Exhibit
10.1


 


DEBTOR IN POSSESSION


LOAN AND SECURITY AGREEMENT


 


 


by and among


 


ULTIMATE ELECTRONICS, INC.


 


and


 


EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO


as debtors and debtors in possession and as joint and
several Borrowers,


 


THE LENDERS THAT ARE SIGNATORIES HERETO


as the Lenders,


 


and


 


WELLS FARGO RETAIL FINANCE, LLC


as Arranger and Agent


 


 


Dated as of January 14, 2005


 





















 


Table of Contents


 


	
  1.

  	
  DEFINITIONS AND
  CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  
	
   

  	
  1.3

  	
  Code

  	
   

  
	
   

  	
  1.4

  	
  Construction

  	
   

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  
	
   

  	
  1.6

  	
  The Term
  “Borrower” or “Borrowers”

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOANS AND TERMS OF
  PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Advances

  	
   

  
	
   

  	
  2.2

  	
  Borrowing
  Procedures and Settlements

  	
   

  
	
   

  	
  2.3

  	
  The Tranche B Facility

  	
   

  
	
   

  	
  2.4

  	
  The Tranche C Facility

  	
   

  
	
   

  	
  2.5

  	
  Payments
  and Reduction of Total Commitment

  	
   

  
	
   

  	
  2.6

  	
  Overadvances

  	
   

  
	
   

  	
  2.7

  	
  Interest Rates and
  Letter of Credit Fee: Rates, Payments, and Calculations

  	
   

  
	
   

  	
  2.8

  	
  Credit Card Collections

  	
   

  
	
   

  	
  2.9

  	
  Depository Accounts

  	
   

  
	
   

  	
  2.10

  	
  Collections

  	
   

  
	
   

  	
  2.11

  	
  Crediting Payments; Float Charge

  	
   

  
	
   

  	
  2.12

  	
  Designated Account

  	
   

  
	
   

  	
  2.13

  	
  Maintenance of Loan
  Account; Statements of Obligations

  	
   

  
	
   

  	
  2.14

  	
  Fees

  	
   

  
	
   

  	
  2.15

  	
  Letters of Credit

  	
   

  
	
   

  	
  2.16

  	
  LIBOR
  Option

  	
   

  
	
   

  	
  2.17

  	
  Capital Requirements

  	
   

  
	
   

  	
  2.18

  	
  Joint and
  Several Liability of Borrowers; Rights of Contribution

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF
  AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to the Effectiveness of this Agreement

  	
   

  
	
   

  	
  3.2

  	
  Conditions
  Precedent to all Extensions of Credit

  	
   

  
	
   

  	
  3.3

  	
  Term

  	
   

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
   

  
	
   

  	
  3.5

  	
  Payments
  of Principal of Tranche B Loan and Tranche C Loan; Early Termination by
  Borrowers

  	
   

  
	
   

  	
  3.6

  	
  Revolving
  Credit Lenders Prepayment Premium

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  PRIORITY AND
  COLLATERAL SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Superpriority
  Claims and Collateral Security

  	
   

  
	
   

  	
  4.2

  	
  No Discharge; Survival
  of Claims

  	
   

  



 


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  5.

  	
  CREATION OF SECURITY
  INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Grant of Security Interest

  	
   

  
	
   

  	
  5.2

  	
  Authorization
  to File Financing Statements

  	
   

  
	
   

  	
  5.3

  	
  Negotiable Collateral

  	
   

  
	
   

  	
  5.4

  	
  Collection
  of Accounts, General Intangibles, and Negotiable Collateral

  	
   

  
	
   

  	
  5.5

  	
  Other Actions

  	
   

  
	
   

  	
  5.6

  	
  Delivery
  of Additional Documentation Required; Lien Perfection

  	
   

  
	
   

  	
  5.7

  	
  Power of Attorney

  	
   

  
	
   

  	
  5.8

  	
  Right to Inspect

  	
   

  
	
   

  	
  5.9

  	
  Control Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  No Encumbrances

  	
   

  
	
   

  	
  6.2

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  6.3

  	
  Eligible Inventory

  	
   

  
	
   

  	
  6.4

  	
  Equipment

  	
   

  
	
   

  	
  6.5

  	
  Location of
  Inventory and Equipment

  	
   

  
	
   

  	
  6.6

  	
  Inventory Records

  	
   

  
	
   

  	
  6.7

  	
  Location of Chief
  Executive Office; FEIN; Organizational I.D. Number; Names; Status

  	
   

  
	
   

  	
  6.8

  	
  Due Organization and
  Qualification; Subsidiaries

  	
   

  
	
   

  	
  6.9

  	
  Due Authorization; No Conflict

  	
   

  
	
   

  	
  6.10

  	
  Litigation

  	
   

  
	
   

  	
  6.11

  	
  No Material Adverse Change

  	
   

  
	
   

  	
  6.12

  	
  Fraudulent Transfer

  	
   

  
	
   

  	
  6.13

  	
  Employee Benefits

  	
   

  
	
   

  	
  6.14

  	
  Environmental Condition

  	
   

  
	
   

  	
  6.15

  	
  Intellectual Property

  	
   

  
	
   

  	
  6.16

  	
  Locations; Leases

  	
   

  
	
   

  	
  6.17

  	
  Complete Disclosure

  	
   

  
	
   

  	
  6.18

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  6.19

  	
  No
  Materially Adverse Contracts, etc

  	
   

  
	
   

  	
  6.20

  	
  Compliance
  with Other Instruments, Laws, etc

  	
   

  
	
   

  	
  6.21

  	
  Holding
  Company and Investment Company Acts

  	
   

  
	
   

  	
  6.22

  	
  Absence of
  Financing Statements, etc

  	
   

  
	
   

  	
  6.23

  	
  Certain Transactions

  	
   

  
	
   

  	
  6.24

  	
  Regulations U and X

  	
   

  
	
   

  	
  6.25

  	
  Payment of Taxes

  	
   

  
	
   

  	
  6.26

  	
  Filed Entities

  	
   

  
	
   

  	
  6.27

  	
  Fiscal Year

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Accounting System

  	
   

  
	
   

  	
  7.2

  	
  Collateral Reporting

  	
   

  



 


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  7.3

  	
  Financial
  Statements, Reports, Certificates

  	
   

  
	
   

  	
  7.4

  	
  Return

  	
   

  
	
   

  	
  7.5

  	
  Maintenance of
  Properties

  	
   

  
	
   

  	
  7.6

  	
  Title to Equipment

  	
   

  
	
   

  	
  7.7

  	
  Maintenance of Equipment

  	
   

  
	
   

  	
  7.8

  	
  Taxes

  	
   

  
	
   

  	
  7.9

  	
  Insurance

  	
   

  
	
   

  	
  7.10

  	
  Location of
  Inventory and Equipment

  	
   

  
	
   

  	
  7.11

  	
  Compliance with Laws

  	
   

  
	
   

  	
  7.12

  	
  Leases

  	
   

  
	
   

  	
  7.13

  	
  Brokerage Commissions

  	
   

  
	
   

  	
  7.14

  	
  Existence

  	
   

  
	
   

  	
  7.15

  	
  Environmental

  	
   

  
	
   

  	
  7.16

  	
  Disclosure Updates

  	
   

  
	
   

  	
  7.17

  	
  Inventories,
  Appraisals, Financial Advisors and Audits

  	
   

  
	
   

  	
  7.18

  	
  Electronic Reporting

  	
   

  
	
   

  	
  7.19

  	
  Employee Benefits

  	
   

  
	
   

  	
  7.20

  	
  Additional
  Collateral Covenants

  	
   

  
	
   

  	
  7.21

  	
  Investment Proceeds, Etc

  	
   

  
	
   

  	
  7.22

  	
  Additional
  Real Property Collateral

  	
   

  
	
   

  	
  7.23

  	
  Landlord Waivers
  and Consents

  	
   

  
	
   

  	
  7.24

  	
  Material Inventory
  Supplier

  	
   

  
	
   

  	
  7.25

  	
  No Setoff or
  Counterclaims

  	
   

  
	
   

  	
  7.26

  	
  Security
  Documents, Legal Opinions

  	
   

  
	
   

  	
  7.27

  	
  FACA Compliance

  	
   

  
	
   

  	
  7.28

  	
  Cash
  Management Arrangements; Depository Arrangements

  	
   

  
	
   

  	
  7.29

  	
  Business Plan

  	
   

  
	
   

  	
  7.30

  	
  Use of Proceeds

  	
   

  
	
   

  	
  7.31

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Indebtedness

  	
   

  
	
   

  	
  8.2

  	
  Liens
  and Restrictions on Negative Pledges and Upstream Guaranties

  	
   

  
	
   

  	
  8.3

  	
  Restrictions
  on Fundamental Changes

  	
   

  
	
   

  	
  8.4

  	
  Disposal of Assets

  	
   

  
	
   

  	
  8.5

  	
  Change Name; New
  Subsidiaries

  	
   

  
	
   

  	
  8.6

  	
  Guarantee

  	
   

  
	
   

  	
  8.7

  	
  Nature of Business

  	
   

  
	
   

  	
  8.8

  	
  Prepayments and
  Amendments

  	
   

  
	
   

  	
  8.9

  	
  Change of Control

  	
   

  
	
   

  	
  8.10

  	
  Consignments

  	
   

  
	
   

  	
  8.11

  	
  Distributions

  	
   

  
	
   

  	
  8.12

  	
  Accounting Methods

  	
   

  
	
   

  	
  8.13

  	
  Investments

  	
   

  



 


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  8.14

  	
  Transactions with
  Affiliates

  	
   

  
	
   

  	
  8.15

  	
  Suspension

  	
   

  
	
   

  	
  8.16

  	
  Change
  in Location of Chief Executive Office; Inventory and Equipment with Bailees

  	
   

  
	
   

  	
  8.17

  	
  Securities Accounts

  	
   

  
	
   

  	
  8.18

  	
  No
  Prohibited Transactions Under ERISA

  	
   

  
	
   

  	
  8.19

  	
  Deposit
  Accounts, Credit card clearinghouse, etc

  	
   

  
	
   

  	
  8.20

  	
  Store Openings

  	
   

  
	
   

  	
  8.21

  	
  Bankruptcy Cases

  	
   

  
	
   

  	
  8.22

  	
  Prepetition Indebtedness

  	
   

  
	
   

  	
  8.23

  	
  Financial Covenants

  	
   

  
	
   

  	
  8.24

  	
  Postpetition Inventory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  THE LENDER
  GROUP’S RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Rights and Remedies

  	
   

  
	
   

  	
  10.2

  	
  In
  addition to any notices required by the Orders, Agent shall give notice of
  the disposition of the Collateral as follows:

  	
   

  
	
   

  	
  10.3

  	
  Securities and Deposits

  	
   

  
	
   

  	
  10.4

  	
  Standards
  for Exercising Rights and Remedies

  	
   

  
	
   

  	
  10.5

  	
  License

  	
   

  
	
   

  	
  10.6

  	
  Remedies Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  TAXES AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  WAIVERS; INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Demand; Protest; etc

  	
   

  
	
   

  	
  12.2

  	
  The
  Lender Group’s Liability for Collateral

  	
   

  
	
   

  	
  12.3

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  CHOICE
  OF LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  ASSIGNMENTS
  AND PARTICIPATIONS; SUCCESSORS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Assignments and
  Participations

  	
   

  
	
   

  	
  15.2

  	
  Successors

  	
   

  



 


iv





















 


	
  16.

  	
  AMENDMENTS; WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Amendments and Waivers

  	
   

  
	
   

  	
  16.2

  	
  Replacement of
  Holdout Lender

  	
   

  
	
   

  	
  16.3

  	
  No Waivers;
  Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  AGENT AND THE LENDER
  GROUP

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Appointment
  and Authorization of Agent

  	
   

  
	
   

  	
  17.2

  	
  Delegation of Duties

  	
   

  
	
   

  	
  17.3

  	
  Liability of Agents

  	
   

  
	
   

  	
  17.4

  	
  Reliance by Agents

  	
   

  
	
   

  	
  17.5

  	
  Notice of
  Default or Event of Default

  	
   

  
	
   

  	
  17.6

  	
  Credit Decision

  	
   

  
	
   

  	
  17.7

  	
  Costs and
  Expenses; Indemnification

  	
   

  
	
   

  	
  17.8

  	
  Agent in Individual
  Capacity

  	
   

  
	
   

  	
  17.9

  	
  Successor Agent

  	
   

  
	
   

  	
  17.10

  	
  Lender in
  Individual Capacity

  	
   

  
	
   

  	
  17.11

  	
  Payments
  to, and Distributions by, Agent

  	
   

  
	
   

  	
  17.12

  	
  Duties in the
  Case of Enforcement

  	
   

  
	
   

  	
  17.13

  	
  Withholding Taxes

  	
   

  
	
   

  	
  17.14

  	
  Collateral Matters

  	
   

  
	
   

  	
  17.15

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  	
   

  
	
   

  	
  17.16

  	
  Agency for Perfection

  	
   

  
	
   

  	
  17.17

  	
  Payments by
  Agent to the Lenders

  	
   

  
	
   

  	
  17.18

  	
  Concerning
  the Collateral and Related Loan Documents

  	
   

  
	
   

  	
  17.19

  	
  Field
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
  Other Reports and Information

  	
   

  
	
   

  	
  17.20

  	
  Several
  Obligations; No Liability

  	
   

  
	
   

  	
  17.21

  	
  Legal
  Representation of Agent

  	
   

  
	
   

  	
  17.22

  	
  Confidentiality

  	
   

  
	
   

  	
  17.23

  	
  Press
  Releases and Related Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Governing Documents
  of Parent

  	
   

  
	
   

  	
  18.2

  	
  Effectiveness

  	
   

  
	
   

  	
  18.3

  	
  Section Headings

  	
   

  
	
   

  	
  18.4

  	
  Interpretation

  	
   

  
	
   

  	
  18.5

  	
  Severability of
  Provisions

  	
   

  
	
   

  	
  18.6

  	
  Amendments in Writing

  	
   

  
	
   

  	
  18.7

  	
  Counterparts;
  Telefacsimile Execution

  	
   

  
	
   

  	
  18.8

  	
  Revival
  and Reinstatement of Obligations

  	
   

  
	
   

  	
  18.9

  	
  Integration

  	
   

  
	
   

  	
  18.10

  	
  Parent as Agent for
  Borrowers

  	
   

  



 


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DEBTOR IN POSSESSION LOAN AND SECURITY AGREEMENT


 


THIS DEBTOR IN POSSESSION LOAN AND SECURITY AGREEMENT (this “Agreement”), is entered into
as of January 14, 2005, between and among, on the one hand, the lenders
identified on the signature pages hereof (such lenders, together with their
respective successors and assigns, are referred to hereinafter each
individually as a “Lender” and collectively as the “Lenders”),
including, without limitation, WELLS FARGO
RETAIL FINANCE, LLC, a Delaware limited liability company (“WFRF”),
and WFRF as the arranger and administrative agent for the Lenders and any other
holder of Obligations referred to below (“Agent”), and, on the other
hand, ULTIMATE ELECTRONICS, INC.,
a Delaware corporation and a debtor and debtor in possession under Chapter 11
of the Bankruptcy Code (“Parent”), and each of Parent’s Subsidiaries
identified on the signature pages hereof, each of such subsidiaries being a
debtor and debtor in possession under Chapter 11 of the Bankruptcy Code (such
Subsidiaries, together with Parent, are referred to hereinafter each
individually as a “Borrower”, and individually and collectively, jointly
and severally, as the “Borrowers”, as governed by the provisions of Section 1.6
of the Agreement).


 


WHEREAS, on January 11, 2005 (the “Filing
Date”), the Borrowers filed separate petitions under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware;


 


WHEREAS, each of the Borrowers intends to continue to operate its business
pursuant to Sections 1107 and 1108 of the Bankruptcy Code;


 


WHEREAS, the Borrowers are party to that certain Fourth Amended and Restated
Loan and Security Agreement, dated as of July 27, 2004 (as amended,
amended and restated or otherwise modified from time to time, the “Prepetition Credit Agreement”), among the
Borrowers, as borrowers (collectively, the “Prepetition
Borrowers”), certain lenders thereto (collectively, the “Prepetition Lenders”), Wells Fargo Retail
Finance, LLC., administrative agent for the Prepetition Lenders (the “Prepetition Agent”) and arranger, Back Bay
Capital Funding LLC, as tranche B agent (the “Prepetition  Tranche
B  Agent”) and National City Business Credit, Inc., as
documentation agent, pursuant to which the Prepetition Lenders extended credit
to the Prepetition Borrowers on the terms set forth therein;


 


WHEREAS, as of the date hereof, the Prepetition Lenders under the Prepetition
Credit Agreement are owed approximately $55,312,159.00 in revolving loan
principal obligations, including $1,800,000 in face amount of outstanding
undrawn letters of credit and $4,000 in unpaid letter of credit reimbursement
obligations in respect of drawings under letters of credit, $13,000,000 in
Tranche B Loan principal obligations, plus interest, fees, costs and
expenses and all Obligations (under and as defined in the Prepetition Credit
Agreement);


 


WHEREAS, the obligations under the Prepetition Credit Agreement are secured by
a security interest in certain of the existing and after acquired assets of the
Borrowers and such security interest is perfected and has priority over other
security interests;


 


WHEREAS, the Borrowers have requested that the Lenders referred to herein
provide financing to the Borrowers consisting of revolving credit loans, term
loans, and the issuance of letters of credit in an amount up to $118,547,500
pursuant to Sections 364(c)(1), (2) and(3) and Section 364(d) of the
Bankruptcy Code;


 


WHEREAS, the Lenders have indicated their willingness to agree to lend such amounts
pursuant to Sections 364(c)(1), (2), (3) and Section 364(d) of the
Bankruptcy Code on the terms and conditions of this Agreement so long as such
postpetition credit obligations are secured by Liens on all of the assets,


 


1





















 


property and interests, real
and personal, tangible and intangible, of the Borrowers, whether now owned or
leased or hereafter acquired or leased and given superpriority status as
provided in the Interim Order and the Final Order, and


 


WHEREAS, the Borrowers have agreed to provide such collateral security and
superpriority claims subject to the approval of the Bankruptcy Court.


 


NOW, THEREFORE, in consideration of these premises and of the mutual undertakings set
forth herein, the parties hereto hereby agree as follows:


 


1.             DEFINITIONS AND CONSTRUCTION.


 


1.1          Definitions.  As used in this Agreement, the following
terms shall have the following definitions:


 


“Account
Debtor” means any Person who is or who may become obligated under, with
respect to, or on account of, an Account, chattel paper, or a General
Intangible.


 


“Accounting
Changes” means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by any Borrowers’ certified
public accountants; and (iii) purchase accounting adjustments under A.P.B. 16
or 17 and EITF 88-16, the application of the accounting principles set forth in
FASB 109, including the establishment of reserves pursuant thereto, and any
reversal of any reserves established as a result of purchase accounting
adjustments.


 


“Accounts”
means all of Borrowers’ now owned or hereafter acquired right, title, and
interest with respect to “accounts” (as that term is defined from time to time
in the Code), and any and all supporting obligations in respect thereof
including any and all credit insurance, guaranties or security therefor.


 


“ACH
Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic funds transfers through the
direct Federal Reserve Fedline system) provided by Wells Fargo or its
Affiliates for the account of Administrative Borrower or its Subsidiaries.


 


“Administrative
Borrower” has the meaning set forth in Section 18.10.


 


“Advances”
means Borrowings and other advances made by the Revolving Credit Lenders and
the Swing Lender to the Borrowers.


 


“Affiliate”
means, as applied to any Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of Stock, by
contract, or otherwise; provided, however, that, in any event: (a) any
Person which owns directly or indirectly 5% or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or 5% or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such


 


2





















 


Person) shall be deemed to
control such Person; (b) each director (or comparable manager) of a Person
shall be deemed to be an Affiliate of such Person; and (c) each partnership or
joint venture in which a Person is a partner or joint venturer shall be deemed
to be an Affiliate of such Person.


 


“Agent”
means Wells Fargo Retail Finance, LLC, solely in its capacity as agent for the
Lenders hereunder, and any successor thereto.


 


“Agent’s
Account” means an account at a bank designated by Agent from time to time
as the account into which Borrowers shall make all payments to Agent for the
benefit of the Lender Group and into which the Lender Group shall make all
payments to Agent under this Agreement and the other Loan Documents; unless and
until Agent notifies Administrative Borrower and the Lender Group to the
contrary, Agent’s Account shall be that certain deposit account bearing account
number 323-266193 and maintained by Agent with Wells Fargo Bank, San Francisco,
CA, ABA No. 121-000-248, Account No. 4945088607, Reference: Ultimate
Electronics, Inc.


 


“Agent
Advances” has the meaning set forth in Section 2.2(e)(i).


 


“Agent
Fee Letter” means that certain fee letter, dated as of even date herewith,
between Borrowers and Agent, in form and substance satisfactory to Agent.


 


“Agent’s
Liens” means the Liens granted by Borrowers to Agent for the benefit of the
Lender Group under this Agreement or the other Loan Documents.


 


“Agent’s
Monitoring Fee” means such monitoring fees as set forth in the Agent’s Fee
Letter, which such fee shall be payable in advance on the Closing Date and each
anniversary date of the Closing Date and which shall be non-refundable when
paid (irrespective of whether this Agreement is terminated thereafter).


 


“Agent-Related
Persons” means Agent together with its Affiliates, officers, directors,
employees, partners, investors and agents.


 


“Agreement”
has the meaning set forth in the preamble hereto, together with all Exhibits
and Schedules attached hereto.


 


“Applicable
Margin” means, for Base Rate Loans, zero percent (0%) and for LIBOR Rate
Loans, two percent (2.00%).


 


“Appraised
Fair Market Value” means, at any date of determination, the fair market
value determined by an appraiser selected by Agent and pursuant to a
methodology acceptable to Agent in its Permitted Discretion.


 


“Arrangement
Fee” means such arrangement fee as set forth in the Agent Fee Letter, which
such fee shall be payable on the Closing Date and which shall be non-refundable
when paid (irrespective of whether this Agreement is terminated thereafter).


 


“Assignee”
has the meaning set forth in Section 15.1.


 


“Assignment
and Acceptance” means an Assignment and Acceptance in the form of Exhibit A-1.


 


3





















 


“Authorized
Person” means any officer or other employee of Administrative Borrower.


 


“Avoidance
Actions” means actions of the Borrowers under Chapter 5 or Section 724(a)
of the Bankruptcy Code and proceeds thereof. 
The term does not include an action to avoid a transfer under Section 549
of the Bankruptcy Code if the transfer was of an asset otherwise constituting
Collateral.


 


“Balance
Sheet Date” means September 30, 2004.


 


“Bankruptcy
Code” means the United States Bankruptcy Code, as in effect from time to
time.


 


“Bankruptcy
Court” means the United States Bankruptcy Court for the District of
Delaware or such other court having jurisdiction over the Cases.


 


“Bank
Products” means any service or facility extended to Administrative Borrower
or its Subsidiaries by Wells Fargo or any Affiliate of Wells Fargo including,
without limitation:  (a) credit cards,
(b) credit card processing services, (c) debit cards, (d) purchase cards, (e)
ACH Transactions or (f) cash management, including controlled disbursement,
accounts or services.


 


“Bank
Products Reserves” means, as of any date of determination, the amount of
reserves that Agent has established (based upon Wells Fargo’s or its
Affiliate’s reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.


 


“Base
LIBOR Rate” means the rate per annum, determined by Agent in accordance
with its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate (rounded upwards, if necessary, to the next
1/16%), on the basis of the rates at which Dollar deposits are offered to major
banks in the London interbank market on or about 11:00 a.m. (Boston,
Massachusetts time) 2 Business Days prior to the commencement of the applicable
Interest Period, for a term and in amounts comparable to the Interest Period
and amount of the LIBOR Rate Loan requested by Administrative Borrower in
accordance with this Agreement, which determination shall be conclusive in the
absence of manifest error.


 


“Base
Rate” means, the rate of interest announced within Wells Fargo at its
principal office in San Francisco as its “prime rate”, with the understanding
that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal publication
or publications as Wells Fargo may designate. 
To the extent Wells Fargo fails to announce its “prime rate” or such
“prime rate” is otherwise unavailable, the rate publicly quoted from time to
time by The Wall Street Journal as the “prime rate”.


 


“Base
Rate Loan” means any Advance (or portion of an Advance) that bears interest
at a rate determined by reference to the Base Rate.


 


“Benefit
Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of any
Borrower has been an “employer” (as defined in Section 3(5) of ERISA)
within the past six years.


 


“Bingham”
has the meaning set forth in Section 17.21.


 


“Blocked
Account Agreements” has the meaning set forth in Section 2.9(a)(i).


 


4





















 


“Board
of Directors” means the board of directors (or comparable managers) of
Parent or any committee thereof duly authorized to act on behalf thereof.


 


“Books”
means all of each Borrower’s and its Subsidiaries’ now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of each Borrower’s or its Subsidiaries’ Records relating to its
or their business operations or financial condition, and all of its goods or
General Intangibles related to such information).


 


“Borrower”
and “Borrowers” have the respective meanings set forth in the preamble
to this Agreement.


 


“Borrowing”
means a borrowing hereunder consisting of Advances made on the same day by the
Revolving Credit Lenders (or Agent on behalf thereof), or by Swing Lender in
the case of a Swing Loan, or by Agent in the case of an Agent Advance, in each
case, to Administrative Borrower.


 


“Borrowing
Base” means


 


(a)                                  the lesser of


 


(i)                                     85% of the Net Retail Liquidation Value of
Eligible Inventory, or


 


(ii)                                  75% of the Cost of Eligible Inventory; plus


 


(b)                                 the lesser of


 


(i)                                     60% of the Appraised Fair Market Value of the
Thornton Colorado Facility, or


 


(ii)                                  $10,380,000; plus


 


(c)           85% of Eligible Credit Card Receivables, minus


 


(d)                                 the aggregate of such Reserves Against
Availability as may have been established by Agent, minus


 


(e)           a reserve for the Carve Out in the amount of
(x) at all times prior to the entry of the Final Order, $1,000,000 and (y) at
all times thereafter, $2,000,000.


 


“Borrowing
Base Certificate” means a certificate in the form of Exhibit B-1, as
such form may be revised from time to time by Agent.


 


“Budget”
means, initially, the thirteen (13) week cash flow projection of the Parent and
its Subsidiaries delivered to the Agent and the Lenders, and the updated
business plan delivered to the Agent pursuant to Section 7.29, in
each case in a form, substance and in such detail as is reasonably satisfactory
to the Agent and attached hereto as Exhibit B-2.


 


“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
national banks are authorized or required to close, except that, if a
determination of a Business Day shall relate to


 


5





















 


a LIBOR Rate Loan, the term
“Business Day” also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.


 


“Buyout
Acceptance Notice” means notice given to the Agent by either the Tranche B
Lenders or the Tranche C Lenders, as applicable, of such Lenders’ intent to
cause an assignment to such Lenders or their respective designees, as provided
in Section 2.3(g) or Section 2.4(g), as applicable.


 


“Buyout
Exercise Notice” means the Agent giving the Tranche B Lenders notice that
the Agent intends to grant, consent to, or otherwise approve, a sale or
transfer by the Borrowers of assets not permitted by Section 8.4
(as in effect on the Closing Date) at a time when (a) Tranche B Lenders have
not consented to such sale or transfer and (b) either (i) Excess Availability
immediately after such sale or transfer is less than Excess Availability
immediately prior to such sale or transfer or (ii) an Overadvance exists or an
Overadvance will exist, or is projected to exist, upon the completion of such
sale or transfer.


 


Buyout
Exercise Period”
means (a) with respect to the Tranche B Lenders, at any time (i) within sixty
(60) days following any Standstill Termination Date or (ii) within ten (10)
days following the Tranche B Lenders’ receipt of a Buyout Exercise Notice; and
(b) with respect to the Tranche C Lenders, at any time within five (5) Business
Days prior to the commencement of any enforcement action by either the Agent or
the Tranche B Lender against all or any material portion (i.e., greater than $                     
in the aggregate) of the Collateral and (ii) within five (5) Business Days
prior to a proposed sale or other disposition of Collateral outside the
ordinary course of business in an amount to exceed $25,000,000 in the aggregate
since the Closing Date.


 


“Capital
Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.


 


“Carve
Out” means at the time of reference thereto, an amount equal to the sum of
(a) allowed administrative expenses pursuant to 28 U.S.C. § 1930 (a)(6)
and (b) allowed fees and expenses incurred by the Borrowers and the Creditors’
Committee pursuant to Sections 327 and 1103 of the Bankruptcy Code.  For purposes of clause (b), (i) if, at
the time of reference, a Termination Declaration Date has not occurred, the
amount of the Carve-Out shall not be limited (and such fees and expenses may be
paid as otherwise permitted by the Bankruptcy Code and/or Bankruptcy Court
order, but remain subject to allowance by the Bankruptcy Court, and the
Carve-Out shall not be reduced by such payment provided no Termination
Declaration Date has occurred), and (ii) if, at the time of reference, a
Termination Declaration Date has occurred and is continuing, the amount of the
Carve-Out shall be limited to the sum of $1,000,000, which such sum shall be
increased to $2,000,000 upon entry of the Final Order (the “Carve-Out Amount”), regardless of whether
the fees and expenses are allowed and unpaid at the time of the Termination
Date or are incurred before or after such date. 
The Carve-Out shall be reduced by the amount of any unapplied retainers
provided to professionals of the Debtors and any official committee(s) of
creditors.  In no event may any portion
of the Carve-Out be used to challenge the debt or collateral position of the
Agent, the Lenders, the Prepetition Agent, or the Prepetition Lenders and the
Carve-Out shall not include any fees and expenses incurred by any professional
in connection with any of the following: (a) an assertion or joinder in (but
excluding any investigation into) any claim, counter-claim, action, proceeding,
application, motion, objection, defense, or other contested matter seeking any
order, judgment, determination or similar relief: (i) challenging the legality,
validity, priority, perfection, or enforceability of any of the Pre-Petition
Obligations (as defined in the Interim Order or the Final Order, whichever is
then in effect), the Pre-Petition Liens (as defined in the Interim Order or the
Final Order, whichever is then in effect), the Adequate Protection Security (as
defined in the Interim Order or the Final Order, whichever is then in effect),
the Obligations, or the DIP Protections (as defined in the Interim


 


6





















 


Order or the Final Order,
whichever is then in effect), (ii) invalidating, setting aside,
recharacterizing, avoiding, or subordinating, in whole or in part, the
Pre-Petition Obligations (as defined in the Interim Order or the Final Order,
whichever is then in effect), the Pre-Petition Liens (as defined in the Interim
Order or the Final Order, whichever is then in effect), the Adequate Protection
Security (as defined in the Interim Order or the Final Order, whichever is then
in effect), the Obligations, or the DIP Protections (as defined in the Interim
Order or the Final Order, whichever is then in effect), (iii) challenging or
objecting to the retiring of the Pre-Petition Obligations (as defined in the
Interim Order or the Final Order, whichever is then in effect), as set forth in
paragraph 1.5 of the Interim Order, or (iv) preventing, hindering, or delaying
of the Agent’s, Lenders’, the Pre-Petition Agent, or the Pre-Petition Lenders’
assertion or enforcement of any of their respective liens, claims, rights or
security interests or realization upon either the Pre-Petition Collateral (as
defined in the Interim Order or the Final Order, whichever is then in effect)
or Collateral (other than as contemplated by Paragraph 10.2 in the Interim
Order), (b) a request to use any Cash Collateral (as such term is defined in Section 363
of the Bankruptcy Code) without the prior written consent of the Agent, (c) a
request for authorization to obtain debtor-in-possession financing or other
financial accommodations pursuant to Section 364(c) or (d) of the
Bankruptcy Code other than from the Agent or the Lenders without the prior
written consent of the Agent, (d) the commencement or prosecution of any action
or proceeding of any claims, causes of action, or defenses against the
Prepetition Agent, the Agent, the Prepetition Lenders or the Lenders or any of
their respective officers, directors, employees, agents, attorneys, affiliates,
assigns, or successors, including, without limitation, any attempt to recover
or avoid any claim or interest from the Prepetition Agent, the Agent, the
Prepetition Lenders or the Lenders under Chapter 5 of the Bankruptcy Code, (e)
any act which has or could have the effect of materially and adversely
modifying or compromising the rights and remedies of the Prepetition Agent, the
Agent, the Prepetition Lenders or the Lenders to any term or condition set
forth in or acknowledged by this Agreement, the DIP Credit Facility (as defined
in the Interim Order or the Final Order, whichever is then in effect) or the
Interim Order and which results in an occurrence of an Event of Default under
this Agreement, the DIP Credit Facility (as defined in the Interim Order),
and/or this Interim Order, (f) selling or otherwise disposing of any
Collateral, or incurring any indebtedness not permitted under this Agreement,
without the Agent’s express written consent, or (g) whatsoever arising after
the conversion of any of the Chapter 11 cases to a case under Chapter 7 of the
Bankruptcy Code; provided, however, that no more that $35,000 of
the Carve-Out may be used to investigate any matters set forth in subparagraphs
(a) through and including (g) hereof, whether such investigation shall occur
before or after an Event of Default; provided, further, however,
nothing herein shall be construed as consent to the allowance of any
professional fees or expenses or shall affect the right of the Agent, the
Lenders, the Prepetition Agent or the Prepetition Lenders to object to the
allowance and payment of such fees and expenses.


 


“Cases”
means, collectively, the Borrowers’ reorganization cases under Chapter 11 of
the Bankruptcy Code pending in the Bankruptcy Court.


 


“Cash
Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of acquisition,
having the highest rating obtainable from either S&P or Moody’s, (c)
commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody’s, and (d) certificates of deposit or bankers’
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or


 


7





















 


better, from S&P or
Moody’s, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation.


 


“Change
of Control” shall be deemed to have occurred at such time as a “person” or
“group” (within the meaning of Sections 13(d) and 14(d) of the Exchange
Act) (other than (a) William J. Pearse, Barbara A. Pearse and the various
immediate family trusts of William J. Pearse and Barbara A. Pearse, whether now
existing or hereafter created including, without limitation, the William James
Pearse III Trust No. 1, the William James Pearse III Trust No. 2, the
Megan Pearse Trust No. 1, the Megan Pearse Trust No. 2, the Bradford Pearse
Trust No. 1 and the Bradford Pearse Trust No. 2 and (b) Mark J. Wattles) become
the “beneficial owner” (as defined in Rule 13d—3 under the Exchange Act),
directly or indirectly, of more than 20% of the total voting power of all
classes of stock then outstanding of Parent entitled to vote in the election of
directors.


 


“Closing
Date” means the date on which Agent notifies Administrative Borrower that
each of the conditions precedent set forth in Section 3.1 either
have been satisfied or have been waived.


 


“Code”
means the New York Uniform Commercial Code, as in effect from time to time.


 


“Collateral”
has the meaning provided in Section 4.1.


 


“Collateral
Access Agreement” means a landlord waiver, mortgagee waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in the Equipment or Inventory, in each case, in form and substance
satisfactory to Agent.


 


“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including, without limitation, all cash equivalents, checks, and credit card
slips (whether from a Credit Card Issuer or otherwise) and receipts as arise
out of the sale of Collateral, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrowers.


 


“Commitment”
means, (a) with respect to each Revolving Credit Lender, such Revolving Credit
Lender’s Revolving Credit Commitment; (b) with respect to all Revolving Credit
Lenders, the aggregate of all their Revolving Credit Commitments; (c) with
respect to each Tranche B Lender, its Pro Rata Share of the outstanding
principal amount of the Tranche B Loan; and (d) with respect to each Tranche C
Lender, its Pro Rata Share of the outstanding principal amount of the Tranche C
Loan.  The Commitments of all Lenders
collectively not to exceed the lesser of (i) the Total Commitment and (ii) the
amount approved in the Interim Order or the Final Order, which ever is in
effect at the time of reference thereto, as the same may be reduced from time
to time; or if such commitment is terminated pursuant to the provisions hereof,
zero.


 


“Commitment
Fee” means such commitment fee as set forth in the Agent Fee Letter, which
such fee shall be payable on the Closing Date and which shall be non-refundable
when paid (irrespective of whether this Agreement is terminated thereafter).


 


“Compliance
Certificate” means a certificate substantially in the form of Exhibit
C-1 delivered by the chief financial officer of Parent to Agent.


 


“Concentration
Account” means the Concentration Account Number 1018169963 established
pursuant to the Blocked Account Agreement with the Concentration Account Bank.


 


8





















 


“Concentration
Account Bank” means Wells Fargo Colorado NA, whose office is located at
1740 Broadway, Denver, Colorado 80274, and whose ABA number is 102000076 or
such then other banks as may be agreed to by Parent and Agent from time to
time.


 


“Control
Agreement” means a control agreement, in form and substance satisfactory to
Agent, executed and delivered by the applicable Borrower, Agent, and the
applicable securities intermediary with respect to a Securities Account or a
bank with respect to a deposit account.


 


“Copyright
Security Agreements” means the copyright security agreements executed and
delivered by each Borrower and Agent, the form and substance of which are
satisfactory to Agent.


 


“Cost”
means the calculated cost of purchases, as determined from invoices received by
a Borrower, such Borrower’s purchase journal or stock ledger, based upon such
Borrower’s accounting practices, known to Agent, which practices are in effect
on the date on which this Agreement was executed or subsequently adopted with
the written approval of Agent.  “Cost”
does not include any inventory capitalization costs inclusive of advertising or
other non purchase price charges (such as freight) used in the Borrowers’
calculation of cost of goods sold, but may include other charges used in such
Borrower’s determination of cost of goods sold and bringing goods to market,
all within Agent’s sole discretion and in accordance with GAAP.


 


“Cost
Factor” means the result of 1 minus a Borrower’s then cumulative markup
percent derived from such Borrower’s purchase journal.


 


“Credit
Card Agreements” means those certain credit card receipts agreements, each
in form and substance reasonably satisfactory to Agent and each of which is
among Agent, the applicable Borrower and one of Borrowers’ Credit Card Processors.


 


“Credit
Card Issuer” means collectively MasterCard or Visa bank credit or debit
cards or other bank credit or debit cards issued through MasterCard
International, Inc., Visa, U.S.A., Inc. or Visa International and American
Express and Discover.


 


“Credit
Card Processor” means any Person that acts as a credit card clearinghouse
or processor with respect to any sales transactions involving credit card
purchases by customers using credit cards issued by any Credit Card Issuer.


 


“Creditors’
Committee” means the official unsecured creditors’ committee, if any,
appointed in the Cases.


 


“Daily
Balance” means, with respect to each day during the term of this Agreement,
the amount of an Obligation owed at the end of such day.


 


“Dated
Assets” has the meaning set forth in Section 2.18.


 


“Dated
Liabilities” has the meaning set forth in Section 2.18.


 


“deems
itself insecure” means that the Person deems itself insecure in accordance
with the provisions of Section 1208 of the Code.


 


9





















 


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


 


“Defaulting
Lender” means any Revolving Credit Lender that fails to make any Advance
(or other extension of credit) that it is required to make hereunder on the
date that it is required to do so hereunder.


 


“Defaulting
Lender Rate” means (a) the Base Rate for the first 3 days from and after
the date the relevant payment is due, and (b) thereafter, at the interest rate
then applicable to Advances that are Base Rate Loans (inclusive of the
Applicable Margin applicable thereto).


 


“Designated
Account” means account number 101816995 of Administrative Borrower
maintained with the Designated Account Bank, or such other deposit account of
Administrative Borrower (located within the United States) that has been
designated as such, in writing, by Administrative Borrower to Agent.


