCELLANEOUS

          10.01 Amendments, Etc.

          (a) No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no Consent to any departure by any Loan Party
therefrom, shall be effective unless in writing signed by the Administrative
Agent, with the Consent of the applicable Lenders, and the Borrower or the
applicable Loan Party, as the case may be, and acknowledged by the
Administrative Agent, and each such waiver or Consent shall be effective only in
the specific instance and for the specific purpose for which given.

          (b) Notwithstanding any other provision of this Agreement or any Loan
Document, including without limitation, any other provision of this Section
10.01:

 

 

 

          (i) Any matter that requires the consent of the Majority Lenders or
Unanimous Lenders shall also require the consent of each of the Agents;

 

 

 

          (ii) Except as set forth in Section 10.01(b)(iii), any matter which
may be determined by the Administrative Agent in its discretion, shall also
require the consent of each of the other Agents;

 

 

 

          (iii) Any matter relating to the administration of the Tranche A
Borrowing Base or Tranche A-l Borrowing Base shall require the consent of the
Administrative Agent and the Managing Agents; and

 

 

 

          (iv) Upon the occurrence of any Event of Default, the Agents, in their
discretion may, and either of the Administrative Agent or the Managing Agents
may, require the Agents to, cease making Loans, declare the occurrence of an
Event of Default, implement any default rate of interest, accelerate all
Obligations, and require the enforcement of the provisions of the Security
Documents authorizing the sale or other disposition of all or any part of the
Collateral and exercise all or any such other legal and equitable and other
rights or remedies as it may have in respect of such Collateral.

          (c) 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. In addition:

 

 

 

          (i) The Majority Lenders may direct the Agents to require the prompt
repayment of Permitted Overadvances that have been outstanding for more than
forty-five (45) consecutive Business Days or that have been made more than twice
in any twelve month period (the Lenders recognizing that, except as described in
this Section 10.0l(c), any Credit Extension which results in a Permitted
Overadvance may be made by the Administrative Agent and the Managing Agents in
their discretion without the consent of the Lenders and that each Lender shall
be bound thereby);

 

 

 

          (ii) The Majority Lenders may direct the Agents to suspend making
Loans (including the making of any Permitted Overadvances), if the Borrower is
then in Default, following which direction, and for as long as the Borrower is
in Default, the only Loans which may be made are the following:

 

 

 

          (A) Permitted Overadvances not otherwise terminated as provided in
Section 10.01(c)(i);

 

 

 

          (B) Loans made to “cover” the honoring of Letters of Credit; and

 

 

 

          (C) Loans made with consent of the Majority Lenders;

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          (iii) The Majority Lenders may undertake the following if an Event of
Default has occurred and not been duly waived:

 

 

 

          (A) Require the Agents to declare all Obligations to be immediately
payable in full; and

 

 

 

          (B) Direct the Agents to increase the rate of interest to the Default
Rate as provided in, and to the extent permitted by, this Agreement.

          (d) The consent or direction of the following is required for the
following actions:

 

 

 

          (i) Any forgiveness of all or any portion of any payment Obligation:
All Lenders whose payment Obligation is being so forgiven (other than any
Defaulting Lender); and

 

 

 

          (ii) Any decrease in any interest rate or fee payable under any of the
Loan Documents (other than any fee payable to the Agents (for which the consent
of the Agents shall be required): All Lenders adversely affected thereby (other
than any Defaulting Lender).

          (e) None of the following may take place except with the Consent of
the Unanimous Lenders:

 

 

 

          (i) Any release of a material portion of the Collateral, other than a
release of Collateral otherwise required or provided for in the Loan Documents,
unless such release is being made to facilitate a liquidation which has been
previously authorized, or is otherwise permitted hereunder, in which case no
such Consent of Unanimous Lenders is required;

 

 

 

          (ii) Any amendment of the definitions of “Tranche A Borrowing Base”,
“Tranche A-l Borrowing Base”, “Availability” or “Excess 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:

 

 

 

          (A) The foregoing shall not limit the adjustment by the Agents of any
Reserve in the Agents’ administration of the Loans as otherwise permitted by
this Agreement; and

 

 

 

          (B) The foregoing shall not prevent the Agents, in their
administration of the Loans, from restoring any component of the Tranche A
Borrowing Base or Tranche A-l Borrowing Base which had been lowered by the
Agents back to the value of such component, as stated in this Agreement or to an
intermediate value.

