EX-10.1



 





Exhibit 10.1




SECOND AMENDED AND RESTATED LOAN AND SECURITY

AGREEMENT

Filene’s Basement, Inc.

 The Borrower




NATIONAL CITY BUSINESS CREDIT, INC.

Administrative Agent And Collateral Agent for

The Revolving Credit Lenders Referenced Herein




National City Bank

As Letter of Credit Issuer and 

As Lead Arranger




Wells fargo retail finance llc 

and

wachovia capital finance corporation (central)

as co-documentation agents




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	Article 1 - Definitions:
	 	 	2	 
	 
	 	 	 	 
	Article 2 - The Revolving Credit:
	 	 	39	 
	 
	 	 	 	 
	2.1. Establishment of Revolving Credit
	 	 	39	 
	2.2. Advances in Excess of Applicable Borrowing Base (OverLoans)
	 	 	40	 
	2.3. Risks of Value of Collateral
	 	 	40	 
	2.4. Commitment to Make Revolving Credit Loans and Support Letters of Credit
	 	 	41	 
	2.5. Revolving Credit Loan Requests
	 	 	41	 
	2.6. Suspension of Revolving Credit
	 	 	43	 
	2.7. Making of Revolving Credit Loans
	 	 	43	 
	2.8. SwingLine Loans
	 	 	44	 
	2.9. The Loan Account
	 	 	45	 
	2.10. The Revolving Credit Notes
	 	 	46	 
	2.11. Payment of The Loan Account
	 	 	46	 
	2.12. Interest on Revolving Credit Loans
	 	 	47	 
	2.13. Arrangement Fee; Upfront fee; Collateral Monitoring Fee; Early Termination Fee
	 	 	48	 
	2.14. Unused Line Fee
	 	 	48	 
	2.15. Concerning Fees
	 	 	49	 
	2.16. Agent’s and Revolving Credit Lenders’ Discretion
	 	 	49	 
	2.17. Procedures For Issuance of L/Cs and Banker’s Acceptances
	 	 	49	 
	2.18. Fees For L/Cs and Banker’s Acceptances
	 	 	51	 
	2.19. Concerning L/C’s and Banker’s Acceptances
	 	 	53	 
	2.20. Changed Circumstances
	 	 	54	 
	2.21. Intentionally Omitted
	 	 	55	 
	2.22. Revolving Credit Lenders’ Commitments
	 	 	55	 
	2.23. Payments
	 	 	56	 
	 
	 	 	 	 
	Article 3 - Conditions Precedent:
	 	 	56	 
	 
	 	 	 	 
	3.1. Corporate Due Diligence
	 	 	57	 
	3.2. Opinions
	 	 	57	 
	3.3. Additional Documents
	 	 	57	 
	3.4. Officers’ Certificates
	 	 	57	 
	3.5. Representations and Warranties
	 	 	57	 
	3.6. Minimum Day One Availability
	 	 	57	 
	3.7. Subordinated Indebtedness; Intercreditor Agreement
	 	 	57	 
	3.8. Repayment Under Existing Loan Agreement
	 	 	57	 
	3.9. Consents
	 	 	57	 
	3.10. Appraisals and Commercial Finance Examinations
	 	 	57	 
	3.11. Financial Information
	 	 	58	 
	3.12. Material Agreements
	 	 	58	 
	3.13. Litigation
	 	 	58	 
	3.14. Perfection of Encumbrances
	 	 	58	 
	3.15. All Fees and Expenses Paid
	 	 	58	 
	3.16. Cash Management
	 	 	58	 
	3.17. Insurance
	 	 	59	 
	3.18. No Loan Party in Default
	 	 	59	 






i









 






	 	 	 	 	 
	3.19. No Adverse Change
	 	 	59	 
	3.20. Certain Changes
	 	 	59	 
	3.21. Benefit of Conditions Precedent
	 	 	59	 
	 
	 	 	 	 
	Article 4 - General Representations and Warranties:
	 	 	59	 
	 
	 	 	 	 
	4.1. Due Organization. Authorization. No Conflicts
	 	 	59	 
	4.2. Trade Names
	 	 	60	 
	4.3. Intellectual Property
	 	 	61	 
	4.4. Locations
	 	 	61	 
	4.5. Encumbrances
	 	 	61	 
	4.6. Indebtedness
	 	 	61	 
	4.7. Insurance
	 	 	62	 
	4.8. Licenses
	 	 	62	 
	4.9. Leases
	 	 	62	 
	4.10. Requirements of Law
	 	 	62	 
	4.11. Labor Relations
	 	 	62	 
	4.12. Taxes
	 	 	63	 
	4.13. No Margin Stock
	 	 	64	 
	4.14. Investment Company Status
	 	 	64	 
	4.15. ERISA
	 	 	64	 
	4.16. Hazardous Materials
	 	 	65	 
	4.17. Litigation
	 	 	65	 
	4.18. Adequacy of Disclosure
	 	 	66	 
	4.19. Unrestricted Subsidiaries
	 	 	66	 
	4.20. No Bankruptcy Filing
	 	 	66	 
	4.21. Patriot Act
	 	 	66	 
	4.22. Foreign Asset Control Regulations
	 	 	66	 
	 
	 	 	 	 
	Article 5 - GENERAL COVENANTS:
	 	 	67	 
	 
	 	 	 	 
	5.1. Payment and Performance of Liabilities
	 	 	67	 
	5.2. Due Organization. Authorization. No Conflicts
	 	 	67	 
	5.3. Trade Names
	 	 	67	 
	5.4. Locations
	 	 	67	 
	5.5. Encumbrances
	 	 	68	 
	5.6. Indebtedness
	 	 	69	 
	5.7. Insurance
	 	 	69	 
	5.8. Licenses
	 	 	69	 
	5.9. Requirements of Law
	 	 	70	 
	5.10. Labor Relations
	 	 	70	 
	5.11. Maintain Properties
	 	 	70	 
	5.12. Taxes
	 	 	70	 
	5.13. No Margin Stock
	 	 	71	 
	5.14. ERISA
	 	 	71	 
	5.15. Hazardous Materials
	 	 	71	 
	5.16. Dividends. Investments. Corporate Action
	 	 	72	 
	5.17. Loans
	 	 	73	 
	5.18. Protection of Assets
	 	 	74	 
	5.19. Line of Business; Conduct of Business
	 	 	75	 






ii









 






	 	 	 	 	 
	5.20. Affiliate Transactions
	 	 	75	 
	5.21. Additional Subsidiaries
	 	 	76	 
	5.22. Further Assurances
	 	 	76	 
	5.23. Adequacy of Disclosure
	 	 	77	 
	5.24. No Restrictions on Liabilities
	 	 	77	 
	5.25. Unrestricted Subsidiaries
	 	 	77	 
	5.26. Parent’s Line of Business
	 	 	77	 
	5.27. Restrictions on Payment of Senior Non-Convertible Facility
	 	 	77	 
	5.28. Restrictions on Payment of PIES
	 	 	77	 
	5.29. Restrictions on Payment of Filene’s Notes
	 	 	78	 
	 
	 	 	 	 
	Article 6 - Financial Reporting and Performance Covenants:
	 	 	78	 
	 
	 	 	 	 
	6.1. Maintain Records
	 	 	78	 
	6.2. Access to Records
	 	 	79	 
	6.3. Prompt Notice to Administrative Agent
	 	 	79	 
	6.4. Borrowing Base Reports
	 	 	81	 
	6.5. Monthly Reports
	 	 	81	 
	6.6. Intentionally Omitted
	 	 	81	 
	6.7. Annual Reports
	 	 	81	 
	6.8. Officers’ Certificates
	 	 	82	 
	6.9. Inventories, Appraisals, and Audits
	 	 	82	 
	6.10. Additional Financial Information
	 	 	83	 
	6.11. Information Delivered Pursuant to Article 6
	 	 	84	 
	 
	 	 	 	 
	Article 7 - Use of Collateral:
	 	 	84	 
	 
	 	 	 	 
	7.1. Use of Inventory Collateral
	 	 	84	 
	7.2. Inventory Quality
	 	 	85	 
	7.3. Adjustments and Allowances
	 	 	85	 
	7.4. Validity of Accounts
	 	 	85	 
	7.5. Notification to Account Debtors
	 	 	85	 
	 
	 	 	 	 
	Article 8 - Cash Management. Payment of Liabilities:
	 	 	85	 
	 
	 	 	 	 
	8.1. Depository Accounts
	 	 	85	 
	8.2. Credit Card Receipts
	 	 	86	 
	8.3. The Administrative Agent’s, Collection, and Operating Accounts
	 	 	86	 
	8.4. Proceeds and Collections
	 	 	87	 
	8.5. Payment of Liabilities
	 	 	88	 
	8.6. The Operating Account
	 	 	89	 
	 
	 	 	 	 
	Article 9 - Grant of Security Interest:
	 	 	89	 
	 
	 	 	 	 
	9.1. Grant of Security Interest
	 	 	89	 
	9.2. Extent and Duration of Security Interest
	 	 	90	 
	 
	 	 	 	 
	Article 10 - Collateral Agent As Borrower’s Attorney-In-Fact:
	 	 	91	 
	 
	 	 	 	 
	10.1. Appointment as Attorney-In-Fact
	 	 	91	 
	10.2. No Obligation to Act
	 	 	92	 






iii









 






	 	 	 	 	 
	Article 11 - Events of Default:
	 	 	92	 
	 
	 	 	 	 
	11.1. Failure to Pay the Revolving Credit
	 	 	92	 
	11.2. Failure To Make Other Payments
	 	 	92	 
	11.3. Failure to Perform Covenant or Liability (No Grace Period)
	 	 	92	 
	11.4. Financial Reporting Requirements
	 	 	93	 
	11.5. Failure to Perform Covenant or Liability (Grace Period)
	 	 	93	 
	11.6. Misrepresentation
	 	 	93	 
	11.7. Acceleration of Other Debt. Breach of Lease
	 	 	93	 
	11.8. Default Under Other Agreements
	 	 	93	 
	11.9. Uninsured Casualty Loss
	 	 	94	 
	11.10. Attachment. Judgment. Restraint of Business
	 	 	94	 
	11.11. Business Failure
	 	 	94	 
	11.12. Bankruptcy
	 	 	94	 
	11.13. Termination of Guaranty
	 	 	95	 
	11.14. Challenge to Loan Documents
	 	 	95	 
	11.15. Change in Control
	 	 	95	 
	 
	 	 	 	 
	Article 12 - Rights and Remedies Upon Default:
	 	 	95	 
	 
	 	 	 	 
	12.1. Acceleration
	 	 	95	 
	12.2. Rights of Enforcement
	 	 	95	 
	12.3. Sale of Collateral
	 	 	96	 
	12.4. Occupation of Business Location
	 	 	97	 
	12.5. Grant of Nonexclusive License
	 	 	97	 
	12.6. Assembly of Collateral
	 	 	97	 
	12.7. Rights and Remedies
	 	 	97	 
	 
	 	 	 	 
	Article 13 - Revolving Credit Fundings and Distributions:
	 	 	97	 
	 
	 	 	 	 
	13.1. Revolving Credit Funding Procedures
	 	 	97	 
	13.2. SwingLine Loans
	 	 	98	 
	13.3. Administrative Agent’s Covering of Fundings
	 	 	99	 
	13.4. Ordinary Course Distributions
	 	 	101	 
	 
	 	 	 	 
	Article 14 - Acceleration and Liquidation:
	 	 	101	 
	 
	 	 	 	 
	14.1. Acceleration Notices
	 	 	101	 
	14.2. Acceleration
	 	 	102	 
	14.3. Initiation of Liquidation
	 	 	102	 
	14.4. Actions At and Following Initiation of Liquidation
	 	 	102	 
	14.5. Collateral Agent’s Conduct of Liquidation
	 	 	102	 
	14.6. Distribution of Liquidation Proceeds
	 	 	103	 
	14.7. Relative Priorities To Proceeds of Liquidation
	 	 	103	 
	 
	 	 	 	 
	Article 15 - The Agent:
	 	 	104	 
	 
	 	 	 	 
	15.1. Appointment of The Agent
	 	 	104	 
	15.2. Responsibilities of Agent
	 	 	105	 
	15.3. Concerning Distributions By the Agent
	 	 	105	 
	15.4. Dispute Resolution
	 	 	106	 
	15.5. Distributions of Notices and of Documents
	 	 	106	 
	15.6. Confidential Information
	 	 	107	 






iv









 






	 	 	 	 	 
	15.7. Reliance by Agent
	 	 	107	 
	15.8. Non-Reliance on Agent and Other Revolving Credit Lenders
	 	 	107	 
	15.9. Indemnification
	 	 	108	 
	15.10. Resignation of Agent
	 	 	108	 
	15.11. Lead Arranger
	 	 	109	 
	 
	 	 	 	 
	Article 16 - Action By Agent - Consents - Amendments - Waivers:
	 	 	109	 
	 
	 	 	 	 
	16.1. Administration of Credit Facilities
	 	 	109	 
	16.2. Actions Requiring or On Direction of Majority Lenders
	 	 	110	 
	16.3. Action Requiring Certain Consent
	 	 	110	 
	16.4. Actions Requiring or Directed By Unanimous Consent
	 	 	110	 
	16.5. Actions Requiring SwingLine Lender Consent
	 	 	112	 
	16.6. Actions Requiring Agent’s Consent
	 	 	112	 
	16.7. Miscellaneous Actions
	 	 	112	 
	16.8. Actions Requiring Borrower’s Consent
	 	 	112	 
	16.9. NonConsenting Revolving Credit Lender
	 	 	113	 
	 
	 	 	 	 
	Article 17 - Assignments By Revolving Credit Lenders:
	 	 	115	 
	 
	 	 	 	 
	17.1. Assignments and Acceptances
	 	 	115	 
	17.2. Assignment Procedures
	 	 	115	 
	17.3. Effect of Assignment
	 	 	116	 
	 
	 	 	 	 
	Article 18 - Notices:
	 	 	116	 
	 
	 	 	 	 
	18.1. Notice Addresses
	 	 	116	 
	18.2. Notice Given
	 	 	117	 
	18.3. Wire Instructions. Notice Given
	 	 	118	 
	 
	 	 	 	 
	Article 19 - Term:
	 	 	118	 
	 
	 	 	 	 
	19.1. Termination of Revolving Credit
	 	 	118	 
	19.2. Actions On Termination
	 	 	118	 
	 
	 	 	 	 
	Article 20 - General:
	 	 	119	 
	 
	 	 	 	 
	20.1. Protection of Collateral
	 	 	119	 
	20.2. Publicity
	 	 	119	 
	20.3. Confidentiality
	 	 	119	 
	20.4. Successors and Assigns
	 	 	120	 
	20.5. Severability
	 	 	120	 
	20.6. Amendments. Course of Dealing
	 	 	120	 
	20.7. Power of Attorney
	 	 	121	 
	20.8. Application of Proceeds
	 	 	121	 
	20.9. Increased Costs
	 	 	121	 
	20.10. Replacement of Revolving Credit Lender
	 	 	122	 
	20.11. Costs and Expenses of the Agent and Issuer
	 	 	123	 
	20.12. Copies and Facsimiles
	 	 	123	 
	20.13. Ohio Law
	 	 	123	 
	20.14. Consent to Jurisdiction
	 	 	123	 
	20.15. Indemnification
	 	 	124	 
	20.16. Rules of Construction
	 	 	124	 
	20.17. Agent’s Consent
	 	 	126	 






v









 






	 	 	 	 	 
	20.18. Participations
	 	 	126	 
	20.19. Right of Set-Off
	 	 	126	 
	20.20. Pledges To Federal Reserve Banks
	 	 	127	 
	20.21. Maximum Interest Rate
	 	 	127	 
	20.22. Waivers
	 	 	127	 
	20.23. Additional Waivers
	 	 	128	 
	20.24. Patriot Act Notices
	 	 	129	 
	20.25. Existing Loan Agreement Amended and Restated
	 	 	129	 






vi









 





EXHIBITS



	 	 	 	 	 
	1.1

	 	:
	 	Existing L/Cs and Banker’s Acceptances
	1.3

	 	:
	 	Intercompany Notes
	1.4

	 	:
	 	Exempt DDA
	1.5

	 	:
	 	Unrestricted Subsidiaries
	1.6

	 	:
	 	Existing Investments
	1.7

	 	:
	 	Permitted Dispositions
	2.5

	 	:
	 	Form of Loan Request
	2.8(c)

	 	:
	 	SwingLine Note
	2.10(a)

	 	:
	 	Tranche A Note
	2.10(b)

	 	:
	 	Tranche A-1 Note
	2.22

	 	:
	 	Revolving Credit Lenders’ Commitments
	3.3

	 	:
	 	Additional Documents
	4.1

	 	:
	 	Corporate Information
	4.2

	 	:
	 	Trade Names
	4.4

	 	:
	 	Locations, Leases, and Landlords
	4.5(a)

	 	:
	 	Encumbrances
	4.5(b)

	 	:
	 	Consigned Property
	4.6

	 	:
	 	Indebtedness
	4.7

	 	:
	 	Insurance Policies
	4.8

	 	:
	 	Licenses
	4.9

	 	:
	 	Capital Leases
	4.11

	 	:
	 	Labor Contracts
	4.12

	 	:
	 	Taxes
	4.16

	 	:
	 	Hazardous Materials
	4.17

	 	:
	 	Litigation
	5.17(e)

	 	:
	 	Existing Loans
	5.17(f)

	 	:
	 	Intercompany Loans
	6.4

	 	:
	 	Borrowing Base Certificate
	6.5

	 	:
	 	Monthly Financial Reporting Requirements
	8.1

	 	:
	 	DDA’s.
	8.2

	 	:
	 	Credit Card Arrangements
	8.3

	 	:
	 	Administrative Agent’s Accounts; Collection Account Banks; Operating Accounts
	17.2

	 	:
	 	Assignment and Acceptance






vii









 





SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT




January 23, 2008




     THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (“this Agreement”) is made
between




     National City Business Credit, Inc., an Ohio corporation with offices at 2300 Crown
Colony Drive, Suite 202, Quincy, Massachusetts 02169, as administrative agent (in such
capacity, herein the “Administrative Agent”), for the ratable benefit of the “Revolving
Credit Lenders”, who are, at present, those financial institutions identified on the
signature pages of this Agreement and who in the future are those Persons (if any) who
become “Revolving Credit Lenders” in accordance with the provisions hereof;




     National City Business Credit, Inc., as Collateral Agent (in such capacity, herein the
“Collateral Agent”), for the ratable benefit of the Revolving Credit Lenders;




     Wells Fargo Retail Finance LLC and Wachovia Capital Finance Corporation (Central), as
Co-Documentation Agents;




     and




     The Revolving Credit Lenders;




     and




Filene’s Basement, Inc. (the “Borrower”), a Delaware corporation with its principal
executive offices at 3241 Westerville Road, Columbus, Ohio 43224-3751;


in consideration of the mutual covenants contained herein and benefits to be derived herefrom,




WITNESSETH:




     WHEREAS, the Borrower and certain other affiliated Persons entered into a Loan and Security
Agreement dated as of June 11, 2002 with the Administrative Agent, the Revolving Credit Lenders
party thereto and National City Business Credit, Inc. and Fleet Retail Group, Inc., as collateral
agents for the Revolving Credit Lenders (as amended and in effect through the Effective Date, the
“Original Loan Agreement”); and



     WHEREAS, the Borrower and certain other affiliated Persons entered into an Amended and
Restated Loan and Security Agreement dated as of July 5, 2005 with the Administrative Agent, the
Collateral Agent, the Revolving Credit Lenders party thereto and National City Business Credit,
Inc. (as amended and in effect through the Second Amendment Effective Date, the “Existing Loan
Agreement”), which amended and replaced the Original Loan Agreement; and



1









 





     WHEREAS, pursuant to that certain Purchase Agreement dated as of January 23, 2008 (as amended
and in effect from time to time, the “Purchase Agreement”) by and between Retail Ventures, Inc. and
VCHI Acquisition Co., a Delaware corporation (the “Purchaser”), (i) one hundred percent (100%) of
the capital stock of each of Retail Ventures Jewelry, Inc. and J.S. Overland Delivery, Inc. is
being contributed to Value City Department Stores LLC (“VCDS”), (ii) one hundred percent (100%) of
the membership interests of VCDS is being contributed to Value City Holdings, Inc., a Delaware
corporation (“VCH”), and (ii) eighty-one percent (81%) of the capital stock of VCH is being sold
and transferred to the Purchaser; and



     WHEREAS, in connection with the transactions contemplated by the above referenced Purchase
Agreement, the Administrative Agent and the Revolving Credit Lenders have been requested to release
VCDS and its Subsidiaries, Retail Ventures Jewelry, Inc. and J.S. Overland Delivery, Inc. from
their respective obligations under the Existing Loan Agreement and any collateral security granted
by them to secure such obligations; and



     WHEREAS, the Borrower, the Revolving Credit Lenders and the Administrative Agent desire to
amend and restate the Existing Loan Agreement to accomplish the foregoing and as otherwise provided
herein.



     NOW THEREFORE, it is hereby agreed that the Existing Loan Agreement is hereby amended and
restated as follows:



ARTICLE 1 - DEFINITIONS:



     As used herein, the following terms have the following meanings or are defined in the section
of this Agreement so indicated:



“Acceleration”: The making of demand or declaration that any Indebtedness, not otherwise due
and payable, is due and payable. Derivations of the word “Acceleration” (such as
“Accelerate”) are used with like meaning in this Agreement.



“Acceleration Notice”: Written notice as follows:




     (a) From the Administrative Agent to the Revolving Credit Lenders, as provided
in Section 14.1(a).




     (b) From the Majority Lenders to the Administrative Agent, as provided in
Section 14.1(b).



“Account Debtor”: Has the meaning given that term in the UCC.



“Accounts”: Include, without limitation, “accounts” as defined in the UCC, and also all:
accounts, accounts receivable, receivables, and rights to payment (whether or not
earned by performance) for: property that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of; services rendered or to be rendered; a policy of
insurance issued or to be issued; a secondary obligation incurred or to be incurred;
arising out of the use of a credit or charge card or information contained on or used
with that card; winnings in a lottery or other game of chance; and also all Inventory
which gave rise thereto, and all rights associated


2









 






with such Inventory, including the right of stoppage in transit; all reclaimed,
returned, rejected or repossessed Inventory (if any) the sale of which gave rise to
any Account.



“ACH”: Automated clearing house.



“Acquisition”: The purchase or acquisition of all or substantially all of the assets of any
Person, the purchase of a controlling equity interest in any Person, or the merger or
consolidation of any Person with any other Person, in any transaction or group of
transactions which are part of a common plan.



“Adjustment Date”: The first day of each calendar quarter, commencing with the quarter
beginning immediately following the delivery of the Borrower’s 2007 Fiscal Year audited
financial statements to the Administrative Agent.



“Administrative Agent”: NCBC, or its successors or assigns, in its capacity as
administrative agent for the Revolving Credit Lenders hereunder.



“Administrative Agent’s Account”: Is defined in Section 8.3.



“Administrative Agent’s Cover”: Is defined in Section 13.3(c)(i).



“Affiliate”: The following:




     (a) With respect to any Person, any other Person that directly or, alone or
with a group of related Persons whose interests taken as a whole, indirectly through
one of more intermediaries, Controls, is Controlled by, or is under common Control
with, such Person. Notwithstanding anything to the contrary herein contained, in no
event shall (i) the Agent, the Issuer, or any Revolving Credit Lender or (ii) VCH,
VCDS or any of their Subsidiaries be considered an “Affiliate” of a Loan Party.




     (b) Any Person: which is a parent, brother-sister or Subsidiary, of the
Borrower; whose enterprise’s tax returns or financial statements are consolidated
with those of the Borrower; which is a member of the same controlled group of
corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal
Revenue Code of 1986, as amended from time to time) of which the Borrower is a
member; or Controls or is Controlled by the Borrower.




     (c) With respect to the Loan Parties, without limiting the provisions of
clauses (a) and (b) hereof, “Affiliate” includes Schottenstein Stores Corporation.



“Agent”:
Collectively, the Administrative Agent and the Collateral Agent.



“Agent’s Rights and Remedies”: Is defined in Section 12.7.



“Applicable Commitment Percentage”: With respect to (a) any Tranche A Lender, at any time,
the percentage (carried out to the ninth decimal place) of the Tranche A Dollar
Commitments represented by such Tranche A Lender’s Tranche A Dollar Commitment at such
time, (b) any Tranche A-1 Lender, at any time, the


3









 






percentage (carried out to the ninth decimal place) of the Tranche A-1 Dollar
Commitments represented by such Tranche A-1 Lender’s Tranche A-1 Dollar Commitment
at such time, and (c) all Revolving Credit Lenders, at any time, the percentage
(carried out to the ninth decimal place) of the Loan Commitments represented by the
sum of such Revolving Credit Lender’s Tranche A Dollar Commitment and Tranche A-1
Dollar Commitment at such time. If the commitment of each Revolving Credit Lender
to make Revolving Credit Loans and the obligation of the Issuer to issue L/Cs have
been terminated or if such commitments have expired, then the Applicable Commitment
Percentage of each Revolving Credit Lender shall be determined based on the
Applicable Commitment Percentage of such Revolving Credit Lender most recently in
effect, giving effect to any subsequent assignments. The initial Applicable
Commitment Percentages of each Revolving Credit Lender is set forth opposite the
name of such Revolving Credit Lender on Schedule 2.22 or in the Assignment and
Acceptance pursuant to which such Person becomes a party hereto, as applicable.



“Applicable Law”: As to any Person: (i) All statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) all court orders and injunctions,
arbitrator’s decisions, and/or similar rulings, in each instance ((i) and (ii)) of or
by any federal, state, municipal, and other governmental authority, or court, tribunal,
panel, or other body which has or claims jurisdiction over such Person, or any property
of such Person, or of any other Person for whose conduct such Person would be
responsible.



“Applicable Margin”: The following percentages for Base Margin Loans and LIBOR Loans based
upon the following criteria:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Applicable	 	 
	 	 	 	 	Applicable	 	Applicable	 	Margin for	 	Applicable
	 	 	 	 	Margin for	 	Margin for	 	Tranche A-	 	Margin for
	 	 	 	 	Tranche A	 	Tranche A	 	1 Base	 	Tranche A-
	 	 	Excess	 	Base Margin	 	LIBOR	 	Margin	 	1 LIBOR
	Level	 	Availability	 	Loans	 	Loans	 	Loans	 	Loans
	1

	 	Greater than $25,000,000
	 	 	0	%	 	 	1.50	%	 	 	0.75	%	 	 	3.00	%
	2

	 	Greater than
$15,000,000, but
less than or equal
to $25,000,000
	 	 	0	%	 	 	1.75	%	 	 	0.75	%	 	 	3.00	%
	3

	 	Less than or equal
to $15,000,000
	 	 	0	%	 	 	2.00	%	 	 	0.75	%	 	 	3.00	%






The Applicable Margin shall initially be established at Level 2. Thereafter, the
Applicable Margin shall be adjusted on each Adjustment Date, based upon the


4









 






Average Excess Availability during the prior quarter. Upon the occurrence and
during the continuance of a Specified Event of Default, the Applicable Margin may,
at the option of the Agent, be immediately increased to the percentages set forth in
Level 3 (even if the Excess Availability requirements for another Level have been
met) and interest shall be determined in the manner set forth in Section 2.12(g).



“Appraised Inventory Liquidation Value”: The product of (a) the Cost of Eligible Inventory
(net of Inventory Reserves) multiplied by (b) that percentage, determined from the then
most recent appraisal of the Borrower’s Inventory undertaken at the request of the
Collateral Agent, to reflect the appraiser’s estimate of the net recovery on the
Borrower’s Inventory in the event of an in-store liquidation of that Inventory.



“Appraised
Inventory Percentage”: 87.5%.



“Assigning
Revolving Credit Lender”: Is defined in Section 17.1(a).



“Assignment
and Acceptance”: Is defined in Section 17.2.



“Authorized
Officer”: Is defined in Section 6.8.



“Availability”: Gross Availability Minus the Excess Availability Reserve.



“Availability Reserves”: Without duplication, such reserves as the Collateral Agent from
time to time determines in the Collateral Agent’s reasonable, good faith discretion as
being appropriate to reflect the impediments to the Collateral Agent’s ability to
realize upon the Collateral. The Collateral Agent shall furnish the Borrower with
written notice two (2) Business Days prior to imposing or changing any Availability
Reserve (unless a Specified Event of Default then exists and is continuing, in which
event no prior notice shall be required). Without limiting the generality of the
foregoing, Availability Reserves may include (but are not limited to) reserves based on
the following:




	 	(i)	 	rent (but only if a landlord’s waiver,
acceptable to the Collateral Agent, has not been received by the
Collateral Agent).
	 
	 	(ii)	 	Customer Credit Liabilities.
	 
	 	(iii)	 	taxes and other governmental charges,
including, ad valorem, personal property, and such other taxes which
are reasonably likely to have priority over the Collateral Interests of
the Collateral Agent in the Collateral.
	 
	 	(iv)	 	L/C Landing Costs.
	 
	 	(v)	 	Hedge Agreements.





5









 




Without limiting the rights of the Collateral Agent to establish or modify Availability
Reserves, the initial Availability Reserves on the Second Amendment Effective Date shall be
the following:





	 	(a)	 	gift certificates and merchandise credits (in
an amount equal to fifty percent (50%) of the outstanding gift
certificates and merchandise credits reflected in the Borrower’s
financial statements (which amount shall be updated no less frequently
than every thirty (30) days and which financial statements will be
maintained consistently with past practices)).
	 
	 	(b)	 	landlord lien reserve equal to two months’ rent
for all stores located in Washington, Pennsylvania and Virginia.
	 
	 	(c)	 	layaway deposits (in an amount equal to one
hundred percent (100%) of the outstanding layaway deposits reflected in
the Borrower’s financial statements (which amount shall be updated no
less frequently than every thirty (30) days and which financial
statements will be maintained consistently with past practices)).
	 
	 	(d)	 	Hedge Agreements.





“Average Excess Availability”: For any period, the sum of Excess Availability for each day
comprising such period divided by the number of days in such period.



“Banker’s Acceptance”: A time draft or bill of exchange relating to a documentary letter
of credit which has been accepted by the Issuer. Without limitation, Existing Banker’s
Acceptances shall be deemed to be Banker’s Acceptances issued under this Agreement and
shall be entitled to all of the benefits hereof.



“Banker’s Acceptance Fees”: The fees payable in respect of Banker’s Acceptances pursuant
to Section 2.18.



“Bankruptcy Code”: Title 11, U.S.C., as amended from time to time.



“Base”: For any day, a rate per annum equal to the higher of (a) the rate of interest which
is established from time to time by NCB at its principal office in Cleveland, Ohio as
its “prime rate” in effect, such rate to be adjusted automatically, without notice, as
of the opening of business on the effective date of any change in such rate (it being
agreed that (i) such rate is not necessarily the lowest rate of interest then available
from NCB on fluctuating rate loans, and (ii) such rate may be established by NCB by
public announcement or otherwise), and (b) the Federal Funds Effective Rate in effect
on such day plus one-half of one percent (0.50%) per annum.



“Base Margin Loan”: Each Revolving Credit Loan while bearing interest at the Base
Margin Rate.



“Base Margin Rate”: That per annum rate which is the aggregate of the Base plus the
Applicable Margin for Base Margin Loans.



6









 





“Borrower”:
Is defined in the Preamble.



“Borrowing Base Certificate”: Is defined in Section 6.4.



“Business Day”: Any day other than (a) a Saturday or Sunday; (b) any day on which banks in
Cleveland, Ohio, generally are not open to the general public for the purpose of
conducting commercial banking business; (c) a day on which the principal office of the
Administrative Agent is not open to the general public to conduct business; or (d) when
used in connection with a LIBOR Loan, any day on which banks are not open for dealings
in dollar deposits in the London interbank market.



“Business Plan”: The business plan dated December 18, 2007 for the Loan Parties’ Fiscal
year ending January 2009, as set forth in that certain confidential side letter from
the Borrower to the Administrative Agent.



“Capital Expenditures”: The expenditure of funds or the incurrence of liabilities which may
be capitalized in accordance with GAAP.



“Capital Lease”: Any lease which may be capitalized in accordance with GAAP.



“Cash Control Event”: Either (i) an Event of Default has occurred and is continuing,
or (ii) the Average Excess Availability for any five (5) consecutive Business Days is
less than Fifteen Million Dollars ($15,000,000). For purposes hereof, the occurrence
of a Cash Control Event shall be deemed continuing notwithstanding that Average Excess
Availability may thereafter exceed the amount set forth in the preceding sentence
unless and until Average Excess Availability exceeds such amounts for ninety (90)
consecutive Business Days, in which case a Cash Control Event shall no longer be deemed
to be continuing for purposes hereof; provided that a Cash Control Event shall be
deemed continuing (even if Average Excess Availability exceeds the required amounts for
ninety (90) consecutive Business Days) if a Cash Control Event has occurred and been
discontinued on one (1) occasion during the preceding twelve month period.



“Change in Control”: The occurrence of any of the following:




     (a) The acquisition, by any group of Persons (within the meaning of the
Securities Exchange Act of 1934, as amended) or by any Person (other than by (x) a
Person Controlled by Schottenstein Stores Corporation, or (y) one or more Family
Trusts) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission) of 25% or more of the issued and outstanding capital stock
of the Parent having the right, under ordinary circumstances, to vote for the
election of directors of the Parent, excluding from the foregoing any acquisition
pursuant to warrants issued under the exercise of conversion rights under the Senior
Non-Convertible Facility.




     (b) More than thirty percent (30%) of the Persons who were directors of the
Parent on the first day of any period consisting of twelve (12) consecutive calendar
months (the first of which twelve (12) month periods commencing with



7









 







the first day of December, 2007), cease to be directors of the Parent for any
reason, other than death, disability, or replacement (in the ordinary course of
business and not as a result of any change in the equity ownership of the Parent) by
other Persons nominated by the nominating committee of the board of directors of the
Parent.




     (c) The failure of the Parent to own, directly or indirectly, 95% of the
capital stock of each of the other Loan Parties.




     (d) The failure of Schottenstein Stores Corporation or one or more Family
Trusts to possess, directly or indirectly, the power to cause the direction of the
management and policies of the Parent and the Borrower.



“Chattel Paper”: Has the meaning given that term in the UCC.



“Class A Common Shares” has the meaning set forth for such term in the Articles of
Incorporation of DSW as in effect on the Effective Date.



“Class B Common Shares” has the meaning set forth for such term in the Articles of
Incorporation of DSW as in effect on the Effective Date.



“Co-Documentation Agents” means Wells Fargo Retail Finance LLC and Wachovia Capital Finance
Corporation (Central).



“Collateral”: Is defined in Section 9.1.



“Collateral Agent”: NCBC, or its successors or assigns, in its capacity as Collateral Agent
for the Revolving Credit Lenders hereunder.



“Collateral Interest”: Any interest in property to secure an obligation, including, without
limitation, a security interest, mortgage, and deed of trust.



“Collateral Monitoring Fee”: Is defined in Section 2.13.



“Collection Account”: Any DDA into which the proceeds of Collateral are transferred and
concentrated, including, without limitation, transfers from other DDAs, credit card
processors, checks, and accounts receivables. The Collection Accounts as of the Second
Amendment Effective Date are set forth on Exhibit 8.3 hereto.



“Collection Account Agreement”: An agreement, in form satisfactory to the Collateral Agent,
which agreement recognizes the Collateral Agent’s Collateral Interest in the contents
of the DDA which is the subject of such agreement and agrees that, after and during the
continuance of a Cash Control Event, such contents shall be transferred only to the
Administrative Agent’s Account or as otherwise instructed by the Administrative Agent.



“Commercial Tort Claim”: Has the meaning given that term in the UCC.



“Competitive Business”: Any business or enterprise consisting of any of the following:



8









 






	 	(a)	 	Operation of off-price discount department stores.
	 
	 	(b)	 	Operation of retail furniture stores and related accessories.
	 
	 	(c)	 	Operation of designer and name brand shoe stores.
	 
	 	(d)	 	Operation of licensed shoe departments.
	 
	 	(e)	 	Furniture manufacturing.
	 
	 	(f)	 	Bedding manufacturing.





“Consent”: Actual consent given by the Revolving Credit Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice to a
Revolving Credit Lender from the Agent of a proposed course of action to be followed by
the Agent without such Revolving Credit Lender’s giving the Agent written notice of
that Revolving Credit Lender’s objection to such course of action, provided that the
Agent may rely on such passage of time as consent by a Revolving Credit Lender only if
such written notice states that consent will be deemed effective if no objection is
received within such time period.



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



“Control”: The possession, direct or indirect, of the power to cause the direction of the
management and policies of a Person whether through the ownership of voting securities,
by contract or otherwise. A Person shall be deemed to have control of another Person if
it is a “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 of the
Securities Exchange Act of 1934, as amended) or a member of a “group” that is the
beneficial owner, directly or indirectly, of 20% or more of the voting stock or equity
interest in such Person. The terms “Controlled” and “Controlling” as used herein are
intended to have the same meaning as “Control.” Notwithstanding the foregoing, no Loan
Party shall be deemed to “control” VCDS or VCH following the completion of the
transactions contemplated by the Purchase Agreement.



“Cost”: The lower of cost or market, determined in each case in accordance with GAAP.



“Costs of Collection”: Includes, without limitation, all reasonable attorneys’ fees and
reasonable out-of-pocket expenses incurred by the Agent’s and Issuer’s attorneys, and
all reasonable out-of-pocket costs incurred by the Agent and the Issuer in the
administration of the Liabilities and/or the Loan Documents, including, without
limitation, reasonable costs and expenses associated with travel on behalf of the Agent
and Issuer, where such costs and expenses are related to or in respect of the Agent’s
and Issuer’s: administration and management of the




9











 





Liabilities; negotiation, documentation, and amendment of any Loan Document; or
efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities,
and/or the Agent’s Rights and Remedies and/or any of the rights and remedies of the
Agent and Issuer against or in respect of any guarantor or other Person liable in
respect of the Liabilities (whether or not suit is instituted in connection with
such efforts). “Costs of Collection” also includes the reasonable fees and expenses
of Lenders’ Special Counsel. The Costs of Collection are Liabilities, and at the
Administrative Agent’s option may bear interest at the then effective Base Margin
Rate after such time as they have been added to the Loan Account.



“Credit Card Advance Rate”: 85%



“Customer Credit Liability”: Gift certificates, customer deposits, merchandise credits,
layaway obligations, frequent shopping programs, and similar liabilities of the
Borrower to its retail customers and prospective customers.



“DDA”: Any checking or other demand daily depository account maintained by the Borrower
other than any Exempt DDA.



“Default”: Any occurrence, circumstance, or state of facts which (a) is an Event of Default;
or (b) would become an Event of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence, circumstance, or state of
facts were not cured within any applicable grace period.