 


“Designated
Account Bank” means Wells Fargo Colorado NA, whose office is located at
1740 Broadway, Denver, Colorado 80274 and whose ABA number is 121-000-248.


 


“Dollars”
or “$” means United States dollars.


 


“Eligible
Credit Card Receivables” means Accounts due to the Borrowers from a Credit
Card Issuer or Credit Card Processor that shall have entered into a Credit Card
Agreement, provided  however that Accounts due to the Borrowers
from American Express shall be Eligible Credit Card Receivables notwithstanding
the absence of a Credit Card Agreement among the Agent, the Borrowers and American
Express.


 


“Eligible
Inventory” means consumer electronic products Inventory of Borrowers
consisting of first quality, finished goods held for sale in the ordinary
course of Borrowers’ business, net of any unearned vendors’ discounts and
Inventory Reserves (as defined below), that are located at Borrowers’ premises
identified on Schedule E-1, that strictly comply with each of and
all the representations and warranties respecting Inventory made by Borrowers
in the Loan Documents, and that are and continue to be acceptable to Agent in
all respects; provided, however, that standards of eligibility
may be fixed and revised from time to time by Agent in Agent’s sole
discretion.  In determining the amount to
be so included, Inventory shall be valued at the lower of Cost or market on a
basis consistent with Borrowers’ current and historical accounting practices,
or such accounting practices as may be in effect from time to time and approved
in writing by Agent.  Without limiting
the foregoing, the following shall not be Eligible Inventory:


 


(a)           Inventory that is not owned solely by a
Borrower or in which a Borrower does not have good, valid and marketable title
thereto (including Inventory acquired on consignment);


 


(b)           Inventory that is not located at one of the
locations set forth on Schedule E-1;


 


(c)           Inventory that is located on real property
leased by a Borrower and located in a jurisdiction which grants a landlord a
lien on the Collateral located on the leased premises senior or superior to the
Lien of the Agent as a matter of law, unless it is subject to a Collateral
Access Agreement executed by the mortgagee, lessor, or other third party, as
the case may be;


 


10





















 


(d)           Inventory located at a distribution center
leased by a Borrower or a contract warehouse, in each case that is not subject
to a Collateral Access Agreement and, with respect to any contract warehouse,
unless such Inventory is segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises;


 


(e)           Inventory that is not subject to a valid and
perfected first priority Agent’s Lien;


 


(f)            Inventory that consists of goods in transit,
other than goods in transit between the locations specified in Schedule E-1;


 


(g)           Inventory of a Borrower that is damaged,
defective, or not currently saleable in the normal course of such Borrower’s
operations;


 


(h)           Inventory of a Borrower in an amount equal to
such Borrower’s invoice variance reserves;


 


(i)            Discontinued consumer electronic products
Inventory of a Borrower (to include obsolete and slow-moving Inventory based
upon it being on hand beyond a number of days determined by Agent from time to
time) in an amount in excess of 12% of total net amount of such Borrower’s
consumer electronic products Inventory (determined after deducting unearned
vendors’ discounts);


 


(j)            Free goods;


 


(k)           That portion of Borrowers’ consumer
electronic products Inventory consisting of cellular phones in the net amount
in excess of $2,000,000 (determined after deducting unearned vendors’
discounts); Inventory of a Borrower that is a restrictive or custom item,
work-in-process, a component that is not part of finished goods, or constitutes
parts, packaging and shipping materials, supplies used or consumed in such
Borrower’s business, is subject to a Lien in favor of any third Person,
consists of bill and hold goods, or Inventory acquired on consignment; and


 


(l)            Inventory that is non-SKU Inventory.


 


Agent may establish reserves (“Inventory Reserves”) from time to
time in Agent’s discretion with respect to the determination of the
saleability, at retail, of the Eligible Inventory or which reflect such other
factors as affect the current Retail or market value of the Eligible Inventory
or the Net Retail Liquidation Value of the Inventory.


 


“Eligible
Transferee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course
of its business and having (together with its Affiliates) total assets in
excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender
that was party hereto as of the Closing Date or any partner, shareholder or
investor in any Tranche B Lender or any Tranche C Lender, and (e) any other
Person approved by Agent.


 


11





















 


“Environmental
Actions” means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other communication from any Governmental Authority, or
any third party involving violations of Environmental Laws or releases of
Hazardous Materials from (a) any assets, properties, or businesses of any
Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Borrower or any predecessor in interest.


 


“Environmental
Law” means any applicable federal, state, provincial, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrowers, relating
to the environment, employee health and safety (to the extent it regulates
occupational exposure to Hazardous Materials), or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC § 1251
et  seq; the Toxic Substances Control Act, 15 USC, § 2601 et
seq; the Clean Air Act, 42 USC § 7401 et  seq.; the
Safe Drinking Water Act, 42 USC. § 3803 et  seq.; the Oil
Pollution Act of 1990, 33 USC. § 2701 et  seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC. § 11001 et
seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et
seq.; and the Occupational Safety and Health Act, 29 USC. §651 et
seq. (to the extent it regulates occupational exposure to Hazardous
Materials); any state and local or foreign counterparts or equivalents, in each
case as amended from time to time.


 


“Environmental
Liabilities and Costs” means all liabilities, monetary obligations,
Remedial Actions, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.


 


“Environmental
Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.


 


“Equipment”
means all of Borrowers’ now owned or hereafter acquired right, title, and
interest with respect to “equipment” (as such term is defined from time to time
in the Code) and including without limitation, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles
and trailers), tools, parts, goods (other than consumer goods, farm products,
or Inventory), wherever located, including (a) any interest of the Borrowers in
any of the foregoing and (b) all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute thereto.


 


“ERISA
Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of a Borrower under
IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302
of ERISA and Section 412 of the IRC, any organization subject to ERISA
that is a member of an affiliated service group of which a Borrower is a member
under IRC Section 414(m), or (d) solely for purposes of Section 302
of


 


12





















 


ERISA and Section 412
of the IRC, any Person subject to ERISA that is a party to an arrangement with
a Borrower and whose employees are aggregated with the employees of a Borrower
under IRC Section 414(o).


 


“ERISA
Event” means (a) a Reportable Event with respect to any Benefit Plan or
Multiemployer Plan, (b) the withdrawal of Parent, any of its Subsidiaries or
ERISA Affiliates from a Benefit Plan during a plan year in which it was a
“substantial employer” (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under Section 4042(a)(1),
(2), or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA,
(f) the partial or complete withdrawal within the meaning of Sections 4203 and
4205 of ERISA, of Parent, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Benefit Plan under Section 401(a)(29)
of the IRC by Parent or its Subsidiaries or any of their ERISA Affiliates.


 


“Event
of Default” has the meaning set forth in Section 9.


 


“Excess
Availability” means as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day,
the amount as determined by Agent at any time, in its Permitted Discretion
equal to the least of (i) the aggregate amount of all Revolving Credit
Commitments less the Letter of Credit Usage less Advances, (ii) the Borrowing
Base less the Letter of Credit Usage less Advances, or (iii) the Tranche B
Borrowing Base less the Letter of Credit Usage less Advances, in each case and
without duplication subject to the sublimits, Reserves Against Availability and
other reserves from time to time established in accordance with this Agreement.


 


“Excess
Availability Requirement” has the meaning set forth in Section 8.23(b).


 


“Exchange
Act” means the Securities Exchange Act of 1934, as in effect from time to time.


 


“FEIN”
means Federal Employer Identification Number.


 


“Filing
Date” has the meaning set forth in the preamble.


 


“Final
Order” means a final order of the Bankruptcy Court in the Cases authorizing
and approving this Agreement and the other Loan Documents under Section 364(c)
of the Bankruptcy Code and entered at or after a final hearing, in form and
substance reasonably satisfactory to the Agent and Bingham and the Borrowers
and their counsel.  The Final Order
shall, among other things, have:


 


(a)           authorized the transactions contemplated by this Agreement and the
extensions of credit under this Agreement in an amount not greater than the
Total Commitment provided for herein after entry of the Final Order;


 


(b)           granted the claim status and Liens described in Section 4.1,
and prohibited the granting of additional Liens on the assets of the Borrowers
other than Permitted Liens; and


 


13





















 


(c)           provided that such Liens are automatically perfected by the entry of the
Final Order and also granted to the Agent for the benefit of the Agent and the
Lenders relief from the automatic stay of Section 362(a) of the Bankruptcy
Code to enable the Agent, if the Agent elects to do so in its discretion, to
make all filings and recordings and to take all other actions considered
necessary or advisable by the Agent to perfect, protect and insure the priority
of its Liens upon the Collateral as a matter of non-bankruptcy law.


 


“Funding
Date” means the date on which a Borrowing occurs.


 


“Funding
Losses” has the meaning set forth in Section 2.16(b)(ii).


 


“GAAP”
means generally accepted accounting principles as in effect on the Balance
Sheet Date in the United States, consistently applied, unless, in accordance
with the provisions of Section 8.12, GAAP is adjusted to conform
with Accounting Changes.


 


“General
Intangibles” means all of Borrowers’ now owned or hereafter acquired right,
title, and interest with respect to general intangibles and other personal
property (including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names including, without limitation the trade
names “Soundtrack”, “Ultimate Electronics”, “Fast Trak”, and “Audio King”,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements, infringement
claims, computer programs, information contained on computer disks or tapes,
software, literature, reports, catalogs, money, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims, membership interests in
limited liability companies and general partnership interests in general
partnerships and limited and general partnership interests in limited
partnerships), and any and all supporting obligations in respect thereof, and
any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.


 


“Governing
Documents” means, with respect to any Person, the certificate or articles
of incorporation, by-laws, or other organizational or governing documents of
such Person.


 


“Governmental
Authority” means any foreign, federal, state, local, or other governmental
or administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.


 


“Guaranteed
Pension Plan” means any employee pension benefit plan within the meaning of
§3(2) of ERISA maintained or contributed to by any Borrower or any ERISA
Affiliate the benefits of which are guaranteed on termination in full or in
part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.


 


“Hazardous
Materials” means (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum,
or petroleum derived substances, natural gas, natural gas liquids, synthetic
gas, drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, and (d) asbestos in any form or


 


14





















 


electrical equipment that
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million.


 


“Holdout
Lender” has the meaning set forth in Section 16.2.


 


“Indebtedness”
means, without duplication (a) all obligations of a Borrower for borrowed
money, (b) all obligations of a Borrower evidenced by bonds, debentures, notes,
or other similar instruments (including obligations incurred in connection with
the acquisition of property, assets or businesses) and all reimbursement or
other obligations of a Borrower in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations of a Borrower under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of a Borrower,
irrespective of whether such obligation or liability is assumed, (e) all
obligations of a Borrower for the deferred purchase price of assets (other than
trade debt incurred in the ordinary course of a Borrower’s business and
repayable in accordance with customary trade practices), (f) all obligations of
a Borrower under Synthetic Leases, (g) all sales by a Borrower of (i) accounts
or general intangibles for money due or to become due, (ii) chattel paper,
instruments or documents creating or evidencing a right to payment of money or
(iii) other receivables (collectively “receivables”), whether pursuant to a
purchase facility or otherwise, other than in connection with the disposition
of the business operations of such Borrower relating thereto or a disposition
of defaulted receivables for collection and not as a financing arrangement, and
together with any obligation of such Borrower to pay any discount, interest,
fees, indemnities, penalties, recourse, expenses or other amounts in connection
therewith, (h) all obligations of a Borrower (an “equity related purchase
obligation”) to purchase, redeem, retire or otherwise acquire for value any
shares of Stock issued by such Borrower or any rights measured by the value of
such Stock, (i) all obligations of a Borrower under any forward contract, futures
contract, swap, option or other financing agreement or arrangement (including,
without limitation, caps, floors, collars and similar agreements), the value of
which is dependent upon interest rates, currency exchange rates, commodities or
other indices (a “derivative contract”), (j) all obligations in respect of
Indebtedness of any other entity (including any partnership in which a Borrower
is a general partner) to the extent that a Borrower is liable therefor as a
result of such Borrower’s ownership interest in or other relationship with such
entity based on the Governing Documents of such entity or other documents
governing such Borrower’s ownership interest or other relationship with such
entity, except to the extent that the terms of such Indebtedness provide that
such Borrower is not liable therefor and such terms are enforceable under
applicable law, (k) all obligations, contingent or otherwise, of a Borrower
guaranteeing, or having the economic effect of guarantying or otherwise acting
as surety for, any obligation of a type described in any of clauses (a) through
(j) (the “primary obligation”) of another Person (the “primary obligor”), in
any manner, whether directly or indirectly, and including, without limitation,
any obligation of such Borrower (i) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (ii) to purchase property, securities or services for the purpose
of assuring the payment of such primary obligation, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay
such primary obligation.


 


The
“amount” or “principal  amount” of any Indebtedness at any
time of determination represented by (t) any Indebtedness, issued at a price
that is less than the principal amount at maturity thereof, shall be the amount
of the liability in respect thereof determined in accordance with GAAP, (u) any
Capital Lease shall be the principal component of the aggregate of the rental
obligations under such Capital Lease payable over the term thereof that is not
subject to termination by the lessee, (v) any sale of receivables shall be the
amount of unrecovered capital or principal investment of the purchaser (other
than any Borrower or any of its wholly owned Subsidiaries) thereof, excluding
amounts representative of


 


15





















 


yield or interest earned on
such investment, (w) any Synthetic Lease shall be the stipulated loss value,
termination value or other equivalent amount, (x) any derivative contract shall
be the maximum amount of any termination or loss payment required to be paid by
such Person if such derivative contract were, at the time of determination, to
be terminated by reason of any event of default or early termination event
thereunder, whether or not such event of default or early termination event has
in fact occurred, (y) any equity related purchase obligation shall be the maximum
fixed redemption or purchase price thereof inclusive of any accrued and unpaid
dividends to be comprised in such redemption or purchase price and (z) any
guaranty or other contingent liability referred to in clause (k) shall be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such guaranty or other contingent obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.


 


“Indemnified
Liabilities” has the meaning set forth in Section 12.3.


 


“Indemnified
Person” has the meaning set forth in Section 12.3.


 


“Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.


 


“Intercompany
Subordination Agreement” means a subordination agreement executed and
delivered by Borrowers and Agent, the form and substance of which is
satisfactory to Agent.


 


“Interest
Period” means, with respect to each LIBOR Rate Loan, a period commencing on
the date of the making of such LIBOR Rate Loan and ending 1 month thereafter; provided,
however, that (a) if any Interest Period would end on a day that is not
a Business Day, such Interest Period shall be extended (subject to clauses
(c)-(e) below) to the next succeeding Business Day, (b) interest shall
accrue at the applicable rate based upon the LIBOR Rate from and including the
first day of each Interest Period to, but excluding, the day on which any
Interest Period expires, (c) any Interest Period that would 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, (d) with respect
to an 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), the Interest Period shall
end on the last Business Day of the calendar month that is 1 month after the
date on which the Interest Period began, as applicable, and (e) Borrowers (or
Administrative Borrower on behalf thereof) may not elect an Interest Period
which will end after the Termination Date.


 


“Interim
Order” means an order of the Bankruptcy Court in the form attached hereto
as Exhibit I-1 with such changes as the Agent may consent to in the
Agent’s sole discretion.


 


“Inventory”
means all Borrowers’ now owned or hereafter acquired right, title, and interest
with respect to “inventory” (as such term is defined from time to time in the
Code) and including without limitation, goods held for sale or lease or to be
furnished under a contract of service, goods that are leased by a Borrower as
lessor, goods that are furnished by a Borrower under a contract of service, and
all of Borrowers’ now-owned or hereafter acquired raw materials, work in
process, or materials used or consumed in a Borrower’s business including
packing and shipping materials.


 


16





















 


“Investment”
means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances,
transfers of property to, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.  In determining the
aggregate amount of Investments outstanding at any particular time: (a) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still outstanding;
(b) there shall be included as an Investment all interest accrued with respect
to Indebtedness constituting an Investment unless and until such interest is
paid; (c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (d)
there shall not be deducted in respect of any Investment any amounts received
as earnings on such Investment, whether as dividends, interest or otherwise,
except that accrued interest included as provided in the foregoing clause (b)
may be deducted when paid; and (e) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof.


 


“Investment
Property” means all of Borrowers’ now owned or hereafter acquired right,
title, and interest with respect to “investment property” as that term is
defined in the Code, and any and all supporting obligations in respect thereof.


 


“IRC”
means the Internal Revenue Code of 1986, as in effect from time to time.


 


“Issuing
Lender” means WFRF.


 


“L/C”
has the meaning set forth in Section 2.15.


 


“L/C
Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.


 


“L/C
Undertaking” has the meaning set forth in Section 2.15.


 


“Lender”
and “Lenders” means the Revolving Credit Lenders, the Tranche B Lenders
and the Tranche C Lenders, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 15.1.


 


“Lender
Group” means, individually and collectively, each of the Lenders (including
the Issuing Lender) and the Agent.


 


“Lender
Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by the Lender Group, (b) fees or charges
actually paid or incurred by Agent in connection with the Lender Group’s
transactions with Borrowers relating to the Loan Documents, including, fees or
charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation, and
UCC searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, real estate surveys, real estate title
policies and endorsements, and environmental audits, (c) costs and expenses
incurred by Agent in the


 


17





















 


disbursement of funds to or
for the account of Borrowers (by wire transfer or otherwise), (d) charges paid
or incurred by Agent resulting from the dishonor of checks, (e) reasonable
costs and expenses paid or incurred by the Agent to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) audit fees and expenses of Agent related to
audit examinations of the Books to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement, (g) reasonable
costs and expenses of third party claims or any other suit paid or incurred by
the Lender Group in enforcing or defending the Loan Documents or in connection
with the transactions contemplated by the Loan Documents or the Lender Group’s
relationship with any Borrower or any guarantor of the Obligations, (h) Agent’s
reasonable fees and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, syndicating, administering, amending or
modifying the Loan Documents and any related document or instrument, (i) actual
and reasonable costs and expenses (including attorney’s fees and expenses) incurred
by the Lenders in connection with the negotiation, preparation and execution of
this Agreement and the other Loan Documents, and (j) Agent’s reasonable fees
and expenses (including fees, expenses and other charges of attorneys and
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred in terminating, enforcing, or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.


 


“Lender-Related
Person” means, with respect to any Lender, such Lender, together with such
Lender’s Affiliates, and the officers, directors, employees, partners,
investors and agents of such Lender.


 


“Letter
of Credit” means an L/C or an L/C Undertaking, as the context requires.


 


“Letter
of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit plus 100% of the amount of outstanding time drafts accepted
by an Underlying Issuer as a result of drawings under Underlying Letters of
Credit.


 


“LIBOR
Deadline” has the meaning set forth in Section 2.16(b)(i).


 


“LIBOR
Notice” means a written notice in the form of Exhibit L-1.


 


“LIBOR
Option” has the meaning set forth in Section 2.16(a).


 


“LIBOR
Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate
per annum determined by Agent (rounded upwards, if necessary, to the next
1/16%) by dividing (a) the Base
LIBOR Rate for such Interest Period, by
(b) 100% minus the Reserve Percentage. 
The LIBOR Rate shall be adjusted on and as of the effective day of any
change in the Reserve Percentage.


 


“LIBOR
Rate Loan” means each Advance (or portion of an Advance) that bears
interest at a rate determined by reference to the LIBOR Rate.


 


“Lien”
means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, whether such interest shall be
based on the common law, statute, or contract, whether such interest shall be
recorded or perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, adverse


 


18





















 


claim or charge, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property Collateral.


 


“Loan
Account” has the meaning set forth in Section 2.13.


 


“Loan
Documents” means this Agreement, the Blocked Account Agreements, the Credit
Card Agreements, all Control Agreements, the Pledge Agreement, the Letters of
Credit, the Mortgages, the Perfection Certificates, the Trademark Security
Agreement, the Intercompany Subordination Agreement, any certificates
(including without limitation, the Borrowing Base Certificate and the
Compliance Certificate) from time to time delivered by a Borrower pursuant to
this Agreement or any other Loan Document, any Note or Notes (and any allonges
thereto) executed by a Borrower in connection with this Agreement and payable
to a member of the Lender Group, Uniform Commercial Code financing statements
required under this Agreement, and any other agreement entered into, now or in
the future, by any Borrower and the Lender Group in connection with this
Agreement.


 


“Manufacturer
Payables” means Indebtedness of any Borrower to the manufacturers,
suppliers, providers, vendors or distributors of such Borrower’s Inventory
incurred by such Borrower for the acquisition of such Inventory, which
Indebtedness is not secured by any lien, security interest or encumbrance.


 


“Material
Adverse Change” means (a) a material adverse change in the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrowers taken as a whole other than the
commencement of the Cases (including events leading up to and following such
commencement), (b) a material impairment of a Borrower’s ability to perform its
obligations under the Loan Documents to which it is a party or of the Lender
Group’s ability to enforce the Obligations or realize upon the Collateral, or
(c) a material adverse effect on the value of the Collateral or the amount that
Agent would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral, or (d)
a material impairment of the validity, enforceability, attachment, perfection
or priority of the Agent’s Liens with respect to the Collateral as a result of
an action or failure to act on the part of a Borrower.


 


“Material
Inventory Supplier” means any supplier, provider, manufacturer, vendor or
distributor of a Borrower’s Inventory from whom such Borrower purchases
directly or indirectly, two percent (2.00%) or more of the total Inventory
purchased by such Borrower during any fiscal year.


 


“Mortgages”
means, individually and collectively, one or more mortgages, deeds of trust, or
deeds to secure debt, executed and delivered by a Borrower in favor of Agent,
for the benefit of the Lender Group, in form and substance satisfactory to
Agent, that encumber the Real Property Collateral and the related improvements
thereto as the same may be amended, supplemented or otherwise modified from time
to time.


 


“Multiemployer
Plan” means a “multiemployer plan” (as defined in Section 4001(a)(3)
of ERISA) to which Parent, any of its Subsidiaries, or any ERISA Affiliate has
contributed, or was obligated to contribute, within the past six years.


 


“Negotiable
Collateral” means all of Borrowers’ now owned and hereafter acquired right,
title, and interest with respect to letters of credit, letter of credit rights
(whether or not in writing), instruments,


 


19





















 


promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.


 


“Net
Cash Proceeds” means with respect to any sale or other disposition of assets
of any Person, the cash proceeds received by such Person from such sale or
other disposition, less all reasonable and documented out-of-pocket fees,
commissions and other reasonable and customary direct expenses actually
incurred in connection with such sale or other disposition, including the
amount of any transfer or documentary taxes required to be paid as a result
thereof by such Person.


 


“Net
Liquidation Percentage” means, at any date of determination, the percentage
of the Cost value of Borrowers’ Eligible Inventory that is estimated to be
recoverable in an orderly liquidation of such Eligible Inventory, net of
liquidation expenses, such percentage to be as determined from time to time by
Agent in its Permitted Discretion.


 


“Net
Retail Liquidation Value” means, at any date of determination, the result
(expressed in Dollars) of the Net Liquidation Percentage times the Cost
value of Eligible Inventory as of such date.


 


“Note”
or “Notes” means the Revolving Credit Notes, the Tranche B Notes and the
Tranche C Notes.


 


“Obligations”
means all loans, Advances, Borrowings, Tranche B Loan, Tranche C Loan, debts,
principal, interest, contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers’ Loan Account pursuant hereto and all obligations arising
out of or in connection with Bank Products provided by any Agent-Related
Persons), obligations, fees (including the Tranche C Commitment Fee and fees
provided for in the Agent Fee Letter, the Tranche B Fee Letter), charges,
costs, Lender Group Expenses, lease payments, guaranties, covenants, and duties
of any kind and description owing by Borrowers to the Lender Group pursuant to
or evidenced by the Loan Documents and irrespective of whether for the payment
of money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid
when due and all Lender Group Expenses that Borrowers are required to pay or
reimburse by the Loan Documents, by law, or otherwise.  Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, and supplements, thereto and thereof, as applicable,
both prior and subsequent to any Insolvency Proceeding.


 


“Orders”
means the Final Order and the Interim Order.


 


“Organizational
I.D. Number” means with respect to a Person, other than a natural person,
the organizational identification number assigned to such Person, if any, by
the applicable governmental unit or agency of the jurisdiction of organization
of such Person.


 


“Originating
Lender” has the meaning set forth in Section 15.1(e).


 


“Overadvance”
has the meaning set forth in Section 2.6.


 


“Paid in Full” or “paid
in full” means indefeasible payment of all amounts owing under the Loan
Documents according to the terms thereof, including loan fees, service fees,
professional fees, interest (and specifically including interest accrued after
the commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not the same would be or is
allowed or disallowed in whole or in part in any Insolvency Proceeding.


 


20





















 


“Parent” has the
meaning set forth in the preamble to this Agreement.


 


“Participant” has the
meaning set forth in Section 15.1(e).


 


“PBGC” means the
Pension Benefit Guaranty Corporation created by §4002 of ERISA and any
successor entity or entities having similar responsibilities.


 


“Perfection Certificate”
means the Representations and Warranties of Officers forms submitted by
Administrative Borrower to Agent with respect to each Borrower, together with
Borrowers’ completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.


 


“Permitted Discretion”
means a determination made in good faith and in the exercise of reasonable
(from the perspective of a secured asset-based lender) business judgment.


 


“Permitted Investments”
means (a) Investments in Cash Equivalents, (b) Investments by any Borrower in
any other Borrower; provided that if any such Investment is in the form
of Indebtedness, such Indebtedness investment shall be subject to the terms and
conditions of the Intercompany Subordination Agreement and (c) advances made in
connection with purchases of goods or services in the ordinary course of
business.


 


“Permitted Liens”
means (a) Liens held by Agent for the benefit of Agent and the Lenders, (b)
Liens for unpaid taxes that either (i) are not yet delinquent for more than 30
days, or (ii) are the subject of Permitted Protests, (c) Liens in
existence on the Filing Date, (d) purchase money Liens or the interests of
lessors under Capital Leases to the extent that such Liens or interests secure
Permitted Purchase Money Indebtedness or the acquisition or lease of the
underlying asset hereunder and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof and only secures the purchase
price of the asset, (e) Liens on assets other than Inventory arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
Borrowers’ business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, or (ii) are the
subject of Permitted Protests, (f) Liens arising from deposits made in
connection with obtaining worker’s compensation or other unemployment
insurance, (g) Liens arising by reason of security for surety or appeal bonds
in the ordinary course of Borrowers’ business, (h) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this Agreement),
incurred in the ordinary course of the borrowers’ business and not in
connection with the borrowing of money, (i) with respect to the Real Property
Collateral, easements, rights of way and zoning restrictions that do not
materially interfere with or impair the use or operation thereof by the
Borrowers, (j) Liens in favor of consignors in respect of consignments
permitted by Section 8.10, (k) Liens of or resulting from any
judgment or award that would not cause a Material Adverse Change or constitute a
Default and as to which the time for appeal or petition for rehearing of which
has not yet expired, or in respect of which a Borrower is in good faith
prosecuting an appeal or proceeding for review and in respect of which a stay
of execution pending such appeal or proceeding for review has been secured, and
(l) adequate protection Liens in favor of holders of Prior Permitted Liens to
the extent approved in writing by the Agent.


 


“Permitted Prior Liens”
means valid, properly perfected and otherwise unavoidable Liens existing as of
the Filing Date and are specifically set forth on Schedule P-1
attached hereto, and Liens otherwise approved in writing by the Agent.  The term includes a Lien on proceeds or
products of, or accessions to, assets subject to a Permitted Prior Lien and
arising or created after the Filing Date to the extent that such


 


21





















 


Lien
in the proceeds, products or accessions would have been valid, properly
perfected and not subject to avoidance if the proceeds, products or accessions
had arisen or been created immediately prior to the commencement of the Cases.


 


“Permitted Protest”
means the right of the applicable Borrower to protest any Lien (other than any
such Lien that secures the Obligations), taxes (other than payroll taxes or
taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the Books in an amount that is reasonably satisfactory to Agent,
(b) any such protest is instituted promptly and prosecuted diligently by the
applicable Borrower in good faith, and (c) Agent is satisfied that, while any
such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Agent’s Liens.


 


“Permitted Purchase Money
Indebtedness” means, as of any date of determination, Purchase Money
Indebtedness incurred after the Closing Date in an aggregate amount outstanding
at any one time not in excess of $1,000,000. 
In no event shall Permitted Purchase Money Indebtedness include
Indebtedness incurred for the purpose of financing all or any part of the
acquisition cost of any Inventory.


 


“Person” means
natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and any Governmental
Authority.


 


“Personal Property Collateral”
means all Collateral other than Real Property Collateral.


 


“Pledge Agreement”
means the amended and restated and consolidated master securities pledge
agreement executed and delivered by each Borrower and Agent, the form and
substance of which is satisfactory to Agent.


 


“Prepetition Agent”
has the meaning set forth in the preamble hereto.


 


“Prepetition Borrowers”
has the meaning set forth in the preamble hereto.


 


“Prepetition Credit
Agreement” has the meaning set forth in the preamble hereto.


 


“Prepetition Lenders”
has the meaning set forth in the preamble hereto.


 


“Prepetition Tranche B
Agent” has the meaning set forth in the preamble hereto.


 


“Priority Bank Products”
means, collectively, (a) credit card services or facilities (other than private
label credit card services or facilities with recourse to the Borrowers
administered by Wells Fargo or an Affiliate of Wells Fargo which are not in
existence on the Closing Date) and (b) Bank Products set forth in clause (b)
through clause (f), inclusive, of the definition of “Bank Products”.


 


“Pro Rata Share”
means:


 


(a)                                  with respect to
a Revolving Credit Lender’s obligation to make Advances and receive payments of
principal, interest, fees, costs, and expenses with respect thereto under this
Agreement, (i) prior to Revolving Credit Commitments being reduced to zero, the
percentage obtained by dividing (X) such Revolving Credit Lender’s Commitment,
by (Y) the aggregate Revolving Credit Commitments of all Revolving Credit
Lenders, and (ii) from and after the time that the Revolving Credit Commitments
have


 


22





















 


been
terminated or reduced to zero, the percentage obtained by dividing (A) the
aggregate principal amount of such Revolving Credit Lender’s Advances by (B)
the aggregate principal amount of all Advances,


 


(b)                                 with respect to
a Revolving Credit Lender’s obligation to participate in Letters of Credit, to
reimburse the Issuing Lender, and to receive payments of fees with respect
thereto hereunder, (x) prior to the Revolving Credit Commitments being reduced
to zero, the percentage obtained by dividing (i) such Revolving Credit Lender’s
Revolving Credit Commitment, by (ii) the aggregate Revolving Credit Commitments
of all Revolving Credit Lenders, and (y) from and after the time that the
Revolving Credit Commitments have been terminated or reduced to zero, the
percentage obtained by dividing (I) the aggregate principal amount of such
Revolving Credit Lender’s Advances by (II) the aggregate principal amount of all
Advances,


 


(c)                                  with respect to
a Tranche B Lender’s obligation under this Agreement to fund Tranche B Loans
and right to receive payments of principal, interest, fees, costs and expenses
with respect thereto, the percentage obtained by dividing (X) the aggregate
principal amount of the outstanding Tranche B Loan made by such Tranche B
Lender by (Y) the aggregate principal amount of the Tranche B Loans
outstanding,


 


(d)                                 with respect to
a Tranche C Lender’s obligation under this Agreement to fund Tranche C Loans
and right to receive payments of principal, interest, fees, costs and expenses
with respect thereto, the percentage obtained by dividing (X) the aggregate
principal amount of the outstanding Tranche C Loan made by such Tranche C
Lender by (Y) the aggregate principal amount of the Tranche C Loans
outstanding,


 


(e)                                  with respect to
all other matters hereunder, the percentage under the applicable agreement
obtained by dividing (i) such Lender’s Commitment, by (ii) the aggregate amount
of Commitments of all Lenders; provided, however, that, in each
case, in the event all Commitments have been terminated or reduced to zero, Pro
Rata Share shall be determined according to the Commitments in effect
immediately prior to such termination.


 


“Purchase Money Indebtedness”
means Indebtedness (other than the Obligations, but including Capital Lease
Obligations) incurred at the time of, or within 20 days after, the acquisition
of any fixed assets for the purpose of financing all or any part of the
acquisition cost thereof.


 


“Real Property Collateral”
means any estates or interests in real property now owned or leased or
hereafter acquired or leased by any Borrower and the improvements thereto and
identified on Schedule R-1, including without limitation, the
Thornton Colorado Facility, any real property hereafter acquired by a Borrower
and any leasehold interests now or hereafter acquired by a Borrower.


 


“Record” means
information that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable form.


 


“Remedial Action”
means all actions taken to (a) clean up, remove, remediate, contain, treat,
monitor, assess, evaluate, or in any way address Hazardous Materials in the
indoor or outdoor environment, (b) prevent or minimize a release or threatened
release of Hazardous Materials so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment, (c)
perform any pre-remedial studies, investigations, or post-remedial operation
and maintenance activities, or (d) conduct any other actions authorized by 42
USC § 9601.


 


23





















 


“Replacement Lender”
has the meaning set forth in Section 16.2.


 


“Report” has the
meaning set forth in Section 17.19.


 


“Reportable Event”
means any of the events described in Section 4043(c) of ERISA or the
regulations thereunder other than a Reportable Event as to which the provision
of 30 days notice to the PBGC is waived under applicable regulations.


 


“Required Lenders”
means the Required Revolving Credit Lenders and the Required Tranche B Lenders.


 


“Required Revolving
Credit Lenders” means, at any time, Revolving Credit Lenders whose Pro Rata
Shares aggregate 51% or more of the Revolving Credit Commitments, or if the
Revolving Credit Commitments have been terminated irrevocably, 51% or more of
the Obligations in respect of the Borrowings then outstanding.


 


“Reorganization Plan”
means a plan or plans of reorganization in the Cases.


 


“Required Tranche B Lenders”
means, at any time, Tranche B Lenders whose Pro Rata Shares aggregate 51% or
more of the Obligations in respect of the Tranche B Loan then outstanding.


 


“Retail” means the
Cost of Inventory divided by the Cost Factor.


 


“Reserve Percentage”
means, on any day, for any Lender, the maximum percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor Governmental
Authority) for determining the reserve requirements (including any basic,
supplemental, marginal, or emergency reserves) that are in effect on such date
with respect to eurocurrency funding (currently referred to as “eurocurrency
liabilities”) of that Lender, but so long as such Lender is not required or
directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.


 


“Reserves Against
Availability” means such reserves as Agent, from time to time determines in
its Permitted Discretion as being appropriate to reflect impediments to Lender
Group’s ability to realize upon the Collateral.


 


“Revolving Credit
Commitment” means, for each Revolving Credit Lender, the amount set forth
opposite such Revolving Credit Lender’s name under the applicable heading on Schedule 1.1(a)
or on the signature page of the Assignment and Acceptance pursuant to which
such Revolving Credit Lender became a Revolving Credit Lender hereunder in
accordance with the provisions of Section 15.1.


 


“Revolving Credit Lender”
means a Lender identified on Schedule 1.1(a) or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Revolving Credit Lender hereunder in accordance with Section 15.1.


 


“Revolving Credit Lenders
Prepayment Premium” means, as of any date of determination whether or not
acknowledged or allowed for in any case or proceeding under the Bankruptcy
Code, an amount equal to $2,000,000.


 


24





















 


“Revolving Credit Notes”
means one or more of the promissory notes issued pursuant to Section 2.1(g)
to evidence the Advances hereunder and substantially in the form of Exhibit
N-1 annexed hereto, as amended, endorsed or otherwise modified from time to
time.


 


“Revolving Undersecured
Finding” has the meaning provided in Section 2.5(d) of this
Agreement.


 


“Revolver Usage”
means, as of any date of determination, the sum of (a) the then extant amount
of outstanding Advances, plus (b) the
then extant amount of the Letter of Credit Usage.


 


“Risk Participation
Liability” means, as to each Letter of Credit, all reimbursement
obligations of Borrowers to the Issuing Lender with respect to an L/C
Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the
Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrowers, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.


 


“SEC” means the
United States Securities and Exchange Commission and any successor thereto.


 


“Securities Account”
means a “securities account” as that term is defined in the Code.


 


“Settlement” has the
meaning set forth in Section 2.2(f)(i).


 


“Settlement Date” has
the meaning set forth in Section 2.2(f)(i).


 


“Solvent” means, with
respect to any Person on a particular date, that such Person is not insolvent
(as such term is defined in the Uniform Fraudulent Transfer Act).


 


Standstill Termination Date” means any
date on which an Event of Default exists under Section 9.1 and has
existed for at least fifteen (15) consecutive days prior to such date, (a) on
which Excess Availability is less than $5,000,000 and (i) fifteen (15) days
prior to such date Excess Availability was less than $5,000,000 and during such
fifteen (15) day period there was no period of three (3) consecutive days in
which Excess Availability was equal to or exceeded $5,000,000 or (ii) during
the forty-five (45) days prior to such date Excess Availability was less than
$5,000,000 for twenty-five (25) or more days during such period, (b) the date
which is thirty (30) days after the Tranche B Lenders have given notice to the
Agent that an Event of Default in respect of Section 7.2(a), Section 7.3(a),
(b), (c) or (d) has occurred, unless any such Event of
Default is cured within such thirty (30) day period, or (c) the date which is
thirty (30) days after the Tranche B Lenders have given notice to the Agent
that an Event of Default in respect of Section 8.23 has occurred.


 


“Stock” means all
shares, options, warrants, interests, participations, or other equivalents
(regardless of how designated) of or in a Person, whether voting or nonvoting,
including common stock, preferred stock, or any other “equity security” (as
such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the SEC under the Exchange Act).


 


“Subsidiary” of a
Person means a corporation, partnership, limited liability company, or other
entity in which that Person directly or indirectly owns or controls the shares
of Stock having ordinary voting power to elect a majority of the board of
directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity. For the avoidance of
doubt, the Ultimate Electronics Children’s Foundation shall not be considered a
Subsidiary.


 


25





















 


“Superpriority Claim”
means a claim against a Borrower or its estate in its Case which is an
administrative expense claim having priority over (a) any and all allowed
administrative expenses and (b) unsecured claims now existing or hereafter
arising, including, without limitation, administrative expenses of the kind
specified in Section 503(b), 506(c), 507(b), 1113 or 1114 of the
Bankruptcy Code.


 


“Swing Lender” means
WFRF.


 


“Swing Loan” has the
meaning set forth in Section 2.2(d)(i).


 


“Synthetic Lease”
means any lease of goods or other property, whether real or personal, which is
treated as an operating lease under GAAP and as a loan or financing for U.S.
income tax purposes.


 


“Termination Date”
means the earlier to occur of (a) July 14, 2006, (b) the effective date of
a Reorganization Plan that has been confirmed by an order of the Bankruptcy
Court, and (c) the effective date of a sale of all or substantially all of the
Borrowers’ assets or business pursuant to Section 363 of the Bankruptcy
Code which is authorized by the Bankruptcy Court and in the event of a series
of transactions resulting in the sale of all or substantially all of the
Borrowers’ assets, the latest of such sales.


 


“Termination Declaration
Date” means the earliest to occur of (a) the date on which the Agent
declares all Obligations to be due and payable on account of the occurrence of
an Event of Default, (b) the date on which the Agent declares a termination of
the Commitments on account of the occurrence of an Event of Default, and (c)
the Termination Date.