 

 

 

          (iii) Any release of any Person obligated on account of the
Obligations;

 

 

 

          (iv) The making of any Loan which, when made, exceeds Availability and
is not a Permitted Overadvance, subject, however, to the following:

 

 

 

          (A) No consent is required in connection with the making of any Loan
to “cover” any honoring of a drawing under any L/C; and

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          (B) Each Lender recognizes that subsequent to the making of a Loan
which does not constitute a Permitted Overadvance, the unpaid principal balance
of the Loans may exceed Availability on account of changed circumstances beyond
the control of any Agent (such as a drop in collateral value);

 

 

 

          (v) Any amendment which has the effect of limiting the Administrative
Agent’s and the Managing Agents’ right or ability to make Permitted
Overadvances;

 

 

 

          (vi) The waiver of the obligation of the Borrower to reduce the Total
Outstandings to an amount permitted by the Aggregate Borrowing Base (other than
a Permitted Overadvance);

 

 

 

          (vii) Any amendment of this Section 10.01;

 

 

 

          (viii) Amendment of any of the following Definitions:

 

 

 

          (A) “Majority Lenders”;

 

 

 

          (B) “Permitted Overadvance”;

 

 

 

          (C) “Unanimous Lenders”;

 

 

 

          (ix) Any amendment of the Maturity Date; and

 

 

 

          (x) Any amendment of Section 7.15 (“Excess Availability”).

          (f) No action, amendment, or waiver of compliance with, any provision
of the Loan Documents or of this Agreement which affects any Agent in its
respective capacity as an Agent may be undertaken without the written consent of
such Agent, and no action referenced herein which affects the rights, duties,
obligations, or liabilities of any Agent shall be effective without the written
consent of that Agent.

          (g) Notwithstanding anything to the contrary in this Section 10.01, no
Defaulting Lender shall have any right to approve or disapprove any amendment,
waiver or Consent hereunder, except that the Commitment of such Lender may not
be increased or extended without the consent of such Lender.

          (h) If any Lender does not Consent (a “Non-Consenting Lender”) to a
proposed amendment, waiver, consent or release with respect to any Loan Document
that requires the Consent of each Lender and that has been approved by the
Majority Lenders, the Borrower may replace such Non-Consenting Lender in
accordance with Section 10.13; provided that such amendment, waiver, consent or
release can be effected as a result of the assignment contemplated by such
Section (together with all other such assignments required by the Borrower to be
made pursuant to this paragraph).

          10.02 Notices; Effectiveness; Electronic Communications.

          (a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and except as provided in subsection (b)
below), all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopier as follows, and all notices
and other communications expressly permitted hereunder to be given by telephone
shall be made to the applicable telephone number, as follows:

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          (i) if to the Borrower, at 125 South Wacker, #2600, Chicago, Illinois
60606-1719, Attention: Chief Financial Officer, or at such other address for
notice as the Borrower shall last have furnished in writing to the Person giving
the notice;

 

 

 

          (ii) if to the Administrative Agent, the Collateral Agent, or LaSalle,
25 Braintree Hill Office Park, Braintree, Massachusetts 02184 Attention: Robert
Barnhard, or such other address for notice as the Administrative Agent, the
Collateral Agent, or, as the case may be, LaSalle shall last have furnished in
writing to the Person giving the notice;

 

 

 

          (iii) if to ABN AMRO Bank N.V., individually or in its capacity as
Syndication Agent, at 565 Fifth Avenue, 25th Floor, New York, New York, 10017,
Attention: Jeffrey Sarfaty, or such other address for notice as it shall last
have furnished in writing to the Person giving the notice; and

 

 

 

          (iv) if to any Lender, at such Lender’s address set forth on Schedule
2.01, or such other address for notice as such Bank shall have last furnished in
writing to the Person giving the notice.