“Delinquent Revolving Credit Lender”: Is defined in Section 13.3(c).



“Deposit Account”: Has the meaning given that term in the UCC and also includes all demand,
time, savings, passbook, or similar accounts maintained with a bank.



“Documents”: Has the meaning given that term in the UCC.



“Documents of Title”: Has the meaning given that term in the UCC.



“DSW”: DSW Inc., an Ohio corporation with its principal executive offices at 810 DSW Drive,
Columbus, Ohio 43219.



“DSW Common Stock” means the Capital Stock of DSW consisting of Class A Common
Shares and Class B Common Shares.



“DSW Shoe”: DSW Shoe Warehouse, Inc., a Missouri corporation with its principal
executive offices at 810 DSW Drive, Columbus, Ohio 43219.



“Early
Termination Fee”: Is defined in Section 2.13.



“Effective Date”: July 5, 2005.



“Eligible Assignee”: A bank, insurance company, or company engaged in the business of making
commercial loans having a combined capital and surplus in excess of $500,000,000 or any
domestic Affiliate of any Revolving Credit Lender, or any Person to whom a Revolving
Credit Lender assigns its rights and obligations


10









 






under this Agreement as part of a programmed assignment and transfer of such
Revolving Credit Lender’s rights in and to a material portion of such Revolving
Credit Lender’s portfolio of asset based credit facilities. In no event shall an
“Eligible Assignee” include a Person who is engaged in a Competitive Business with
any Loan Party, and as long as Schottenstein Stores Corporation remains in Control
of the Borrower, an “Eligible Assignee” shall in no event include a Person which is
engaged in a Competitive Business or a Related Business with Schottenstein Stores
Corporation.



“Eligible Credit Card Receivables”: Accounts due on a non-recourse basis from major or
private label credit card processors, which have been outstanding for less than five
(5) Business Days.



“Eligible Inventory”: Such of the Borrower’s Inventory, inclusive of Eligible L/C Inventory,
at such locations, and of such types, character, qualities and quantities, as the
Collateral Agent in its reasonable, good faith discretion from time to time determines
to be acceptable for borrowing, as to which Inventory, the Collateral Agent has a
perfected security interest which is prior and superior to all security interests,
claims, and Encumbrances. Without limiting the foregoing, Inventory acquired in a
Permitted Acquisition (other than a Permitted Acquisition involving the merger of one
or more Loan Parties) shall not be deemed Eligible Inventory unless the Collateral
Agent otherwise agrees.



“Eligible L/C Inventory”: Without duplication of other Eligible Inventory, Inventory not yet
delivered to the Borrower, the purchase of which is supported by a documentary L/C or
Banker’s Acceptance then having an initial expiry of sixty (60) or less days, provided
that




     (a) Such Inventory is of such types, character, qualities and quantities (net
of Inventory Reserves) as the Collateral Agent in its reasonable, good faith
discretion from time to time determines to be eligible for borrowing and it would
otherwise constitute Eligible Inventory; and




     (b) The documentary L/C supporting such purchase names the Collateral Agent as
consignee of the subject Inventory and the Collateral Agent has control over the
documents which evidence ownership of the subject Inventory (such as by the
providing to the Collateral Agent of a customs brokers agreement in form reasonably
satisfactory to the Collateral Agent).



“Employee Benefit Plan”: An employee pension benefit plan that is covered by Title IV of
ERISA or is subject to the minimum finding standards under Section 412 of the Internal
Revenue Code of 1986, as amended from time to time, and as to which the Borrower or any
ERISA Affiliate may have any liability.



“Encumbrance”: Each of the following:




     (a) A Collateral Interest or agreement to create or grant a Collateral
Interest; a security interest; the interest of a lessor under a Capital Lease;
conditional sale or other title retention agreement; sale of accounts receivable or



11









 







chattel paper; or other arrangement pursuant to which any Person is entitled to
any preference or priority with respect to the property or assets of another Person
or the income or profits of such other Person; each of the foregoing whether
consensual or non-consensual and whether arising by way of agreement, operation of
law, legal process or otherwise.




     (b) The filing of any financing statement under the UCC or comparable law of
any jurisdiction, unless such financing statement is terminated promptly upon any
Loan Party’s knowledge thereof.



“End Date”: The date upon which all of the following conditions are met: (a) all
payment Liabilities described in Section 19.2(a) have been paid in full (b)
satisfactory arrangements with respect to L/Cs and Banker’s Acceptances have been made
in accordance with the provisions of Section 19.2(b), and (c) all obligations of any
Revolving Credit Lender to make loans and advances and to provide other financial
accommodations to the Borrower hereunder shall have been irrevocably terminated.



“Environmental Actions”: Any complaint, summons, citation, notice, directive, order, claim,
litigation, investigation, judicial or administrative proceeding, judgment, letter or
other communication from any Person or Governmental Authority involving violations of
Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties
or businesses owned or operated by any Loan Party or any of its Subsidiaries or any
predecessor in interest; or (ii) onto any facilities which received Hazardous Materials
generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.



“Environmental Laws”: The Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. § 9601, et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. § 6901, et seq.), the Federal Clean Water Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et
seq.), as such laws may be amended or otherwise modified from time to time, and
any other present or future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding determination of
any Governmental Authority imposing liability or establishing standards of conduct for
protection of the environment or other government restrictions relating to the
protection of the environment or the Release, deposit or migration of any Hazardous
Materials into the environment.



“Environmental Liabilities and Costs”: All liabilities, monetary obligations, remedial
actions, losses, damages, punitive damages, consequential damages, treble damages,
reasonable costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigations 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 condition or a Release of


12









 






Hazardous Materials from or onto (i) any property presently or formerly owned by any
Loan Party or any of its Subsidiaries or (ii) any facility which received Hazardous
Materials generated by any Loan Party or any of its Subsidiaries.



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



“Equipment”: Includes, without limitation, “equipment” as defined in the UCC, and also all
furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment,
plant equipment, tools, dies, molds, and other goods, property, and assets which are
used and/or were purchased for use in the operation or furtherance of a Person’s
business, and any and all accessions or additions thereto, and substitutions therefor.



“ERISA”: The Employee Retirement Income Security Act of 1974, as amended.



“ERISA Affiliate”: Any Person which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and
which would be treated as a single employer under Section 414 of the Internal Revenue
Code of 1986, as amended from time to time.



“Eurocurrency Reserve Percentage”: For any Interest Period with respect to a LIBOR Loan, as
of any date of determination, the aggregate of the then stated maximum reserve
percentages (including any marginal, special, emergency or supplemental reserves),
expressed as a decimal, applicable to such Interest Period (if more than one such
percentage is applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentages shall be so applicable) by the Board
of Governors of the Federal Reserve System, any successor thereto, or any other banking
authority, domestic or foreign, to which the Administrative Agent or any Revolving
Credit Lender may be subject in respect of eurocurrency funding (currently referred to
as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board) or in
respect of any other category of liabilities including deposits by reference to which
the rate of interest on LIBOR Loans is determined or any category or extension of
credit or other assets that include LIBOR Loans, as defined in such regulations. For
purposes hereof, such reserve requirements shall include, without limitation, those
imposed under Regulation D of the Federal Reserve Board and the LIBOR Loans shall be
deemed to constitute Eurocurrency Liabilities subject to reserve requirements without
benefit of credits for proration, exceptions or offsets which may be available to any
Revolving Credit Lender under Regulation D.



“Events of Default”: Is defined in Article 11. An “Event of Default” shall be deemed to
have occurred and to be continuing unless and until that Event of Default has been duly
waived by the Administrative Agent in writing or cured to the satisfaction of the
Administrative Agent.



“Excess Availability”: As of any date of determination, Gross Availability less all then
held checks, accounts payable which are beyond customary payment terms


13









 






consistent with past practice (other than accounts payable which are being disputed
in good faith and for which the Borrower has adequate reserves), and overdrafts
(other than daylight overdrafts, as defined in the Federal Reserve Daylight Credit
Policies in effect from time to time).



“Excess Availability Reserve”: $10,000,000.



“Excluded Property”: Shall mean the following:




     (a) the Equipment that is subject to a “purchase money security interest”, as
such term is now or hereafter defined in the UCC, which (x) constitutes a Permitted
Encumbrance under this Agreement and (y) prohibits the creation by a Loan Party of a
junior security interest therein, unless the holder thereof has consented to the
creation of such a junior security interest; or




     (b) any General Intangibles, other than Payment Intangibles, if and only to the
extent that (i) in the case of any such General Intangible, (x) any contract
evidencing such General Intangible contains a valid and effective contractual
restriction or limitation which prohibits the grant or creation of a security
interest therein, or (y) a valid and effective restriction or limitation imposed by
applicable law, regulation, rule, order or other directive of any governmental body,
agency or authority, or the order of any court of competent jurisdiction, prohibits
the grant or creation of a security interest in such General Intangible, or (ii) in
the case of any such General Intangible, such General Intangible would be subject to
loss or forfeiture upon the grant or creation of a security interest therein by
reason of (x) a valid and effective contractual restriction or limitation contained
in any contract evidencing such General Intangible, or (y) a valid and effective
restriction or limitation imposed by applicable law, regulation, rule, order or
other directive of any governmental body, agency or authority, or the order of any
court of competent jurisdiction; or




     (c) Inventory or other property held pursuant to consignment (other than
between Loan Parties) arrangements in which the Borrower is the consignee to the
extent that the consignor has properly perfected its interest therein; or




     (d) all motor vehicles owned by any Loan Party;




     (e) any Exempt DDA;




     (f) all capital stock, or options, warrants or any other right to acquire
capital stock, of DSW, DSW Shoe or any Subsidiary of either of the foregoing;




     (g) the PIES Collateral; and




     (h) all capital stock, or options, warrants or any other right to acquire
capital stock, of VCH owned by the Parent;


provided that, the Proceeds realized from any of the foregoing (other than
(i) Proceeds of the property described in clauses (f), (g) and (h), (ii) money or other
property received from the exercise of warrants issued by a Loan Party, (iii) money or other
property held


14









 






 by a Loan Party and originally received from the issuance of the PIES, and (iv) interest
earned on the money or property described in clauses (i) and (iii) above) shall not be
deemed Excluded Property but shall constitute Collateral.




“Exempt DDA”: Those depository accounts described on Exhibit 1.4 hereto, and, in
addition, any depository account maintained by the Borrower, the only contents of which
may be transfers from the Operating Accounts and actually used solely (i) for petty
cash purposes; (ii) for payroll; (iii) for charitable contributions; or (iv) for
medical, pension, benefits, VEBA, employees, taxes, stock options and like special
purpose accounts.



“Existing Banker’s Acceptances”: Those Banker’s Acceptances described on Exhibit
1.1 hereto which have been issued by NCB for the account of the Borrower under the
Existing Loan Agreement.



“Existing L/Cs”: Those letters of credit described on Exhibit 1.1 hereto which have
been issued by NCB for the account of the Borrower under the Existing Loan Agreement.



“Existing Loan Agreement”: Is defined in the Recitals.



“Facility Guarantee”: The Second Amended and Restated Guaranty executed by the Facility
Guarantors in favor of the Agent, the Issuer and the Revolving Credit Lenders.



“Facility Guarantors”: The Parent and all other Subsidiaries of the Parent now existing or
hereafter created, other than (a) the Borrower and (b) DSW, DSW Shoe, and any direct or
indirect Subsidiary of DSW or DSW Shoe and the Unrestricted Subsidiaries.



“Facility Guarantors Collateral Documents”: All security agreements, mortgages, pledge
agreements, deeds of trust, and other instruments, documents or agreements executed and
delivered by any Facility Guarantor to secure the Facility Guarantee.



“Family Trust”: One or more trusts established for the benefit of any of Jay L.
Schottenstein, Susan S. Diamond, Ann S. Deshe, Lori Schottenstein, Geraldine
Schottenstein, any of their respective spouses, children or lineal descendants, or any
Person Controlled by any such trust or trusts.



“Farm Products”: Has the meaning given that term in the UCC.



“Federal Funds Effective Rate”: For any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, provided that (i) if
the day for which such rate is to be determined is not a Business Day, the Federal
Funds Effective Rate for such day shall be such rate on


15









 






such transactions on the immediately preceding Business Day as so published on the
next succeeding Business Day, and (ii) if such rate is not so published for any
Business Day, the Federal Funds Effective Rate for such day shall be the average of
quotations for such day on such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by the
Administrative Agent.



“Fee Letter”: That letter dated January 18, 2008 and styled “Fee Letter” between the
Borrower and the Administrative Agent, as such letter may from time to time be amended.



“Filene’s Notes”: Collectively, (a) the PIES Note, and (b) the Subordinated Note.



“Fiscal”: When followed by “month”, “quarter” or “year”, the relevant fiscal period based
on the Borrower’s fiscal year and accounting conventions.



“Fixtures”: Has the meaning given that term in the UCC.



“GAAP”: Generally accepted accounting principles in effect from time to time in the United
States, applied on a consistent basis, provided that “GAAP” shall mean generally
accepted accounting principles consistent with those used in the preparation of the
financial statements described herein.



“General Intangibles”: Includes, without limitation, with respect to any Person, “general
intangibles” as defined in the UCC; and also all: rights to payment for credit
extended; deposits (other than DDAs); amounts due to such Person; credit memoranda in
favor of such Person; warranty claims; tax refunds and abatements; insurance refunds
and premium rebates; all means and vehicles of investment or hedging, including,
without limitation, options, warrants, and futures contracts; records; customer lists;
telephone numbers; goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to performance; royalties;
license and/or franchise fees; rights of admission; licenses; franchises; license
agreements, including all rights of such Person to enforce same; permits, certificates
of convenience and necessity, and similar rights granted by any governmental
authority; patents, patent applications, patents pending, and other intellectual
property; internet addresses and domain names; developmental ideas and concepts;
proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and
charts; catalogs; manuals; technical data; computer software programs (including the
source and object codes therefor), computer records, computer software, rights of
access to computer record service bureaus, service bureau computer contracts, and
computer data; tapes, disks, semi-conductors chips and printouts; trade secrets
rights, copyrights, mask work rights and interests, and derivative works and
interests; user, technical reference, and other manuals and materials; trade names,
trademarks, service marks, and all goodwill relating thereto; applications for
registration of the foregoing; and all other general intangible property of such
Person in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter
related to, or connected with, the design, development, manufacture, sale, marketing,
leasing, or use of any or all


16









 






property produced, sold, or leased, by such Person or credit extended or services
performed, by such Person, whether intended for an individual customer or the
general business of such Person, or used or useful in connection with research by
such Person.



“Goods”: Has the meaning given that term in the UCC, and also includes all things movable
when a security interest therein attaches and also all computer programs embedded in
goods and any supporting information provided in connection with a transaction relating
to the program if (i) the program is associated with the goods in such manner that it
customarily is considered part of the goods or (ii) by becoming the owner of the goods,
a Person acquires a right to use the program in connection with the goods.



“Governmental Authority”: Any nation or government, any federal, state, city, town,
municipality, county, local or other political subdivision thereof or thereto and any
department, commission, board, bureau, instrumentality, agency or other entity
exercising executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government.



“Gross Availability”: The result of the following in the aggregate with respect to all
Borrowers:




	 	(i)	 	The lesser of






	 	(A)	 	The Revolving Credit Ceiling
	 
	 	 	 	or
	 
	 	(B)	 	The Tranche A-1
Borrowing Base (or if the Tranche A-1 Commitments have
been terminated, the Tranche A Borrowing Base)






	 	 	 	Minus






	 	(ii)	 	The aggregate unpaid balance of the Loan Account.






	 	 	 	Minus






	 	(iii)	 	The aggregate undrawn Stated
Amount of all then outstanding L/Cs and Banker’s Acceptances.






	 	 	 	Minus






	 	(v)	 	The aggregate of the Availability
Reserves.





“Hazardous Materials”: (a) Any element, compound or chemical that is defined, listed or
otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous waste, special waste,
or solid waste under Environmental Laws or that is reasonably likely to cause
immediately, or at some reasonably foreseeable future


17









 






time, harm to or have an adverse effect on, the environment or risk to human health
or safety, including, without limitation, any pollutant, contaminant, waste,
hazardous waste, toxic substance or dangerous good which is defined or identified in
any Environmental Law and which is present in the environment in such quantity or
state that it contravenes any Environmental Law; (b) petroleum and its refined
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous
waste characteristic, including, without limitation, corrosivity, ignitability,
toxicity or reactivity as well as any radioactive or explosive materials; and
(e) any raw materials, building components (including, without limitation,
asbestos-containing materials) and manufactured products containing hazardous
substances listed or classified as such under Environmental Laws.



“Hedge Agreements”: All obligations of any Person in respect of interest rate swap
agreements, currency swap agreements and other similar agreements designed to hedge
against fluctuations in interest rates or foreign exchange rates.



“Indebtedness”: Without duplication, all obligations, contingent and otherwise, that in
accordance with GAAP should be classified upon the balance sheet of the Borrower and/or
the consolidated balance sheet of the Parent as liabilities, other than trade payables,
deferred rent, or accrued expenses incurred in the ordinary course of business or to
which reference should be made by footnotes thereto, including in any event and whether
or not so classified:




     (a) All obligations in respect of money borrowed (including any indebtedness
which is non-recourse to the credit of such Person but which is secured by an
Encumbrance on any asset of such Person) whether or not evidenced by a promissory
note, bond, debenture or other written obligation to pay money.




     (b) All obligations evidenced by bonds, notes, debentures or other similar
instruments.




     (c) All obligations in connection with Hedge Agreements.




     (d) All obligations in connection with any letter of credit or acceptance
transaction (including, without limitation, the face amount of all letters of credit
and acceptances issued for the account of such Person or reimbursement on account of
which such Person would be obligated).




     (e) All obligations in connection with the sale or discount of accounts
receivable or chattel paper of such Person.




     (f) All obligations on account of deposits or advances other than deferred rent
incurred in the ordinary course of business.




     (g) All obligations as lessee under Capital Leases; and




     (h) All obligations in connection with any sale and leaseback transaction.



18









 






     “Indebtedness” also includes:




     (x) Indebtedness of others secured by an Encumbrance on any asset of
such Person, whether or not such Indebtedness is assumed by such Person.




     (y) Any guaranty, endorsement, suretyship or other undertaking pursuant
to which that Person may be liable in respect of Indebtedness of any third
party; and




     (z) The Indebtedness of a partnership or joint venture for which such
Person is liable as a general partner or joint venturer.



“Indemnified
Person”: Is defined in Section 20.15.



“Information”: Is defined in Section 20.3.



“Instruments”: Has the meaning given that term in the UCC.



“Intercompany Notes”: The promissory notes and other evidences of Indebtedness among the
Loan Parties outstanding from time to time. The Intercompany Notes outstanding as of
the Second Amendment Effective Date are the Filene’s Notes and the notes set forth on
Exhibit 1.3 hereto.



“Interest Payment Date”: With reference to:




     Each LIBOR Loan: The last day of the Interest Period relating thereto (and on
the last day of the third month for any such loan which has a six month Interest
Period); the Termination Date; and the End Date.




     Each Base Margin Loan: The first day of each August, November, February and
May; the Termination Date; and the End Date.



“Interest Period”: The following:




     (a) With respect to each LIBOR Loan: Subject to Subsection (c), below, the
period commencing on the date of the making or continuation of, or conversion to,
the subject LIBOR Loan and ending one, two, three, or six months thereafter, as the
Borrower may elect by notice (pursuant to Section 2.5) to the Administrative Agent




     (b) With respect to each Base Margin Loan: Subject to Subsection (c), below,
the period commencing on the date of the making or continuation of or conversion to
such Base Margin Loan and ending on that date (i) as of which the subject Base
Margin Loan is converted to a LIBOR Loan, as the Borrower may elect by notice
(pursuant to Section 2.5) to the Administrative Agent, or (ii) on which the subject
Base Margin Loan is paid by the Borrower.




     (c) The setting of Interest Periods is in all instances subject to the
following:



19









 






     (i) Any Interest Period for a Base Margin Loan which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day.




     (ii) Any Interest Period for a LIBOR Loan which would otherwise end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is in the next calendar
month, in which event such Interest Period shall end on the last Business
Day of the month during which the Interest Period ends.




     (iii) Subject to Subsection (iv), below, any Interest Period applicable
to a LIBOR Loan, which Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period ends, shall end on the last Business Day of the month during
which that Interest Period ends.




     (iv) Any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.




     (v) The number of Interest Periods in effect at any one time is subject
to Section 2.12(e) hereof.



“Inventory”: Includes, without limitation, “inventory” as defined in the UCC and also all:
(a) Goods which are leased by a Person as lessor; are held by a Person for sale or
lease or to be furnished under a contract of service; are furnished by a Person under a
contract of service; or consist of raw materials, work in process, or materials used or
consumed in a business; (b) Goods of said description in transit; (c) Goods of said
description which are returned, repossessed and rejected; (d) packaging, advertising,
and shipping materials related to any of the foregoing; (e) all names, marks, and
General Intangibles affixed or to be affixed or associated thereto; and (f) Documents
and Documents of Title which represent any of the foregoing.



“Inventory Reserves”: Without duplication, such Reserves as may be established from time to
time by the Collateral Agent in the Collateral Agent’s reasonable, good faith
discretion with respect to the determination of the saleability, at retail, of the
Eligible Inventory or which reflect such other factors as affect the market value of
the Eligible Inventory. The Collateral Agent shall furnish the Borrower with notice two
(2) Business Days prior to imposing or changing any Inventory Reserve (unless a
Specified Event of Default then exists and is continuing, in which event no prior
notice shall be required). Without limiting the rights of the Collateral Agent to
establish or modify Inventory Reserves, the initial Inventory Reserves on the Second
Amendment Effective Date shall be the following:




     (a) shrinkage;




     (b) consigned Inventory;




     (c) damaged Inventory; and



20









 






     (d) return to vendor Inventory.



“Investment Property”: Has the meaning given that term in the UCC.



“Issuer”: The issuer of any L/C or Banker’s Acceptance. The Issuer shall be NCB or such
other Revolving Credit Lender (or Affiliate of a Revolving Credit Lender) as the
Borrower (with the consent of the Administrative Agent, which consent shall not be
unreasonably withheld) may select.



“L/C”: Any letter of credit issued pursuant to this Agreement. Without limitation, Existing
L/Cs shall be deemed to be L/Cs issued under this Agreement and shall be entitled to
all of the benefits hereof.



“L/C Landing Costs”: To the extent not included in the Stated Amount of an L/C or a
Banker’s Acceptance, customs, duty, freight, and other out-of-pocket costs and expenses
which will be expended to “land” the Inventory, the purchase of which is supported by
such L/C or Banker’s Acceptance.



“L/C
Fees”: The fees payable in respect of L/Cs pursuant to Section 2.18.



“Lead Arranger”: NCB.



“Lease”: Any lease or other agreement, no matter how styled or structured, pursuant to which
a Person is entitled to the use or occupancy of any space.



“Leasehold Interest”: Any interest of a Loan Party as lessee under any Lease.



“Lenders’ Special Counsel”: A single counsel, selected by the Majority Lenders following the
occurrence of an Event of Default, to represent the interests of the Revolving Credit
Lenders in connection with the enforcement, attempted enforcement, or preservation of
any rights and remedies under this, or any other Loan Document, as well as in
connection with any “workout”, forbearance, or restructuring of the credit facility
contemplated hereby.



“Letter-of-Credit Right”: Has the meaning given that term in UCC and also refers to any
right to payment or performance under an L/C, whether or not the beneficiary has
demanded or is at the time entitled to demand payment or performance.



“Liabilities”: Includes, without limitation, the following:




     (a) All and each of the following, arising under this Agreement or under any of
the other Loan Documents, whether now existing or hereafter arising:




     (i) Any and all direct and indirect liabilities, debts, and obligations
of the Borrower to the Agent or any Revolving Credit Lender, each of every
kind, nature, and description.




     (ii) Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the



21









 







Borrower to the Agent or any Revolving Credit Lender (including all
future advances whether or not made pursuant to a commitment by the Agent or
any Revolving Credit Lender), whether or not any of such are liquidated,
unliquidated, primary, secondary, secured, unsecured, direct, indirect,
absolute, contingent, or of any other type, nature, or description, or by
reason of any cause of action which the Agent or any Revolving Credit Lender
may hold against the Borrower.




     (iii) All notes and other obligations of the Borrower now or hereafter
assigned to or held by the Agent or any Revolving Credit Lender, each of
every kind, nature, and description.




     (iv) All interest, fees, and charges and other amounts which may be
charged by the Agent or any Revolving Credit Lender to the Borrower and/or
which may be due from the Borrower to the Agent or any Revolving Credit
Lender from time to time.




     (v) All reasonable costs and expenses incurred or paid by the Agent or
any Revolving Credit Lender in respect of any agreement between the Borrower
and the Agent or any Revolving Credit Lender or instrument furnished by the
Borrower to the Agent or any Revolving Credit Lender (including, without
limitation, Costs of Collection, reasonable attorneys’ fees, and all court
and litigation costs and expenses).




     (vi) Any and all covenants of the Borrower to or with the Agent or any
Revolving Credit Lender and any and all obligations of the Borrower to act
or to refrain from acting in accordance with any agreement between the
Borrower and the Agent or any Revolving Credit Lender or instrument
furnished by the Borrower to the Agent or any Revolving Credit Lender.




     (vii) Each of the foregoing as if each reference to the “the Agent or
any Revolving Credit Lender” were to each Affiliate of the Agent.




     (b) Any and all direct or indirect liabilities, debts, and obligations of the
Borrower to the Agent or any Affiliate of the Agent, each of every kind, nature, and
description owing on account of any service or accommodation provided to, or for the
account of the Borrower pursuant to this or any other Loan Document, including cash
management services, Hedge Agreements, and the issuances of L/C’s and Banker’s
Acceptances.



“LIBOR Business Day”: Any day which is both a Business Day and a day on which the London
interbank market in which NCB participates is open for dealings in United States Dollar
deposits.



“LIBOR Loan”: Any Revolving Credit Loan which bears interest at a LIBOR Rate.



“LIBOR Margin”: The Applicable Margin for LIBOR Loans.



22









 





“LIBOR Offer Rate”: For any Interest Period for LIBOR Loans, the quotient (rounded upwards,
if necessary, to the next 1/100 of 1%) of : (x) the per annum rate of interest
determined by the Administrative Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as of approximately 11:00 a.m.
(London time) two LIBOR Business Days prior to the beginning of such Interest Period
pertaining to such LIBOR Loan, as provided by Bloomberg’s or Reuters (or any other
similar company or service that provides rate quotations comparable to those currently
provided by such companies as the rate in the London interbank market) as the rate in
the London interbank market for deposits in U.S. Dollars in immediately available funds
with a maturity comparable to such Interest Period divided by (y) a number
equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate
quotation is not available for any reason, then the rate (for purposes of clause (x)
hereof) shall be the rate, determined by the Administrative Agent as of approximately
11:00 a.m. (London time) two LIBOR Business Days prior to the beginning of such
Interest Period pertaining to such LIBOR Loan, to be the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the per annum rates at which deposits in U.S.
Dollars in immediately available funds in an amount comparable to NCBC’s Applicable
Commitment Percentage of such LIBOR Loan and with a maturity comparable to such
Interest Period are offered to the prime banks by leading banks in the London interbank
market. The LIBOR Offer Rate shall be adjusted automatically on and as of the effective
date of any change in the Eurocurrency Reserve Percentage.



“LIBOR Rate”: That per annum rate which is the aggregate of the LIBOR Offer Rate plus the
LIBOR Margin.



“Liquidation”: The exercise, by the Collateral Agent, of those rights accorded to the
Collateral Agent under the Loan Documents as a creditor of the Borrower following and
on account of the occurrence and continuance of an Event of Default looking towards the
realization on the Collateral. Derivations of the word “Liquidation” (such as
“Liquidate”) are used with like meaning in this Agreement.



“Loan Account”: Is defined in Section 2.9.



“Loan Commitment”: With respect to each Revolving Credit Lender, the aggregate of
that respective Revolving Credit Lender’s Tranche A Dollar Commitment and Tranche A-1
Dollar Commitment.



“Loan Documents”: This Agreement, the Facility Guarantee, the Facility Guarantors
Collateral Documents, and each other instrument or document from time to time executed
and/or delivered in connection with the arrangements contemplated hereby or in
connection with any transaction with the Agent or any Affiliate of the Agent related to
this Agreement, including, without limitation, any transaction which arises out of any
cash management, depository, investment, banker’s acceptance, letter of credit,
interest rate protection, Hedge Agreement, or other services provided by the Agent or
any Affiliate of the Agent, as each may be amended from time to time.



23









 








“Loan Party or Loan Parties”: Collectively, the Borrower and the Facility
Guarantors.



“Majority Lenders”: (a) If there are two or fewer Revolving Credit Lenders who are not
Delinquent Revolving Credit Lenders: All Revolving Credit Lenders who are not
Delinquent Revolving Credit Lenders.




     (b) If there are three or more Revolving Credit Lenders who are not Delinquent
Revolving Credit Lenders: Revolving Credit Lenders (other than Delinquent Revolving
Credit Lenders) holding at least 66 2/3% of the Revolving Credit Commitment
Percentages of the Revolving Credit Dollar Commitments of Revolving Credit Lenders
who are not Delinquent Revolving Credit Lenders.



“Material Accounting Change”: Any change in GAAP applicable to accounting periods subsequent
to the Parent’s fiscal year most recently completed prior to the execution of this
Agreement, which change has a material effect on the Parent’s Consolidated financial
condition or operating results, as reflected on financial statements and reports
prepared by or for the Parent and its Subsidiaries, when compared with such condition
or results as if such change had not taken place.



“Material Adverse Effect”: A material adverse effect on (a) the business, operations,
property, assets, or financial condition of the Loan Parties taken as a whole, or
(b) the validity or enforceability of this Agreement or any of the other Loan Documents
or any of the material rights or remedies of the Agent or the Revolving Credit Lenders
hereunder or thereunder.



“Maturity
Date”: January 23, 2013.



“NCB”: National City Bank, a national banking association.



“NCBC”: National City Business Credit, Inc., an Ohio corporation.



“Nominee”: A business entity (such as a corporation or limited partnership) formed by the
Collateral Agent to own or manage any Post Foreclosure Asset.



“Non-Convertible Senior Collateral”: The sum of $250,000 (plus interest accruing thereon)
deposited in account number 987216351 maintained in the name of the Parent with
National City Bank, and any investment property resulting from such deposit, which
account and investment property have been pledged as security for the Senior
Non-Convertible Facility.



“Operating Account”: Is defined in Section 8.3.



“Original Loan Agreement”: Is defined in the Recitals.



“OverLoan”: A loan, advance, or providing of credit support (such as the issuance of any
L/C) to the extent that, immediately after its having been made, Availability is less
than zero.



“Parent”: Retail Ventures, Inc., an Ohio corporation.



24









 





“Participant”: Is defined in Section 20.18, hereof.



“Payment Intangible”: As defined in the UCC and also any general intangible under which the
Account Debtor’s primary obligation is a monetary obligation.



“Permitted Acquisition”: (i) Any Acquisition the cash consideration for which is less than
$3,000,000 in the aggregate in any fiscal year of the Parent and its Subsidiaries and
which satisfies the conditions set forth in clauses (f), (g), (h), and (i) below, and
(ii) any other Acquisition in which each of the following conditions are satisfied:




     (a) No Default or Event of Default then exists or would arise from the
consummation of such Acquisition.




     (b) Such Acquisition shall have been approved by the Board of Directors of the
Person (or similar governing body if such Person is not a corporation) which is the
subject of such Acquisition and such Person shall not have announced that it will
oppose such Acquisition or shall not have commenced any action which alleges that
such Acquisition will violate applicable law.




     (c) The Borrower shall have furnished the Collateral Agent with ten (10) days
prior notice of such intended Acquisition and shall have furnished the Collateral
Agent with a current draft of the acquisition agreement and other acquisition
documents, a summary of any due diligence undertaken by the Parent and/or the
Borrower in connection with such Acquisition, appropriate financial statements of
the Person which is the subject of such Acquisition, pro forma projected financial
statements for the twelve month period following such Acquisition after giving
effect to such Acquisition (including balance sheets, cash flows and income
statements by month for the acquired Person, individually, and on a consolidated
basis with all Loan Parties), and such other information as the Collateral Agent may
reasonably require, each of which shall be reasonably satisfactory to the Collateral
Agent.




     (d) The structure of the Acquisition shall be acceptable to the Collateral
Agent in its reasonable judgment. If an Acquisition of capital stock or other
equity interests, after consummation of such Acquisition, the Parent or the Borrower
shall own directly or indirectly a majority of the equity interests in the Person
being acquired and shall control a majority of any voting interests, and/or shall
otherwise Control the Person being acquired.




     (e) The Collateral Agent shall have received (i) the results of appraisals of
the assets (or the assets of the Person) to be acquired in such Acquisition and of a
commercial finance examination of the Person which is (or whose assets are) being
acquired, and (ii) such other due diligence as the Collateral Agent may reasonably
require, all of the results of the foregoing to be reasonably satisfactory to the
Collateral Agent.




     (f) Any assets acquired shall be utilized in, and if the Acquisition involves a
merger, consolidation or stock acquisition, the Person which is the



25









 







subject of such Acquisition shall be engaged in, only those businesses
permitted under Section 5.19, below.




     (g) If the Person which is the subject of such Acquisition is a Subsidiary of
the Parent or the Borrower, such Subsidiary shall have executed such documents as
may be necessary to be joined as a “Borrower” or “Facility Guarantor” hereunder , as
determined by the Collateral Agent, and the Collateral Agent shall have received a
first priority security and mortgage interest (subject to Permitted Encumbrances) in
such Subsidiary’s capital stock, inventory, accounts, equipment, real estate,
leaseholds, and other property of the same nature as constitutes Collateral under
this Agreement in order to secure the Liabilities.




     (h) The total consideration paid for all Acquisitions (whether in cash,
tangible property, notes or other property (other than capital stock of the Parent))
after the Second Amendment Effective Date, shall not exceed in the aggregate the sum
of $20,000,000.




     (i) Excess Availability immediately prior to such Acquisition, immediately
after giving effect thereto, and projected Excess Availability on a pro forma
projected basis for the twelve months immediately following such Acquisition, shall
not be less than $40,000,000.



“Permitted Disposition”: Shall mean any of the following:




     (a) Licenses of intellectual property or licensed or leased departments of a
Loan Party or any of its Subsidiaries in the ordinary course of business or to any
other Loan Party;




     (b) Leases or subleases of Leases, to the extent at any point in time such
Lease or subleases have anticipated minimum fixed annual rental payments of not more
than $3,000,000 in the aggregate;




     (c) Sales, assignments, transfers, conveyances or other dispositions of any or
all of the property specified in Exhibit 1.7 hereof; provided
that in connection with a sale or similar disposition of any such property,
if a Loan Party receives a note or similar obligations as all or part of the
consideration therefor, such Loan Party shall secure such note or obligation with a
mortgage or similar Lien on such property and pledge such note or other obligation
to the Collateral Agent as security for the Liabilities pursuant to the terms of the
Loan Documents;




     (d) Sales of Inventory and Equipment in connection with store closures
permitted in accordance with the provisions of Section 5.4(c) hereof,
provided that all sales of Inventory in connection with store closings
(1) after the occurrence and during the continuance of an Event of Default, or (2)
consisting of more than four (4) retail stores at the same time, shall be in
accordance with liquidation agreements and with liquidators reasonably acceptable to
the Collateral Agent;



26









 






     (e) the sale, lease or transfer of any property to the Parent or to any Loan
Party;




     (f) as long as no Event of Default then exists or would arise therefrom, the
dividend, distribution or other transfer of the capital stock of DSW owned by the
Parent to the stockholders of the Parent;




     (g) (i) the sale of any property, land or building (including any related
receivables or other intangible assets) to DSW, DSW Shoe or any Person which is not
a Subsidiary of the Parent, or (ii) in addition to the transfers described in clause
(f) of this definition, the sale of the entire capital stock (or other equity
interests) and Indebtedness of any Subsidiary owned by a Loan Party to any Person
which is not a Subsidiary of the Borrower, or (iii) the consummation of any other
asset sale with a Person who is not a Subsidiary of the Borrower, provided that, in
each case ((i)-(iii)):




	 	A.	 	the consideration for such transaction
represents fair value, and at least 90% of such consideration consists
of cash, provided that in connection with a sale or
similar disposition of any such Property, if a Loan Party receives a
note or similar obligations as all or part of the consideration
therefor, such Loan Party shall secure such note or obligation with a
mortgage or similar Lien on such Property and pledge such note or other
obligation to the Collateral Agent as security for the Liabilities
pursuant to the terms of the Loan Documents;
	 
	 	B.	 	the aggregate consideration for all such
transactions completed in any fiscal year does not exceed $1,000,000,
	 
	 	C.	 	the aggregate consideration for all such
transactions completed after the Second Amendment Effective Date does
not exceed $5,000,000, and
	 
	 	D.	 	other than in connection with a transaction,
the aggregate consideration for which is equal to an amount less than
$500,000, at least five (5) Business Days prior to the date of
completion of such transaction such Loan Party shall have delivered to
the Agent an officer’s certificate executed on behalf of such Loan
Party by an Authorized Officer of such Loan Party, which certificate
shall contain a description of the proposed transaction, the date such
transaction is scheduled to be consummated, the estimated purchase
price or other consideration for such transaction, financial
information pertaining to compliance with the preceding clause (A), and
which shall (if requested by the Agent) include a certified copy of the
draft or definitive documentation pertaining thereto.
	 
	 	(h)	 	the sale or transfer of Inventory to a Person
who shall operate a licensed department in a Loan Party’s store; and




27









 






	 	(i)	 	the sale, lease or other transfer of any
property pursuant to the Purchase Agreement.