 


“Thornton Colorado
Facility” means Parent’s facility at 321 West 84th Avenue, Thornton,
Colorado, consisting of the headquarters of Parent, a warehouse of Parent, and
a retail store of Parent.  For the
avoidance of doubt, “Thorton Colorado Facility” does not include the adjacent
undeveloped parcel.


 


“Total Commitment”
means an aggregate outstanding amount not to exceed:


 


(a)                                  except as otherwise provided
in clause (b) below, the amount of $15,000,000 plus the aggregate amount
of all “Obligations” (as defined in the Prepetition Credit Agreement) for the
payment in full of such “Obligations” under the Prepetition Credit Agreement
and approved in the Interim Order; and


 


(b)                                 on and after (i) the entry
of the Final Order, (ii) the satisfaction or waiver of any condition that has
been deferred or waived in the discretion of the Agent pursuant to the last
paragraph of Section 3.2(f), and (iii) the execution and delivery
by the Borrowers of new Notes to the Revolving Credit Lenders requesting such
Notes in an aggregate face amount of $100,000,000, the sum of $118,547,000.


 


The Total Commitment may be
reduced from time to time pursuant to the provisions of this Agreement.  If the Commitments are terminated pursuant to
the provisions of this Agreement, the Total Commitment shall be zero.


 


“Trademark Security
Agreement” means the trademark security agreement executed and delivered by
Parent and Agent, the form and substance of which is satisfactory to Agent.


 


26





















 


“Tranche B Borrowing Base”
means


 


(a)                                  the lesser of


 


(i)                                     97% of the Net Retail Liquidation Value
of Eligible Inventory; or


 


(ii)                                  80% of the Cost of Eligible Inventory; plus


 


(b)                                 the lesser of


 


(i)                                     60% of the Appraised Fair Market Value of
the Thornton Colorado Facility, or


 


(ii)                                  $10,380,000; plus


 


(c)                                  85% of Eligible Credit Card Receivables, minus


 


(d)                                 the aggregate
principal amount outstanding of the Tranche B Loan as of the date of such
determination; minus


 


(e)                                  the aggregate of such Reserves Against
Availability as may have been established by Agent in connection with the
Borrowing Base, minus


 


(f)                                    a reserve for the Carve Out in the amount
of (x) at all times prior to the entry of the Final Order, $1,000,000 and (y)
at all times thereafter, $2,000,000.


 


“Tranche B Commitment Fee”
means such commitment fee as set forth in the Tranche B Fee Letter, which such
fee shall be payable on the Closing Date and which shall be non-refundable when
paid (irrespective of whether this Agreement is terminated thereafter).


 


“Tranche C Commitment Fee”
means a fee in the amount equal to 1.50% of the Tranche C Loan, which such fee
shall be payable on the Closing Date and which shall be non-refundable when
paid (irrespective of whether this Agreement is terminated thereafter).


 


“Tranche B Early
Termination Fee” has the meaning provided in Section 2.3(c).


 


“Tranche B Fee Letter”
means that certain fee letter, dated as of even date herewith, between
Borrowers and Tranche B Lenders, in form and substance satisfactory to Tranche
B Lenders.


 


“Tranche B Interest”
shall have the meaning provided in Section 2.3(d).


 


“Tranche C Interest”
shall have the meaning provided in Section 2.4(d).


 


“Tranche B Interest Rate”
means, Base Rate plus six percent (6%).


 


“Tranche C Interest Rate”
means, twenty percent (20%) per annum, payable in kind.


 


“Tranche B Lender”
means a Lender identified on Schedule 1.1(a) or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Tranche B Lender hereunder in accordance with Section 15.1


 


27





















 


“Tranche C Lender”
means a Lender identified on Schedule 1.1(a) or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Tranche C Lender hereunder in accordance with Section 15.1


 


“Tranche B Lender Fees”
means the Tranche B Commitment Fee and such others fees which may be due to the
Tranche B Lenders hereunder.


 


“Tranche B Loan Interest
Payment Date” shall have the meaning provided in Section 2.3(d).


 


“Tranche B Loan”
means the Tranche B Loan made or to be made by the Tranche B Lenders to the
Borrowers on the Closing Date in the original aggregate principal amount of
$13,000,000 pursuant to Section 2.3(a).


 


“Tranche C Loan”
means the Tranche C Loan made or to be made by the Tranche C Lenders to the
Borrowers on the Closing Date in the original aggregate principal amount of
$5,547,500 pursuant to Section 2.4(a).


 


“Tranche B Note”
means one or more of the promissory notes issued pursuant to Section 2.3(b)
to evidence the Tranche B Loan made hereunder and substantially in the form of Exhibit
N-2 annexed hereto, as amended, endorsed or otherwise modified from time to
time.


 


“Tranche C Note”
means one or more of the promissory notes issued pursuant to Section 2.4(b)
to evidence the Tranche C Loan made hereunder and substantially in the form of Exhibit
N-3 annexed hereto, as amended, endorsed or otherwise modified from time to
time.


 


“Type of Organization”
means with respect to a Person other than a natural person, the kind or type of
entity by which such Person is organized, such as corporation, limited
partnership or limited liability company.


 


“Underlying Issuer”
means a third Person which is the beneficiary of an L/C Undertaking and which
has issued a letter of credit at the request of the Issuing Lender for the
benefit of Borrowers.


 


“Underlying Letter of
Credit” means a letter of credit that has been issued by an Underlying
Issuer.


 


“Voidable Transfer”
has the meaning set forth in Section 18.7.


 


“Wattles Equity
Investment” means that certain (i) Stock Purchase Agreement, dated as of January 11,
2005 (as in effect on the Closing Date), between Parent and Mark Wattles Enterprises,
LLC and (ii) the Option Agreement, dated as of January 11, 2005 (as in
effect on the Closing Date), between Parent and Mark Wattles Enterprises, LLC.


 


“Wells Fargo” means
Wells Fargo Bank, National Association, a national banking association.


 


“WFRF” means Wells
Fargo Retail Finance, LLC, a Delaware limited liability company.


 


“Yield Revenue”
means, as of the date of determination, with respect to the Tranche B Loan or
the Tranche C Loan, as the case may be, all amounts which are payable on account
of the Tranche B Loan, the Tranche B Lender Fees and the Tranche B Interest
Rate with respect to the Tranche B Loan, or


 


28





















 


as
the case may be, the Tranche C Loan, the Tranche C Commitment Fee and the Tranche
C Interest Rate (including, interest payable in kind), in each case from the
Closing Date through and including the first anniversary of the Closing Date.


 


1.2                               Accounting Terms.  All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP applied on a consistent basis by the accounting entity to
which they refer.  When used herein, the
term “financial statements” shall include the notes and schedules thereto.  Whenever the term “Borrowers” or the term
“Parent” is used in respect of a financial covenant or a related definition, it
shall be understood to mean Parent and its Subsidiaries on a consolidated basis
unless the context clearly requires otherwise.


 


1.3                               Code. 
Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth from time to time in the Code unless
otherwise defined herein, with the term “instrument” being that defined under Article 9
of the Code.


 


1.4                               Construction.  Unless the
context of this Agreement or any other Loan Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “including,” “include” and “includes”
are not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Agreement or any other Loan Document
refer to this Agreement or such other Loan Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other Loan
Document, as the case may be.  Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. 
Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
restatements, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements, thereto and thereof, as applicable
(subject to any restrictions on such alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements set forth herein).  Any
reference herein to any Person shall be construed to include such Person’s
successors and assigns.  Any requirement
of a writing contained herein or in the other Loan Documents shall be satisfied
by the transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.  This
Agreement and the other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements
are, however, cumulative and are to be performed in accordance with the terms
thereof.  Text which is shown in italics (except for parenthesized italicized text), shown in
bold, shown IN ALL CAPITAL LETTERS, or
in any combination of the foregoing, shall be deemed to be conspicuous.  The words “may not” are prohibitive and not
permissive.  Any reference to a Person’s
“knowledge” (or words of similar import) are to such Person’s knowledge
assuming that such Person has undertaken reasonable and diligent investigation
with respect to the subject of such “knowledge” (whether or not such
investigation has actually been undertaken).


 


1.5                               Schedules and Exhibits.  All of the
schedules and exhibits attached to this Agreement shall be deemed incorporated
herein by reference.


 


1.6                               The Term “Borrower” or “Borrowers”.  Unless
otherwise specifically provided herein, all references to “Borrower” or
“Borrowers” herein shall refer to and include each Borrower separately and all
representations contained herein shall be deemed to be separately made by each
of them, and each of the covenants, agreements and obligations set forth herein
shall be deemed to be the joint and several covenants, agreements and
obligations of them.  Any notice,
request, consent, report or other information


 


29





















 


or
agreement delivered to Agent or any other member of the Lender Group by any
Borrower shall be deemed to be ratified by, consented to and also delivered by
each other Borrower.  Each Borrower
recognizes and agrees that each covenant and agreement of “Borrower” or
“Borrowers” under this Agreement and the other Loan Documents shall create a
joint and several obligation of the Borrowers, which may be enforced against
Borrowers, jointly or against each Borrower separately.  Without limiting the terms of this Agreement
and the other Loan Documents, security interests, assets and collateral shall
extend to the properties, interests, assets and collateral of each
Borrower.  Similarly, the term “Obligations”
shall include, without limitation, all obligations, liabilities and
indebtedness of such entities, or any one of them, to any member the Lender
Group, whether such obligations, liabilities and indebtedness shall be joint,
several, joint and several or individual. 
Unless otherwise specified in this Agreement, the parties hereto
anticipate that any notice, request, consent, report or other information or
agreement to be delivered in connection with this Agreement by Borrowers to
Agent will be executed by Parent as Administrative Borrower, on behalf of
Borrowers, and that any such notice, request, consent, report or other
information or agreement delivered to Agent and executed by Parent shall be
deemed to be executed by Parent on behalf of all the Borrowers.  In addition, unless otherwise specified in
this Agreement, the parties hereto anticipate that any advances made hereunder
by any member of the Lender Group to Borrowers shall be disbursed directly to
Parent.


 


2.                                      LOANS AND TERMS OF PAYMENT


 


2.1                               Advances.


 


(a)                                  Commitment to Lend. 
Subject to the terms and conditions of this Agreement, and during the
term of this Agreement, each Revolving Credit Lender with a Revolving Credit
Commitment agrees (severally, not jointly or jointly and severally) to make
Advances to Borrowers in an amount at any one time outstanding not to exceed
such Revolving Credit Lender’s Pro Rata Share of an amount equal to the least
of (i) the aggregate Revolving Credit Commitments of all Revolving Credit
Lenders as in effect on such date less
Letter of Credit Usage as of such date, (ii) the amount approved to be borrowed
by way of Advances and L/Cs in the Interim Order or the Final Order, whichever
is then in effect, (iii) the Borrowing Base less
Letter of Credit Usage as of such date, and (iv) the Tranche B Borrowing Base less Letter of Credit Usage as of such
date.  The Revolving Credit Lenders and
the Agent shall have no obligation to fund any Advance that would exceed the
applicable amount pursuant to the preceding sentence.


 


(b)                                 Agent’s Rights. 
Anything to the contrary in this Section 2.1
notwithstanding, Agent shall have the right, without declaring an Event of
Default, to reduce the inventory advance rates or establish Reserves Against
Availability in such amounts, and with respect to such matters, as Agent in its
sole discretion shall deem necessary or appropriate, against the Borrowing Base
and the Tranche B Borrowing Base, including with respect to (i) sums that
Borrowers are required to pay (such as taxes, assessments, insurance premiums,
or, in the case of leased assets, rents or other amounts payable under such
leases) and has failed to pay under any Section of this Agreement or any
other Loan Document, (ii) as determined by Agent in its Permitted Discretion
based on noncompliance with the covenants set forth in Sections 7 and 8,
and (iii) amounts owing by Borrowers to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral (other than any existing
Permitted Lien set forth on Schedule P-1 which is specifically
identified thereon as entitled to have priority over the Agent’s Liens), which
Lien or trust, in the Permitted Discretion of Agent, likely would have a
priority superior to the Agent’s Liens (such as Liens or trusts in favor of
landlords, warehousemen, carriers, mechanics, materialmen, laborers, or
suppliers, or Liens or trusts for ad valorem,
excise, sales, or other taxes where given priority under applicable law) in and
to such item of the Collateral.


 


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(c)                                  Payment and Reborrowing of Advances. 
Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.


 


(d)                                 Revolving Credit Note. 
Each Borrower shall execute and deliver on the Closing Date (or such
other date on which a Revolving Credit Lender may become a party hereto in
accordance with Section 15.1) to Agent for each Revolving Credit
Lender which so requests a Revolving Credit Note to evidence that Revolving
Credit Lender’s Advances, in the principal amount of that Revolving Credit
Lender’s Commitment and with appropriate insertions.


 


2.2                               Borrowing Procedures and
Settlements.


 


(a)                                  Procedure for Borrowing. 
Each Borrowing shall be made by an irrevocable written request by an
Authorized Person delivered to Agent (which notice must be received by Agent no
later than 2:00 p.m.(Boston, Massachusetts time)) on the Business Day prior to
the date that is the requested Funding Date in the case of a request for an
Advance that is to bear interest at a rate based on the Base Rate and three (3)
Business Days prior to the date that is the requested Funding Date in the case
of an Advance that is to bear interest at a rate based on the LIBOR Rate.  Such request shall specify (i) the amount of
such Borrowing, (ii) the requested Funding Date, which shall be a Business Day,
(iii) whether the Advance is to constitute a LIBOR Rate Loan or a Base
Rate Loan, and (iv) if such Advance is to constitute a LIBOR Rate Loan,
the requested Interest Period therefor. 
At Agent’s election, in lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such request
by the required time, with such telephonic notice to be confirmed in writing
within 24 hours of the giving of such notice.


 


(b)                                 Agent’s Election. 
Promptly after receipt of a request for a Borrowing pursuant to Section 2.2(a),
Agent shall elect, in its discretion, (i) to have the terms of Section 2.2(c)
apply to such requested Borrowing, or (ii) if the Borrowing is for an Advance,
to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.2(d)
in the amount of the requested Borrowing; provided, however, that
if Swing Lender declines in its sole discretion to make a Swing Loan pursuant
to Section 2.2(d), Agent shall elect to have the terms of Section 2.2(c)
apply to such requested Borrowing.


 


(c)                                  Making of Advances.


 


(i)                                     In the event that Agent shall elect to
have the terms of this Section 2.2(c) apply to a requested
Borrowing as described in Section 2.2(b), then promptly after
receipt of a request for a Borrowing pursuant to Section 2.2(a),
Agent shall notify the Revolving Credit Lenders, not later than 3:00 p.m.
(Boston, Massachusetts time) on the Business Day immediately preceding the
Funding Date applicable thereto, by facsimile, telephone, or other similar form
of transmission, of the requested Borrowing. 
Each Revolving Credit Lender shall make the amount of such Revolving
Credit Lender’s Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to Agent’s Account, not later than 2:00 p.m.
(Boston, Massachusetts time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, upon satisfaction of the applicable conditions precedent set forth in
Section 3 hereof, Agent shall make the proceeds thereof available
to Administrative Borrower on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent to
Administrative Borrower’s Designated Account; provided, however,
that, subject to the provisions of Section 2.2(i), Agent shall not
request any Revolving Credit Lender to make, and no Revolving Credit Lender shall
have the obligation to make, any Advance if Agent


 


31





















 


shall have actual
knowledge that (1) one or more of the applicable conditions precedent set forth
in Section 3 will not be satisfied on the requested Funding Date
for the applicable Borrowing unless such condition has been waived, or (2) the
requested Borrowing would exceed the Excess Availability on such Funding Date.


 


(ii)                                  Unless Agent receives notice from a
Revolving Credit Lender on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one (1) Business Day prior to the
date of such Borrowing, that such Revolving Credit Lender will not make
available as and when required hereunder to Agent for the account of Borrowers
the amount of that Revolving Credit Lender’s Pro Rata Share of the Borrowing,
Agent may assume that each Revolving Credit Lender has made or will make such
amount available to Agent in immediately available funds on the Funding Date
and Agent may (but shall not be so required), in reliance upon such assumption,
make available to Borrowers on such date a corresponding amount.  If and to the extent any Revolving Credit
Lender shall not have made its full amount available to Agent in immediately
available funds and Agent in such circumstances has made available to Borrowers
such amount, that Revolving Credit Lender shall on the Business Day following
such Funding Date make such amount available to Agent, together with interest
at the Defaulting Lender Rate for each day during such period.  A notice submitted by Agent to any Revolving
Credit Lender with respect to amounts owing under this subsection shall be
conclusive, absent manifest error.  If
such amount is so made available, such payment to Agent shall constitute such
Revolving Credit Lender’s Advance on the date of Borrowing for all purposes of
this Agreement.  If such amount is not
made available to Agent on the Business Day following the Funding Date, Agent will
notify Administrative Borrower of such failure to fund and, upon demand by
Agent, Borrowers shall pay such amount to Agent for Agent’s account, together
with interest thereon for each day elapsed since the date of such Borrowing, at
a rate per annum equal to the interest rate applicable at the time to the
Advances composing such Borrowing.  The
failure of any Revolving Credit Lender to make any Advance on any Funding Date
shall not relieve any other Revolving Credit Lender of any obligation hereunder
to make an Advance on such Funding Date, but no Revolving Credit Lender shall
be responsible for the failure of any other Revolving Credit Lender to make the
Advance to be made by such other Revolving Credit Lender on any Funding Date.


 


(iii)                               Agent shall not be obligated to transfer
to a Defaulting Lender any payments made by Borrowers to Agent for the
Defaulting Lender’s benefit, and, in the absence of such transfer to the
Defaulting Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender which is a Revolving Credit Lender ratably in accordance
with their Revolving Credit Commitments (but only to the extent that such
Defaulting Lender’s Advance was funded by the other members of the Lender
Group) or, if so directed by Administrative Borrower and if no Default or Event
of Default had occurred and is continuing (and to the extent such Defaulting
Lender’s Advance was not funded by the Lender Group), retain same to be
re-advanced to Borrowers as if such Defaulting Lender had made Advances to
Borrowers.  Subject to the foregoing,
Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the
account of such Defaulting Lender the amount of all such payments received and
retained by it for the account of such Defaulting Lender.  Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a “Revolving Credit Lender” and such Lender’s
Revolving Credit Commitment shall be deemed to be zero.  This Section shall remain effective with
respect to such Defaulting Lender until (x) the Obligations under this
Agreement shall have been declared or shall have become immediately due and
payable, (y) the non-Defaulting Lenders, Agent, and Administrative Borrower
shall have


 


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waived such
Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes its
Pro Rata Share of the applicable Advance and pays to Agent all amounts owing by
Defaulting Lender in respect thereof. 
The operation of this Section shall not be construed to increase or
otherwise affect the Revolving Credit Commitment of any Revolving Credit
Lender, to relieve or excuse the performance by such Defaulting Lender or any
other Revolving Credit Lender of its duties and obligations hereunder, or to
relieve or excuse the performance by Borrowers of their duties and obligations
hereunder to Agent or to the Revolving Credit Lenders other than such
Defaulting Lender.  Any such failure to
fund by any Defaulting Lender shall constitute a material breach by such
Defaulting Lender of this Agreement and shall entitle Administrative Borrower
at its option, upon written notice to Agent, to arrange for a substitute Lender
to assume the Revolving Credit Commitment of such Defaulting Lender, such
substitute Lender to be acceptable to Agent. 
In connection with the arrangement of such a substitute Lender, the
Defaulting Lender shall have no right to refuse to be replaced hereunder, and
agrees to execute and deliver a completed form of Assignment and Acceptance
Agreement in favor of the substitute Lender (and agrees that it shall be deemed
to have executed and delivered such document if it fails to do so) subject only
to being repaid its share of the outstanding Obligations (including an assumption
of its Pro Rata Share of the Risk Participation Liability) without any premium
or penalty of any kind whatsoever; provided  further, however,
that any such assumption of the Revolving Credit Commitment of such Defaulting
Lender shall not be deemed to constitute a waiver of any of the Lender Groups’
or Borrowers’ rights or remedies against any such Defaulting Lender arising out
of or in relation to such failure to fund.


 


(d)                                 Making of Swing Loans.


 


(i)                                     In the event Agent shall elect, with the
consent of Swing Lender, as a Revolving Credit Lender, to have the terms of
this Section 2.2(d) apply to a requested Borrowing as described in Section 2.2(b),
Swing Lender as a Revolving Credit Lender shall make such Advance in the amount
of such Borrowing (any such Advance made solely by Swing Lender as a Revolving
Credit Lender pursuant to this Section 2.2(d) being referred to as
a “Swing Loan” and such Advances being referred to collectively as “Swing
Loans”) available to Borrowers on the Funding Date applicable thereto by
transferring immediately available funds to Administrative Borrower’s
Designated Account.  Each Swing Loan is
an Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Swing Loan shall be eligible
for the LIBOR Option and all payments on any Swing Loan shall be payable to
Swing Lender as a Revolving Credit Lender solely for its own account (and for
the account of the holder of any participation interest with respect to such
Swing Loan).  Subject to the provisions
of Section 2.2(i), Agent shall not request Swing Lender as a
Revolving Credit Lender to make, and Swing Lender as a Revolving Credit Lender
shall not make, any Swing Loan if Agent has actual knowledge that (i) one or
more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (ii) the requested
Borrowing would exceed the Excess Availability on such Funding Date.  Swing Lender as a Revolving Credit Lender
shall not otherwise be required to determine whether the applicable conditions
precedent set forth in Section 3 have been satisfied on the Funding
Date applicable thereto prior to making, in its sole discretion, any Swing
Loan.


 


(ii)                                  The Swing Loans shall be secured by the
Agent’s Liens, shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to Advances that are
Base Rate Loans.


 


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(e)                                  Agent Advances.


 


(i)                                     Subject to the limitations contained in Section 2.2(i),
Agent hereby is authorized by Borrowers and the Revolving Credit Lenders, from
time to time in Agent’s sole discretion, (1) after the occurrence and during
the continuance of a Default or an Event of Default, or (2) at any time that
any of the other applicable conditions precedent set forth in Section 3
have not been satisfied, to make Advances to Borrowers on behalf of the
Revolving Credit Lenders that Agent, in its Permitted Discretion deems
necessary or desirable (A) to preserve or protect the Collateral, or any
portion thereof, (B) to enhance the likelihood of repayment of the Obligations,
or (C) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in Section 10 (any of the Advances described in
this Section 2.2(e) shall be referred to as “Agent Advances”).  Each Agent Advance is an Advance hereunder
and shall be subject to all the terms and conditions applicable to other
Advances, except that no such Agent Advance shall be eligible for the LIBOR
Option and all payments thereon shall be payable to Agent solely for its own
account (and for the account of the holder of any participation interest with
respect to such Agent Advance).


 


(ii)                                  The Agent Advances shall be repayable on
demand and secured by the Agent’s Liens granted to Agent under the Loan
Documents, shall constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances that are Base
Rate Loans.


 


(f)                                    Settlement.  It is agreed
that each Revolving Credit Lender’s funded portion of the Advances is intended
by the Revolving Credit Lenders to equal, at all times, such Revolving Credit
Lender’s Pro Rata Share of the outstanding Advances.  Such agreement notwithstanding, Agent, Swing
Lender, and the other Revolving Credit Lenders agree (which agreement shall not
be for the benefit of or enforceable by Borrowers) that in order to facilitate
the administration of this Agreement and the other Loan Documents, settlement
among them as to the Advances, the Swing Loans, and the Agent Advances shall
take place on a periodic basis in accordance with the following provisions:


 


(i)                                     Agent shall request settlement (“Settlement”)
with the Revolving Credit Lenders on a periodic basis contemplated to be
weekly, (1) on behalf of Swing Lender, with respect to each outstanding Swing
Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect
to Collections received, as to each by notifying the Revolving Credit Lenders
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 3:00 p.m. (Boston, Massachusetts time) on
the Business Day immediately prior to the date of such requested Settlement
(the date of such requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances, Swing Loans,
and Agent Advances for the period since the prior Settlement Date.  Subject to the terms and conditions contained
herein (including Section 2.2(c)(iii)):  (y) if a Revolving Credit Lender’s balance of
the Advances, Swing Loans, and Agent Advances exceeds such Revolving Credit
Lender’s Pro Rata Share of the Advances, Swing Loans, and Agent Advances as of
a Settlement Date, then Agent shall, by no later than 2:00 p.m. (Boston,
Massachusetts time) on the Settlement Date, transfer in immediately available
funds to the account of such Revolving Credit Lender as such Revolving Credit
Lender may designate, an amount such that each such Revolving Credit Lender
shall, upon receipt of such amount, have as of the Settlement Date, its Pro
Rata Share of the Advances, Swing Loans, and Agent Advances, and (z) if a
Revolving Credit Lender’s balance of the Advances, Swing Loans, and Agent


 


34





















 


Advances is less
than such Revolving Credit Lender’s Pro Rata Share of the Advances, Swing
Loans, and Agent Advances as of a Settlement Date, such Revolving Credit Lender
shall no later than 2:00 p.m. (Boston, Massachusetts time) on the Settlement
Date transfer in immediately available funds to the Agent’s Account, an amount
such that each such Revolving Credit Lender shall, upon transfer of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances,
Swing Loans, and Agent Advances.  Such
amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Swing Loan or
Agent Advance and, together with the portion of such Swing Loan or Agent
Advance representing Swing Lender’s Pro Rata Share thereof, shall constitute
Advances of such Revolving Credit Lenders. 
If any such amount is not made available to Agent by any Revolving
Credit Lender on the Settlement Date applicable thereto to the extent required
by the terms hereof, Agent shall be entitled to recover for its account such
amount on demand from such Revolving Credit Lender together with interest
thereon at the Defaulting Lender Rate.


 


(ii)                                  In determining whether a Revolving Credit
Lender’s balance of the Advances, Swing Loans, and Agent Advances is less than,
equal to, or greater than such Revolving Credit Lender’s Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date, Agent shall,
as part of the relevant Settlement, apply to such balance the portion of
payments actually received in good funds by Agent with respect to principal,
interest, fees payable by Borrowers and allocable to the Revolving Credit
Lenders hereunder, and proceeds of Collateral. 
To the extent that a net amount is owed to any such Revolving Credit Lender
after such application, such net amount shall be distributed by Agent to that
Revolving Credit Lender as part of such next Settlement.


 


(iii)                               Between Settlement Dates, Agent, to the
extent no Agent Advances or Swing Loans are outstanding, may pay over to Swing
Lender any payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to Swing Lender’s Pro Rata Share of the Advances.  If, as of any Settlement Date, Collections
received since the then immediately preceding Settlement Date have been applied
to Swing Lender’s Pro Rata Share of the Advances other than to Swing Loans, as
provided for in the previous sentence, Swing Lender shall pay to Agent for the
accounts of the Revolving Credit Lenders, and Agent shall pay to the Revolving
Credit Lenders, to be applied to the outstanding Advances of such Revolving
Credit Lenders, an amount such that each Revolving Credit Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of
the Advances.  During the period between
Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect
to Agent Advances, and each Revolving Credit Lender (subject to the effect of
letter agreements between Agent and individual Revolving Credit Lenders) with
respect to the Advances other than Swing Loans and Agent Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent, or the
Revolving Credit Lenders, as applicable.


 


(g)                                 Notation.  Agent shall
record on its books the principal amount of the Advances owing to each
Revolving Credit Lender, including the Swing Loans owing to Swing Lender, and
Agent Advances owing to Agent, and the interests therein of each Revolving
Credit Lender, from time to time.  In
addition, each Revolving Credit Lender is authorized, at such Revolving Credit
Lender’s option, to note the date and amount of each payment or prepayment of
principal of such Revolving Credit Lender’s Advances in its books and records,
including computer records, such books and records constituting conclusive
evidence, absent manifest error, of the accuracy of the information contained
therein.


 


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(h)                                 Lenders’ Failure to Perform. 
All Advances (other than Swing Loans and Agent Advances) shall be made
by the Revolving Credit Lenders contemporaneously and in accordance with their
Pro Rata Shares.  It is understood that
(i) no Revolving Credit Lender shall be responsible for any failure by any
other Revolving Credit Lender to perform its obligation to make any Advance (or
other extension of credit) hereunder, nor shall any Revolving Credit Commitment
of any Revolving Credit Lender be increased or decreased as a result of any
failure by any other Revolving Credit Lender to perform its obligations
hereunder, and (ii) no failure by any Revolving Credit Lender to perform its
obligations hereunder shall excuse any other Revolving Credit Lender from its
obligations hereunder.


 


(i)                                     Optional Overadvances. 
Any contrary provision of this Agreement notwithstanding, the Lenders
hereby authorize Agent or Swing Lender, as applicable, and Agent or Swing
Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrowers
notwithstanding that an Overadvance exists or thereby would be created, so long
as (i) after giving effect to such Advances (including a Swing Loan), the
Revolver Usage (except for and excluding amounts charged to the Loan Account
for interest, fees, or Lender Group Expenses) does not exceed the lesser of the
Borrowing Base less the Excess
Availability Requirement or the Tranche B Borrowing Base less the Excess Availability Requirement,
by more than ten percent (10%) of the then available Borrowing Base less the Excess Availability Requirement
or Tranche B Borrowing Base less
the Excess Availability Requirement, as applicable, or the aggregate Revolving
Credit Commitment of all Revolving Credit Lenders or the amount approved to be
borrowed by way of Advances and L/Cs in the Interim Order or the Final Order,
whichever is then in effect, and (ii) at the time of the making of any such Advance
(including a Swing Loan), Agent does not believe, in good faith, that the
Overadvance created by such Advance will be outstanding for more than 45
days.  The foregoing provisions are for
the exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrowers in any way. 
The Advances and Swing Loans, as applicable, that are made pursuant to
this Section 2.2(i) shall be subject to the same terms and
conditions as any other Advance or Swing Loan, as applicable, except that they
shall not be eligible for the LIBOR Option and the rate of interest applicable
thereto shall be the rate applicable to Advances that are Base Rate Loans under
Section 2.7(c) hereof without regard to the presence or absence of
a Default or Event of Default.


 


(i)                                     In the event Agent obtains actual
knowledge that the Revolver Usage exceeds the amounts permitted by the
preceding paragraph, regardless of the amount of, or reason for, such excess,
Agent shall notify Revolving Credit Lenders as soon as practicable (and prior
to making any (or any additional) intentional Overadvances (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Revolving Credit Lenders
with Revolving Credit Commitments thereupon shall, together with Agent, jointly
determine the terms of arrangements that shall be implemented with Borrowers
and intended to reduce, within a reasonable time, the outstanding principal
amount of the Advances to Borrowers to an amount permitted by the preceding
paragraph.  In the event Agent or any
Revolving Credit Lender disagrees over the terms of reduction or repayment of
any Overadvance, the terms of reduction or repayment thereof shall be
implemented according to the determination of the Required Revolving Credit
Lenders.


 


(ii)                                  Each Revolving Credit Lender with a
Revolving Credit Commitment shall be obligated to settle with Agent as provided
in Section 2.2(f) for the amount of such Revolving Credit Lender’s
Pro Rata Share of any unintentional Overadvances by Agent reported to such
Revolving Credit Lender, any intentional Overadvances made as permitted under
this


 


36





















 


Section 2.2(i), and any Overadvances resulting from the
charging to the Loan Account of interest, fees, or Lender Group Expenses.


 


2.3                               The Tranche B Facility.


 


(a)                                  Commitment to Lend. 
Subject to the terms and conditions set forth in this Agreement, each
Tranche B Lender severally agrees to make a Tranche B Loan to the Borrowers on
the Closing Date in an amount equal to such Tranche B Lender’s Pro Rata Share
of the Tranche B Loan as provided on Schedule 1.1(a).


 


(b)                                 Tranche B Loan Notes. 
The Tranche B Loan shall be evidenced by separate promissory notes of
the Borrowers in substantially the form of Exhibit N-2 hereto (the “Tranche
B Notes”), dated the Closing Date, and completed with appropriate
insertions.  The Borrowers irrevocably
authorize the Tranche B Lenders to make or cause to be made a notation on the
Tranche B Lender’s records reflecting the original principal amount of such
Tranche B Lender’s portion of the Tranche B Loan and, at or about the time of
the Tranche B Lender’s receipt of any principal payment on the Tranche B Loan
Note, an appropriate notation on such Tranche B Lender’s records reflecting
such payment.  The aggregate unpaid
amount set forth on each Tranche B Lender’s records shall be prima facie
evidence of the principal amount thereof owed and unpaid on such Tranche B
Lender’s Tranche B Loan, but the failure to record, or any error in so
recording, any such amount on such Tranche B Lender’s records shall not affect
the obligations of the Borrowers hereunder or under any Tranche B Loan Notes to
make payments of principal of and interest on the Tranche B Loan Notes when
due.


 


(c)                                  Tranche B Early Termination Fee.


 


(i)                                     If the Borrowers prepay the Tranche B
Loan in whole or in part prior to the first anniversary of the Closing Date,
then, in view of the impracticality and extreme difficulty of ascertaining the
actual amount of damages to any of the Tranche B Lenders or profits lost by any
of the Tranche B Lenders as a result thereof, and by mutual agreement of the parties
as to a reasonable estimation and calculation of the lost profits or damages of
any Tranche B Lender, the Borrowers shall pay a premium with respect to each
such prepayment (the “Tranche B Early Termination Fee”) in an amount
equal to the greater of (x) the Yield Revenue less the aggregate amount
of any Tranche B Lender Fees less any Tranche B Interest actually paid
by the Borrowers during the period from the Closing Date through the first
anniversary of the Closing Date (in the event of any partial prepayment
hereunder, such prepayments shall be applied to this clause (x) on a pro
rata basis) and (y) one and one half percent (1 1⁄2%) of the aggregate amount of
any prepayments of the Tranche B Term Loans.


 


(ii)                                  In the event that the Agent or any
Affiliate of the Agent provides a subordinated credit facility to the Borrowers
upon the Borrowers’ emergence from the bankruptcy proceedings, each Lender
hereby waives the Tranche B Early Termination Fee due hereunder; provided
that the Agent shall be under no obligation to provide any such credit facility
to the Borrowers and any such credit facility shall be on terms and conditions
satisfactory to the Agent.


 


(iii)                               WFRF hereby agrees that, so long as
“Tranche B Early Termination Fee” (as defined under the Prepetition Credit
Agreement) is not subject to any avoidance action in the Cases, to apply that
portion of the “Tranche B Early Termination Fee” actually received by WFRF
under the Prepetition Credit Agreement to the Tranche B Commitment Fee due
hereunder.


 


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(d)                                 Interest on Tranche B Loan. 
Except as otherwise provided in Section 2.7(c), interest and
fees on the outstanding amount of the Tranche B Loan shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and shall
bear interest until repaid at the rate per annum equal to the Tranche B
Interest Rate (the “Tranche B Interest”).  The Tranche B Interest shall be payable
monthly in arrears on the first Business Day of each month (the “Tranche B
Loan Interest Payment Date”) and on the Termination Date.  Following the occurrence and during the
continuance of any Event of Default, at the direction of the Required Tranche B
Lenders, interest shall accrue and shall be payable on the unpaid principal
balance of the Tranche B Loan at the aggregate of the Tranche B Loan Interest
Rate plus three and one half percent (3 1⁄2%).


 


(e)                                  Tranche B Fees.. 
Borrowers shall pay to the Tranche B Lenders, all fees set forth in the
Tranche B Fee Letter.


 


(f)                                    Payments on Account of Tranche B Loan. 
Subject to Section 3.5(a), the Borrowers authorize the Agent
to determine and to pay over directly to the Tranche B Lenders any and all
amounts due and payable from time to time under or on account of the Tranche B
Loan as advances under the Borrowings it being understood, however, that the
authorization of the Agent provided in this Section 2.3(f) shall
not excuse the Borrowers from fulfilling their obligations to the Tranche B
Lenders on account of the Tranche B Loan nor place any obligation on the Agent
to do so.  The Agent shall provide prompt
advice to the Borrowers of any amount which is so paid over by the Agent to the
Tranche B Lenders pursuant to this Section 2.3(f). The Borrowers
shall not be entitled to any credit, rebate or repayment of any fee or
assessment previously earned by the Tranche B Lenders pursuant to this
Agreement notwithstanding any termination of this Agreement or suspension or
termination of the Agent’s and any Lender’s respective obligation to make loans
and advances hereunder.


 


(g)                                 Buyout Option. 
At any time during any Buyout Exercise Period and upon the instruction
of the Tranche B Lenders, the Tranche B Lenders shall give the Agent a Buyout
Acceptance Notice of its intent to cause the assignment to the Tranche B
Lenders, or their respective designees, by the Revolving Credit Lenders, of all
right, title and interest in, to, arising under or in respect of all
Obligations of the Revolving Credit Lenders, the Swing Lender, the Issuing
Lender and the Agent.  Such assignments
shall be effected on the Business Day which is not more than three (3) Business
Days following the Buyout Acceptance Notice by the execution, by the Revolving
Credit Lenders, the Swing Lender, the Issuing Lender and the Agent of an
Assignment and Acceptance in exchange for the payment, in immediately available
funds, of the amount of the Obligations in respect of the Borrowings as of the
date on which such assignment is made.  The
Tranche B Lenders’ buy out right under this Section 2.3(g) may only
be exercised completely with respect to all of the Obligations of the Revolving
Credit Lenders, the Swing Lender, the Issuing Lender and the Agent.  Following the exercise of the buy out right
under this Section 2.3(g), the Tranche B Lenders shall (i) not
waive or alter the Revolving Credit Lenders Prepayment Premium or alter the
payment provisions of Section 2.5, and (ii) upon receipt of any
amounts on account of the Revolving Credit Lenders Prepayment Premium, pay such
amounts to the Agent of the account of the Revolving Credit Lenders in
accordance with their Pro Rata Share as of the date of the buy out under this Section 2.3(g).


 


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2.4                               The Tranche C Facility.


 


(a)                                  Commitment to Lend. 
Subject to the terms and conditions set forth in this Agreement, each
Tranche C Lender severally agrees to make a Tranche C Loan to the Borrowers on
the Closing Date in an amount equal to such Tranche C Lender’s Pro Rata Share
of the Tranche C Loan as provided on Schedule 1.1(a).


 


(b)                                 Tranche C Loan Notes. 
The Tranche C Loan shall be evidenced by separate promissory notes of
the Borrowers in substantially the form of Exhibit N-3 hereto (the “Tranche
C Notes”), dated the Closing Date, and completed with appropriate
insertions.  The Borrowers irrevocably
authorize the Tranche C Lenders to make or cause to be made a notation on the
Tranche C Lender’s records reflecting the original principal amount of such Tranche
C Lender’s portion of the Tranche C Loan and, at or about the time of the
Tranche C Lender’s receipt of any principal payment on the Tranche C Loan Note,
an appropriate notation on such Tranche C Lender’s records reflecting such
payment.  The aggregate unpaid amount set
forth on each Tranche C Lender’s records shall be prima facie evidence of the
principal amount thereof owed and unpaid on such Tranche C Lender’s Tranche C
Loan, but the failure to record, or any error in so recording, any such amount
on such Tranche C Lender’s records shall not affect the obligations of the
Borrowers hereunder or under any Tranche C Loan Notes to make payments of
principal of and interest on the Tranche C Loan Notes when due.


 


(c)                                  Tranche C Early Termination Fee.