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

          (b) Notices and other communications to the Lenders and the L/C Issuer
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent, provided that the foregoing shall not apply to notices to
any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C
Issuer, as applicable, has notified the Administrative Agent that it is
incapable of receiving notices under such Article by electronic communication.
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such procedures
may be limited to particular notices or communications.

          Unless the Administrative Agent otherwise prescribes, (i) notices and
other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

          (c) Each of the Loan Parties, the Agents and the L/C Issuer may change
its address, telecopier or telephone number for notices and other communications
hereunder by notice to the other parties hereto. Each other Lender may change
its address, telecopier or telephone number for notices and other communications
hereunder by notice to the Borrower, the Agents and the L/C Issuer. In addition,
each Lender agrees to notify the Administrative Agent from time to time to
ensure that the Administrative Agent has on record (i) an effective address,
contact name, telephone number, telecopier number and

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electronic mail address to which notices and other communications may be sent
and (ii) accurate wire instructions for such Lender.

          (d) The Agents, the L/C Issuer and the Lenders shall be entitled to
rely and act upon any notices (including telephonic Loan Notices) purportedly
given by or on behalf of the Loan Parties even if (i) such notices were not made
in a manner specified herein, were incomplete or were not preceded or followed
by any other form of notice specified herein, or (ii) the terms thereof, as
understood by the recipient, varied from any confirmation thereof. The Loan
Parties shall indemnify the Agents, the L/C Issuer, each Lender and the Related
Parties of each of them from all losses, costs, expenses and liabilities
resulting from the reliance by such Person on each notice purportedly given by
or on behalf of the Loan Parties. All telephonic notices to and other telephonic
communications with the Agents may be recorded by the Agents, and each of the
parties hereto hereby consents to such recording.

          10.03 No Waiver; Cumulative Remedies. No failure by any Credit Party
to exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under any other Loan Document preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided herein and in the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. Without limiting the generality of the foregoing, the making of
a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether any Credit Party may have had notice or
knowledge of such Default at the time.

          10.04 Expenses; Indemnity; Damage Waiver.

          (a) The Borrower shall pay all Credit Party Expenses.

          (b) The Loan Parties shall indemnify the Agents (and any sub-agent
thereof), each other Credit Party, and each Related Party of any of the
foregoing Persons (each such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the fees, charges and disbursements
of any counsel for any Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by the Borrower or any other Loan
Party arising out of, in connection with, or as a result of

 

 

 

          (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby, or, in the case of the Agents (and any sub-agents thereof) only, the
administration of this Agreement and the other Loan Documents;

 

 

 

          (ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the L/C Issuer to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit);

 

 

 

          (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property owned or operated by any Loan Party or any of its
Subsidiaries, or any Environmental Liability related in any way to any Loan
Party or any of its Subsidiaries;

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          (iv) any claims of, or amounts paid by any Credit Party to, a Blocked
Account Bank or other Person which has entered into a control agreement with any
Credit Party hereunder; or

 

 

 

          (v) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by Borrower or any other
Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and
regardless of whether any Indemnitee is a party thereto, in all cases, whether
or not caused by or arising, in whole or in part, out of the comparative,
contributory or sole negligence of the Indemnitee;

          provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses (x) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee, (y) result from a claim brought by a
Borrower or any other Loan Party against an Indemnitee for breach in bad faith
of such Indemnitee’s obligations hereunder or under any other Loan Document, if
the Borrower or such Loan Party has obtained a final and nonappealable judgment
in its favor on such claim as determined by a court of competent jurisdiction or
(z) arise out of or in connection with claims solely between and among one or
more Credit Parties.

          (c) To the extent that the Loan Parties for any reason fail to
indefeasibly pay any amount required under subsection (a) or (b) of this Section
to be paid by it, each Lender severally agrees to pay to the Agents (or any such
sub-agent), the L/C Issuer or such Related Party, as the case may be, such
Lender’s Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Agents (or any such sub-agent) or the L/C Issuer in its capacity as
such, or against any Related Party of any of the foregoing acting for the Agents
(or any such sub-agent) or L/C Issuer in connection with such capacity. The
obligations of the Lenders under this subsection (c) are subject to the
provisions of Section 2.11(f).