“Permitted Encumbrances”: Shall mean any of the following:




     (a) Encumbrances for taxes not yet delinquent or which are being contested in
good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the applicable Loan
Party in accordance with GAAP, and provided further that, no notice
of tax lien has been filed with respect thereto;




     (b) Encumbrances in respect of property or assets imposed by law in the
ordinary course of business, such as carrier’s, warehousemen’s, mechanics’,
materialmen’s, repairmen’s, landlord’s or similar Encumbrances arising in the
ordinary course of business which (i) are not overdue in accordance with customary
business practices and consistent with the applicable Loan Party’s prior practices,
and do not in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the business of the
Loan Parties, or (ii) are being contested in good faith by a Loan Party, by
appropriate proceedings diligently instituted and conducted and without danger of
any material risk to the Collateral and adequate reserves or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been made
therefor;




     (c) Encumbrances, pledges or deposits in connection with workers’ compensation,
unemployment insurance and other types of social security;




     (d) Deposits to secure the performance of tenders, bids, sales, trade and
government contracts, leases, statutory obligations, surety, appeal, and supersedeas
bonds, warranty, advance payment, customs, performance and return-of-money bonds and
other obligations of a like nature in the ordinary course of business (exclusive of
obligations in respect of the payment of borrowed money) whether pursuant to
statutory requirements, common law or consensual arrangements;




     (e) Easements, rights of way, leases, zoning or deed restrictions, licenses,
covenants, building, restrictions, minor defects or irregularities in title and
other similar real estate encumbrances incurred in the ordinary course of business
that in the aggregate do not materially interfere with the conduct of the business
of the Loan Parties; defects and irregularities in titles, survey exceptions,
encumbrances, easements or reservations of others for rights-of-way, roads,
pipelines, railroad crossings, services, utilities or other similar purposes;
outstanding mineral rights or reservations (including rights with respect to the
removal of material resource) which do not materially diminish the value of the
surface estate, assuming usage of such surface estate similar to that being carried
on by any Loan Party as of the effective date;



28









 






     (f) Any interest or title of a lessor under any lease entered into by any Loan
Party in the ordinary course of business not in violation of the Loan Documents;




     (g) Any interest or title of any lessee under any leases or subleases of real
property of a Loan Party not in violation of the requirements of the Loan Documents,
provided that all such Encumbrances do not in the aggregate materially detract from
the value of such Loan Party’s property or materially impair the use thereof in the
operation of such Loan Party’s business;




     (h) Encumbrances arising from financing statements regarding property subject
to Capital Leases not in violation of the requirements of the Loan Documents,
provided that such Encumbrances are only in respect of the property
subject to, and secure only, the respective lease;




     (i) Rights of consignors of goods to a Loan Party as consignee;




     (j) Encumbrances arising from judgments, decrees or attachments in existence
less than 30 days after the entry thereof, with respect to which execution has been
stayed and with respect to which payment in full above any applicable deductible is
covered by insurance or a bond, or in circumstances not constituting an Event of
Default under Section 11.10(a);




     (k) Encumbrances created by this Agreement or the other Loan Documents;




     (l) Encumbrances (i) listed on Exhibit 4.5(a), annexed hereto, or (ii)
arising out of the refinancing, extension, renewal or refunding of any Indebtedness
secured by any such Encumbrances, provided that the principal amount of such
Indebtedness is not increased and such Indebtedness is not secured by any additional
assets;




     (m) Encumbrances which are placed upon Equipment or improvements to real
property (including the associated real property) used in the ordinary course of
business of a Loan Party or any Subsidiary (other than DSW, DSW Shoe and their
Subsidiaries) (i) at the time of (or within 90 days after) the acquisition of such
Equipment or the completion of such improvements by such Loan Party or any such
Subsidiary (other than DSW, DSW Shoe and their Subsidiaries) to secure Indebtedness
incurred to pay or finance all or a portion of the purchase price or other cost
thereof, provided that the Encumbrance on the Equipment so acquired or the real
property so improved does not encumber any other asset of such Loan Party or any
such Subsidiary; or (ii) are existing on Equipment or real property at the time
acquired by a Loan Party or any Subsidiary or on assets of a Person at the time such
Person first becomes a Subsidiary of the Borrower; provided that (A) any such
Encumbrances were not created at the time of or in contemplation of the acquisition
of such assets or Person by a Loan Party or any Subsidiaries; (B) in the case of any
such acquisition of a Person, any such Encumbrance attaches only to the Equipment or
real estate, as applicable, of such Person; and (C) in the case of any such
acquisition of Equipment or real estate by



29









 







a Loan Party or any Subsidiary, any such Encumbrance attaches only to the
property and assets so acquired and not to any other property or assets of such Loan
Party or any such Subsidiary; provided that the Encumbrances
outstanding from time to time under this clause (m) shall not secure any
Indebtedness other than Permitted Indebtedness described in clause (b) of such
definition;




     (n) Encumbrances securing Indebtedness assumed in connection with, or
continuing to exist after, but not incurred in connection with, or contemplation of,
a Permitted Acquisition, which Encumbrances were in effect prior to the consummation
of the Permitted Acquisition, provided that such Encumbrances may
not extend to any Accounts, Inventory, or General Intangibles of the Loan Parties or
of the Person so acquired; and




     (o) An Encumbrance granted by the Parent on the Non-Convertible Senior
Collateral in connection with the Senior Non-Convertible Facility.


The inclusion of the foregoing as “Permitted Encumbrances” shall not limit or impair the
right of the Collateral Agent to impose Reserves on account thereof in accordance with the
provisions of this Agreement.




“Permitted Indebtedness”: Shall mean any of the following:




     (a) Indebtedness incurred under this Agreement and the other Loan Documents
including any Indebtedness on account of the Revolving Credit;




     (b) Any Indebtedness incurred under the Senior Non-Convertible Facility;




     (c) Indebtedness on account of Equipment or improvements to real property
acquired in compliance with the requirements of subparagraph (m) of the definition
of Permitted Encumbrances, the incurrence of which would not otherwise be prohibited
by this Agreement; provided that such Indebtedness shall not exceed
$10,000,000 in the aggregate at any time outstanding for all Loan Parties and, with
respect to the Parent only, shall not exceed $5,000,000 in the aggregate outstanding
at any time;




     (d) (i) Indebtedness consisting of all obligations of a Loan Party or any
Subsidiary (other than DSW, DSW Shoe and their Subsidiaries) as lessee under Capital
Leases, and




          (ii) Indebtedness consisting of all obligations of a Loan Party or any
Subsidiary (other than DSW, DSW Shoe and their Subsidiaries) under any lease (i)
which is accounted for by the lessee as an operating lease and (ii) under which the
lessee is intended to be the “owner” of the leased property for Federal income tax
purposes;




provided that (A) at the time of any incurrence thereof after the
date hereof, and after giving effect thereto, no Event of Default shall have
occurred and be continuing or would result therefrom; and (B) the aggregate
outstanding principal



30









 







amount (using the obligations in lieu of principal amount, in the case of any
Capital Lease, or present value, based on the implicit interest rate, in lieu of
principal amount, in the case of any lease described above in part (ii)) of
Indebtedness permitted by this clause (d) shall not exceed $10,000,000 in the
aggregate principal amount outstanding at any time for all Loan Parties and, with
respect to the Parent only, shall not exceed $5,000,000 in the aggregate principal
amount outstanding at any time.




     (e) Indebtedness of the Loan Parties and any Subsidiary (other than DSW, DSW
Shoe and their Subsidiaries) under Hedge Agreements other than for speculative
purposes with any Revolving Credit Lender or an Affiliate of a Revolving Credit
Lender;




     (f) The Indebtedness listed on Exhibit 4.6, annexed hereto;




     (g) Indebtedness to sellers in connection with Permitted Acquisitions;




     (h) Intercompany indebtedness between and among the Loan Parties (other than
the Parent) and intercompany Indebtedness due to the Parent by any other Loan Party,
in each case, to the extent permitted hereunder;




     (i) Indebtedness with respect to indemnities, warranties, statutory
obligations, and surety, appeal and supersedeas bonds incurred in the ordinary
course of business;




     (j) Indebtedness in respect of overdraft protections and otherwise in
connection with deposit accounts;




     (k) Indebtedness arising out of the refinancing, extension, renewal or
refunding of any Indebtedness permitted under this Agreement, provided that the
principal amount of such Indebtedness is not increased from the amount outstanding
at the time of such refinancing;




     (l) Indebtedness owed by the Parent to any of the other Loan Parties in an
amount not to exceed $5,000,000 (less amounts paid under Section 5.16(a)
hereof) in the aggregate at any time outstanding;




     (m) Indebtedness owed by the Parent under the PIES;




     (n) Intercompany Indebtedness between and among the Loan Parties, as evidenced
by the Intercompany Notes, including without limitation on account of the Filene’s
Notes;




     (o) Indebtedness consisting of the RVI Indemnity, as defined in that certain
Agreement to Acquire Leases and Lease Properties dated as of October 3, 2007 by and
between, among others, VCDS, GB Retailers, Inc. and Burlington Coat Factory
Warehouse Corporation; and



31









 






     (p) Indebtedness consisting of any indemnification obligations of the Parent,
in its capacity as the Seller, pursuant to the terms of the Purchase Agreement



“Permitted Investments”: Shall mean each of the following:




     (a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing not more than one
year from the date of acquisition thereof;




     (b) investments in commercial paper maturing not more than one year from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from Standard & Poors or from Moody’s Investment Services,
Inc.;




     (c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing not more than one year from the date of acquisition thereof issued
or guaranteed by or placed with, and money market deposit accounts issued or offered
by, any domestic office of any financial institution organized under the laws of the
United States of America or any State thereof that has a combined capital and
surplus and undivided profits of not less than $500,000,000;




     (d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above (without regard to the limitation
on maturity contained in such clause) and entered into with a financial institution
satisfying the criteria described in clause (c) above;




     (e) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from either
Standard & Poors or from Moody’s Investment Services, Inc.;




     (f) investments in money market funds, substantially all the assets of which
are comprised of securities of the types described in clauses (a) through (e) above;




     (g) investments acquired by a Loan Party or any of its Subsidiaries (i) in
exchange for any other investment held by such Loan Party or any such Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other investment, or (ii) as a result of a
foreclosure by such Loan Party or any of its Subsidiaries with respect to any
secured investment or other transfer of title with respect to any secured investment
in default;



32









 






     (h) investments by a Loan Party in the capital of any wholly-owned Subsidiary
of such Loan Party, including without limitation, any Permitted Acquisitions,
provided that such Loan Party has complied with the provisions of Section 5.21
hereof with respect to such Subsidiary;




     (i) to the extent not permitted by the foregoing clauses, existing investments
in any Subsidiaries (and any increases thereof attributable to increases in retained
earnings);




     (j) to the extent not permitted by the foregoing clauses, the existing
investments described on Exhibit 1.6 hereto;




     (k) investments of a Loan Party and any Subsidiary in Hedge Agreements other
than for speculative purposes;




     (l) investments of any Person which are outstanding at the time such Person
becomes a Subsidiary of a Loan Party as a result of a Permitted Acquisition, but not
any increase in the amount thereof unless otherwise permitted by this Agreement;




     (m) any other investments (whether in the form of cash or contribution of
property, and if in the form of a contribution of property, such property shall be
valued for purposes of this clause at the fair value thereof) in any corporation,
partnership, limited liability company, joint venture or other business entity,
which is not itself a Subsidiary of the Parent or the Borrower or owned or
Controlled by any director, officer or employee of the Parent or the Borrower or any
of its Subsidiaries, not otherwise permitted by the foregoing clauses, made after
the Second Amendment Effective Date, shall be permitted to be incurred if (i) no
Event of Default shall have occurred and be continuing, or would result therefrom,
and (ii) the aggregate cumulative amount of such investments (together with any
loans and advances permitted under Section 5.6) does not exceed $4,000,000;




     (n) investments by the Parent in the capital stock of DSW existing on the
Second Amendment Effective Date and increases thereof due to retained earnings; and




     (o) investments contemplated by the Purchase Agreement, including, but not
limited to, investments by the Parent in VCH;




provided that, except for Excluded Property and loans to officers and
directors, all such Permitted Investments are subject to a perfected Encumbrance in
favor of the Collateral Agent.



“Person”: Any natural person, and any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise or entity.



33









 








“PIES” : The Premium Income Exchangeable Securities up to $172.5 million pursuant to an
Indenture dated August 16, 2006 between the Parent and HSBC Bank USA, National
Association, as trustee.



“PIES Collateral”: Certain of the capital stock
of DSW consisting of Class B common shares in the amounts required by the Indenture evidencing the PIES and the Proceeds
therefrom, including, without limitation, (i) any Proceeds payable to holders of DSW
Common Stock received on a cash merger, reclassification or sale of all or
substantially all of the assets of DSW, and (ii) any Proceeds payable to the holders of
the PIES in the form of the capital stock of DSW consisting of Class A common shares
for which the Class B common shares may be exchanged.



“PIES Note”: That certain Amended and Restated Replacement Promissory Note made by
the Borrower in favor of the Parent, dated as of the Second Amendment Effective Date,
in the principal amount of $27,599,000, evidencing the restated obligations of the
Borrower to the Parent as a result of the Parent’s loan of certain proceeds from the
PIES to the Borrower.



“Post Foreclosure Asset”: All or any part of the Collateral, ownership of which is
acquired by the Collateral Agent or a Nominee on account of the “bidding in” at a
disposition as part of a Liquidation or by reason of a “deed in lieu” type of
transaction.



“Protective OverAdvances”: Revolving Credit Loans which are OverLoans, but as to which each
of the following conditions is satisfied: (a) when aggregated with all other Revolving
Credit Loans, SwingLine Loans, Protective OverAdvances and the Stated Amount of L/Cs
and Banker’s Acceptances, the Revolving Credit Ceiling is not exceeded; and (b) when
aggregated with all other Protective OverAdvances, such Revolving Credit Loans do not
aggregate more than $10,000,000; (c) such Protective OverAdvances shall not remain
outstanding for more than forty-five (45) days in any period of one hundred eighty
(180) consecutive days, and (d) such Revolving Credit Loans are made or undertaken in
the Administrative Agent’s reasonable, good faith discretion (or as directed by the
Collateral Agent) to protect and preserve the interests of the Revolving Credit
Lenders. Overadvances on account of circumstances beyond the control of the Agent
(such as a drop in collateral value) shall not be deemed “Protective Overadvances” and
shall not be subject to the limitations contained herein.



“Proceeds”:
Includes, without limitation, “Proceeds” as defined in the UCC.



“Purchase Agreement”: Is defined in the recitals hereto.



“Receipts”: All cash, cash equivalents, money, checks, credit card slips, receipts and other
Proceeds from any sale of the Collateral.



“Receivables Collateral”: That portion of the Collateral which consists of Accounts, Payment
Intangibles, Chattel Paper, Instruments, Documents of Title, Documents, Investment
Property, Payment Intangibles, Letter-of-Credit Rights, bankers’ acceptances, and all
other rights to payment.



34









 





“Related Business”: Any business or enterprise consisting of any of the following:




     (a) asset maximization services; or




     (b) asset valuation services.



“Release”: Any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, seeping, migrating, dumping or disposing of any
Hazardous Material (including the abandonment or discarding of barrels, containers and
other closed receptacles containing any Hazardous Material) into the indoor or outdoor
environment, including, without limitation, the movement of Hazardous Materials through
or in the ambient air, soil, surface or ground water, or property, which is in
violation of any Environmental Laws.



“Register”:
Is defined in Section 17.2(c).



“Requirements of Law”: As to any Person:




     (a) Applicable Law.




     (b) That Person’s organizational documents.




     (b) That Person’s by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.



“Reserves”:
The following: Availability Reserves and Inventory Reserves.



“Revolving
Credit”: Is defined in Section 2.1.



“Revolving Credit Ceiling”: $100,000,000.00.



“Revolving Credit Lenders”: Each Tranche A Lender and each Tranche A-1 Lender to which
reference is made in the Preamble of this Agreement and any other Person who becomes a
“Tranche A Lender” or a “Tranche A-1 Lender” in accordance with the provisions of this
Agreement.



“Revolving Credit Loans”: Tranche A Loans and Tranche A-1 Loans made under the Revolving
Credit, except that where the term “Revolving Credit Loan” is used with reference to
available interest rates applicable to the loans under the Revolving Credit, it refers
to so much of the unpaid principal balance of the Loan Account as bears the same rate
of interest for the same Interest Period. (See Section 2.12(d)).



“Revolving Credit Note”: Collectively, the Tranche A Notes and the Tranche A-1 Notes.



“SEC”: The Securities and Exchange Commission.



35









 








“Second Amendment Effective Date”: The date upon which the conditions precedent set forth in
Article 3 hereof have been satisfied or waived and the first Revolving Credit Loans are
to be made and L/Cs to be issued hereunder.



“Senior Non-Convertible Facility”: The loan from Schottenstein Stores Corporation to the
Parent in the principal amount of $250,000 evidenced by a certain loan agreement dated
as of August 16, 2006.



“Specified Event of Default”: An Event of Default arising under any of the following
sections of this Agreement:




     (a) Section 11.1.




     (b) Section 11.2.




     (c) Section 11.3 (with respect to Sections 5.16, 5.17, 5.20, 5.27, 5.28, 5.29
and Article 8 only).




     (d) Section 11.5 (with respect to a breach of Sections 5.5 and 5.7 only).




     (e) Section 11.6.




     (f) Section 11.11.




     (g) Section 11.12.




     (h) Section 11.15.



“Stated Amount”: The maximum amount for which an L/C or Banker’s Acceptance may be honored.



“Subordinated Note”: That certain Subordinated Promissory Note, dated as of January 3,
2008, made by the Borrower to the Parent in the principal amount of $25,000,000.



“Subordination Agreement”: That certain Subordination Agreement, dated as of January 3,
2008, among the Borrower, the Parent and the Agent, as amended and in effect from time
to time.



“Subsidiary”: Any corporation, association, partnership, limited liability company, trust,
or other business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of
votes or Controlling interests) of the outstanding voting interests. For the avoidance
of doubt, neither VCDS nor VCH shall be deemed a Subsidiary of the Parent upon the
completion of the transactions contemplated by the Purchase Agreement.



“Successful Syndication”: Has the meaning set forth in the Fee Letter.



36









 





“Supporting Obligation”: Has the meaning given that term in the UCC and also refers to a
Letter-of-Credit Right or secondary obligation which supports the payment or
performance of an Account, Chattel Paper, a Document, a General Intangible, an
Instrument, or Investment Property.



“SwingLine”: The facility pursuant to which the SwingLine Lender may advance Revolving
Credit Loans aggregating up to the SwingLine Loan Ceiling.



“SwingLine Lender”: NCBC.



“SwingLine Loan Ceiling”: $15,000,000.00 (subject to increase as provided in Section
16.3(e)).



“SwingLine Loans”: Defined in Section 2.8.



“Termination Date”: The earliest of (a) the Maturity Date; or (b) the date of the
occurrence of any event described in Section , below; or (c) the date designated as the
Termination Date in the Administrative Agent’s notice to the Borrower setting the
Termination Date on account of the occurrence of any Event of Default other than as
described in Section , below; or (d) that date designated as the Termination Date,
thirty (30) days irrevocable written notice of which is provided by the Borrower to the
Administrative Agent.



“Tranche A Borrowing Base”: The aggregate of the following:




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




          Plus




     (b) The Appraised Inventory Percentage of the Appraised Inventory Liquidation
Value.




          Less




     (c) Availability Reserves.



“Tranche
A Dollar Commitment”: As set forth on
Exhibit 2.22, annexed hereto (as
such amounts may change in accordance with the provisions of this Agreement).



“Tranche A Lender”: Each Revolving Credit Lender having a Tranche A Dollar Commitment.



“Tranche A Loans”: Revolving Credit Loans made under the Revolving Credit with reference to
the Tranche A Borrowing Base.



“Tranche A Note”: Has the meaning set forth in Section 2.10.



37









 





“Tranche A-1 Appraised Inventory Percentage” An amount equal to the sum of the Appraised
Inventory Percentage and the following percentages for the periods indicated:



	 	 	 	 	 
	Period	 	Percentage
	December 1, 2007 through April 30, 2008
	 	 	10	%
	May 1, 2008 through August 31, 2008
	 	 	12.5	%
	September 1, 2008 through November 30, 2008
	 	 	10	%
	December 1, 2008 and at all times thereafter
	 	 	7.5	%






“Tranche A-1 Borrowing Base”: The aggregate of the following:




     (a) The face amount of Eligible Credit Card Receivables multiplied by the
Tranche A-1 Credit Card Advance Rate.




          Plus




     (b) The Tranche A-1 Appraised Inventory Percentage of the Appraised Inventory
Liquidation Value.




          Plus




     (c) The Appraised Inventory Percentage of the Appraised Inventory Liquidation
Value




          Less




     (d)Availability Reserves.



“Tranche A-1 Credit Card Advance Rate”: 95%.



“Tranche
A-1 Dollar Commitment”: As set forth on
Exhibit 2.22, annexed hereto (as
such amounts may change in accordance with the provisions of this Agreement).



“Tranche A-1 Lender”: Each Revolving Credit Lender having a Tranche A-1 Dollar Commitment.



“Tranche A-1 Loans”: Revolving Credit Loans made under the Revolving Credit with reference
to the Tranche A-1 Borrowing Base.



38









 





“Tranche A-1 Note”: Has the meaning set forth in Section 2.10.


“Transfer”: Wire transfer pursuant to the wire transfer system maintained by the Board of
Governors of the Federal Reserve Board, or as otherwise may be agreed to from time to
time by the Administrative Agent making such Transfer and the subject Revolving Credit
Lender. Wire instructions may be changed in the same manner that Notice Addresses may
be changed (Section 18.1), except that no change of the wire instructions for
Transfers to any Revolving Credit Lender shall be effective without the consent of the
Administrative Agent.



“UCC”: The Uniform Commercial Code as in effect from time to time in the State of Ohio.



“Unanimous Consent”: Consent of Revolving Credit Lenders (other than Delinquent Revolving
Credit Lenders) holding 100% of the Loan Commitments (other than Loan Commitments held
by a Delinquent Revolving Credit Lender).



“Unrestricted Subsidiary”: Those Subsidiaries of the Borrower described on Exhibit
1.5 hereto.



“Unused
Line Fee”: As defined in Section 2.14.



“Upfront
Fee”: Is defined in Section 2.13.


“VCDS”:
Is defined in the recitals hereto.



“VCH”:
Is defined in the recitals hereto.



ARTICLE 2 - THE REVOLVING CREDIT:



     2.1. Establishment of Revolving Credit.



          (a) The Revolving Credit Lenders hereby establish a revolving line of credit (the “Revolving
Credit”) in the Borrower’s favor pursuant to which each Revolving Credit Lender, subject to, and in
accordance with, this Agreement, acting through the Administrative Agent, shall make loans and
advances and otherwise provide financial accommodations to and for the account of the Borrower as
provided herein.



          (b) Loans, advances, and financial accommodations under the Revolving Credit shall be made
with respect to the Tranche A Borrowing Base and the Tranche A-1 Borrowing Base and shall be
subject to Availability. The Tranche A Borrowing Base and the Tranche A-1 Borrowing Base and
Availability shall be determined by the Administrative Agent by reference to Borrowing Base
Certificates furnished as provided in Section 6.4, below, and shall be subject to the following:




          (A) Such determination shall take into account such Reserves as the
Administrative Agent may determine as being applicable thereto.




          (B) The Cost of Eligible Inventory will be determined in a manner consistent
with current tracking practices of the Borrower as in effect on



39









 







the date hereof and as previously disclosed to the Administrative Agent, based
on the Borrower’s stock ledger inventory.



          (c) The commitment of each Revolving Credit Lender to provide such loans, advances, and
financial accommodations is subject to Section 2.22.




          (d) The proceeds of borrowings under the Revolving Credit shall be used to refinance existing
Indebtedness of the Borrower, to finance Capital Expenditures of the Borrower, for the Borrower’s
working capital and general corporate purposes (including to make intercompany loans to the Parent
for the sole purpose of paying interest, fees and other charges (but not principal) on account of
the PIES pursuant to Section 5.17 hereof), all solely to the extent permitted by this
Agreement. No proceeds of a borrowing under the Revolving Credit may be used, nor shall any be
requested, with a view towards the accumulation of any general fund or funded reserve of the
Borrower other than in the ordinary course of the Borrower’s business and consistent with the
provisions of this Agreement.




     2.2. Advances in Excess of Applicable Borrowing Base (OverLoans).



          (a) No Revolving Credit Lender has any obligation to the Borrower to make any loan or advance,
or otherwise to provide any credit to or for the benefit of the Borrower where the result of such
loan, advance, or credit is an OverLoan.




          (b) No Tranche A Lender has any obligation to the Borrower to make any loan or advance, or
otherwise to provide any credit to or for the benefit of the Borrower where such loan, advance, or
credit results in the aggregate outstanding amount of the loans, advances and credit extended by
the Tranche A Lenders exceeds the lesser of (i) the aggregate Tranche A Dollar Commitments of all
Tranche A Lenders, or (ii) when combined with the outstanding balance of Tranche A-1 Loans, the
Tranche A-1 Borrowing Base.




          (c) The Revolving Credit Lenders’ obligations, among themselves, are subject to (among other
provisions of this Agreement) Section 13.3(a) (which relates to each Revolving Credit Lender’s
making amounts available to the Administrative Agent).




          (d) The Revolving Credit Lenders’ providing of an OverLoan on any one occasion does not affect
the obligations of the Borrower hereunder (including the Borrower’s obligation to immediately repay
any amount which otherwise constitutes an OverLoan) nor obligate any of the Revolving Credit
Lenders to do so on any other occasion.




     2.3. Risks of Value of Collateral. The Agent’s reference to a given asset
in connection with the making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit and/or the monitoring of compliance with the provisions
hereof shall not be deemed a determination by the Agent or any Revolving Credit Lender relative to
the actual value of the asset in question. All risks concerning the value of the Collateral are
and remain upon the Borrower. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Administrative Agent in connection
with the making of loans, credits, and advances and the providing of financial accommodations under
the Revolving Credit.



40









 





     2.4. Commitment to Make Revolving Credit Loans and Support Letters of
Credit. Subject to the provisions of this Agreement, the Revolving Credit Lenders shall make
a loan or advance under the Revolving Credit and the Administrative Agent shall endeavor to have an
L/C or Banker’s Acceptance issued for the account of one or more of the Loan Parties, in each
instance if duly and timely requested by the Borrower as provided herein provided that:



          (a) No OverLoan is then outstanding and none will result therefrom.




          (b) No Borrower is then in Default and none will thereby become in Default.




          (c) Notwithstanding anything to the contrary contained in this Agreement, L/C’s and Banker’s
Acceptances issued for the account of the Parent shall be limited to those L/Cs required to support
the workman’s compensation obligations of the Parent and its Subsidiaries (other than DSW, DSW Shoe
and their Subsidiaries) and for no other purpose.




     2.5. Revolving Credit Loan Requests. 



          (a) Requests for loans and advances under the Revolving Credit or for the continuance or
conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the
Borrower in accordance with the provisions of Sections 2.5(b) through and including 2.5(d) hereof,
by written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing if
so requested by the Administrative Agent). Such notice of borrowing shall be substantially in the
form of Exhibit
2.5 hereto, signed by the Borrower and transmitted to the Administrative
Agent by telecopier. Each such notice shall be irrevocable and shall specify (i) the amount of the
proposed borrowing and the date thereof (which shall be a Business Day) and (ii) whether the
borrowing then being requested is to be a borrowing of Base Margin Loans or LIBOR Loans and, if
LIBOR Loans, the Interest Period with respect thereto. If no election is made as to the type of
Loan or no election of Interest Period is specified in any such notice for a borrowing of LIBOR
Loans, such notice shall be deemed a request for borrowing of Base Margin Loans. The
Administrative Agent may rely on any telephonic request for a borrowing to the same extent that the
Administrative Agent may rely on a written request. The Borrower shall bear all risks related to
the giving of borrowing requests telephonically.




          (b) Subject to the provisions of this Agreement, the Borrower may, on behalf of the Borrower,
request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to
that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the
following:





          (i) If such Revolving Credit Loan is to be or is to be converted to a Base Margin Loan:
By 2:00 p.m. on the Business Day on which the subject Revolving Credit Loan is to be made or
is to be so converted (provided that if notice is furnished after 12:00 noon on any
Business Day, the Revolving Credit Loan so requested shall be deemed a request for a
SwingLine Loan). Base Margin Loans requested by the Borrower, other than those resulting
from the conversion of a LIBOR Loan, shall not be less than $250,000 and in increments of
$10,000 in excess of such minimum.




          (ii) If such Revolving Credit Loan is to be, or is to be continued as, or converted to,
a LIBOR Loan: By 2:00 p.m. three (3) LIBOR Business Days before the



41









 






commencement of any new
Interest Period or the end of the then applicable Interest Period. LIBOR Loans and
conversions to LIBOR Loans shall each be not less than $3,000,000 and in increments of
$1,000,000 in excess of such minimum.




          (iii) Any LIBOR Loan which matures while the Borrower is in Default shall be converted,
at the option of the Administrative Agent, to a Base Margin Loan notwithstanding any notice
from the Borrower that such Loan is to be continued as a LIBOR Loan.




          (iv) LIBOR Loans may not be converted or continued as LIBOR Loans at any time other
than the end of the Interest Period applicable thereto unless the Borrower shall pay, upon
demand, any amounts due pursuant to Section 2.11(f) hereof.



          (c) Any request for a Revolving Credit Loan after any repayment of outstanding Tranche A-1
Loans pursuant to Section 2.11 hereof shall be deemed a request for a Tranche A-1 Loan until the
Revolving Credit Lenders’ Tranche A-1 Dollar Commitments have been fully funded.




          (d) Any request for a Revolving Credit Loan or for the continuance or conversion of an
interest rate applicable to a Revolving Credit Loan which is made after the applicable deadline
therefor, as set forth above, shall be deemed to have been made at the opening of business on the
then next Business Day or LIBOR Business Day, as applicable.




          (e) The Borrower may, on behalf of any Loan Party, request that the Administrative Agent cause
the issuance by the Issuer of L/Cs or Banker’s Acceptances for the account of the Borrower as
provided in Section 2.17. Notwithstanding anything to the contrary contained in this Agreement,
L/C’s and Banker’s Acceptances issued for the account of the Parent shall be limited to those L/Cs
required to support the workman’s compensation obligations of the Parent and its Subsidiaries
(other than DSW, DSW Shoe and their Subsidiaries) and for no other purpose.




          (f) The Administrative Agent may rely on any request for a loan or advance, or other financial
accommodation under the Revolving Credit which the Administrative Agent, in good faith, believes to
have been made by a Person duly authorized to act on behalf of the Borrower and may decline to make
any such requested loan or advance, or issuance, or to provide any such financial accommodation
pending the Administrative Agent’s being furnished with such documentation concerning that Person’s
authority to act as may be satisfactory to the Administrative Agent.




          (g) A request by the Borrower for loan or advance, or other financial accommodation under the
Revolving Credit shall be irrevocable and shall constitute certification by the Borrower that as of
the date of such request, each of the following is true and correct:





          (i) There has been no material adverse change in the Borrower’s financial condition
from the most recent financial information furnished the Agent or any Revolving Credit
Lender pursuant to this Agreement.




          (ii) Each representation which is made herein or in any of the Loan Documents is then
true and complete in all material respects as of and as if made on the



42









 






date of such request except to the extent that
any of the same relates expressly to a different date.



          (iii) Unless accompanied by a written certificate of the Borrower’s President or its
Chief Financial Officer describing (in reasonable detail) the facts and circumstances of
any Default then existing and the steps (if any) being taken to remedy such condition, that
no Default has occurred and is continuing.



     2.6. Suspension of Revolving Credit. If, at any time or from time to time,
the Borrower is in Default:



          (a) The Administrative Agent may, and at the direction of the Majority Lenders shall, suspend
the Revolving Credit immediately, in which event, neither the Administrative Agent nor any
Revolving Credit Lender shall be obligated, during such suspension, to make any loans or advance to
the Borrower, or to provide any financial accommodation hereunder or to seek the issuance of any
L/C or of any Banker’s Acceptance for the account of any Loan Party. Nothing contained herein
shall limit the right of the Administrative Agent to make Protective OverAdvances or the obligation
of the Revolving Credit Lenders with respect to SwingLine Loans, Protective OverAdvances, L/Cs and
Banker’s Acceptances during such suspension period.




          (b) The Administrative Agent may, and at the direction of the Majority Lenders shall, suspend
the right of the Borrower to request any LIBOR Loan or to convert any Base Margin Loan to a LIBOR
Loan.




     2.7. Making of Revolving Credit Loans.



          (a) On the Second Amendment Effective Date, each Tranche A-1 Lender, severally and not jointly
with any other Tranche A-1 Lender, agrees, upon the terms and subject to the conditions herein set
forth, to make Tranche A-1 Loans to the Borrower in a single drawing in an amount equal to such
Tranche A-1 Lender’s Tranche A-1 Dollar Commitment.




          (b) A loan or advance under the Revolving Credit shall be made by the transfer of the
proceeds of such loan or advance to the Operating Account of the applicable Division. The proceeds
of any Revolving Credit Loan shall be made available before 3:00 p.m. on the date requested in
accordance with Section 2.5 hereof.




          (c) A loan or advance shall be deemed to have been made under the Revolving Credit (and the
Borrower shall be indebted to the Administrative Agent and the Revolving Credit Lenders for the
amount thereof immediately) at the following:





          (i) The Administrative Agent’s initiation of the transfer of the proceeds of such loan
or advance in accordance with the Borrower’s instructions (if such loan or advance is of
funds requested by the Borrower).




          (ii) The charging of the amount of such loan to the Loan Account (in all other
circumstances).



43









 





          (d) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse
to or liability of the Administrative Agent or any Revolving Credit Lender, on account of:





          (i) Any delay in the making of any loan or advance requested under the Revolving
Credit.




          (ii) Any delay by any bank or other depository institution in treating the proceeds of
any such loan or advance as collected funds.




          (iii) Any delay in the receipt, and/or any loss, of funds which constitute a loan or
advance under the Revolving Credit, the wire transfer of which was properly initiated by the
Administrative Agent in accordance with wire instructions provided to the Administrative
Agent by the Borrower.



     2.8. SwingLine Loans. 



          (a) For ease of administration, Tranche A Loans which are Base Margin Loans may be made by the
SwingLine Lender (in the aggregate, the “SwingLine Loans”) in accordance with the procedures set
forth in this Agreement for the making of loans and advances under the Revolving Credit. The
aggregate unpaid principal balance of the SwingLine Loans shall not at any one time be in excess of
the lesser of (i) the SwingLine Loan Ceiling, or (ii) Availability. The SwingLine Lender shall not
make a SwingLine Loan if the SwingLine Lender has received notice from the Administrative Agent
that the Administrative Agent has suspended, or the Administrative Agent has received written
notice from the Majority Lenders instructing the Administrative Agent to suspend, the Revolving
Credit in accordance with the terms hereof. Absent such notification, the SwingLine Lender (x)
shall not otherwise be required to determine whether the conditions precedent to such SwingLine
Loan have been satisfied or whether the requested borrowing would cause Availability to be
exceeded, and (y) shall be entitled in all cases to have each Tranche A Lender make Revolving
Credit Loans in settlement of such SwingLine Loans in accordance with the provisions of Section
13.2 hereof.




          (b) The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate
applicable to Base Margin Loans (or a money market based rate quoted by the Agent and accepted by
the Borrower) and shall be repayable as a loan under the Revolving Credit.




          (c) The Borrower’s obligation to repay SwingLine Loans shall be evidenced by a Note in the
form of
Exhibit
2.8(c), annexed hereto, executed by the Borrower, and payable to the
SwingLine Lender. Neither the original nor a copy of that Note shall be required, however, to
establish or prove any Liability. Upon receipt of an affidavit of an officer of, and a customary
indemnity from, a SwingLine Lender as to the loss, theft, destruction or mutilation of the
SwingLine Note, the Borrower will issue in lieu thereof a replacement SwingLine Note in the same
principal amount thereof and of like tenor.




          (d) For all purposes of this Loan Agreement, the SwingLine Loans and the Borrower’s
obligations to the SwingLine Lender constitute Tranche A Loans and are secured as “Liabilities”.




44









 








          (e) SwingLine Loans shall be subject to periodic settlement with the Tranche A Lenders as
provided in this Agreement.




     2.9. The Loan Account. 



          (a) An account (“Loan Account”) shall be opened on the books of the Administrative Agent in
which a record shall be kept of all loans and advances made under the Revolving Credit (including,
without limitation, Swingline Loans).




          (b) The Administrative Agent shall also keep a record (either in the Loan Account or
elsewhere, as the Administrative Agent may from time to time elect) of all interest, fees, service
charges, costs, expenses, and other debits owed to the Agent and each Revolving Credit Lender on
account of the Liabilities from the Borrower and of all credits against such amounts so owed.




          (c) All credits against the Liabilities shall be conditional upon final payment to the
Administrative Agent for the account of the Agent or Revolving Credit Lender entitled thereto of
the items giving rise to such credits. The amount of any item credited against the Liabilities
which is charged back against the Agent or any Revolving Credit Lender or is disgorged for any
reason or is not so paid shall be a Liability and shall be added to the Loan Account, whether or
not the item so charged back or not so paid is returned.




          (d) Except as otherwise provided herein, all fees, service charges, costs, and expenses for
which the Borrower is obligated hereunder are payable on demand.




          (e) The Administrative Agent, without the request of the Borrower, may advance under the
Revolving Credit any interest, fee, service charge, or other payment to which the Agent or any
Revolving Credit Lender is entitled from the Borrower pursuant hereto and may charge the same to
the Loan Account notwithstanding that an OverLoan may result thereby; provided that the
Administrative Agent shall not charge the Loan Account for any third-party expenses incurred by the
Agent (such as fees for attorneys, appraisers and commercial finance examinations) without first
having furnished the Borrower with a copy of the invoice therefor two (2) Business Days prior to
the date that the Loan Account is to be so charged. Any such advance shall be deemed a Base Margin
Loan. Such action on the part of the Administrative Agent shall not constitute a waiver of the
Administrative Agent’s rights and the Borrower’s obligations under Section 2.11(b). Any amount
which is added to the principal balance of the Loan Account as provided in this Section shall bear
interest at the interest rate then and thereafter applicable to Base Margin Loans. The
Administrative Agent shall promptly furnish the Borrower with a detailed statement itemizing any
amounts so charged to the Loan Account.




          (f) Any statement rendered by the Administrative Agent or any Revolving Credit Lender to the
Borrower concerning the Liabilities shall be considered correct and accepted by the Borrower and
shall, absent manifest error, be conclusively binding upon the Borrower unless the Borrower
provides the Administrative Agent with written objection thereto within twenty (20) days from the
receipt by the Borrower of such statement, which written objection shall indicate, with
particularity, the reason for such objection. The Loan Account and the Administrative Agent’s
books and records concerning the loan arrangement contemplated herein and the Liabilities shall be
prima facie evidence and proof of the items described therein.




45









 





     2.10. The Revolving Credit Notes. The Borrower’s obligation to repay loans
and advances (a) under the Tranche A Dollar Commitments, with interest as provided herein, shall be
evidenced by Notes (each, a “Tranche A Note”) in the form of Exhibit 2.10(a) and (b) under the
Tranche A-1 Dollar Commitments, with interest as provided herein, shall be evidenced by Notes
(each, a “Tranche A-1 Note”) in the form of Exhibit 2.10(b), annexed hereto, executed by the
Borrower, one payable to each Revolving Credit Lender. Neither the original nor a copy of any
Revolving Credit Note shall be required, however, to establish or prove any Liability. Upon
receipt of an affidavit of an officer of, and a customary indemnity from, a Revolving Credit Lender
as to the loss, theft, destruction or mutilation of the Revolving Credit Note, the Borrower will
issue in lieu thereof a replacement Revolving Credit Note in the same principal amount thereof and
of like tenor.