 


(i)                                     If the Borrowers prepay the Tranche C Loan
in whole or in part prior to the first anniversary of the Closing Date, then,
in view of the impracticality and extreme difficulty of ascertaining the actual
amount of damages to any of the Tranche C Lenders or profits lost by any of the
Tranche C Lenders as a result thereof, and by mutual agreement of the parties
as to a reasonable estimation and calculation of the lost profits or damages of
any Tranche C Lender, the Borrowers shall pay a premium with respect to each
such prepayment (the “Tranche C Early Termination Fee”) in an amount
equal to the greater of (x) the Yield Revenue less the aggregate amount
of the Tranche C Commitment Fee less any Tranche C Interest actually
paid by the Borrowers or accrued on the Tranche C Loan during the period from
the Closing Date through the first anniversary of the Closing Date (in the
event of any partial prepayment hereunder, such prepayments shall be applied to
this clause (x) on a pro rata basis) and (y) one and one half percent (1
1⁄2%) of the aggregate amount of any prepayments of the Tranche C Term Loans.


 


(ii)                                  In the event that the Tranche C Lenders
provide a subordinate credit facility to the Borrowers upon the Borrowers’
emergence from the bankruptcy proceedings, the Tranche C Early Termination Fee
due hereunder shall be waived; provided that the Tranche C Lenders shall
be under no obligation to provide any such credit facility to the Borrowers and
any such credit facility shall be on terms and conditions satisfactory to the
Tranche C Lenders.


 


(d)                                 Interest on Tranche C Loan. 
Except as otherwise provided in Section 2.7(c), interest and
fees on the outstanding amount of the Tranche C Loan shall be compounded
monthly and shall bear interest until repaid at the rate per annum equal to the
Tranche C Interest Rate (the “Tranche C Interest”).  The Tranche C Interest shall be payable in
kind monthly in arrears on the first Business Day of each month and payable in
cash on the Termination Date.  Following
the occurrence and during the continuance of any Event of Default interest
shall accrue and shall be payable in kind on the unpaid principal balance of
the Tranche C Loan at the aggregate of the Tranche C Loan Interest Rate plus four and one half percent (4 1⁄2%),
compounded monthly.


 


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(e)                                  Payments on Account of Tranche C Loan. 
Subject to Section 3.5(a), the Borrowers authorize the Agent
to determine and to pay over directly to the Tranche C Lenders any and all
amounts due and payable from time to time under or on account of the Tranche C
Loan as advances under the Borrowings it being understood, however, that the
authorization of the Agent provided in this Section 2.4(e) shall
not excuse the Borrowers from fulfilling their obligations to the Tranche C
Lenders on account of the Tranche C Loan nor place any obligation on the Agent
to do so.  The Agent shall provide prompt
advice to the Borrowers of any amount which is so paid over by the Agent to the
Tranche C Lenders pursuant to this Section 2.4(e). The Borrowers
shall not be entitled to any credit, rebate or repayment of any fee or
assessment previously earned by the Tranche C Lenders pursuant to this
Agreement notwithstanding any termination of this Agreement or suspension or
termination of the Agent’s and any Lender’s respective obligation to make loans
and advances hereunder.


 


(f)                                    Buyout Option. 
At any time during any Buyout Exercise Period in respect of the Tranche
C Loan and upon the instruction of the Tranche C Lenders, the Tranche C Lenders
shall give the Agent a Buyout Acceptance Notice of its intent to cause the
assignment to the Tranche C Lenders, or their respective designees, by the
Revolving Credit Lenders and the Tranche B Lenders, of all right, title and
interest in, to, arising under or in respect of all Obligations of the
Revolving Credit Lenders, the Swing Lender, the Issuing Lender, the Tranche B
Lenders and the Agent.  Such assignments
shall be effected on the Business Day which is not more than three (3) Business
Days following the Buyout Acceptance Notice by the execution, by the Revolving
Credit Lenders, the Swing Lender, the Issuing Lender, the Tranche B Lenders and
the Agent of an Assignment and Acceptance in exchange for the payment, in
immediately available funds, of the amount of the Obligations owing to the
Revolving Credit Lenders, the Swing Lender, the Issuing Lender, the Tranche B
Lenders and the Agent as of the date on which such assignment is made.  The Tranche C Lenders’ buy out right under
this Section 2.4(f) may only be exercised completely with respect
to all of the Obligations of the Revolving Credit Lenders, the Swing Lender,
the Issuing Lender, the Tranche B Lenders and the Agent.


 


(g)                                 Tranche C Fees. 
Borrowers shall pay to the Tranche C Lenders, the Tranche C Commitment
Fee.


 


2.5                               Payments and Reduction of
Total Commitment.


 


(a)                                  Termination Date. 
Borrowers promise to pay on the Termination Date, and there shall become
absolutely due and payable on the Termination Date, all of the Advances and
Tranche B Term Loans and Tranche C Term Loans outstanding on such date,
together with any and all accrued and unpaid interest thereon and any fees or
other amounts due in connection therewith.


 


(b)                                 Mandatory.  Concurrently
with the receipt by the Borrowers of Net Cash Proceeds received by the Borrowers
from any asset dispositions (other than asset dispositions permitted pursuant
to Section 8.4), casualties and condemnations and equity issuances
(other than the Wattles Equity Investment), the Borrowers shall pay to the
Agent, for the accounts of the Lenders, an amount equal to one hundred percent
(100%) of such proceeds in the manner set forth in Section 2.5(d).  Upon receipt thereof, the Total Commitment
shall also be permanently reduced by such amount.


 


(c)                                  Payments by Borrowers Generally.


 


(i)                                     Except as otherwise expressly provided
herein and subject to Section 3.5(a), all payments by Borrowers
hereunder and under the Notes shall be made to Agent’s Account for the account
of the Lender Group and shall be made in immediately available funds,


 


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no later than 2:00
p.m. (Boston, Massachusetts time) on the date specified herein.  Any payment received by Agent later than 2:00
p.m. (Boston, Massachusetts time), shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day.


 


(ii)                                  Unless Agent receives notice from
Administrative Borrower prior to the date on which any payment is due to the
Lenders that Borrowers will not make such payment in full as and when required,
Agent may assume that Borrowers have made (or will make) such payment in full
to Agent on such date in immediately available funds and Agent may (but shall
not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such
Lender.  If and to the extent Borrowers
do not make such payment in full to Agent on the date when due, each Lender severally
shall repay to Agent on demand such amount distributed to such Lender, together
with interest thereon at the Defaulting Lender Rate for each day from the date
such amount is distributed to such Lender until the date repaid.


 


(d)                                 Apportionment and Application of Payments.


 


(i)                                   Except as otherwise
provided with respect to Defaulting Lenders and except as otherwise provided in
the Loan Documents (including letter agreements between Agent and individual
Lenders), and subject to Section 3.5(a), aggregate principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Obligations to which such payments relate
held by each Lender) and payments of fees and expenses (other than fees or
expenses that are for Agent’s separate account, after giving effect to any
letter agreements between Agent and individual Lenders) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee relates. 
All payments shall be remitted to Agent and all such payments and all
proceeds of Accounts or other Collateral received by Agent (other than (i)
payments received while no Default or Event of Default has occurred and is
continuing and (ii) which relate to the payment of principal or interest of
specific Obligations or which relate to the payment of specific fees or
expenses), shall be applied as follows:


 


(A)                              first, to pay any
Lender Group Expenses then due to Agent under the Loan Documents, until paid in
full,


 


(B)                                second, to pay
any Lender Group Expenses then due to the Revolving Credit Lenders and the
Tranche B Lenders under the Loan Documents, on a ratable basis, until paid in
full,


 


(C)                                third, to pay
any fees then due to Agent (for its separate account, after giving effect to
any letter agreements between Agent and the individual Lenders) under the Loan
Documents, until paid in full,


 


(D)                               fourth, to pay
any fees then due to any or all of the Revolving Credit Lenders (after giving
effect to any letter agreements between Agent and individual Revolving Credit
Lenders) under the Loan Documents, on a ratable basis, until paid in full,


 


(E)                                 fifth, to pay
interest due in respect of all Agent Advances, until paid in full,


 


41





















 


(F)                                 sixth, ratably
to pay interest due in respect of the Advances (other than Agent Advances), and
the Swing Loans, until paid in full,


 


(G)                                seventh, to pay
the principal of all Agent Advances, until paid in full,


 


(H)                               eighth, to pay
the principal of all Swing Loans, until paid in full


 


(I)                                    ninth, at
Agent’s election (which election Agent agrees will not be made if an
Overadvance would be created thereby), to pay amounts then due and owing by
Administrative Borrower or its Subsidiaries in respect of Priority Bank
Products, until paid in full,


 


(J)                                   tenth, to pay
the principal of all Advances, until paid in full,


 


(K)                               eleventh, to
Agent, to be held by Agent, for the ratable benefit of Issuing Lender and those
Lenders having a Commitment, as cash collateral in an amount up to 105% of the
then extant Letter of Credit Usage (or if any such cash collateral is subject
to the Carve Out, then the amount thereof shall be increased by the amount of
the Carve Out to which it is subject), until paid in full,


 


(L)                                 twelfth, to
Agent, to be held by Agent, for the benefit of Wells Fargo or its Affiliates,
as applicable, as cash collateral in an amount up to the amount of the Bank
Products Reserves established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until Administrative Borrower’s
and its Subsidiaries’ Obligations in respect of the then extant Bank Products
have been paid in full or the cash collateral amount has been exhausted,


 


(M)                            thirteenth, to pay
any Tranche B Commitment Fee then due to any or all of the Tranche B Lenders
under the Loan Documents, on a ratable basis, until paid in full,


 


(N)                               fourteenth,
ratably to pay Tranche B Interest due in respect of the Tranche B Loan, until
paid in full,


 


(O)                               fifteenth,
ratably to pay the outstanding principal amount of the Tranche B Loan, until
paid in full,


 


(P)                                 sixteenth, to
pay the Revolving Credit Lenders Prepayment Premium then due, until paid in
full,


 


(Q)                               seventeenth,
ratably to pay the Tranche B Early Termination Fee due and any other fees due
to the Tranche B Lenders, until paid in full,


 


(R)                                eighteenth, to
pay any other Obligations (including, without limitation, in respect of Bank
Products owed by the Administrative Borrower or its Subsidiaries) due and owing
to the Agent, the Swingline Lender, the Issuing Lender, the Revolving Credit
Lenders and the Tranche B Lenders, until paid in full,


 


(S)                                 nineteenth, to
pay any Tranche C Commitment Fee then due to any or all of the Tranche C
Lenders under the Loan Documents, on a ratable basis, until paid in full,


 


42





















 


(T)                                twentieth,
ratably to pay Tranche C Interest due in respect of the Tranche C Loan, until
paid in full,


 


(U)                               twenty-first,
ratably to pay the outstanding principal amount of the Tranche C Loan, until
paid in full,


 


(V)                                twenty-second,
to pay any other Obligations due, until paid in full, and


 


(W)                           twenty-third, to
Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under applicable law.


 


(ii)                                Agent promptly shall
distribute to each Lender, pursuant to the applicable wire instructions
received from each Lender, in writing, such funds as it may be entitled to
receive, subject to a Settlement delay as provided in Section 2.2(i).


 


(iii)                             In each instance, so long
as no Default or Event of Default has occurred and is continuing, this Section shall
not be deemed to apply to any payment by Borrowers specified by Borrowers to be
for the payment of specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.


 


(iv)                            In the event of a direct
conflict between the priority provisions of this Section and other
provisions contained in any other Loan Document, it is the intention of the
parties hereto that such priority provisions in such documents shall be read
together and construed, to the fullest extent possible, to be in concert with
each other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section shall control and govern.


 


(v)                               If at any time any
payment made on account of Obligations relating to the Borrowings is rescinded
or must otherwise be returned by a Revolving Credit Lender by reason of the
Liens on the Collateral which secured the Obligations relating to the
Borrowings also securing the Obligations relating to the Tranche B Loan and/or
the Tranche C Loan (a “Revolving Undersecured Finding”), then each of
the Tranche B Lenders and the Tranche C Lenders, as applicable, shall make such
dispositions and arrangements with the other Lenders with respect to the amount
of such returned payment to the extent relating to a Revolving Undersecured
Finding, whether by way of distribution, pro
tanto, assignment of claims, subrogation or otherwise, as shall
result in each Lender receiving the amount that such Lender would have received
had the returned payment never been made and the priorities set forth in this Section been
followed.


 


2.6                               Overadvances.  Subject to Section 2.2(i),
if, at any time or for any reason, the amount of Obligations (other than
Obligations with respect to Bank Products) owed by Borrowers to the Lender
Group pursuant to Sections 2.1 and 2.15 is greater than either
the Dollar limitations set forth in Section 2.1 or 2.15, (an
“Overadvance”), Borrowers immediately shall pay to Agent, in cash, the
amount of such excess, which amount shall be used by Agent to reduce the
Obligations in accordance with the priorities set forth in Section 2.5(d).  In addition, Borrowers hereby promise to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group as and when due and payable under the terms
of this Agreement and the other Loan Documents.


 


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2.7                               Interest Rates and Letter of Credit Fee: Rates,
Payments, and Calculations.


 


(a)                                  Interest Rates. 
Except as provided in clause (c) below, all Obligations (except
for undrawn Letters of Credit and Obligations relating to Bank Products) that
have been charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof as follows (i) if the relevant Obligation
is an Advance that is a LIBOR Rate Loan, each LIBOR Rate Loan shall bear
interest at a per annum rate equal to the LIBOR Rate plus the Applicable Margin
with respect to LIBOR Rate Loans as in effect from time to time, (ii) if the
relevant Obligation is an Advance that is a Base Rate Loan, each Base Rate Loan
shall bear interest at a per annum rate equal to the Base Rate plus the Applicable
Margin with respect to Base Rate Loans as in effect from time to time, (iii) if
the relevant Obligation is in respect of a Tranche B Loan, as provided in Section 2.3
above and (iv) if the relevant Obligation is in respect of a Tranche C Loan, as
provided in Section 2.4 above. 
If on any day an Advance is outstanding with respect to which notice has
not been delivered to Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Advance shall bear interest at the rate of interest otherwise
applicable to Base Rate Loans.


 


(b)                                 Letter of Credit Fee. 
Borrowers shall pay Agent (for the ratable benefit of the Revolving
Credit Lenders with a Revolving Credit Commitment, subject to any letter
agreement between Agent and individual Revolving Credit Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.15(f)) which shall accrue at a rate equal to 1.5% per
annum times the Daily Balance of the undrawn amount of all outstanding Letters
of Credit.


 


(c)                                  Default Rate. 
Upon the occurrence and during the continuation of an Event of Default
(and at the election of Agent or the Required Revolving Credit Lenders),


 


(i)                                     all Obligations (except for undrawn
Letters of Credit and except as provided in Section 2.3(d) and Section 2.4(d))
that have been charged to the Loan Account pursuant to the terms hereof shall
bear interest on the Daily Balance thereof at a per annum rate equal to two and
one-half percentage points (2.50%) above the per annum rate otherwise
applicable hereunder, and


 


(ii)                                  the Letter of Credit fee provided for in Section 2.7(b)
above shall be increased to two and one-half percentage points (2.50%) above
the per annum rate otherwise applicable hereunder.


 


(d)                                 Payment.  Interest,
Letter of Credit fees, and all other fees payable hereunder shall be due and
payable, in arrears, on the first day of each month at any time that
Obligations or Commitments are outstanding.  Borrowers hereby authorize Agent, from time to
time, without prior notice to Borrowers, to charge such interest and fees, all
Lender Group Expenses (as and when incurred), the charges, commissions, fees,
and costs provided for in Section 2.15(f) (as and when accrued or
incurred), the fees and costs provided for in Section 2.14 (as and
when accrued or incurred), and all other payments as and when due and payable
under any Loan Document to Borrowers’ Loan Account, which amounts thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder.  Any
interest not paid when due shall be compounded by being charged to Borrowers’
Loan Account and shall thereafter constitute Advances hereunder and shall
accrue interest at the rate then applicable to Advances that are Base Rate
Loans hereunder.  For the avoidance of
doubt, payments hereunder shall be subject to Section 2.5(c) at all
times.


 


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(e)                                  Computation. 
All computations of interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.  In the event the
Base Rate is changed from time to time hereafter, the rates of interest
hereunder based upon the Base Rate automatically and immediately shall be
increased or decreased by an amount equal to such change in the Base Rate.


 


(f)                                    Intent to Limit Charges to Maximum Lawful
Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.  Borrowers and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.


 


2.8                               Credit Card Collections.


 


(a)                                  Annexed
hereto is Schedule 2.8, which describes all arrangements to which
each Borrower is a party with respect to the payment to such Borrower of the
proceeds of all credit card charges for sales by such Borrower as of the
Closing Date.


 


(b)                                 Payment
of all credit card charges submitted by Borrowers to Credit Card Processors
identified on Schedule 2.8 or otherwise and any other amounts
payable to Borrowers by such Credit Card Processors shall be directed to such
account as may be designated by Agent pursuant to Credit Card Agreements.
Borrowers shall not attempt to change any direction or designation set forth in
the Credit Card Agreements regarding payment of charges without the prior
written consent of Agent.


 


2.9                               Depository Accounts.  Annexed hereto is Schedule 2.9
which describes all present depository accounts of each Borrower, which schedule includes,
with respect to each such depository account (i) the name and address of that
depository; (ii) the account number(s) maintained with such depository; and
(iii) a contact person at such depository. 
In addition, the following depository accounts have been or will be
established (and are referred to herein):


 


(a)                                  The
Concentration Account, the contents of which shall constitute Collateral and
Negotiable Collateral.


 


(b)                                 The
Designated Account, the contents of which shall constitute Collateral and
Negotiable Collateral.


 


2.10                        Collections.


 


(a)                                  All
Collections constitute Collateral and proceeds of Collateral and shall be held
in trust by Borrowers for Agent; shall not be commingled with any of Borrowers’
other funds; and shall be deposited and/or transferred daily only to the
Concentration Account.


 


45





















 


(b)                                 Administrative
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less than daily (and whether or not there is then an outstanding balance in the
Loan Account) of all Collections, including, without limitation:


 


(i)                                     The
then contents of each depository account (other than the Designated Account),
each such transfer to be net of any minimum balance, not to exceed $1,500, as
may be required to be maintained in the subject depository account by the bank
at which such depository account is maintained.


 


(ii)                                  The
proceeds of all credit card charges not otherwise provided for pursuant hereto.


 


(c)                                  Agent
shall transfer to the Designated Account any surplus (attributable to
Borrowers) in excess of the Obligations in the Loan Account remaining after the
application to the Obligations referred to in Section 2.13 (less
those amounts which are to be netted out as provided therein).


 


(d)                                 Upon
terms and conditions set forth in the Blocked Account Agreement, all
Collections received in the Concentration Account shall be wired into the Agent
Account.


 


2.11                        Crediting Payments; Float Charge.  The receipt of any payment item by Agent
(whether from transfers to Agent by the depository account banks or
Concentration Account Bank or otherwise) shall be applied provisionally to
reduce the Obligations outstanding under Section 2.1, but shall not
be considered a payment on account unless such payment item is a wire transfer
of immediately available federal funds made to the Agent’s Account or unless
and until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent’s Account on a Business Day on or before 2:00 p.m.
(Boston, Massachusetts time).  If any
payment item is received into the Agent’s Account on a non-Business Day or
after 2:00 p.m. (Boston, Massachusetts time) on a Business Day, it shall be
deemed to have been received by Agent as of the opening of business on the
immediately following Business Day. 
Agent shall be entitled to charge Borrowers for one-half of one (1)
Business Day of ‘clearance’ or ‘float’ at the rate applicable to LIBOR Rate
Loans under Section 2.7 on all Collections that are received by
Agent (regardless of whether forwarded by the depository account banks or the
Concentration Account Bank to Agent). 
This across-the-board one-half of one (1) Business Day clearance or
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of the financing of Borrowers and shall apply
irrespective of whether or not there are any outstanding monetary Obligations;
the effect of such clearance or float charge being the equivalent of charging
one-half of one (1) Business Day of interest on such Collections.  The parties acknowledge and agree that the
economic benefit of the foregoing provisions of this Section 2.11
shall be for the exclusive benefit of Agent.


 


2.12                        Designated Account.  Agent is authorized to make the Advances, and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to Section 2.7(d).  Administrative Borrower agrees to establish
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Advances requested by Borrowers and
made by Agent or the Lenders hereunder. 
Unless otherwise agreed by Agent and


 


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Administrative Borrower,
any Advance, Agent Advance, or Swing Loan requested by Borrowers and made by
Agent or the Revolving Credit Lenders hereunder shall be made to the Designated
Account.


 


2.13                        Maintenance of Loan Account;
Statements of Obligations.  Agent
shall maintain an account on its books in the name of Borrowers (the “Loan
Account”) on which Borrowers will be charged with all Advances (including
Agent Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrowers or for Borrowers’ account, the Letters of Credit issued by Issuing
Lender for Borrowers’ account, and with all other payment Obligations hereunder
or under the other Loan Documents, including accrued interest, fees and
expenses, and Lender Group Expenses.  In
accordance with Section 2.11, the Loan Account will be credited
with all payments received by Agent from Borrowers or for Borrowers’ account,
including all amounts received in the Agent’s Account from any depository
account bank or Concentration Account Bank. 
Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrowers and the Lender
Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in any such statements.


 


2.14                        Fees. 
Borrowers shall pay to Agent the following fees and charges, which fees
and charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter) and shall be apportioned among the
Revolving Credit Lenders in accordance with the terms of letter agreements between
Agent and individual Revolving Credit Lenders:


 


(a)                                  Unused
Line Fee. On the first day of each month during the term of this Agreement,
an unused line fee in the amount equal to 0.25% per annum times the result of
(A) the aggregate Revolving Credit Commitments of all Revolving Credit Lenders,
less (B) the sum of (x) the average Daily Balance of Advances that were
outstanding during the immediately preceding month, plus (y) the average
Daily Balance of the Letter of Credit Usage during the immediately preceding
month.


 


(b)                                 Servicing
Fees. The Agent’s Monitoring Fee and all other fees set forth in the Agent
Fee Letter.


 


2.15                        Letters of Credit.


 


(a)                                  On
the Closing Date, each “L/C” issued and outstanding under the Prepetition
Credit Agreement shall automatically and without any action on the part of any
Person, be deemed to be an L/C under this Agreement.


 


(b)                                 Subject
to the terms and conditions of this Agreement, the Issuing Lender agrees to
issue letters of credit for the account of Borrowers (each, an “L/C”) or
to purchase participations or execute indemnities or reimbursement obligations
(each such undertaking, an “L/C Undertaking”) with respect to letters of
credit issued by an Underlying Issuer (as of the Closing Date, the prospective
Underlying Issuer is to be Wells Fargo) for the account of Borrowers.  To request the issuance of an L/C or an L/C
Undertaking (or the amendment, renewal, or extension of an outstanding L/C or
L/C Undertaking), Administrative Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in
advance of the requested date of issuance, amendment, renewal, or extension) a
notice requesting the issuance of an L/C or L/C Undertaking, or identifying the
L/C or L/C


 


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Undertaking to be
amended, renewed, or extended, the date of issuance, amendment, renewal, or
extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or of the Underlying Letter of Credit, as applicable), and such other
information as shall be necessary to prepare, amend, renew, or extend such L/C
or L/C Undertaking.  If requested by the
Issuing Lender, Borrowers also shall be an applicant under the application with
respect to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking.  The Issuing Lender shall
have no obligation to issue a Letter of Credit if any of the following would
result after giving effect to the requested Letter of Credit:


 


(i)                                     the
Letter of Credit Usage would exceed the lesser of (A) the Borrowing Base less
the then extant amount of outstanding Advances and (B) the Tranche B Borrowing
Base less the then extant amount of outstanding Advances, or


 


(ii)                                  the
Letter of Credit Usage would exceed $5,000,000, or


 


(iii)                               the
Letter of Credit Usage would exceed any specified amount approved by the Bankruptcy
Court solely for L/Cs in the Final Order or the Interim Order, whichever is
then in effect; or


 


(iv)                              the
Letter of Credit Usage would exceed the aggregate Revolving Credit Commitments
of all Revolving Credit Lenders less the then extant amount of outstanding
Advances.


 


Borrowers and the Lender
Group acknowledge and agree that certain Underlying Letters of Credit may be
issued to support letters of credit that already are outstanding as of the
Closing Date.  Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to July 14, 2006 and all such Letters of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable
in Dollars.  If Issuing Lender is
obligated to advance funds under a Letter of Credit, Borrowers immediately
shall reimburse such L/C Disbursement to Issuing Lender by paying to Agent an
amount equal to such L/C Disbursement not later than 2:00 p.m., Boston,
Massachusetts time, on the date that such L/C Disbursement is made, if
Administrative Borrower shall have received written or telephonic notice of
such L/C Disbursement prior to 1:00 p.m., Boston, Massachusetts time, on such
date, or, if such notice has not been received by Administrative Borrower prior
to such time on such date, then not later than 2:00 p.m., Boston, Massachusetts
time, on (i) the Business Day that Administrative Borrower receives such
notice, if such notice is received prior to 1:00 p.m., Boston, Massachusetts
time, on the date of receipt, and, (ii) in the absence of such reimbursement,
the L/C Disbursement immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances that are Base Rate Loans under Section 2.7.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting Advance.  Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Revolving Credit Lenders
have made payments pursuant to Section 2.15(d) to reimburse the
Issuing Lender, then to such Revolving Credit Lenders and the Issuing Lender as
their interest may appear.


 


(c)                                  Promptly
following receipt of a notice of L/C Disbursement pursuant to Section 2.15(b),
each Revolving Credit Lender with a Revolving Credit Commitment agrees to fund
its Pro Rata


 


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Share of any Advance
deemed made pursuant to the foregoing subsection on the same terms and
conditions as if Borrowers had requested such Advance and Agent shall promptly
pay to Issuing Lender the amounts so received by it from the Revolving Credit
Lenders.  By the issuance of a Letter of
Credit (or an amendment to a Letter of Credit increasing the amount thereof)
and without any further action on the part of the Issuing Lender or the
Revolving Credit Lenders with Revolving Credit Commitments, the Issuing Lender
shall be deemed to have granted to each Revolving Credit Lender with a
Revolving Credit Commitment, and each Revolving Credit Lender with a Revolving
Credit Commitment shall be deemed to have purchased, a participation in each
Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit, and each such Revolving Credit Lender
agrees to pay to Agent, for the account of the Issuing Lender, such Revolving
Credit Lender’s Pro Rata Share of any payments made by the Issuing Lender under
such Letter of Credit.  In consideration
and in furtherance of the foregoing, each Revolving Credit Lender with a
Revolving Credit Commitment hereby absolutely and unconditionally agrees to pay
to Agent, for the account of the Issuing Lender, such Revolving Credit Lender’s
Pro Rata Share of each L/C Disbursement made by the Issuing Lender and not
reimbursed by Borrowers on the date due as provided in clause (a) of
this Section, or of any reimbursement payment required to be refunded to
Borrowers for any reason.  Each Revolving
Credit Lender with a Revolving Credit Commitment acknowledges and agrees that
its obligation to deliver to Agent, for the account of the Issuing Lender, an
amount equal to its respective Pro Rata Share pursuant to this Section 2.15(c)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3
hereof.  If any such Revolving Credit
Lender fails to make available to Agent the amount of such Revolving Credit
Lender’s Pro Rata Share of any payments made by the Issuing Lender in respect
of such Letter of Credit as provided in this Section, Agent (for the account of
the Issuing Lender) shall be entitled to recover such amount on demand from
such Revolving Credit Lender together with interest thereon at the Defaulting
Lender Rate until paid in full.


 


(d)                                 Each
Borrower hereby agrees to indemnify, save, defend, and hold the Revolving
Credit Lenders harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Revolving Credit Lenders arising out
of or in connection with any Letter of Credit; provided, however,
that no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability that is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Revolving Credit
Lenders.  Each Borrower agrees to be
bound by the Underlying Issuer’s regulations and interpretations of any
Underlying Letter of Credit or by Issuing Lender’s interpretations of any L/C
issued by Issuing Lender to or for such Borrower’s account, even though this
interpretation may be different from such Borrower’s own, and each Borrower
understands and agrees that the Revolving Credit Lenders shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrowers’ instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto.  Each Borrower understands that the L/C
Undertakings may require Issuing Lender to indemnify the Underlying Issuer for
certain costs or liabilities arising out of claims by Borrowers against such
Underlying Issuer.  Each Borrower hereby
agrees to indemnify, save, defend, and hold the Revolving Credit Lenders
harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Revolving Credit Lenders under
any L/C Undertaking as a result of the Revolving Credit Lenders’
indemnification of any Underlying Issuer; provided, however, that
no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability that is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Revolving Credit
Lenders.


 


(e)                                  Each
Borrower hereby authorizes and directs any Underlying Issuer to deliver to the
Issuing Lender all instruments, documents, and other writings and property
received by such


 


49





















 


Underlying Issuer
pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender’s instructions with respect to all matters arising in connection
with such Underlying Letter of Credit and the related application.


 


(f)                                    Any
and all charges, commissions, fees, and costs incurred by the Issuing Lender
relating to Underlying Letters of Credit shall be Lender Group Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrowers
to Agent for the account of the Issuing Lender; it being acknowledged and
agreed by each Borrower that, as of the Closing Date, the issuance charge
imposed by the prospective Underlying Issuer is 0.50% per annum times the face
amount of each Underlying Letter of Credit, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.


 


(g)                                 If
by reason of (i) any change in any applicable law, treaty, rule, or regulation
or any change in the interpretation or application thereof by any Governmental
Authority, or (ii) compliance by the Underlying Issuer or the Revolving Credit
Lenders with any direction, request, or requirement (irrespective of whether
having the force of law) of any Governmental Authority or monetary authority
including, Regulation D of the Federal Reserve Board as from time to time in
effect (and any successor thereto):


 


(i)                                     any
reserve, deposit, or similar requirement is or shall be imposed or modified in
respect of any Letter of Credit issued hereunder, or


 


(ii)                                  there
shall be imposed on the Underlying Issuer or the Revolving Credit Lenders any
other condition regarding any Underlying Letter of Credit or any Letter of
Credit issued pursuant hereto;


 


and the result of the foregoing is to increase,
directly or indirectly, the cost to the Revolving Credit Lenders of issuing,
making, guaranteeing, or maintaining any Letter of Credit or to reduce the
amount receivable in respect thereof by the Revolving Credit Lenders, then, and
in any such case, Agent may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrowers shall pay on demand such amounts as
Agent may specify to be necessary to compensate the Revolving Credit Lenders
for such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at the rate
then applicable to Base Rate Loans hereunder. 
The determination by Agent of any amount due pursuant to this Section 2.15,
as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.


 


2.16                        LIBOR Option.


 


(a)                                  Interest
and Interest Payment Dates.  In lieu of having interest charged at the rate
based upon the Base Rate, Borrowers shall have the option (the “LIBOR Option”)
to have interest on all or a portion of the Advances be charged at the LIBOR
Rate.  Interest on LIBOR Rate Loans shall
be payable on the earliest of (i) the last day of the Interest Period
applicable thereto, (ii) the occurrence of an Event of Default in consequence
of which the Required Revolving Credit Lenders or Agent on behalf thereof elect
to accelerate the maturity of the Obligations, (iii) termination of this
Agreement pursuant to the terms hereof, or (iv) the first day of each month
that such LIBOR Rate Loan is outstanding. 
On the last day of each applicable Interest Period, unless
Administrative Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically


 


50





















 


shall convert to the rate
of interest then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has
occurred and is continuing, Borrowers no longer shall have the option to request
that Advances bear interest at the LIBOR Rate and Agent shall have the right to
convert the interest rate on all outstanding LIBOR Rate Loans to the rate then
applicable to Base Rate Loans hereunder.


 


(b)                                 LIBOR
Election.


 


(i)                                     Administrative
Borrower may, at any time and from time to time, so long as no Event of Default
has occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 2:00 p.m. (Boston, Massachusetts time) at least three (3)
Business Days prior to the commencement of the proposed Interest Period (the “LIBOR
Deadline”).  Notice of Administrative
Borrower’s election of the LIBOR Option for a permitted portion of the Advances
and an Interest Period pursuant to this Section 2.16 shall be made
by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR
Deadline, or by telephonic notice received by Agent before the LIBOR Deadline
(to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior
to 5:00 p.m. (Boston, Massachusetts time) on the same day.  Promptly upon its receipt of each such LIBOR
Notice, Agent shall provide a copy thereof to each of the Revolving Credit
Lenders having a Revolving Credit Commitment.


 


(ii)                                  Each
LIBOR Notice shall be irrevocable and binding on Borrowers.  In connection with each LIBOR Rate Loan, each
Borrower shall indemnify, defend, and hold Agent and the Revolving Credit
Lenders harmless against any loss, cost, or expense incurred by Agent or any
Revolving Credit Lender as a result of (a) the payment of any principal of any
LIBOR Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of
any LIBOR Rate Loan other than on the last day of the Interest Period
applicable thereto, or (c) the failure to borrow, convert, continue or prepay
any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, and expenses, collectively, “Funding
Losses”).  Funding Losses shall, with
respect to Agent or any Revolving Credit Lender, be deemed to equal the amount
determined by Agent or such Revolving Credit Lender to be the excess, if any,
of (i) the amount of interest that would have accrued on the principal amount
of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that
would have been applicable thereto, for the period from the date of such event
to the last day of the then current Interest Period therefor (or, in the case
of a failure to borrow, convert or continue, for the period that would have
been the Interest Period therefor), minus (ii) the amount of interest
that would accrue on such principal amount for such period at the interest rate
which Agent or such Revolving Credit Lender would be offered were it to be
offered, at the commencement of such period, Dollar deposits of a comparable
amount and period in the London interbank market.  A certificate of Agent or a Revolving Credit
Lender delivered to Administrative Borrower setting forth any amount or amounts
that Agent or such Revolving Credit Lender is entitled to receive pursuant to
this Section 2.16 shall be conclusive absent manifest error.


 


(iii)                               Borrowers
shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000
in excess thereof.


 


(c)                                  Prepayments.  Borrowers may prepay LIBOR Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans
are prepaid on any date that is not the last day of the


 


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Interest Period
applicable thereto, including as a result of any automatic prepayment through
the required application by Agent of proceeds of Collections in accordance with
Section 2.5(c) or for any other reason, including early termination
of the term of this Agreement or acceleration of the Obligations pursuant to
the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the
Revolving Credit Lenders and their Participants harmless against any and all
Funding Losses in accordance with clause (b) above.


 


(d)                                 Special
Provisions Applicable to LIBOR Rate.


 


(i)                                     The
LIBOR Rate may be adjusted by Agent with respect to any Revolving Credit Lender
on a prospective basis to take into account any additional or increased costs
to such Revolving Credit Lender of maintaining or obtaining any eurodollar
deposits or increased costs due to changes in applicable law occurring
subsequent to the commencement of the then applicable Interest Period,
including changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor),
excluding the Reserve Percentage, which additional or increased costs would
increase the cost of funding loans bearing interest at the LIBOR Rate.  In any such event, the affected Revolving
Credit Lender shall give Administrative Borrower and Agent notice of such a
determination and adjustment and Agent promptly shall transmit the notice to
each other Revolving Credit Lender and, upon its receipt of the notice from the
affected Revolving Credit Lender, Administrative Borrower may, by notice to
such affected Revolving Credit Lender (y) require such Revolving Credit Lender
to furnish to Administrative Borrower a statement setting forth the basis for
adjusting such LIBOR Rate and the method for determining the amount of such
adjustment, or (z) repay the LIBOR Rate Loans with respect to which such adjustment
is made (together with any amounts due under clause (b)(ii) above).


 


(ii)                                  In
the event that any change in market conditions or any law, regulation, treaty,
or directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion of
any Revolving Credit Lender, make it unlawful or impractical for such Revolving
Credit Lender to fund or maintain LIBOR Rate Loans or to continue such funding
or maintaining, or to determine or charge interest rates at the LIBOR Rate,
such Lender shall give notice of such changed circumstances to Agent and
Administrative Borrower and Agent promptly shall transmit the notice to each
other Revolving Credit Lender and (y) in the case of any LIBOR Rate Loans of
such Revolving Credit Lender that are outstanding, the date specified in such
Revolving Credit Lender’s notice shall be deemed to be the last day of the
Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate
Loans of such Revolving Credit Lender thereafter shall accrue interest at the
rate then applicable to Base Rate Loans, and (z) Borrowers shall not be
entitled to elect the LIBOR Option until such Revolving Credit Lender
determines that it would no longer be unlawful or impractical to do so.


 


(e)                                  No
Requirement of Matched Funding. 
Anything to the contrary contained herein notwithstanding, neither
Agent, nor any Revolving Credit Lender, nor any of their Participants, is
required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.  The provisions of this Section shall
apply as if each Revolving Credit Lender or its Participants had match funded
any Obligation as to which interest is accruing at the LIBOR Rate by acquiring
eurodollar deposits for each Interest Period in the amount of the LIBOR Rate
Loans.


 


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2.17                        Capital Requirements.  If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies,
or any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), will have the effect of reducing the return on such Lender’s
or such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof.  Following receipt of such notice, Borrowers
agree to pay such Lender on demand the amount of such reduction of return of
capital as and when such reduction is determined, payable within 90 days after
presentation by such Lender of a statement in the amount and setting forth in
reasonable detail such Lender’s calculation thereof and the assumptions upon
which such calculation was based (which statement shall be deemed true and
correct absent manifest error).  In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.


 


2.18                        Joint and Several Liability
of Borrowers; Rights of Contribution.


 


(a)                                  Each
of Borrowers is accepting joint and several liability hereunder and under the
other Loan Documents in consideration of the financial accommodations to be
provided by the Agent and the Lenders under this Agreement, for the mutual
benefit, directly and indirectly, of each of Borrowers and in consideration of
the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.


 


(b)                                 Each
of Borrowers, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including, without limitation, any Obligations
arising under this Section 2.18), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each Person composing Borrowers without preferences or
distinction among them.


 


(c)                                  If
and to the extent that any of Borrowers shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Persons composing Borrowers will make such payment with respect to, or
perform, such Obligation.


 


(d)                                 The
Obligations of each Person composing Borrowers under the provisions of this Section 2.18
constitute the absolute and unconditional, full recourse Obligations of each
Person composing Borrowers enforceable against each such Borrower to the full
extent of its properties and assets, irrespective of the validity, regularity
or enforceability of this Agreement or any other circumstances whatsoever.


 


(e)                                  Except
as otherwise expressly provided in this Agreement, each Person composing
Borrowers hereby waives notice of acceptance of its joint and several
liability, notice of any Advances or Letters of Credit issued under or pursuant
to this Agreement, notice of the occurrence of any Default, Event of Default,
or of any demand for any payment under this Agreement, notice of any action at
any time taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any


 


53





















 


requirement of diligence
or to mitigate damages, any and all suretyship defenses and, generally, to the
extent permitted by applicable law, all demands, notices and other formalities
of every kind in connection with this Agreement (except as otherwise provided
in this Agreement).  Each Person
composing Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Person
composing Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by Agent or Lenders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Person composing Borrowers.  Without limiting the generality of the
foregoing, each of Borrowers assents to any other action or delay in acting or
failure to act on the part of any Agent or Lender with respect to the failure
by any Person composing Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this Section 2.18
afford grounds for terminating, discharging or relieving any Person composing
Borrowers, in whole or in part, from any of its Obligations under this Section 2.18,
it being the intention of each Person composing Borrowers that, so long as any
of the Obligations hereunder remain unsatisfied, the Obligations of such Person
composing Borrowers under this Section 2.18 shall not be discharged
except by performance and then only to the extent of such performance.  The Obligations of each Person composing
Borrowers under this Section 2.18 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Person
composing Borrowers or any Agent or Lender. 
The joint and several liability of the Persons composing Borrowers hereunder
shall continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, constitution or place
of formation of any of the Persons composing Borrowers or any Agent or Lender.  Each Person composing a Borrower, in the
event applicable, hereby waives the application of Sections 13-50-102 and
13-50-103 of the Colorado Revised Statutes.