          (d) To the fullest extent permitted by applicable Law, the Loan
Parties shall not assert, and hereby waive, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or Letter of Credit or the use of the proceeds
thereof. No Indemnitee shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed to such
unintended recipients by such Indemnitee through telecommunications, electronic
or other information transmission systems in connection with this Agreement or
the other Loan Documents or the transactions contemplated hereby or thereby
other than for direct or actual damages resulting from the gross negligence or
willful misconduct of such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

          (e) All amounts due under this Section shall be payable not later than
ten Business Days after demand therefor.

          (f) The agreements in this Section shall survive the resignation of
any Agent and the L/C Issuer, the assignment of any Commitment or Loan by any
Lender, the replacement of any Lender, the termination of the Aggregate
Commitments and the repayment, satisfaction or discharge of all the other
Obligations.

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          10.05 Payments Set Aside. To the extent that any payment by or on
behalf of the Loan Parties is made to any Credit Party, or any Credit Party
exercises its right of setoff, and such payment or the proceeds of such setoff
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by such Credit Party in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Law or otherwise, then (a) to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees
to pay to the Agents upon demand its applicable share (without duplication) of
any amount so recovered from or repaid by the Agents, plus interest thereon from
the date of such demand to the date such payment is made at a rate per annum
equal to the Federal Funds Effective Rate from time to time in effect. The
obligations of the Lenders and the L/C Issuer under clause (b) of the preceding
sentence shall survive the payment in full of the Obligations and the
termination of this Agreement.

          10.06 Successors and Assigns.

          (a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that no Loan Party may assign or otherwise transfer any
of its rights or obligations hereunder or under any other Loan Document without
the prior written Consent of the Administrative Agent and each Lender and no
Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee in accordance with the provisions
of Section 10.06(b), (ii) by way of participation in accordance with the
provisions of subsection Section 10.06(d), or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of Section
10.06(e) (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in Section 10.06(d) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Credit Parties) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

          (b) Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment(s) and the Loans (including for
purposes of this Section 10.06(b), participations in L/C Obligations) at the
time owing to it); provided that any such assignment shall be subject to the
following conditions:

 

 

 

(i) Minimum Amounts

 

 

 

          (A) in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the Loans at the time owing to it or in the
case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, no minimum amount need be assigned; and

 

 

 

          (B) in any case not described in Section 10.06(b)(i)(A), the aggregate
amount of the Commitment (which for this purpose includes Loans outstanding
thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date”
is specified in the Assignment and Assumption, as of the Trade Date, shall not
be less than $10,000,000 unless each of the Administrative Agent and, so long as
no Default has occurred and is continuing, the Borrower otherwise consents (each

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such consent not to be unreasonably withheld or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met;

 

 

 

          (ii) Proportionate Amounts. Each partial assignment shall be made as
an assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Commitment
assigned, except that this clause (ii) shall not prohibit any Lender from
assigning all or any portion of its rights and obligations with respect to its
Tranche A Commitment and its Tranche A-1 Commitment on a non-pro rata basis;

 

 

 

          (iii) Required Consents. No consent shall be required for any
assignment except to the extent required by Section 10.06(b)(i)(B) and, in
addition:

 

 

 

          (A) the consent of the Borrower (such consent not to be unreasonably
withheld or delayed) shall be required unless (1) a Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a Lender,
an Affiliate of a Lender or an Approved Fund;

 

 

 

          (B) the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required for assignments in respect
of any Commitment if such assignment is to a Person that is not a Lender, an
Affiliate of such Lender or an Approved Fund with respect to such Lender; and

 

 

 

          (C) the consent of the L/C Issuer (such consent not to be unreasonably
withheld or delayed) shall be required for any assignment that increases the
obligation of the assignee to participate in exposure under one or more Letters
of Credit (whether or not then outstanding).

 

 

 

          (iv) Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Assumption,
together with a processing and recordation fee of $3,500, provided, however,
that the Administrative Agent may, in its sole discretion, elect to waive such
processing and recordation fee in the case of any assignment.