     2.11. Payment of The Loan Account.



          (a) The Borrower may repay all or any portion of the principal balance of the Loan Account
from time to time until the Termination Date. All such prepayments shall first be applied to
Tranche A Loans until paid in full and thereafter shall be applied to Tranche A-1 Loans.




          (b) The Borrower, without notice or demand from the Administrative Agent or any Revolving
Credit Lender, shall immediately pay the Administrative Agent that amount, from time to time, which
is necessary so that there is no OverLoan outstanding. Any such payment shall be first applied to
Tranche A Loans until paid in full and then to Tranche A-1 Loans.




          (c) Subject to Section 8.4, during the continuance of a Cash Control Event, the Borrower shall
repay the Revolving Credit:





          (i) in an amount equal to the proceeds realized from the sale, refinancing, or other
disposition of, or realization upon, any Collateral; and




          (ii) in accordance with the provisions of Article 8 hereof.


All amounts prepaid under this Section 2.11 shall be first applied to Tranche A Loans until paid in
full and then to Tranche A-1 Loans and may be reborrowed under the Revolving Credit, subject to and
in accordance with, the terms of this Agreement.




          (d) The Borrower shall repay the then entire unpaid balance of the Loan Account and all other
Liabilities on the Termination Date.




          (e) The Administrative Agent shall endeavor to cause the application of payments (if any),
pursuant to Sections 2.11(a), 2.11(b) and 2.11(c) against LIBOR Loans then outstanding in such
manner as results in the least cost to the Borrower, but shall not have any affirmative obligation
to do so nor liability on account of the Administrative Agent’s failure to have done so. In no
event shall action or inaction taken by the Administrative Agent excuse the Borrower from any
indemnification obligation under Section 2.11(f).




          (f) The Borrower shall indemnify the Administrative Agent and each Revolving Credit Lender and
hold the Administrative Agent and each Revolving Credit Lender



46









 






harmless from and against any loss, cost or expense (including loss of anticipated profits and
amounts payable by the Administrative Agent or such Revolving Credit Lender on account of “breakage
fees” (so-called)) which the Administrative Agent or such Revolving Credit Lender may sustain or
incur (including, without limitation, by virtue of acceleration after the occurrence of any Event
of Default) as a consequence of the following:





          (i) Failure by the Borrower to pay any of the principal amount of or any interest on
any LIBOR Loan as and when due and payable, including any such loss or expense arising from
interest or fees payable by such Revolving Credit Lender in order to maintain its LIBOR
Loans.




          (ii) Failure by the Borrower to make a borrowing or conversion after the Borrower has
given (or is deemed to have given) a request for a Revolving Credit Loan or a request to
convert a Revolving Credit Loan from one applicable interest rate to another.




          (iii) The making of any payment on a LIBOR Loan or the making of any conversion of any
such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest
Period with respect thereto.



          (g) (i) Upon at least ten (10) Business Days’ prior written notice to the Administrative
Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Tranche A Dollar Commitments. Each such reduction shall be in the
principal amount of $5,000,000 or any integral multiple thereof, provided that no such partial
reductions shall exceed $10,000,000 in the aggregate after the Second Amendment Effective Date.
Each such reduction or termination shall (i) be applied ratably to the Tranche A Dollar Commitments
of each Tranche A Lender and (ii) be irrevocable when given. At the effective time of each such
termination, the Borrower shall pay to the Administrative Agent for application as provided herein
any amount by which the unpaid balance of the Tranche A Loans and aggregate undrawn Stated Amount
of all then outstanding L/Cs and Banker’s Acceptances outstanding on such date exceeds the amount
to which the Tranche A Dollar Commitments are so reduced. Any such reduction or termination of the
Tranche A Dollar Commitments may not be reinstated. If the Tranche A Dollar Commitments are
terminated, the Tranche A-1 Dollar Commitments shall also be deemed terminated contemporaneously
therewith.




          (ii) The Borrower may not permanently terminate or permanently reduce, the Tranche A-1 Dollar
Commitments unless contemporaneously therewith, the Tranche A Dollar Commitments are permanently
terminated.




     2.12. Interest on Revolving Credit Loans. 



          (a) Each Revolving Credit Loan shall bear interest at the Base Margin Rate unless timely
notice is given (as provided in Section 2.5) that the subject Revolving Credit Loan (or a portion
thereof) is, or is to be converted to, a LIBOR Loan.




          (b) Each Revolving Credit Loan which consists of a LIBOR Loan shall bear interest at the
applicable LIBOR Rate.




47









 








          (c) Subject to, and in accordance with, the provisions of this Agreement, the Borrower may
cause all or a part of the unpaid principal balance of the Loan Account to bear interest at the
Base Margin Rate or the LIBOR Rate as specified from time to time by the Borrower by notice to the
Administrative Agent.




          (d) For ease of reference and administration, each part of the Loan Account which bears
interest at the same rate of interest and for the same Interest Period is referred to herein as if
it were a separate “Revolving Credit Loan”.




          (e) The Borrower shall not select, renew, or convert any interest rate for a Revolving Credit
Loan such that, in addition to interest at the Base Margin Rate, there are more than eight (8)
Interest Periods for LIBOR Loans in the aggregate applicable to the Revolving Credit Loans at any
one time.




          (f) The Borrower shall pay accrued and unpaid interest on each Revolving Credit Loan in
arrears as follows:





          (i) On the applicable Interest Payment Date for that Revolving Credit Loan.




          (ii) On the Termination Date and on the End Date.




          (iii) Following the occurrence of any Event of Default, with such frequency as may be
determined by the Administrative Agent.



          (g) Following the occurrence of any Event of Default (and whether or not the Agent exercises
its rights on account thereof), all Revolving Credit Loans shall bear interest, at the option of
the Administrative Agent or at the instruction of the Majority Lenders, at a rate which is the
aggregate of the applicable rate (including the Applicable Margin) for Base Margin Loans and/or
LIBOR Loans, as applicable, plus two percent (2%) per annum.




     2.13. Arrangement Fee; Upfront fee; Collateral Monitoring Fee; Early Termination
Fee. In addition to any other fee or expense to be paid by the Borrower on account of the
Revolving Credit, the Borrower shall pay the Administrative Agent the “Arrangement Fee”, the
“Upfront Fee”, the “Early Termination Fee” and the “Collateral Monitoring Fee” at the times and in
the amounts as set forth the Fee Letter.



     2.14.
Unused Line Fee. In addition to any other fee to be paid by the
Borrower on account of the Revolving Credit, the Borrower shall pay the Administrative Agent, for
the account of the Tranche A Lenders, an “Unused Line Fee” (so referred to herein) of 0.25% per
annum of the average difference, during the month just ended (or relevant period with respect to
the payment being made on the Termination Date) between the aggregate Tranche A Dollar Commitments
and the aggregate of the unpaid principal balance of the Tranche A Loans and the undrawn Stated
Amount of L/Cs and Banker’s Acceptances outstanding during the relevant period.



          (b) In addition to any other fee to be paid by the Borrower on account of the Revolving
Credit, the Borrower shall pay the Administrative Agent, for the account of the Tranche A-1
Lenders, an “Unused Line Fee” (so referred to herein) of 0.25% per annum of the




48









 







average difference,
during the month just ended (or relevant period with respect to the payment being made on the
Termination Date) between the aggregate Tranche A-1 Dollar Commitments and the aggregate of the
unpaid principal balance of the Tranche A-1 Loans during the relevant period.




          (c) The Unused Line Fee shall be paid in arrears, on the first day of each month after the
execution of this Agreement and on the Termination Date.




     2.15. Concerning Fees. The Borrower shall not be entitled to any credit,
rebate or repayment of any fee earned by the Administrative Agent or any Revolving Credit Lender
pursuant to this Agreement or any Loan Document notwithstanding any termination of this Agreement
or suspension or termination of the Administrative Agent’s and any Revolving Credit Lender’s
respective obligation to make loans and advances hereunder.



     2.16. Agent’s and Revolving Credit Lenders’ Discretion.



          (a) Each reference in the Loan Documents to the exercise of reasonable, good faith discretion
or the like by the Agent or any Revolving Credit Lender shall be to such Person’s exercise of its
judgment, in good faith, based upon such information of which that Person then has actual
knowledge.




          (b) The burden of establishing the failure of the Agent or any Revolving Credit Lender to have
acted in a reasonable manner in such Person’s exercise of such discretion shall be the Borrower’s.




     2.17. Procedures For Issuance of L/Cs and Banker’s Acceptances. 



          (a) The Borrower may request, either directly or through Retail Ventures Imports, Inc., that
an Issuer cause the issuance of L/Cs or Banker’s Acceptances for the account of any Loan Party.
Requests for L/Cs and Banker’s Acceptances shall be given by the Borrower to the Administrative
Agent and the Issuer not later than 2:00 p.m. three (3) Business Days prior to the specified date
for the issuance of the requested L/C or Banker’s Acceptance. Requests for L/Cs and Banker’s
Acceptances may be requested by the Borrower by written or telephonic notice (in the case of
telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent or the
Issuer). Each such notice shall be irrevocable and shall specify with respect to each L/C and
Banker’s Acceptance requested (i) the face amount of the proposed L/C or Banker’s Acceptance, which
shall be denominated in dollars and the intended date of issuance thereof (which shall be a
Business Day), (ii) the beneficiary, and (iii) the terms (including the anticipated expiry date) of
the L/C or Banker’s Acceptance. The Administrative Agent and the Issuer may rely on any telephonic
request for the issuance of a L/C or Banker’s Acceptance to the same extent that the Administrative
Agent and the Issuer may rely on a written request. The Borrower shall bear all risks related to
the giving of requests for the issuance of L/Cs or Banker’s Acceptances telephonically.
Notwithstanding anything to the contrary contained in this Agreement, (i) L/C’s and Banker’s
Acceptances issued for the account of the Parent shall be
limited to those L/Cs required to support the workman’s compensation obligations of the Parent
and its Subsidiaries (other than DSW, DSW Shoe and their Subsidiaries) and for no other purpose,
and (ii) no L/C or Banker’s Acceptance shall be issued by any Issuer which is not also the
Administrative Agent unless such Issuer shall have received notice from the Administrative Agent
that the conditions to such issuance have been met. Any Issuer shall notify the



49









 






Administrative
Agent in writing on each Business Day of all L/Cs or Banker’s Acceptances issued on the prior
Business Day by such Issuer.




          (b) The Administrative Agent and/or the applicable Issuer will, subject to the terms of this
Agreement, issue any L/C or Banker’s Acceptance so requested by the Borrower from and including the
Second Amendment Effective Date until the thirtieth (30th) Business Day prior to the Maturity Date,
provided that, at the time that the request is made, the Revolving Credit has not been suspended as
provided in Section 2.6 and if so issued:





          (i) The aggregate Stated Amount of all L/Cs and Banker’s Acceptances then outstanding,
does not exceed $25,000,000;




          (ii) The expiry of the L/C or Banker’s Acceptance is not later than the earlier of
thirty (30) days prior to the Maturity Date or the following:




          (A) As to standby L/Cs: one (1) year from initial issuance (or in the case of
renewal or extension thereof, one year after such renewal or extension),
provided that each standby L/C may, upon the request of the Borrower,
include a provision whereby, subject to the approval of the Issuer, such standby L/C
may be renewed for additional consecutive periods of twelve (12) months or less (but
not beyond the date that is thirty Business Days prior to the Maturity Date) unless
the Issuer notifies the beneficiary thereof at least 30 days prior to the then
applicable expiration date that such L/C will not be renewed.




          (B) As to documentary L/Cs: ninety (90) days from issuance.




          (C) As to Banker’s Acceptances: ninety (90) days from issuance.




          (iii) If, notwithstanding the foregoing, the Administrative Agent causes the issuance
of an L/C or Banker’s Acceptance, the expiry of which is later than the Maturity Date, it
shall be 105% cash collateralized at its issuance; and




          (iv) An OverLoan will not result from the issuance of the subject L/C or Banker’s
Acceptance.



          (c) Concurrently with requesting the issuance of a L/C or a Banker’s Acceptance, the
applicable Borrower shall execute and deliver to the Issuer in respect of such requested L/C or
Banker’s Acceptance a reimbursement or similar agreement in the Issuer’s then standard form of
application for and reimbursement agreement with respect to letters of credit and banker’s
acceptances; provided however that in the event of any conflict between the provisions of such
reimbursement agreement and this Agreement, the provisions of this Agreement shall govern.




          (d) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse
to, nor liability of, the Administrative Agent or any Revolving Credit Lender on account of





          (i) Any delay or refusal by an Issuer to issue an L/C or a Banker’s Acceptance;



50









 






          (ii) Any action or inaction of an Issuer on account of or in respect to, any L/C or any
Banker’s Acceptance.



          (e) Immediately upon the issuance of any L/C or any Banker’s Acceptance by the Issuer (or the
amendment of a L/C or Banker’s Acceptance increasing the amount thereof), and without any further
action on the part of the Issuer, the Issuer shall be deemed to have sold to each Tranche A Lender,
and each such Tranche A Lender shall be deemed unconditionally and irrevocably to have purchased
from the Issuer, without recourse or warranty, an undivided interest and participation, to the
extent of such Tranche A Lender’s Applicable Commitment Percentage, in such L/C and Banker’s
Acceptance, each drawing thereunder and the obligations of the Borrower under this Agreement and
the other Loan Documents with respect thereto. In consideration thereof, each Tranche A Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent for the account of
the Issuer its Applicable Commitment Percentage of each disbursement made by the Issuer with
respect to a L/C or Banker’s Acceptance which is not reimbursed by the Borrower. Each Tranche A
Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and
shall not be effected by any event or circumstance whatsoever, including the existence of a Default
or the suspension of the Revolving Credit. Any action taken or omitted by the Issuer under or in
connection with a L/C or Banker’s Acceptance, if taken or omitted in the absence of gross
negligence, actual bad faith, or willful misconduct, shall not create for the Issuer any resulting
liability to any Revolving Credit Lender.




          (f) The Borrower shall reimburse the Issuer for the amount of any honoring of a drawing under
an L/C or Banker’s Acceptance on the same day on which such honoring takes place in immediately
available funds in U.S. dollars. The Administrative Agent, without the request of the Borrower, may
advance under the Revolving Credit (and charge to the Loan Account) the amount of any honoring of
any L/C or Banker’s Acceptance and other amount for which the Borrower, the Issuer, or the Tranche
A Lenders become obligated on account of, or in respect to, any L/C or Banker’s Acceptance. Such
advance shall be a Base Margin Loan and shall be made whether or not the Borrower is in Default or
such advance would result in an OverLoan. Such action shall not constitute a waiver of the
Administrative Agent’s rights under Section 2.11(b) hereof.




     2.18. Fees For L/Cs and Banker’s Acceptances. 



          (a) The Borrower shall pay the Administrative Agent, for the account of the Tranche A Lenders,
on the first day of each calendar month, in arrears, a fee (each, an “L/C Fee”) equal to the
following per annum percentages of the average Stated Amount of the following categories of L/Cs
outstanding during the subject month:





          (i) As to standby L/Cs: the Applicable Margin for LIBOR Loans.




          (ii) As to documentary L/Cs: the Applicable Margin for LIBOR Loans minus 0.50%.




          (iii) After the occurrence and during the continuance of an Event of Default, at the
option of the Administrative Agent (or at the instruction of the Majority Lenders), the L/C
Fee shall be increased for any L/Cs which from time to time are not



51









 





cash collateralized in
the amounts required in accordance with the provisions of this Agreement by an amount equal
to two percent (2%) per annum.


          (b) The applicable Borrower shall pay the Administrative Agent, for the account of the
Revolving Credit Lenders, on the first day of each month, in arrears, a fee (each, a “Banker’s
Acceptance Fee”) equal to the Applicable Margin for LIBOR Loans minus 0.50% of the average Stated
Amount of the Banker’s Acceptances outstanding during the subject month. After the occurrence and
during the continuance of an Event of Default, at the option of the Administrative Agent (or at the
instruction of the Majority Lenders), the Banker’s Acceptance Fee shall be increased for any
Banker’s Acceptances which from time to time are not cash collateralized in the amounts required in
accordance with the provisions of this Agreement by an amount equal to two percent (2%) per annum.


          (c) In addition to the fees to be paid as provided in Subsections 2.18(a) and 2.18(b), above,
the Borrower shall pay to the Administrative Agent (or to the Issuer, if so requested by
Administrative Agent), on demand, all issuance, processing, negotiation, amendment, and
administrative fees and other amounts charged by the Issuer on account of, or in respect to, any
L/C or Banker’s Acceptance.


          (d) If any change in Applicable Law shall either:



          (i) impose, modify or deem applicable any reserve, special deposit or similar
requirements against letters of credit heretofore or hereafter issued by any Issuer or with
respect to which any Tranche A Lender or any Issuer has an obligation to lend to fund
drawings under any L/C or any Banker’s Acceptance; or


          (ii) impose on any Issuer any other condition or requirements relating to any such
letters of credit or banker’s acceptance;



and the result of any event referred to in Section 2.18(d)(i) or 2.18(d)(ii), above, shall be to
increase the cost to any Tranche A Lender or to any Issuer of issuing or maintaining any L/C or
Banker’s Acceptance (which increase in cost shall be the result of such Issuer’s reasonable
allocation among that Tranche A Lender’s or Issuer’s letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the Administrative Agent and
delivery by the Administrative Agent to the Borrower of a certificate of an officer of the subject
Tranche A Lender or the subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Tranche A Lender or such Issuer, and the
basis for determining such increased costs and their allocation, the Borrower shall immediately pay
to the Administrative Agent, from time to time as specified by the Administrative Agent, such
amounts as shall be sufficient to compensate the subject Tranche A Lender or the subject Issuer for
such increased cost. Any Tranche A Lender’s or any Issuer’s determination of costs incurred under
Section 2.18(d)(i) or 2.18(d)(ii), above, and the allocation, if any, of such costs among the
Borrower and other letter of credit customers of such Tranche A
Lender or such Issuer, if done in good faith and made on an equitable basis and in accordance with
such officer’s certificate, shall, absent manifest error, be presumed to be accurate.



52









 





     2.19. Concerning L/C’s and Banker’s Acceptances. 



          (a) None of the Issuer, the Issuer’s correspondents, any Revolving Credit Lender, the
Administrative Agent, or any advising, negotiating, or paying bank with respect to any L/C or
Banker’s Acceptance shall be responsible in any way for:


          (i) The performance by any beneficiary under any L/C or Banker’s Acceptance of that
beneficiary’s obligations to the Borrower.


          (ii) The form, sufficiency, correctness, genuineness, authority of any Person signing;
falsification; or the legal effect of; any documents called for under any L/C or Banker’s
Acceptance if (with respect to the foregoing) such documents on their face appear to be in
order.


          (b) The Issuer may honor, as complying with the terms of any L/C or any Banker’s Acceptance
and of any drawing thereunder, any drafts or other documents otherwise in order, but signed or
issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the
party authorized under such L/C or Banker’s Acceptance to draw or issue such drafts or other
documents.


          (c) The Issuer may reject any drafts and documents presented under any L/C or any Banker’s
Acceptance which are discrepant in any manner, notwithstanding any prior course of dealing by the
Issuer in honoring drafts under L/Cs or Banker’s Acceptances.


          (d) Unless otherwise agreed to, in the particular instance, the Borrower hereby authorizes any
Issuer to:


          (i) Select an advising bank, if any.



          (ii) Select a paying bank, if any.



          (iii) Select a negotiating bank.



          (e) All directions, correspondence, and funds transfers relating to any L/C or any Banker’s
Acceptance are at the risk of the Borrower. The Issuer shall have discharged the Issuer’s
obligations under any L/C or Banker’s Acceptance which, or the drawing under which, includes
payment instructions, by the initiation of the method of payment called for in, and in accordance
with, such instructions (or by any other commercially reasonable and comparable method). None of
the Administrative Agent, any Revolving Credit Lender, or the Issuer shall have any responsibility
for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph or
cable, or for any inaccuracy of translation.


          (f) The Administrative Agent’s, each Revolving Credit Lender’s, and the Issuer’s rights,
powers, privileges and immunities specified in or arising under this Agreement are in addition to
any heretofore or at any time hereafter otherwise created or arising, whether by statute or rule of
law or contract.


          (g) Except to the extent otherwise expressly provided hereunder or agreed to in writing by the
Issuer and the Borrower, documentary L/Cs will be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce, Publication No. 500, and standby L/Cs will
be governed by International Standby Practices



53









 







ISP98 (adopted by the International Chamber of
Commerce on April 6, 1998) and any respective subsequent revisions thereof.




          (h) The obligations of the Borrower under this Agreement with respect to L/Cs and Banker’s
Acceptances are absolute, unconditional, and irrevocable and shall be performed strictly in
accordance with the terms hereof under all circumstances, whatsoever including, without limitation,
the following:





          (i) Any lack of validity or enforceability or restriction, restraint, or stay in the
enforcement of this Agreement, any L/C, any Banker’s Acceptance, or any other agreement or
instrument relating thereto.




          (ii) The Borrower’s consent to any amendment or waiver of, or consent to the departure
from, any L/C or any Banker’s Acceptance.




          (iii) The existence of any claim, set-off, defense, or other right which the Borrower
may have at any time against the beneficiary of any L/C or Banker’s Acceptance.




          (iv) Any good faith honoring of a drawing under any L/C or Banker’s Acceptance, which
drawing possibly could have been dishonored based upon a strict construction of the terms of
the L/C or Banker’s Acceptance.



     2.20. Changed Circumstances. 



          (a) The Administrative Agent may advise the Borrower that the Administrative Agent has made
the good faith determination (which determination shall be final and conclusive) of any of the
following:





          (i) Adequate and fair means do not exist for ascertaining the rate for LIBOR Loans.




          (ii) The continuation of or conversion of any Revolving Credit Loan to a LIBOR Loan has
been made impracticable or unlawful by the occurrence of a contingency that materially and
adversely affects the applicable market or the compliance by the Administrative Agent or any
Revolving Credit Lender in good faith with any Applicable Law.




          (iii) The indices on which the interest rates for LIBOR Loans are based shall no longer
represent the effective cost to the Administrative Agent or any Revolving Credit Lender for
U.S. dollar deposits in the interbank market for deposits in which it regularly
participates.



          (b) In the event that the Administrative Agent advises the Borrower of an occurrence described
in Section 2.20(a), then, until the Administrative Agent notifies the Borrower that the
circumstances giving rise to such notice no longer apply:





          (i) The obligation of the Administrative Agent or each Revolving Credit Lender to make
loans of the type affected by such changed circumstances or to



54









 






permit the Borrower to select
the affected interest rate as otherwise applicable to any Revolving Credit Loans shall be
suspended.




          (ii) Any notice which the Borrower had given the Administrative Agent with respect to
any LIBOR Loan, the time for action with respect to which has not occurred prior to the
Administrative Agent’s having given notice pursuant to Section 2.20(a), shall be deemed at
the option of the Administrative Agent to not having been given.



     2.21. Intentionally Omitted. 



     2.22. Revolving Credit Lenders’ Commitments. 



          (a) Subject to Section 17.1 (which provides for assignments and assumptions of commitments),
each Revolving Credit Lender’s “Tranche A Dollar Commitment”, “Tranche A-1 Dollar Commitment” and
“Applicable Commitment Percentage” (respectively so referred to herein) is set forth on
Exhibit 2.22, annexed hereto.




          (b) The obligations of each Revolving Credit Lender are several and not joint.




          (c) No Revolving Credit Lender shall have any liability to the Borrower on account of the
failure of any other Revolving Credit Lender to provide any loan or advance under the Revolving
Credit nor any obligation to make up any shortfall which may be created by such failure.




          (d) The Tranche A Dollar Commitments, Tranche A-1 Dollar Commitments, Applicable Commitment
Percentages, and identities of the Revolving Credit Lenders may be changed, from time to time by
the reallocation or assignment of the Tranche A Dollar Commitments or the Tranche A-1 Dollar
Commitments among the Revolving Credit Lenders or with other Persons who determine to become
“Revolving Credit Lenders”, provided, however unless an Event of Default has occurred and is
continuing (in which event, no consent of the Borrower is required) any assignment to a Person
(other than to another Lender or to any domestic Affiliate of any Lender) shall be subject to the
prior consent of the Borrower (not to be unreasonably withheld or delayed), which consent will be
deemed given unless the Borrower provides the Administrative Agent with written objection, not more
than five (5) Business Days after the Administrative Agent shall have given the Borrower written
notice of a proposed assignment), provided that the Borrower’s consent shall in no event be
required with respect to the following: (i) an assignment to another Revolving Credit Lender; or
(ii) an assignment to a transferee of a Revolving Credit Lender’s rights in and to a material
portion of such Revolving Credit Lender’s portfolio of asset based credit facilities.




          (e) Upon written notice given the Borrower from time to time by the Administrative Agent, of
any assignment or allocation referenced in Section 2.22(d):





          (i) The Borrower shall execute one or more replacement Revolving Credit Notes to
reflect such changed Tranche A Dollar Commitments, Tranche A-1 Dollar Commitments, and
identities and shall deliver such replacement Revolving Credit
Notes to the Administrative Agent (which promptly thereafter shall deliver to the
Borrower the Revolving Credit Notes so replaced) provided however, in the event that a



55









 






Revolving Credit Note is to be exchanged following its acceleration or the entry of an order
for relief under the Bankruptcy Code with respect to the Borrower, the Administrative Agent,
in lieu of causing the Borrower to execute one or more new Revolving Credit Notes, may issue
the Administrative Agent’s certificate confirming the resulting Tranche A Dollar
Commitments, Tranche A-1 Dollar Commitments, and Applicable Commitment Percentages.




          (ii) Such change shall be effective from the effective date specified in such written
notice and any Person added as a Revolving Credit Lender shall have all rights and
privileges of a Revolving Credit Lender hereunder thereafter as if such Person had been a
signatory to this Agreement and any other Loan Document to which a Revolving Credit Lender
is a signatory and any Person removed as a Revolving Credit Lender shall be relieved of any
obligations or responsibilities of a Revolving Credit Lender hereunder thereafter.



     2.23. Payments.



          (a) The Borrower shall make each payment required to be made by it hereunder or under any
other Loan Document (whether of principal, interest, fees or reimbursement of drawings under L/Cs,
Banker’s Acceptances, or otherwise) prior to 2:00 p.m. on the date when due, in immediately
available funds, without setoff or counterclaim. Any amounts received after such time on any date
may, in the reasonable, good faith discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating interest thereon. All such
payments shall be made to the Administrative Agent at its offices at 2300 Crown Colony Drive, Suite
202, Quincy, Massachusetts 02169 (or such other address as to which the Borrower shall have been
advised by the Administrative Agent), except payments to be made directly to the Issuer as
expressly provided herein. If any payment under any Loan Document shall be due on a day that is not
a Business Day, except with respect to LIBOR Loans, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon
shall be payable for the period of such extension. All payments under each Loan Document shall be
made in dollars.




          (b) If and to the extent that any payment owed by the Borrower to the Administrative Agent,
any Revolving Credit Lender or the Issuer is not made when due, the Borrower authorizes the
Administrative Agent, the Revolving Credit Lenders and the Issuer, as the case may be, to charge
from time to time against any or all of the deposit accounts of the Borrower any amount so due.
Notice of such charge shall be given promptly to the Borrower.




ARTICLE 3 - CONDITIONS PRECEDENT:



     As a condition to the effectiveness of this Agreement, the establishment of the Revolving
Credit, and the making of the first loan under the Revolving Credit, each of the documents
respectively described in Sections 3.1 through and including 3.4, (each in form and substance
satisfactory to the Administrative Agent) shall have been delivered to the Administrative Agent,
and the conditions respectively described in Sections 3.5 through and including 3.21, shall have
been satisfied:



56









 





     3.1. Corporate Due Diligence. 



          (a) Certificates of corporate good standing or full force and effect, as applicable, for each
Loan Party, respectively issued by the Secretary of State for the state in which that Loan Party is
incorporated.


          (b) Certificates of due qualification, in good standing, issued by the Secretary(ies) of State
of each State for each Loan Party reasonably required by the Administrative Agent.


          (c) Certificates of each Loan Party’s Secretary of the due adoption, continued effectiveness,
and setting forth the texts of, each corporate resolution adopted in connection with the
establishment of the loan arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan Documents.


     3.2.
Opinions Opinions of counsel to the Loan Parties in form and substance
satisfactory to the Administrative Agent.


     3.3. Additional Documents Such additional instruments and documents as the
Agent or its counsel may reasonably require or request including, without limitation, the documents
described on Exhibit 3.3 hereto.


     3.4. Officers’ Certificates Certificates executed by the Chief Financial
Officer of the Borrower in form and substance satisfactory to the Administrative Agent.


     3.5.
Representations and Warranties Each of the representations made by or on
behalf of each Loan Party in this Agreement or in any of the other Loan Documents or in any other
report, statement, document, or paper provided by or on behalf of each Loan Party shall be true and
complete as of the date as of which such representation or warranty was made.


     3.6. Minimum Day One Availability After giving effect to the first funding
under the Revolving Credit, any charges to the Loan Account made in connection with the
establishment of the credit facility contemplated hereby, L/Cs and Banker’s Acceptances to be
issued at, or immediately subsequent to, such establishment, Excess Availability shall not be less
than $30,000,000.00.


     3.7.
Subordinated Indebtedness; Intercreditor Agreement The Borrower shall
have received the proceeds of subordinated Indebtedness in the amount of at least $25,000,000, the
terms of which subordinated Indebtedness shall be satisfactory to the Administrative Agent in its
sole reasonable, good faith discretion. The Agent
shall have entered into an intercreditor agreement with the holder of such subordinated
Indebtedness on terms reasonably satisfactory to the Administrative Agent.



     3.8.
Repayment Under Existing Loan Agreement The Administrative Agent shall
have received a principal payment under the Existing Loan Agreement so that, after giving effect
thereto, no OverLoan shall exist hereunder.


     3.9.
Consents. All necessary consents and approvals to the transactions
contemplated hereby shall have been obtained and shall be satisfactory to the Administrative Agent.


     3.10. Appraisals and Commercial Finance Examinations The Collateral Agent
shall have received (a) appraisals of the Borrower’s Inventory by a third party appraiser


57









 





acceptable to the Collateral Agent, and (b) a commercial finance examination with respect to the
Borrower and its Subsidiaries, including a review of the Borrower’s books and records, each in form
and substance satisfactory to the Collateral Agent.




     3.11. Financial Information.



     The Administrative Agent shall have received such financial information and projections as the
Agent may reasonably request, including, without limitation, monthly financial projections of the
Borrower for the subsequent three fiscal years and annual financial projections of the Borrower
through the Maturity Date. All such financial information shall be reasonably satisfactory to the
Agent and shall reflect the Borrower’s ability to perform their obligations hereunder.



     3.12.
Material Agreements The consummation of the transactions contemplated
hereby shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with,
or result in a default or event of default under, any material agreement of any Loan Party. There
shall not have occurred any default of any material contract or agreement of any Loan Party. The
Agent shall be satisfied with the corporate structure and organizational documents of the Borrower
and the Parent.



     3.13.
Litigation There shall not be pending any litigation or other
proceeding, the result of which could reasonably be expected to have a Material Adverse Effect.



     3.14. Perfection of Encumbrances. 



          (a) The Collateral Agent shall have received results of searches or other evidence reasonably
satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to
the Collateral Agent) indicating the absence of Encumbrances, except for Permitted Encumbrances, on
the assets of the Loan Parties, except for which termination statements and releases reasonably
satisfactory to the Collateral Agent are being tendered concurrently with such extension of credit.




          (b) The Collateral Agent shall have received all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably requested by the Collateral
Agent to be filed, registered or recorded to create or perfect the first priority Encumbrances
intended to be created under the Loan Documents (subject to Permitted Encumbrances having priority
over the Encumbrance of the Collateral Agent pursuant to operation of law) and all such documents
and instruments shall have been so filed (or provision made therefor), registered or recorded to
the satisfaction of the Collateral Agent.




     3.15. All Fees and Expenses Paid. All fees due at or immediately after the
first funding under the Revolving Credit and all costs and expenses incurred by the Agent and the
Lead Arranger in connection with the establishment of the credit facility contemplated hereby
(including the fees and expenses of counsel to the Agent and the Lead Arranger) shall have been
paid in full.



     3.16.
Cash Management. The Loan Parties shall have established cash
management systems reasonably acceptable to the Agent, including, without limitation, compliance
with the provisions of Sections 8.1(b), 8.2(b), and 8.3(a).



58









 





     3.17. Insurance. The Agent shall be reasonably satisfied with the
insurance maintained by the Loan Parties and the Agent shall have received an endorsement to such
insurance policies naming the Agent as loss payee and/or additional insured and otherwise
satisfactory in form and substance to the Agent.



     3.18. No Loan Party in Default. No Loan Party is in Default.



     3.19. No Adverse Change. The Agent shall be reasonably satisfied that any
financial statements delivered to it fairly present the business and financial condition of the
Borrower and its Subsidiaries, and that there has been no material adverse change in the assets,
business, financial condition, or income of the Borrower and its Subsidiaries since the December 1,
2007 financial information delivered to the Agent.



     3.20. Certain Changes.



          (a) No material changes in governmental regulations or policies affecting the Loan Parties,
the Agent, the Lead Arranger or any Revolving Credit Lender involved in this transaction shall have
occurred prior to the Second Amendment Effective Date.




          (b) There shall not have occurred prior to the Effective Date any disruption or material
adverse change in the financial or capital markets in general that would, in the reasonable opinion
of the Administrative Agent, have a material adverse effect on the market for loan syndications or
adversely affecting the syndication of the Revolving Credit Loans.




     3.21. Purchase Agreement.


The transactions contemplated by the Purchase Agreement shall have been consummated on terms
reasonably satisfactory to the Agent.




     3.22. Benefit of Conditions Precedent. The conditions set forth in this
Article 3 are for the sole benefit of the Agent and each Revolving Credit Lender and may be waived
by the Administrative Agent in whole or in part without prejudice to the Agent or any Revolving
Credit Lender.


No document shall be deemed delivered to the Agent or any Revolving Credit Lender until received
and accepted by the Administrative Agent at its offices in Cleveland, Ohio. Under no circumstances
shall this Agreement take effect until executed and accepted by the Agent.




ARTICLE 4 - GENERAL REPRESENTATIONS AND WARRANTIES:



     To induce each Revolving Credit Lender to establish the credit facility contemplated herein
and to induce the Revolving Credit Lenders to provide loans and advances under the Revolving Credit
(each of which loans shall be deemed to have been made in reliance thereupon) the Loan Parties, in
addition to all other representations and warranties made by any Loan Party in any other Loan
Document, make those representations and warranties set forth below.



     4.1. Due Organization. Authorization. No Conflicts. 



          (a) Each Loan Party presently is in good standing as a corporation or other entity under the
laws of the state in which it is organized, and, except as described on EXHIBIT 4.1,



59









 





annexed
hereto, is duly qualified and in good standing in every other state in which, by reason of the
nature or location of each Loan Parties’ assets or operation of each of their respective business,
such qualification may be necessary, except where the failure to so qualify would not have a
Material Adverse Effect.




          (b) Each Loan Party’s respective organizational identification number assigned to it by the
state of its incorporation and its respective federal employer identification number, as of the
Second Amendment Effective Date, is listed on Exhibit 4.1, annexed hereto.




          (c) Each Loan Party has all requisite power and authority to execute and deliver all Loan
Documents to which that Loan Party is a party and has all requisite power to perform all
Liabilities.




          (d) The execution and delivery by each Loan Party of each Loan Document to which it is a
party; each Loan Party’s consummation of the transactions contemplated by such Loan Documents
(including, without limitation, the creation of Collateral Interests by that Loan Party to secure
the Liabilities); and each Loan Party’s performance under those of the Loan Documents to which it
is a party:





          (i) Have been duly authorized by all necessary action.




          (ii) Do not contravene in any material respect any provision of any Requirement of Law,
agreement or other obligation of that Loan Party.




          (iii) Will not result in the creation or imposition of, or the obligation to create or
impose, any Encumbrance upon any assets of that Loan Party pursuant to any Requirement of
Law, agreement or other obligation, except pursuant to the Loan Documents.



          (e) The Loan Documents have been duly executed and delivered by each Loan Party and are the
legal, valid and binding obligations of each Loan Party, enforceable against each Loan Party in
accordance with their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or
by equitable principles relating to enforceability.




     4.2. Trade Names.



          (a)
Exhibit 4.2, annexed hereto, is a listing as of the Second Amendment Effective
Date, of:





          (i) All names under which, to the knowledge of the Borrower, any Loan Party has
conducted its business in the past five (5) years.




          (ii) All Persons with whom any Loan Party has consolidated or merged, or from whom any
Loan Party has acquired in a single transaction or in a series of related transactions
substantially all of such Person’s assets in the past five (5) years.



60









 





     4.3. Intellectual Property. 



          (a) Each Loan Party owns and possesses, or has the right to use all material patents,
industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos,
copyrights, trade secrets, know-how, confidential information, and other intellectual or
proprietary property of any third Person necessary for that Loan Party’s conduct of that Loan
Party’s business.




          (b) The conduct by each Loan Party of that Loan Party’s business does not, to the knowledge of
the Loan Parties, presently infringe (nor will any Loan Party conduct its business in the future so
as to infringe) the patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person, except where such infringement is
not reasonably likely to have a Material Adverse Effect.




     4.4. Locations. 



          (a) The Collateral, and the books, records, and papers of the Loan Parties pertaining thereto,
are kept and maintained solely (i) at those locations which are
listed on
Exhibit 4.4,
annexed hereto (or as supplemented pursuant to the terms of this Agreement), which Exhibit
includes, with respect to each such location, the name and address of the landlord on the Lease
which covers such location (or an indication that a Loan Party owns the subject location) and of
all service bureaus with which any such records are maintained or (ii) at such other locations as
to which the Borrower has provided ten (10) days prior written notice to the Administrative Agent
of the intended location of the Collateral, books, records, and papers thereat.




          (b) No tangible personal property of any Loan Party is in the care or custody of any third
party or stored or entrusted with a bailee or other third party, except (i) goods in transit to a
Loan Party or as otherwise disclosed pursuant to, or permitted by, this Section 4.4, or (ii) for
Inventory in an amount not to exceed $1,000,000 at Cost in the aggregate at any time in the
ordinary course of business.




     4.5. Encumbrances. 



          (a) The Loan Parties are the owners of the Collateral free and clear of all Encumbrances other
than any Permitted Encumbrance.