 


(f)                                    Each
Person composing Borrowers represents and warrants to Agent and Lenders that
such Borrower is currently informed of the financial condition of Borrowers and
of all other circumstances which a diligent inquiry would reveal and which bear
upon the risk of nonpayment of the Obligations. 
Each Person composing Borrowers further represents and warrants to Agent
and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents.  Each
Person composing Borrowers hereby covenants that such Borrower will continue to
keep informed of Borrowers’ financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Obligations.


 


(g)                                 Each
of the Persons composing Borrowers waives all rights and defenses arising out
of an election of remedies by the Agent or any Lender, even though that
election of remedies, such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed the Agent’s, or such
Lender’s rights of subrogation and reimbursement against such Borrower by the
operation of Section 580(d) of the California Code of Civil Procedure or
otherwise.


 


(h)                                 Each
of the Persons composing Borrowers waives all rights and defenses that such
Borrower may have because the Obligations are secured by Real Property
Collateral.  This means, among other
things and subject to the notice requirements of the Orders:


 


54





















 


(i)                                     Agent
and Lenders may collect from such Borrower without first foreclosing on any
Real or Personal Property Collateral pledged by Borrowers.


 


(ii)                                  If
Agent or any Lender forecloses on any Real Property Collateral pledged by
Borrowers:


 


A.                                   The amount of the
Obligations may be reduced only by the price for which that Collateral is sold
at the foreclosure sale, even if the Collateral is worth more than the sale
price.


 


B.                                     Agent and Lenders may
collect from such Borrower even if Agent or Lenders, by foreclosing on the Real
Property Collateral, has destroyed any right such Borrower may have to collect
from the other Borrowers.


 


This is an unconditional and
irrevocable waiver of any rights and defenses such Borrower may have because
the Obligations are secured by Real Property Collateral.  These rights and defenses include, but are
not limited to, any rights or defenses based upon Section 580a, 580b, 580d
or 726 of the California Code of Civil Procedure.


 


(i)                                     Each
Borrower states and acknowledges that: (i) pursuant to this Agreement,
Borrowers desire to utilize their borrowing potential on a consolidated basis
to the same extent possible if they were merged into a single corporate entity;
(ii) it has determined that it will benefit specifically and materially from
the advances of credit contemplated by this Agreement; (iii) it is both a
condition precedent to the obligations of the Lender Group and a desire of the
Borrowers that each Borrower execute and deliver to the Lender Group this
Agreement; and (iv) Borrowers have requested and bargained for the structure
and terms of and security for the Advances contemplated by this Agreement.


 


(j)                                     It
is the intent of each Borrower that the indebtedness, obligations and liability
hereunder of no one of them be subject to challenge on any basis.  Accordingly, as of the date hereof, the
liability of each Borrower under this Section 2.18, together with
all of its other liabilities to all Persons as of the date hereof and as of any
other date on which a transfer is deemed to occur by virtue of this Agreement,
calculated in amount sufficient to pay its probable net liabilities on its
existing Indebtedness as the same become absolute and matured (“Dated
Liabilities”) is, and is to be, less than the amount of the aggregate of a
fair valuation of its property as of such corresponding date (“Dated Assets”).  To this end, each Borrower under this Section 2.18
(i) grants to and recognizes in each other Borrower, ratably, rights of
subrogation and contribution in the amount, if any, by which the Dated Assets
of such Borrower, but for the aggregate of subrogation and contribution in its
favor recognized herein, would exceed the Dated Liabilities of such Borrower
and (ii) acknowledges receipt of and recognizes its right to subrogation and
contribution ratably from each other Borrower in the amount, if any by which
the Dated Liabilities of such Borrower, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the Dated Assets
of such Borrower under this Section 2.18.  In recognizing the value of the Dated Assets
and the Dated Liabilities, it is understood that Borrowers will recognize, to
at least the same extent of their aggregate recognition of liabilities
hereunder, their rights to subrogation and contribution hereunder.  It is a material objective of this Section 2.18
that each Borrower recognizes rights to subrogation and contribution rather
than be deemed to be insolvent (or in contemplation thereof) by reason of any
arbitrary interpretation of its joint and several obligations hereunder.


 


(k)                                  The
provisions of this Section 2.18 are made for the benefit of the
Agent, the Lenders and their respective successors and assigns, and may be
enforced by it or them from time to time


 


55





















 


against any or all of the
Persons composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.18
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by any
Agent or Lender upon the insolvency, bankruptcy or reorganization of any of the
Persons composing Borrowers, or otherwise, the provisions of this Section 2.18
will forthwith be reinstated in effect, as though such payment had not been
made.


 


(l)                                     Each
of the Persons composing Borrowers hereby agrees that it will not enforce any
of its rights of contribution or subrogation against the other Persons
composing Borrowers with respect to any liability incurred by it hereunder or
under any of the other Loan Documents, any payments made by it to the Agent or
the Lenders with respect to any of the Obligations or any collateral security
therefor until such time as all of the Obligations have been paid in full in
cash.  Any claim which any Borrower may have
against any other Borrower with respect to any payments to any Agent or Lender
hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.


 


(m)                               Each
of the Persons composing Borrowers hereby agrees that, after the occurrence and
during the continuance of any Default or Event of Default, the payment of any
amounts due with respect to the indebtedness owing by any Borrower to any other
Borrower is hereby subordinated to the prior payment in full in cash of the
Obligations.  Each Borrower hereby agrees
that after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash.  If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for the Agent, and the Borrower shall deliver any such
amounts to the Agent for application to the Obligations in accordance with Section 2.5(d).


 


3.                                      CONDITIONS; TERM OF AGREEMENT.


 


3.1                               Conditions Precedent to the
Effectiveness of this Agreement.  The effectiveness of this Agreement is
subject to the fulfillment, to the satisfaction of Agent, of each of the
conditions precedent set forth below:


 


(a)                                  the
Closing Date shall occur on or before the date which is five days after the
entry of the Interim Order in the Cases;


 


(b)                                 Agent
shall have filed Uniform Code Financing Statements in each Borrower’s state of
incorporation;


 


56





















 


(c)                                  Agent
shall have received each of the following documents, in form and substance
satisfactory to Agent, duly executed, and each such document shall be in full
force and effect:


 


(i)                                     the
Notes,


 


(ii)                                  the
Agent Fee Letter, and


 


(iii)                               the
Tranche B Lenders Fee Letter.


 


(d)                                 Agent
shall have received a certificate from the Secretary of each Borrower attesting
to the resolutions of such Borrower’s Board of Directors authorizing its
execution, delivery, and performance of this Agreement and the other Loan
Documents to which such Borrower is a party and authorizing specific officers
of such Borrower to execute the same;


 


(e)                                  Agent
shall have received copies of each Borrower’s Governing Documents, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of
such Borrower;


 


(f)                                    Agent
shall have received a certificate of status with respect to each Borrower,
dated within 25 days of the Closing Date, such certificate to be issued by the
appropriate officer of the jurisdiction of organization of such Borrower, which
certificate shall indicate that such Borrower is in good standing in such
jurisdiction;


 


(g)                                 Agent
shall have received certificates of status with respect to each Borrower whose
chief executive office is located in a jurisdiction different from its
jurisdiction of organization, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of such Borrower), which
certificates shall indicate that such Borrower is in good standing in such
jurisdiction;


 


(h)                                 Agent
shall have received a certificate of insurance, together with the endorsements
thereto, as are required by Section 7.9, the form and substance of
which shall be satisfactory to the Agent;


 


(i)                                     Agent
shall have received an opinion of Borrowers’ counsel, addressed to the Agent
and the Lenders, in form and substance reasonably satisfactory to Agent;


 


(j)                                     Agent
and each Tranche B Lender shall have received the initial Borrowing Base
Certificate dated as of the Closing Date;


 


(k)                                  all
other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Agent;


 


(l)                                     Borrowers
shall pay all Lender Group Expenses incurred in connection with the
transactions evidenced by this Agreement;


 


(m)                               the
Agent shall have received the Arrangement Fee;


 


(n)                                 the
Agent shall have received the Agent’s Commitment Fee for the pro rata account
of the Revolving Credit Lenders;


 


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(o)                                 the
Agent shall have received the Agent’s Monitoring Fee;


 


(p)                                 Tranche
B Lenders shall have received, pro rata, the Tranche B Commitment Fee;


 


(q)                                 Tranche
C Lenders shall have received, pro rata, the Tranche C Commitment Fee;


 


(r)                                    The
Lenders shall have received the Budget, which identifies the thirteen (13) week
cash flow projection of the Parent and its Subsidiaries for the 13-week period
immediately after the Closing Date and which shall be in form and substance
satisfactory to the Agent;


 


(s)                                  Borrowers
shall have received not less than $4,400,000 from the issuance of common
equity, which issuance shall be on terms and conditions satisfactory to the
Agent;


 


(t)                                    Borrowers
shall have Excess Availability of not less than $20,000,000;


 


(u)                                 Borrowers
shall have, contemporaneously with the closing of this Agreement, paid in full
all “Obligations” (as defined in the Prepetition Credit Agreement) due under
the Prepetition Credit Agreement; and


 


(v)                                 All
cash management and other “first day orders” submitted for entry on or about
the date of the commencement of the Cases shall be in form and substance
reasonably satisfactory to the Agent, unless the Agent shall approve thereof in
writing.


 


3.2                               Conditions Precedent to all
Extensions of Credit. 
The obligation of the Lender Group (or any member thereof) to make any
Advance (or to extend any other credit hereunder) shall be subject to the
following conditions precedent:


 


(a)                                  the
representations and warranties contained in this Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of the
date of such extension of credit, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date);


 


(b)                                 no
Default or Event of Default shall have occurred and be continuing on the date
of such extension of credit, nor shall either result from the making thereof;


 


(c)                                  no
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against any Borrower, Agent, any
Lender, or any of their Affiliates;


 


(d)                                 no
Material Adverse Change shall have occurred;


 


(e)                                  Agent
and each Tranche B Lender shall have received the most recent Borrowing Base
Certificate to be delivered to Agent in accordance with Section 7.2;
and


 


(f)                                    the
Bankruptcy Court shall have entered the Interim Order or the Final Order and
such Order shall be in full force and effect and shall not have been amended,
modified or stayed without the written consent of the Agent, or reversed.  If either the Interim Order or the Final
Order is the subject


 


58





















 


of a pending appeal in
any respect, none of such Orders, the making of the Loans, the issuance,
extension or renewal of any L/C, or the performance by any of the Borrowers of
any of the Obligations shall be the subject of a presently effective stay
pending appeal.  The Borrowers, the Agent
and the Lenders shall be entitled to rely in good faith upon each of the Orders
notwithstanding objection thereto or appeal therefrom by any interested
party.  The Borrowers, the Agent and the
Lenders shall be permitted and, at the election of the Agent, required to
perform their respective obligations in compliance with this Agreement,
notwithstanding any such objection or appeal unless the relevant Order has been
stayed by a court of competent jurisdiction. 
The Agent may, however, defer any obligations of the Lenders to make any
Loans or of the Issuing Bank to issue any L/C until such time as no objection
to or appeal from the Interim Order or, as the case may be, the Final Order is
pending and the period for lodging any objection or appeal has expired.


 


3.3                               Term.  This Agreement shall become effective upon
the execution and delivery hereof by Borrowers, Agent, and the Lenders and
shall continue in full force and effect for a term ending on the Termination
Date.  The foregoing notwithstanding and
subject to Section 10.1, (i) upon the election of the Required
Revolving Credit Lenders and, in addition, (ii) following the Standstill
Termination Date, the Required Tranche B Lenders, the Agent shall have the
right to terminate its obligations under this Agreement immediately and without
notice upon the occurrence and during the continuation of an Event of Default.


 


3.4                               Effect of Termination.  On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to any outstanding Letters of Credit and Obligations with respect
to Bank Products) immediately shall become due and payable without notice or
demand (including (a) either (i) providing cash collateral to be held by Agent
for the benefit of those Revolving Credit Lenders with a Revolving Credit
Commitment in an amount equal to 105% of the then extant Letter of Credit
Usage; provided, however, if any such cash collateral is subject
to the Carve Out, then the amount thereof shall be increased by the amount of
the Carve Out to which it is subject, or (ii) causing the original Letters of
Credit to be returned to the Issuing Lender, and (b) providing cash collateral
to be held by Agent for the benefit of Wells Fargo or its Affiliates with
respect to the then extant Obligations with respect to Bank Products).  No termination of this Agreement, however,
shall relieve or discharge Borrowers of their duties, Obligations, or covenants
hereunder and the Agent’s Liens in the Collateral shall remain in effect until
all Obligations have been fully and finally discharged and the Lender Group’s
obligations to provide additional credit hereunder have been terminated.  When this Agreement has been terminated and
all of the Obligations have been fully and finally discharged and the Lender
Group’s obligations to provide additional credit under the Loan Documents have
been terminated irrevocably, the Agent’s Liens shall automatically terminate
and be of no further force and effect, and Agent will, at Borrowers’ sole
expense, execute and deliver any UCC termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent’s Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.


 


3.5                               Payments of Principal of
Tranche B Loan and Tranche C Loan; Early Termination by Borrowers.


 


(a)                              Repayment of Tranche B Loan and Tranche C
Loan.  (i)  Except
as required by Section 2.5(d), Borrowers may not make any principal
payments on account (X) of the Tranche B Loan and Tranche B Early Termination
Fee until all Obligations (other than the Revolving Credit Lenders Prepayment
Premium) owing to the Agent, the Issuing Lender, the Swingline Lender and


 


59





















 


each Revolving Credit Lender have been paid in full and the Commitments
have been terminated and (Y) the Tranche C Loan until the Borrowers’
Obligations to the Agent, the Issuing Lender, the Swingline Lender, each
Revolving Credit Lender and each Tranche B Lender have been paid in full and
the Commitments have been terminated.


 


(ii)                              The Borrowers jointly and severally
promise to pay on the Termination Date, and there shall become absolutely due and
payable on the Termination Date, the Tranche B Loan and the Tranche C Loan
outstanding on such date, together with any and all accrued and unpaid interest
thereon.


 


(b)  Early
Termination by Borrowers.  Borrowers have the option, at any time
upon 15 days prior written notice by Administrative Borrower to Agent, to
terminate this Agreement by paying to Agent, for the benefit of the Lender
Group, in cash, the Obligations (including (a) either (i) providing cash
collateral to be held by Agent for the benefit of those Revolving Credit
Lenders with a Revolving Credit Commitment in an amount equal to 105% of the
then extant Letter of Credit Usage, provided, however, if any
such cash collateral is subject to the Carve Out, then the amount thereof shall
be increased by the amount of the Carve Out to which it is subject, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender and
(b) providing cash collateral to be held by the Agent for the benefit of Wells
Fargo or its Affiliates with respect to the then extant Obligations with
respect to Bank Products), in full, together with, to the extent due, the
Revolving Credit Lenders Prepayment Premium (to be allocated based upon letter
agreements between Agent and individual Required Revolving Credit Lenders) and
the Tranche B Early Termination Fee.  If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section 3.5, then the Commitments shall
terminate and Borrowers shall be obligated to repay the Obligations (including
(a) either (i) providing cash collateral to be held by Agent for the benefit of
those Revolving Credit Lenders with a Revolving Credit Commitment in an amount
equal to 105% of the then extant Letter of Credit Usage or such increased amount
described above, or (ii) causing the original Letters of Credit to be returned
to the Issuing Lender and (b) providing cash collateral to be held by the Agent
for the benefit of Wells Fargo or its Affiliates with respect to the then
extant Obligations with respect to Bank Products, in full, together with, to
the extent due, the Revolving Credit Lenders Prepayment Premium and the Tranche
B Early Termination Fee, on the date set forth as the date of termination of
this Agreement in such notice).  In the
event of the termination of this Agreement and repayment of the Obligations at
any time prior to the Termination Date, for any other reason, including,
subject to Section 10.1, (a) termination upon the election of the
Required Revolving Credit Lenders or Required Tranche B Lenders, as applicable,
to terminate after the occurrence of an Event of Default, (b) foreclosure and
sale of Collateral, (c) sale of the Collateral, or (d) confirmation of a
Reorganization Plan, then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to the Lender Group or
profits lost by the Lender Group as a result of such early termination, and by
mutual agreement of the parties as to a reasonable estimation and calculation
of the lost profits or damages of the Lender Group, Borrowers shall pay the
Revolving Credit Lenders Prepayment Premium to Agent (to be allocated based
upon letter agreements between Agent and individual Revolving Credit Lenders)
and the Tranche B Early Termination Fee, pro rata, to the Tranche B Lenders,
measured as of the date of such termination.


 


3.6                               Revolving Credit Lenders Prepayment Premium.  In
the event that the Agent is the lead arranger and sole book runner for a credit
facility to the Borrowers upon the Borrowers’ emergence from the bankruptcy
proceedings, the Revolving Credit Lenders Prepayment Premium Fee shall be


 


60





















 


waived; provided
that the Agent shall be under no obligation to provide any such credit facility
to the Borrowers and any such credit facility shall be on terms and conditions
satisfactory to the Agent.


 


4.                                      PRIORITY AND COLLATERAL SECURITY.


 


4.1                               Superpriority Claims and
Collateral Security.  Each of the
Borrowers hereby represents, warrants and covenants upon entry of the Interim
Order that all Obligations:


 


(a)                                      subject
to the Carve Out, shall at all times constitute a Superpriority Claim having
priority, pursuant to Sections 364(c)(1) of the Bankruptcy Code, senior to any
claims of any entity, including without limitation, any claims under Sections
503, 507, 1113 and 1114 of the Bankruptcy Code, and


 


(b)                                     subject
to the Carve Out, pursuant to Sections 364(c)(2), (c)(3) and (d) of the
Bankruptcy Code shall at all times be secured by:


 


(i) a first
priority perfected Lien in all presently owned and hereafter acquired assets of
the Borrowers, wherever located, whether now owned or leased or hereafter
acquired or leased or arising, whether realty, personalty or fixtures,
including without limitation,


 


A.                                   Accounts,


 


B.                                     Books,


 


C.                                     “Goods”
(as defined in the Code), including Equipment,


 


D.                                    General
Intangibles,


 


E.                                      Inventory,


 


F.                                      Investment
Property,


 


G.                                     Negotiable
Collateral,


 


H.                                    Real
Property Collateral,


 


I.                                         commercial
tort claims set forth on Schedule C-3 and any hereafter arising
commercial tort claims,


 


J.                                        health
care insurance receivables,


 


K.                                    money
or other assets of each such Borrower that now or hereafter come into the
possession, custody, or control of any member of the Lender Group, and


 


L.                                      all
supporting obligations and all proceeds and products (whether tangible or
intangible) of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, “Goods”


 


61





















 


(as defined in the Code), Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property Collateral, commercial tort claims, health care receivables, money,
deposit accounts, other assets or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof;


 


(ii) the
proceeds of avoidance actions under Section 547 of the Bankruptcy Code, to
the extent that the Carve Out funded the estates’ expenses in investigating
such actions, commencing such actions, and conducting the litigation and/or
settlement discussion that resulted in the receipt of such proceeds,


 


(iii) proceeds
of any avoidance actions brought pursuant to Section 549 of the Bankruptcy
Code to recover any post-petition transfer of collateral, (iv) the Borrowers’
rights under Section 506(c) of the Bankruptcy Code and the proceeds
thereof, (v) any unencumbered assets of the Borrowers, and


 


(vi) all
capital stock and other equity interests in the Borrowers (other than the
Parent) and their Subsidiaries, senior in priority to all other security
interests and liens.


 


The security interest will not be subject to Section 551 of the
Bankruptcy Code nor shall the Collateral be charged pursuant to Section 506(c)
of the Bankruptcy Code.


 


4.2                               No Discharge; Survival of Claims.  Each of the Borrowers agrees that (a) the
Obligations shall not be discharged by the entry of an order confirming a
Reorganization Plan (and each of the Borrowers pursuant to Section 1141(d)(4)
of the Bankruptcy Code, hereby waives any such discharge), (b) the
Superpriority Claim granted to the Agents and Lenders pursuant to the Orders
and the Liens granted to the Agent, for the benefit of the Agent and the
Lenders, pursuant to the Orders and the Security Documents, shall not be
affected in any manner by the entry of an order confirming a Reorganization
Plan and (c) none of the Borrowers shall propose or support any Reorganization
Plan, in each case, that is not conditioned upon the payment in full in cash,
on or prior to the Termination Date, of all of the Obligations, and, with
respect to Obligations arising pursuant to Section 11 or Section 12
after such date, thereafter for the payment in full of such Obligations in cash
when due and payable.


 


5.                                      CREATION OF SECURITY INTEREST.


 


5.1                               Grant of Security Interest.  Each Borrower hereby grants to Agent, for the
benefit of the Lender Group and any other holder of Obligations, a continuing
security interest in, and so pledges and assigns to Agent, for the benefit of
Lender Group and any other holder of Obligations, all of its right, title, and
interest in all currently existing and hereafter acquired or arising Collateral
in order to secure prompt repayment of any and all of the Obligations in
accordance with the terms and conditions of the Loan Documents and in order to
secure prompt performance by Borrowers of each of their covenants and duties
under the Loan Documents.  The Agent’s
Liens in and to the Collateral shall attach to all Collateral without further
act on the part of Agent or Borrowers. 
Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, except for transactions permitted by Section 8.4,
Borrowers have no authority, express or implied, to dispose of any item or
portion of the Collateral.


 


5.2                               Authorization to File
Financing Statements.  Each Borrower hereby irrevocably authorizes
Agent at any time and from time to time to file in any filing office in any
Code jurisdiction any


 


62





















 


initial financing
statements and amendments thereto that (a) indicate the Collateral (i) as all
assets of such Borrower or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Code or such jurisdiction, or (ii) as being of an equal or lesser scope
or with greater detail, and (b) provide any other information required by part
5 of Article 9 of the Code or such other jurisdiction for the sufficiency
or filing office acceptance of any financing statement or amendment, including
(i) whether such Borrower is an organization, the type of organization and any
organizational identification number issued to such Borrower and, (ii) in the
case of a financing statement filed as a fixture filing, a sufficient
description of Real Property Collateral to which the Collateral relates.  Each Borrower agrees to furnish any such information
to Agent promptly upon request.  Each
Borrower also ratifies its authorization for Agent to have filed in any Code
jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.


 


5.3                               Negotiable Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Agent’s security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Agent, shall endorse and deliver physical possession of
such Negotiable Collateral to Agent.


 


5.4                               Collection of Accounts,
General Intangibles, and Negotiable Collateral.  Subject to any notice requirements contained
in the Orders, at any time after the occurrence and during the continuation of
an Event of Default Agent or Agent’s designee may (a) notify Account Debtors of
Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Agent or that Agent has a security interest therein, or (b) collect
the Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account.  Each Borrower agrees that it will hold in
trust for the Lender Group, as the Lender Group’s trustee, any Collections that
it receives and immediately will deliver said Collections to Agent in their
original form as received by the applicable Borrower.


 


5.5                               Other Actions.  Further to
insure the attachment, perfection and first priority of, and the ability of the
Agent to enforce Agent’s Liens, each Borrower agrees, in each case at the
Borrowers’ expense, to take the following actions with respect to the following
Collateral and without limitation on the Borrowers’ other obligations contained
in this Agreement:


 


(a)                                  Investment
Property.  If any Borrower shall, now
or at any time hereafter, hold or acquire any certificated securities, such
Borrower shall forthwith endorse, assign and deliver the same to Agent,
accompanied by such instruments of transfer or assignment duly executed in
blank as Agent may from time to time specify. 
If any securities now or hereafter acquired by any Borrower are
uncertificated and are issued to such Borrower or its nominee directly by the
issuer thereof, such Borrower shall immediately notify Agent thereof and, at
Agent’s request and option, either (i) cause the issuer to enter into a Control
Agreement, or (ii) pursuant to an agreement in form and substance satisfactory
to Agent, arrange for Agent to become the registered owner of the
securities.  If any securities, whether
certificated or uncertificated, or other investment property now or hereafter
acquired by any Borrower are held by such Borrower or its nominee through a
securities intermediary or commodity intermediary, such Borrower shall
immediately notify Agent thereof and, at Agent’s request and option, either (i)
cause such securities intermediary or (as the case may be) commodity
intermediary to enter into a Control Agreement, or (ii) pursuant to an
agreement in form and substance satisfactory to Agent, in the case of financial
assets or other investment property held through a securities intermediary,
arrange for Agent to become the entitlement holder with respect to such
investment property, with such Borrower being permitted, only with the written
consent of Agent, to exercise rights to withdraw or otherwise deal with


 


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such investment
property.  The provisions of this
paragraph shall not apply to any financial assets credited to a securities
account for which Agent is the securities intermediary.


 


(b)                                 Collateral
in the Possession of a Bailee.  In addition to the requirements under Section 8.16,
if any Collateral is, now or at any time hereafter, in the possession of a
bailee, the Borrowers shall promptly notify Agent thereof and, at Agent’s
request and option, shall promptly obtain a Collateral Access Agreement.


 


(c)                                  Electronic
Chattel Paper and Transferable Records. 
If any Borrowers, now or at any time hereafter, holds or acquires an
interest in any electronic chattel paper or any “transferable record,” as that
term is defined in Section 201 of the federal Electronic Signatures in
Global and National Commerce Act, or in §16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, such Borrower shall
promptly notify Agent thereof and, at the request and option of Agent, shall
take such action as Agent may reasonably request to vest in Agent control,
under §9-105 of the Code, of such electronic chattel paper or control under Section 201
of the federal Electronic Signatures in Global and National Commerce Act or, as
the case may be, §16 of the Uniform Electronic Transactions Act, as so in
effect in such jurisdiction, of such transferable record.


 


(d)                                 Letter-of-credit
Rights.  If any Borrower is, now or
at any time hereafter, a beneficiary under a letter of credit, such Borrower
shall promptly notify Agent thereof and, at the request and option of Agent,
such Borrower shall, pursuant to an agreement in form and substance reasonably
satisfactory to Agent, use its best efforts to either (i) arrange for the
issuer and any confirmer of such letter of credit to consent to an assignment
to Agent of the proceeds of the letter of credit or (ii) arrange for Agent to
become the transferee beneficiary of the letter of credit, with Agent agreeing,
in each case, that the proceeds of the letter of credit are to be applied in
accordance with Section 2.5(c).


 


(e)                                  Commercial
Tort Claims.  If
any Borrower shall, now or at any time hereafter, hold or acquire a commercial
tort claim, such Borrower shall immediately notify Agent in a writing signed by
the Administrative Borrower of the particulars thereof and grant to Agent, for
the benefit of the Lender Group, in such writing a security interest therein
and in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance reasonably satisfactory to Agent.


 


(f)                                    Copyrights.  Each Borrower covenants, promptly following
such Borrower’s acquisition thereof, to provide to Agent like identifications
of all material copyrights and other rights in and to all material
copyrightable works hereafter acquired by such Borrower, to register such
copyrights with the Copyright Office (unless such Borrower determines that such
copyright is not material to the conduct of its business) and to execute and
deliver to Agent, for the benefit of Lender Group, supplemental Copyright
Security Agreements, in form and substance satisfactory to Agent, for the
benefit of Lender Group, modified to reflect such subsequent acquisitions and
registrations.


 


5.6                               Delivery of Additional
Documentation Required; Lien Perfection.  Each Borrower further agrees, upon the
request of Agent and at Agent’s option, to take any and all other actions as
Agent may reasonably determine to be necessary or useful for the attachment,
perfection and first priority of, and the ability of Agent to enforce, Agent’s
Lien in any and all of the Collateral, including (a) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the Code, to the extent, if any, that such Borrower’s signature thereon
is required therefor, (b) causing Agent’s name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, Agent’s
security interest in such Collateral, (c) complying with any provision of any
statute, regulation or treaty of the United


 


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States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, Agent’s security
interest in such Collateral, (d) use its best efforts obtaining governmental
and other third party waivers, consents and approvals, in form and substance
reasonably satisfactory to Agent, including any consent of any licensor or
other person obligated on Collateral, (e) obtaining waivers or consents from
mortgagees and landlords or lessors in form and substance satisfactory to
Agent, provided that to the extent the Borrower is unable to obtain
waivers from landlords or lessors with respect to any (i) distribution center,
Inventory at such location shall not be deemed Eligible Inventory and (ii)
location where any Person benefits from a Lien or trust over Collateral as set
forth in Section 2.1(c), the Agent may establish Reserves Against
Availability as set forth in Section 2.1(c), (f) creating and
perfecting Liens in favor of Agent in any Real Property Collateral acquired
after the Closing Date, and (g) taking all actions under any earlier versions
of the Code or under any other law, as reasonably determined by Agent to be
applicable in any relevant Code or other jurisdiction, including any foreign
jurisdiction.  Each Borrower hereby
ratifies its authorization for Agent to have filed in any jurisdiction any like
additional documents if filed prior to the date hereof.  The parties agree that a photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.  In addition, on such periodic basis as Agent
shall require, Borrowers shall (a) provide Agent with a report of all new
patentable, copyrightable, or trademarkable materials acquired or generated by
Borrowers during the prior period (unless such Borrower determines that such
patentable, copyrightable, or trademarkable materials are not material to the
conduct of its business), (b) cause all patents, copyrights, and trademarks
acquired or generated by Borrowers that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in
a manner sufficient to impart constructive notice of Borrowers’ ownership
thereof (unless such Borrower determines that such patent, copyright or
trademark is not material to the conduct of its business), and (c) cause to be
prepared, executed, and delivered to Agent supplemental schedules to the
applicable Loan Documents to identify such patents, copyrights, and trademarks
as being subject to the security interests created thereunder and otherwise
execute and deliver at Agent’s request appropriate security documents with
respect to such patents, copyrights and trademarks (in each case, unless such
Borrower determines that such patent, copyright or trademark is not material to
the conduct of its business).


 


5.7                               Power of Attorney.  Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent’s officers, employees, or
agents designated by Agent) as such Borrower’s true and lawful attorney, with
power, subject to any notice requirements contained in the Orders, to (a) if
such Borrower refuses to, or fails timely to execute and deliver any of the
documents described Section 5.6, sign the name of such Borrower on
any of the documents described in Section 5.6, (b) at any time that
an Event of Default has occurred and is continuing or Agent, in its reasonable
credit judgment as an asset-based lender, deems itself insecure, sign such
Borrower’s name on any invoice or bill of lading relating to the Collateral,
drafts against Account Debtors, or notices to Account Debtors, (c) send
requests for verification of Accounts, (d) at any time that an Event of Default
has occurred or is continuing endorse such Borrower’s name on any Collection
item that may come into the Lender Group’s possession, (e) at any time that an
Event of Default has occurred and is continuing or Agent in its reasonable
credit judgment as an asset based lender deems itself insecure, notify the post
office authorities to change the address for delivery of Borrowers’ mail to an
address designated by Agent, to receive and open all mail addressed to
Borrowers, and to retain all mail relating to the Collateral and forward all
other mail to Borrowers, (f) at any time that an Event of Default has occurred
and is continuing or Agent in its reasonable credit judgment as an asset based
lender deems itself insecure, make, settle, and adjust all claims under such
Borrower’s policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (g) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts, chattel paper, or General


 


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Intangibles directly with
Account Debtors, for amounts and upon terms that Agent determines to be
reasonable, and Agent may cause to be executed and delivered any documents and
releases that Agent determines to be necessary. 
The appointment of Agent as each Borrower’s attorney, and each and every
one of its rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group’s obligations to extend credit hereunder are terminated.


 


5.8                               Right to Inspect.  Agent (through any of its respective
officers, employees, or agents) shall have the right, from time to time
hereafter to inspect the Books and to check, test, and appraise the Collateral
in order to verify Borrowers’ financial condition or the amount, quality,
value, condition of, or any other matter relating to, the Collateral.


 


5.9                               Control Agreements.  Each Borrower agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under Section 8.17
and, if to another securities intermediary, unless each of the applicable
Borrower, Agent, and the substitute securities intermediary have entered into a
Control Agreement, if such a Control Agreement is required by Agent.  No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other Investment
Property shall be modified by Borrowers without the prior written consent of
Agent.  Upon the occurrence and during
the continuance of an Event of Default, Agent may notify any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof
to the Agent’s Account.  No arrangement
contemplated hereby or by any Control Agreement or Blocked Account Agreement
shall be modified by Borrower without the prior written consent of Agent.


 


6.                                      REPRESENTATIONS AND WARRANTIES.


 


In order to induce the
Lender Group to enter into this Agreement, each Borrower makes the following
representations and warranties to the Lender Group which shall be true,
correct, and complete, in all material respects, as of the date hereof, and
shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:


 


6.1                               No Encumbrances.  Each Borrower (a) owns all of the assets
reflected in the consolidated balance sheet of the Parent and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date), subject to no Liens or other rights of others, except Permitted
Liens and (b) has good and indefeasible title to all of the property comprising
the Collateral and the Real Property Collateral, free and clear of Liens except
for Permitted Liens.  None of the
Collateral constitutes, or is the proceeds of, “farm products” as defined in
§9-102(a)(34) of the Code.  No Account
Debtor or other Person obligated on any of the Collateral that is a
governmental authority covered by the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral has any
single Account in an amount equal to or greater than $25,000 and all Accounts
from governmental authorities are equal to or less than $100,000 in the
aggregate.  No Borrower holds any
commercial tort claim except as indicated on its Perfection Certificates and
set forth on Schedule C-3 hereto (as may be updated from time to
time with the written consent of the Agent). 
All other information set forth on the Perfection Certificates
pertaining to the Collateral is accurate and complete as of the date
hereof.  There has been no change in any
of such


 


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information since the
date on which the Perfection Certificates were signed by Borrowers except as
otherwise permitted under this Agreement.


 


6.2                               [Intentionally Omitted]


 


6.3                               Eligible Inventory.  All Eligible Inventory is of good and
merchantable quality, and to the knowledge of Borrower free from defects.


 


6.4                               Equipment.  All of the Equipment is used or held for use
in Borrowers’ business and is fit for such purposes.


 


6.5                               Location of Inventory and
Equipment.  The Inventory and Equipment are not stored
with a bailee, warehouseman, or similar party (without Agent’s prior written
consent) and are located only at the locations identified on Schedule 6.16
(as may be updated from time to time with the written consent of the Agent) or
otherwise permitted by Section 7.10 (as may be updated from time to
time with the written consent of the Agent).


 


6.6                               Inventory Records.  Each Borrower keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.


 


6.7                               Location of Chief Executive
Office; FEIN; Organizational I.D. Number; Names; Status.  The chief executive office of each Borrower
is located at the address indicated in Schedule 6.7, each
Borrower’s FEIN is identified in Schedule 6.7 (as may be updated
from time to time with the written consent of the Agent), each Borrower’s state
of organization, Type of Organization and Organizational I.D. Number is set
forth on Schedule 6.7 (as may be updated from time to time with the
written consent of the Agent), and the exact legal name of each Borrower is set
forth on Schedule 6.7 (as may be updated from time to time with the
written consent of the Agent).


 


6.8                               Due Organization and
Qualification; Subsidiaries


 


(a)                                  Each
Borrower is duly organized and existing and in good standing under the laws of
the jurisdiction of its organization, has all requisite corporate (or the
equivalent company) power to own its property and conduct its business as now
conducted and as presently contemplated and qualified to do business in any
state where the failure to be so qualified reasonably could be expected to have
a Material Adverse Change.


 


(b)                                 Set
forth on Schedule 6.8(b) (as may be updated from time to time with
the written consent of the Agent), is a complete and accurate description of
the authorized capital Stock of each Borrower, by class, and, as of the Closing
Date, a description of the number of shares of each such class that are issued
and outstanding.  Other than as described
on Schedule 6.8(b), there are no subscriptions, options, warrants,
or calls relating to any shares of each Borrower’s capital Stock, including any
right of conversion or exchange under any outstanding security or other
instrument.  No Borrower is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.


 


(c)                                  Set
forth on Schedule 6.8(c) (as may be updated from time to time with
the written consent of the Agent), is a complete and accurate list of each
Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization, their Type of Organization, their Organizational I.D.
Number and their exact legal name; (ii) the number of shares of each class of


 


67





















 


common and preferred
Stock authorized for each of such Subsidiaries; and (iii) the number and the
percentage of the outstanding shares of each such class owned directly or
indirectly by the applicable Borrower. 
All of the outstanding capital Stock of each such Subsidiary has been
validly issued and is fully paid and non-assessable.


 


(d)                                 Except
as set forth on Schedule 6.8(c) (as may be updated from time to
time with the written consent of the Agent), there are no subscriptions,
options, warrants, or calls relating to any shares of any Borrower’s
Subsidiaries’ capital Stock, including any right of conversion or exchange
under any outstanding security or other instrument.  No Borrower or any of its respective
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of any Borrower’s
Subsidiaries’ capital Stock or any security convertible into or exchangeable
for any such capital Stock.


 


6.9                               Due Authorization; No Conflict.


 


(a)                                  Subject
to the entry by the Bankruptcy Court of the Interim Order or the Final Order,
as applicable, as to each Borrower, the execution, delivery, and performance by
such Borrower of this Agreement and the Loan Documents to which it is a party
and the transactions contemplated hereby are within the corporate (or other
equivalent company) authority of such Borrower and have been duly authorized by
all necessary action on the part of such Borrower.


 


(b)                                 Subject
to the entry by the Bankruptcy Court of the Interim Order or the Final Order,
as applicable, as to each Borrower, the execution, delivery, and performance by
such Borrower of this Agreement and the Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local law
or regulation applicable to any Borrower, the Governing Documents of any
Borrower, the Orders or any unstayed order, judgment, or decree of any court or
other Governmental Authority binding on any Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any post-petition material contractual obligation of any
Borrower, (iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of any Borrower’s interest holders
or any approval or consent of any Person under any post-petition material
contractual obligation of any Borrower.


 


(c)                                  Other
than the entry of the Interim Order or the Final Order, as applicable, the
execution, delivery, and performance by each Borrower of this Agreement and the
Loan Documents to which such Borrower is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person.


 


(d)                                 As
to each Borrower, this Agreement and the other Loan Documents to which such
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Borrower, and upon entry of the Interim
Order or the Final Order, as applicable, will be the legally valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or similar laws relating to or limiting creditors’ rights
generally.


 


(e)                                  The
Agent’s Liens are validly created, and upon entry of the Interim Order or the
Final Order, as applicable, will be perfected, and first priority Liens,
subject only to Permitted Liens.  Except
as set forth on Schedule 6.9, the Collateral and the Agent’s rights
with respect to the Collateral are


 


68





















 


not subject to any
setoff, claims, withholdings or other defenses, other than the right of setoff
provided hereunder and claims arising in the ordinary course of business
consistent with past practices.


 


6.10                        Litigation.  Other than
the Cases and those matters disclosed on Schedule 6.10, there are
no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers, threatened against Borrowers, or any of their Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance (subject
to customary deductibles), or (b) matters arising after the Closing Date that
are not reasonably expected to result in a Material Adverse Change.


 


6.11                        No Material Adverse Change.  All financial statements relating to
Borrowers  that have been delivered by
Borrowers to the Lender Group have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and present fairly
in all material respects, Borrowers’ financial condition as of the date thereof
and results of operations for the period then ended.  There has not been a Material Adverse Change
with respect to Borrowers since the Filing Date.