          Subject to acceptance and recording thereof by the Administrative
Agent pursuant to Section 10.06(c), from and after the effective date specified
in each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 3.01, 3.04, 3.05 and 10.04 with
respect to facts and circumstances occurring prior to the effective date of such
assignment. Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
Section 10.06(d).

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          (c) The Administrative Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at the Administrative Agent’s Office a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive, absent manifest error, and the Loan Parties,
the Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.

          (d) With respect to the sale of Participations:

 

 

 

          (i) any Lender may at any time, without the consent of, or notice to,
the Loan Parties or the Administrative Agent, sell participations to any Person
(other than a natural person or the Loan Parties or any of the Loan Parties’
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations) owing to it); provided that (x) such Lender’s
obligations under this Agreement shall remain unchanged, (y) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Loan Parties, the Agents, the Lenders and the L/C
Issuer shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement. Any Participant
shall agree in writing to comply with all confidentiality obligations set forth
in Section 10.07 as if such Participant was a Lender hereunder;

 

 

 

          (ii) any agreement or instrument pursuant to which a Lender sells such
a participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant. Subject to subsection (e) of this
Section, the Loan Parties agree that each Participant shall be entitled to the
benefits of Sections 3.01 and 3.04 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to Section 10.06(b). To the
extent permitted by law, each Participant also shall be entitled to the benefits
of Section 10.08 as though it were a Lender, provided such Participant agrees to
be subject to Section 2.12 as though it were a Lender; and

 

 

 

          (iii) a Participant shall not be entitled to receive any greater
payment under Section 3.01 or 3.04 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower’s prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 3.01 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Loan Parties, to comply with Section
3.0l(e) as though it were a Lender.

          (e) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement (including under its Note,
if any) to secure obligations of such Lender, including any pledge or assignment
to secure obligations to a Federal Reserve Bank; provided that no

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such pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

          (f) The words “execution,” “signed,” “signature,” and words of like
import in any Assignment and Assumption shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be
of the same legal effect, validity or enforceability as a manually executed
signature or the use of a paper-based recordkeeping system, as the case may be,
to the extent and as provided for in any applicable law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

          (g) Notwithstanding anything to the contrary contained herein, if at
any time LaSalle assigns all of its Commitment and Loans pursuant to Section
10.06(b), LaSalle may, upon 30 days’ notice to the Borrower and the Lenders,
resign as L/C Issuer. In the event of any such resignation as L/C Issuer, the
Majority Lenders, with the consent of the Borrower, shall be entitled to appoint
from among the Lenders a successor L/C Issuer hereunder; provided, however, that
no failure by the Majority Lenders to appoint any such successor shall affect
the resignation of LaSalle as L/C Issuer. If LaSalle resigns as L/C Issuer, it
shall retain all the rights, powers, privileges and duties of the L/C Issuer
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as L/C Issuer and all L/C Obligations with respect
thereto (including the right to require the Lenders to make Base Rate Loans or
fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(g)).
Upon the appointment of a successor L/C Issuer, (a) such successor shall succeed
to and become vested with all of the rights, powers, privileges and duties of
the retiring L/C Issuer and (b) the successor L/C Issuer shall issue letters of
credit in substitution for the Letters of Credit, if any, outstanding at the
time of such succession or make other arrangements satisfactory to LaSalle to
effectively assume the obligations of LaSalle with respect to such Letters of
Credit.

          10.07 Treatment of Certain Information; Confidentiality.

          (a) Each of the Credit Parties agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed:

 

 

 

          (i) to its Affiliates and to its and its Affiliates’ respective
partners, directors, officers, employees, agents, advisors and representatives
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential);

 

 

 

          (ii) to the extent requested by any regulatory authority purporting to
have jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners);

 

 

 

          (iii) to the extent required by applicable Laws or regulations or by
any subpoena or similar legal process;

 

 

 

          (iv) to any other party hereto;

 

 

 

          (v) in connection with the exercise of any remedies hereunder or under
any other Loan Document or any action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder;

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          (vi) subject to an agreement containing provisions substantially the
same as those of this Section, to (x) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (y) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to any Loan Party and
its obligations;

 

 

 

          (vii) with the consent of the Borrower; or

 

 

 

          (viii) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available to
any Credit Party or any of their respective Affiliates on a non-confidential
basis from a source other than the Loan Parties.