          (b) No Loan Party has possession of any property on consignment to that Loan Party from a
third party that is not a Loan Party except (i) as of the Second Amendment Effective Date, those
listed on Exhibit 4.5(b), annexed hereto and (ii) those as to which the Loan Parties notify the
Administrative Agent in accordance with the provisions of Section 6.3 hereof.




     4.6. Indebtedness.  The Loan Parties do not have any Indebtedness other
than:



          (a) Permitted Indebtedness; and




          (b) A Loan Party’s guaranty of Permitted Indebtedness of another Loan Party.




61









 





     4.7. Insurance. 



          Exhibit 4.7, annexed hereto, is a schedule of all insurance policies owned by the
Loan Parties or under which any Loan Party is the named insured as of the Second Amendment
Effective Date. Each of such policies is in full force and effect. To the best of such Loan
Party’s knowledge, neither the issuer of any such policy nor any Loan Party is in default or
violation of any such policy.




     4.8. Licenses.  Each material license, distributorship, franchise, and
similar agreement issued to, or to which any Loan Party is a party is in full force and effect.
Each material license agreement to which a Loan Party is a party as of the Second Amendment
Effective Date is listed on Exhibit 4.8, annexed hereto. No party to any such license or
agreement is in default or violation thereof, except where such default or failure is not
reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or
threat of cancellation of any such license or agreement.



     4.9. Leases. Exhibit 4.9, annexed hereto, is a schedule of all
presently effective Capital Leases as of the Second Amendment Effective Date. (Exhibit
4.4 includes a list of all other presently effective Leases). Each of such Leases and Capital
Leases is in full force and effect. No Loan Party, to the best of its knowledge, is in default or
violation of any such Lease or Capital Lease, except where such violation is not reasonably likely
to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation
of any such Lease or Capital Lease, which
cancellation (together with all other similar cancellations) is reasonably likely to have a
Material Adverse Effect.



     4.10. Requirements of Law.  Each Loan Party and each of its Subsidiaries is
in compliance with all Requirements of Law except where the failure of such compliance will not
have a Material Adverse Effect. No Loan Party has received any notice of any violation of any
Requirement of Law (other than of a violation which does not have a Material Adverse Effect), which
violation has not been cured or otherwise remedied.



     4.11. Labor Relations.



          (a) As of the Second Amendment Effective Date, no Loan Party is a party to any collective
bargaining or other labor contract except as listed on
Exhibit 4.11, annexed hereto.




          (b) There is not presently pending and, to any Loan Party’s knowledge, there is not threatened
any of the following except to the extent any of the following is not reasonably likely to have a
Material Adverse Effect:





          (i) Any strike, slowdown, picketing, work stoppage, or employee grievance process.




          (ii) Except as described on Exhibit 4.17 annexed hereto, any proceeding
against or affecting any Loan Party relating to the alleged violation of any Applicable Law
pertaining to labor relations or before National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable governmental body, organizational activity, or
other labor or employment dispute against or affecting any Loan Party, which, if determined
adversely to that Loan Party is reasonably likely to have a Material Adverse Effect on that
Loan Party.



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          (iii) Any lockout of any employees by any Loan Party (and no such action is
contemplated by any Loan Party).




          (iv) Any application for the certification of a collective bargaining agent.



          (c) No event has occurred or circumstance exists which could provide the basis for any work
stoppage or other labor dispute which would be reasonably likely to have a Material Adverse Effect.




          (d) Each Loan Party:





          (i) Has complied with all Applicable Law relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health, and plant
closing, except where such non-compliance is not reasonably likely to have a Material
Adverse Effect.




          (ii) Is not liable for the payment of compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for that Loan Party’s failure to comply with any
Applicable Law referenced in Section 4.11(d)(i) which is reasonably likely to have a
Material Adverse Effect.



     4.12. Taxes. 



          (a) With respect to the Loan Parties’ federal, state, and local tax liability and obligations:





          (i) To the best of its knowledge, the Borrower, in compliance with all Applicable Law,
has properly filed all material returns due to be filed up to the date of this Agreement.




          (ii)
Except as described on
Exhibit
4.12:




          (A) Currently, no Loan Party has received from any taxing authority any request
to perform any examination of or with respect to any Loan Party nor any other
written or verbal notice in any way relating to any claimed failure by any Loan
Party to comply with all Applicable Law concerning payment of any taxes or other
amounts in the nature of taxes in excess of $500,000 in any one instance.




          (B) No agreement exists which waives or extends any statute of limitations
applicable to the right of any taxing authority to assert a deficiency or make any
other claim for or in respect to federal income taxes.




          (C) No issue has been raised in any tax examination of any Loan Party which
reasonably could be expected to result in the assertion of a deficiency for any
fiscal year open for examination, assessment, or claim by any taxing authority in
excess of $500,000 in the aggregate for all Loan Parties.



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          (b) The Loan Parties have paid, as they become due and payable, all taxes and unemployment
contributions and other charges of any kind or nature levied, assessed or claimed against any Loan
Party or the Collateral by any Person whose claim could result in an Encumbrance upon any asset of
any Loan Party or by any governmental authority except for (i) taxes, contributions and charges
which are being contested in good faith by such Loan Party, by appropriate proceedings diligently
instituted and conducted, without danger to any material risk to the Collateral, and adequate
reserves or appropriate provision, if any, as shall be required in conformity with GAAP, shall have
been made therefor, and provided that no Encumbrance has been filed on account thereof, and (ii)
taxes, contributions, and other charges which the Loan Parties have inadvertently not paid when due
as long as (A) the aggregate amount thereof does not exceed $500,000, and (B) no Encumbrance has
been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains
knowledge or should have obtained knowledge thereof, the Borrower make payment of such taxes,
contributions or charges; has properly exercised any trust responsibilities imposed upon any Loan
Party by reason of withholding from employees’ pay or by reason of any Loan Parties’ receipt of
sales tax or other funds for the account of any third party; has timely made all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now or hereafter
established by any
Loan Party; and has timely filed all tax and other returns and other reports with each
Governmental Authority to whom any Loan Party is obligated to so file, except for such returns or
reports which the Loan Parties have inadvertently not paid when due as long as (A) the aggregate
amount of taxes, assessments or charges with respect to such returns does not exceed $500,000, and
(B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized
Officer obtains knowledge or should have obtained knowledge thereof, the Borrower file such returns
and/or reports and make payment of any amounts required to be paid on account thereof.




     4.13. No Margin Stock. No Loan Party is engaged in the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the meaning of
Regulations U, T, and X of the Board of Governors of the Federal Reserve System of the United
States).



     4.14. Investment Company Status. No Loan Party is an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of 1940.



     4.15. ERISA. Except to the extent that such action is not reasonably likely
to have a Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has within the
past three (3) years:




          (i) Violated or failed to be in full compliance with any Loan Party’s Employee Benefit
Plan.




          (ii) Failed timely to file all reports and filings required by ERISA to be filed by any
Loan Party.




          (iii) Engaged in any nonexempt “prohibited transactions” or “reportable events”
(respectively as described in ERISA).



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          (iv) Engaged in, or committed, any act such that a tax or penalty reasonably could be
imposed upon any Loan Party on account thereof pursuant to ERISA.




          (v) Incurred any material accumulated funding deficiency within the meaning of ERISA.




          (vi) Terminated any Employee Benefit Plan such that a lien could be asserted against
any assets of any Loan Party on account thereof pursuant to ERISA.




          (vii) Failed to make any required contribution or payment to, or made a complete or
partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the
meaning of Section 4001(a) of ERISA.



     4.16. Hazardous Materials. Except as set forth on Exhibit 4.16 hereto, (i) the operations of each Loan Party
are in material compliance with all Environmental Laws; (ii) to the best of each Loan Party’s
knowledge, there has been no Release at any of the properties owned or operated by any Loan Party
or a predecessor in interest, or at any disposal or treatment facility which received Hazardous
Materials generated by any Loan Party or any predecessor in interest which is reasonably likely to
have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan
Party or any predecessor in interest nor does any Loan Party have knowledge or notice of any
threatened or pending Environmental Action against any Loan Party or any predecessor in interest
which is reasonably likely to have a Material Adverse Effect; (iv) no Loan Party has knowledge of
any Environmental Actions that have been asserted against any facilities that may have received
Hazardous Materials generated by any Loan Party or any predecessor in interest which are reasonably
likely to have a Material Adverse Effect; (v) to the best of such Loan Party’s knowledge, no
property now or formerly owned or operated by a Loan Party has been used as a treatment or disposal
site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental
Authority any Release which is required to be so reported by any Environmental Laws which is
reasonably likely to have a Material Adverse Effect; (vii) each Loan Party holds all licenses,
permits and approvals required under any Environmental Laws in connection with the operation of the
business carried on by it, except for such licenses, permits and approvals as to which a Loan
Party’s failure to maintain or comply with is not reasonably likely to have a Material Adverse
Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws
that (A) any work, repairs, construction or Capital Expenditures are required to be made in respect
as a condition of continued compliance with any Environmental Laws, or any license, permit or
approval issued pursuant thereto or (B) any license, permit or approval referred to above is about
to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in
each case, except as is not reasonably likely to have a Material Adverse Effect.



     4.17. Litigation. Except as described in Exhibit 4.17, annexed
hereto, there is not presently pending or threatened by or against any Loan Party any suit, action,
proceeding, or investigation which, if determined adversely to any Loan Party, would have a
Material Adverse Effect. As of the Second Amendment Effective Date, no Loan Party is the holder of
any Commercial Tort Claim other than as described on Exhibit 4.17.




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     4.18. Adequacy of Disclosure. 



          (a) All monthly, quarterly and annual financial statements furnished to the Administrative
Agent and to each Revolving Credit Lender by the Loan Parties on a consolidated basis have been
prepared in accordance with GAAP consistently applied (provided however, that unaudited financial
statements are subject to normal year end adjustments and to the absence of footnotes). All
financial statements furnished to the Administrative Agent and to each Revolving Credit Lender by
the Loan Parties present fairly the condition of the Loan Parties at the date(s) thereof and the
results of operations and cash flows for the period(s) covered (provided however, that unaudited
financial statements are subject to normal year end adjustments and to the absence of footnotes).
There has been no change in the Consolidated financial condition, results of operations, or cash
flows of the Loan Parties since the date(s) of such financial statements, other than changes which
are not reasonably likely to have a Material Adverse Effect.




          (b) No Loan Party has any material contingent obligation or material obligation under any
Lease or Capital Lease which is not noted in the Loan Parties’ annual Consolidated financial
statements furnished to the Administrative Agent and to each Revolving Credit Lender prior to the
execution of this Agreement.




          (c) No document, instrument, agreement, or paper given to the Agent or to any Revolving Credit
Lender by or on behalf of each Loan Party or any guarantor of the Liabilities in connection with
the execution of this Agreement by the Agent and to each Revolving Credit Lender contains any
untrue statement of a material fact or omits or will omit to state a material fact necessary in
order to make the statements therein not misleading. There is no fact known to any Loan Party
which has, or which, in the foreseeable future is reasonably likely to have a Material Adverse
Effect.




     4.19. Unrestricted Subsidiaries. Each of the Unrestricted Subsidiaries is
inactive or in the process of being liquidated or dissolved.



     4.20. No Bankruptcy Filing. No Loan Party is contemplating, or has any
knowledge of any other Person contemplating, taking any of the actions described in Section 11.11
or 11.12 hereof. No Loan Party is contemplating the liquidation of all or a major portion of such
Loan Party’s assets.



     4.21. Patriot Act. The Borrower is in compliance, in all material respects,
with the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Patriot Act”). No part of the proceeds of the Loans will be used, directly or indirectly,
for any payments to any governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.



     4.22. Foreign Asset Control Regulations. Neither of the advance of the
Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50
U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign
assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V,
as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or
executive order relating thereto (which for the avoidance of doubt shall include, but shall not be
limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism


66









 





(66 Fed. Reg. 49079
(2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).
Furthermore, neither the Borrower or its Affiliates (a) is or will become a “blocked person” as
described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control
Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise
associated, with any such “blocked person” or in any manner violative of any such order.




ARTICLE 5 - GENERAL COVENANTS:



     5.1. Payment and Performance of Liabilities. The Loan Parties shall pay
each payment Liability when due (or when demanded, if payable on demand) and shall promptly,
punctually, and faithfully perform each other Liability.



     5.2. Due Organization. Authorization. No Conflicts. 



          (a) Each Loan Party shall remain in good standing as a corporation or other entity under the
laws of the state in which it is organized, and shall hereafter remain duly qualified and in good
standing in every other state in which, by reason of the nature or location of each Loan Parties’
assets or operation of each of their respective business, such qualification may be necessary,
except where the failure to so qualify would not have a Material Adverse Effect.




          (b) No Loan Party shall change its state of organization; any organizational identification
number assigned to that Loan Party by that state; or that Loan Party’s federal taxpayer
identification number, without the prior written consent of the Administrative Agent, which consent
shall not be unreasonably withheld.




          (c) Except where the failure to observe, maintain, or perform the following is not reasonably
likely to have a Material Adverse Effect:





          (i) All customary formalities regarding the corporate existence of each Loan Party will
be observed.




          (ii) In accordance with its present practices, each Loan Party will accurately maintain
its organizational documents separate from those of any Affiliate of such Loan Party and any
other Person.



     5.3. Trade Names.



          The Borrower will provide the Administrative Agent with not less than ten (10) days prior
written notice (with reasonable particularity) of any change to any Loan Party’s name from that
under which that Loan Party is conducting its business at the execution of this Agreement and will
not effect such change unless each Loan Party is then in compliance with all provisions of this
Agreement.




     5.4. Locations. 



          (a) The Collateral, and the books, records, and papers of the Loan Parties pertaining thereto,
will be kept and maintained solely (i) at those locations which are listed on




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Exhibit 4.4,
annexed hereto (or as supplemented pursuant to the terms of this Agreement), which Exhibit
includes, with respect to each such location, the name and address of the landlord on the Lease
which covers such location (or an indication that a Loan Party owns the subject location) and of
all service bureaus with which any such records are maintained or (ii) at such
other locations as to which the Borrower has provided ten (10) days prior written notice to
the Administrative Agent of the intended location of the Collateral, books, records, and papers
thereat.




          (b) No Loan Party shall remove any of the Collateral from those locations described in Section
4.4(a) except for the following purposes:





          (i) To accomplish sales of Inventory in the ordinary course of business.




          (ii) To move Inventory or other Collateral from one such location to another such
location.




          (iii) To utilize such of the Collateral as is removed from such locations in the
ordinary course of business.



          (c) No Loan Party will:





          (i) Alter, modify, or amend any Lease in a manner which is reasonably likely to have a
Material Adverse Effect.




          (ii) Other than leased departments and similar arrangements with third parties, commit
to open or close, or open or close, any location at which any Loan Party maintains, offers
for sales, or stores any of the Collateral, in any fiscal year such that the actual number
of stores of all Borrower in the aggregate (A) exceeds by four (4) the number of stores
reflected on the Business Plan for such fiscal year, or (B) is more than four (4) fewer than
the number of stores reflected on the Business Plan for such fiscal year (without giving
effect to any new stores which the Business Plan projected to be opened or closed, but which
have not in fact been opened or closed)



          (d) No tangible personal property of any Loan Party shall hereafter be placed under such care,
custody, storage, or entrustment, except (i) goods in transit to a Loan Party or as otherwise
disclosed pursuant to, or permitted by, this Section 5.5, or (ii) for Inventory in an amount not to
exceed $1,000,000 at Cost in the aggregate at any time in the ordinary course of business.




     5.5. Encumbrances. 



          (a) The Loan Parties shall remain, the owners of the Collateral free and clear of all
Encumbrances other than any Permitted Encumbrance.




          (b) No Loan Party shall have possession of any property on consignment to that Loan Party from
a third party that is not a Loan Party except (i) those listed on Exhibit 4.5(b), annexed
hereto and (ii) those as to which the Loan Parties notify the Administrative Agent in accordance
with the provisions of Section 6.3 hereof.





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     5.6. Indebtedness.  The Loan Parties shall not hereafter have any
Indebtedness other than:



          (a) Permitted Indebtedness; and




          (b) A Loan Party’s guaranty of Permitted Indebtedness of another Loan Party.




     5.7. Insurance. 



          (a) The Borrower shall provide the Administrative Agent with prompt written notice of any
change in the insurance policies owned by the Loan Parties or under which any Loan Party is the
named insured from those in effect as of the Second Amendment Effective Date.




          (b) The Loan Parties shall have and maintain at all times insurance covering such risks, in
such amounts, containing such terms, in such form, for such periods, and written by the companies
presently providing such insurance, or such other companies as may be selected by the Borrower and
are satisfactory to the Agent (whose consent shall not be unreasonably withheld).




          (c) All insurance carried by the Loan Parties shall provide for a minimum of thirty (30) days’
prior written notice of cancellation to the Administrative Agent and all such insurance which
covers the Collateral shall





          (i) Include an endorsement in favor of the Collateral Agent, which endorsement shall
provide that the insurance, to the extent of the Collateral Agent’s interest therein, shall
not be impaired or invalidated, in whole or in part, by reason of any act or neglect of any
Loan Party or by the failure of any Loan Party to comply with any warranty or condition of
the policy.




          (ii) Not include an endorsement in favor of any other Person (other than those Persons
intended as beneficiaries of any builder’s risk insurance, and the holder of any Permitted
Encumbrances).



          (d) The Borrower shall furnish the Collateral Agent from time to time, upon request of the
Collateral Agent, with certificates or other evidence satisfactory to the Collateral Agent
regarding compliance by the Loan Parties with the foregoing requirements.




          (e) In the event of the failure by the Loan Parties to maintain insurance as required herein,
the Agent, at its option and the Loan Parties’ expense, may obtain such insurance at the expense of
the Loan Parties, provided, however, the Agent’s obtaining of such insurance shall not constitute a
cure or waiver of any Event of Default occasioned by the Loan Parties’ failure to have maintained
such insurance.




     5.8. Licenses. The Loan Parties shall (a) with respect to existing
licensors and licensees, use its best efforts to, and (b) with respect to license agreements
entered into after the Second Amendment Effective Date, shall, cause the licensors and licensees to
enter into such tri-party or estoppel agreements as the Agent may reasonably request.



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     5.9. Requirements of Law.  Each Loan Party shall and shall cause its
Subsidiaries to be in compliance with, and shall hereafter comply with and use its assets in
compliance with, all Requirements of Law except where the failure of such compliance will not have
a Material Adverse Effect.



     5.10. Labor Relations.



          The Borrower shall provide the Administrative Agent with prompt written notice of any
additional or amended collective bargaining or other labor contract entered into after the Second
Amendment Effective Date.




     5.11. Maintain Properties. The Loan Parties shall:



          (a) Keep the Collateral in good order and repair (ordinary reasonable wear and tear and
insured casualty excepted).




          (b) Not suffer or cause the waste or destruction of any material part of the Collateral.




          (c) Not use any of the Collateral in violation of any policy of insurance thereon.




          (d) Not sell, lease, or otherwise dispose of any of the Collateral, other than the following:





          (i) The use of Inventory in compliance with this Agreement.




          (ii) The disposal of Equipment which is obsolete, worn out, or damaged beyond repair,
or no longer useful in the Loan Parties’ businesses.




          (iii) Permitted Dispositions.




          (iv) The turning over to the Administrative Agent of all Receipts as provided herein.




          (v) The use of the Collateral to pay Liabilities arising in the ordinary course.



     5.12. Taxes. 



          The Loan Parties shall: pay, as they become due and payable, all taxes and unemployment
contributions and other charges of any kind or nature levied, assessed or claimed against any Loan
Party or the Collateral by any Person whose claim could result in an Encumbrance upon any asset of
any Loan Party or by any governmental authority, provided, however, that (i) no such taxes,
contributions and charges are required to be paid if being contested in good faith by such Loan
Party, by appropriate proceedings diligently instituted and conducted, without danger to any
material risk to the Collateral, and adequate reserves or appropriate provision, if any, as shall
be required in conformity with GAAP, shall have been made therefor, and provided that no
Encumbrance has been filed on account thereof, and (ii) the inadvertent failure of a Loan Party to
pay any such taxes, contributions, and other charges when




70









 







due shall not constitute an Event of Default hereunder as long as (A) the aggregate amount thereof
does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C)
promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge
thereof, the Borrower makes payment of such taxes, contributions or charges; properly exercise any
trust responsibilities imposed upon any Loan Party by reason of withholding from employees’ pay or
by reason of any Loan Parties’ receipt of sales tax or other funds for the account of any third
party; timely make all contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by any Loan Party; and timely file all tax and other
returns and other reports with each Governmental Authority to whom any Loan Party is obligated to
so file, provided that the inadvertent failure of a Loan Party to file any such returns or reports
when due shall not constitute an Event of Default hereunder as long as (A) the aggregate amount of
taxes, assessments or charges with respect to such returns does not exceed $500,000, and (B) no
Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer
obtains knowledge or should have obtained knowledge thereof, the Borrower files such returns and/or
reports and make payment of any amounts required to be paid on account thereof.




     5.13. No Margin Stock. No part of the proceeds of any borrowing hereunder
will be used at any time to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock.



     5.14. ERISA.



          Neither any Loan Party nor any ERISA Affiliate shall ever engage in any action of the type
described in Section 4.15, if as a result thereof, such Loan Party or ERISA Affiliate will, or
could reasonably be expected to, incur liability that could reasonably likely have a Material
Adverse Effect.




     5.15. Hazardous Materials. 



          (a) Each Loan Party shall, except where a violation or failure is not reasonably likely to
have a Material Adverse Effect: (i) keep any property either owned or operated by it or any of its
Subsidiaries free of any Environmental Liens; (ii) comply, and cause each of its Subsidiaries to
comply, in all material respects with Environmental Laws and provide to the Collateral Agent any
documentation of such compliance which the Collateral Agent may reasonably request; (iii) provide
the Collateral Agent written notice within five (5) days of any Release of a Hazardous Material in
excess of any reportable quantity from or onto property at any time owned or operated by it or any
of its Subsidiaries and take any remedial actions required to abate said Release; (iv) provide the
Collateral Agent with written notice within ten (10) days of the receipt of any of the following:
(A) notice that an Environmental Lien has been filed against any property of any Loan Party or any
of its Subsidiaries; (B) commencement of any Environmental Action or notice that an Environmental
Action will be filed against any Loan Party or any of its Subsidiaries; and (C) notice of a
violation, citation or other administrative order which, to the extent that any of the foregoing
are reasonably likely to have a Material Adverse Effect and (v) defend, indemnify and hold harmless
the Agent and the Revolving Credit Lenders and their transferees, and their respective employees,
agents, officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and
consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising
out of (A) the generation, presence,




71









 







disposal, Release or threatened Release of any Hazardous Materials on, under, in, originating
or emanating from any property at any time owned or operated by any Loan Party or any of its
Subsidiaries (or its predecessors in interest or title), (B) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information, investigation, lawsuit
brought or threatened, settlement reached or order by a Governmental Authority relating to the
presence or Release of such Hazardous Materials, (D) any violation of any Environmental Law and/or
(E) any Environmental Action filed against the Agent or any Revolving Credit Lender, to the extent
that any of the foregoing is reasonably likely to have a Material Adverse Effect.




          (b) No Loan Party shall knowingly or negligently permit the use, handling, generation,
storage, treatment, Release or disposal of Hazardous Materials at any property owned or leased by
it or any of its Subsidiaries, except in compliance with Environmental Laws and so long as such
use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials is not
reasonably likely to result in a Material Adverse Effect.




     5.16. Dividends. Investments. Corporate Action.  No Loan Party shall:



          (a) Pay any cash dividend or make any other distribution in respect of any class of that Loan
Party’s capital stock (other than dividends payable to another Loan Party or payable solely in the
capital stock of such paying Loan Party). Notwithstanding anything to the contrary contained
herein, dividends (other than dividends payable solely in the capital stock of another Loan Party)
shall only be payable to the Parent by any other Loan Party to the extent not otherwise in
violation of the Loan Documents and in any event in an amount not to exceed $5,000,000 (less loans
and advances to the Parent made under clause (l) of the definition of Permitted Indebtedness) in
the aggregate after the date hereof. In addition, as long as no Event of Default then exists or
would arise therefrom, the Borrower may make other cash dividends or distributions to the Parent
for the sole purpose of paying interest, fees and other charges (but not principal) on account of
the PIES, provided that no such dividends or distributions may be made unless (i)
the payments made on account of the Filene’s Notes are not sufficient to pay such interest, fees
and other charges and (ii) Excess Availability immediately after giving effect to such dividends
and distributions is equal to or greater than $12,500,000, and provided further
that such dividends and distributions, when combined with intercompany loans made under clause (v)
of Section 5.17(f), shall not exceed $6,500,000 in the aggregate in any fiscal year.




          (b) Own, redeem, retire, purchase, or acquire any of any Loan Party’s capital stock; provided
that the Loan Parties may make cash payments for any such purposes if:





          (i) no Default or Event of Default shall have occurred and be continuing at the time of
declaration or payment thereof; and




          (ii) after giving effect to the making any such cash payment, the aggregate amount so
expended for such purposes subsequent to the Second Amendment Effective Date does not exceed
$1,500,000; and




          (iii) after giving effect to the making any such cash payment, the aggregate amount so
expended for such purposes in any fiscal year of the Borrower does not exceed $500,000.



72









 





          (c) Invest in or purchase any stock or securities or rights to purchase any such stock or
securities, of any Person other than a Permitted Investment, or a Permitted Acquisition.




          (d) Merge or consolidate or be merged or consolidated with or into any other corporation or
other entity, other than in connection with a Permitted Acquisition (provided that a Loan Party is
the surviving, continuing or resulting corporation) or of one Loan Party into another Loan Party;
provided that, if no Default or Event of Default shall have occurred and be continuing or would
result therefrom, the following shall be permitted:





          (i) The merger, consolidation or amalgamation of any wholly-owned Subsidiary with or
into the Borrower or with or into another wholly-owned Subsidiary of the Borrower, so long
as in any merger, consolidation or amalgamation involving the Borrower, the Borrower is the
surviving, continuing or resulting corporation;




          (ii) The liquidation or dissolution of any Unrestricted Subsidiary.




          (iii) Any acquisition which is a Permitted Acquisition, provided that all of the
applicable conditions contained in the definition of the term Permitted Acquisition are
satisfied.




Notwithstanding the foregoing, the Parent may not merge or consolidate or be merged or
consolidated with or into any other Person without the prior written consent of the
Administrative Agent.



          (e) Subordinate any debts or obligations owed to that Loan Party by any third party to any
other debts owed by such third party to any other Person.




          (f) Enter into leases of property or assets not constituting Permitted Acquisitions, unless
such leases are not otherwise in violation of this Agreement.




          (g) Organize or create any Affiliate other than in connection with a Permitted Acquisition or
in compliance with the provisions of Section 5.21 hereof with respect to such Subsidiary.




          (h) Acquire any assets other than in the ordinary course and conduct of that Loan Party’s
business as conducted at the execution of this Agreement, other than in connection with a Permitted
Acquisition or as otherwise permitted in this Agreement.




     5.17. Loans. No Loan Party shall make any loans or advances to, nor acquire
the Indebtedness of, any Person, provided, however, the foregoing does not prohibit any of the
following:



          (a) Advance payments made to that Loan Party’s suppliers in the ordinary course;.




          (b) Advances to that Loan Party’s officers, employees, and salespersons with respect to
reasonable expenses to be incurred by such officers, employees, and salespersons for the benefit of
that Loan Party, which expenses are properly substantiated by the Person seeking such advance and
properly reimbursable by that Loan Party;




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          (c) Loans and advances to employees for business-related moving expenses, costs of replacement
homes, business machines or supplies, automobiles and other similar expenses, in each case incurred
in the ordinary course of business not to exceed (together with loans and advances under Section
5.17(d) and investments permitted under clause (m) of the definition of Permitted Investments)
$6,000,000 in the aggregate outstanding to all employees at any one time;




          (d) Loans and advances to that Loan Party’s officers, employees, and salespersons in
connection with any employment agreements or arrangements, or any stock options or option plans not
to exceed $6,000,000 (together with loans and advances under Section 5.17(c) and investments
permitted under clause (m) of the definition of Permitted Investments) in the aggregate outstanding
to all employees at any one time;




          (e) To the extent not permitted by the foregoing clauses, the existing loans and advances,
described on Exhibit 5.17(e) hereto;




          (f) Intercompany loans and advances or other intercompany Indebtedness (i) existing on the
date hereof and described on EXHIBIT 5.17(f) hereof, (ii) hereafter made by any Loan Party to any
of its wholly owned Subsidiaries which are also Loan Parties; and (iii) hereafter made to the
Parent by any other Loan Party to the extent any of the same constitutes Permitted Indebtedness
under clause (l) of the definition of Permitted Indebtedness or to any Loan Party by the Parent,
(iv) on account of the Filene’s Notes, and (v) as long as no Event of Default then exists or would
arise therefrom, other intercompany loans to the Parent for the sole purpose of paying interest,
fees and other charges (but not principal) on account of the PIES, provided that no
such loans may be made unless (i) the payments made on account of the Filene’s Notes are not
sufficient to pay such interest, fees and other charges and (ii) Excess Availability immediately
after giving effect to such loans is equal to or greater than $12,500,000, and provided
further that such loans, when combined with dividends and distributions made under the last
sentence of Section 5.16(a), shall not exceed $6,500,000 in the aggregate in any fiscal
year; and provided that such intercompany loans shall be evidenced by such
documentation as the Collateral Agent may require.




          (g) Loans and advances of a Person outstanding at the time such Person becomes a Subsidiary as
a result of a Permitted Acquisition, provided that any such loans or advances were not made
at the time of or in contemplation of the acquisition of such Person by a Loan Party or any
Subsidiaries.




          (h) Any other loans and advances to or for the benefit of any Person which (i) is not itself a
Loan Party, (ii) are not otherwise permitted by the foregoing clauses, and (iii) are made after the
Second Amendment Effective Date, which loans and advances have been approved in advance by the
Administrative Agent.




     5.18. Protection of Assets. The Administrative Agent, in the Administrative
Agent’s reasonable, good faith discretion, and from time to time, may discharge any tax or
Encumbrance on any of the Collateral, or take any other action which the Administrative Agent may
deem reasonably necessary or desirable to repair, insure, maintain, preserve, collect, or realize
upon any of the Collateral. The Administrative Agent shall not have any obligation to undertake
any of the foregoing and shall have no liability on account of any action so undertaken except
where there is a specific finding in a judicial proceeding (in which the Administrative



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Agent has had an opportunity to be heard), from which finding no further appeal is available,
that the Administrative Agent had acted in actual bad faith, in willful misconduct, or in a grossly
negligent manner. The Loan Parties shall pay to the Administrative Agent, on demand, or the
Administrative Agent, in its reasonable, good faith discretion, may add to the Loan Account, all
amounts paid or incurred by the Administrative Agent pursuant to this Section 5.18.




     5.19. Line of Business; Conduct of Business.



          (a) No Loan Party shall engage in any business other than the business in which it is
currently engaged or a business reasonably related thereto, or any retail lease department
operation.




          (b) The Loan Parties shall conduct their business substantially in accordance with the
Business Plan, or as otherwise approved by the Administrative Agent pursuant to Section 6.10,
below. The foregoing shall not obligate the Borrower to achieve any specific financial performance
and no financial performance covenants are intended to be imposed thereby.




     5.20. Affiliate Transactions. 



          (a) Except as set forth in that certain confidential side letter from the Borrower to the
Administrative Agent and for loans which may be made between Loan Parties permitted pursuant to
Section 5.17, above, no Loan Party shall make any payment, nor give any value to any Affiliate
except for leases, goods and services with such Affiliate for a price and on terms which shall be
in the ordinary course of business at prices and on terms and conditions no less favorable to that
Loan Party than those which would have been charged and imposed in an arms length transaction from
unrelated third parties, except (i) sales of goods to an Affiliate for use or distribution outside
of the United States of America which complies with the any applicable legal requirements of the
Internal Revenue Code of 1986 and the Treasury Regulations, each as amended from time to time,
provided that such sales shall not exceed $500,000 in the aggregate in any fiscal year of
the Borrower, (ii) loans, advances and other payments to officers and directors as part of their
compensation which are entered into in the ordinary course of business and which are not otherwise
prohibited under the Loan Documents, (iii) other dividends and distributions to officers,
directors and shareholders otherwise permitted under this Agreement, or (iv) transactions between
or among the Loan Parties not prohibited hereunder and not involving any other Affiliate.




          (b) The Loan Parties shall not (i) without the prior written consent of the Administrative
Agent, amend, modify or waive any of the provisions of the instruments, documents or agreements
described in the confidential side letter referred to in clause (a) above, the effect of which is
to increase the payments or value to be furnished by a Loan Party to any Affiliate (other than for
ordinary increases under such instruments, documents and agreements in the ordinary course of
business, for which the Loan Parties are presently obligated to make payment in such instrument,
document or agreement as in effect on the Second Amendment Effective Date) or which would cause
such instruments, documents or agreements to be at prices and on terms and conditions less
favorable to that Loan Party than those which would have been charged and imposed in an arms length
transaction from unrelated third parties, or (ii) make any payments under such instruments,
documents or agreements in advance of the date when due (other than payments made to Affiliates to
fund obligations or anticipated claims under workers’




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compensation, medical plans, employee benefit plans or agreements, and other similar plans,
all in accordance with current practices).




          (c) The Borrower shall use their best efforts to cause their Affiliates to execute and deliver
to the Agent and the Revolving Credit Lenders such documentation as the Administrative Agent may
reasonably require to evidence the Affiliates’ agreement with the provisions of this Section 5.20.




     5.21. Additional Subsidiaries. If any additional Subsidiary (other than
DSW, DSW Shoe and their Subsidiaries and other than any Unrestricted Subsidiary) is formed or
acquired after the Second Amendment Effective Date, the Borrower will notify the Collateral Agent
thereof and (a)  the Loan Parties will cause such Subsidiary to become a Borrower or Facility
Guarantor hereunder, as determined by the Collateral Agent, within three (3) Business Days after
such Subsidiary is formed or acquired and promptly take such actions to create and perfect
Encumbrances on such Subsidiary’s assets to secure the Liabilities as the Collateral Agent or the
Majority Lenders shall reasonably request and (b) if any shares of capital stock or Indebtedness of
such Subsidiary are owned by or on behalf of any Loan Party, the Loan Parties will cause such
shares and promissory notes evidencing such Indebtedness to be pledged within three (3) Business
Days after such Subsidiary is formed or acquired. Nothing contained herein shall be deemed a
modification of any other provisions of this Agreement restricting the formation or acquisition of
Subsidiaries by the Loan Parties.



     5.22. Further Assurances.



          (a) No Loan Party will hereafter acquire any asset or any interest in property (other than
Leasehold Interests) which is not, immediately upon such acquisition, subject to such a perfected
Collateral Interest in favor of the Collateral Agent to secure the Liabilities (subject only to
Permitted Encumbrances).




          (b) Each Loan Party shall execute and deliver to the Collateral Agent such instruments,
documents, and papers, and shall do all such things from time to time hereafter as the Collateral
Agent may reasonably request to carry into effect the provisions and intent of this Agreement; to
protect and perfect the Collateral Agent’s Collateral Interests in the Collateral; and to comply
with all applicable statutes and laws, and facilitate the collection of the Receivables Collateral.
Each Loan Party shall execute all such instruments as may be reasonably required by the Collateral
Agent with respect to the recordation and/or perfection of the Collateral Interests created or
contemplated herein.




          (c) Each Loan Party hereby designates the Collateral Agent as and for that Loan Party’s true
and lawful attorney, with full power of substitution, to sign and file any financing statements in
order to perfect or protect the Collateral Agent’s Collateral Interests in the Collateral.




          (d) This Agreement constitutes an authenticated record which authorizes the Collateral Agent
to file such financing statements as the Collateral Agent determine as appropriate to perfect or
protect the Collateral Interests created by this Agreement.




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     5.23. Adequacy of Disclosure. 



          No document, instrument, agreement, or paper hereafter given to the Agent or to any Revolving
Credit Lender by or on behalf of each Loan Party or any guarantor of the Liabilities in connection
with the execution of this Agreement by the Agent and to each Revolving Credit Lender contains or
will contain any untrue statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements therein not misleading.




     5.24. No Restrictions on Liabilities. No Loan Party shall enter into or
directly or indirectly become subject to any agreement which prohibits or restricts, in any manner,
any Loan Party’s:



          (a) Creation of, and granting of Collateral Interests in favor of the Collateral Agent.




          (b) Incurrence of Liabilities.




     5.25. Unrestricted Subsidiaries. No Unrestricted Subsidiary shall, at any
time, have assets in excess of $500,000 in the aggregate.



     5.26. Parent’s Line of Business. The Parent shall not engage in any
business, and shall not own any property or assets, other than acquiring and owning (a) the capital
stock of any other Loan Party, DSW or the Unrestricted Subsidiaries, and (b) any investments
permitted to be made by the Parent hereunder, and (c) otherwise incidental to the operation of the
business of a holding company.



     5.27. Restrictions on Payment of Senior Non-Convertible Facility. The
Senior Non-Convertible Facility may be paid only as follows:



          (a) Interest and fees on the Senior Non-Convertible Facility may be paid by the Parent in cash
in the ordinary course in accordance with the terms of the documents evidencing the Senior
Non-Convertible Facility as long as no Event of Default has occurred and is continuing.




          (b) Principal on the Senior Non-Convertible Facility may be paid only from the net cash
proceeds of the Non-Convertible Senior Collateral.




     5.28.
Restrictions on Payment of PIES



          (a) The PIES may be paid only as follows:





          (i) Interest on the PIES may be paid in cash in the ordinary course in accordance with
the terms of the documents evidencing the PIES;




          (ii) Principal on the PIES may be paid only by the delivery of all or any part of the
PIES Collateral; provided that no cash payments of principal on account of
the PIES may be made (other than from Proceeds constituting the PIES Collateral) without the
prior written consent of the Majority Lenders, which consent shall not be unreasonably
withheld.



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          (b) The Loan Parties shall not hereafter effect or permit any changes in or amendment to the
PIES or any instruments, agreements or documents relating thereto, which would (i) accelerate any
date for any payment or prepayment of principal, interest, fees or other amounts due thereunder,
(ii) increase the rate of interest, any fees or other amounts payable thereunder, (iii) require the
Loan Parties to repay the principal of the PIES in cash, (iv) grant any collateral for the PIES
(other than the PIES Collateral), or (v) otherwise be adverse to the Revolving Credit Lenders
(including, without limitation, any modification which could reasonably likely be expected to have
a Material Adverse Effect).




     5.29. Restrictions on Payment of Filene’s Notes.



          (a) As long as no Default or Event of Default then exists or would arise therefrom, the Loan
Parties may make regularly scheduled payments of interest on the PIES Note to the Parent.