 


6.12                        Fraudulent Transfer.  No transfer of property is being made by any
Borrower and no obligation is being incurred by any Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents
with the intent to defraud either present or future creditors of Borrowers.


 


6.13                        Employee Benefits.


 


None of Parent, any of its
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan other than other than those listed on Schedule 6.13.  Borrower, each of its Subsidiaries and each
ERISA Affiliate have satisfied the minimum funding standards of ERISA and the
IRC with respect to each Benefit Plan to which it is obligated to
contribute.  No ERISA Event has occurred
nor has any other event occurred that may result in an ERISA Event that
reasonably could be expected to result in a Material Adverse Change.  None of Parent, its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Benefit Plan is subject to any direct or
indirect liability with respect to any Benefit Plan under any applicable law,
treaty, rule, regulation, or agreement. 
None of Parent, its Subsidiaries or any ERISA Affiliate is required to
provide security to any Benefit Plan under Section 401(a)(29) of the IRC.


 


6.14                        Environmental Condition.  Except as set forth on Schedule 6.14,
(a) to Borrowers’ knowledge, none of Borrowers’ properties or assets has ever
been used by Borrowers or by previous owners or operators in the disposal of,
or to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable
Environmental Law, (b) to Borrowers’ knowledge, none of Borrowers’ properties
or assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, (c)
none of Borrowers have received notice that a Lien arising under any
Environmental Law has attached to any revenues or to any Real Property
Collateral owned or operated by Borrowers, and (d) none of Borrowers have
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by any Borrower resulting in the releasing or disposing
of Hazardous Materials into the environment.


 


6.15                        Intellectual Property.  Each Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted.  Attached hereto as Schedule 6.15
(as may be updated from time to time with the


 


69





















 


written consent of the
Agent) is a true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which each Borrower is the owner or is an exclusive
licensee.


 


6.16                        Locations; Leases


 


(a)                                  The
Collateral, and the Books of each Borrower pertaining thereto, are kept and
maintained solely at Parent’s chief executive office at 321 West 84th
Avenue, Suite A, Thornton, Colorado 80260, and at those locations which are
listed on Schedule 6.16 (as updated pursuant to Section 7.10)
annexed hereto, which Schedule includes all service bureaus with
which any such records are maintained and the names and addresses of each of
each Borrower’s landlords.  Except (i) to
accomplish sales of Inventory in the ordinary course of business, (ii) to
utilize such of the Collateral as is removed in the ordinary course of business
(such as motor vehicles and laptop computers) or (iii) in connection with any
going out of business sale approved by the Agent in writing in the Agent’s sole
discretion, no Borrower shall remove any Collateral from said executive office
or those locations listed on Schedule 6.16.


 


(b)                                 No
Borrower will:


 


(i)                                     Alter,
modify or amend any provisions of any Lease which pertain to any Lien rights of
the lessor thereunder or the waiver or compromise of the same without the prior
written consent of Agent.


 


(ii)                                  Except
after prior written notice to Agent, commit to, or open or close any location
at which such Borrower maintains, offers for sale or stores any of the
Collateral.


 


(c)                                  Fail
to promptly send to Agent copies of any amendments, modifications or
alterations to any existing Leases and copies of any newly executed Leases; provided,
however, the foregoing shall not limit the obligations of Borrowers
under Section 6.16(b) above.


 


(d)                                 Except
as otherwise agreed by Agent, no tangible personal property of any Borrower is
in the care or custody of any third party or stored or entrusted with a bailee
or other third party and none shall hereafter be placed under such care,
custody, storage or entrustment.


 


6.17                        Complete Disclosure.  All factual information (taken as a whole)
furnished by or on behalf of Borrowers in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrowers in writing to the Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary
to make such information (taken as a whole) not misleading in any material
respect at such time in light of the circumstances under which such information
was provided.  As of the date on which
any Budgets are delivered to Agent, such Budgets represent Borrowers’ good
faith best estimate of its future performance for the periods covered thereby.


 


6.18                        [Intentionally
Omitted]


 


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6.19                        No
Materially Adverse Contracts, etc.  No Borrower nor any of their Subsidiaries is
subject to any Governing Document or other legal restriction, or any judgment,
decree, order, law, statute, rule or regulation that has or is expected in the
future to cause a Material Adverse Change. 
No Borrower nor any of its Subsidiaries is a party to any post-petition
contract or agreement that has or is expected, in the judgment of Borrowers’
officers, to cause any Material Adverse Change.


 


6.20                        Compliance
with Other Instruments, Laws, etc.  No Borrower nor any of its Subsidiaries is in
violation of any provision of its Governing Documents, or any post-petition
agreement or instrument to which it may be subject or by which it or any of its
properties may be bound or any decree, order, judgment, statute, license, rule
or regulation, in any of the foregoing cases in a manner that could result in
the imposition of substantial penalties or could cause a Material Adverse
Change.


 


6.21                        Holding
Company and Investment Company Acts.  Neither any Borrower nor any of their
Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding
company, or an “affiliate” of a “holding company”, as such terms are defined in
the Public Utility Holding Company Act of 1935; nor is it an “investment
company”, or an “affiliated company” or a “principal underwriter” of an
“investment company”, as such terms are defined in the Investment Company Act
of 1940.


 


6.22                        Absence
of Financing Statements, etc. 
Except with respect to Permitted Liens, the Borrower has not authorized
the filing of or has not permitted the filing of any financing statement,
security agreement, chattel mortgage, real estate mortgage or other document
filed or recorded with any filing records, registry or other public office,
that purports to cover, affect or give notice of any present or possible future
Lien on any assets or property of any Borrower or any of their Subsidiaries or
any rights relating thereto.


 


6.23                        Certain
Transactions.  Except as
set forth on Schedule 6.23, none of the officers, directors, or
employees of any Borrower or any of their Subsidiaries is presently a party to
any transaction with any Borrower or any of their Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of Borrowers, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.


 


6.24                        Regulations
U and X.  No portion of
any Advance is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of purchasing or carrying any “margin security” or “margin stock”
as such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.


 


6.25                        Payment
of Taxes.  All tax
returns, reports and declarations required to be filed by Borrowers by any
jurisdiction to which any of them is subject have been timely filed.  All taxes and other governmental assessments
and charges upon Borrowers or their properties, assets, income and franchises
(including real property taxes and payroll taxes) arising after the Closing
Date but not subject of a Permitted Protest have been paid prior to
delinquency, except to the extent provided in the Bankruptcy Code or as
provided in an order of the Bankruptcy Court in the Cases.  Except to the extent permitted by the
Bankruptcy Court to the contrary, Borrowers have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  Borrowers do not intend to treat the
Advances, Letters of Credit and/or related


 


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transactions
hereunder as being a “reportable transaction” (within the meaning of Treasury
Regulation Section 1.6011-4).


 


6.26                        Filed
Entities.  All
Subsidiaries of the Borrowers are debtors in the Cases in the Bankruptcy Court.


 


6.27                        Fiscal
Year.  Parent has a fiscal
year which is the twelve months ending on January 31 of each calendar
year.


 


7.                                      AFFIRMATIVE
COVENANTS.


 


Each Borrower
covenants and agrees that, so long as any credit hereunder shall be available
and until full and final payment of the Obligations, Borrowers shall and shall
cause each of their respective Subsidiaries to do all of the following:


 


7.1                               Accounting
System.  Maintain a system
of accounting that enables Borrowers to produce financial statements in
accordance with GAAP and maintain records pertaining to the Collateral that
contain information as from time to time reasonably may be requested by
Agent.  Borrowers also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.


 


7.2                               Collateral
Reporting.


 


Provide Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following
times in form satisfactory to Agent:


 


(a)                                  Daily Reports.  Daily on or before 1:00 p.m. (Boston, Massachusetts
time), a Borrowing Base Certificate (in the form of Exhibit B-1 annexed
hereto (as such form may be revised from time to time by Agent).  Such Certificate may be sent to Agent, the
Revolving Credit Lenders and the Tranche B Lenders by facsimile or e-mail
transmission, provided that the original thereof is forwarded to Agent on the
date of such transmission.  No
adjustments to the Borrowing Base Certificate may be made without support
documentation and such other documentation as may be requested by Agent from
time to time.


 


(b)                                 Weekly Reports.  Weekly, not later than Friday for the
immediately preceding fiscal week:


 


(i)                                     a summary of
accounts receivable and accounts payable agings (including a summary of
post-petition accounts payable) of the Parent and its Subsidiaries.


 


(ii)                                  sales audit report to
include daily sales report with a month to date sales by store and geographic
region.


 


(iii)                               collateral activity
summary (“roll forward inventory report”), to include, without
limitation, Borrowers’ report number 30 or a future report equivalent thereto.


 


(iv)                              copies of all pleadings,
papers, notices, orders and other papers filed in or issued from the Bankruptcy
Court or any appellate court in the Cases and copies of all reports filed with
the Office of the United States Trustee relating to any of the Cases.


 


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(c)                                  Monthly Reports.  Monthly, Borrowers shall provide Agent, the
Revolving Credit Lenders and the Tranche B Lenders with original counterparts
of (each in such form as Agent from time to time may specify):


 


(i)                                     Within fifteen
(15) days of the end of the previous month:


 


A.                                   stock
ledger (extract) inventory report by department, to include each Borrower’s, as
applicable, report number 30 or a future report equivalent thereto.


 


B.                                     stock
ledger (extract) inventory report by store, to include each Borrower’s, as
applicable, report number 3 or a future report equivalent thereto.


 


C.                                     upon
request, open to buy report.


 


D.                                    month
end daily sales report which includes comparable same store information.


 


E.                                      purchases
and accounts payable aging report.


 


(ii)                                  Within
thirty (30) days of the end of the previous month:


 


A.                                   Statement
of gross margin in a format reasonably satisfactory to Agent.


 


B.                                     stock
ledger inventory report reconciliation to availability and to general ledger in
a format reasonably satisfactory to Agent.


 


(iii)                               a store activity report
in form and substance reasonably acceptable to Agent;


 


(d)                                 Immediately upon
becoming aware thereof, the Borrowers shall notify the Agent, each Lender in
writing of any setoff, claims (including with respect to Real Estate and
environmental claims), withholdings or other defenses to which any of the
Collateral, or the Agent’s rights with respect to the Collateral, are subject.


 


(e)                                  Not
less than five (5) Business Days prior to any of the Borrowers rejecting any
contract or making any motion to reject any contract, the Borrowers shall
notify the Agent, each Lender in writing setting forth in such notice the
Borrowers’ reasons why such rejection (i) will be in the best interests of the
Borrowers and (ii) will not have a Material Adverse Change, and avoid
proceeding with such rejection if such rejection will have a Material Adverse
Change.


 


In addition,
each Borrower agrees to cooperate fully with Agent to facilitate and implement
a system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth above.


 


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7.3                               Financial
Statements, Reports, Certificates.  Deliver to Agent with copies to each Lender:


 


(a)                                  within
fifteen (15) days of the end of the previous month, a report which shall
contain a comparison of the prior month showing actual performance and any
variance of such actual performance from the projected performance in the
Budget, together with a certificate signed by the chief financial officer of
the Parent to the effect that such information is true and correct,


 


(b)                                 as
soon as available, but in any event within 30 days (45 days in the case of a
month that is the end of one of the first 3 fiscal quarters in a fiscal year)
after the end of each month during each of Parent’s fiscal years,


 


(i)                                     a
company prepared consolidated balance sheet, income statement, and statement of
cash flow covering Parent’s and its Subsidiaries’ operations during such
period,


 


(ii)                                  an
inventory certificate, and


 


(iii)                               a
certificate signed by the chief financial officer of Parent to the effect that:


 


A.                                   the
financial statements delivered hereunder have been prepared in accordance with
GAAP (except for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects the consolidated
financial condition of Parent and its Subsidiaries,


 


B.                                     the
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date), or, if not so true and correct, a description of such inaccuracy,


 


C.                                     there
does not exist any condition or event that constitutes a Default or Event of
Default (or, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrowers have taken, are taking, or propose to take with respect thereto);


 


D.                                    all
rent and additional rent due pursuant to any store lease have or have not been
paid (and if not paid, broken down by store location); provided, however,
that Borrowers need not report unpaid additional rent based on year end
adjustments for common area expenses to the extent such additional rent is
unknown to or disputed by such Borrower, and


 


E.                                      premiums
for insurance required under Section 7.9 hereof have or have not
been paid.


 


(iv)                              for
each month that is the date on which a financial covenant in Section 8.23
is to be tested, a Compliance Certificate demonstrating, in reasonable detail,
compliance or the absence of compliance at the end of such period with the
applicable financial covenants contained in Section 8.23; and


 


(c)                                  as
soon as available, but in any event within 90 days after the end of each of
Parent’s fiscal years,


 


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(i)                                     financial
statements of Parent and its Subsidiaries for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Agent and
certified, without any qualifications (other than in respect of the filing of
the Cases or a going concern qualification), by such accountants to have been
prepared in accordance with GAAP (such audited financial statements to include
a balance sheet, income statement, and statement of cash flow and, if prepared,
such accountants’ letter to management), and


 


(ii)                                  a
certificate of such accountants addressed to Agent and the Lenders stating that
such accountants either do not have knowledge of the existence of any Default
or Event of Default under Section 8.23 or, to their knowledge, the
extent of such Default or Event of Default,


 


(d)                                 on
or before fiscal month ending April 30, 2005, copies of Borrowers’
Projections, in form and substance (as to scope and underlying assumptions)
satisfactory to Agent, in its Permitted Discretion, for the period commencing
May 1, 2005 through the Termination Date, month by month, certified by the
chief financial officer of Parent as being such officer’s good faith best
estimate of the financial performance of Parent and its Subsidiaries during the
period covered thereby;


 


(e)                                  if
and when filed by any Borrower,


 


(i)                                     Form
10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,


 


(ii)                                  any
other filings made by any Borrower with the SEC,


 


(iii)                               copies
of Borrowers’ federal income tax returns, and any amendments thereto, filed
with the Internal Revenue Service, and


 


(iv)                              any
other information that is provided by Parent to its shareholders generally,


 


(f)                                    if
and when filed by any Borrower and as requested by Agent, satisfactory evidence
of payment of applicable excise taxes in each jurisdictions in which (i) any
Borrower conducts business or is required to pay any such excise tax, (ii)
where any Borrower’s failure to pay any such applicable excise tax would result
in a Lien on the properties or assets of any Borrower, or (iii) where any
Borrower’s failure to pay any such applicable excise tax reasonably could be
expected to result in a Material Adverse Change,


 


(g)                                 at
such times and with such frequency as is requested by Agent, such information
and documentation as is determined by Agent to be appropriate based upon
Agent’s review and analysis of the Accounts and the information and
documentation from time to time available to Agent,


 


(h)                                 as
soon as a Borrower has knowledge of any event or condition that constitutes a
Default or an Event of Default, notice thereof and a statement of the curative
action that Borrowers propose to take with respect thereto,


 


(i)                                     upon
the request of Agent, any other report reasonably requested relating to the
financial condition of Borrowers, and


 


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(j)                                     cause
any guarantor of any of the Obligations to deliver its annual financial
statements at the time when Borrower provides its audited financial statements
to Agent and each Tranche B Lender and copies of all federal income tax returns
as soon as the same are available and in any event no later than 30 days after
the same are required to be filed by law.


 


In addition to
the financial statements referred to above, Borrowers agree to deliver
financial statements prepared on a consolidated basis and that no Borrower, or
any Subsidiary of a Borrower, will have a fiscal year different from that of
Parent.  Borrowers agree that their independent
certified public accountants are authorized to communicate with Agent and the
Lenders and to release to Agent and the Lenders whatever financial information
concerning Borrowers that Agent or the Lenders reasonably may request.  Borrowers further agree to permit the Agent
and the Lender or any other designated representative of the Agent or Lenders
to visit and inspect any of the properties of the Borrowers, to examine the
books of account of the Borrowers (and to make copies thereof and extracts therefrom),
and to discuss the affairs, finances and accounts of the Borrowers with, and to
be advised as to the same by, their officers. 
Each Borrower waives the right to assert a confidential relationship, if
any, it may have with any accounting firm or service bureau in connection with
any information requested by Agent and the Lenders pursuant to or in accordance
with this Agreement, and agrees that Agent and Lenders may contact directly any
such accounting firm or service bureau in order to obtain such information.  Agent and the Lenders hereby agree to use its
best efforts to give such Borrower at least simultaneous notice that Agent or
the Lenders is so contacting directly any such accounting firm or service bureau.


 


7.4                               Return.  Cause returns and allowances as between
Borrowers and their Account Debtors, to be on the same basis and in accordance
with the usual customary practices of the applicable Borrower, as they exist at
the time of the execution and delivery of this Agreement, unless changed with written
consent of Agent.  If, at a time when an
Event of Default has occurred and is continuing, any Account Debtor returns any
Inventory to any Borrower, the applicable Borrower promptly shall determine the
reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Agent) in the appropriate amount to such Account Debtor.


 


7.5                               Maintenance
of Properties.  Maintain
and preserve all of its properties that are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted, continue to engage in the business now conducted by them and
related businesses and comply at all times with the material provisions of all
leases to which it is a party as lessee, so as to prevent any loss or
forfeiture thereof or thereunder, involving property with a value of over
$100,000.


 


7.6                               Title
to Equipment.  Upon
Agent’s request, each Borrower immediately shall deliver to Agent, properly
endorsed, any and all evidences of ownership of, certificates of title, or
applications for title to any items of Equipment of such Borrower.


 


7.7                               Maintenance
of Equipment.  Maintain
the Equipment which is necessary or useful in the conduct of Borrower’s
business in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved
except for equipment that, in the Administrative Borrower’s reasonable
judgment, should not be repaired or replaced. 
Other than those items of Equipment that constitute fixtures on the
Closing Date, Borrowers shall use their best efforts not to permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.


 


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7.8                               Taxes.  Subject to the limitations imposed by the
Bankruptcy Code and to the orders of the Bankruptcy Court, (i) cause all
assessments and taxes, whether real, personal, or otherwise, due or payable by,
or imposed, levied, or assessed against Borrowers or any of their assets to be
paid and discharged in full, before delinquency or before the expiration of any
extension period, except to the extent that the validity of such assessment or
tax shall be the subject of a Permitted Protest; (ii) shall make due and timely
payment or deposit of all such federal, state, and local taxes, assessments, or
contributions required of it by law, unless the subject of a Permitted Protest,
and will execute and deliver to Agent, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto; (iii) will
make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that the applicable Borrower has made such payments or deposits; and (iv) shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.


 


7.9                               Insurance.


 


(a)                                  At
Borrowers’ expense, maintain insurance respecting its property and assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. 
Borrowers also shall maintain business interruption, public liability,
and product liability insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation, each as ordinarily are insured
against by other Persons engaged in the same or similar businesses.


 


(b)                                 All
such policies of insurance shall be in such amounts and with such insurance
companies as are reasonably satisfactory to Agent.  All hazard insurance and such other insurance
as Agent shall specify shall contain a mortgagee endorsement or an equivalent
satisfactory to Agent showing Agent as sole loss payee thereof.  Every policy of insurance referred to in this
Section 7.9 shall contain an agreement by the insurer that it will
not cancel such policy for any reason except after 30 days prior written notice
to Agent and that any loss payable thereunder shall be payable notwithstanding
any act or negligence of any Borrower and any member of the Lender Group which
might, absent such agreement, result in a forfeiture of all or a part of such
insurance payment.  Administrative
Borrower shall deliver to Agent certified copies of such insurance.  Original policies or certificates thereof
satisfactory to Agent evidencing such insurance shall be delivered to Agent at
least 30 days prior to the expiration of the existing or preceding
policies.  In the event of failure by
Borrower to provide and maintain insurance as provided herein, Agent may, at
its option, provide such insurance and charge the amount thereof to Borrower.


 


(c)                                  Administrative
Borrower shall give Agent prompt notice of any loss covered by such insurance
in excess of $250,000.  Agent shall have
the exclusive right to adjust any losses payable under any such insurance
policies in excess of $250,000, without any liability to Borrowers whatsoever
in respect of such adjustments.  Any
monies received as payment for any loss under any insurance policy mentioned
above or as payment of any award or compensation for condemnation or taking by
eminent domain, shall be paid over to Agent to be applied at the option of the
Required Revolving Credit Lenders either to the prepayment of the Obligations
or shall be disbursed to Administrative Borrower under staged payment terms reasonably
satisfactory to the Required Revolving Credit Lenders for application to the
cost of repairs, replacements, or restorations. Any such repairs, replacements,
or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction.  Upon the
occurrence of an Event of Default,


 


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Agent
shall apply all prepaid premiums to the payment of the Obligations as set forth
in Section 2.5(d) hereof.


 


(d)                                 Borrowers
shall not take out separate insurance concurrent in form or contributing in the
event of loss with that required to be maintained under this Section 7.9,
unless Agent is included thereon as named insured with the loss payable to
Agent under a standard mortgagee endorsement or its equivalent.  Administrative Borrower immediately shall
notify Agent whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the same, and
copies of such policies promptly shall be provided to Agent.


 


7.10                        Location
of Inventory and Equipment. 
Keep the Inventory and Equipment only at the locations identified on Schedule
6.16; provided, however, that Administrative Borrower may amend Schedule
6.16 so long as such amendment occurs by written notice to Agent not less
than 15 days (or such shorter period as may be consented by the Agent in
writing in the Agent’s discretion) prior to the date on which the Inventory or
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected the Agent’s Liens
on such assets and also provides to Agent a Collateral Access Agreement.


 


7.11                        Compliance
with Laws.  Comply with
the requirements of all applicable laws, rules, regulations, and orders of any
Governmental Authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not result in and reasonably could not be expected to result in a Material
Adverse Change.


 


7.12                        Leases.  Except to the extent permitted by the
Bankruptcy Court, pay when due all rents and other amounts payable under any
leases to which any Borrower is a party or by which any Borrower’s properties
and assets are bound, unless such payments are the subject of a Permitted
Protest.  To the extent Borrowers fail
timely to make payment of such rent and other amounts payable when due under
its leases, Agent shall be entitled, in its discretion, to reserve an amount
equal to such unpaid amounts against the Borrowing Base.


 


7.13                        Brokerage
Commissions.  Pay any and
all brokerage commission or finders fees incurred in connection with or as a
result of Borrowers’ obtaining financing from the Lender Group under this
Agreement.  Borrowers agree and
acknowledge that payment of all such brokerage commissions or finders fees
shall be the sole responsibility of Borrowers, and each Borrower agrees to
indemnify, defend, and hold Agent and the Lender Group harmless from and
against any claim of any broker or finder arising out of Borrowers’ obtaining
financing from the Lender Group under this Agreement.


 


7.14                        Existence.  Unless otherwise consented to by the Agent,
all times preserve and keep in full force and effect each Borrower’s valid
existence and good standing and any rights and franchises material to
Borrowers’ businesses.


 


7.15                        Environmental.  (a) Keep any property either owned or
operated by any Borrower free of any Environmental Liens or post bonds or other
financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent documentation of such compliance
which Agent reasonably requests, (c) promptly notify Agent of any release of a
Hazardous Material of any reportable quantity from or onto property owned or
operated by any Borrower and take any Remedial Actions required to


 


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abate
said release or otherwise to come into compliance with applicable Environmental
Law, and (d) promptly provide Agent with written notice within 10 days of the
receipt of any of the following:  (i)
notice that an Environmental Lien has been filed against any of the real or
personal property of any Borrower, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against any
Borrower, and (iii) notice of a violation, citation, or other administrative
order which reasonably could be expected to result in a Material Adverse
Change.


 


7.16                        Disclosure
Updates.  Promptly and in
no event later than 10 Business Days after obtaining knowledge thereof, (a)
notify Agent if any written information, exhibit, or report furnished to the
Lender Group contained any untrue statement of a material fact or omitted to
state any material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and (b) correct any
defect or error that may be discovered therein or in any Loan Document or in
the execution, acknowledgement, filing, or recordation thereof.


 


7.17                        Inventories,
Appraisals, Financial Advisors and Audits.


 


(a)                                  Agent,
at the expense of Borrowers, may participate in and/or observe each physical
count and/or inventory of so much of the Collateral as consists of Inventory
which is undertaken on behalf of any Borrower.


 


(b)                                 Upon
Agent’s request from time to time, Borrowers shall obtain, or shall permit
Agent to obtain financial or SKU based physical counts and/or inventories of
the Collateral, conducted by such inventory takers as are satisfactory to Agent
and following such methodology as may be required by Agent, each of which
physical counts and/or financial or SKU based inventories shall be observed by
Borrower’s accountants.  For each fiscal
year commencing on or after January 31, 2005 in which this Agreement is in
effect, Borrowers shall perform (at their expense) one (1) full physical
inventory as of fiscal year end for all locations.  Agent may require mid-year physical counts
during any fiscal year of Parent (at Borrower’s expense).  Agent shall have the right to increase
Reserves Against Availability based on any variance revealed by any physical
inventory counts.  The results of such
mid-year counts shall be provided to Agent within ten (10) Business Days of
completion of the count.  The draft or
unaudited results of such required mid-year inventories or counts shall be
furnished to Agent within five (5) Business Days of the taking of such
inventories or counts.


 


(c)                                  At
Borrowers’ expense, Borrowers will obtain and deliver to Agent, or, if Agent so
elects, will cooperate with Agent in Agent’s obtaining, a report of an
independent collateral auditor, appraiser or appraisers satisfactory to Agent
(which may be affiliated with one of the Lenders) with respect to the Accounts
and Inventory components included in the Borrowing Base and other assets of the
Borrower, which report shall indicate whether or not the information set forth
in the Borrowing Base Certificate most recently delivered is accurate and
complete in all material respects based upon a review by such auditors of the
Accounts (including verification with respect to the amount, aging, identity
and credit of the respective account debtors and the billing practices of the
Borrowers) and Inventory (including verification as to the value, location and
respective types) or such other assets. 
Based upon the results of such independent collateral auditor, appraiser
or appraisers, the Agent and the Tranche B Lenders shall have the right to
potentially increase the inventory advance rates.


 


(d)                                 The
Borrowers acknowledge that Bingham may retain consultants and/or financial
advisors to, among other things, make visits to, and discuss financial and
operational matters with, the Borrowers and to advise the Agent and the Lenders
as to the business, operations and financial condition of the Borrowers.  Such consultant shall not be limited in the
frequency of visits to the facilities


 


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of the
Borrowers.  The Borrowers shall cooperate
with such consultant and provide such consultant with all information
reasonably requested by such consultant in connection with its engagement by
Bingham, subject to a reasonable confidentiality arrangement.


 


(e)                                  So
long as the Thornton Colorado Facility is a component of the Borrowing Base,
Borrowers shall, at the request of Agent, obtain and deliver to Agent, at
Borrowers’ expense, once every calendar year, commencing in 2005, appraisal
reports in form and substance and from appraisers satisfactory to Agent,
stating the then current Appraised Fair Market Value of the Thornton Colorado
Facility.


 


7.18                        Electronic
Reporting.  At Agent’s
option all information and reports required to be submitted to Agent by
Borrower shall be transmitted electronically pursuant to an electronic
transmitting reporting system and shall be in a record layout format designated
by Agent from time to time.


 


7.19                        Employee
Benefits.


 


(a)                                  Promptly,
and in any event within ten (10) Business Days after Parent or any of its
Subsidiaries knows or has reason to know that an ERISA Event has occurred that
reasonably could be expected to result in a Material Adverse Change, a written
statement of the chief financial officer of Parent describing such ERISA Event
and any action that is being taking with respect thereto by Parent, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC.  Parent or
such Subsidiary, as applicable, shall (i) be deemed to know all facts known by
the administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within three (3) Business Days after the filing
thereof with the IRS, deliver, or cause to be delivered, to Agent a copy of
each funding waiver request filed with respect to any Benefit Plan and all
communications received by Parent, any of its Subsidiaries or, to the knowledge
of Parent, any ERISA Affiliate with respect to such request, and (iii)
promptly, and in any event within three (3) Business Days after receipt by
Parent, any of its Subsidiaries or, to the knowledge of Parent, any ERISA
Affiliate, of notice of the PBGC’s intention to terminate a Benefit Plan or to
have a trustee appointed to administer a Benefit Plan, deliver, or cause to be
delivered, to Agent copies of each such notice.


 


(b)                                 Cause
to be delivered to Agent, upon Agent’s request, each of the following:  (i) a copy of each Benefit Plan (or, where any
such plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Parent or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three most recent plan years,
annual reports on Form 5500 Series required to be filed with any governmental
agency for each Benefit Plan; (iv) all actuarial reports prepared for the last
three plan years for each Benefit Plan; (v) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions required
to be made by any Borrower or any ERISA Affiliate to each such plan and copies
of the collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to any Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former employees of
Parent or its Subsidiaries under any Retiree Health Plan.


 


7.20                        Additional
Collateral Covenants.  Except for the security interest herein granted,
be the owners of the Collateral free from any right or claim of any other
person or any Lien (other than


 


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Permitted Liens), and shall defend the same against all
claims and demands of all persons at any time claiming the same or any
interests therein adverse to Agent or any Lender.


 


7.21                        Investment
Proceeds, Etc.  The
proceeds of any Investment from any source in any Borrower or any Subsidiary of
a Borrower and any other funds received by any Borrower other than from
ordinary course business operations (including, without limitation, tax
refunds, damage awards, or insurance or condemnation proceeds) shall be
deposited directly into the Agent’s Account to be applied on account of the
Obligations in accordance with Section 2.5(d).


 


7.22                        Additional
Real Property Collateral. 
If, after the Closing Date, any
Borrower or any of its Subsidiaries acquires Real Property Collateral used as a
manufacturing or warehouse facility (unless such Borrower shall have received
the prior written consent of the Agent waiving the application of this Section 7.22
as to such Real Property Collateral), such Borrower shall, or shall cause such
Subsidiary to, forthwith deliver to Agent a fully executed mortgage or deed of
trust over such Real Property Collateral, in form and substance satisfactory to
Agent, together with evidences of insurance with Agent named as loss payee and
additional insured.  Borrowers further agree
that, following the taking of such actions with respect to such Real Property
Collateral, Agent shall have, for the benefit of the Lender Group, a valid and
enforceable first priority Mortgage over such Real Property Collateral, free
and clear of all Liens except for Permitted Liens.


 


7.23                        Landlord
Waivers and Consents. 
Subject to Section 2.1(c), (a) use its best efforts to
promptly obtain and deliver to Agent within ninety (90) days following the
opening of a new store location in a jurisdiction which grants a landlord a
lien on the Collateral located on the leased premises senior or superior to the
Lien of the Agent as a matter of law a Collateral Access Agreement by the
landlord for such location of such Borrower and (b) promptly obtain and deliver
to Agent a Collateral Access Agreement by the landlord of any leased
distribution center of the Borrower.


 


7.24                        Material
Inventory Supplier. 
Promptly after entering into any agreement with any Material Inventory
Supplier or any amendment to any agreement with any Material Inventory
Supplier, provide Agent with a copy of such agreement or amendment (other than
oral agreements and amendments).


 


7.25                        No
Setoff or Counterclaims. 
Make payments hereunder and under the other Loan Documents by or on
behalf of Borrowers without setoff or counterclaim and free and clear of, and
without deduction or withholding for or on account of, any federal, state or
federal taxes.


 


7.26                        Security
Documents, Legal Opinions. 
Within fifteen (15) days after the Closing Date, (i) execute and deliver
to Agent any security agreements or other documents requested by the Agent,
granting to the Agent, for the benefit of the Lender Group, a first priority
Lien on the real property and personal assets of the Borrowers, including,
without limitation (and unless waived by the Agent in writing), a the Pledge
Agreement, the Trademark Security Agreement, the Intercompany Subordination
Agreements, the Credit Card Agreement from Wells Fargo Merchant Services,
L.L.C., and a Mortgage on the Thornton Colorado Facility, tax certificates evidencing
payment of all due and payable real estate taxes on such property, in each case
in form and substance satisfactory to the Agent; (ii) execute and deliver a
Perfection Certificate for each Borrower; (iii) deliver Uniform Commercial Code
searches satisfactory to the Agent; and (iv) deliver to the Agent and the
Lenders an opinion of Borrowers’ counsel in respect of (x) the Borrowers’ due
authorization, execution and delivery of the Security Documents and (y) due
authorization, execution and delivery of the Loan Documents by Fast Trak, Inc.
Ultimate Electronics Leasing LP and Ultimate Electronics Texas LP.


 


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7.27                        FACA
Compliance.  Provide Agent
with any consents pursuant to the Federal Assignment of Claims Act or like
federal, state or local statute with respect to any one Account from a
governmental authority in excess of $25,000 or as to all Accounts from
governmental authorities in excess of $100,000 in the aggregate.


 


7.28                        Cash Management Arrangements; Depository
Arrangements.  Each
of the Borrowers shall, and shall cause their Subsidiaries to, implement and
maintain in place cash management arrangements as shall be in form and
substance satisfactory to the Agent. 
Without limiting the generality of the foregoing, the parties agree
that:


 


(a)                                    all
cash and cash equivalents held by the Borrowers and their Subsidiaries and all
proceeds of Accounts and other accounts, chattel paper, general intangibles,
instruments and other payment rights for which any of the Borrowers any of
their Subsidiaries is an obligee shall be deposited into either the
Concentration Account or any bank accounts of the Borrowers or their
Subsidiaries subject to any of the Agency Account Agreements; provided, however, the  Agent and
the Lenders agree no such agency agreement shall be required for the Bank of
America, N.A.. accounts with account numbers 338000057488 and 3475162677, but
such accounts shall be subject to the security interests in favor of the Agent.


 


(b)                                   all
cash and cash equivalents held by the Borrowers and their Subsidiaries and all
such proceeds of Accounts and other accounts, chattel paper, general
intangibles, instruments and other payment rights shall, on each Business Day
or such other frequency as may be agreed to by the Agent be transferred to the
Concentration Account, for application to the Obligations pursuant to the
provisions hereof.


 


In the event that, any of the Borrowers receives any
cash, checks or other cash proceeds of Collateral, the Borrowers shall, promptly
upon receipt thereof, in the identical form received (except for any
endorsements thereon which may be required by the Agent), cause such cash,
checks and cash proceeds to be paid directly into the Concentration Account or,
except as provided in clause (a) above, into any account subject to an
Agency Account Agreement.  The Borrowers
agree to seek approval of the foregoing cash management arrangements by entry
of a “first-day order” submitted for entry on or about the commencement of the
Cases and in form and substance satisfactory to the Agent.


 


7.29                        Business Plan.  Within sixty (60) days following the Closing
Date, the Borrowers shall deliver to the Agent a new business plan through the
Termination Date which shall contain, among other things, (i) the go forward
store base for the Borrowers, and (ii) the liquidation strategy or a plan for
any stores which are to be closed.  Such
business plan shall be in form and substance satisfactory to the Agent,
including, without limitation, demonstrating adequate liquidity at all times,
and all bidding, sale and other procedures and documents in connection with
such store closures shall be in form and substance satisfactory to the Agent.


 


7.30                        Use of Proceeds.  Each of the Borrowers shall use the proceeds
of the Loans and the L/Cs solely (i) for purposes of repaying in full all
obligations due under the Prepetition Credit Agreement on the Closing Date,
(ii) for working capital, letters of credit and capital expenditures permitted
hereunder, (iii) for other general corporate purposes, (iv) for payment of any
related transaction costs, fees and expenses, including, up to $1,200,000 of
private placement fees to Challenger Capital Group Ltd. and (v) for payment of
the costs of administration of the Cases, in each case, in a manner
substantially consistent with the Budget (after delivery thereof) and on terms
and conditions as provided under this Agreement.


 


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7.31                        Further Assurances.  Each of the Borrowers will, and will cause
each of its Subsidiaries to, cooperate with the Lenders and the Agents and
execute such further instruments and documents as the Lenders or the
Administrative Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Agreement and the other Loan
Documents.


 


8.                                      NEGATIVE
COVENANTS.


 


Each Borrower
covenants and agrees that, so long as any credit hereunder shall be available
and until full and final payment of the Obligations, Borrowers will not and
will not permit any of their respective Subsidiaries to do any of the
following:


 


8.1                               Indebtedness.  Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:


 


(a)                                  Indebtedness
evidenced by this Agreement and the other Loan Documents, together with
Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit;


 


(b)                                 Indebtedness
incurred prior to the Filing Date;


 


(c)                                  Indebtedness
secured by Permitted Liens;


 


(d)                                 Manufacturer
Payables;


 


(e)                                  Permitted
Purchase Money Indebtedness;


 


(f)                                    Indebtedness
of any Borrower to any other Borrower, provided that such Indebtedness
shall be subject to the terms and conditions of an Intercompany Subordination
Agreement;


 


(g)                                 Indemnities
and/or guaranties in connection with any going out of business arrangements
approved by the Agent in writing;


 


(h)                                 Indebtedness
to the Agent or the Affiliates of the Agent in respect of overdrafts and
related liabilities in connection with cash management services, credit card
services and ACH transfers of funds; and


 


(i)                                     other
unsecured Indebtedness in an aggregate amount outstanding not to exceed
$500,000.


 


8.2                               Liens
and Restrictions on Negative Pledges and Upstream Guaranties.


 


(a)                                  Create,
incur, assume, or permit to exist, directly or indirectly, any Lien on or with
respect to any of its assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted Liens.


 


(b)                                 Enter into or permit to exist any arrangement or
agreement (excluding this Agreement and the other Loan Documents) which
directly or indirectly prohibits any Borrower or any of its Subsidiaries from
creating, assuming or incurring any Lien upon its properties, revenues or
assets or those of any of their Subsidiaries whether now owned or hereafter
acquired.


 


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(c)                                  Enter
into any agreement, contract or arrangement (excluding this Agreement and the
other Loan Documents) restricting the ability of any Subsidiary of any
Borrowers to pay or make dividends or distributions in cash or kind to
Borrowers, to make loans, advances or other payments of whatsoever nature to
Borrowers, or to make transfers or distributions of all or any part of its assets
to Borrowers; in each case other than (i)
restrictions on specific assets which assets are the subject of Permitted
Purchase Money Indebtedness, (ii) customary anti-assignment provisions
contained in leases and licensing agreements entered into by such Borrower or
such Subsidiary in the ordinary course of its business, (iii) customary
restrictions and conditions contained in any agreement relating to the
disposition of assets permitted by Section 8.4 pending the
consummation of such sale or (iv) to the extent required by applicable law.


 


8.3                               Restrictions
on Fundamental Changes. 
Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock, or liquidate, wind up, or dissolve
itself (or suffer any liquidation or dissolution) or convey, sell, lease,
license, assign, transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its assets, other than
(i) a liquidation or dissolution of any of Parent’s Subsidiaries or a transfer
or dissolution of all or any substantial part of the property or assets of any
of Parent’s Subsidiaries, in which Parent becomes the owner of such property or
assets, or effect any asset or Stock acquisition (other than the acquisition of
assets in the ordinary course of business) and (ii) in connection with a going
out of business arrangement approved by the Agent in writing, in the Agent’s
sole discretion.


 


8.4                               Disposal
of Assets.  Convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of the assets of
any Borrower other than (a) sales of Inventory to buyers in the ordinary
course of such Borrower’s business as currently conducted, (b) transfers of
Inventory that are not Eligible Inventory occurring in the ordinary course of
business and consistent with past practices, and (c) sales of inventory in
connection with the closing of retail store locations approved by the Agent in
writing provided, however that any such sale of inventory in
connection with the closing of retail stores shall have been conducted by a
nationally recognized commercial retail inventory liquidator pursuant to an
agency agreement in form and substance satisfactory to Agent; provided, further,
however, the Borrowers shall be permitted to liquidate up to five (5)
stores conducted by a nationally recognized commercial retail inventory
liquidator pursuant to an agency agreement in form and substance satisfactory
to Agent, unless otherwise agreed to in writing by the Agent.  Notwithstanding the foregoing, a transaction
permitted pursuant to Section 8.3 hereof shall also be a
transaction permitted by this Section 8.4.