          (b) For purposes of this Section, “Information” means all information
received from the Loan Parties or any Subsidiary thereof relating to the Loan
Parties or any Subsidiary thereof or their respective businesses, other than any
such information that is available to any Credit Party on a non-confidential
basis prior to disclosure by the Loan Parties or any Subsidiary thereof. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

          (c) Each of the Credit Parties acknowledges that (i) Information may
include material non-public information concerning the Loan Parties or a
Subsidiary, as the case may be, (ii) it has developed compliance procedures
regarding the use of material non-public information and (ii) it will handle
such material non-public information in accordance with applicable Law,
including Federal and state securities Laws.

          10.08 Right of Setoff. If an Event of Default shall have occurred and
be continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender, the L/C
Issuer and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the
Administrative Agent or the Majority Lenders, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender, the
L/C Issuer or any such Affiliate to or for the credit or the account of the
Borrower or any other Loan Party against any and all of the Obligations now or
hereafter existing under this Agreement or any other Loan Document to such
Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C
Issuer shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Borrower or such Loan Party may be
contingent or unmatured or are owed to a branch or office of such Lender or the
L/C Issuer different from the branch or office holding such deposit or obligated
on such indebtedness. The rights of each Lender, the L/C Issuer and their
respective Affiliates under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender, the L/C Issuer or
their respective Affiliates may have. Each Lender and the L/C Issuer agrees to
notify the Borrower and the Administrative Agent promptly after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application.

          10.09 Interest Rate Limitation. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable Law (the “Maximum Rate”). If the Administrative
Agent or any Lender shall receive interest in an amount that exceeds the Maximum
Rate, the excess interest shall be applied to the principal of the Loans or, if
it exceeds such unpaid principal, refunded to the Borrower. In determining
whether the interest contracted for, charged, or received by the

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Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to
the extent permitted by applicable Law, (a) characterize any payment that is not
principal as an expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations hereunder.

          10.10 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof that, when taken together, bear the
signatures of each of the other parties hereto. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be as
effective as delivery of a manually executed counterpart of this Agreement.

          10.11 Survival. All representations and warranties made hereunder and
in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and
delivery hereof and thereof. Such representations and warranties have been or
will be relied upon by the Credit Parties, regardless of any investigation made
by any Credit Party or on their behalf and notwithstanding that any Credit Party
may have had notice or knowledge of any Default at the time of any Credit
Extension, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter
of Credit shall remain outstanding. Further, the provisions of Sections 3.01,
3.04, 3.05 and 10.04, as well as Article IX, shall survive and remain in full
force and effect regardless of the repayment of the Obligations, the expiration
or termination of the Letters of Credit and the Commitments or the termination
of this Agreement or any provision hereof. In connection with the termination of
this Agreement and the release and termination of the security interests in the
Collateral, the Agents may require such indemnities and collateral security as
they shall reasonably deem necessary or appropriate to protect the Credit
Parties against (i) loss on account of credits previously applied to the
Obligations that may subsequently be reversed or revoked, and (ii) any
obligations that may thereafter arise with respect to the Other Liabilities.

          10.12 Severability. If any provision of this Agreement or the other
Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

          10.13 Replacement of Lenders.

           (a) If any Lender requests compensation under Section 3.04, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or any Lender gives a notice pursuant to Section 3.02, or if any Lender is a
Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by, Section
10.06), all of its interests, rights and obligations under this Agreement and
the related Loan

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Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:

 

 

 

          (i) the Borrower shall have paid to the Administrative Agent the
assignment fee specified in Section 10.06(b);

 

 

 

          (ii) such Lender (other than a Defaulting Lender or Non-Consenting
Lender) shall have received payment of an amount equal to the outstanding
principal of its Loans and L/C Advances, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 3.05) from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts), and any Defaulting Lender or Non-Consenting
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and L/C Advances, and accrued interest thereon;

 

 

 

          (iii) in the case of any such assignment resulting from a claim for
compensation under Section 3.04 or payments required to be made pursuant to
Section 3.01 or Section 3.02, such assignment will result in a reduction in such
compensation or payments thereafter; and

 

 

 

          (iv) such assignment does not conflict with applicable Laws.