          (b) Until the Senior Debt (as defined in the Subordination Agreement) is indefeasibly paid in
full in cash, the Parent may not receive, and the Loan Parties may not make, Distributions (as
defined in the Subordination Agreement) to the Parent on account of the Subordinated Note (whether
principal, interest or otherwise).




          (c) The Loan Parties shall not prepay the Filene’s Notes, in whole or in part, at any time,
without the prior written consent of the Majority Lenders, which consent shall not be unreasonably
withheld.




ARTICLE 6 - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:



     6.1. Maintain Records.  The Loan Parties shall:



          (a) At all times, keep proper books of account, in which full, true, and accurate entries
shall be made of all of the Loan Parties’ financial transactions, all in accordance with GAAP
applied consistently with prior periods to fairly reflect the Consolidated financial condition of
the Loan Parties at the close of, and its results of operations for, the periods in question.




          (b) Timely provide the Administrative Agent with those financial reports, statements, and
schedules required by this Article 6 or otherwise, each of which reports, statements and schedules
shall be prepared, to the extent applicable, in accordance with GAAP applied consistently with
prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the
close of, and the results of operations for, the period(s) covered therein.




          (c) At all times, keep accurate current records of the Collateral including, without
limitation, accurate current stock, cost, and sales records of its Inventory, accurately and
sufficiently itemizing and describing the kinds, types, and quantities of Inventory and the cost
and selling prices thereof.




          (d) At all times, retain (i) Deloitte and Touche, LLP, or such other nationally recognized
independent certified public accountants who are reasonably satisfactory to Schottenstein Stores
Corporation (as long as it remains in Control of the Borrower) or (ii) or such other independent
certified public accountants who are reasonably satisfactory to Schottenstein




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Stores Corporation (as long as it remains in Control of the Borrower) and the Administrative
Agent, and instruct such accountants, subject to the terms of such accountants’ internal policies,
and subject to the confidentiality provisions of this Agreement, to fully cooperate with, and be
available to, the Administrative Agent to discuss the Loan Parties’ financial performance,
financial condition, operating results, controls, and such other matters, within the scope of the
retention of such accountants, as may be raised by the Administrative Agent.




          (e) Not change any Loan Party’s fiscal year.




     6.2. Access to Records. 



          (a) Each Loan Party shall accord the Agent with reasonable access during normal business hours
from time to time as each Agent may require to all properties owned by or over which any Loan Party
has control. The Agent shall have the right, and each Loan Party will permit the Agent from time
to time as the Agent may request, to examine, inspect, copy, and make extracts from any and all of
the Loan Parties’ books, records, electronically stored data, papers, and files. Each Loan Party
shall make that Loan Party’s copying facilities available to the Agent.




          (b) Each Loan Party hereby authorizes the Agent to:





          (i) Inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw
off, and otherwise use any and all computer or electronically stored information or data
which relates to any Loan Party. Each Loan Party shall request full cooperation with the
Agent from any service bureau, contractor, accountant, or other Person.




          (ii) Verify at any time the Collateral or any portion thereof, including verification
with Account Debtors, and/or with each Loan Party’s computer billing companies, collection
agencies, and accountants.



          (c) The Agent from time to time may designate one or more representatives to exercise the
Agent’s rights under this Section 6.2 as fully as if the Agent were doing so, provided that
the Agent shall not designate a Person which is in a Competitive Business.




     6.3. Prompt Notice to Administrative Agent. 



          (a) The Borrower shall provide the Administrative Agent with written notice promptly upon the
occurrence of any of the following events, which written notice shall be with reasonable
particularity as to the facts and circumstances in respect of which such notice is being given:





          (i) Any change in any Loan Party’s President, chief executive officer, chief operating
officer, and chief financial officer (without regard to the title(s) actually given to the
Persons discharging the duties customarily discharged by officers with those titles).




          (ii) Any ceasing of any Loan Party’s payment of the debts of that Loan Party generally
as they mature, in the ordinary course, to its creditors (other than its ceasing of making
of such payments on account of a dispute which, if adversely



79









 






determined to the Loan Parties is not reasonably likely to have a Material Adverse
Effect).




          (iii) Any failure by any Loan Party to pay rent at any of that Loan Party’s locations,
which failure continues for more than three (3) days following the last day on which such
rent was payable unless such failure is not reasonably likely to have a Material Adverse
Effect.




          (iv) Any material adverse change in the business, operations, or financial affairs of
the Borrower.




          (v) The occurrence of any Default.




          (vi) Any intention on the part of any Loan Party to discharge that Loan Party’s present
independent accountants or any withdrawal or resignation by such independent accountants
from their acting in such capacity (as to which, see Subsection 6.1(d)).




          (vii) Any litigation which, if determined adversely to any Loan Party, is reasonably
likely to have a Material Adverse Effect.




          (viii) Any intention of the Borrower to enter into a consignment arrangement or
licensing or other similar agreement (whether for intellectual property, leased departments
in stores or otherwise) with any other Person (other than a Loan Party).




          (ix) Any Material Accounting Changes.




          (x) Any event, occurrence or circumstance not specifically described herein which is
reasonably likely to have a Material Adverse Effect.




          (xi) Any Loan Party’s entering into a license agreement after the Second Amendment
Effective Date.




          (xii) Any Loan Party’s entering into a Capital Lease after the Second Amendment
Effective Date.



          (b) The Borrower shall:





          (i) Provide the Administrative Agent, when so distributed, with copies of any materials
distributed to all shareholders of the Borrower (qua such shareholders).




          (ii) Provide the Administrative Agent:




               (A) When filed, copies of all filings with the SEC. Such copies may be
provided in electronic format.




               (B) When received, copies of all correspondence from the SEC, other than
routine general communications from the SEC.



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               (C) Should any of the information on any of the Exhibits hereto become
misleading in any material respect, the Borrower shall promptly advise the
Administrative Agent in writing with such revisions or updates as may be necessary
or appropriate to update or correct the same; provided however that no such Exhibit
shall be deemed to have been amended, modified or superseded by any such correction
or update, nor shall any breach of representation or warranty resulting from the
inaccuracy or incompleteness of such Exhibit be deemed to have been cured or waived,
unless and until the Administrative Agent, in its discretion shall have accepted in
writing such revisions.



          (iii) At the request of the Administrative Agent, from time to time, provide the
Administrative Agent with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio advertising).




          (iv) Provide the Administrative Agent, when received by any Loan Party, with a copy of
any management letter or similar communications from any independent accountant of any Loan
Party.




     6.4. Borrowing Base Reports. Monthly, on the fifth Business Day of each
month, the Borrower shall provide the Administrative Agent with borrowing base certificates (each,
a “Borrowing Base Certificate”) in the form of Exhibit 6.4 annexed hereto (as such form
may be revised from time to time by the Administrative Agent) and sales audit reports and flash
collateral reports (each in such form as may be specified from time to time by the Collateral
Agent); provided that, at any time Excess Availability is less than $15,000,000 for three
consecutive days, such Borrowing Base Certificates and other information shall be furnished weekly,
on Friday of each week (as of the then immediately preceding Saturday). Such reports may be sent to
the Administrative Agent by facsimile transmission, provided that the original thereof is forwarded
to the Administrative Agent on the date of such transmission.



     6.5.
Monthly Reports Monthly, the Borrower shall provide the Administrative
Agent with those financial statements and reports described in Exhibit 6.5, annexed
hereto, at the times set forth in such exhibit.



     6.6.
Intentionally Omitted  




     6.7. Annual Reports. 



          (a) Annually, within ninety (90) days following the end of the Loan Parties’ fiscal year, the
Borrower shall furnish the Administrative Agent with the following:





          (i) An original signed counterpart of the Loan Parties’ Consolidated annual financial
statement, which statement shall have been prepared by, and bear the unqualified opinion of,
the Borrower’s independent certified public accountants (i.e. said statement shall be
“certified” by such accountants) and shall include, at a minimum (with comparative
information for the then prior fiscal year) a balance sheet, statement of operations,
statement of changes in shareholders’ equity, and cash flows.




          (ii) The officer’s compliance certificate described in Section 6.8.



          (b) No later than fifteen (15) days prior to the end of each of the Loan Parties’ fiscal
years, the Borrower shall give written notice to such independent certified accountants




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(with a copy of such notice, when sent, to the Administrative Agent) that such annual
financial statement will be delivered by the Borrower to the Administrative Agent (for subsequent
distribution to each Revolving Credit Lender), and that the Borrower has been advised that the
Administrative Agent and each Revolving Credit Lender will rely thereon with respect to the
administration of, and transactions under, the credit facility contemplated by this Agreement.




     6.8. Officers’ Certificates. The Borrower shall cause either the Borrower’s
Chief Executive Officer, President, Executive Vice President, Chief Financial Officer, Controller,
or Treasurer (collectively, an “Authorized Officer”), in each instance, to provide such Person’s
certificate with the monthly, quarterly and annual financial statements to be provided pursuant to
this Agreement, which certificate shall:



          (a) Indicate that (i) with respect to the Consolidated financial statement, the subject
statement was prepared in accordance with GAAP consistently applied, and (ii) with respect to all
financial statements, presents fairly the financial condition of the applicable Loan Parties at the
close of, and the results of the applicable Loan Parties’ operations and cash flows (where such
cash flows are required to be provided) for, the period(s) presented, subject, however to the
following:





                 (A) Usual year end adjustments (this exception shall not be included in the certificate
which accompanies such annual statement).




                 (B) Material Accounting Changes (in which event, such certificate shall include a
schedule (in reasonable detail) of the effect of each such Material Accounting Change.



          (b) Indicate either that (i) no Default has occurred and is continuing, or (ii) if such an
event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or
contemplated by the Loan Parties to be taken on account thereof.




     6.9. Inventories, Appraisals, and Audits. 



          (a) The Collateral Agent, at the reasonable expense of the Loan Parties, may participate in
and/or observe each scheduled physical count of Inventory which is undertaken on behalf of any Loan
Party.




          (b) The Loan Parties, at their own expense, shall cause not less than one (1) physical
inventory to be undertaken in each twelve (12) month period during which this Agreement is in
effect conducted by such inventory takers as are reasonably satisfactory to the Collateral Agent
and following such methodology as may be reasonably satisfactory to the Collateral Agent.





               (i) The Borrower, within forty-five (45) days following the completion of such
inventory, shall provide the Collateral Agent with a reconciliation of the results of each
such inventory (as well as of any other physical inventory undertaken by any Loan Party) and
shall post such results to the Loan Parties’ stock ledger and, as applicable to the Loan
Parties’ other financial books and records .



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               (ii) The Collateral Agent, in its reasonable, good faith discretion, if any Event of
Default has occurred and is continuing, may cause such additional inventories to be taken as
the Collateral Agent determines (each, at the expense of the Loan Parties).



          (c) The Collateral Agent may obtain appraisals of the Collateral (copies of which, subject to
the approval of the appraiser, shall be provided to the Borrower promptly upon receipt thereof),
from time to time (in all events, at the Loan Parties’ expense) conducted by Hilco Appraisal
Services, LLC or such appraisers as are satisfactory to the Collateral Agent. The Collateral Agent
may conduct up to two (2) appraisals (in each event, at the Loan Parties’ expense) of the
Collateral during any twelve (12) month period during which this Agreement is in effect,
provided that if Excess Availability is less than $15,000,000 or an Event of Default has
occurred and is continuing, the Agent, in its reasonable, good faith discretion, may undertake
additional such appraisals (likewise at the Loan Party’s expense).




          (d) The Collateral Agent may conduct up to two (2) commercial finance field examinations (in
each event, at the Loan Parties’ expense) of the Loan Parties’ books and records during any twelve
(12) month period during which this Agreement is in effect, provided that if Excess
Availability is less than $15,000,000 or an Event of Default has occurred and is continuing, the
Agent, in its reasonable, good faith discretion, may undertake additional such audits (likewise at
the Loan Party’s expense) during such period.




          (e) Notwithstanding anything to the contrary herein contained, upon the occurrence of any
event or circumstance which is reasonably likely to have a material adverse effect on the business,
operations, property, assets, or financial condition of any Loan Party, the limitations set forth
in clauses (c) and (d) on the number of appraisals and commercial finance examinations which the
Agent may cause to be undertaken shall be inapplicable and the Agent may undertake as many
appraisals and commercial finance examinations with such frequency as the Agent may deem reasonably
appropriate and necessary.




          (f) The Collateral Agent from time to time may undertake “mystery shopping” (so-called) visits
to all or any of the Loan Parties’ business premises.




     6.10. Additional Financial Information. 



          (a) In addition to all other information required to be provided pursuant to this Article 6,
the Borrower promptly shall provide the Agent with such other and additional information concerning
the Loan Parties, the Collateral, the operation of the Loan Parties’ business, and the Loan
Parties’ financial condition, including original counterparts of financial reports and statements,
as the Agent or any Revolving Credit Lender may from time to time reasonably request from the
Borrower.




          (b) The Borrower shall, upon the Administrative Agent’s request, provide the Administrative
Agent, from time to time hereafter, with updated forecasts of the Loan Parties’ anticipated
performance and operating results for the current fiscal year. Such forecasts shall be in a format
consistent with the format previously provided to the Administrative Agent.




          (c) In all events, the Borrower, no sooner than ninety (90) nor later than sixty (60) days
prior to the end of each of the Loan Parties’ fiscal year, shall provide the





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Administrative Agent with an updated and extended forecast which shall go out at least through
the end of the then next fiscal year and shall include a statement of operations, balance sheet,
and statement of cash flow, by month, each Consolidated and each prepared in conformity with GAAP
and consistent with the Loan Parties’ then current accounting practices.




          (d) When available the “Annual Budget”, as approved by the Borrower’s Board of Directors,
shall be provided to the Administrative Agent. The Annual Budget shall be subject to the approval
of the Administrative Agent (whose approval shall not be unreasonably withheld) only if the Annual
Budget varies in a material way from the Business Plan for such fiscal year.




          (e) Each Loan Party recognizes that all commercial finance examinations, inventories,
analysis, financial information, and other materials which the Agent may obtain, develop, or
receive with respect to the Loan Parties (other than appraisals and inventories received from third
parties) are confidential to the Agent and that, except as otherwise provided herein, no Loan Party
is entitled to receipt of any of such commercial finance examinations, inventories, analysis,
financial information, and other materials, nor copies or extracts thereof or therefrom.




     6.11. Information Delivered Pursuant to Article 6.



     All information required to be delivered pursuant to Article 6 may be delivered by and in
electronic format.



ARTICLE 7 - Use of Collateral:




     7.1. Use of Inventory Collateral. 



          (a) No Loan Party shall engage in any of the following with respect to its Inventory:





          (i) Any sale other than for fair consideration in the conduct of the Loan Parties’
business in the ordinary course.




          (ii) Sales or other dispositions to creditors, except returns in the ordinary course of
business.




          (iii) Sales or other dispositions in bulk except in the ordinary course of business
consistent with past practices.




          (iv) Sales in breach of any provision of this Agreement.




          (v) Sales other than in connection with Permitted Dispositions.



          (b) Without the prior written consent of the Collateral Agent, no sale of Inventory shall be
on consignment (other than between Loan Parties), approval, or under any other circumstances such
that, with the exception of the Loan Parties’ customary return policy applicable to the return of
inventory purchased by the Loan Parties’ retail customers in the ordinary course, such Inventory
may be returned to a Loan Party without the consent of the Collateral Agent.




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     7.2. Inventory Quality. All Inventory now owned or hereafter acquired by
each Loan Party is and will be of good and merchantable quality, consistent with past practices.



     7.3. Adjustments and Allowances. Each Loan Party may grant such allowances
or other adjustments to that Loan Party’s Account Debtors as that Loan Party may reasonably deem to
accord with sound business practice and which are normal and customary extensions and adjustments
in the ordinary course of business, provided, however, the authority granted the Loan Parties
pursuant to this Section 7.3 may be limited or terminated by the Administrative Agent at any time
in the Administrative Agent’s reasonable, good faith discretion after the occurrence and during the
continuance of an Event of Default.



     7.4. Validity of Accounts. 



          (a) Except for adjustments and disputes in the ordinary course of business, the amount of each
Account shown on the books, records, and invoices of the Loan Parties represented as owing by each
Account Debtor is the correct amount actually owing by such Account Debtor and shall have been
fully earned by performance by the Loan Parties.




          (b) No Loan Party has any knowledge of any impairment of the validity or collectibility of any
of the Accounts, other than returns, reserves, unauthorized use of credit cards, bad checks,
adjustments and disputes which occur in the ordinary course of business. The Borrower shall
notify the Administrative Agent of any such impairment immediately after any Loan Party becomes
aware of any such impairment.




          (c) No Loan Party shall post any bond to secure any Loan Party’s performance under any
agreement to which any Loan Party is a party nor cause any surety, guarantor, or other third party
obligee to become liable to perform any obligation of any Loan Party (other than to the Collateral
Agent) in the event of any Loan Party’s failure so to perform, if, as a result of the surety,
guarantor or third party obligee’s performance, such Person would obtain a Encumbrance on any
Collateral having priority to the Encumbrance of the Collateral Agent.




     7.5. Notification to Account Debtors. The Collateral Agent shall have the
right (after the occurrence of a Cash Control Event) to notify any of the Loan Parties’ Account
Debtors to make payment directly to the Administrative Agent and to collect all amounts due on
account of the Collateral.



ARTICLE 8 - Cash Management. Payment of Liabilities: 




     8.1. Depository Accounts. 



          (a) Annexed hereto as Exhibit 8.1 is a listing of all present DDA’s, which listing
includes, with respect to each depository of the Loan Parties, the following: (i) the name and
address of that depository; (ii) the account number(s) of the account(s) maintained with such
depository; and (iii) a contact person at such depository.




          (b) The Borrower shall deliver the following to the Administrative Agent, as a condition to
the effectiveness of this Agreement:




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          (i) Notifications, executed on behalf of the Borrower, to each depository institution
with which any DDA is maintained (other than any Exempt DDA and the Collection Accounts), in
form satisfactory to the Administrative Agent of the Collateral Agent’s interest in such
DDA. Such Notifications shall be held in escrow by the Administrative Agent until the
occurrence of a Cash Control Event at which time they may be delivered to the applicable
depositary institutions.




          (ii) A Collection Account Agreement with any depository institution at which a
Collection Account is maintained, including those listed on Exhibit 8.1.



          (c) No Borrower will establish any DDA hereafter (other than an Exempt DDA) unless,
contemporaneous with such establishment, the Borrower delivers the following to the Administrative
Agent:





          (i) A notification for the depository at which such DDA is established if the same
would have been required pursuant to Section 8.1(b)(i) if the subject DDA were open at the
execution of this Agreement.




          (ii) A Collection Account Agreement executed on behalf of the depository at which such
DDA is established if the same would have been required pursuant to Section 8.1(b)(ii) if
the subject DDA were open at the execution of this Agreement.



     8.2. Credit Card Receipts.



          (a) Annexed hereto as Exhibit 8.2 is a Schedule which describes all arrangements to
which the Borrower is a party with respect to the payment to the Borrower of the proceeds of credit
card charges for sales by the Borrower.




          (b) The Borrower shall deliver to the Administrative Agent, as a condition to the
effectiveness of this Agreement, an agreement executed on behalf of the Borrower with each of the
Borrower’s credit card clearinghouses and processors (in form satisfactory to the Administrative
Agent), which agreement provides that, during the existence of a Cash Control Event, payment of all
credit card charges submitted by the Borrower to that clearinghouse or other processor and any
other amount payable to the Borrower by such clearinghouse or other processor shall be directed to
the Administrative Agent’s Account or as otherwise designated from time to time by the
Administrative Agent. The Borrower shall not change such direction or designation except upon and
with the prior written consent of the Administrative Agent and the Borrower will not enter into any
agreements with a new credit card clearinghouse or processor hereafter unless, contemporaneous with
such establishment, the Borrower delivers to the Administrative Agent an agreement with such credit
card clearinghouse or processor of like terms to those required hereunder on the Second Amendment
Effective Date.




     8.3. The Administrative Agent’s, Collection, and Operating Accounts . 



          (a) The following checking accounts have been or will be established (and are so referred to
herein):



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          (i) The “Administrative Agent’s Account(s)” (so referred to herein): Established by the
Administrative Agent with NCB as more specifically described on Exhibit 8.3 hereto.




          (ii) The “Collection Accounts” (so referred to herein): Established by the Borrower
with those financial institutions described on Exhibit 8.3 hereof.




          (iii) The “Operating Accounts” (so referred to herein): Established by the Borrower
with NCB as more specifically described on Exhibit 8.3 hereto.



          (b) The contents of each DDA and of each Collection Account constitutes Collateral and
Proceeds of Collateral. The contents of each Administrative Agent’s Account constitutes the
Administrative Agent’s property.




          (c) The Borrower shall pay all fees and charges of, and maintain such impressed balances as
may be required by the depository in which any account is opened as required hereby (even if such
account is opened by and/or is the property of the Agent).




     8.4. Proceeds and Collections . 



          (a) All Receipts constitute Collateral and proceeds of Collateral.




          (b) Absent a Cash Control Event, the Borrower may collect all Receipts and use such Receipts
in the ordinary course of business.




          (c) During a Cash Control Event, the Borrower shall cause all Receipts to be deposited or
transferred to the Administrative Agent’s Account.




          (d) Subject to this Section 8.4, upon notice from the Administrative Agent to the Borrower
that a Cash Control Event has occurred:





     (i) All Receipts:




          (A) Shall be held in trust by the Borrower for the Collateral Agent.




          (B) Shall not be commingled with any of the Borrower’s other funds.




          (C) Shall be deposited and/or transferred only to a Collection Account or the
applicable Administrative Agent’s Accounts, and the Borrower shall not have any
authority to withdraw any amounts from such accounts and the Administrative Agent
shall have no obligation to deposit such Receipts in the applicable Operating
Account.




          (ii) The Borrower shall cause the ACH transfer or wire transfer to the Collection
Account or the applicable Administrative Agent’s Account (except in those instances in which such transfer is not within the control of the Borrower), no less
frequently than daily (and whether or not there is then an outstanding balance in the Loan
Account) of the following:



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          (A) The then contents of each DDA (other than any Exempt DDA), each such
transfer to be net of any minimum balance, not to exceed $2,000.00, as may be
required to be maintained in the subject DDA by the bank at which such DDA is
maintained.




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




          (iii) In the event that, notwithstanding the provisions of this Section 8.4(d), the
Borrower receives or otherwise has dominion and control of any Receipts, or any proceeds or
collections of any Collateral, such Receipts, proceeds, and collections shall be held in
trust by the Borrower for the Agent and shall not be commingled with any of the Borrower’s
other funds or deposited in any account of the Borrower other than as instructed by the
Administrative Agent.




          (iv) The Borrower shall not disburse any funds in the DDAs, Collection Accounts or
other deposit accounts (other than Exempt DDAs and the Operating Accounts in the ordinary
course of business consistent with past practices) other than in accordance with the
provisions of this Section 8.4.



     8.5. Payment of Liabilities. 



          (a) Except as provided in Section 14.7, on each Business Day after the occurrence and during
the continuance of a Cash Control Event, the Administrative Agent shall apply the then collected
balance of each Administrative Agent’s Account (net of fees charged, and of such impressed balances
as may be required by the bank at which such Administrative Agent’s Account is maintained) First,
towards the SwingLine Loans, Second, towards the unpaid balance of the Loan Account, such
application being first to Tranche A Loans and then to Tranche A-1 Loans), and Third, to all other
Liabilities in such order as the Administrative Agent may determine.




          (b) The following rules shall apply to deposits and payments under and pursuant to this
Section 8.5:





          (i) Funds shall be deemed to have been deposited to an Administrative Agent’s Account
on the Business Day on which deposited, provided that notice of such deposit is available to
the Administrative Agent by 1:00PM on that Business Day.




          (ii) Funds paid to the Administrative Agent, other than by deposit to an Administrative
Agent’s Account, shall be deemed to have been received on the Business Day when they are
good and collected funds, provided that notice of such payment is available to the
Administrative Agent by 1:00PM on that Business Day.




          (iii) If notice of a deposit to an Administrative Agent’s Account (Section 8.5(b)(i))
or payment (Section 8.5(b)(ii)) is not available to the Administrative Agent until after 1:00PM on a Business Day, such deposit or payment shall be deemed to
have been made at 9:00AM on the then next Business Day.



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          (iv) All deposits to an Administrative Agent’s Account and other payments to the
Administrative Agent are subject to clearance and collection. For purposes of calculating
interest hereunder, after the occurrence and during the continuance of a Cash Control Event,
all principal payments made by or on account of the Borrower shall be deemed to have been
applied to the Loan Account one Business Day after receipt.



          (c) The Administrative Agent shall transfer to the Operating Account any surplus in the
Administrative Agent’s Account remaining after the application towards the Liabilities referred to
in Section 8.5(a), above (less those amounts which are to be netted out, as provided therein)
provided, however, in the event that




               (i) any Default has occurred and is continuing; and



               (ii) one or more L/Cs and Banker’s Acceptances are then outstanding,


then the Administrative Agent may, and at the direction of the Majority Lenders shall, establish a
funded reserve of up to 105% of the aggregate Stated Amounts of such L/C’s and such Banker’s
Acceptances. Such funded reserve shall either be (i) returned to the Borrower provided that the
Borrower is not in Default or (ii) applied towards the Liabilities in the manner set forth herein
following the occurrence of any Event of Default described in Section or acceleration following
the occurrence of any other Event of Default.




     8.6. The Operating Account.



          (a) Except as otherwise specifically provided in, or permitted by, this Agreement, funds in
the Operating Account shall be utilized to fund disbursements made by the Borrower, including,
without limitation, from any expense accounts maintained by the Borrower.




          (b) After the occurrence and during the continuance of any Event of Default or at any time
that Average Excess Availability for any five (5) consecutive Business Days is less than
$20,000,000.00, NCB shall not be obligated to permit any outgoing ACH transfers unless the amount
of the proposed transfer is fully prefunded in accordance with the requirements and practices of
NCB.




ARTICLE 9 - Grant of Security Interest:




     9.1.
Grant of Security
Interest To secure the Borrower’s prompt, punctual,
and faithful performance of all and each of the Liabilities, the Borrower hereby grants to the
Collateral Agent, for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agent,
and the Affiliates of each of them, a continuing security interest in and to, and assigns to the
Collateral Agent, for the ratable benefit of the Revolving Credit Lenders, the following, and each
item thereof, whether now owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an interest, and all
products, Proceeds, substitutions, and accessions of or to any of the following, but excluding the
Excluded Property (all of which, together with any other property in which the Collateral Agent may in the future be granted a security
interest, is referred to herein as the “Collateral”):



          (a) All Accounts.



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          (b) All Inventory.




          (c) All General Intangibles.




          (d) All Equipment.




          (e) All Goods.




          (f) All Farm Products.




          (g) All Fixtures.




          (h) All Chattel Paper.




          (i) All Letter-of-Credit Rights.




          (j) All Payment Intangibles.




          (k) All Supporting Obligations.




          (l) The Commercial Tort Claim described on Exhibit 4.17 hereto.




          (m) All books, records, and information relating to the Collateral and/or to the operation of
the Borrower’s business, and all rights of access to such books, records, and information, and all
property in which such books, records, and information are stored, recorded, and maintained.




          (n) All Leasehold Interests.




          (o) All Investment Property, Instruments, Documents, Deposit Accounts, money, policies and
certificates of insurance, deposits, impressed accounts, compensating balances, cash, or other
property.




          (p) All insurance proceeds, refunds, and premium rebates, including, without limitation,
proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates
arise out of any of the foregoing. (9.1 through 9.1(o)) or otherwise.




          (q) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing
(9.1 through 9.1(p)), including the right of stoppage in transit.




     9.2. Extent and Duration of Security Interest. 



          (a) The security interest created and granted herein is in addition to, and supplemental of,
any security interest previously granted by the Borrower to the Collateral Agent (including,
without limitation, under any mortgages and deeds of trust) and shall continue in full force and
effect applicable to all Liabilities until





          (i) the Termination Date has occurred; and



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          (ii) all Liabilities have been paid or satisfied in full in cash and satisfactory
arrangements with respect to L/Cs and Banker’s Acceptances as provided in Section 19.2
hereof have been made; and




          (iii) the security interest created herein is specifically terminated in writing by
duly authorized officers of the Collateral Agent as provided in Section 19.2(d) hereof.



          (b) It is intended that the Collateral Interests created herein extend to and cover all assets
of the Borrower, except for Excluded Property.




          (c) If the Borrower shall at any time acquire a Commercial Tort Claim, the Borrower shall
promptly notify the Administrative Agent in writing of the details thereof and the Borrower shall
take such actions as the Collateral Agent shall request in order to grant to the Collateral Agent,
for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agent, and the Affiliates
of each of them, a perfected and first priority security interest therein and in the Proceeds
thereof.




ARTICLE 10 - Collateral Agent As Borrower’s Attorney-In-Fact:




     10.1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Collateral Agent (acting through any officer of the Collateral Agent)
as the Borrower’s true and lawful attorney, with full power of substitution, following the
occurrence of an Event of Default, to convert the Collateral into cash at the sole risk, cost, and
expense of the Borrower, but for the sole benefit of the Agent and the Revolving Credit Lenders.
The rights and powers granted the Collateral Agent by this appointment include but are not limited
to the right and power to:



          (a) Prosecute, defend, compromise, or release any action relating to the Collateral.




          (b) Sign change of address forms to change the address to which the Borrower’s mail is to be
sent to such address as the Collateral Agent shall designate (after which copies of all such mail
shall be promptly furnished to the Borrower); receive and open the Borrower’s mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn over the balance of such mail
either to the Borrower or to any trustee in bankruptcy or receiver of the Borrower, or other legal
representative of the Borrower whom the Collateral Agent determine to be the appropriate Person to
whom to so turn over such mail.




          (c) Endorse the name of the Borrower in favor of the Collateral Agent upon any and all checks,
drafts, notes, acceptances, or other items or instruments; sign and endorse the name of the
Borrower on, and receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts, warehouse receipts,
or other documents of title respectively relating to the Collateral.




          (d) Sign the name of the Borrower on any notice to the Borrower’s Account Debtors or
verification of the Receivables Collateral; sign the Borrower’s name on any Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims of mechanic’s
liens, or assignments or releases of mechanic’s liens securing the Accounts.




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          (e) Take all such action as may be necessary to obtain the payment of any letter of credit
and/or banker’s acceptance of which the Borrower is a beneficiary.




          (f) Repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any,
necessary to fulfill in whole or in part the purchase order of any customer of the Borrower.




          (g) Use, license or transfer any or all General Intangibles of the Borrower.




     10.2. No Obligation to Act. The Collateral Agent shall not be obligated to
do any of the acts or to exercise any of the powers authorized by Section 10.1 herein, but if the
Collateral Agent elect to do any such act or to exercise any of such powers, they shall not be
accountable for more than they actually receive as a result of such exercise of power, and shall
not be responsible to the Borrower for any act or omission to act except for any act or omission to
act as to which there is a final determination made in a judicial proceeding (in which proceeding
the Collateral Agent have had an opportunity to be heard) which determination includes a specific
finding that the subject act or omission to act had been grossly negligent or in actual bad faith,
or willful misconduct.



ARTICLE 11 - EVENTS OF DEFAULT:



     The occurrence of any event described in this Article 11 respectively shall constitute an
“Event of Default” herein. The occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Agent or any Revolving Credit
Lender and any Loan Party and instruments and papers heretofore, now, or hereafter given the Agent
or any Revolving Credit Lender by any Loan Party in connection with any of the Loan Documents.



     11.1. Failure to Pay the Revolving Credit. The failure by any Loan Party to
pay when due any principal of, interest on, or fees in respect of, the Revolving Credit.



     11.2. Failure To Make Other Payments. The failure by any Loan Party to pay
when due (or upon demand, if payable on demand) any payment Liability other than any payment
liability on account of the principal of, or interest on, or fees in respect of, the Revolving
Credit.



     11.3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by any Loan Party to promptly, punctually, faithfully and timely perform, discharge, or
comply with any covenant or Liability included in any of the following provisions hereof:



	 	 	 
	Section	 	Relates to
	5.6

	 	Indebtedness
	5.12

	 	Taxes
	5.16

	 	Dividends. Investments. Other Corporate Actions
	5.17

	 	Loans
	5.20

	 	Affiliate Transactions
	5.26

	 	Parent’s Line of Business
	5.27

	 	Payment of Senior Non-Convertible Facility






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	Section	 	Relates to
	5.28

	 	Payment of PIES
	5.29

	 	Payment of Filene’s Notes
	Article 6

	 	Reporting Requirements (except as set forth in Section 11.4,
below)
	Article 8

	 	Cash Management






     11.4. Financial Reporting Requirements. The failure by the Borrower to
promptly, punctually, faithfully and timely perform, discharge, or comply with the financial
reporting requirements included in Section 6.4, subject, however, to the following limited number
of grace periods applicable to certain of those requirements:



	 	 	 	 	 	 	 
	 	 	REQUIRED	 	 	 	 
	 	 	BY	 	 	 	NUMBER OF GRACE
	REPORT / STATEMENT	 	SECTION	 	GRACE PERIOD	 	PERIODS
	Borrowing Base Report

	 	6.4
	 	Two (2) Business
Days
	 	Twice in any twelve
(12) consecutive
months






     11.5. Failure to Perform Covenant or Liability (Grace Period). The failure
by any Loan Party, within twenty (20) days following the earlier of any Authorized Officer’s
knowledge of a breach of any covenant or Liability not described in any of Sections 11.1, 11.2,
11.3, or 11.4 or of its receipt of written notice from the Administrative Agent of the breach of
any of such covenants or Liabilities, provided that if such failure cannot be reasonably cured
within such twenty (20) day period and the Loan Parties have diligently proceeded, and continue to
diligently proceed, to effectuate a cure of such failure, such failure shall not be an Event of
Default hereunder unless (a) such failure is not cured within twenty (20) days after the expiration
of such initial twenty (20) day period, or (b) such failure, in the reasonable judgment of the
Collateral Agent, is reasonably likely to have a Material Adverse Effect.



     11.6. Misrepresentation. The determination by the Administrative Agent that
any representation or warranty at any time made by any Loan Party to the Agent or any Revolving
Credit Lender was not true or complete in all material respects when given.



     11.7. Acceleration of Other Debt. Breach of Lease . The occurrence and continuance of any event of default or other event, which with
the giving of notice, the passage of time or both, would be an event of default under (i) the
Senior Non-Convertible Facility or (ii) any other Indebtedness of any Loan Party equal to or in
excess of One Million Dollars ($1,000,000.00) to any creditor other than the Agent or any Revolving
Credit Lender, (whether or not such Indebtedness has been accelerated), or, Leases aggregating more
than five percent (5%) of all Leases of the Loan Parties existing from time to time could be
terminated due to a default by a Loan Party thereunder (whether or not the subject creditor or
lessor takes any action on account of such occurrence).



     11.8. Default Under Other Agreements. The occurrence of any breach of any
covenant or Liability imposed by, or of any default under, any agreement between the Agent or any
Revolving Credit Lender and any Loan Party or instrument given by any Loan Party to the Agent or
any Revolving Credit Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in
the aggregate and the expiration, without cure, of any applicable grace period



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(notwithstanding
that the Agent or Revolving Credit Lender may not have exercised all or any of its rights on
account of such breach or default).



     11.9. Uninsured Casualty Loss. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any material portion of the Collateral.



     11.10. Attachment. Judgment. Restraint of Business. 



          (a) The entry of any judgment in excess of One Million Dollars ($1,000,000.00) against any
Loan Party, which judgment (i) is not covered by insurance (as to which the insurer has not
notified the applicable Loan Party of the insurer’s reservation of rights) or (ii) is not
satisfied, stayed (if a money judgment) or appealed from (with execution or similar process stayed)
within thirty (30) days of its entry.




          (b) The entry of any order or the imposition of any other process having the force of law, the
effect of which is to restrain the conduct by the Borrower of its business in the ordinary course
and which is reasonably likely to have a Material Adverse Effect.




     11.11. Business Failure. Any act by, against, or relating to any Loan
Party, or its property or assets, which act constitutes the determination, by any Loan Party, to
initiate a program of substantial or total self-liquidation; application for, consent to, or
sufferance of the appointment of a receiver, trustee, or other Person, pursuant to court action or
otherwise, over all, or any part of any Loan Party’s property; the granting of any trust mortgage
or execution of an assignment for the benefit of the creditors of any Loan Party, or the occurrence
of any other voluntary or involuntary liquidation or extension of debt agreement for any Loan
Party; the offering by or entering into by any Loan Party of any composition, extension, or any
other arrangement seeking relief generally from or extension of the debts of any Loan Party; or the
initiation of any judicial or non-judicial proceeding or agreement by, against, or including any
Loan Party which seeks or intends to accomplish a reorganization or arrangement with creditors;
and/or the initiation by or on behalf of any Loan Party of the liquidation or winding up of all or any part of any Loan Party’s
business or operations except that any of the foregoing actions which are commenced against a Loan
Party shall not be deemed an Event of Default hereunder as long as such action is timely contested
in good faith by that Loan Party by appropriate proceedings and is dismissed within sixty (60) days
of the institution of the foregoing.



     11.12.  Bankruptcy. The failure by any Loan Party to generally pay the debts
of that Loan Party as they mature; adjudication of bankruptcy or insolvency relative to any Loan
Party; the entry of an order for relief or similar order with respect to any Loan Party in any
proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any
complaint, application, or petition by any Loan Party initiating any matter in which any Loan Party
is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code
or any other insolvency statute or procedure; the filing of any complaint, application, or petition
against any Loan Party initiating any matter in which that Loan Party is or may be granted any
relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency
statute or procedure, which complaint, application, or petition is not timely contested in good
faith by that Loan Party by appropriate proceedings or, if so contested, is not dismissed within
sixty (60) days of when filed.



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     11.13. Termination of Guaranty. The termination or attempted termination of
any Facility Guarantee by any Facility Guarantor.



     11.14. Challenge to Loan Documents. 



          (a) Any challenge by or on behalf of any Loan Party to the validity of any Loan Document or
the applicability or enforceability of any Loan Document strictly in accordance with the subject
Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any
security interest created by or in any Loan Document or any payment made pursuant thereto.




          (b) Any determination by any court or any other judicial or government authority that any Loan
Document is not enforceable strictly in accordance with the subject Loan Document’s terms or which
voids, avoids, limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.




     11.15. Change in Control. Any Change in Control.



ARTICLE 12 - Rights and Remedies Upon Default: 




     12.1.
Acceleration. Upon the occurrence of any Event of Default as
described in Section , all Indebtedness of the Loan Parties to the Revolving Credit Lenders shall
be immediately due and payable. Upon the occurrence and continuance of any Event of Default other
than as described in Section 11.12, the Administrative Agent may (and on the issuance of Acceleration Notice(s) requisite to the
causing of Acceleration, the Administrative Agent shall) declare all Indebtedness of the Borrower
to the Revolving Credit Lenders to be immediately due and payable and the Agent may exercise all of
the Agent’s Rights and Remedies as the Agent from time to time thereafter determine as appropriate.