 


8.5                               Change
Name; New Subsidiaries. 
Change any Borrower’s name, FEIN, corporate structure or identity, type
or jurisdiction of organization, or add any new fictitious name, and form any
new Subsidiary.


 


8.6                               Guarantee.  Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by
endorsement of instruments or items of payment for deposit to the account of
Borrowers or which are transmitted or turned over to Agent or guaranties by
Parent of goods purchased by  a
Subsidiary of Parent in the ordinary course of business of  such Subsidiary; provided  however,
any guarantees in existence on the Filing Date shall not be precluded by this Section 8.6.


 


8.7                               Nature
of Business.  Make any
change in the principal nature of Borrowers’ business.


 


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8.8                               Prepayments
and Amendments.


 


(a)                                  Prepay,
redeem, defease, purchase, or otherwise acquire any Indebtedness of any
Borrower, other than the Obligations in accordance with this Agreement other
then in connection with a mandatory prepayment required by an asset disposition
or casualty event.


 


(b)                                 Directly
or indirectly, amend, modify, alter, increase, or change any of the terms or
conditions of any agreement, instrument, document, indenture, or other writing
evidencing  or concerning Indebtedness
permitted under Section 8.1(b) through (f).


 


(c)                                  Directly
or indirectly, amend, modify, alter, or change any of the terms or conditions
of any agency agreement, any other agency agreement or any instrument, document
or other writing executed and delivered in connection therewith without the
prior written consent of the Agent.


 


8.9                               Change
of Control.  Cause,
permit, or suffer, directly or indirectly, any Change of Control.


 


8.10                        Consignments.  Except in connection with a going out of
business arrangement approved by the Agent in writing in the Agent’s sole
discretion, consign any Inventory (except that all Borrowers in the aggregate
may be a consignee of up to $1,000,000 of Inventory at any particular time) or
sell any Inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale.


 


8.11                        Distributions.  Make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or purchase,
acquire, redeem, or retire any of any Borrower’s Stock, of any class, whether
now or hereafter outstanding; provided, however, so long as no
Default or Event of Default has occurred or would result therefrom, any
subsidiary of Parent may make distributions and declare and pay dividends to
Parent or to another Borrower.


 


8.12                        Accounting
Methods.


 


(a)                                  Modify
or change its method of accounting (other than in accordance with the
procedures set forth herein) or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of Borrowers’
accounting records without said accounting firm or service bureau agreeing to
provide Agent information regarding the Collateral or Borrowers’ financial
condition.  Borrowers waive the right to
assert a confidential relationship, if any, it may have with any accounting
firm or service bureau in connection with any information requested by Agent
pursuant to or in accordance with this Agreement, and agrees that Agent may
contact directly any such accounting firm or service bureau in order to obtain
such information.  Agent hereby agrees to
use its best efforts to give Borrowers at least simultaneous notice that Agent
is so contacting directly any such accounting firm or services bureau.


 


(b)                                 If
any Accounting Changes occur and such changes result in a change in the
calculation of the financial covenants used in this Agreement or any other Loan
Document, then Borrowers, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating Borrowers’ financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been made; provided
however, that the agreement of the Required Revolving Credit Lenders to
any required amendments of such provisions shall be sufficient to bind all
Lenders.  If Agent, Borrowers and
Required Revolving Credit Lenders agree upon the required


 


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amendments,
then after appropriate amendments have been executed and the underlying
Accounting Change with respect thereto has been implemented, or if the
Accounting Change does not result in a change in the calculation of financial
covenants, any reference to GAAP contained in this Agreement or in any other
Loan Document shall refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. 
If Agent, Borrowers and Required Revolving Credit Lenders cannot agree upon
the required amendments within sixty (60) days following the date of
implementation of any Accounting Change, then all financial statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with this Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting
Change.  For purposes of Section 9.1,
a breach of a financial covenant contained in Section 8.23 shall be
deemed to have occurred as of the last day of any specified measurement period,
regardless of when the financial statements reflecting such breach are
delivered to Agent.


 


8.13                        Investments.  Except for Permitted Investments, directly or
indirectly, make or acquire any Investment or incur any liabilities (including
contingent obligations) for or in connection with any Investment, provided,
however, that Administrative Borrower and its Subsidiaries shall not
have Permitted Investments (other than in the accounts subject to a Control
Agreement or accounts solely containing funds used to satisfy Borrowers’
obligations to fund health insurance claims) in deposit accounts or Securities
Accounts unless Administrative Borrower or any of its Subsidiaries, as
applicable, and the applicable securities intermediary or bank have entered
into a Control Agreement or similar arrangements governing such Permitted
Investments, as Agent shall determine in its Permitted Discretion, to perfect
(and further establish) the Agent’s Liens in such Permitted Investments.


 


8.14                        Transactions
with Affiliates.  Directly
or indirectly enter into or, except as set forth on Schedule 6.23,
permit to exist any material transaction between any Borrower with another
Borrower or between any Borrower with any other Affiliate of such Borrower
except for transactions that are in the ordinary course of such Borrowers’
business, upon fair and reasonable terms, that are no less favorable to such
Borrower than would be obtained in an arm’s length transaction with a
non-Affiliate.


 


8.15                        Suspension.  Except as permitted by Section 7.29
hereof, suspend or go out of a substantial portion of its business.


 


8.16                        Change
in Location of Chief Executive Office; Inventory and Equipment with Bailees.  Relocate its chief executive office to a new
location without Administrative Borrower providing 30 days prior written
notification thereof to Agent and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected the Agent’s Liens
and also provides to Agent a Collateral Access Agreement with respect to such
new location.  Except in connection with
any going out of business sale approved by the Agent in writing, the Inventory
and Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Agent’s prior written consent.


 


8.17                        Securities
Accounts.  If Agent has
notified Administrative Borrower that a Control Agreement will thereafter be
required for any Securities Account, establish or maintain any Securities
Account unless Agent shall have received a Control Agreement in respect of such
Securities Account.  Borrowers agree to
not transfer assets out of any Securities Account.


 


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8.18                        No
Prohibited Transactions Under ERISA.  Directly or indirectly:


 


(a)                                  engage
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption
has not been previously obtained from the Department of Labor;


 


(b)                                 permit
to exist with respect to any Benefit Plan any accumulated funding deficiency
(as defined in Sections 302 of ERISA and 412 of the IRC), whether or not
waived;


 


(c)                                  fail
to pay timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;


 


(d)                                 terminate
any Benefit Plan where such event would result in any liability of Parent, any
of its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;


 


(e)                                  fail
to make any required contribution or payment to any Multiemployer Plan;


 


(f)                                    fail
to pay any required installment or any other payment required under Section 412
of the IRC on or before the due date for such installment or other payment;


 


(g)                                 amend
a Benefit Plan resulting in an increase in current liability for the plan year
such that either of any Borrower, any Subsidiary of any Borrower or any ERISA
Affiliate is required to provide security to such Benefit Plan under Section 401(a)(29)
of the IRC; or


 


(h)                                 withdraw
from any Multiemployer Plan where such withdrawal is reasonably likely to
result in any liability of any such entity under Title IV of ERISA; which,
individually or in the aggregate, results in or reasonably would be expected to
result in a claim against or liability of Borrowers, any of their Subsidiaries
or any ERISA Affiliate in excess of $100,000.


 


8.19                        Deposit
Accounts, Credit card clearinghouse, etc.  (a) 
Establish any bank accounts, credit card clearinghouse or processors,
other than those bank accounts, clearinghouses and processors and other
accounts, all listed on Schedule 2.9, without Agent’s prior written consent,
(b) violate directly or indirectly any Control Agreement, Credit Card
Agreement, cash management bank product agreement, or other bank agency or lock
box agreement in favor of Agent for the benefit of the Lender Group with
respect to such account, (c) deposit into any of the payroll accounts listed on
Schedule 2.9 any amounts in excess of amounts necessary to pay current
payroll obligations from such accounts or (d) change any direction or
designation relating to any credit card clearinghouse or processor.


 


8.20                        Store
Openings.  Open any new
location at which Borrowers maintain, offer for sale or store any of the
Collateral.


 


8.21                        Bankruptcy Cases.  None of the Borrowers will, nor will any of
the Borrowers permit any of its Subsidiaries to, seek, consent or suffer to
exist (a) any modification, stay, vacation or amendment to the Orders, unless
the Agent has consented to such modification, stay, vacation or amendment in
writing, (b) a priority claim for any administrative expense or unsecured claim
against any of the Borrowers (now existing or hereafter arising of any kind or
nature whatsoever, including without limitation any administrative expense of
the kind specified in Section 503(b), 506(c) or 507(b) of the Bankruptcy
Code) equal or superior to the priority claim of the Agents and the Lenders in
respect of the Obligations, except for the Carve Out; or (c) any Lien on any
Collateral, having a priority equal or superior to the Lien in favor of the
Agent in respect of the Obligations, except for Permitted Prior Liens


 


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entitled
to priority under applicable non-bankruptcy law and for purchase money Liens
entitled to priority under applicable law.


 


8.22                        Prepetition Indebtedness.  The Borrowers shall not pay or discharge, or
cause to be paid or discharged, any Indebtedness of any Borrower incurred
before the Filing Date other than payments:


 


(a)                                  approved
by the Bankruptcy Court and satisfactory to the Agent on or about the Filing
Date in connection with the Borrowers’ “first day orders”;


 


(b)                                 in
respect of coverage for director and officer liabilities and constituting the
deductible amounts under applicable director and officer insurance policies
purchased by the Borrowers, not exceeding the total sum of $450,000;


 


(c)                                  as
required in any Reorganization Plan that provides for payment in full in cash
of all of the Obligations, on or about the effective date of the Reorganization
Plan;


 


(d)                                 required
to be made pursuant to an order of the Bankruptcy Court in the Cases for
adequate protection pursuant to the Bankruptcy Code on account of Permitted
Prior Liens approved in writing by the Agent; or


 


(e)                                  of
severance and other employee related payments approved by the Bankruptcy Court
and satisfactory to the Agent;


 


provided,
however, the Borrowers shall be permitted to return up to $750,000 in
the aggregate of Inventory shipped to any of the Borrowers prior to the Filing
Date that would not otherwise be Eligible Inventory so as to pay or discharge,
or caused to be paid or discharged pre-petition Indebtedness.


 


None of the Borrowers shall seek, or file any motion
with the Bankruptcy Court in accordance with Section 546(g) of the
Bankruptcy Code seeking, to return any goods shipped to any of the Borrowers
prior to the Filing Date, without the Agent’s consent in writing.


 


8.23                        Financial
Covenants.


 


(a)                                  Borrowers
and their Subsidiaries shall not permit:


 


(i)                                     Commencing with
the fiscal month ending on or about April 30, 2005, sales receipts, tested
monthly for the four weeks then ended, to be less than 85% of the amounts in
the Budget.


 


(ii)                                  Aggregate
disbursements, tested monthly for the four weeks then ended, to be more than
120% of the amounts in the Budget.


 


(iii)                               End of each fiscal month
Inventory by category, at Cost, to be at a level of less than 90% but not
greater than 110% of amount identified in the line item identified in the
Budget relating to such Costs.


 


(iv)                              The actual gross margin
for any fiscal month to be more than three percentage points (3%) less than the
gross margin percentage set forth in the line item in the Budget for actual
gross margins for such fiscal month.


 


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(v)                                 Inventory by category
received by the Borrowers, tested monthly for the four weeks then ended, to be
less than 85% of the amounts in the Budget.


 


(b)                                 The Borrowers shall,
at all times, maintain Excess Availability of not less than $5,000,000.


 


8.24                        Postpetition
Inventory.  Borrowers
shall not, and shall not permit any of the Borrowers’ subsidiaries to, return
any Inventory shipped to any of the Borrowers after the Filing Date; provided,
however, Borrowers shall be permitted to return any Inventory shipped to
any of the Borrowers after the Filing Date that is non-Eligible Inventory in
the ordinary course of the Borrowers’ business consistent with past practices.


 


9.                                      EVENTS
OF DEFAULT.


 


Any one or
more of the following events shall constitute an event of default (each, an “Event
of Default”) under this Agreement:


 


9.1                               If
Borrowers fail to pay when due and payable, all or any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts constituting Obligations);


 


9.2                               If any Borrower neglects to perform, keep, or
observe any term, provision, condition, covenant or agreement contained in Section 7.2(a)
(Delivery of Daily Borrowing Base Certificates), Section 7.3(a)
(Financial Statement), Section 7.28 (Cash Management Arrangements;
Depository Arrangements), Section 7.29 (Business Plan), Section 7.30
(Use of Proceeds) and Section 8.23 (Financial Covenants), each
member of the Lender Group shall be relieved of its obligation to extend credit
hereunder.


 


9.3                               (a)                                  If
any Borrower neglects to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in Section 7.2(b)
through (e) (Collateral Reporting), Section 7.7 (Maintenance
of Equipment), the portion of Section 7.8 (Taxes) as pertains to
state franchise taxes, Section 7.9 (Insurance), Section 7.10
(Location of Inventory and Equipment), Section 7.11 (Compliance
with Laws) or Section 7.12 (Leases), of this Agreement and such
failure continues for a period of three (3) Business Days; (b) If Borrower
fails or neglects to perform, keep, or observe any term, provision, condition,
covenant, or agreement contained in Section 7.1 (Accounting
System), Section 7.4 (Return), Section 7.5 (Maintenance
of Properties), Section 7.19 (Employee Benefits), Section 7.23
(Landlord Waivers and Consents) or Section 7.24 (Material Inventory
Supplier) of this Agreement and such failure continues for a period of seven
(7) Business Days; or (c) If Borrower fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant, or agreement contained
in this Agreement, or in any of the other Loan Documents (giving effect to any
grace periods, cure periods, or required notices, if any, expressly provided
for in such Loan Documents); in each case, other than any such term, provision,
condition, covenant, or agreement that is the subject of another provision of
this Section 9, in which event such other provision of this Section 9
shall govern); provided that, during any period of time that any such failure
or neglect of Borrower referred to in this paragraph exists, even if such
failure or neglect is not yet an Event of Default by virtue of the existence of
a grace or cure period or the pre-condition of the giving


 


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of a notice, each member of the Lender Group shall be relieved of its
obligation to extend credit hereunder;


 


9.4                               Any
representation or warranty of any of the Borrowers or any of their Subsidiaries
in this Agreement or any of the other Loan Documents or in any other document
or instrument delivered pursuant to or in connection with this Agreement shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;


 


9.5                               Any
of the Borrowers or any of their Subsidiaries shall be unable to pay its
postpetition Indebtedness, or any pre-petition Indebtedness if, by order of the
Bankruptcy Court issued with respect to such pre-petition Indebtedness, the
failure to so pay thereunder entitles the holder thereof to relief from the
automatic stay of §362 of the Bankruptcy Code, in excess of $500,000 in the
aggregate of such postpetition or pre-petition Indebtedness, or any event specified
in any note, agreement, indenture or other document evidencing or securing any
such postpetition Indebtedness shall occur if the effect of such event is to
cause, or (with the giving of notice or the lapse of time or both) to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause such Indebtedness to become due, or to be
prepaid (except for mandatory prepayments as a result of asset dispositions or
casualty in full prior to its stated maturity;


 


9.6                               If
there is a Material Adverse Change;


 


9.7                               If
any material portion of any Borrower’s or any of its Subsidiaries’ assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or
comes into the possession of any third Person, except in connection with any
going out of business arrangement approved by the Agent in writing;


 


9.8                               If any of the Loan Documents shall be
cancelled, terminated, revoked or rescinded; or the Agent’s Lien on any of the
Collateral shall cease to be perfected or have the priority contemplated by
this Agreement or the Orders, as the case may be, or any action at law, suit or
in equity or other legal proceeding to cancel, revoke, rescind or otherwise
challenge any of the Loan Documents or the Liens securing the Obligations shall
be commenced by any of the Borrowers or any of their Subsidiaries; or any court
or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof;


 


9.9                               There shall remain undischarged for more than
thirty (30) days any final postpetition judgment or execution action against
any of the Borrowers or any of their Subsidiaries, or relief from the automatic
stay of Section 362(a) of the Bankruptcy Code shall be granted to any
creditor or creditors of any of the Borrowers or any of their Subsidiaries with
respect to assets having an aggregate value in excess of $500,000.


 


9.10                        The
Bankruptcy Court shall enter any order (i) amending, supplementing, altering,
staying, vacating, rescinding, reversing, revocating or otherwise modifying any
Order or any other order with respect to any of the Cases affecting in any
material respect this Agreement, (ii) appointing a Chapter 11 trustee, an
examiner or other responsible officer with enlarged powers relating to the
operation of the business (powers beyond those set forth in Section 1106(a)(3)
and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy
Code in any of the Cases, (iii) dismissing any of the Cases or converting any
of the Cases to a Chapter 7 case, (iv) granting relief from the automatic stay
to any creditor holding or asserting a Lien or reclamation claim on or to
permit foreclosure on a material portion


 


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(i.e., more than $500,000 in the aggregate) of the assets of any of the
Borrowers or any of their Subsidiaries or where the deprivation of any of the
Borrowers or any of their Subsidiaries of such assets would reasonably be
expected to have a Material Adverse Change or (v) terminating any Borrower’s
exclusivity rights to file a Reorganization Plan (or such an order shall be so
requested, unless the Borrowers in good faith are contesting such termination);


 


9.11                        The
Bankruptcy Court shall fail to enter the Final Order on or before the date
which is thirty-five (35) days after the Closing Date;


 


9.12                        An application
shall be filed by any of the Borrowers or any of their Subsidiaries for the
approval of any other Superpriority Claim in any of the Cases which is pari passu with or senior to the claims of
the Agent and the Lenders against any of the Borrowers or any of their
Subsidiaries, unless after giving effect to the transactions contemplated by
such application, all Obligations (whether contingent or otherwise) shall be
paid in full in cash and the Commitments shall be terminated), or there shall
arise any such Superpriority Claim;


 


9.13                        Any of the
Borrowers or any of their Subsidiaries shall fail to comply with any order of
the Bankruptcy Court in any material respect;


 


9.14                        Any of the
Borrowers or any of their Subsidiaries makes any payment of prepetition indebtedness
other than as provided herein and other than as provided for in the first day
orders and payments as may be approved by the Bankruptcy Court from time to
time;


 


9.15                        Any of the
Borrowers or any of their Subsidiaries shall file a motion in any of the Cases
(i) to use cash collateral of the Lenders under Section 363(c) of the
Bankruptcy Code without the Required Lenders’ consent, (ii) to recover from any
portions of the Collateral any costs or expenses of preserving or disposing of
such Collateral under Section 506(c) of the Bankruptcy Code, to cut off
rights in the Collateral under Section 552(b) of the Bankruptcy Code, or
(iii) to take any other action or actions adverse to the Lenders or their
rights and remedies hereunder or under any of the other Loan Documents or the
Administrative Agent’s or the Lenders’ interest in any of the Collateral;


 


9.16                        A suit or
action against any of the Lenders or the Agent shall be commenced by any of the
Borrowers or any of their Subsidiaries, any federal, state environmental
protection or health and safety agency or any official committee in any Case,
which suit or action asserts any claim or legal or equitable remedy
contemplating subordination of any claim or Lien of the Lenders or the Agent,
and shall remain undismissed or unstayed for thirty (30) days after its
commencement without any preliminary relief of the nature sought having been
granted; and, with respect to any suit or action by any such federal or state
agency or official committee, a preliminary order for relief or judgment or
decree shall have been entered in such suit or action against the Lenders or
the Agent, and, in the case of a preliminary order, such preliminary order has
not been stayed within ten (10) days after its entry;


 


9.17                        The
Borrowers shall be enjoined from conducting its business or the operations of
the Borrowers’ business shall be disrupted for any reason whatsoever which
would reasonably be expected to have a Material Adverse Change;


 


9.18                        [Intentionally Omitted]


 


9.19                        Any
Borrower or any ERISA Affiliate incurs any liability to the PBGC or a
Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount
exceeding $250,000, or any


 


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Borrower or any ERISA Affiliate is assessed post-petition withdrawal
liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring
aggregate annual payments exceeding $250,000, or any of the following occurs
with respect to a Guaranteed Pension Plan: (a) an ERISA Event, or a failure to
make a required installment or other payment (within the meaning of §302(f)(1)
of ERISA), provided that Agent determines in its Permitted Discretion
that such event (i) could be expected to result in post-petition liability of
any Borrower or any of its Subsidiaries to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $250,000 and (ii) could constitute
grounds for the termination of such Guaranteed Pension Plan by the PBGC, for
the appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan or for the imposition of a lien in
favor of such Guaranteed Pension Plan; or (b) the appointment by a United
States District Court of a trustee to administer such Guaranteed Pension Plan;
or (c) the institution by the PBGC of proceedings to terminate such Guaranteed
Pension Plan.


 


9.20                        Any Borrower shall fail to consummate any
confirmed Reorganization Plan within ninety (90) days of entry of an order of
confirmation confirming such Reorganization Plan.


 


9.21                        Mark J. Wattles shall cease to be employed as
the Chairman of the Board and, from and after the entry of the Final Order, the
Chief Restructuring Officer of the Borrowers at any time.


 


10.                               THE
LENDER GROUP’S RIGHTS AND REMEDIES.


 


10.1                        Rights
and Remedies.  Upon the
occurrence, and during the continuation, of an Event of Default, the Agent may,
or upon the instruction of Required Lenders shall, by notice (such notice shall
not relieve any of the Borrowers or any of their Subsidiaries of any Obligation
hereunder) to the Borrowers, terminate the unused portion of the Commitments
hereunder, and upon such notice being given such unused portion of the
Commitments hereunder shall terminate immediately and each Lender shall be
relieved of all further obligations to make Loans (except to the extent
necessary to effect Settlement) and the Issuing Lender shall be relieved of all
further obligations to issue, extend or renew L/Cs.  Further, upon the occurrence, and during the
continuation, of an Event of Default, the Agent may, or upon the instruction
the Required Revolving Credit Lenders or, following the Standstill Termination
Date, the Required Tranche B Lenders or Required Revolving Credit Lenders
shall, exercise any of the rights of a secured party under the Code and any
other rights and remedies provided for in this Agreement or any other Loan
Document or otherwise available to it at law or in equity on behalf of the
Lender Group (and Agent shall do the same on behalf of the Lender Group); provided,
however, in order to exercise any foreclosure on any of the Collateral
or otherwise to exercise remedies against the Collateral, the Agent shall,
provide three (3) Business Days’ notice (such notice shall not relieve any of
the Borrowers or any of their Subsidiaries of any Obligation hereunder) to the
Borrowers, the holder of any Lien or the lessor of any goods which has served
upon the Agent a request that such holder or such lessor receive such notice,
the United States Trustee and the Creditors’ Committee, that the Agent be
entitled to relief from the automatic stay. 
Such rights and remedies to include, but not be limited to, the
following, all of which are authorized by Borrowers:


 


(i)                                     Declare all
Obligations, whether evidenced by this Agreement, any Note or by any of the
other Loan Documents, or otherwise, immediately due and payable;


 


(ii)                                  Cease advancing money
or extending credit to or for the benefit of Borrowers under this Agreement,
under any of the Loan Documents, or under any other agreement between Borrowers
and the Lender Group;


 


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(iii)                               Terminate this Agreement
and any of the other Loan Documents as to any future liability or obligation of
the Lender Group, but without affecting any of the Agent’s Liens in the
Collateral and without affecting the Obligations;


 


(iv)                              Notify Account Debtors
and other Persons obligated on the Collateral to make payment or otherwise
render performance to or for Agent, and, to the extent permitted under the
Code, enforce the obligations of Account Debtors and other Persons obligated on
the Collateral and exercise the rights of Borrowers with respect to such
obligations and any property that may secure such obligations;


 


(v)                                 Settle or adjust
disputes and claims directly with Account Debtors for amounts and upon terms
which Agent considers advisable, and in such cases, Agent will credit the Loan
Account with only the net amounts received by Agent in payment of such disputed
Accounts after deducting all Lender Group Expenses incurred or expended in
connection therewith;


 


(vi)                              Take any proceeds of the
Collateral;


 


(vii)                           Make any filings with the
applicable recording offices required to enforce any Borrower’s rights as a
mortgagee of Real Property Collateral;


 


(viii)                        Cause Borrowers to hold all
returned Inventory in trust for the Lender Group, segregate all returned
Inventory from all other assets of Borrowers or in Borrowers’ possession and
conspicuously label said returned Inventory as the property of the Lender
Group;


 


(ix)                                Instruct any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof
to the Agent’s Account;


 


(x)                                   Make such payments
and do such acts as Agent considers necessary or reasonable to protect its
security interests in the Collateral. 
Each Borrower agrees to assemble the Personal Property Collateral if
Agent so requires, and to make the Personal Property Collateral available to
Agent at a place that Agent may designate which is reasonably convenient to
both parties.  Each Borrower authorizes
Agent to enter the premises where the Personal Property Collateral is located,
to take and maintain possession of the Personal Property Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien that in
Agent’s determination appears to conflict with the Agent’s Liens and to pay all
expenses incurred in connection therewith and to charge Borrowers’ Loan Account
therefor.  With respect to any of
Borrowers’ owned or leased premises, each Borrower hereby grants Agent a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of the Lender Group’s rights or
remedies provided herein, at law, in equity, or otherwise;


 


(xi)                                Without constituting a
retention of any Collateral in satisfaction of an obligation (within the
meaning of the Code), set off and apply to the Obligations any and all (i)
balances and deposits of any Borrower held by the Lender Group (including
without limitation any amounts received in a bank account subject to a Control
Agreement or the Concentration Accounts), or (ii) Indebtedness at any time
owing to or for the credit or the account of any Borrower held by the Lender Group;


 


(xii)                             Hold, as cash collateral,
any and all balances and deposits of any Borrower held by the Lender Group, and
any amounts received in a bank account subject to a Control Agreement or the
Concentration Accounts, to secure the full and final repayment of all of the
Obligations;


 


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(xiii)                          Instruct each depositary bank
with whom a bank account subject to a Control Agreement is maintained, to pay
any and all balances and deposits in the applicable Concentration Account to
the Agent’s Account;


 


(xiv)                         Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Personal Property Collateral.  Each Borrower hereby grants to Agent a
license or other right to use, without charge, such Borrower’s labels, patents,
copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for
sale, and selling any Personal Property Collateral and such Borrower’s rights
under all licenses and all franchise agreements shall inure to the Lender
Group’s benefit; and


 


(xv)                            Occupy the Borrowers’ premises
to complete inventories and fulfill orders.


 


(xvi)                         Conduct going out of business
sales from the Borrowers’ premises; foreclose on all or any portion of the
Collateral; sell the Collateral at either a public or private sale, or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrowers’ premises) as Agent determines
is commercially reasonable.  It is not
necessary that the Personal Property Collateral be present at any such sale.


 


During such three (3) Business Days notice period, the
Borrowers have the right to seek an emergency hearing before the Bankruptcy
Court for the sole purpose of contesting whether an Event of Default has
occurred; provided that the Borrowers shall have no right to use or seek to use
the Collateral during such three (3) Business Day notice period, except to the
extent solely necessary to meet payroll obligations and expenses essential to
the preservation of the Borrowers and their estates.  Unless during such three (3) Business Day
notice period the Bankruptcy Court determines that an Event of Default has not
occurred, upon the expiration of such three (3) Business Day notice period (i)
the Agent and the Lenders shall have relief from the automatic stay without
further notice or order and may foreclose on all or any portion of the
Collateral or otherwise exercise any remedies against the Collateral permitted
hereunder or under any other Loan Document and other nonbankruptcy law,
including without limitation, the exercise of rights of setoff and the
maintenance of cash collateral in an amount equal to 105% of the extant Letter
of Credit Usage (or if any such cash collateral is subject to the Carve Out,
then the amount thereof shall be increased by the amount of the Carve Out to
which it is subject) and to (ii) any right of any of the Borrowers to use cash
collateral shall cease.


 


In addition, at the expiration of any three (3)
Business Day notice period referred to above, in case any one or more of the
Events of Default shall have occurred and be continuing, and whether or not the
Lenders shall have accelerated the maturity of the Loans pursuant to Section 10,
each Lender, if owed any amount with respect to the Loans, Letter of Credit
Usage or other Obligations, may, and the Agent may, and shall if requested by
the Required Revolving Credit Lenders, or following the Standstill Termination
Date, the Required Tranche B Lenders in their sole discretion, on behalf of the
Lenders, proceed to protect and enforce its rights 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 to such Lender
are evidenced, including as permitted by applicable law the obtaining of the ex
parte appointment of a receiver, 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 such Lender.


 


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The rights and
remedies of the Agent under this Section 10 as to any Collateral shall
be subject to the rights of any other holder of a Lien in such Collateral to
the extent that the Lien of such other holder is entitled to priority over the
Lien of the Agent in such Collateral.


 


NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE TRANCHE C LENDERS SHALL HAVE NO
RIGHT TO TAKE ANY ENFORCEMENT ACTION OR CAUSE THE AGENT TO TAKE ANY ENFORCEMENT
ACTION UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT PRIOR TO OBLIGATIONS
OWING TO THE AGENT, THE SWINGLINE LENDER, THE ISSUING LENDER, THE REVOLVING
CREDIT LENDER AND THE TRANCHE B LENDERS BEING PAID IN FULL.


 


10.2                        In addition to any notices required by the Orders,
Agent shall give notice of the disposition of the Collateral as follows:


 


(a)                                  Agent
shall give Administrative Borrower (for the benefit of the applicable Borrower)
a notice in writing of the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public sale is to be made
of the Collateral, the time on or after which the private sale or other
disposition is to be made; and


 


(b)                                 The
notice shall be personally delivered or mailed, postage prepaid, to
Administrative Borrower as provided in Section 13, at least 5 days
before the earliest time of disposition set forth in the notice; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market;


 


(c)                                  Borrowers
hereby acknowledge that ten (10) days prior written notice of such sale or
sales shall be reasonable notice; in addition Borrowers waive any and all
rights that they have to a judicial hearing in advance of the enforcement of
any of Agent’s rights and remedies hereunder, including its right if a Default
exists to take immediate possession of Collateral and to exercise its rights
and remedies with respect thereto;


 


(d)                                 Agent,
on behalf of the Lender Group may credit bid and purchase at any public sale;


 


(e)                                  Agent
may seek the appointment of a receiver or keeper to take possession of all or
any portion of the Collateral or to operate same and, to the maximum extent
permitted by law, may seek the appointment of such a receiver without the
requirement of prior notice or a hearing;


 


(f)                                    Agent
shall have the rights and remedies of a secured party under the Code and any
additional rights and remedies as may be provided to a secured party in any
jurisdiction in which Collateral is located;


 


(g)                                 The
Lender Group shall have all other rights and remedies available to it at law or
in equity pursuant to any Loan Documents and whether or not the Lenders shall
have accelerated the maturity of the Obligations pursuant to this Section
10.2, each Lender, if owed any amount with respect to the Obligations, may,
with the written consent of Required Revolving Credit Lenders or Agent but not
otherwise, proceed to protect and enforce its rights 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 to such Lender
are evidenced, included as permitted by applicable law the obtaining of the ex
parte appointment


 


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of a
receiver, 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 such Lender; and


 


(h)                                 Any
deficiency that exists after disposition of the Personal Property Collateral as
provided above will be paid immediately by Borrowers.  Any excess will be returned, without interest
and subject to the rights of third Persons, by Agent to Administrative Borrower
(for the benefit of the applicable Borrower).


 


10.3                        Securities and Deposits.  During the
continuance of an Event of Default and subject to any requirements set forth in
the Orders, Agent may at any time, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.


 


10.4                        Standards for Exercising
Rights and Remedies. 
To the extent that applicable law imposes duties on Agent to exercise
remedies in a commercially reasonable manner, Borrowers acknowledge and agree
that it is not commercially unreasonable for Agent (a) to fail to incur
expenses reasonably deemed significant by Agent to prepare Collateral for
disposition or otherwise to fail to complete raw material or work in process
into finished goods or other finished products for disposition, (b) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (c) to fail to exercise collection remedies against account
debtors or other persons obligated on Collateral or to fail to remove Liens on
or any adverse claims against Collateral, (d) to exercise collection remedies
against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as the Borrowers,
for expressions of interest in acquiring all or any portion of the Collateral,
(g) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to dispose
of assets in wholesale rather than retail markets, (j) to disclaim disposition
warranties, (k) to purchase insurance or credit enhancements to insure Agent
against risks of loss, collection or disposition of Collateral or to provide to
Agent a guaranteed return from the collection or disposition of Collateral, or
(l) to the extent deemed appropriate by Agent, to obtain the services of
brokers, investment bankers, consultants and other professionals to assist
Agent in the collection or disposition of any of the Collateral, or (m) conduct
going out of business sales and otherwise liquidate the inventory.  Borrowers acknowledge that the purpose of
this Section 10.4 is to provide non-exhaustive indications of what
actions or omissions by Agent would fulfill Agent’s duties under the Code or
any other relevant jurisdiction in Agent’s exercise of remedies against the
Collateral and that other actions or omissions by Agent shall not be deemed to
fail to fulfill such duties solely on account of not being indicated in this Section
10.4.  Without limitation upon the
foregoing, nothing contained in this Section 10.4. shall be construed to
grant any rights to Borrowers or to impose any duties on Agent that would not
have been granted or imposed by this Agreement or by applicable law in the
absence of this Section 10.4.


 


10.5                        License.  Effective
upon the occurrence of an Event of Default and subject to the requirements set
forth in the Orders, each Borrower hereby grants to Agent a royalty free
non-exclusive license to use, apply and affix any trademark, tradename, logo or
the like in which any Borrower now or hereafter has rights, such license being
with respect to Agent’s exercise of the rights hereunder, including,


 


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without
limitation, in connection with any completion of the manufacture of Inventory
or sale or other disposition of Inventory.


 


10.6                        Remedies Cumulative.  The rights
and remedies of the Lender Group under this Agreement, the other Loan
Documents, and all other agreements shall be cumulative and may be exercised
simultaneously.  The Lender Group shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity.  No
exercise by the Lender Group of one right or remedy shall be deemed an
election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver.  No delay by
the Lender Group shall constitute a waiver, election, or acquiescence by it.


 


11.                               TAXES AND EXPENSES.


 


If any Borrower fails to pay
any monies (whether taxes, assessments, insurance premiums, or, in the case of
leased properties or assets, rents or other amounts payable under such leases)
due to third Persons, or fails to make any deposits or furnish any required
proof of payment or deposit, all as required under the terms of this Agreement,
then, Agent to the extent Agent determines that such failure by Borrowers could
result in a Material Adverse Change, in its sole discretion and without prior
notice to any Borrower, may do any or all of the following:  (a) make payment of the same or any part
thereof, (b) set up such reserves in Borrowers’ Loan Account as Agent deems
necessary to protect the Lender Group from the exposure created by such
failure, or (c) in the case of the failure to comply with Section 7.9
hereof, obtain and maintain insurance policies of the type described in Section
7.9 and take any action with respect to such policies as Agent deems
prudent.  Any such amounts paid by Agent
shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement.  Agent need not inquire as to,
or contest the validity of, any such expense, tax, or Lien and the receipt of
the usual official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.


 


12.                               WAIVERS; INDEMNIFICATION.


 


12.1                        Demand; Protest; etc.  Each Borrower
waives demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of documents, instruments, chattel paper, and
guarantees at any time held by the Lender Group on which any such Borrower may
in any way be liable and any and all suretyship defenses.


 


12.2                        The Lender Group’s
Liability for Collateral.  Each Borrower
hereby agrees that:  (a) so long as the
Lender Group complies with its obligations, if any, under the Code, Agent shall
not in any way or manner be liable or responsible for:  (i) the safekeeping of the Collateral, (ii)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause, (iii) any diminution in the value thereof, or (iv) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other
Person, and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by Borrowers. Each Borrower shall remain obligated and liable
under each contract or agreement comprised in the Collateral to be observed or
performed by Borrowers thereunder. 
Neither Agent nor any Lender shall have any obligation or liability
under any such contract or agreement by reason or arising out of this Agreement
or the receipt by Agent or any Lender of any payment relating to any of the
Collateral, nor shall Agent or any Lender be obligated in any manner to perform
any of the obligations of Borrowers under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment


 


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received
by Agent or any Lender in respect of the Collateral or as to the sufficiency of
any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to Agent or to which
Agent or any Lender may be entitled to at any time or times. Agent’s sole duty
with respect to the custody, safe-keeping and physical preservation of the
Collateral in its possession, under §9-207 of the Code, or otherwise, shall be
to deal with such Collateral in the same manner as Agent deals with similar
property for its own account.


 


12.3                        Indemnification.  Each Borrower
shall pay, indemnify, defend, and hold the Agent-Related Persons and the
Lender-Related Persons with respect to each Lender, each Participant, and each
of their respective officers, directors, employees, agents, and
attorneys-in-fact (each, an “Indemnified Person”) harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all reasonable
attorneys fees and disbursements and other costs and expenses actually incurred
in connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of them in connection with or as a result of or related to (a)
the execution, delivery, enforcement, performance, or administration of this
Agreement, any of the other Loan Documents, or the transactions contemplated
hereby or thereby, (b) the reversal or withdrawal of any provisional credits
granted by Agent upon the transfer of funds from lock box, bank agency,
concentration accounts or otherwise under any cash management arrangements with
any Borrower or any Subsidiary or in connection with the provisional honoring
of funds transfers, checks or other items, (c) any actual or alleged
infringement of any patent, copyright, trademark, service mark or similar right
of any Borrower or any of its Subsidiaries comprised in the Collateral, (d)
with respect to the Borrowers and their Subsidiaries and their respective
properties and assets, any Environmental Claims, (e) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective
of whether any Indemnified Person is a party thereto), or any act, omission,
event, or circumstance in any manner related thereto and (f) with respect to
any decision made hereunder or under any other Loan Document at the Agent’s
Permitted Discretion (all the foregoing, collectively, the “Indemnified
Liabilities”).  The foregoing to the
contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
Person under this Section 12.3 with respect to any Indemnified Liability
that a court of competent jurisdiction finally determines in a final
non-appealable order to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. 
This provision shall survive the termination of this Agreement and the
repayment of the Obligations.  If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN
PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.


 


13.                               NOTICES.


 


Unless otherwise provided in
this Agreement, all notices or demands by Borrowers and the Agent to the other
relating to this Agreement or any other Loan Document shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally delivered or
sent by registered or certified mail (postage prepaid, return receipt
requested), overnight courier, electronic mail (at such email addresses as
Administrative Borrower


 


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or
Agent, as applicable, may designate to each other in accordance herewith), or
telefacsimile to Borrowers in care of Administrative Borrower, or to the Agent,
at its address set forth below:


 


	
  If to Borrowers:

  	
  Ultimate
  Electronics, Inc.