          (b) A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

          10.14 Governing Law; Jurisdiction; Etc.

          (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.

          (b) SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF ANY FEDERAL COURT
SITTING THEREIN AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
LOAN PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
COURT OF THE STATE OF ILLINOIS OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL
AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY
LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

          (c) WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF

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VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS
SECTION. EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

          10.15 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

          10.16 No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s length commercial transaction between the Loan
Parties, on the one hand, and the Credit Parties, on the other hand, and each of
the Loan Parties is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby
and by the other Loan Documents (including any amendment, waiver or other
modification hereof or thereof); (ii) in connection with the process leading to
such transaction, the each Credit Party is and has been acting solely as a
principal and is not the financial advisor, agent or fiduciary, for the Loan
Parties or any of their respective Affiliates, stockholders, creditors or
employees or any other Person; (iii) none of the Credit Parties has assumed or
will assume an advisory, agency or fiduciary responsibility in favor of the Loan
Parties with respect to any of the transactions contemplated hereby or the
process leading thereto, including with respect to any amendment, waiver or
other modification hereof or of any other Loan Document (irrespective of whether
any of the Credit Parties has advised or is currently advising any Loan Party or
any of its Affiliates on other matters) and none of the Credit Parties has any
obligation to any Loan Party or any of its Affiliates with respect to the
transactions contemplated hereby except those obligations expressly set forth
herein and in the other Loan Documents; (iv) the Credit Parties and their
respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Loan Parties and their
respective Affiliates, and none of the Credit Parties has any obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (v) the Credit Parties have not provided and will not provide
any legal, accounting, regulatory or tax advice with respect to any of the
transactions contemplated hereby (including any amendment, waiver or other
modification hereof or of any other Loan Document) and each of the Loan Parties
has consulted its own legal, accounting, regulatory and tax advisors to the
extent it has deemed appropriate. Each of the Loan Parties hereby waives and
releases, to the fullest extent permitted by law, any claims that it may

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have against each of the Credit Parties with respect to any breach or alleged
breach of agency or fiduciary duty.

          10.17 USA PATRIOT Act Notice

          Each Lender that is subject to the Act (as hereinafter defined) and
the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Loan Parties that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Act”), it is required to obtain, verify and record information that identifies
each Loan Party, which information includes the name and address of each Loan
Party and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify each Loan Party in accordance with the Act.
Each Loan Party is in compliance, in all material respects, with the Patriot
Act. No part of the proceeds of the Loans will be used by the Loan Parties,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

          10.18 Time of the Essence. Time is of the essence of the Loan
Documents.

          10.19 Existing Credit Agreement Amended and Restated. This Agreement
shall amend and restate the Existing Credit Agreement in its entirety, with the
parties hereby agreeing that there is no novation of the Existing Credit
Agreement. On the Closing Date, the rights and obligations of the parties under
the Existing Credit Agreement shall be subsumed within and be governed by this
Agreement; provided, however, that each of the “Loans” (as such term is defined
in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement on the Closing Date shall, for purposes of this Agreement, be included
as Loans hereunder and each of the “Letters of Credit” (as defined in the
Existing Credit Agreement) outstanding under the Existing Credit Agreement on
the Closing Date shall be Letters of Credit hereunder.

          10.20 Press Releases. Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of Administrative Agent or
its Affiliates or referring to this Agreement or the other Loan Documents
without at least two (2) Business Days’ prior notice to Administrative Agent and
without the prior written consent of Administrative Agent unless (and only to
the extent that) such Credit Party or Affiliate is required to do so under
Applicable Law and then, in any event, such Credit Party or Affiliate will
consult with Administrative Agent before issuing such press release or other
public disclosure. No Credit Party shall publish advertising material relating
to the financing transactions contemplated by this Agreement using any Loan
Party’s name, product photographs, logo or trademark without the prior written
consent of Borrower. Administrative Agent or such Lender shall provide a draft
reasonably in advance of any advertising material to the Borrower for review and
comment prior to the publication thereof. Administrative Agent reserves the
right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements.