     12.2.
Rights of
Enforcement The Collateral Agent shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which the Collateral
Agent shall have all and each of the following rights and remedies:



          (a) To give notice to any bank at which any DDA or Collection Account is maintained and in
which Proceeds of Collateral are deposited, to turn over such Proceeds directly to the Agent.




          (b) To give notice to any customs broker of any of the Borrower to follow the instructions of
the Collateral Agent as provided in any written agreement or undertaking of such broker in favor of
the Collateral Agent.




          (c) To collect the Receivables Collateral with or without the taking of possession of any of
the Collateral.




          (d) To take possession of all or any portion of the Collateral.




          (e) To sell, lease, or otherwise dispose of any or all of the Collateral, in its then
condition or following such preparation or processing as the Collateral Agent deems advisable and
with or without the taking of possession of any of the Collateral.




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          (f) To conduct one or more going out of business sales which include the sale or other
disposition of the Collateral.




          (g) To apply the Receivables Collateral or the Proceeds of the Collateral towards (but not
necessarily in complete satisfaction of) the Liabilities.




          (h) To exercise all or any of the rights, remedies, powers, privileges, and discretions under
all or any of the Loan Documents.




     12.3. Sale of Collateral. 



     After the occurrence and during the continuance of an Event of Default:



          (a) Any sale or other disposition of the Collateral may be at public or private sale upon such
terms and in such manner as the Collateral Agent deem advisable, having due regard to compliance
with any statute or regulation which might affect, limit, or apply to the Collateral Agent’
disposition of the Collateral.




          (b) The Collateral Agent, in the exercise of the Collateral Agent’s rights and remedies upon
default, may conduct one or more going out of business sales, in the Collateral Agent’s own right
or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by the Borrower. The Collateral Agent and any
such agents or contractors, in conjunction with any such sale, may augment the Inventory with other
goods (all of which other goods shall remain the sole property of the Collateral Agent or such
agents or contractors). Any amounts realized from the sale of such goods which constitute
augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in
their disposition) shall be the sole property of the Collateral Agent or such agents or contractors
and neither the Borrower nor any Person claiming under or in right of the Borrower shall have any
interest therein. Upon request of the Borrower, the Collateral Agent shall promptly furnish, or
cause to be furnished, to the Borrower a reconciliation of the amounts received from the
augmentation of the Inventory and the allocation of costs and expenses thereto.




          (c) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a
type customarily sold on a recognized market (in which event the Collateral Agent shall provide the
Borrower such notice as may be practicable under the circumstances), the Collateral Agent shall
give the Borrower at least ten (10) days prior notice, by authenticated record, of the date, time,
and place of any proposed public sale, and of the date after which any private sale or other
disposition of the Collateral may be made. The Borrower agrees that such written notice shall
satisfy all requirements for notice to the Borrower which are imposed under the UCC or other
applicable law with respect to the exercise of the Collateral Agent’s rights and remedies upon
default.




          (d) The Agent and any Revolving Credit Lender may purchase the Collateral, or any portion of
it at any sale held under this Article.




          (e) The Collateral Agent shall deliver the proceeds of the Collateral Agent’s exercise of its
rights and remedies upon default to the Administrative Agent for application pursuant to Section
14.6 hereof.




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     12.4. Occupation of Business Location. In connection with the Collateral
Agent’s exercise of the Collateral Agent’s rights under this Article 12, the Collateral Agent may
enter upon, occupy, and use any premises owned or occupied by the Borrower, and may exclude the
Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used
by the Collateral Agent. The Collateral Agent shall not be required to remove any of the
Collateral from any such premises upon the Collateral Agent’s taking possession thereof, and may
render any Collateral unusable to the Borrower. In no event shall the Collateral Agent be liable
to the Borrower for use or occupancy by the Collateral Agent of any premises pursuant to this
Article 12, nor for any charge (such as wages for the Borrower’s employees and utilities) incurred
in connection with the Collateral Agent’s exercise of the Agent’s Rights and Remedies.



     12.5. Grant of Nonexclusive License. In connection with the Collateral
Agent’s exercise of the Collateral Agent’s rights under this Article 12, the Borrower hereby grants
to the Collateral Agent a royalty free nonexclusive irrevocable license to use, apply, and affix
any trademark, trade name, logo, or the like in which the Borrower now or hereafter has rights,
such license being with respect to the Collateral Agent’s exercise of the rights hereunder
including, without limitation, in connection with any completion of the manufacture of Inventory or
sale or other disposition of Inventory.



     12.6. Assembly of Collateral. In connection with the Collateral Agent’s
exercise of the Collateral Agent’s rights under this Article 12, the Collateral Agent may require
the Borrower to assemble the Collateral and make it available to the Collateral Agent at the
Borrower’s sole risk and expense at a place or places which are reasonably convenient to both the
Collateral Agent and the Borrower.



     12.7. Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Agent hereunder (herein, the “Agent’s Rights and Remedies”) shall be cumulative
and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by
the Agent in exercising or enforcing any of the Agent’s Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Agent of any Event of Default or of any default
under any other agreement shall operate as a waiver of any other default hereunder or under any
other agreement. No single or partial exercise of any of the Agent’s Rights or Remedies, and no
express or implied agreement or transaction of whatever nature entered into between the Agent and
any Person, at any time, shall preclude the other or further exercise of the Agent’s Rights and
Remedies. No waiver by the Agent of any of the Agent’s Rights and Remedies on any one occasion
shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver.
The Agent’s Rights and Remedies may be exercised at such time or times and in such order of
preference as the Agent may determine. The Agent’s Rights and Remedies may be exercised without
resort or regard to any other source of satisfaction of the Liabilities.



ARTICLE 13 - Revolving Credit Fundings and Distributions: 




     13.1.
Revolving Credit Funding
Procedures.  Subject to Section 13.2:


          (a) The Administrative Agent shall advise each Revolving Credit Lender, no later than 12:30
p.m. on a date on which any Revolving Credit Loan (other than a SwingLine Loan) is to be made on
that date. Such advice, in each instance, may be by telephone or facsimile transmission, provided
that if such advice is by telephone, it shall be confirmed in writing.




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Advice of a Revolving
Credit Loan shall include the amount of and interest rate applicable to the subject Revolving
Credit Loan.




          (b) Subject to that Revolving Credit Lender’s Tranche A Dollar Commitment or Tranche A-1
Dollar Commitment, as applicable, each Revolving Credit Lender, by no later than 3:00 p.m. on the
day on which the subject Revolving Credit Loan is to be made, shall Transfer that Revolving Credit
Lender’s Applicable Commitment Percentage of the subject Revolving Credit Loan to the
Administrative Agent in immediately available funds.




     13.2. SwingLine Loans. 



          (a) In the event that, when a Base Margin Rate Revolving Credit Loan is requested, the
aggregate unpaid balance of the SwingLine Loan is less than the SwingLine Loan Ceiling, then the
SwingLine Lender may advise the Administrative Agent that the SwingLine Lender has determined to
include up to the amount of the requested Revolving Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender shall Transfer the amount of
the requested Revolving Credit Loan to the Administrative Agent.




          (b) The SwingLine Loan shall be converted to a Revolving Credit Loan in which all Tranche A
Lenders participate as follows:





          (i) At any time and from time to time, but no less frequently than once during each
five (5) Business Day period, the SwingLine Lender may advise the Administrative Agent that
all, or any part of the SwingLine Loan is to be converted to a Revolving Credit Loan in
which all Tranche A Lenders participate.




          (ii) At the times set forth in Section 13.4, the then entire unpaid principal balance
of the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Tranche A
Lenders participate.




          (iii) At the initiation of a Liquidation, the then entire unpaid principal balance of
the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Tranche A
Lenders participate.


In either such event, the Administrative Agent shall advise each Tranche A Lender of such
conversion as if, and with the same effect as if such conversion were the making of a Revolving
Credit Loan as provided in Section 9.1.




          (c) The SwingLine Lender, in separate capacities, may also be the Administrative Agent and a
Revolving Credit Lender.




          (d) The SwingLine Lender, in its capacity as SwingLine Lender, is not a “Revolving Credit
Lender” for any of the following purposes:





          (i) Except as otherwise specifically provided in the relevant Section, any distribution
pursuant to Section 14.6.




          (ii) Determination of whether the requisite Loan Commitments have Consented to action
requiring such Consent.




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     13.3. Administrative Agent’s Covering of Fundings. 



          (a) Each Revolving Credit Lender shall make available to the Administrative Agent, as provided
herein, that Revolving Credit Lender’s Applicable Commitment Percentage of the following:





          (i) Each Tranche A Loan, up to the maximum amount of that Tranche A Lender’s Tranche A
Dollar Commitment of the Tranche A Loans.




          (ii) Each Tranche A-1 Loan, up to the maximum amount of that Tranche A-1 Lender’s
Tranche A-1 Dollar Commitment of the Tranche A-1 Loans.




          (iii) Up to the maximum amount of that Tranche A Lender’s Tranche A Dollar Commitment
of each drawing under a L/C and Banker’s Acceptance (to the extent that such drawing under a
L/C or Banker’s Acceptance is not “covered” by a Revolving Credit Loan as provided herein).



          (b) In all circumstances, the Administrative Agent may:





          (i) Assume that each Revolving Credit Lender, subject to Section 13.3(a), timely shall
make available to the Administrative Agent that Revolving Credit Lender’s Applicable
Commitment Percentage of each Revolving Credit Loan, notice of which is provided pursuant to
Section 9.1 and shall make available, to the extent not “covered” by a Revolving Credit
Loan, that Tranche A Lender’s Applicable Commitment Percentage of any honoring of an L/C or
a Banker’s Acceptance.




          (ii) In reliance upon such assumption, make available the corresponding amount to the
Borrower (but the Administrative Agent shall not be obligated to make such amount available
to the Borrower until actual receipt thereof from the Revolving Credit Lenders).




          (iii) Assume that each Revolving Credit Lender timely shall pay, and shall make
available, to the Administrative Agent all other amounts which that Revolving Credit Lender
is obligated to so pay and/or make available hereunder or under any of the Loan Documents.



          (c) In the event that, in reliance upon any of such assumptions, the Administrative Agent
makes available a Revolving Credit Lender’s Applicable Commitment Percentage of one or more
Revolving Credit Loans, or any other amount to be made available hereunder or under any of the Loan
Documents, which amount a Revolving Credit Lender (a “Delinquent Revolving Credit Lender”) fails to
provide to the Administrative Agent within one (1) Business Day of written notice of such failure,
then:





          (i) The amount which had been made available by the Administrative Agent is an
“Administrative Agent’s Cover” (and is so referred to herein).




          (ii) All interest paid by the Borrower on account of the Revolving Credit Loan or
coverage of the subject drawing of a L/C or Banker’s Acceptance which consist of the
Administrative Agent’s Cover shall be retained by the Administrative Agent until the
Administrative Agent’s Cover, with interest, has been paid.



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          (iii) The Delinquent Revolving Credit Lender shall pay to the Administrative Agent, on
demand, interest at a rate equal to the prevailing Federal Funds Effective Rate on any
Administrative Agent’s Cover in respect of that Delinquent Revolving Credit Lender.




          (iv) The Administrative Agent shall have succeeded to all rights to payment to which
the Delinquent Revolving Credit Lender otherwise would have been entitled hereunder in
respect of those amounts paid by or in respect of the Borrower on account of the
Administrative Agent’s Cover together with interest until it is repaid. Such payments shall
be deemed made first towards the amounts in respect of which the Administrative Agent’s
Cover was provided and only then towards amounts in which the Delinquent Revolving Credit
Lender is then participating. For purposes of distributions to be made pursuant to Section
13.4(a) (which relates to ordinary course distributions) or Section 14.6 (which relates to
distributions of proceeds of a Liquidation) below, amounts shall be deemed distributable to
a Delinquent Revolving Credit Lender (and consequently, to the Administrative Agent to the
extent to which the Administrative Agent is then entitled) at the highest level of
distribution (if applicable) at which the Delinquent Revolving Credit Lender would otherwise
have been entitled to a distribution.




          (v) Subject to Subsection 13.3(c)(iv), the Delinquent Revolving Credit Lender shall be
entitled to receive any payments from the Borrower to which the Delinquent Revolving Credit
Lender is then entitled, provided however there shall be deducted from such amount and
retained by the Administrative Agent any interest to which the Administrative Agent is then
entitled on account of Section 13.3(c)(ii), above.



          (d) A Delinquent Revolving Credit Lender shall not be relieved of any obligation of such
Delinquent Revolving Credit Lender hereunder (all and each of which shall constitute continuing
obligations on the part of any Delinquent Revolving Credit Lender).




          (e) A Delinquent Revolving Credit Lender may cure its status as a Delinquent Revolving Credit
Lender by paying the Administrative Agent the aggregate of the following:





          (i) The Administrative Agent’s Cover (to the extent not previously repaid by the
Borrower and retained by the Administrative Agent in accordance with Subsection 13.3(c)(iv),
above) with respect to that Delinquent Revolving Credit Lender.




          Plus




          (ii) The aggregate of the amount payable under Subsection 13.3(c)(iii), above (which
relates to interest to be paid by that Delinquent Revolving Credit Lender).




          Plus




          (iii) All such costs and expenses as may be incurred by the Administrative Agent in the
enforcement of the Administrative Agent’s rights against such Delinquent Revolving Credit
Lender.



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     13.4. Ordinary Course Distributions. (This Section 13.4 applies unless the
provisions of Section 14.6 (which relates to distributions in the event of a Liquidation) becomes
operative).



          (a) Weekly, on each Thursday (or more frequently at the Administrative Agent’s option) the
Administrative Agent and each Revolving Credit Lender shall settle up on amounts advanced under the
Revolving Credit and payments received on account of the Revolving Credit (including, without
limitation, collected funds received in the Administrative Agent’s Accounts and not released to the
Operating Accounts as provided herein).




          (b) The Administrative Agent shall distribute to the SwingLine Lender and to each Revolving
Credit Lender, such Person’s respective pro-rata share of payments of interest and fees on account
of the Revolving Credit when actually received and collected by the Administrative Agent. For
purposes of calculating interest due to a Revolving Credit Lender, that Revolving Credit Lender
shall be entitled to receive interest on the actual amount contributed by that Revolving Credit
Lender towards the principal balance of the Revolving Credit Loans outstanding during the
applicable period covered by the interest payment made by the Borrower. Any net principal
reductions to the Revolving Credit Loans received by the Administrative Agent in accordance with
the Loan Documents during such period shall not reduce such actual amount so contributed, for
purposes of calculation of interest due to that Revolving Credit Lender, until the Administrative
Agent has distributed to that Revolving Credit Lender its pro-rata share thereof.




          (c) No Revolving Credit Lender shall have any interest in, or right to receive any part of,
the Arrangement Fee or the Collateral Monitoring Fee to be paid by the Borrower to the
Administrative Agent pursuant to this Agreement.




          (d) Any amount received by the Administrative Agent as reimbursement for any cost or expense
(including without limitation, reasonable attorneys’ fees) shall be distributed by the
Administrative Agent to that Person which is entitled to such reimbursement as provided in this
Agreement (and if such Person(s) is (are) the Revolving Credit Lenders, pro-rata based upon their
respective Applicable Commitment Percentages at the date on which the expense, in respect of which
such reimbursement is being made, was incurred).




          (e) Each distribution pursuant to this Section 13.4 is subject to Section 13.3(c), above.




ARTICLE 14 - Acceleration and Liquidation:




     14.1. Acceleration Notices.



          (a) The Administrative Agent may give the Revolving Credit Lenders an Acceleration Notice at
any time following the occurrence of an Event of Default.




          (b) The Majority Lenders may give the Administrative Agent an Acceleration Notice at any time
following the occurrence of an Event of Default. Such notice may be by multiple counterparts,
provided that counterparts executed by the requisite Revolving Credit Lenders are received by the
Administrative Agent within a period of five (5) consecutive Business Days.



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     14.2. Acceleration. Unless stayed by judicial or statutory process, the
Administrative Agent shall Accelerate the Liabilities on account of the Revolving Credit within a
commercially reasonable time following:



          (a) The Administrative Agent’s giving of an Acceleration Notice to the Revolving Credit
Lenders as provided in Section 14.1(a).




          (b) The Administrative Agent’s receipt of an Acceleration Notice from the Majority Lenders, in
compliance with Section 14.1(b) .




     14.3. Initiation of Liquidation. Unless stayed by judicial or statutory
process, a Liquidation shall be initiated by the Administrative Agent within a commercially
reasonable time following Acceleration of Liabilities on account of the Revolving Credit.



     14.4. Actions At and Following Initiation of Liquidation. 



          (a) At the initiation of a Liquidation:





          (i) The unpaid principal balance of the SwingLine Loan (if any) shall be converted,
pursuant to Section 13.2(b)(iii), to a Tranche A Loan in which all Tranche A Lenders
participate.




          (ii) The Administrative Agent and the Revolving Credit Lenders shall “net out” each
Revolving Credit Lender’s respective contributions towards the Revolving Credit Loans, so
that each Revolving Credit Lender holds that Revolving Credit Lender’s Applicable Commitment
Percentage of the Revolving Credit Loans and advances.



          (b) Following the initiation of a Liquidation, each Tranche A Lender shall contribute, towards
any L/C and Banker’s Acceptance thereafter honored and not immediately reimbursed by the Borrower,
that Tranche A Lender’s Applicable Commitment Percentage of such honoring.




     14.5. Collateral Agent’s Conduct of Liquidation. 



          (a) Any Liquidation shall be conducted by the Collateral Agent, subject to the direction of
the Majority Lenders.




          (b) The Collateral Agent may establish one or more Nominees to “bid in” or otherwise acquire
ownership to any Post Foreclosure Asset.




          (c) The Collateral Agent shall manage the Nominee and manage and dispose of any Post
Foreclosure Assets with a view towards the realization of the economic benefits of the ownership of
the Post Foreclosure Assets and in such regard, the Collateral Agent and/or the Nominee may
operate, repair, manage, maintain, develop, and dispose of any Post Foreclosure Asset in such
manner as the Collateral Agent determine as appropriate under the circumstances.




          (d) The Collateral Agent may decline to undertake or to continue taking a course of action or
to execute an action plan (whether proposed by the Collateral Agent or any Revolving Credit Lender)
unless indemnified to the Collateral Agent’s satisfaction by the



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Revolving Credit Lenders against
any and all liability and expense which may be incurred by the Collateral Agent by reason of taking
or continuing to take that course of action or action plan.




          (e) Each Revolving Credit Lender shall execute all such instruments and documents not
inconsistent with the provisions of this Agreement as the Collateral Agent and/or the Nominee
reasonably may request with respect to the creation and governance of any Nominee, the conduct of
the Liquidation, and the management and disposition of any Post Foreclosure Asset.




     14.6. Distribution of Liquidation Proceeds. 



          (a) The Collateral Agent may establish one or more reasonably funded reserve accounts into
which proceeds of the conduct of any Liquidation may be deposited in anticipation of future
expenses which may be incurred by the Collateral Agent in the exercise of rights as a secured
creditor of the Borrower and prior claims which the Collateral Agent anticipate may need to be
paid.




          (b) The Collateral Agent shall distribute the net proceeds of Liquidation to the
Administrative Agent for application in accordance with the relative priorities set forth in
Section 14.7.




          (c) Each Revolving Credit Lender, on the written request of the Collateral Agent and/or any
Nominee, not more frequently than once each month, shall reimburse the Collateral Agent and/or any
Nominee, pro-rata, for any cost or expense reasonably incurred by the Collateral Agent and/or the
Nominee in the conduct of a Liquidation, which amount is not covered out of current proceeds of the
Liquidation, which reimbursement shall be paid over to and distributed by the Collateral Agent.




     14.7. Relative Priorities To Proceeds of Liquidation. 



          (a) All distributions of proceeds of a Liquidation shall be net of payment over to the
Collateral Agent as reimbursement for all reasonable third party costs and expenses incurred by the
Collateral Agent and to Lenders’ Special Counsel and to any funded reserve established pursuant to
Section 14.6(a).




          (b) The proceeds of a Liquidation, net of those amounts described in Section 13.3(c)(iv),
shall be distributed based on the following priorities:





          (i) To the SwingLine Lender, on account of any SwingLine loans not converted to
Revolving Credit Loans pursuant to Section 14.4(a)(i); and then




          (ii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to the unpaid principal balance of the Tranche A Loans; and then




          (iii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to accrued interest on the Tranche A Loans; and then



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          (iv) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to those fees distributable hereunder on the Tranche A Loans, L/Cs and
Bankers’ Acceptances; and then




          (v) To the Collateral Agent, an amount equal to 105% of the Stated Amount of all L/Cs
and Bankers’ Acceptances then outstanding; and then




          (vi) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to the unpaid principal balance of the Tranche A-1 Loans; and then




          (vii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to accrued interest on the Tranche A-1 Loans; and then




          (viii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit
Lender), pro-rata, to those fees distributable hereunder on the Tranche A-1 Loans; and then




          (ix) To any Delinquent Revolving Credit Lenders, pro-rata to amounts to which such
Delinquent Revolving Credit Lenders otherwise would have been entitled hereunder; and then




          (x) To any other Liabilities, including any obligations due on account of Hedge
Agreements.



ARTICLE 15 - The Agent: 




     15.1. Appointment of The Agent. 



          (a) Each Lender appoints and designates NCBC as the “Administrative Agent” hereunder and under
the Loan Documents.




          (b) Each Lender appoints and designates NCBC as the “Collateral Agent” hereunder and under the
Loan Documents.




          (c) Each Revolving Credit Lender authorizes the Agent:





          (i) To execute those of the Loan Documents and all other instruments relating thereto
to which the Agent is a party.




          (ii) To take such action on behalf of the Revolving Credit Lenders and to exercise all
such powers as are expressly delegated to the Agent hereunder and in the
Loan Documents and all related documents, together with such other powers as are
reasonably incident thereto.



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     15.2. Responsibilities of Agent.



          (a) The Agent shall not have any duties or responsibilities to, or any fiduciary relationship
with, any Revolving Credit Lender except for those expressly set forth in this Agreement.




          (b) Neither the Agent nor any of its Affiliates shall be responsible to any Revolving Credit
Lender for any of the following:





          (i) Any recitals, statements, representations or warranties made by the Borrower or any
other Person.




          (ii) Any appraisals or other assessments of the assets of the Borrower or of any other
Person responsible for or on account of the Liabilities.




          (iii) The value, validity, effectiveness, genuineness, enforceability, or sufficiency
of the Loan Agreement, the Loan Documents or any other document referred to or provided for
therein.




          (iv) Any failure by the Borrower or any other Person (other than the Agent) to perform
its respective obligations under the Loan Documents.



          (c) The Agent may employ attorneys, accountants, and other professionals and agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such
attorneys, accountants, and other professionals or agents or attorneys-in-fact selected by the
Agent with reasonable care. No such attorney, accountant, other professional, agents, or
attorney-in-fact shall be responsible for any action taken or omitted to be taken by any other such
Person.




          (d) Neither the Agent, nor any of its directors, officers, or employees shall be responsible
for any action taken or omitted to be taken or omitted to be taken by any other of them in
connection herewith in reliance upon advice of its counsel nor, in any other event except for any
action taken or omitted to be taken as to which a final judicial determination has been or is made
(in a proceeding in which such Person has had an opportunity to be heard) that such Person had
acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.




          (e) The Agent shall not have any responsibility in any event for more funds than the Agent
actually receives and collects.




          (f) The Agent, in its separate capacity as a Lender, shall have the same rights and powers
hereunder as any other Lender.




     15.3. Concerning Distributions By the Agent. 



          (a) The Administrative Agent in its reasonable discretion based upon the Agent’s determination
of the likelihood that additional payments will be received, expenses
incurred, and/or claims made by third parties to all or a portion of such proceeds, may delay
the distribution of any payment received on account of the Liabilities.




          (b) The Administrative Agent may disburse funds prior to determining that the sums which the
Agent expects to receive have been finally and unconditionally paid to the Agent. If and to the
extent that the Administrative Agent does disburse funds and it later



105









 






becomes apparent that the
Agent did not then receive a payment in an amount equal to the sum paid out, then any Revolving
Credit Lender to whom the Administrative Agent made the funds available, on demand from the
Administrative Agent, shall refund to the Administrative Agent the sum paid to that Person.




          (c) If, in the opinion of the Agent, the distribution of any amount received by the Agent
might involve the Agent in liability, or might be prohibited hereby, or might be questioned by any
Person, then the Administrative Agent may refrain from making distribution until the Agent’s right
to make distribution has been adjudicated by a court of competent jurisdiction.




          (d) The proceeds of any Revolving Credit Lender’s exercise of any right of, or in the nature
of, set-off shall be deemed, First, to the extent that a Revolving Credit Lender is entitled to any
distribution hereunder, to constitute such distribution and Second, shall be shared with the other
Revolving Credit Lenders as if distributed pursuant to (and shall be deemed as distributions under)
Section 14.7.




          (e) Each Revolving Credit Lender recognizes that the crediting of the Borrower with the
“proceeds” of any transaction in which a Post Foreclosure Asset is acquired is a non-cash
transaction and that, in consequence, no distribution of such “proceeds” will be made by the
Administrative Agent to any Revolving Credit Lender.




          (f) In the event that (x) a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Agent is to be repaid or disgorged or (y) those Lenders adversely
affected thereby determine to effect such repayment or disgorgement, then each Revolving Credit
Lender to which any such distribution shall have been made shall repay, to the Agent which had made
such distribution, that Revolving Credit Lender’s pro-rata share of the amount so adjudged or
determined to be repaid or disgorged.




     15.4. Dispute Resolution. Any dispute among the Revolving Credit Lenders
and/or the Agent concerning the interpretation, administration, or enforcement of the financing
arrangements contemplated by this or any other Loan Document or the interpretation or
administration of this or any other Loan Document which cannot be resolved amicably shall be
resolved in the United States District Court for the District of Ohio, sitting in Cleveland, Ohio,
or in the courts of Cuyahoga County, Ohio, to the jurisdiction of which courts each Revolving
Credit Lender hereto hereby submits.



     15.5. Distributions of Notices and of Documents. The Administrative Agent
will forward to each Revolving Credit Lender, promptly after the Administrative Agent’s receipt
thereof, a copy of each notice or other document furnished to the Administrative Agent pursuant to
this Agreement, including Borrowing Base Certificates and
monthly, quarterly, and annual financial statements received from the Borrower pursuant to
Article 6 of this Agreement, other than any of the following:



          (a) Routine communications associated with requests for Revolving Credit Loans and/or the
issuance of L/Cs and Banker’s Acceptances.




          (b) Routine or nonmaterial communications.



106









 







          (c) Any notice or document required by any of the Loan Documents to be furnished directly to
the Revolving Credit Lenders by the Borrower.




          (d) Any notice or document of which the Administrative Agent has knowledge that such notice or
document had been forwarded to the Revolving Credit Lenders other than by the Administrative Agent.




     15.6. Confidential Information. 



          (a) Each Revolving Credit Lender will maintain, as confidential in accordance with the
provisions of Section 20.3 hereof, all of the following:





          (i) Proprietary approaches, techniques, and methods of analysis which are applied by
the Agent in the administration of the credit facility contemplated by this Agreement.




          (ii) Proprietary forms and formats utilized by the Agent in providing reports to the
Revolving Credit Lenders pursuant hereto, which forms or formats are not of general
currency.



          (b) Nothing included herein shall prohibit the disclosure of any such information as may be
required to be provided by judicial process or by regulatory authorities having jurisdiction over
any party to this Agreement.




     15.7. Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telex, or facsimile)
reasonably believed by the Agent to be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of attorneys, accountants
and other experts selected by the Agent. As to any matters not expressly provided for in this
Agreement, any Loan Document, or in any other document referred to therein, the Agent shall in all
events be fully protected in acting, or in refraining from acting, in accordance with the
applicable Consent required by this Agreement. Instructions given with the requisite Consent shall
be binding on all Revolving Credit Lenders.



     15.8. Non-Reliance on Agent and Other Revolving Credit Lenders. 



          (a) Each Revolving Credit Lender represents to all other Revolving Credit Lenders and to the
Agent that such Revolving Credit Lender:





          (i) Independently and without reliance on any representation or act by the Agent or by
any other Revolving Credit Lender, and based on such documents and information as that
Revolving Credit Lender has deemed appropriate, has made such Revolving Credit Lender’s own
appraisal of the financial condition and affairs of the Borrower and decision to enter into
this Agreement.




          (ii) Has relied upon that Revolving Credit Lender’s review of the Loan Documents by
that Revolving Credit Lender and by counsel to that Revolving Credit Lender as that
Revolving Credit Lender deemed appropriate under the circumstances.



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          (b) Each Revolving Credit Lender agrees that such Revolving Credit Lender, independently and
without reliance upon the Agent or any other Revolving Credit Lender, and based upon such documents
and information as such Revolving Credit Lender shall deem appropriate at the time, will continue
to make such Revolving Credit Lender’s own appraisals of the financial condition and affairs of the
Borrower when determining whether to take or not to take any discretionary action under this
Agreement.




          (c) The Agent, in the discharge of the Agent’s duties hereunder, shall not be required to make
inquiry of, or to inspect the properties or books of, any Person.




          (d) Except for notices, reports, and other documents and information expressly required to be
furnished to the Revolving Credit Lenders by the Administrative Agent hereunder (as to which, see
Section 15.5), the Agent shall have no affirmative duty or responsibility to provide any Revolving
Credit Lender with any credit or other information concerning any Person, which information may
come into the possession of the Agent or any Affiliate of the Agent.




          (e) Each Revolving Credit Lender, at such Revolving Credit Lender’s request, shall have
reasonable access to all nonprivileged documents in the possession of the Agent, which documents
relate to the Agent’s performance of its respective duties hereunder.




     15.9. Indemnification. Without limiting the liabilities of the Borrower
under this Agreement or any of the other Loan Documents, each Revolving Credit Lender shall
indemnify the Agent, pro-rata, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including reasonable attorneys’ fees and expenses and other out-of-pocket expenditures)
which may at any time be imposed on, incurred by, or asserted against the Agent and in any way
relating to or arising out of this Agreement or any other Loan Document or any documents
contemplated by or referred to therein or the transactions contemplated thereby or the enforcement
of any of terms hereof or thereof or of any such other documents, provided, however, no Revolving
Credit Lender shall be liable for any of the foregoing to the extent that any of the foregoing
arises from any action taken or omitted to be taken by the Agent as to which a final judicial
determination has been or is made (in a proceeding in which the Agent has had an opportunity to be
heard) that the Agent had acted in a grossly negligent manner, in actual bad faith, or in willful
misconduct.



     15.10. Resignation of Agent.



          (a) The Agent may resign at any time by giving 30 days prior written notice thereof to the
Revolving Credit Lenders. Upon receipt of any such notice of resignation, the Majority Lenders
shall have the right to appoint a successor to the Agent (and if no Event of Default has occurred
and is continuing, with the consent of the Borrower, not to be unreasonably withheld and, in any
event, deemed given by the Borrower if no written objection is provided by the Borrower to the
(resigning) Agent within ten (10) Business Days notice of such proposed appointment). If a
successor Agent shall not have been so appointed and accepted such appointment within 30 days after
the giving of notice by the resigning Agent, then the resigning Agent may appoint a successor
Agent, which shall be a financial institution having a combined capital and surplus in excess of
$500,000,000. The consent of the Borrower otherwise required by this Section 15.10(a) shall not be
required if an Event of Default has occurred and is continuing.



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          (b) Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor shall thereupon succeed to, and become vested with, all the rights, powers, privileges,
and duties of the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged from
the (resigning) Agent’s duties and obligations hereunder, other than on account of any
responsibility for any action taken or omitted to be taken by the (resigning) Agent as to which a
final judicial determination has been or is made (in a proceeding in which the (resigning) Person
has had an opportunity to be heard) that such Person had acted in a grossly negligent manner or in
bad faith, or in willful misconduct.




          (c) After any retiring Agent’s resignation, the provisions of this Agreement and of all other
Loan Documents shall continue in effect for the retiring Person’s benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.




     15.11.
Lead Arranger; Co-Documentation Agents. Notwithstanding the
provisions of this Agreement or any of the other Loan Documents, the Lead Arranger and the
Co-Documentation Agents shall not have any powers, rights, duties, responsibilities or liabilities
with respect to this Agreement and the other Loan Documents other than confidentiality provisions
contained herein.



ARTICLE 16 - Action By
Agent - Consents - Amendments - Waivers: 




     16.1. Administration of Credit Facilities. 



          (a) Except as otherwise specifically provided in this Agreement, the Agent may take any action
with respect to the credit facility contemplated by the Loan Documents as the Agent determines to
be appropriate, provided, however, the Agent is under no affirmative obligation to take any action
which it is not required by this Agreement or the Loan Documents specifically to so take.




          (b) Except as specifically provided in the following Sections of this Agreement, whenever a
Loan Document or this Agreement provides that action may be taken or omitted to be taken in the
Agent’s reasonable, good faith discretion, the Agent shall have the sole right to take, or refrain
from taking, such action without, and notwithstanding, any vote of the Revolving Credit Lenders:




	 	 	 
	Actions Described in Section	 	Type of Consent Required
	16.2

	 	Majority Lenders
	16.3

	 	Certain Consent
	16.4

	 	Unanimous Consent
	16.5

	 	Consent of SwingLine Lender
	16.6

	 	Consent of the Agent






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



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     16.2. Actions Requiring or On Direction of Majority Lenders.




     Except as otherwise provided in this Agreement, the Consent or direction of the Majority
Lenders is required for any amendment, waiver, or modification of any Loan Document.



     16.3. Action Requiring Certain Consent. The Consent or direction of the
following is required for the following actions:



          (a) Any forgiveness of all or any portion of any payment Liability: All Revolving Credit
Lenders whose payment Liability is being so forgiven: (other than any Delinquent Revolving Credit
Lender).




          (b) Any decrease in any interest rate or fee payable under any of the Loan Documents (other
than any fee payable to the Administrative Agent (for which the consent of the Administrative Agent
shall be required): All Revolving Credit Lenders adversely affected thereby (other than any
Delinquent Revolving Credit Lender).




          (c) Any postponement of the scheduled time for payment of any amount payable under any of the
Loan Documents: All Revolving Credit Lenders adversely affected thereby (other than any Delinquent
Revolving Credit Lender).




          (d) Volitional Disgorgement as described in 15.3(f): Each Revolving Credit Lender (other than
any Delinquent Revolving Credit Lender) which is adversely affected thereby.




          (e) Increase in the SwingLine Ceiling: The consent of the SwingLine Lender and the Majority
Lenders.




     16.4. Actions Requiring or Directed By Unanimous Consent. None of the
following may take place except with Unanimous Consent:



          (a) Any release of a material portion of the Collateral, but such Consent to such release is
not required if any of the following conditions is satisfied:





          (i) Such release is otherwise required or provided for in the Loan Documents.




          (ii) Such release is being made to facilitate a Liquidation (but such release shall
require the consent of the Majority Lenders).




          (iii) No OverLoan exists immediately after giving effect to the application to the Loan
Account of the net proceeds received on account of the transaction in which such release is
made (but such release shall require the consent of the Majority Lenders).



          (b) Any amendment of the Definitions of “Tranche A Borrowing Base”, “Tranche A-1 Borrowing
Base”, “Excess Availability Reserve”, “Availability”, or of any definition of any component
thereof, such that more credit would be available to the Borrower, based on the same assets, as
would have been available to the Borrower immediately prior to such amendment , it being
understood, however, that:



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          (i) The foregoing shall not limit the adjustment by the Collateral Agent of any Reserve
(other than the Excess Availability Reserve) in the Collateral Agent’s administration of the
Revolving Credit as otherwise permitted by this Agreement.




          (ii) The foregoing shall not prevent the Administrative Agent, in its administration of
the Revolving Credit, from restoring any component of the Tranche A Borrowing Base or the
Tranche A-1 Borrowing Base which had been lowered by the Administrative Agent back to the
value of such component, as stated in this Agreement or to an intermediate value.



          (c) Any waiver, amendment, or modification which has the effect of increasing any Tranche A
Dollar Commitment, Tranche A-1 Dollar Commitment, Applicable Commitment Percentage, or the
Revolving Credit Ceiling, except that no Consent shall be required for any such increase which is
the result of the application of the following Sections of this Agreement:





          (i) Section 16.9 (which relates to NonConsenting Revolving Credit Lenders).




          (ii) Section 17.1 (which relates to assignments and assumptions).



          (d) Any release of any Person obligated on account of the Liabilities.




          (e) The making of any OverLoan which is not a Protective OverAdvance, subject, however, to the
following:





          (i) No Consent is required in connection with the making of any Revolving Credit Loan
to “cover” any honoring of a drawing under any L/C or any Banker’s Acceptance.




          (ii) Each Lender recognizes that subsequent to the making of a Revolving Credit Loan
which does not constitute a Protective OverAdvance, the unpaid principal balance of the Loan
Account may exceed the Tranche A Borrowing Base or the Tranche A-1 Borrowing Base on account
of changed circumstances beyond the control of the Agent (such as a drop in collateral
value).



          (f) Any amendment which has the effect of modifying the Administrative Agent’s right or
ability to make Protective OverAdvances.




          (g) The waiver of the obligation of the Borrower to reduce the unpaid principal balance of
loans under the Revolving Credit to an amount so that no OverLoan (other than a Protective
OverAdvance) is outstanding.




          (h) Any amendment of this Article 16.




          (i) Any subordination of the Liabilities to any material obligation of the Borrower, unless
such subordination is otherwise required pursuant to this or is permitted by this Agreement.



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          (j) Amendment of any of the following Definitions:



“Majority Lender”

“Maturity Date”

“Protective OverAdvance”

“Unanimous Consent”




     16.5. Actions Requiring SwingLine Lender Consent. No action, amendment, or
waiver of compliance with, any provision of the Loan Documents or of this Agreement which affects
the SwingLine Lender may be undertaken without the Consent of the SwingLine Lender.



     16.6. Actions Requiring Agent’s Consent. 



     No action referenced herein which modifies the rights, duties, and obligations of the Agent
shall be effective without the written consent of the Agent.



     16.7. Miscellaneous Actions. 



          (a) Notwithstanding any other provision of this Agreement, no single Revolving Credit Lender
independently may exercise any right of action or enforcement against or with respect to the
Borrower.




          (b) The Agent shall be fully justified in failing or refusing to take action under this
Agreement or any Loan Document on behalf of any Revolving Credit Lender unless the Agent shall
first





          (i) receive such clear, unambiguous, written instructions as the Agent deem
appropriate; and




          (ii) be indemnified to the Agent’s satisfaction by the Revolving Credit Lenders against
any and all liability and expense which may be incurred by the Agent by reason of taking or
continuing to take any such action, unless such action had been grossly negligent, in
willful misconduct, or in bad faith.