  
	
   

  	
  321
  West 84th Avenue, Suite A

  
	
   

  	
  Thornton,
  Colorado  80260

  
	
   

  	
  Attn:  Chief Financial Officer

  
	
   

  	
  Fax
  No.  (303) 412-2502

  
	
   

  	
   

  
	
  with copies to:

  	
  Skadden,
  Arps, Slate, Meagher & Flom LLP

  
	
   

  	
  333
  West Wacker Drive

  
	
   

  	
  Chicago,
  Illinois  60606

  
	
   

  	
  Attn:  Eric J. Ivester, Esq. & Randall J.
  Rademaker, Esq.

  
	
   

  	
  Fax
  No.  (312) 407-0411

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Hogan
  & Hartson L.L.P.

  
	
   

  	
  1200
  Seventeenth Street

  
	
   

  	
  Denver,
  Colorado   80202

  
	
   

  	
  Attn:
  Paul Hilton, Esq.

  
	
   

  	
  Fax
  No. (303) 899-7333

  
	
   

  	
   

  
	
  If to Agent:

  	
  Wells
  Fargo Retail Finance LLC

  
	
   

  	
  One
  Boston Place, 18th Floor

  
	
   

  	
  Boston,
  Massachusetts  02108

  
	
   

  	
  Attn:  Jennifer Blanchette

  
	
   

  	
  Fax
  No.  (617) 523-4027

  
	
   

  	
   

  
	
  with copies to:

  	
  Bingham
  McCutchen LLP

  
	
   

  	
  150
  Federal Street

  
	
   

  	
  Boston,
  Massachusetts  02110

  
	
   

  	
  Attn:  Robert A.J. Barry, Esq.

  
	
   

  	
  Fax
  No. (617) 951-8736

  



 


Agent and Borrowers may
change the address at which they are to receive notices hereunder, by notice in
writing in the foregoing manner given to the other party.  All notices or demands sent in accordance
with this Section 13, other than notices by Agent in connection with
enforcement rights against the Collateral under the provisions of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereof in the mail.  Each Borrower acknowledges and agrees that
notices sent by the Lender Group in connection with the exercise of enforcement
rights against Collateral under the provisions of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.


 


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14.                               CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.


 


(a)                                  THE VALIDITY OF THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN
DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THE APPLICATION OF THE BANKRUPTCY CODE IS MANDATORY


 


(b)                                 THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT AND/OR THE
STATE AND FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
OR OTHER PROPERTY MAY BE FOUND. 
BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM  NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT
IN ACCORDANCE WITH THIS SECTION 14(b).


 


BORROWERS AND THE LENDER
GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS.  BORROWERS AND THE LENDER GROUP
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


 


(c)                                  EXCEPT AS PROHIBITED BY LAW, EACH
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES.  EACH BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR AGENT WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT EACH MEMBER OF THE LENDER GROUP HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG
OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.


 


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15.                               ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.


 


15.1                        Assignments and
Participations


 


(a)                                  Any Lender may, with the written consent
of Agent (provided that no written consent of Agent shall be required in
connection with any assignment and delegation by a Lender to an Eligible
Transferee), assign and delegate to one or more assignees (each an “Assignee”)
all, or any ratable part of all, of the Obligations, the Commitments and the
other rights and obligations of such Lender hereunder and under the other Loan
Documents, provided, that assignments of Revolving Credit Commitments
and Obligations in respect of any Borrowings shall be in a minimum amount of
$5,000,000; and provided, further, that assignments of all or a
portion of a Tranche B Lender’s interests or a Tranche C Lender’s interests,
rights and obligations under this Agreement may be assigned without the written
consent of the Agent if (i) an Event of Default exists or (ii) the assignment
is to an existing Lender hereunder; provided, however, that
Borrowers and Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (x) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower and Agent by such Lender and the Assignee, (y) such
Lender and its Assignee have delivered to Administrative Borrower and Agent an
Assignment and Acceptance in form and substance satisfactory to Agent, and (z)
the assignor Lender or Assignee has paid to Agent for Agent’s separate account
a processing fee in the amount of $5,000. 
Anything contained herein to the contrary notwithstanding, the consent
of Agent shall not be required (and payment of any fees shall not be required)
if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the
business or loan portfolio of such Lender.


 


(b)                                 From and after the date that Agent
notifies the assignor Lender (with a copy to Administrative Borrower) that it
has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor Lender
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 12.3
hereof) and be released from its obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender’s rights and obligations under this Agreement and the other
Loan Documents, such Lender shall cease to be a party hereto and thereto), and
such assignment shall affect a novation between Borrowers and the Assignee.


 


(c)                                  By executing and delivering an Assignment
and Acceptance, the assigning Lender thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows:  (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (iii) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and


 


101





















 


decision
to enter into such Assignment and Acceptance, (iv) such Assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement, (v) such Assignee appoints and
authorizes Agent to take such actions and to exercise such powers under this
Agreement as are delegated to Agent, by the terms hereof, together with such
powers as are reasonably incidental thereto, and (vi) such Assignee agrees that
it will perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.


 


(d)                                 Immediately upon each Assignee’s making
its processing fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. 
The Commitment allocated to each Assignee shall reduce such Commitments
of the assigning Lender pro tanto.


 


(e)                                  Any Lender may at any time, with the
written consent of Agent, sell to one or more commercial banks, financial
institutions, or other Persons not Affiliates of such Lender (a “Participant”)
participating interests in its Obligations, the Commitment, and the other
rights and interests of that Lender (the “Originating Lender”) hereunder
and under the other Loan Documents (provided that no written consent of Agent
shall be required in connection with any sale of any such participating
interests by a Lender to an Eligible Transferee); provided, however,
that (i) the Originating Lender shall remain a “Lender” for all purposes of
this Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender hereunder shall not constitute a
“Lender” hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrowers, Agent, and the Lenders shall continue to deal solely and
directly with the Originating Lender in connection with the Originating Lender’s
rights and obligations under this Agreement and the other Loan Documents, (iv)
no Lender shall transfer or grant any participating interest under which the
Participant has the right to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to this Agreement
or of any other Loan Document would (A) extend the final Termination Date of
the Obligations hereunder in which such Participant is participating, (B)
reduce the interest rate applicable to the Obligations hereunder in which such
Participant is participating, (C) release all or a material portion of the
Collateral or guaranties (except to the extent expressly provided herein or in
any of the Loan Documents) supporting the Obligations hereunder in which such
Participant is participating, (D) postpone the payment of, or reduce the amount
of, the interest or fees payable to such Participant through such Lender, or
(E) change the amount or due dates of scheduled principal repayments or
prepayments or premiums; and (v) all amounts payable by Borrowers hereunder
shall be determined as if such Lender had not sold such participation; except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement.  The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrowers, the Collections, the Collateral, or otherwise in respect of the


 


102





















 


Obligations.  No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves.


 


(f)                                    In connection with any such assignment or
participation or proposed assignment or participation, a Lender may disclose
all documents and information which it now or hereafter may have relating to
Borrowers or Borrowers’ business.


 


(g)                                 If any assignee Lender is an Affiliate of
any Borrower, then any such assignee Lender shall have no right to vote as a
Lender hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or other
modifications to any of the Loan Documents or for purposes of making requests
to Agent pursuant to Section 10, and the determination of the Required
Revolving Credit Lenders, Required Tranche B Lenders, as applicable, shall for
all purposes of this Agreement and the other Loan Documents be made without
regard to such assignee Lender’s interest in any of the Obligations.  If any Lender sells a participating interest
in any of the Obligations to a Participant, and such Participant is a Borrower
or an Affiliate of a Borrower, then such transferor Lender shall promptly
notify Agent of the sale of such participation. 
A transferor Lender shall have no right to vote as a Lender hereunder or
under any of the other Loan Documents for purposes of granting consents or
waivers or for purposes of agreeing to amendments or modifications to any of
the Loan Documents or for purposes of making requests to Agent pursuant to Section
10 to the extent that such participation is beneficially owned by a
Borrower or any Affiliate of a Borrower, and the determination of the Required
Revolving Credit Lenders or Required Tranche B Lenders, as applicable, shall
for all purposes of this Agreement and the other Loan Documents be made without
regard to the interest of such transferor Lender in the Obligations to the
extent of such participation.  The
provisions of this Section 15.1(g) shall not apply to an assignee Lender
or participant which is also a Lender on the Closing Date or to an assignee
Lender or participant which has disclosed to the other Lenders that it is an
Affiliate of a Borrower and which, following such disclosure, has been excepted
from the provisions of this Section 15.1(g)
in a writing signed by the Required Lenders determined without regard to the
interest of such assignee Lender or transferor Lender, to the extent of such
participation, in the Advances or Obligations in respect of Letters of Credit.


 


(h)                                 Any other provision in this Agreement notwithstanding,
any Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve
Bank or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.


 


15.2                        Successors.  This
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties; provided, however, that Borrowers
may not assign this Agreement or any rights or duties hereunder without the
Lenders’ prior written consent and any prohibited assignment shall be
absolutely void ab initio.  No consent to assignment by the Lenders shall
release any Borrower from its Obligations. 
A Lender may assign this Agreement and the other Loan Documents and its
rights and duties hereunder and thereunder pursuant to Section 15.1
hereof and, except as expressly required pursuant to Section 15.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.


 


16.                               AMENDMENTS; WAIVERS.


 


16.1                        Amendments and Waivers.  No amendment
or waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by Borrowers


 


103





















 


therefrom,
shall be effective unless the same shall be in writing and signed by the
Required Revolving Credit Lenders (or by Agent at the written request of the
Required Revolving Credit Lenders) and Administrative Borrower (on behalf of
all Borrowers) and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.  Notwithstanding the foregoing, no such
amendment, waiver or consent shall:


 


(a)                                  unless in writing and
signed by all Revolving Credit Lenders and all Tranche B Lenders affected
thereby and Administrative Borrower (on behalf of all Borrowers) and acknowledged
by Agent, do any of the following:


 


(i)                                     increase or extend any Commitment of any
Lender,


 


(ii)                                  postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due hereunder or under any other Loan Document (other
than the Termination Date) payable to such Lender,


 


(iii)                               reduce the principal of, or the rate of
interest on, any loan or other extension of credit hereunder, or reduce any
fees or other amounts payable hereunder or under any other Loan Document,


 


(iv)                              change the definition of “Required
Lenders” and “Required Revolving Credit Lenders”;


 


(b)                                 unless in writing and signed by all
Revolving Credit Lenders and all Tranche B Lenders and Administrative Borrower
(on behalf of all Borrowers) and acknowledged by Agent, do any of the
following:


 


(i)                                     postpone or extend the Termination Date,


 


(ii)                                  change the percentage of Commitments that
is required to take any action hereunder,


 


(iii)                               amend this Section or any provision of
the Agreement providing for consent or other action by all Lenders,


 


(iv)                              contractually subordinate any of the
Agent’s Liens,


 


(v)                                 release any Borrower from any obligation
for the payment of money,


 


(vi)                              change the definition of Borrowing Base
or the definitions of Eligible Inventory, Eligible Credit Card Receivables,
Total Commitment, Net Liquidation Percentage, Net Retail Liquidation Value, or
Total Commitment,  or any component
definitions contained in the foregoing terms; provided
however, with respect to the definition of Eligible Inventory which permit
the Agent to modify criteria and standards thereof in its Permitted Discretion
and sole discretion, respectively, any modification by the Agent to make such
definitions more restrictive shall not require the consent of any Lender;


 


(c)                                  without the written consent of the Agent,
amend any of the provisions of Section 17 and any fees payable to the
Agent for the account of the Agent;


 


104





















 


(d)                                 without the written consent of the
Required Tranche B Lenders and the Administrative Borrower (on behalf of all
Borrowers) do any of the following:


 


(i)                                     amend, modify or waive Section 2.3,
2.5(c), 7.2, 7.3, 8.23, 9, 10, 16.1(d)
or, in each case, any component definition contained therein (as applicable to
Tranche B Lenders) or the definition of Total Commitment,


 


(ii)                                  change the definition of Tranche B
Borrowing Base, Required Tranche B Lenders, Standstill Termination Date, Buyout
Exercise Period, Buyout Exercise Notice and Buyout Acceptance Notice or any
component definition contained therein,


 


(iii)                               change the right of the Tranche B Lenders’
to receive reports pursuant to Section 7.2 and Section 7.3,


 


(iv)                              increase the Applicable Margin (other
than increases due to default rates being applicable) by more than two and one
half percent (2 1/2%); provided, however, any increase in the
Applicable Margin shall result in an increase in the Tranche B Interest Rate
and default rate of interest applicable to Tranche B Loan, as applicable, in an
amount equal to 150% of such increase,


 


(v)                                 accelerate the scheduled dates of
principal or interest payments or the Termination Date (other than following an
Event of Default); provided, however, that the foregoing shall
not in any way limit the rights of the Agent and the Revolving Credit Lenders
to make adjustments to Reserves or otherwise modify the Borrowing Base and
Tranche B Borrowing Base as permitted by this Agreement;


 


(e)                                  without the written consent of the
Tranche C Lenders and the Administrative Borrower (on behalf of all Borrowers)
do any of the following:


 


(i)                                     postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due hereunder or under any other Loan Document (other
than the Termination Date) payable to such Tranche C Lender,


 


(ii)                                  reduce the principal of, or the rate of
interest on, the Tranche C Loan, or reduce any fees or other amounts payable on
account of the Tranche C Loan,


 


(iii)                             contractually
subordinate any of the Agent’s Liens,


 


(iv)                            release
any Borrower from any obligation for the payment of the Tranche C Loan, and


 


(v)                               change
the right of the Tranche C Lenders’ to receive reports pursuant to Section
7.2 and Section 7.3.


 


(f)                                    without the written consent of Agent,
Issuing Lender, or Swing Lender, affect the rights or duties of Agent, Issuing
Lender, or Swing Lender, as applicable, under this Agreement or any other Loan
Document.


 


105





















 


The foregoing notwithstanding, any amendment, modification, waiver,
consent, termination, or release of, or with respect to, any provision of this
Agreement or any other Loan Document that relates only to the relationship of
the Lender Group among themselves, and that does not affect the rights or
obligations of Borrowers, shall not require consent by or the agreement of
Borrowers.


 


16.2                        Replacement of Holdout
Lender. 
If any action to be taken by the Lender Group or Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender (“Holdout Lender”) fails to give its consent, authorization, or
agreement, then Agent, upon at least 5 Business Days prior irrevocable notice
to the Holdout Lender, may permanently replace the Holdout Lender with one or
more substitute Lenders (each, a “Replacement Lender”), and the Holdout
Lender shall have no right to refuse to be replaced hereunder.  Such notice to replace the Holdout Lender
shall specify an effective date for such replacement, which date shall not be
later than 15 Business Days after the date such notice is given.


 


Prior to the effective date
of such replacement, the Holdout Lender and each Replacement Lender shall
execute and deliver an Assignment and Acceptance Agreement, subject only to the
Holdout Lender being repaid its share of the outstanding Obligations (including
an assumption of its Pro Rata Share of the Risk Participation Liability but
excluding its Pro Rata Share of any Revolving Credit Lenders Prepayment Premium
or the Tranche B Early Termination Fee, as applicable) without any premium or
penalty of any kind whatsoever.  If the
Holdout Lender shall refuse or fail to execute and deliver any such Assignment
and Acceptance Agreement prior to the effective date of such replacement, the
Holdout Lender shall be deemed to have executed and delivered such Assignment
and Acceptance Agreement.  The
replacement of any Holdout Lender shall be made in accordance with the terms of
Section 15.1.  Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender’s Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit.


 


16.3                        No Waivers; Cumulative
Remedies. 
No failure by Agent or any Lender to exercise any right, remedy, or
option under this Agreement or, any other Loan Document, or delay by Agent or
any Lender in exercising the same, will operate as a waiver thereof.  No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated.  No waiver by Agent or any Lender
on any occasion shall affect or diminish Agent’s and each Lender’s rights
thereafter to require strict performance by Borrowers of any provision of this
Agreement.  Agent’s and each Lender’s
rights under this Agreement and the other Loan Documents will be cumulative and
not exclusive of any other right or remedy that Agent or any Lender may have.


 


17.                               AGENT AND THE LENDER GROUP.


 


17.1                        Appointment and
Authorization of Agent.


 


Each Lender hereby
designates and appoints WFRF as its representative under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 17. 
The provisions of this Section 17 are solely for the benefit of
Agent and the


 


106





















 


Lenders, and Borrowers shall have no rights
as a third party beneficiary of any of the provisions contained herein.  Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding,
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent; it being
expressly understood and agreed that the use of the word “Agent” is for
convenience only, that WFRF is merely the representative of the Lenders, and
only has the contractual duties set forth herein.  Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect
to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions that Agent expressly is entitled to take
or assert under or pursuant to this Agreement and the other Loan
Documents.  Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have
the right to exercise the following powers as long as this Agreement remains in
effect:  (a) maintain, in accordance with
its customary business practices, ledgers and records reflecting the status of
the Obligations, the Collateral, the Collections, and related matters, (b) execute
or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances,
for itself or on behalf of the Revolving Credit Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents, (e) open and maintain such bank accounts and
cash management accounts as Agent deems necessary and appropriate in accordance
with the Loan Documents for the foregoing purposes with respect to the
Collateral and the Collections, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrowers, the
Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents.


 


17.2                        Delegation of Duties.  Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to its rights and duties under
this Agreement and the other Loan Documents. 
Agent may utilize the services of such Persons as Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of
any such Persons shall be paid by Borrowers. 
Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made
without gross negligence or willful misconduct.


 


17.3                        Liability of Agents.  None of the
Agent-Related Persons shall (a) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement or any other
Loan Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (b) be responsible in any manner to any
of the Lenders for any recital, statement, representation or warranty made by
any Borrower or any Subsidiary or Affiliate of any Borrower, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Borrower or any other party to any Loan Document to
perform its obligations hereunder or


 


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thereunder.  No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the Books or properties of
Borrowers or the books or records or properties of any of Borrowers’
Subsidiaries or Affiliates.


 


17.4                        Reliance by Agents.


 


(a)                                  Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrowers or counsel to any Lender), independent accountants and
other experts selected by Agent.  Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless Agent shall first receive such
advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable.  If Agent so requests, it
shall first be indemnified to its reasonable satisfaction by Lenders against
any and all liability and expense that may be incurred by it by reason of
taking or continuing to take any such action. 
Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.


 


(b)                                 For purposes of determining compliance
with the conditions set forth in Section 3.1, each Lender that has
executed this Agreement shall be deemed to have consented to, approved or
accepted, or to be satisfied with, each document and matter either sent, or
made available, by Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consent to or approved by or
acceptable or satisfactory to such Lender, unless an officer of Agent active
upon the Borrowers’ account shall have received notice from such Lender not
less than two days prior to the Closing Date specifying such Lender’s objection
thereto and such objection shall not have been withdrawn by notice to Agent to
such effect on or prior to the Closing Date.


 


17.5                        Notice of Default or Event
of Default. 
Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default, except with respect to defaults in the
payment of principal, interest, fees, and expenses required to be paid to Agent
for the account of the Lenders, except with respect to Events of Default of
which Agent has actual knowledge, unless Agent shall have received written
notice from a Lender or Administrative Borrower referring to this Agreement,
describing such Default or Event of Default, and stating that such notice is a “notice
of default.”  Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge.  If any
Lender obtains actual knowledge of any Event of Default, such Lender promptly
shall notify the other Lenders and Agent of such Event of Default.  Each Lender shall be solely responsible for
giving any notices to its Participants, if any. 
Subject to Section 17.4, Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Required
Revolving Credit Lenders in accordance with Section 10; provided,
however, that unless and until Agent has received any such request,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable.


 


17.6                        Credit Decision.  Each Lender
acknowledges that none of the Agent-Related Persons, has made any
representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Borrowers and their Subsidiaries or
Affiliates, shall be deemed to constitute any


 


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representation
or warranty by any Agent-Related Person to any Lender.  Each Lender represents to Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrowers and
any other Person (other than the Lender Group) party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrowers.  Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrowers and any other
Person (other than the Lender Group) party to a Loan Document.  Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by Agent,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of Borrowers and
any other Person party to a Loan Document that may come into the possession of
any of the Agent-Related Persons.


 


17.7                        Costs and Expenses;
Indemnification. 
Agent may incur and pay Lender Group Expenses to the extent Agent
reasonably deems necessary or appropriate for the performance and fulfillment
of its functions, powers, and obligations pursuant to the Loan Documents,
including court costs, reasonable attorneys fees and expenses, costs of
collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrowers are obligated to reimburse Agent or Lenders for such expenses
pursuant to the Loan Agreement or otherwise. 
Agent is authorized and directed to deduct and retain sufficient amounts
from Collections received by Agent to reimburse Agent for such out-of-pocket
costs and expenses prior to the distribution of any amounts to Lenders.  In the event Agent is not reimbursed for such
costs and expenses from Collections received by Agent, each Lender hereby
agrees that it is and shall be obligated to pay to or reimburse Agent for the
amount of such Lender’s Pro Rata Share thereof. 
Whether or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrowers and without limiting the obligation
of Borrowers to do so), according to their Pro Rata Shares, from and against
any and all Indemnified Liabilities; provided, however, that no
Lender shall be liable for the payment to any Agent-Related Person of any
portion of such Indemnified Liabilities resulting solely from such Person’s
gross negligence or willful misconduct nor shall any Lender be liable for the
obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder.  Without
limitation of the foregoing, each Lender shall reimburse Agent upon demand for
such Lender’s ratable share of any costs or out-of-pocket expenses (including
attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrowers.  The undertaking in this
Section shall survive the payment of all Obligations hereunder and the resignation
or replacement of Agent.


 


17.8                        Agent in Individual Capacity.  WFRF and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in, and generally engage in any
kind of banking, trust, financial advisory, underwriting, or other business
with Borrowers and their


 


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Subsidiaries
and Affiliates and any other Person (other than the Lender Group) party to any
Loan Documents as though WFRF were not Agent hereunder, and, in each case,
without notice to or consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, WFRF or its Affiliates may
receive information regarding Borrowers or their Affiliates and any other
Person (other than the Lender Group) party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrowers or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
provide such information to them.  The
terms “Lender” and “Lenders” include WFRF in its individual capacity.


 


17.9                        Successor Agent.  Agent may
resign as Agent upon 45 days notice to the Lenders.  If Agent resigns under this Agreement, the
Required Revolving Credit Lenders shall appoint a successor Agent for the
Lenders.  If no successor Agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent.  In any such event, upon the acceptance of its
appointment as successor Agent hereunder, such successor Agent shall succeed to
all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent, and the retiring Agent’s appointment, powers,
and duties as Agent shall be terminated. 
After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Section 17 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.  If no successor Agent has
accepted appointment as Agent by the date which is 45 days following a retiring
Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of
the duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.


 


17.10                 Lender in Individual
Capacity. 
Any Lender and its respective Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire equity interests
in and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with Borrowers and their Subsidiaries and
Affiliates and any other Person (other than the Lender Group) party to any Loan
Documents as though such Lender were not a Lender hereunder without notice to
or consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrowers or their Affiliates and
any other Person (other than the Lender Group) party to any Loan Documents that
is subject to confidentiality obligations in favor of Borrowers or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver such Lender will use
its reasonable best efforts to obtain), such Lender not shall be under any
obligation to provide such information to them. 
With respect to the Swing Loans and Agent Advances, Swing Lender shall
have the same rights and powers under this Agreement as any other Lender and
may exercise the same as though it were not the sub-agent of the Agent.


 


17.11                 Payments to, and
Distributions by, Agent.


 


(a)                                  A payment by the Borrowers to Agent
hereunder or under any of the other Loan Documents for the account of any
Lender shall constitute a payment to such Lender. Agent agrees promptly to
distribute to each Lender such Lender’s Pro Rata Share of payments received by
Agent for the account of the Lenders except as otherwise expressly provided
herein or in any of the other Loan Documents.


 


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(b)                                 If in the reasonable opinion of Agent the
distribution of any amount received by it in such capacity hereunder or under
any of the other Loan Documents might involve it in liability, it may refrain
from making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction.  If a court of competent jurisdiction shall
adjudge that any amount received and distributed by Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay to
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court.


 


17.12                 Duties in the Case of
Enforcement. 
In case one or more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations shall have
occurred, Agent shall, if (a) so requested by the Required Revolving Credit
Lenders, and (b) the Lenders have provided to Agent such additional indemnities
and assurances against expenses and liabilities as Agent may reasonably
request, proceed to enforce the provisions of this Agreement and the other Loan
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, subject to the
requirements set forth in the Orders. 
Subject to the requirements set forth in the Orders the Required Revolving
Credit Lenders may direct Agent in writing as to the method and the extent of
any such sale or other disposition, the Lenders hereby agreeing to indemnify
and hold Agent, harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided
that Agent need not comply with any such direction to the extent that Agent
reasonably believes Agent’s compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.


 


17.13                 Withholding Taxes.


 


(a)                                  If any Lender is a “foreign corporation,
partnership or trust” within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the IRC, such Lender agrees with and in favor of Agent and Borrowers,
to deliver to Agent and Administrative Borrower:


 


(i)                                     if such Lender claims an exemption from
withholding tax pursuant to its portfolio interest exception, (A) a statement
of the Lender, signed under penalty of perjury, that it is not a (I) a “bank”
as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder (within
the meaning of Section 881(c)(3)(B) of the IRC), or (III) a controlled foreign
corporation described in Section 881(c)(3)(C) of the IRC, and (B) a properly
completed IRS Form W-8BEN, before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or Administrative
Borrower;


 


(ii)                                  if such Lender claims an exemption from,
or a reduction of, withholding tax under a United States tax treaty, properly
completed IRS Form W-8BEN before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or Administrative
Borrower;


 


(iii)                               if such Lender claims that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender,
two properly completed and executed copies of IRS Form W-8ECI before the first
payment of any interest is due under this Agreement and at any other time
reasonably requested by Agent or Administrative Borrower; and


 


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(iv)                              such other form or forms as may be
required under the IRC or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.


 


Such Lender agrees
promptly to notify Agent and Administrative Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.


 


(b)                                 If any Lender claims exemption from, or
reduction of, withholding tax under a United States tax treaty by providing IRS
Form W-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrowers to such Lender,
such Lender agrees to notify Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrowers to such Lender.  To the extent of such percentage amount, Agent
will treat such Lender’s IRS Form W-8BEN as no longer valid.


 


(c)                                  If any Lender is entitled to a reduction
in the applicable withholding tax, Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction.  If
the forms or other documentation required by subsection (a) of this Section are
not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.


 


(d)                                 If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Agent under this Section, together
with all costs and expenses (including attorneys fees and expenses).  The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.


 


(e)                                  All payments made by Borrowers hereunder
or under any note or other Loan Document will be made without setoff,
counterclaim, or other defense, except as required by applicable law other than
for Taxes (as defined below).  All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of a Lender, or (ii) to the extent that
such tax results from a change in the circumstances of the Lender, including a
change in the residence, place of organization, or principal place of business
of the Lender, or a change in the branch or lending office of the Lender
participating in the transactions set forth herein) and all interest, penalties
or similar liabilities with respect thereto (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as “Taxes”).  If any
Taxes are so levied or imposed, each Borrower agrees to pay the full amount of
such Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any note, including
any amount paid pursuant to this Section 17.13(e) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for


 


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herein;
provided, however, that Borrowers shall not be required to
increase any such amounts payable to Agent or any Lender (i) that is not
organized under the laws of the United States, if such Person fails to comply
with the other requirements of this Section 17.13, or (ii) if the
increase in such amount payable results from Agent’s or such Lender’s own
willful misconduct or gross negligence. 
Borrowers will furnish to Agent as promptly as possible after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by Borrowers.


 


17.14                 Collateral Matters.


 


(a)                                  The Lenders hereby irrevocably authorize
Agent, at its option and in its sole discretion, to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Administrative Borrower certifies to Agent that the
sale or disposition is permitted under Section 8.4 of this Agreement or
the other Loan Documents (and Agent may rely conclusively on any such
certificate, without further inquiry), (iii) constituting property in which no
Borrower owned any interest at the time the security interest was granted or at
any time thereafter, or (iv) constituting property leased to a Borrower under a
lease that has expired or is terminated in a transaction permitted under this
Agreement.  Except as provided above,
Agent will not execute and deliver a release of any Lien on any Collateral
without the prior written authorization of (y) if the release is of all or
substantially all of the Collateral, all of the Lenders, or (z) otherwise, the
Required Revolving Credit Lenders.  Upon
request by Agent or Administrative Borrower at any time, the Lenders will
confirm in writing Agent’s authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 17.14; provided,
however, that (1) Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Agent’s opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Lien without recourse, representation, or
warranty, and (2) such release shall not in any manner discharge, affect, or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of Borrowers in respect of) all interests retained by
Borrowers, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.


 


(b)                                 Agent shall have no obligation whatsoever
to any of the Lenders to assure that the Collateral exists or is owned by
Borrowers or is cared for, protected, or insured or has been encumbered, or
that the Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the
Loan Documents, it being understood and agreed that in respect of the Collateral,
or any act, omission, or event related thereto, subject to the terms and
conditions contained herein, Agent may act in any manner it may deem
appropriate, in its sole discretion given Agent’s own interest in the
Collateral in its capacity as one of the Lenders and that Agent shall have no
other duty or liability whatsoever to any Lender as to any of the foregoing,
except as otherwise provided herein.


 


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17.15                 Restrictions on Actions by
Lenders; Sharing of Payments.


 


(a)                                  Each of the Lenders agrees that it shall
not, without the express written consent of Agent, and that it shall, to the
extent it is lawfully entitled to do so, upon the request of Agent, set off
against the Obligations, any amounts owing by such Lender to Borrowers or any
deposit accounts of Borrowers now or hereafter maintained with such
Lender.  Each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
or cause to be taken any action, including, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.


 


(b)                                 If, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms
of this Agreement, or (ii) payments from Agent in excess of such Lender’s
ratable portion of all such distributions by Agent, such Lender promptly shall
(1) turn the same over to Agent, in kind, and with such endorsements as may be
required to negotiate the same to Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; provided, however, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from
it, those purchases of participations shall be rescinded in whole or in part,
as applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to the
extent that such purchasing party is required to pay interest in connection
with the recovery of the excess payment.


 


17.16                 Agency for Perfection.  Agent hereby
appoints each other Lender as its agent (and each Lender hereby accepts such
appointment) for the purpose of perfecting the Agent’s Liens in assets which,
in accordance with Article 9 of the Code can be perfected only by
possession.  Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver such Collateral to Agent
or in accordance with Agent’s instructions.


 


17.17                 Payments by Agent to the
Lenders. 
All payments to be made by Agent to the Lenders shall be made by bank
wire transfer or internal transfer of immediately available funds pursuant to
such wire transfer instructions as each party may designate for itself by
written notice to Agent.  Concurrently
with each such payment, Agent shall identify whether such payment (or any
portion thereof) represents principal, premium, or interest of the Obligations.


 


17.18                 Concerning the Collateral
and Related Loan Documents.  Each member
of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents relating to the Collateral, for the benefit of the
Lender Group.  Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.


 


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17.19                 Field Audits and
Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and
Information. 
By becoming a party to this Agreement, each Lender:


 


(a)                                  is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit, appraisal, inventory reports or other examination report (each a “Report”
and collectively, “Reports”) prepared by Agent, and Agent shall so
furnish each Lender with such Reports,


 


(b)                                 expressly agrees and acknowledges that
Agent does not (i) make any representation or warranty as to the accuracy of
any Report, and (ii) shall not be liable for any information contained in any
Report,


 


(c)                                  expressly agrees and acknowledges that
the Reports are not comprehensive audits or examinations, that Agent or other
party performing any audit or examination will inspect only specific
information regarding Borrowers and will rely significantly upon the Books, as
well as on representations of Borrowers’ personnel,


 


(d)                                 agrees to keep all Reports and other
material, non-public information regarding Borrowers and their Subsidiaries and
their operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (i) to counsel for and other advisors,
accountants, and auditors to such Lender, (ii) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender’s rights hereunder, subject
to receipt of an undertaking by such potential transferee to maintain the
confidentiality of such information, (iii) of information that has become
public by disclosures made by Persons other than such Lender, its Affiliates,
assignees, transferees, or Participants, or (iv) as required or requested by
any court, governmental or administrative agency, pursuant to any subpoena or
other legal process, or by any law, statute, regulation, or court order; provided,
however, that, unless prohibited by applicable law, statute, regulation,
or court order, such Lender shall notify Administrative Borrower of any request
by any court, governmental or administrative agency, or pursuant to any
subpoena or other legal process for disclosure of any such non-public material
information concurrent with, or where practicable, prior to the disclosure
thereof, and


 


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


 


In addition to the
foregoing:  (x) any Lender may from time
to time request of Agent in writing that Agent provide to such Lender a copy of
any report or document provided by Borrowers to Agent that has not been
contemporaneously provided by Borrowers to such Lender, and, upon receipt of
such request, Agent shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrowers, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender’s notice to Agent, whereupon Agent promptly shall request of
Administrative Borrower the


 


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additional
reports or information reasonably specified by such Lender, and, upon receipt
thereof from Administrative Borrower, Agent promptly shall provide a copy of
same to such Lender, and (z) any time that Agent renders to Administrative
Borrower a statement regarding the Loan Account, Agent shall send a copy of
such statement to each Lender.


 


17.20                 Several Obligations; No
Liability. 
Notwithstanding that certain of the Loan Documents now or hereafter may
have been or will be executed only by or in favor of Agent in its capacity as
such, and not by or in favor of the Lenders, any and all obligations on the
part of Agent (if any) to make any credit available hereunder shall constitute
the several (and not joint) obligations of the respective Lenders on a ratable
basis, according to their respective Commitments, to make an amount of such
credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. 
Nothing contained herein shall confer upon any Lender any interest in,
or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender.  Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent any such notice may be required, and no Lender shall have any
obligation, duty, or liability to any Participant of any other Lender.  Except as provided in Section 17.7, no
member of the Lender Group shall have any liability for the acts or any other
member of the Lender Group.  No Lender
shall be responsible to any Borrower or any other Person for any failure by any
other Lender to fulfill its obligations to make credit available hereunder, nor
to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.


 


17.21                 Legal Representation of
Agent. 
In connection with the negotiation, drafting, and execution of this
Agreement and the other Loan Documents, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Bingham McCutchen LLP (“Bingham”)
only has represented and only shall represent WFRF in its capacity as Agent and
as a Lender.  Each other Lender hereby
acknowledges that Bingham does not represent it in connection with any such
matters.


 


17.22                 Confidentiality.  Except as otherwise provided in this
Agreement, Agent shall not disclose any confidential information to any Person
without the written consent of Administrative Borrower, other than (a) to Agent’s
Affiliates and its officers, directors, employees, agents and advisors and to
actual or prospective assignees and participants, and then only on a
confidential basis; (b) as required by any law, rule or regulation or judicial
process; and (c) as requested or required by any state, federal or foreign authority
or examiner regulating banks or banking. 
If Agent is required by any law, rule or regulation or judicial process
to disclose any confidential information, Agent will promptly give notice to
Administrative Borrower so that Administrative Borrower may seek a protective
order or other appropriate remedy.  If
Administrative Borrower shall not obtain such protective order or other remedy,
Agent will endeavor to furnish only that portion of the confidential information
which Agent reasonably believes to be legally required.


 


17.23                 Press Releases and Related
Matters.


 


With the prior written approval of the
Administrative Borrower (which approval shall not be unreasonably withheld),
the Agent or any Lender may issue a “tombstone” notice of the establishment of
the credit facility contemplated by this Agreement and may make reference to
the Borrowers (and may utilize any logo or other distinctive symbol associated
with the Borrowers) in connection with any advertising, promotion, or marketing
undertaken by the Agent or any Lender, irrespective of how such


 


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material will be disseminated. 
Agent reserves the right to provide to industry trade organizations
information necessary and customary for inclusion in league table measurements.


 


18.                               GENERAL PROVISIONS.


 


18.1                        Governing Documents of
Parent. 
Notwithstanding anything to the contrary contained herein or in the
Governing Documents of Parent, Agent and each Lender do not agree to and shall
not be bound by any provision of the Parent’s Governing Document in respect of
any compromise or arrangement between the Parent and its creditors or
stockholders (as of the Closing Date, Article 11 of the Articles of
Incorporation of Parent), and the inclusion of any such provision in Parent’s
Governing Documents shall not impair or frustrate in any way the Agent’s or any
Lender’s rights to initiate, participate in or object to any Insolvency
Proceeding or any proposed compromise or arrangement as described therein.  The Agent and each Lender do not consent to
the jurisdiction of the state courts of the State of Delaware.


 


18.2                        Effectiveness.  This
Agreement shall be binding and deemed effective when executed by Borrowers,
Agent and each Lender whose signature is provided for on the signature pages
hereof.


 


18.3                        Section Headings.  Headings and
numbers have been set forth herein for convenience only.  Unless the contrary is compelled by the
context, everything contained in each Section applies equally to this entire
Agreement.


 


18.4                        Interpretation.  Neither this
Agreement nor any uncertainty or ambiguity herein shall be construed or
resolved against the Lender Group or Borrowers, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to accomplish fairly the purposes and intentions of all parties hereto.


 


18.5                        Severability of Provisions.  Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


18.6                        Amendments in Writing.  This
Agreement only can be amended by a writing in accordance with Section 16.1.


 


18.7                        Counterparts;
Telefacsimile Execution.  This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. 
Delivery of an executed counterpart of this Agreement by telefacsimile
shall be equally as effective as delivery of an original executed counterpart of
this Agreement.  Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. 
The foregoing shall apply to each other Loan Document mutatis mutandis.


 


18.8                        Revival and Reinstatement
of Obligations. 
If the incurrence or payment of the Obligations by any Borrower or the
transfer to the Lender Group of any property should for any reason subsequently
be declared to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other


 


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voidable
or recoverable payments of money or transfers of property (collectively, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in
whole or in part, any such Voidable Transfer, or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or
the amount thereof that the Lender Group is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Lender Group related thereto, the liability of Borrowers automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.


 


18.9                        Integration.  This
Agreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.


 


18.10                 Parent as Agent for
Borrowers. 
Each Borrower hereby irrevocably appoints Parent as the borrowing agent
and attorney-in-fact for all Borrowers (the “Administrative Borrower”)
which appointment shall remain in full force and effect unless and until Agent
shall have received prior written notice signed by each Borrower that such
appointment has been revoked and that another Borrower has been appointed
Administrative Borrower.  Each Borrower
hereby irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative
Borrower deems appropriate on its behalf to obtain Advances and Letters of
Credit and to exercise such other powers as are reasonably incidental thereto
to carry out the purposes of this Agreement. 
It is understood that the handling of the Loan Account and Collateral of
Borrowers in a combined fashion, as more fully set forth herein, is done solely
as an accommodation to Borrowers in order to utilize the collective borrowing
powers of Borrowers in the most efficient and economical manner and at their
request, and that Lender Group shall not incur liability to any Borrower as a
result hereof.  Each Borrower expects to
derive benefit, directly or indirectly, from the handling of the Loan Account
and the Collateral in a combined fashion since the successful operation of each
Borrower is dependent on the continued successful performance of the integrated
group.  To induce the Lender Group to do
so, and in consideration thereof, each Borrower hereby jointly and severally
agrees to indemnify each member of the Lender Group and hold each member of the
Lender Group harmless against any and all liability, expense, loss or claim of
damage or injury, made against the Lender Group by any Borrower or by any third
party whosoever, arising from or incurred by reason of (a) the handling of the
Loan Account and Collateral of Borrowers as herein provided, (b) the Lender
Group’s relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Lender Group hereunder or under the other Loan
Documents, except that Borrowers will have no liability to the relevant
Agent-Related Person or Lender-Related Person under this Section 18.10
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person.


 


 


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