          10.21 Additional Waivers.

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

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interest in, or the release of, any of the Collateral or other security held by
or on behalf of the Collateral Agent or any other Credit Party.

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

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

          (d) Upon payment by any Loan Party of any Obligations, all rights of
such Loan Party against any other Loan Party arising as a result thereof by way
of right of subrogation, contribution, reimbursement, indemnity or otherwise
shall in all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all the Obligations and the date that
the Commitments have been terminated. In addition, any indebtedness of any Loan
Party now or hereafter held by any other Loan Party is hereby subordinated in
right of payment to the prior indefeasible payment in full of the Obligations
and no Loan Party will demand, sue for or otherwise attempt to collect any such
indebtedness. If any amount shall erroneously be paid to any Loan Party on
account of (i) such subrogation, contribution, reimbursement, indemnity or
similar right or (ii) any such indebtedness of any Loan Party, such amount shall
be held in trust for the benefit of the Credit Parties and shall forthwith be
paid to the Administrative Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms of this
Agreement and the other Loan Documents.

          10.22 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

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          10.23 Attachments. The exhibits, schedules and annexes attached to
this Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and the provisions of
this Agreement, the provisions of this Agreement shall prevail.

[signature pages follow]

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.

 

 

 

 

BORROWER

 

 

 

WHITEHALL JEWELLERS, INC.

 

 

 

By:

/s/ Edward A. Dayoob

 

 

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

 

 

 

 

Name:

Edward Dayoob

 

 

 

 

Title:

Pres & CEO

Signature Page to Third Amended and Restated Credit Agreement

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

 

 

 

 

LASALLE BANK NATIONAL
ASSOCIATION, as Administrative Agent and
as Collateral Agent

 

 

 

By:

/s/ Jeff Ryan

 

 

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

 

 

 

 

Name:

Jeff Ryan

 

 

 

 

Title:

Vice President

Signature Page to Third Amended and Restated Credit Agreement

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

 

 

 

 

LASALLE BANK NATIONAL
ASSOCIATION, as a Lender and L/C Issuer

 

 

 

By:

/s/ Jeff Ryan

 

 

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

 

 

 

 

Name:

Jeff Ryan

 

 

 

 

Title:

Vice President

Signature Page to Third Amended and Restated Credit Agreement

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

 

 

 

 

GMAC COMMERCIAL FINANCE LLC, as a Lender

 

 

 

By:

/s/ Michael Malcangi

 

 

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

 

 

 

 

Name:

MICHAEL MALCANGI

 

 

 

 

Title:

VICE PRESIDENT

Signature Page to Third Amended and Restated Credit Agreement

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

 

 

 

 

BANK OF AMERICA, N.A., as a Lender

 

 

 

By:

/s/ Mark D. Twomy

 

 

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

 

 

 

 

Name:

Mark D. Twomy

 

 

 

 

Title:

VP

 

 

 

 

BANK OF AMERICA, N.A., as a Managing Agent

 

 

 

By:

/s/ Mark D. Twomy

 

 

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

 

 

 

 

Name:

Mark D. Twomy

 

 

 

 

Title:

VP

Signature Page to Third Amended and Restated Credit Agreement

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

 

 

 

 

WELLS FARGO RETAIL FINANCE, LLC,
as a Lender

 

 

 

By:

/s/ Cory Loftus

 

 

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

 

 

 

 

Name:

Cory Loftus

 

 

 

 

Title:

Vice President

 

 

 

 

WELLS FARGO RETAIL FINANCE, LLC,
as a Managing Agent

 

 

 

By:

/s/ Cory Loftus

 

 

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

 

 

 

 

Name:

Cory Loftus

 

 

 

 

Title:

Vice President

Signature Page to Third Amended and Restated Credit Agreement

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