          (c) The Agent may establish reasonable procedures for the providing of direction and
instructions from the Revolving Credit Lenders to the Agent, including its reliance on multiple
counterparts, facsimile transmissions, and time limits within which such direction and instructions
must be received in order to be included in a determination of whether the requisite Lenders have
provided their direction, Consent, or instructions.




     16.8. Actions Requiring Borrower’s Consent. 



          (a) The Borrower’s consent is required for any amendment of this Agreement, except that each
of the following Articles of this Agreement may be amended without the consent of the Borrower:



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	Article	 	Title of Article
	 
	13

	 	Revolving Credit Fundings and Distributions
	 
	14

	 	Acceleration and Liquidation (other than any modifications to
the requisite percentage of Revolving Credit Lenders which may furnish an
Acceleration Notice under Section 14.1(b))
	 
	 	 
	15.1

	 	The Agent (provided that the provisions of Section
15.10(a) relating to the Borrower’s consent to a successor Agent in certain
circumstances may not be amended without the Borrower’s consent).
	 
	 	 
	16

	 	Action By Agent — Consents — Amendments — Waivers (other than
as provided in Section 16.8(b))
	 
	 	 
	17

	 	Assignments and Participations (provided that the
provisions of Section 17.1(a)(i) relating to the Borrower’s consent to an
assignment in certain circumstances may not be amended without the Borrower’s
consent).






          (b) Subject to Section 16.8(c), the following Sections of Article 16 may not be amended
without the consent of the Borrower:




	 	 	 
	Actions Described in Section	 	Type of Consent Required
	 	 	 
	16.4

	 	Unanimous Consent
	16.8

	 	Actions Requiring Borrower’s Consent





and further provided that no provision of any Article listed in Section 16.8(a) that (i) obligates
the Agent to exercise reasonable, good faith discretion, or (ii) imposes liability on any Person
for acting in a grossly negligent manner, in actual bad faith or willful misconduct, or (iii)
imposes any confidentiality obligation under this Agreement on any Person, may be amended without
the consent of the Borrower.




          (c) The Borrower’s consent to the amendment of those provisions referenced in Section 16.8(b)





          (i) Shall be deemed given unless written objection is made, within seven (7) Business
Days following the Administrative Agent’s giving notice to the Borrower of the proposed
amendment; and




          (ii) shall not be required following the occurrence of any Event of Default.



     16.9. NonConsenting Revolving Credit Lender. 



          (a) In the event that a Revolving Credit Lender (in this Section 16.9, a “NonConsenting
Revolving Credit Lender”) does not provide its Consent to a proposal by the Agent to take action
which requires consent under this Article 16, then one or more Revolving Credit Lenders who
provided Consent to such action may require the assignment, without recourse and in accordance with
the procedures outlined in Section 17.1, below, of the NonConsenting Revolving Credit Lender’s Loan
Commitment hereunder on fifteen (15) days written notice to the Administrative Agent and to the
NonConsenting Revolving Credit Lender.



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          (b) At the end of such fifteen (15) days, and provided that the NonConsenting Revolving Credit
Lender delivers the Revolving Credit Note held by the NonConsenting Revolving Credit Lender to the
Administrative Agent (or a lost note affidavit and indemnity reasonably acceptable to the
Administrative Agent), the Revolving Credit Lenders who have given such written notice shall
Transfer the following to the NonConsenting Revolving Credit Lender:


          (i) Such NonConsenting Revolving Credit Lender’s pro-rata share of the principal and
interest of the Revolving Credit Loans to the date of such assignment.


          (ii) All fees distributable hereunder to the NonConsenting Revolving Credit Lender to
the date of such assignment.


          (iii) Any out-of-pocket costs and expenses for which the NonConsenting Revolving
Credit Lender is entitled to reimbursement from the Borrower.


          (c) In the event that the NonConsenting Revolving Credit Lender fails to deliver to the
Administrative Agent the Revolving Credit Note held by the NonConsenting Revolving Credit Lender
(or a lost note affidavit and indemnity) as provided in Section 16.9(b), then:




          (i) The amount otherwise to be Transferred to the NonConsenting Revolving Credit
Lender shall be Transferred to the Administrative Agent and held by the Administrative
Agent, without interest, to be turned over to the NonConsenting Revolving Credit Lender
upon delivery of the Revolving Credit Note held by that NonConsenting Revolving Credit
Lender (or a lost note affidavit and indemnity).




          (ii) The Revolving Credit Note held by the NonConsenting Revolving Credit Lender shall
have no force or effect whatsoever.




          (iii) The NonConsenting Revolving Credit Lender shall cease to be a “Revolving Credit
Lender”.




          (iv) The Revolving Credit Lender(s) which have Transferred the amount to the
Administrative Agent as described above shall have succeeded to all rights and become
subject to all of the obligations of the NonConsenting Revolving Credit Lender as
“Revolving Credit Lender”.



          (d) In the event that more than one (1) Revolving Credit Lender wishes to require such
assignment, the NonConsenting Revolving Credit Lender’s Loan Commitment hereunder shall be divided
among such Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit
Commitment Percentages, with the Administrative Agent coordinating such transaction.




          (e) The Administrative Agent shall coordinate the retirement of the Revolving Credit Note held
by the NonConsenting Revolving Credit Lender and the issuance of Revolving Credit Notes to those
Revolving Credit Lenders which “take-out” such NonConsenting Revolving Credit Lender, provided,
however, no processing fee otherwise to be paid as provided in Section 17.2(b) shall be due under
such circumstances.





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ARTICLE 17 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:




     17.1. Assignments
and Acceptances.



          (a) Except as provided herein, each Revolving Credit Lender (in this Section 17.1(a), an
“Assigning Revolving Credit Lender”) may assign to one or more Eligible Assignees (in this Section
17.1(a), each an “Assignee Revolving Credit Lender”) all or a portion of that Revolving Credit
Lender’s interests, rights and obligations under this Agreement and the Loan Documents (including
all or a portion of its Tranche A Dollar Commitment, Tranche A-1 Dollar Commitment) and the same
portion of the Revolving Credit Loans at the time owing to it, and of the Revolving Credit Note
held by the Assigning Revolving Credit Lender, provided that:





          (i) The Administrative Agent and, after the completion of a Successful Syndication,
subject to the provisions of Section 2.22(d) hereof, the Borrower, shall have given its
prior written consent to such assignment, which consent shall not be unreasonably withheld.




          (ii) Each such assignment shall be of a constant, and not a varying, percentage of all
the Assigning Revolving Credit Lender’s rights and obligations under this Agreement.




          (iii) Each partial assignment shall be made as an assignment of a proportionate part of
all the Assigning Revolving Credit Lender’s rights and obligations under this Agreement with
respect to such Lender’s Tranche A Loans, Tranche A Dollar Commitment, Tranche A-1 Loans and
Tranche A-1 Dollar Commitment.




          (iv) Following the effectiveness of such assignment, the Assigning Revolving Credit
Lender’s Loan Commitment (if not an assignment of all of the Assigning Revolving Credit
Lender’s Loan Commitment) shall not be less than $5,000,000.00.



     17.2. Assignment Procedures. (This Section 17.2 describes the procedures to
be followed in connection with an assignment effected pursuant to this Article 17 and permitted by
Section 17.1).



          (a) The parties to such an assignment shall execute and deliver to the Administrative Agent,
for recording in the Register, an Assignment and Acceptance substantially in the form of
Exhibit 17.2, annexed hereto (each, an “Assignment and Acceptance”).




          (b) The Assigning Revolving Credit Lender shall deliver to the Administrative Agent, with such
Assignment and Acceptance, the Revolving Credit Note held by the subject Assigning Revolving Credit
Lender and the Administrative Agent’s processing fee of $3,500.00.




          (c) The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered
to it and a register or similar list (the “Register”) for the recordation of the names and
addresses of the Revolving Credit Lenders and of the Tranche A Dollar Commitment, Tranche A-1
Dollar Commitment and Applicable Commitment Percentage of each Revolving


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Credit Lender. The Register shall be available for inspection by the Revolving Credit Lenders
at any reasonable time and from time to time upon reasonable prior notice. In the absence of
manifest error, the entries in the Register shall be conclusive and binding on all Revolving Credit
Lenders. The Administrative Agent and the Revolving Credit Lenders may treat each Person whose
name is recorded in the Register as a “Revolving Credit Lender” hereunder for all purposes of this
Agreement.




          (d) The Assigning Revolving Credit Lender and Assignee Revolving Credit Lender, directly
between themselves, shall make all appropriate adjustments in payments for periods prior to the
effective date of an Assignment and Acceptance.




     17.3. Effect of Assignment.



          (a) From and after the effective date specified in an Assignment and Acceptance which has been
executed, delivered, and recorded (which effective date the Administrative Agent may delay by up to
five (5) Business Days after the delivery of such Assignment and Acceptance):





          (i) The Assignee Revolving Credit Lender:




          (A) Shall be a party to this Agreement and the Loan Documents (and to any
amendments thereof) as fully as if the Assignee Revolving Credit Lender had executed
each..




          (B) Shall have the rights of a Revolving Credit Lender hereunder to the extent
of the Tranche A Dollar Commitment, Tranche A-1 Dollar Commitment and Applicable
Commitment Percentage assigned by such Assignment and Acceptance.




          (ii) The Assigning Revolving Credit Lender shall be released from the Assigning
Revolving Credit Lender’s obligations under this Agreement and the Loan Documents to the
extent of the Loan Commitment assigned by such Assignment and Acceptance.




          (iii) The Administrative Agent shall undertake to obtain and distribute replacement
Revolving Credit Notes to the subject Assigning Revolving Credit Lender and Assignee
Revolving Credit Lender.



          (b) By executing and delivering an Assignment and Acceptance, the parties thereto confirm to
and agree with each other and with all parties to this Agreement as to those matters which are set
forth in the subject Assignment and Acceptance.




ARTICLE 18 NOTICES:




     18.1. Notice Addresses. All notices, demands, and other communications made
in respect of any Loan Document (other than a request for a loan or advance or other financial
accommodation under the Revolving Credit) shall be made to the following addresses, each of which
may be changed upon seven (7) days written notice to all others given by certified mail, return
receipt requested:



116









 





          If to the Administrative Agent:



National City Business Credit, Inc.

2300 Crown Colony Drive, Suite 202

Quincy, Massachusetts 02169

Attention      : Robert A Barnhard

Fax               : (617) 328-7875




          With a copy to:



Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attention      : David S. Berman, Esquire

Fax               : (617) 880-3456




          If to the Borrower :



Filene’s Basement, Inc.

3241 Westerville Road

Columbus, Ohio 43224

Attention      : James. A. McGrady

Fax               : (614) 473-2721




          With a copy to:



Schottenstein Stores Corporation

1800 Moler Road

Columbus, Ohio 43207

Attention      : Irwin A. Bain, Esquire

Fax               : (614) 443-0972




          With a copy to:



Vorys, Sater, Seymour and Pease LLP

52 East Gay Street

Columbus, Ohio 43215

Attention      : John B. Weimer, Esquire

Fax               : (614) 719-5086




     18.2. Notice Given.



          (a) Except as otherwise specifically provided herein, notices shall be deemed made and
correspondence received, as follows (all times being local to the place of delivery or receipt):





          (i) By certified mail, return receipt requested: the date when actually received.



117









 






          (ii) By recognized overnight express delivery: the Business Day following the day when
sent.




          (iii) By Hand: If delivered on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, when delivered.
Otherwise, at the opening of the then next Business Day.




          (iv) By Facsimile transmission (which must include a header on which the party sending
such transmission is indicated): If sent on a Business Day after 9:00 AM and no later than
three (3) hours prior to the close of customary business hours of the recipient, one (1)
hour after being sent. Otherwise, at the opening of the then next Business Day.



     18.3. Wire Instructions. Notice Given. Subject to change in the same
manner that a notice address may be changed (as to which, see Section 18.1), wire transfers to the
Administrative Agent shall be made in accordance with the following wire instructions:


National City Bank,

Cleveland, Ohio

ABA Number : 041000124

Account Name       : National City Business Credit, Inc.

Account Number    : 3790116

Reference               : Filene’s Basement




ARTICLE 19 - TERM:




     19.1.
Termination of Revolving Credit. The Revolving Credit shall remain in
effect (subject to suspension as provided in Section 2.6 hereof) until the Termination Date.



     19.2.
Actions On Termination.



          (a) On the Termination Date, the Borrower shall pay the Administrative Agent (whether or not
then due), in immediately available funds, all Liabilities including, without limitation: the
following:





          (i) The entire balance of the Loan Account (including the unpaid principal balance of
the Revolving Credit Loans, and the SwingLine Loan ).




          (ii) Any then remaining installments of the Collateral Monitoring Fee.




          (iii) Any payments due on account of the indemnification obligations included in
Section 2.11(f).




          (iv) Any accrued and unpaid Unused Line Fee.




          (v) Any Early Termination Fee then due.




          (vi) All reasonable unreimbursed costs and expenses of the Agent and of Lenders’
Special Counsel for which the Borrower is responsible.



118









 






          (vii) All other Liabilities.



          (b) On the Termination Date, the Borrower shall also shall make such arrangements concerning
any L/Cs and Banker’s Acceptances then outstanding as are reasonably satisfactory to the
Administrative Agent.




          (c) Until such payment (Section 19.2(a)) and arrangements concerning L/Cs and Banker’s
Acceptances (Section 19.2(b)), all provisions of this Agreement, other than those included in
Article 2 which place any obligation on the Administrative Agent or any Revolving Credit Lender to
make any loans or advances or to provide any financial accommodations to the Borrower shall remain
in full force and effect until all Liabilities shall have been paid in full.




          (d) On the Termination Date, and upon satisfaction by the Loan Parties of the terms of Section
19.2(a) and (b), above, the Collateral Agent shall release the Collateral Interests granted the
Collateral Agent by the Borrower hereunder, which may be upon such conditions and indemnifications
as the Collateral Agent may reasonably require.




ARTICLE 20 - GENERAL:



     20.1.
Protection of
Collateral. The Agent has no duty as to the collection
or protection of the Collateral beyond the safe custody of such of the Collateral as may come into
the possession of the Agent.



     20.2. Publicity. Subject to the prior approval of the Borrower (which
approval shall not be unreasonably withheld or delayed), the Administrative Agent may issue a
“tombstone” notice of the establishment of the credit facility contemplated by this Agreement and
may make reference to the Borrower (and may utilize any logo or other distinctive symbol associated
with the Borrower) in connection with any advertising, promotion, or marketing (including reference
in any “case study” of the creditor facility contemplated hereby) undertaken by the Administrative
Agent. The Administrative Agent and the Revolving Credit Lenders further reserve the right to
provide to industry trade organizations information necessary and customary for inclusion in league
table measurements.



     20.3.
Confidentiality. Each of the Agent, the Issuer, the Lead Arranger,
the Revolving Credit Lenders, the SwingLine Lender, and any Person subject to this Section 20.3 by
the terms of this Agreement (or behalf of itself, and each of its directors, officers, and
employees) agrees to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the extent requested by
any regulatory authority, (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with
the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) to any
assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights
or obligations under this Agreement and any actual or prospective counterparty or advisors to any
swap or derivative transactions relating to the Loan Parties and the Liabilities (subject to an
agreement executed for the benefit of the Borrower which contains provisions substantially



119









 







the same as those of this Section 20.3, (g) with the consent of the Loan Parties or (h) to the
extent such Information (i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes legally available to the Agent, the Issuer, the Lead Arranger or any
Revolving Credit Lender on a nonconfidential basis from a source other than the Loan Parties. For
the purposes of this Section, the term “Information” means all information received from
the Loan Parties relating to their business, other than any such information that is available to
the Agent, the Issuer, the Lead Arranger or any Revolving Credit Lender on a nonconfidential basis
prior to disclosure by the Loan Parties, provided that, in the case of information received
from the Loan Parties after the date hereof, such information is identified at the time of
delivery as confidential or of the type of information, such as business plans or financial
information as is customarily confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information that is of a similar
nature. The confidentiality provisions contained in this Agreement shall survive the termination,
assignment or invalidation of this Agreement, or of any of the rights and obligations contained
herein or therein.



     20.4.
Successors and
Assigns. This Agreement shall be binding upon the
Borrower and its representatives, successors, and assigns and shall enure to the benefit of the
Agent and each Revolving Credit Lender and their respective successors and assigns, provided,
however, no trustee or other fiduciary appointed with respect to the Borrower shall have any rights
hereunder. In the event that the Agent or any Revolving Credit Lender assigns or transfers its
rights under this Agreement, the assignee shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of such assignor hereunder and such assignor shall thereupon
be discharged and relieved from its duties and obligations hereunder.



     20.5.
Severability. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect in any instance
shall not affect the validity, legality, or enforceability of such provision in any other instance,
or the validity, legality, or enforceability of any other provision of this Agreement.



     20.6. Amendments. Course of Dealing. 



          (a) This Agreement and the other Loan Documents incorporate all discussions and negotiations
between the Borrower and the Agent and each Revolving Credit Lender, either express or implied,
concerning the matters included herein and in such other instruments, any custom, usage, or course
of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or
course of dealings shall limit, modify, or otherwise affect the provisions hereof or thereof. No
failure by the Agent or any Revolving Credit Lender to give notice to the Borrower of the
Borrower’s having failed to observe and comply with any warranty or covenant included in any Loan
Document shall constitute a waiver of such warranty or covenant or the amendment of the subject
Loan Document. No change made by the Agent to the manner by which the Tranche A Borrowing Base or
the Tranche A-1 Borrowing Base is determined shall obligate the Agent to continue to determine the
Tranche A Borrowing Base or the Tranche A-1 Borrowing Base in that manner.




          (b) The Borrower may undertake any action otherwise prohibited hereby, and may omit to take
any action otherwise required hereby, upon and with the express prior written


120









 







consent of the Administrative Agent. Subject to Article 16, no consent, modification,
amendment, or waiver of any provision of any Loan Document shall be effective unless executed in
writing by or on behalf of the party to be charged with such modification, amendment, or waiver
(and if such party is the Administrative Agent then by a duly authorized officer thereof). Any
modification, amendment, or waiver provided by the Administrative Agent shall be in reliance upon
all representations and warranties theretofore made to the Administrative Agent by or on behalf of
the Borrower (and any guarantor, endorser, or surety of the Liabilities) and consequently may be
rescinded in the event that any of such representations or warranties was not true and complete in
all material respects when given.




     20.7. Power of Attorney. In connection with all powers of attorney included
in this Agreement (which may be exercised only after the occurrence and during the continuance of
an Event of Default), the Borrower hereby grants unto the Administrative Agent (acting through any
of its officers) full power to do any and all things necessary or appropriate in connection with
the exercise of such powers as fully and effectually as the Borrower might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this Agreement. No
power of attorney set forth in this Agreement shall be affected by any disability or incapacity
suffered by the Borrower and each shall survive the same. All powers conferred upon the Agent by
this Agreement, being coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the Agent. The
Administrative Agent, as agent for the Borrower under any power of attorney included in this
Agreement and the other Loan Documents, is not a fiduciary for the Borrower, but instead, in
exercising any one or more rights with respect to such powers of attorney, may do so for the sole
and exclusive benefit of the Revolving Credit Lenders, and not for the benefit of the Borrower.
The Borrower acknowledge and agree that the provisions of Title 20, Pennsylvania Consolidated
Statutes Section 5601 et seq., as amended (including, without limitation, Act 39 of 1999)
shall not be applicable to any one or more powers of attorney contained in any Loan Document
previously, concurrently or in the future executed and delivered by the Borrower.



     20.8. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder, shall be applied
towards the Liabilities in such order and manner as the Administrative Agent determines in its sole
reasonable, good faith discretion, consistent, however, with Sections 14.6 and 14.7 and any other
applicable provisions of this Agreement. The Borrower shall remain liable for any deficiency
remaining following such application.



     20.9.
Increased Costs. If, after the date hereof, as a result of any change
in any Requirement of Law, or change of the interpretation or application thereof by any court or
by any governmental or other authority or entity charged with the administration thereof, whether
or not having the force of law, which:



          (a) subjects any Revolving Credit Lender to any taxes or changes the basis of taxation, or
increases any existing taxes, on payments of principal, interest or other amounts payable by the
Borrower to the Agent or any Revolving Credit Lender under this Agreement (except for taxes on the
Agent or any Revolving Credit Lender based on net income or capital imposed by the jurisdiction in
which the principal or lending offices of the Agent or that Revolving Credit Lender are located);




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          (b) imposes, modifies or deems applicable any reserve, cash margin, special deposit or similar
requirements against assets held by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Revolving Credit Lender;




          (c) imposes on any Revolving Credit Lender any other condition with respect to any Loan
Document; or




          (d) imposes on any Revolving Credit Lender a requirement to maintain or allocate capital in
relation to the Liabilities;



and the result of any of the foregoing, in such Revolving Credit Lender’s reasonable opinion, is to
increase the cost to that Revolving Credit Lender of making or maintaining any loan, advance or
financial accommodation or to reduce the income receivable by that Revolving Credit Lender in
respect of any loan, advance or financial accommodation by an amount which that Revolving Credit
Lender deems to be material, then upon written notice from the Administrative Agent, from time to
time, to the Borrower (such notice to set out in reasonable detail the facts giving rise to and a
summary calculation of such increased cost or reduced income), the Borrower shall forthwith pay to
the Administrative Agent, for the benefit of the subject Revolving Credit Lender, upon receipt of
such notice, that amount which shall compensate the subject Revolving Credit Lender for such
additional cost or reduction in income.




     20.10. Replacement of Revolving Credit Lender.  If (a) any Revolving Credit
Lender incurs increased costs and requests compensation under Section 2.18(d) or Section 20.9, or
(b) any Revolving Credit Lender is a Delinquent Revolving Credit Lender, then the Borrower may



          (a) request such Revolving Credit Lender or Issuer to use reasonable efforts to designate a
different lending office for funding or booking its loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches, or Affiliates, if in the judgment of
such Revolving Credit Lender or Issuer, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 2.18(d) or Section 20.9 hereof, and (ii) would not
subject such Revolving Credit Lender or Issuer to any unreimbursed cost or expense, and would not
otherwise be disadvantageous to such Revolving Credit Lender. The Borrower shall pay all
reasonable costs and expenses incurred by such Revolving Credit Lender in connection with any such
designation of assignment; and




          (b) at its sole expense and effort, upon notice to such Revolving Credit Lender and the
Administrative Agent, require such Revolving Credit Lender to assign and delegate, without recourse
(in accordance with and subject to the restrictions contained in Article 17), all its interests,
rights and obligations under this Agreement to an assignee that shall assume such obligations
(which assignee may be another Revolving Credit Lender, if a Revolving Credit Lender accepts such
assignment), provided that (i) if such assignee is not an existing Revolving Credit Lender,
the Borrower shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Revolving Credit Lender shall have received
payment of an amount equal to the outstanding principal of its Revolving Credit Loans and
participations in unreimbursed drawings under L/Cs and Banker’s Acceptances and SwingLine Loans,
accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and


122









 







fees) or the Borrower (in the case of all other amounts) and (iii) such assignment will result
in a reduction in such compensation, payments or costs. A Revolving Credit Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by
such Revolving Credit Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.




     20.11. Costs and Expenses of the Agent and Issuer. 



          (a) The Borrower shall pay from time to time on demand all Costs of Collection and all
reasonable costs, expenses, and disbursements (including reasonable attorneys’ fees and expenses)
which are incurred by the Agent or the Issuer in connection with the preparation, negotiation,
execution, and delivery of this Agreement and of any other Loan Documents, and all other reasonable
costs, expenses, and disbursements which may be incurred in connection with or in respect to the
credit facility contemplated hereby or which otherwise are incurred with respect to the
Liabilities.




          (b) The Borrower shall pay from time to time on demand all reasonable costs and expenses
(including reasonable attorneys’ fees and expenses) incurred, following the occurrence of any Event
of Default, by the Revolving Credit Lenders to Lenders’ Special Counsel.




          (c) The Borrower authorizes the Administrative Agent to pay all such fees and expenses and in
the Administrative Agent’s reasonable, good faith discretion, to add such fees and expenses to the
Loan Account.




          (d) The undertaking on the part of the Borrower in this Section 20.11 shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by the Agent in favor of
the Borrower, other than a termination, release, or discharge which makes specific reference to
this Section 20.11.




     20.12. Copies and Facsimiles. Each Loan Document and all documents and
papers which relates thereto which have been or may be hereinafter furnished the Agent or any
Revolving Credit Lender may be reproduced by that Revolving Credit Lender or by the Agent by any
photographic, microfilm, xerographic, digital imaging, or other process, and such Person making
such reproduction may destroy any document so reproduced. Any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was made in the regular
course of business). Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party which or on whose
behalf such transmission was received.



     20.13. Ohio Law. This Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be governed by the law of State
of Ohio.



     20.14. Consent to Jurisdiction. 



          (a) The Borrower agrees that any legal action, proceeding, case, or controversy against the
Borrower with respect to any Loan Document may be brought in the


123









 







courts of Franklin County, Ohio or in the United States District Court, District of Ohio,
sitting in Columbus, Ohio, as the Administrative Agent may elect in the Administrative Agent’s sole
reasonable, good faith discretion. By execution and delivery of this Agreement, the Borrower, for
itself and in respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.




          (b) The Borrower WAIVES any objection based on forum non conveniens and any objection to venue
of any action or proceeding instituted under any of the Loan Documents and consents to the granting
of such legal or equitable remedy as is deemed appropriate by the Court.




          (c) Nothing herein shall affect the right of the Agent to bring legal actions or proceedings
in any other competent jurisdiction.




          (d) The Borrower agrees that any action commenced by the Borrower asserting any claim arising
under or in connection with this Agreement or any other Loan Document shall be brought solely in
the courts of Franklin County, Ohio or in the United States District Court, District of Ohio,
sitting in Columbus, Ohio, and that such Courts shall have exclusive jurisdiction with respect to
any such action.




     20.15.
Indemnification. The Borrower shall indemnify, defend, and hold the
Agent, the Issuer, and each Revolving Credit Lender and any Participant and any of their respective
employees, officers, agents, Subsidiaries, and Affiliates (each, an “Indemnified Person”) harmless
of and from any claim brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from reasonable
attorneys’ fees, expenses, and disbursements in connection therewith) on account of the
relationship of the Borrower or of any guarantor or endorser of the Liabilities, including all
costs, expenses, liabilities, and damages as may be suffered by any Indemnified Person in
connection with (x) the Collateral; (y) the occurrence of any Event of Default; or (z) the exercise
of any rights or remedies under any of the Loan Documents (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the Lender’s selection,
but at the expense of the Borrower) other than any claim as to which a final determination is made
in a judicial proceeding (in which the Agent and any other Indemnified Person has had an
opportunity to be heard), which determination includes a specific finding that the Indemnified
Person seeking indemnification had acted in a grossly negligent manner or in actual bad faith or in
willful misconduct. This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the Borrower, other than a
termination, release, or discharge duly executed on behalf of the Agent which makes specific
reference to this Section 20.15.



     20.16.
Rules of
Construction. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement and of the other
Loan Documents:



          (a) Unless otherwise specifically provided for herein (and then only to the extent so
provided), interest and any fee or charge which is stated as a per annum percentage shall be
calculated based on a 360 day year and actual days elapsed for LIBOR Loans and a 365/366 day year
and actual days elapsed for Base Margin Loans.




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          (b) Words in the singular include the plural and words in the plural include the singular.




          (c) Unless otherwise specifically provided for herein or in a specific Loan Document (and then
only to the extent so provided), as between the parties hereto or to any Loan Document, the
definitions of the following terms, as included in the UCC, are deemed to be as follows for
purposes of the performance of obligations arising under or in respect of any Loan Document:





          (i) “Authenticate” means “signed”.




          (ii) “Record” means written information in a tangible form.



          (d) Titles, headings (indicated by being underlined or shown in Small
Capitals) and any Table of Contents are solely for convenience of reference; do not constitute
a part of the instrument in which included; and do not affect such instrument’s meaning,
construction, or effect.




          (e) The words “includes” and “including” are not limiting.




          (f) Text which follows the words “including, without limitation” (or similar words) is
illustrative and not limitational.




          (g) 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.




          (h) The words “may not” are prohibitive and not permissive.




          (i) 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).




          (j) Terms which are defined in one section of any Loan Document are used with such definition
throughout the instrument in which so defined.




          (k) The term “Dollars” and the symbol “$” each refers to United States Dollars.




          (l) Unless limited by reference to a particular Section or provision, any reference to
“herein”, “hereof”, or “within” is to the entire Loan Document in which such reference is made.




          (m) References to “this Agreement” or to any other Loan Document is to the subject instrument
as amended to the date on which application of such reference is being made.




          (n) Except as otherwise specifically provided, all references to time are to Cleveland, Ohio
time.




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          (o) In the determination of any notice, grace, or other period of time prescribed or allowed
hereunder:





          (i) Unless otherwise provided (A) the day of the act, event, or default from which the
designated period of time begins to run shall not be included and the last day of the period
so computed shall be included unless such last day is not a Business Day, in which event the
last day of the relevant period shall be the then next Business Day and (B) the period so
computed shall end at 5:00 PM on the relevant Business Day.




          (ii) The word “from” means “from and including”.




          (iii) The words “to” and “until” each mean “to, but excluding”.




          (iv) The word “through” means “to and including”.



          (p) The Loan Documents shall be construed and interpreted in a harmonious manner and in
keeping with the intentions set forth in Section 20.17 hereof, provided, however, in the event of
any inconsistency between the provisions of this Agreement and any other Loan Document, the
provisions of this Agreement shall govern and control.




     20.17. Agent’s Consent.  Unless otherwise explicitly provided herein, the
Agent’s or any Revolving Credit Lender’s consent to any action of the Borrower which is prohibited
unless such consent is given may be given or refused by the Agent or such Revolving Credit Lender
in its sole reasonable, good faith discretion and without reference to Section 2.16 hereof.



     20.18. Participations. Each Revolving Credit Lender may sell participations
to one or more financial institutions (each, a “Participant”) in that Revolving Credit Lender’s
interests herein provided that no such participation shall include any provision which accords that
Participant with any rights, vis a vis the Agent, with respect to any requirement herein for
approval by a requisite number or proportion of the Revolving Credit Lenders. No such sale of a
participation shall relieve a Revolving Credit Lender from that Revolving Credit Lender’s
obligations hereunder nor obligate the Agent to any Person other than a Revolving Credit Lender.



     20.19. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to the Borrower from the Agent or any Revolving Credit Lender or any Participant
or from any Affiliate of any of the foregoing, and any cash, securities, instruments or other
property of the Borrower in the possession of any of the foregoing (other than in Exempt DDA
accounts), whether for safekeeping or otherwise (regardless of the reason such Person had received
the same) shall at all times constitute security for all Liabilities and for any and all
obligations of the Borrower to the Agent and such Revolving Credit Lender or any Participant or
such Affiliate, and (a) after the occurrence and during the continuance of an Event of Default, or
(b) after the service of process upon the Agent or any Revolving Credit Lender or any Participant
seeking to attach, by trustee, mesne, or other process, any funds of any Loan Party on deposit
with, or assets of any Loan Party in the possession of, the Agent or that Revolving Credit or such
Participant, in excess of Five Hundred Thousand Dollars ($500,000.00), may be applied or set off
against the Liabilities and against such obligations at any time, whether or not such are then due
and whether or not other collateral is then available to the Agent or that Revolving Credit Lender.




126












 





     20.20. Pledges To Federal Reserve Banks. Nothing included in this Agreement
shall prevent or limit any Revolving Credit Lender, to the extent that such Revolving Credit Lender
is subject to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act
(12 U.S.C. §341) from pledging all or any portion of that Lender’s interest and rights under this
Agreement, provided, however, neither such pledge nor the enforcement thereof shall release the
pledging Revolving Credit Lender from any of its obligations hereunder or under any of the Loan
Documents.



     20.21. Maximum Interest Rate. Regardless of any provision of any Loan
Document, neither the Agent nor any Revolving Credit Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in excess of the
maximum rate imposed by Applicable Law. Any payment which is made which, if treated as interest on
a Liability would result in such interest’s exceeding such maximum rate shall be held, to the
extent of such excess, as additional collateral for the Liabilities as if such excess were
“Collateral.”



     20.22. Waivers. 



          (a) The Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of
the waivers included in Section 20.22(b), below, knowingly, voluntarily, and intentionally, and
understands that the Agent and each Revolving Credit Lender, in establishing the facilities
contemplated hereby and in providing loans and other financial accommodations to or for the account
of the Borrower as provided herein, whether not or in the future, is relying on such waivers.




          (b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE
FOLLOWING:





          (i) Except as otherwise specifically required hereby, notice of non-payment, demand,
presentment, protest and all forms of demand and notice, both with respect to the
Liabilities and the Collateral.




          (ii) Except as otherwise specifically required hereby, the right to notice and/or
hearing prior to the Agent’s exercising of the Agent’s rights upon default.




          (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE AGENT OR
ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH THE AGENT OR
ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONG OR BETWEEN THE BORROWER OR ANY OTHER
PERSON AND THE AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN
ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).




          (iv) Any defense, counterclaim, set-off, recoupment, or other basis on which the amount
of any Liability, as stated on the books and records of the Agent, could



127









 






be reduced or claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Liability.




          (v) Any claim to consequential, special, or punitive damages.



     20.23.  Additional Waivers. 



          (a) The Liabilities are the joint and several obligations of each Loan Party. To the fullest
extent permitted by applicable law, the obligations of each Loan Party hereunder shall not be
affected by (i) the failure of the Agent or any Revolving Credit Lender to assert any claim or
demand or to enforce or exercise any right or remedy against any other Loan Party under the
provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions of, this
Agreement, any other Loan Document, or any other agreement, including with respect to any other
Borrower of the Liabilities, or (iii) the failure to perfect any security interest in, or the
release of, any of the security held by or on behalf of the Collateral Agent or any Revolving
Credit Lender.




          (b) The obligations of each Loan Party hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than the indefeasible payment in full
in cash of the Liabilities), including any claim of waiver, release, surrender, alteration or
compromise of any of the Liabilities, and shall not be subject to any defense or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Liabilities or otherwise. Without limiting the generality of the foregoing,
the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Agent or any Revolving Credit Lender to assert any claim or demand
or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by
any waiver or modification of any provision of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Liabilities, or by any other act or omission that
may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise
operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible
payment in full in cash of all the Liabilities).




          (c) To the fullest extent permitted by applicable law, each Loan Party waives any defense
based on or arising out of any defense of any other Loan Party or the unenforceability of the
Liabilities or any part thereof from any cause, or the cessation from any cause of the liability of
any other Loan Party, other than the indefeasible payment in full in cash of all the Liabilities.
The Agent and the Revolving Credit Lenders may, at their election, foreclose on any security held
by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any
such security in lieu of foreclosure, compromise or adjust any part of the Liabilities, make any
other accommodation with any other Loan Party, or exercise any other right or remedy available to
them against any other Loan Party, without affecting or impairing in any way the liability of any
Loan Party hereunder except to the extent that all the Liabilities have been indefeasibly paid in
full in cash. Pursuant to applicable law, each Loan Party waives any defense arising out of any
such election even though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party
against any other Loan Party, as the case may be, or any security.




128









 








          (d) Upon payment by any Loan Party of any Liabilities, all rights of such Loan Party against
any other Loan Party arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of
payment to the prior indefeasible payment in full in cash of all the Liabilities, as more
particularly set forth in an Indemnity, Subrogation and Contribution Agreement to be entered into
among the Loan Parties. In addition, any indebtedness of any Loan Party now or hereafter held by
any other Loan Party is hereby subordinated in right of payment to the prior payment in full of the
Liabilities. None of the Loan Parties will demand, sue for, or otherwise attempt to collect any
such indebtedness. If any amount shall erroneously be paid to any Loan Party on account of (a) such
subrogation, contribution, reimbursement, indemnity or similar right or (b) any such indebtedness
of any Loan Party, such amount shall be held in trust for the benefit of the Agent and the
Revolving Credit Lenders and shall forthwith be paid to the Administrative Agent to be credited
against the payment of the Liabilities, whether matured or unmatured, in accordance with the terms
of the Loan Documents.




     20.24. Patriot Act Notices. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify such Borrower in accordance
with the Patriot Act.



     20.25. Existing Loan Agreement Amended and Restated. This Agreement shall
amend and restate the Existing Loan Agreement in its entirety. On the Second Amendment Effective
Date, the rights and obligations of the parties under the Existing Loan Agreement shall be subsumed
within and be governed by this Agreement; provided, however, that, except as specifically provided
herein, each of the “Revolving Credit Loans” (as such term is defined in the Existing Loan
Agreement) outstanding under the Existing Loan Agreement on the Second Amendment Effective Date
shall, for purposes of this Agreement, be included first, as Tranche A-1 Loans and thereafter, any
balance shall be Tranche A Loans hereunder and each of the “L/Cs” and “Banker’s Acceptances” (as
such terms are defined in the Existing Loan Agreement) outstanding under the Existing Loan
Agreement on the Second Amendment Effective Date shall, for purposes of this Agreement, be included
as L/Cs and Banker’s Acceptances hereunder.



[REMAINDER OF PAGE INTENTIONALLY BLANK]




129









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as a sealed instrument as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	FILENE’S BASEMENT, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	James A. McGrady	 	 
	 

	 	Title:
	 	Executive Vice President, Chief Financial	 	 
	 

	 	 	 	Officer, Treasurer and Secretary	 	 






Signature Page to Second Amended and Restated Loan and Security Agreement




 









 





	 	 	 	 	 	 	 
	 	 	NATIONAL CITY BUSINESS CREDIT, INC.  
	 	 	(Administrative Agent,
Collateral agent and
A Revolving Credit Lender)
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Barbara Anderson	 	 
	 

	 	Title:
	 	Managing Director	 	 






Signature Page to Second Amended and Restated Loan and Security Agreement




 









 





	 	 	 	 	 	 	 
	 	 	NATIONAL CITY BANK	 	 
	 	 	(Issuer and Lead Arranger)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





Signature Page to Second Amended and Restated Loan and Security Agreement




 









 





	 	 	 	 	 	 	 
	 	 	WELLS FARGO RETAIL FINANCE, LLC  
	 	 	(Co-Documentation
Agent And Revolving
Credit Lender)
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





Signature Page to Second Amended and Restated Loan and Security Agreement




 









 





	 	 	 	 	 	 	 
	 	 	WACHOVIA CAPITAL FINANCE  
	 	 	CORPORATION (CENTRAL)
	 	 	(Co-Documentation
Agent And Revolving
Credit Lender)
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





Signature Page to Second Amended and Restated Loan and Security Agreement