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









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 

  
	
   

  	
   

  	
   

  



i







	
   

  	
   

  	
   

  
	
  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 

  



ii







	
   

  	
   

  	
   

  
	
  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
  

  



iii







	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURES

  	
  S-l

  



iv






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








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






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






	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Level

	
 

	
Equity/Debt

  Proceeds

	
 

	
Tranche A

  LIBOR

  Margin

	
 

	
Tranche A

  Base Rate

  Margin

	
 

	
Tranche A-1

  LIBOR

  Margin

	
 

	
Tranche A-l

  Base Rate

  Margin


	


	


	


	


	


	


	


	


	


	


	



	
I

	
 

	
 

	
 

	
1.50%

	
 

	
-0-%

	
 

	
3.25%

	
 

	
1.25%


	


	


	


	


	


	


	


	


	


	


	



	
II

	
 

	
From

  $10,000,000
  to

  $14,999,999

	
 

	
2.00%

	
 

	
0.50%

	
 

	
3.75%

	
 

	
1.75%


	


	


	


	


	


	


	


	


	


	


	



	
III

	
 

	
From

  $15,000,000
  to

  $24,999,999

	
 

	
1.75%

	
 

	
0.25%

	
 

	
3.50%

	
 

	
1.50%


	


	


	


	


	


	


	


	


	


	


	



	
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






          “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






          “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






          “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 


6






          (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


7







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;  





8






          (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


9






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;  


10






          (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.


11






          “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)


12






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.


13






          “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:


14






	
 

	
 


	
 

	
          (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


15






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)


16






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.


17






          “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


18






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


19






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,





20






	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(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


21






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; 


22






          (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; 


23






          (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; 


24






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; 


25






          (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; 


26






          (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


27






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.


28








          “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.


29






          “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.


30






          “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).


31






          “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.


32






          “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


33






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.”  


34






          (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  


35






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;





36






	
 

	
 


	
 

	
          (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 


37






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). 


38






          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;





39







	
 

	
 


	
 

	
          (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;





40






	
 

	
 


	
 

	
          (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





41






	
 

	
 


	
 

	
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





42






	
 

	
 


	
 

	
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





43






	
 

	
 


	
 

	
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;





44






	
 

	
 


	
 

	
          (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


45






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


46






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:


47






	
 

	
 


	
 

	
          (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


48






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.


49






          (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


50






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


51






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


52






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


53






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





54






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 





55






	
 

	
 


	
 

	
          (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


56






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


57






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;





58







	
 

	
 


	
 

	
          (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


59






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.


60






          (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.


61






          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.


62






          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


63






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


64






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.


65






          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


66






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


67






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:


68






          (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;


69






          (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.


70






          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


71






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


72






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

73






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





74






	
 

	
 


	
 

	
(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


75






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


76






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.


77






          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.


78






          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,


79






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


80






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


81






          (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


82






          (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 

  



83






	
   

  	
   

  
	
   

  	
            (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

  



84






	
   

  	
   

  
	
   

  	
            (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, 


85






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


86






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


87






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


88






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”);


89






          (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.



90






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;





91






	
 

	
 


	
 

	
          (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





92






	
 

	
 


	
 

	
          (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:


93






	
 

	
 


	
 

	
          (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


94






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;





95






	
 

	
 


	
 

	
          (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.


96






          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





97






	
 

	
 


	
 

	
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).


98






          (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


99






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;





100






	
 

	
 


	
 

	
          (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


101






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


102






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


103






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


104






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


105






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.


106






          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]


107






          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